QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
(Sitting as a Deputy Judge of the High Court)
| YILPORT KONTEYNER TERMINALI VE LIMAN ISLETMELERI AS
|- and -
|(1) BUXCLIFF KG
(2) NIEDERELBE SCHIFFAHRTSGESELLSCHAFT MGH & CO KG
(3) SVERIGES ANGFARTYGS ASSURANS FORENING
Christopher Smith (instructed by Keates Ferris) for the Defendants
Hearing dates: 8th, 9th, 10th, 11th October 2012
Crown Copyright ©
Mr C Edelman QC:
(1) 4 containers that had been stowed on the deck of the Vessel fell into the sea and 2 further containers fell onto ODESSA STAR.
(2) Hold numbers 4 and 5 were flooded such that five tiers of containers were fully submerged and a sixth tier was submerged by 0.5m. The effect of this was that 473 x 20 foot and 60 x 40 foot containers were wholly or partially immersed in sea water.
"In consideration of your allowing the "CMA CGM VERLAINE" to enter Yilport, berth and discharge her cargo including damaged and flooded containers, we hereby agree to indemnify you upon your written demand of a properly proven claim, in respect of any and all consequences, liability, loss or damage that you may incur and which may arise, including but not limited to, damage to the port or its personnel and facilities, oil pollution, wreck removal and loss and damage to any cargo, its containers and from handling the damaged cargo and its containers including any delays, penalties or fines caused by or raised by the customs authorities and all reasonably and properly incurred legal costs and expenses.
This indemnity will take effect from the moment the vessel is in the vicinity of the approaches to Yilport, continues whilst the vessel remains in Yilport and exits Yilport and its approaches."
"In consideration of your agreement to grant us permission to berth our vessel, "CMA CGM VERLAINE" ("the Vessel") at Yilport for the purpose of discharging some or all of the containers ("cargo operations") presently onboard our vessel, we hereby agree and undertake to yourselves the following terms and conditions:
1. We anticipate the vessel to berth today (8th April) at 14.00 hours. The vessel shall remain at the berth for a maximum period of 72 hours but in any event we agree she will vacate the berth by no later than 14.00 hours, Sunday 11th April 2010 ("the allotted time").
2. If for any reason whatsoever, we are unable to complete the cargo operations within the allotted time, we agree to sail the vessel out to an anchorage at our cost, expense, risk and time. If we require to continue with the cargo operations, as and when the berth becomes available again, upon our request and subject to berth availability you shall have the option to agree to berth the vessel again but always at our cost, expense, risk and time.
3. We shall remain responsible for payment to you of all inward and outward charges including but not limited to tuggage, pilotage, port dues, berth dues, stevedoring, cranage and all other charges levied in accordance with the terms and conditions of Yilport.
4. Because of the vessel's current damaged condition, we acknowledge that you may be required to take additional precautions and safety measures as may be required during the vessel's inward, at berth (including cargo operations) and outward operations. We hereby undertake to indemnify you for all reasonably and properly incurred expenses and charges in this regard."
(1) By 11.00 hours on 10th April, 2053 containers had been discharged.
(2) By 11.30 hours on 11th April, 2,985 containers had been discharged and a total of 440 containers remained on board. Almost all of the containers remaining on board were those which were stowed in holds 4 and 5, i.e. the flooded holds. Sea water was being pumped from these holds with the result that, as at 11.32 hours on 11th April, the hole in the Vessel's hull was 1-1.5m above the water line.
(3) By 11.00 hours on 12th April, 3,318 containers had been discharged and a total of 110 containers remained on board. By noon on 12th April the number of containers on board had reduced to 80, and by 22.00 hours only 30 containers remained on board.
(4) Discharging operations were completed on 13th April at 12.45 hours and the Vessel departed Yilport at 19.30 hours.
(1) Invoice 284674 originally in the sum of US$1,188,747. This invoice is said to cover the cost of discharging the containers from the Vessel and is made up of the Claimant's charges for:
(i) Discharging of the containers (US$923,392 – now reduced to US$910,260).
(ii) ISPS security costs (US$96,040).
(iii) Hatch cover moves (US$26,427).
(iv) Lashing and unlashing (US$19,920).
(v) The removal of twistlocks (US$32,968).
(vi) Berthing dues (US$90,000).
