England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		23/10/2012

Mr Justice Eder :

1. Pursuant to leave granted by Cooke J, this is an appeal under s.69 of the Arbitration Act 1996 against an arbitration award of Mr John Tsatsas and Mr Christopher Moss dated 16 January 2012 (the "Award" and the "Tribunal"). The Award arises out of a charterparty of mv Ladytramp (the "Vessel") dated 9 June 2010 on the "Sugar Charter Party 1999" form (the "Charterparty"). The underlying claim was brought by the Respondent (the "Owners") against the Claimant (the "Charterers") for demurrage during a period when the Vessel arrived at Paranagua on 20 June 2010 and thereafter waited to load a cargo of sugar. Loading was completed on 20 July 2010. In summary, the Tribunal upheld the claim for demurrage and awarded the Owners the sum of US$397,912.77 plus interest and costs.
2. Various issues arose in the arbitration which are no longer relevant. For present purposes, the relevant terms of the Charterparty as set out in the Award are as follows:

"Clause 3: … the said vessel…shall…sail and proceed to 1-2 safe berth(s), 1 safe port (intention Santos) but not south of Paranagua…"

"Clause 6: … The Act of God, perils of the sea, fire on board, in hulk or craft, or on shore, crew, enemies, pirates and thieves, arrests and restraints of princes, rulers and people, collisions, stranding and other accidents of navigation excepted, even when occasioned by negligence, default or error in judgement of the Pilot, Master, mariners or other servants of the Shipowners. Not answerable for any loss or damage arising from explosion, bursting of boilers, breakages of shafts, or any latent defect in the machinery or hull, not resulting from want of due diligence by the Owners of the ship, or any of them, or by the ship's Husband or Manager."

"Clause 19: … At loading port, even if loading commences earlier, laytime for loading to begin at 1400 hours if e-mailed notice of readiness to load is tendered to agents before noon and at 0800 hours next working day if e-mailed notice of readiness is tendered to agents after noon… At loading port(s) in the event of congestion Master has the right to tender notice of readiness at the customary waiting place in ordinary office hours by email to agents whether in berth or not, whether in port or not, whether in free pratique or not, whether customs cleared or not…"

"Clause 28: In the event that whilst at or off the loading place…the loading…of the vessel is prevented or delayed by any of the following occurrences: strikes, riots, civil commotions, lock outs of men, accidents and/or breakdowns on railways, stoppages on railway and/or river and/or canal by ice or frost mechanical breakdowns at mechanical loading plants, government interferences, vessel being inoperative or rendered inoperative due to the terms and conditions of appointment of the Officers and crew time so lost shall not count as laytime."

3. The relevant findings and conclusions reached by the Tribunal are set out in the following paragraphs of the Award:

"The factual background

10. The LADYTRAMP is described as an open-hatch, double-skin bulk carrier built in 2001 with a deadweight capacity of 24,834 metric tons ("mt") on her summer salt water draft of 9.60 meters. The vessel is registered in and flies the flag of Marshall Islands.

11. The events leading to the disputes, as evidenced by copies of contemporaneous correspondence adduced by the parties and from a written Statement made by the agent in Paranagua on 15 July 2011 at the request of the charterers are summarised below.

12. At the time of the fixture, the vessel was discharging at Abidjan in Ivory Coast from where it was due to sail (for Brazil) on 10 or 11 June 2010. On the date of the fixture (9 June 2010), the charterers declared Paranagua as the loading port.

13. In an email dated 4 June 2010, namely a week before the vessel arrived at the loadport, the local agents (MARCON) advised the parties that a fire has occurred at the Compania Brasilliera Logistica A/A terminal (CBL) which, they later said, is the terminal normally used by the charterers and where, they stated, they had initially scheduled the vessel to load. The fire had destroyed the conveyor-belt system linking the terminal to the warehouse rendering it, in the opinion of local experts, inoperable for at least 3 months. They further expressed the view that charterers would need to transfer the cargo intended for the vessel to another terminal.

14. In an email dated 15 June 2010 the agents advised the parties that they were instructed to change the vessel's berthing programme to the Pasa terminal in Paranagua. On the same day the agents emailed the owners directly to say that they had spoken to the charterers and had persuaded them to change the berthing programme to said alternative terminal where "they also have enough cargo". The agents further informed the owners that the Pasa terminal had a long line up and that the contemplated berthing programme would be revised involving a long waiting time.

15. The vessel arrived on 20 June 2010 and tendered notice of readiness to load at 2330 hours. The Statement of Facts showed that in the absence of an available berth the vessel remained off the port until 14 July 2010, when she weighed anchor and entered the inner roads of the port awaiting berthing instructions.