(2) Invoice 284818 originally in the sum of US$986,957.17. This invoice is said to cover the cost of preparing a landfill site to be used to store some of the containers discharged from the Vessel and consists of:
(i) The cost of preparing the landfill site (US$657,971.45 – now reduced to US$620,841).
(ii) A 50% mark up on those costs which has been charged to the Defendants (US$328,985.72 – now reduced to US$310,420).
(iii) Yard cleaning costs (US$37,131 previously erroneously included under (i) and marked up under (ii)).
(3) Invoice 284788 in the sum of US$315,830. This invoice is said to cover numerous container movements within the port that were said to have been caused by the Defendants' request to discharge all of the containers at Yilport.
(4) Invoice 102975 in the sum of US$29,500. This invoice is said to cover welding work that was performed during the discharging operation.
(5) Invoice 284819 in the sum of US$75,013. This invoice is said to cover diving and other related services provided during the discharging operation.
(6) Invoice 285287 originally in the sum of US$506,120. This invoice is said to cover additional labour and administration costs incurred by the Claimants as a result of the discharging operation and is made up of:
(i) The cost of an additional 220 workers (US$316,800 now revised to US$105,600).
(ii) The cost of 42 sub-contractors (US$121,500 now revised to US$40,500).
(iii) Transportation and food costs in respect of the foregoing (US$20,300).
(iv) Administrative costs incurred in relation to the foregoing (US$121,500 – now reduced to US$47,250).
(7) Invoice 408475 in the sum of US$602,707. This invoice is said to cover various costs incurred in relation to the damaged containers and is made up of:
(i) The cost of storing damaged containers at the port (US$267,105).
(ii) Stevedoring costs incurred in relation to the damaged containers (US$207,952).
(iii) The cost of repairing damage and wear to the Claimant's equipment caused by the handling of the damaged containers (US$127,650).
(8) Invoice 285345 in the sum of US$325,000. This invoice is said to cover various miscellaneous expenses and is made up of:
(i) Legal fees (US$15,000).
(ii) Payments to various parties "to facilitate smooth ops" (US$310,000).
(1) The Third Defendant is liable for none of the sums claimed as they fall outside the scope of the LOI.
(2) The Claimant has charged for certain of its services at a rate which is (a) in excess of that which the Claimant is permitted to charge under the LOU and/or (b) unreasonable.
(3) Certain of the sums claimed by the Claimant fall outside the scope of the LOU provided by the First and Second Defendants.
(4) The Claimant has failed to provide adequate proof for certain of the sums claimed.
(a) Factual Evidence:
(i) Mr Mustafa Erkanat, a director of Yilport, who gave evidence at trial,
(ii) Mr Farid Salem, a director of CMA CGM, who did not give evidence before me.
(i) Captain Deger Pamuk of Kalimbassieris, who were instructed to act as surveyors for the Third Defendant. Captain Pamuk gave evidence before me.
(ii) Mr Borchert Meyer who was at the material time the director of nautical operations for the Second Defendant, who did not give evidence before me.
(iii) Mr Caglar Coskunsu, to whom I have already referred, who gave evidence before me.
(iv) Mr Benny Johansson of the Third Defendant, who did not give evidence before me.
(v) Mr Tim Ponath who at the time was Head of TI-5 fleet and Head of Newbuilding for the Second Defendant. He did not give evidence before me.
(vi) Mr Michael Stevens, a solicitor instructed by the Third Defendant in relation to the collision, who did not give evidence before me.
(i) Mr Erkanat: There was what on the face of it appeared to be legitimate criticism of the contents of his witness statement in that he appeared to be exaggerating the seriousness of the situation by suggesting that it was acknowledged at the meeting on 7 April that this was "effectively to be a salvage operation" and by saying that he was "shocked at the condition of the Vessel when I saw her arrive at Yilport". Whilst the Vessel had been very badly holed, the Defendants were right to say that the situation was not as serious as a "salvage" operation and there was nothing intrinsically shocking about the condition of the Vessel. However, when giving evidence before me, Mr Erkanat explained that his background was that he had graduated as an aerospace engineer, had spent twenty-one years working in the fast food industry in the US and had only been working at Yilport since 2006. He therefore did not have any maritime experience and told me that he had not previously seen a ship with damage like this. He also told me that his use of the word "salvage" was as a translation from a Turkish word which had the meaning of salvaging the situation, rather than the technical maritime sense of salvage. Whilst it is perhaps unfortunate that the Defendants were left to gain the impression from Mr Erkanat's statement that he was asserting the situation to be more serious than it was, I am satisfied that this was not Mr Erkanat's intent and that the language that he used was appropriate from his perspective as a Turkish speaker with no real maritime experience. Mr Erkanat dealt with this aspect of his evidence and other aspects openly and fairly, making concessions where appropriate and not attempting to embellish his evidence in any way in order to advance the Claimant's case. During the course of his lengthy cross-examination he answered the questions put to him carefully and thoughtfully (at the start of the second day of his cross-examination, he corrected an answer he had given about charging for container moves in the yard on 8 April and I accept that this was a genuine mistake on his part which he promptly corrected when he realised his error). He only reacted emotively to the cross-examination when it was suggested to him that accepting the Vessel at Yilport was all about how much money the Claimant could extract from the Defendants for providing their assistance and that this was the explanation for the charges that the Claimant had sought to recover from the Defendants. I consider that Mr Erkanat's reaction to this line of questioning was understandable and legitimate. As he said, if this was about how much money the Claimant could make out of the Defendants, the Claimant would have sought to impose terms before accepting the Vessel and before agreeing to the changed instruction to discharge all of the containers. Mr Erkanat's explanation was that the reason that Yilport accepted the Vessel was because Mr Yildirim of the Yildirim Group, of which the Claimant is part, wanted to showcase what Yilport could do and therefore at the meeting of 7 April was focussing on making a presentation about Yilport rather than upon how much the Defendants would have to pay for the discharge, an approach which is borne out by the Defendants' witnesses' account of the meeting. My conclusion is that Mr Erkanat was a witness on whose evidence I could rely and where his evidence conflicts with the evidence of the Defendants' witnesses who were not called before me, I prefer his evidence.
(ii) Captain Pamuk: Captain Pamuk had never been employed to work on a container ship and had never worked in a container port and so the value of his evidence could only be from what he observed or in relation to discussions in which he was involved. However, it became apparent from his evidence that he could not say anything about the discharge operation because he spent most of his time in an office dealing with people such as officials and owners' representatives whilst the surveyors under his supervision did the inspections. All he could contribute was that Evyap had been reluctant to accept the Vessel because its discharge would involve a long, difficult and dangerous operation and so they had tried to get rid of the job by making life very difficult for the owners by imposing difficult requirements, with the result that Yilport was the only alternative for discharging the Vessel. He also accepted that discharging the Vessel was the most realistic option. I have no reason to believe that Captain Pamuk was doing other than his best to tell me the truth to the best of his recollection but the reality was that there was not much that he could contribute on the important issues in the case. The differences between Mr Erkanat and Captain Pamuk as to what was said at the meeting of 7 April were accepted by Captain Pamuk as probably being attributable to the fact that there were different conversations going on in different languages at the same time during the course of the meeting and there was nothing in his statement or in his oral evidence that caused me to doubt the reliability of what Mr Erkanat told me.
(iii) Mr Meyer: He was potentially an important witness for the Defendants. He was at Yilport throughout the discharge operation and appears to have been closely involved in overseeing it. Notwithstanding that, his first witness statement only addressed contractual issues, his supplemental statement was only signed and served very shortly before the trial and only purported to respond to what Mr Erkanat had said and his absence from the trial was attributed to a long-standing family engagement. In circumstances where the Defendants were not calling any of Captain Pamuk's team of surveyors who might have been able to comment on the task confronting the Claimant and what the Claimant did, the Defendants' failure to take adequate steps to ensure that Mr Meyer could and would attend the trial is surprising. I also find it surprising that Mr Meyer's statements, and in particular his first statement, did not address in detail what actually happened in the course of the discharge if it was truly the case that the Defendants believed that the Claimant's charges were excessive for the work that was done.