16. In his written statement, Mr Lemos, the agents' Operations Manager, explained that in fact, because the charterers "could not get sugar to the Pasa Terminal as quickly as hoped" yet another berth, the Centro Sul Servicos Maritimos (Centrosul) Terminal, which is adjacent, but unconnected to, the CBL warehouse, was judged to provide the charterers with the fastest option to obtain replacement sugar for loading. An application for berthing at Centrosul terminal was accordingly made to the port authority and the vessel berthed there (and not at the Pasa Terminal) on 15 July 2010. In the event, berth 212, that was ultimately used, was one of the three (212, 213 or 214) where the vessel would have berthed had the fire not taken place. Loading commenced on 18 July 2010 and was completed on 20 July 2010 at which time the vessel sailed for the discharging port in the Black Sea.

17. In accordance with the charter party terms (recital 9) the owners contended that time began to count at 1400 hours on Monday 21 June 2010 and that allowing for rain periods and permissible laytime (23,500 metric tons per weather working day = 3.91666 days) laytime expired at 2353 hours on 25 June 2010. Thereafter the vessel was on demurrage continuously up to 1300 hours on 20 July 2010, when loading was completed."

"Conclusions

60. The parties' submissions in the arbitration ranged far and wide. However, it seemed to us ultimately that there was a short answer to the defences relied on by the charterers to the owners' claim and we shall deal with that before stating our conclusions in relation to the other issues as succinctly as we can.

61. Once Paranagua was declared as the loading port the charterers' obligation was to nominate "1-2 safe berth(s)" at that port. The fact that the fire occurred whilst the vessel was on passage to Paranagua would not in our view mean that the charterers could not, in principle, rely upon an exceptions clause such as Clause 28 (see cases such as Monroe v Ryan). However, as the owners emphasised, the charterers were entitled to nominate any safe berth in the port of Paranagua and in order for them to rely upon the exceptions in Clause 28 to exclude from laytime the time lost as a result of their inability to use the CBL terminal, the CBL terminal would have had to have been named in Clause 4 of the charterparty – so that the charterers were unable (from a legal standpoint) to nominate an alternative berth.

62. We accepted on the evidence that the cargo which the charterers had originally planned to load was stored in a warehouse which was connected by a conveyor belt to the CBL terminal and the adjacent berth. We also accepted that the evidence supported the charterers' contention that this was the berth at which the vessel's local agents had arranged for her to load. Furthermore, we accepted that the fire which broke out on or about 14 June 2010 destroyed the conveyor belt connecting the warehouse and the terminal and rendered the terminal unusable for the better part of four months. However, we could not accept that the fact that the CBL terminal and berth was unusable throughout the relevant period meant that the charterers were unable to perform their obligation to nominate any "safe berth" at the port for the loading of the contractual cargo.

63. The owners accepted that the position might well have been different if there had only been one berth for the loading of sugar cargoes in the port of Paranagua, so that if that berth became unavailable loading was then not possible at the port at the relevant time. However, that clearly did not seem to us to be the case on the available evidence.

64. The charterers argued that once the sugar to be loaded was placed in storage at the CBL terminal, it was not "practically possible" to move it to another terminal so that "to all intents and purposes, there was only one possible berth for the loading of the sugar at Paranagua". That did not seem to us to be the case. On the evidence it seemed to us that there were a number of alternative berths in Paranagua at which the vessel could have loaded.

65. There were references in the contemporaneous correspondence to the fact that there was scope for "persuading the charterers to change the berthing programme" and to the fact that the charterers had "enough cargo" in the Pasa terminal. That was contradicted a year later in the local agent's witness statement but the contemporaneous evidence certainly suggested to us that the charterers had some flexibility in terms of arranging a cargo for this particular vessel. That was no more than we would expect, since the charterers are a major sugar trader and Paranagua is a significant sugar loading port. There was also a reference in the contemporaneous correspondence to that fact that the charterers "could not get sugar to the terminal as quickly as hoped". Ultimately they had to transfer the cargo from the CBL warehouse by trucks to the Centrosul terminal where the vessel actually loaded at berth 212.

66. We could not therefore accept the submission made on the charterers' behalf that the fire and its effects meant that since the cargo had been transferred to the CBL warehouse it became impossible for them to comply with their obligation to nominate a berth where it could be loaded. That being so, we concluded that the charterers were not entitled to invoke the force-majeure provisions in Clause 28 because the only sense in which loading was "prevented or delayed" was that it became impossible to load at berth originally intended; it continued in our view to be possible to discharge their obligation to nominate a safe berth under Clause 4 of the charterparty and they were obliged to do so by nominating an alternative berth.

67. Had we concluded that the charterers were prevented from loading as a result of the fire, we would have seen no reason as a matter of the construction of Clause 28 why, prima facie, the force-majeure exceptions should not have applied to laytime. Whilst it is correct that general exceptions clauses will only apply to laytime if it is clear as a matter of the strict construction of the relevant provision that this is the intention of the parties that certainly seemed to be the effect of Clause 28 in the present case. Our attention was drawn to an unreported decision to the contrary (the judgment of Thomas J in The "Solon") but that was apparently a decision in the context of a strike and it was not clear whether that case was distinguishable on its facts from the present case.