(iv) Mr Coskunsu: He was a lawyer who had never worked in a container port and did not even specialise in maritime issues, but rather primarily dealt with tax issues for maritime clients. The primary purpose of his giving evidence appears to have been to support the Defendants' case that the appropriate rate for the discharge to be charged by Yilport was the special rate that Yilport had in place for CMA CGM vessels. However, the relevance of his evidence fell away when it became apparent that the only discussion Mr Coskunsu had heard referring to this special rate at the meeting on 7 April was between members of the CMA CGM team. The Claimant sought to take advantage of an email dated 11 April 2010 which Mr Coskunsu sent to Mr Ravindran, a solicitor acting for the Claimant, in which he asked whether the Claimant's remuneration would be an "uplift of a percentage based on normal tariff" but in circumstances where Mr Coskunsu had no relevant maritime or container port experience, I do not consider that any forensic advantage can be gained by the Claimant from the contents of that email. My conclusion about Mr Coskunsu was that he was doing his best to tell me the truth as he believed it to be but ultimately his evidence did not assist the Defendants' case on the issues which arise in this case.
(v) Mr Johannson, Mr Ponath and Mr Stevens The statements of Mr Johannson and Mr Ponath do not bear materially on the issues which I have to decide in this case. Mr Stevens' statement gives some evidence about the meeting on 7 April. He was not called because Mr Lewis, on behalf of the Claimant, decided not to cross-examine him. That means that his account of the meeting of 7 April is unchallenged but there is nothing in his account that materially affects the issues that I have to decide and in those circumstances the decision taken by Mr Lewis not to cross-examine him was understandable and sensible in terms of the management of this case.
(b) Expert Evidence:
"2 CONTAINER TERMINAL SERVICES
2.1 General Terms and Applications
Unless otherwise noted fees for services rendered are standard for Main Container Terminal, Land Container Terminal and Empty Container stocking areas.
All the service rates for non-standard (OOG) containers will be .…% more than the standard rates.
All the service rates for containers with Dangerous Goods (IMO) content will be ….% more than the standard rates.
Based on transport amount, cargo weight, equipment requirements and volumetric characteristics YILPORT will differentiate between OOG container and project load status then determine the rates.
Similar to project cargo, tariff for damaged containers and/or vessels handling from the vessel will be determined by YILPORT depending on the type of operations. …
2.4.4 Other Storage Services
- Pricing for the storage of damaged containers or containers with a leak will be determined case by case basis depending on the severity of the problem. …"
The reference to "project cargo" is a reference to specialist heavy cargo. The Claimant in particular relies on the provisions relating to damaged containers and damaged vessels.
(i) The limitations on the Claimant's freedom of decision are that the Claimant must have exercised its power or discretion honestly or in good faith and must not have done so arbitrarily or capriciously (paragraph 61, citing Abu Dhabi National Tanker Co v. Product Star Shipping Limited (the "Product Star") (No 2)  1 Lloyd's Rep 397);
(ii) Unreasonableness in this context is analogous to Wednesbury unreasonableness (paragraph 64, citing Paragon Finance Plc v. Nash  1 WLR 685);
(iii) Pursuant to the Wednesbury test, the decision remains that of the decision maker, in contrast to the situation where the arbiter on an entirely objective criteria is the Court itself (paragraph 66).
Mr Lewis further submitted that it was appropriate to construe the provisions so as only to impose this implied obligation because it was perfectly sensible from a commercial perspective in that the Claimant was helping out the Defendants, who were in a sorry situation, in circumstances where the extent of the work could not reasonably be known in advance.
"I entirely accept that the scope of an implied term will depend on the circumstances of the particular contract."
The reference to "the circumstances of the particular contract" must include all of the relevant circumstances, including the subject-matter of the decision, the language used in the contract and what explanation there might be for the language used in the contract other than conferring on a party such a wide discretion.
(1) Invoice 284674:
(i) Discharging of the Containers
"8.3 The normal practice for determining the rate to charge for the Terminal Handling Charge on a one-off call would be to apply a standard base rate charge using the port's general tariff plus an "uplift" depending upon the circumstances of the vessel's call.
8.4 That "uplift" could either be negotiated by the parties in advance or, particularly in circumstances where the full details of the operation were not known by the port in advance, could be set afterwards by the port. At that stage the port will know what was involved (and in particular the danger and difficulty levels) and will have a fairer idea of what it is reasonable to charge.
8.5 This case is typical of a situation where, since the condition of the vessel and containers was unknown prior to berthing and discharging, I would have expected the "uplift" only to be fixed after completion of the operations.