68. However, as the owners emphasised exception clauses such as Clause 28 in any event have to be construed strictly against the party relying upon them and Clause 28 contained no mention of 'fires'. Nor was it easy to see how the phrase "mechanical breakdowns at mechanical loading plants" could apply in the present case, since in common sense terms the inoperability of the conveyor belt appeared to have been the result of physical damage due to the fire rather than the mechanical breakdown.

69. Nor could we accept that decisions by the port authority or other body responsible for the operation of the port of Paranagua to re-schedule the loading or discharging of a vessel in the light of the fire amounted to "government interferences". That phrase was suggestive so far as we were concerned of an embargo or export ban, rather than simply an administrative re-scheduling of cargoes due to a fire.

70. Even if the charterers had been in a position to invoke Clause 28, we concluded therefore that they would nevertheless have faced considerable difficulties in persuading us that they were entitled to rely upon any of the specific force-majeure events set out in that clause."

4. It is against those conclusions that the Charterers now seek to appeal. The question of law is as follows: "Whether delay in loading caused by and/or in consequence of a fire which destroys mechanical loading equipment (and/or a port authority's re-scheduling of loading following such destruction) counts as laytime under the Charterparty and whether the fact that loading thereunder at "1-2 safe berths" is lawfully relevant to the operation of Clause 28 of that Charterparty."
5. In essence, the Tribunal concluded that the Charterers were unable to rely upon Clause 28 of the Charterparty for three main reasons:

i) It was the obligation of the Charterers, when loading at the CBL terminal became unusable due to the fire, to nominate an alternative berth and the fact that the CBL terminal was unusable did not mean that the Charterers were unable to perform their obligation to nominate "1-2 safe berths" for loading the contractual cargo (paragraph 62 of the Award). Clause 28 did not apply to that obligation unless the CBL terminal had been "named" in the Charterparty so as to render the Charterers unable (from a legal standpoint) to nominate an alternative berth (paragraph 61 of the Award). There were a number of alternative berths at which cargo could have been loaded (paragraphs 64 and 65 of the Award). As it was not impossible for the Charterers to nominate a "safe berth" where the cargo could be loaded, the only sense in which loading was "prevented or delayed" was that it was impossible to load at the berth originally intended (paragraph 66 of the Award). I will refer to this as "the safe berth point".

ii) Clause 28 made no mention of "fires" as an excepted peril and "in common sense terms", the inoperability of the conveyor belt appeared to have been the result of physical damage due to the fire rather than any mechanical breakdown (paragraph 68 of the Award). I will refer to this as "the fire and mechanical breakdown point".

iii) Any refusal of permission by the Port Authority of Paranagua to vessels to load at the CBL terminal was not "government interferences" which term in Clause 28 related to such things as embargoes and export bans and not simple administrative re-scheduling of cargoes due to a fire (paragraph 69 of the Award). I will refer to this as "the government interference point".

The safe berth point

6. With great respect to the Tribunal, it seems to me that the Charterers are right in their submission that the Tribunal approached this aspect by asking the wrong question i.e. whether the Charterers had a relevant legal obligation to nominate an alternative loading berth when the CBL terminal became unusable. The Tribunal concluded that that obligation (as they perceived it) meant that no delay was relevant in law (paragraphs 61-62 and 66 of the Award).
7. This was, however, not a case about berth nomination but about whether there was prevention or delay in loading caused by a relevant excepted peril. Furthermore, even if it be correct that the wording requiring the Vessel to proceed to "1-2 safe berths" imposes on the Charterers a duty, as opposed to conferring a right, to nominate a second berth, it does not necessarily follow that there can be no prevention or delay in loading while that is being done nor that, as a matter of law and prior to any valid nomination of a berth, the Charterers are necessarily precluded from relying upon Clause 28. In other words, I do not consider that there is any reason in principle nor in the wording of the Charterparty which, as a matter of law, requires the Charterers to nominate a berth as a precondition to the operation of Clause 28. As submitted by Mr Young QC for the Charterers, delays consequential upon the operation of an excepted peril (including congestion caused by re-arrangements) may still be relevant to clauses like Clause 28: see, for example, Carboex v Louis Dreyfus Commodities Suisse [2011] 2 Lloyds Rep 177 (Field J), [2012] 2 Lloyd's Rep 379 (CA).
8. In my view, the correct question for the Tribunal to answer was simply whether there was prevention or delay in loading which was caused by an excepted peril. This had three stages, namely: (i) whether there was prevention or delay in loading, and, if there was (ii) was it caused by an excepted peril and (iii) how long was the relevant delay in loading.
9. As to stage (i), the Tribunal appear to have thought that there was in fact "prevention or delay", albeit that they expressed this finding in the phrase "…the only sense in which loading was 'prevented or delayed' was that it became impossible to load at the berth originally intended…" (paragraph 66 of the Award). However they appear to have regarded that fact as legally irrelevant, preferring instead their "short answer" of law.
10. In accordance with the decision in Reardon Smith v Ministry of Agriculture (The Vancouver Strikes Cases) [1963] A.C. 691, the Charterers would have been entitled to require the Vessel to wait until the CBL terminal, as planned, was again usable and the only question would have been whether there was relevantly caused "prevention or delay" during that period. That the Charterers did not so insist and in fact sought to reduce the delay following the fire and to make alternative arrangements, but only after some delay had been caused, does not alter that analysis.
11. It follows, in my view, that the Tribunal's view that the Clause 28 exceptions could apply only if the CBL terminal had been "named" in the Charterparty (paragraph 61 of the Award) is, as a matter of law, incorrect. The fact that a party can make alternative arrangements and may re-direct a vessel following the operation of an excepted peril does not mean that that excepted peril cannot in law cause delay while such arrangements are put in hand. That is so whether the berth is "named" or not. Naming a berth merely makes alternative arrangements for loading at another berth legally impossible without a variation of the charter.
12. In seeking to support the Tribunal's conclusion on this point, Mr Phillips, counsel for the Owners, submitted in summary as follows:

i) The Charterers cannot rely upon a problem at a berth to which the Vessel was never ordered and which was never nominated (i.e. the CBL terminal);

ii) Once the Pasa terminal or the Centrosul terminal was effectively nominated, such nomination was to be treated as if written in to the Charterparty from the outset (see The Vancouver Strike Cases [1961] 1 Q.B. 42 per Sellers L.J. at p. 86 and per Willmer L.J. at p. 115; The Jasmine B [1992] 1 Lloyd's Rep. 39 per HHJ Diamond QC at p. 42);

iii) As much as that possibly meant that, once a berth was effectively nominated, the Charterers were under no obligation to make a substitute nomination (as the Charterers argue), it also means that the Charterers cannot seek to rely upon Clause 28 as if they had made a different nomination (i.e. the CBL terminal) from the outset.

iv) Thus, the Charterers cannot argue that the delay to the Vessel was the consequence of the fire at the CBL terminal (and thereby bring themselves within Clause 28) in circumstances where (i) the Charterparty stands to be viewed as always having required the Vessel to proceed to the Pasa terminal or the Centrosul terminal, and (ii) there is no finding to the effect that any delay (and consequent loss of time) which resulted from the need to proceed to either of those two terminals was caused by an excepted event within Clause 28.

13. In my view, these submissions do not, at the end of the day, support the "short answer" given by the Tribunal. As I have stated, reliance on Clause 28 does not depend upon the nomination of any particular berth.

The fire and mechanical breakdown point

14. This argument is more finely balanced. It turns primarily on the proper construction of the words in Clause 28 which exclude from laytime time lost as a result of loading being prevented or delayed by "mechanical breakdowns at mechanical loading plants…".
15. As to these words, Mr Phillips submitted that Clause 28 operated as an exception to the running of laytime and that they should therefore be construed contra proferentem against the Charterers. In support of that submission, Mr Phillips relied in particular upon the statement by Lord Sumner in USSB v Strick [1926] AC 545 at p576: "…if this clause in effect prevents lay days from running till the ship gets her regular turn and (I suppose) is in berth, it is evidently a stipulation in the charterers' favour. Such a clause must be construed contra proferentem…". Although Lord Sumner in fact dissented in that case, nevertheless Mr Phillips submitted that this dictum was generally applicable. Mr Young QC initially appeared to accept that Clause 28 had to be construed "strictly". However, he submitted that the words still needed to be read "naturally according to their wording and not be over-restrictive", an approach which he submitted was in accordance with Carboex.
16. In support of the Charterers' case, Mr Young QC submitted in summary as follows:

i) The Tribunal's view that the complete destruction of a loading system is not a "mechanical breakdown at mechanical loading plant" because the cause of that destruction was a "fire" is unsupportable and contrary to the reasoning of the Court of Appeal in The Afrapearl [2004] 2 Lloyd's Rep. 305. In that case, the main issue was whether a leak in a pipe was to be regarded as a "breakdown of machinery or equipment in or about the plant of the charterer". In the event, the Court accepted the charterers' argument in that case that the cause of the breakdown is immaterial and that there is a breakdown if the equipment does not function or if it malfunctions. In particular, as stated by Clarke LJ:

"21. It does seem to me that a distinction should be drawn between a breakdown and its cause. To my mind Robert Goff J was right to draw that distinction. As I see it a breakdown of equipment such as the discharge pipe occurs when it no longer functions as a pipe. The cause of the breakdown may be a hole in the pipe or, as here, a gap in way of the flange which prevents the pipe operating as a discharge pipe. The hole may of course be caused in a number of different ways and for a number of different reasons. One of those reasons will commonly be the fault of someone concerned with the operation of the equipment, here the pipe."

ii) Thus, a "mechanical breakdown" is still a "mechanical breakdown" whatever its cause. One thing is certain, it cannot be said that the destruction of a mechanism is not within "mechanical breakdown".

iii) It would be odd, unreasonable and uncommercial, if one had to distinguish between types of mechanical breakdowns according to their cause, which might require difficult and expensive investigations. Thus, perhaps, what would be the case if a mechanical breakdown caused overheating which caused the fire which caused the destruction of the conveyor system? Or what would be the case if operator error caused the mechanical breakdown which caused overheating which caused the fire which caused the destruction? Or what would happen if the operator error was itself caused by the mechanical breakdown of a gauge which misled him into failing to turn on a lubricating oil pump? Investigations of the taxonomy of mechanical breakdowns according to initiating causes are not what parties to a charterparty like this can reasonably be taken to have contemplated, as the Court of Appeal in The Afrapearl made quite clear.

iv) Here, there can be no doubt that the conveyor system was inoperable and had "broken down". That is sufficient to constitute a "mechanical breakdown" within the meaning of Clause 28 regardless of the cause of such breakdown.

v) Further, that conclusion is unaffected by the fact that the conveyor system was destroyed. The words "mechanical breakdown" are wide enough to include destruction. The contrary would lead to surprising results.

17. These are forceful submissions but I am unable to accept them for the following reasons.
18. First, the starting point must be the finding of the Tribunal as stated in paragraph 13 of the Award viz that the fire had destroyed the conveyor-belt system linking the terminal to the warehouse. Despite Mr Young QC's arguments, it seems to me that, as a matter of ordinary language and common sense, the destruction of an item (or even its partial destruction) is not within the scope of the term "breakdown", still less within the term "mechanical breakdown". This can be tested by reference to two everyday examples which were referred to by Mr Phillips. If a vehicle were consumed by fire and written off, its owner would invite a raised eyebrow if he were to suggest that his car had merely suffered a breakdown. Likewise, if a heating engineer were to be summoned to repair a domestic boiler described as having broken down, he would be surprised to discover that it had in fact caught fire and burned to destruction. As submitted by Mr Phillips, it seems to me that these examples illustrate the difficulty as a matter of ordinary language in way of Charterers' argument.
19. Second, the Owners' construction is, in my view, supported by the judgment of Robert Goff J in The Thanassis A (1982, unreported), referred to with approval by Clarke LJ in The Afrapearl [2004] 1 W.L.R. 311 at [11]-[12]. In that case, a jetty (on which was mounted an oil pipeline) was struck by a vessel which collided with it, resulting in delay to other vessels seeking to use the pipeline. The question arose as to whether such damage was within the scope of "breakdown of machinery or equipment" as those words appeared in the relevant charterparty demurrage exception. Robert Goff J observed as follows:

"The arbitrator, before whom this point was argued, rejected the contention of the Charterers. He did so saying that he could not see how the words of the clause could be wide enough "to include damage to the jetty and oil pipes resulting from a collision by a vessel. 'Breakdown of machinery or equipment' cannot, even on the most generous of constructions, be regarded as the same as a complete destruction of part of the facility."

...

Mr. Gross had a number of other arguments, and the next one was this. He said that the clause refers to "breakdown of machinery or equipment in or about the plant of the Charterer, Supplier, Shipper or Consignee of cargo". He then turned to the findings of fact in the Award (I have already quoted them) which show that the oil pier was damaged by the tanker Presidente Campos Salles, by reason of a collision between that ship and the oil pier; and he said that that included damage to the jetty and oil pipes and could be regarded as a complete destruction of part of the facility. Now what is plain from these findings of fact is that there was a collision; that the jetty itself suffered substantial damage in view of the time of repair; and that the pipes on the jetty were also damaged at the same time. The complete destruction of part of the facility may well refer to a destruction of part of the jetty itself, and possibly also to destruction of part of the piping.