8.6 In addition, in the case of a one-off emergency call such as this it is my opinion that the highest rate of charges would generally apply."
"The stability of the vessel was being constantly monitored and checked by the Master and Chief Officer and they were clearly concerned as to the vessel's stability."
He explained to me that this evidence was based on the fact that discharge lists do not usually change and that he had drawn the inference that the constant changes in the discharge lists could be attributed to a concern over stability. Mr Pugh confirmed that constant changes in the discharge lists would affect the speed of discharge and the order of discharge would affect storage arrangements. This was a critical factor in circumstances where the Claimant had limited storage space available and would have been more critical when the instruction to discharge the entire Vessel was given. As I have indicated, that was not a factor which affected the discharge at Jebel Ali about which Mr Pugh gave evidence, because he told me that the storage area at Jebel Ali was vast.
(i) The service provided by the Claimant in taking the Vessel in circumstances where, as Mr Pamuk recognised, the only realistic option was for containers to be discharged from the Vessel and Yilport was the only port available for that purpose in light of the terms that Evyap had sought to impose;
(ii) The risks undertaken by the Claimant in accepting the Vessel without any detailed knowledge of the condition of the Vessel or the containers aboard it and in discharging the containers. Although Mr Pugh accepted that the LOI would reduce the financial risk to the Claimant, a financial indemnity does not negate the physical risk of damage to property or injury to workmen that the Claimant bore;
(iii) The significant change in the scale of the task that occurred during the course of the discharge as a result of the Defendants' instruction to discharge all of the containers as opposed to the limited number of containers that the Claimant had originally been asked to discharge;
(iv) The successful outcome that the Claimant achieved for the Defendants;
(v) As submitted by the Claimant, the additional charges for discharging damaged containers only amount to US$207,952 (included in Invoice 408475); the additional labour cost claimed is US$213,920; in that context the overall 70% uplift on the specific charges for discharge (which totals US$455,161), could not by any stretch of the imagination be said to be an excessive additional figure for the Defendants to have to pay for what was actually involved in this discharge;
(vi) The uplift covers the discharge of many of the previously submerged and wet containers.
(ii) ISPS Security Costs
"This fee is standard for every container that is loaded or discharged (full or empty)."
There is nothing in the Terms and Conditions which prevents that per container fee from being at a rate which includes a 70% uplift and as I have concluded that the effect of the Claimant's Terms and Conditions is to permit an across the board uplift (as well as additional charges) when the Claimant has to discharge damaged containers and/or from damaged vessels, there is no reason why an uplift should not be applied to this element as well. As I have concluded that a 70% mark-up is reasonable and there is no challenge to the base figure, I allow the sum claimed of US$96,040.
(iii) Hatch Cover Moves
(iv) Lashing and Unlashing
(v) Removal of Twistlocks
(vi) Berthing Dues
(2) Invoice 284818:
(i) Cost of Preparing Construction Site
"Mr Tony Meyer confirmed that Owners were ready to pay those expenses which occurred due to the change caused by the Owners – this confirmation was verbal being given on Friday 9th April and repeated during the weekend … Mr Tony Meyer confirmed for such work to be done, saying "Do whatever you have to do."
In his oral evidence, he confirmed that he did not talk in detail about the contractors or their rates but just referred to the need to prepare the site and to the fact that costs would be incurred, to which Mr Meyer agreed.
(i) The Claimant was entitled to payment of all inward charges and if the creation of additional storage space was necessary in order to enable the Claimant to discharge all of the containers as instructed by the Defendants, that would be an additional inward charge; alternatively
(ii) The Claimant was entitled under its General Terms and Conditions to charge for container storage services and in the exceptional circumstances of this case that would in my judgement encompass the creation of additional storage space for the containers on the Vessel.
(ii) Uplift on Cost of Preparing Construction Site
(iii) Yard Cleaning
(3) Invoice 284788
(4) Invoice 102975
(5) Invoice 284819
(6) Invoice 285287
(i) The Cost of an Additional 220 Workers
(ii) Cost of 42 Sub-Contractors
(iii) Transportation and Food Costs
(iv) Administrative Costs
(7) Invoice 40875:
(i) Cost of Storing Damaged Containers
(ii) Stevedoring Costs
(iii) Cost of Repairing Damage and Wear to the Claimant's Equipment