In those circumstances, I turn back to the clause again, and I ask myself whether what occurred can reasonably be described as a case of a breakdown of machinery or equipment. In my judgment the answer must be in the negative. So far as the damage to the jetty is concerned, I do not see how that can properly be described as breakdown of machinery or equipment. Plainly the jetty is not machinery; plainly it is not equipment. Furthermore, complete destruction of part of the facility would appear to involve something more than a breakdown. In those circumstances I do not see that the words in question are wide enough to embrace what happened in the present case. As I read the Award, I think this is the approach which the arbitrator himself adopted. So, on that simple ground, it seems to me that Mr. Tomlinson's appeal must fail." (emphasis added)

20. It is right to say, as Mr Young QC submitted, that this last paragraph and in particular the single sentence underlined (which was heavily relied upon by Mr Phillips) needs to be read with some care. In particular, it is to be noted that the focus in that passage would seem to be the destruction of the "facility" rather than the jetty itself or the oil pipes which had been damaged in that case. On that basis, Mr Young QC submitted that the term facility included the jetty which was not machinery or equipment; that Robert Goff J was not in truth focussing on the question whether complete destruction of machinery or equipment might nevertheless fall within the term "breakdown" of machinery or equipment; and that the single sentence did not therefore assist Mr Phillips. Mr Young QC may well be right at least in part as to the focus of this part of the judgment of Robert Goff J. Nevertheless, it seems to me that the observations there set out support my own view that as a matter of ordinary language and common sense, the destruction of an item (or even its partial destruction) is not within the scope of the term "breakdown" still less within the term "mechanical breakdown".
21. Third, it seems to me that the Owners' case derives support from a passage in the judgment of Robert Goff J in The Thanassis A where he stated:

"... There was then canvassed in argument the colloquial use of the word "breakdown" in relation to such things as motorcars, which seemed to indicate that in that context at least the word "breakdown" indicates some inherent defect of the machinery of the car itself which results in the car breaking down, whereas if the car was damaged in collision with another car one would not normally say that the car broke down."

22. In response, Mr Young QC submitted that this passage did not support the Owners and that, on the contrary, the succeeding part of the judgment of Robert Goff J strongly supported the Charterers' case:

"Now the difficulty with this argument is that, if one looks at the words of the clause, they refer to "breakdown of machinery or equipment". No doubt the words "breakdown of machinery" might be limited, in the appropriate context, to the colloquial expression "breakdown" when used, for example, in relation to the breakdown of a motorcar. But I find it very difficult to apply that expression in relation to equipment other than machinery. In the case for example of an oil jetty, the relevant equipment may include not merely machinery but, for example, pipes; and it seems to me that piping can legitimately be called equipment in or about the plant of the supplier or consignee of the cargo in the context of a charterparty for a tanker. As I read the words "breakdown of machinery or equipment" they must in the present context go beyond the ordinary example of a machine breaking down due to its own inherent defect. Where there has been a breakdown of equipment in the context of this clause I can see no reason why it should not include, for example, a breakage in a pipe, and in those circumstances it is difficult to see why breakdown should be limited in this clause to something involving an inherent defect in the machinery or equipment.

Now that being so, I feel disinclined to accept Mr. Gross' first submission and I feel fortified in that conclusion by a case which Mr. Tomlinson has cited to me, In re An Arbitration between Trade and Leonard & Sons, Limited [1904] 2 KB 377. That case was concerned with different clauses, which provided as follows:

"detention by ice to be for account of charterers, unless caused by breakdown of steamer."

In that case the ship stranded, and had to go for repairs. Having been repaired she then proceeded to St. Petersburg and was unable to proceed further because of ice. The question which arose was whether, given that there was detention by ice, that detention was caused by breakdown of steamer. It was held by Ridley J., whose decision was affirmed by the Court of Appeal, that it was. He said that although the event which caused the damage to the ship was the stranding nevertheless he was prepared, in the circumstances, to say that there was a breakdown of the steamer, it being irrelevant what was the cause of the damage to the ship.

In my judgment, although I am not dealing with the same clause and I must construe this particular clause in its context, here too the cause of the breakdown is immaterial. It could be some external agent, or it could be some internal defect in the machinery or equipment, but if the machinery or equipment does not function, and possibly also if it malfunctions, then there is a breakdown of the machinery or equipment. So I reject the first argument advanced by Mr. Gross."

23. I agree that this passage does, at first sight, appear to support Mr Young QC's argument that the cause of the malfunction was to be regarded as irrelevant; and I accept, of course, that this passage was, in effect, approved by Clarke LJ in paragraph 21 of his judgment in The Afrapearl. However, as it seems to me, the important point is that Robert Goff J was persuaded to reach the conclusion he did because of the particular wording of the clause in The Thanasiss A i.e. which did not merely refer to "breakdown of machinery" but referred to "breakdown of machinery and equipment" (emphasis added). As stated by Robert Goff J, although no doubt the meaning of the words "breakdown of machinery" might be limited, the position in that case was otherwise because of the additional words "and equipment". In my view, it is clear from this passage that had Robert Goff J been considering only a clause encompassing "breakdown of machinery", he would have been content to apply the "colloquial" meaning to which he referred (i.e. "some inherent defect of the machinery ... itself which results in the [item] breaking down"). It was only the inclusion of the words "and equipment" which compelled a different and broader construction. Drawing the obvious parallel between that analysis and the words of Clause 28 in the present case, it seems to me that the wording "mechanical breakdown at mechanical loading plants" points in favour of the narrower colloquial meaning rather than the much broader construction for which Charterers contend.
24. In my judgment, there is nothing in The Afrapearl which affects this analysis. Indeed, it seems to me important to note that, unlike The Afrapearl and The Thanassis A, Clause 28 in the present case is not concerned simply with "breakdown", but with "mechanical breakdown at mechanical loading plants" (emphasis added). As submitted by Mr Phillips, it seems to me that this difference is significant. The inclusion of the word "mechanical" serves to restrict the scope of the "breakdown" which must be established for the purposes of the exception. In this regard, it is clear that what is required is a breakdown of a mechanical nature. Thus, unlike in The Afrapearl [2004] 1 W.L.R. 311 and The Thanassis A, the nature of the breakdown is relevant. In other words, it is not enough that the mechanical loading plant in question simply no longer functions, or malfunctions (irrespective of the cause of the malfunction). The nature of the malfunction must be mechanical in the sense that it is the mechanism of the mechanical loading plant which ceases to function, or malfunctions, and causes the prevention of or delay to loading (and the consequent loss of time). This connotes an inherent mechanical problem, as distinct from a wider or external cause.
25. Fourth, it seems to me that this conclusion derives some further support when considering the Charterparty as a whole. For example, it is noteworthy that Clause 28 also refers to "accidents and/or breakdown on railways". The inclusion of the word "accidents" with regard to railways is no doubt intended to broaden the scope of that exception. But there is no equivalent or similar word in relation to mechanical loading plants. Similarly, I note that Clause 6 provides expressly for an exception (albeit not one of which Charterers could avail themselves, as they now recognise) in respect of "fire on board, in hulk or craft, or on shore". Thus, where the parties intended, the Charterparty makes express provision for an exception in respect of fire. Clause 28, however, contains no reference to fire. The fact that they did so in Clause 6 but did not do so in Clause 28 provides at least some support for the conclusion that "fire" was therefore not intended to be an exception to the running of laytime.
26. Fifth, insofar as may be necessary, it seems to me that this is a case where the Owners might properly rely upon the contra proferentem principle although I should make plain that my conclusion does not rest on that basis but, as submitted by Mr Young QC, on the basis that the words should be read naturally according to their wording and not be over-restrictive.
27. Finally, under this head, I should mention that the Owners had a further argument viz that the Charterers cannot rely upon Clause 28 because it could only apply when the Vessel became an arrived ship and the laytime clock started to run. In particular, the Owners submitted as follows:

i) Clause 28 applies "In the event that whilst at or off the loading place ... the loading of the vessel is prevented or delayed by ... mechanical breakdowns at mechanical loading plants, government interferences ... time so lost shall not count as laytime". Given that Clause 28 is intended expressly to provide for exceptions to laytime, it can only have been intended to apply from the time that the Vessel became an arrived ship and the laytime clock started to run. In that regard, Clause 19 of the Charterparty provided for the commencement of laytime as stated, "whether in berth or not". Thus, the laytime clock started to run following arrival (i.e. once the Vessel was at or off the loading place) and in accordance with Clause 19.

ii) In light of this, if it was the intention of the parties simply to provide for a laytime exception in respect of any event (whenever occurring, even if it occurred before the Vessel's arrival) which prevented or delayed loading, it was not necessary to do any more than provide to the effect that "In the event that ... the loading of the vessel is prevented or delayed by ... mechanical breakdowns at mechanical loading plants, government interferences ... time so lost shall not count as laytime". By definition, those words, in combination with the "whether in berth or not" wording of Clause 19, would suffice to achieve that effect.

iii) Against this background, it must be assumed that there was some additional purpose behind the introduction of the words "whilst at or off the loading place" in Clause 28. Those words cannot have been intended simply to signify that the protection of the Clause would commence with the start of laytime, for that was achieved in any event by the other words of the Clause (and Clause 19). Nor can they have been intended to signify that the laytime exceptions to which Clause 28 refers should apply only while the Vessel was at or off the loading place, for that would be unnecessary: by definition, a laytime exception could not apply to any period prior to the Vessel becoming an arrived ship.

iv) In light of this, the words "whilst at or off the loading place" must be understood to refer to the timing of the excepted event, especially given their proximity to the words "In the event that ..." and "... the loading ... of the vessel is prevented or delayed ...". In other words, those words are intended to signify that the excepted event must be one which occurs (i.e. commences) while the Vessel is "at or off the loading place". In this regard, it cannot have been intended that it would suffice for the event to occur prior to the Vessel's arrival and the commencement of laytime, for such an event would not then (i.e. at that stage) be one which "prevented or delayed" loading (for loading would not ever have been possible at that stage) and thereby affected the running of laytime.

v) Against this background, the intention of the parties must have been to restrict the exceptions in Clause 28 to stipulated events which occur while the Vessel is "at or off the loading place" (i.e. after its arrival and the commencement of laytime) and (at that stage) prevent or delay loading. Thus, it is time lost in "the event" (in the sense of "In the event that ...") of the excepted cause occurring while the Vessel is "at or off the loading place" (i.e. after its arrival and the commencement of laytime) and thereby preventing or delaying loading which is excepted. Events occurring prior to the Vessel being "at or off the loading place" (i.e. prior to its arrival and the commencement of laytime) do not qualify.

vi) This construction is consistent with a sensible commercial allocation of risk. The "whether in berth or not" wording of Clause 19 allocates to Charterers the risk of delay following arrival and the commencement of laytime (whether or not the cause of such delay existed prior to the arrival of the Vessel). That risk is only transferred back to Owners upon the occurrence of a stipulated event which (i) takes place after the Vessel has arrived and laytime has commenced, (ii) prevents or delays loading, and (iii) causes a loss of time as a result.

vii) Thus, the inclusion of the words "whilst at or off the loading place" (given their proximity to the words "In the event that ..." and "... the loading ... of the vessel is prevented or delayed ...") produces a more restrictive effect than, for example, Clause 9 of the AmWelsh form (which does not contain restricting words like "whilst at or off the loading place", and which was considered in Carboex). In the present case (where the fire at the CBL terminal occurred some days prior to the arrival of the Vessel (see paras 13 and 62 of the Award)), Clause 28 therefore has no application.

28. It may be that the Owners are correct to say that the words "whilst at or off the loading place" are surplusage. However, there is, in my view, no warrant to read the words as intending to signify that the excepted event must be one which occurs (i.e. commences) while the Vessel is "at or off the loading place". Nor do I consider that such a construction is consistent with a sensible commercial allocation of risk. On the contrary, it seems to me that it would be most uncommercial to suggest that the ability of the Charterers to rely upon Clause 28 should depend upon whether the relevant event occurred a minute before as opposed to a minute after the arrival of the Vessel.

The government interference point

29. Under this head, Mr Young QC submitted, in summary, as follows:

i) It is inherent in paragraph 69 of the Award that the Tribunal thought that the Port Authority did re-schedule the loading of vessels in light of the fire at the CBL terminal. They did not take the reasoning further since they thought that "government interferences" could not, in law, extend to such actions and that those words were limited to such matters as embargoes or export bans.

ii) However, there is no sound basis for the Tribunal's gloss on the words. Was there an "interference"? Was it by an arm of "government"? The precise form of the interference and the precise identity of the governmental arm cannot matter, much as the precise cause of the leaking pipeline in The Afrapearl did not matter. Imagine a vessel is loading at a berth and that loading is interrupted by an order of government which requires an armaments vessel to berth there immediately or because there is a warning of a terrorist attack. It is not easy to see any logical or rational basis for saying that resulting delay was not caused by "government interference". The analogy with the common exception of "restraint of princes" might be apt and, in that connection, see Scrutton, 22 Ed., Art. 123 and Cooke on Voyage Charters 3^rd Ed. paras 85.306-307 which show that compliance with an order from a governmental body can bring the case within that exception. Certainly there is nothing in the wording of Clause 28 redolent of (or restrictive to) "embargoes" or "export bans" specifically and the Tribunal did not explain their reasoning.

30. In my view, these submissions are fatally flawed for the following reasons.
31. First, there is no finding in the Award to the effect that (i) the port authority at Paranagua or in control of the CBL terminal was a government entity, or (ii) that permission to berth at the CBL terminal was suspended by the port authority (or any other party). In the absence of such findings, Charterers' argument fails in limine.
32. Second, as a matter of construction the phrase "government interferences" is not, in my judgment, intended to encompass "an administrative re-scheduling of cargoes due to a fire" (paragraph 69 of the Award). In particular and putting aside "government interferences", each of the exceptions for which Clause 28 provides is capable (in the abstract) of affecting all and any berths at all and any ports. Thus, the exceptions are intended to be of general and widespread application. As it seems, they are not intended to give rise to the possibility of inconsistent and differing outcomes depending upon the nature of the berth in question. However, if Charterers' construction of "government interferences" is upheld, inconsistency will be the result, and the application of the exception (and its outcome) would be capricious and unpredictable. For example, it is common for a vessel to be ordered off a berth by reason of poor weather or in order to accommodate the berth or terminal operator's desire to give priority to another vessel. In isolation, neither scenario would stop the running of laytime under Clause 28. However, on the basis of Charterers' interpretation, time would stop running in such circumstances if the berth or terminal operator were a government entity, but not otherwise.
33. Against this background, it seems to me that the parties must have intended some other construction for "government interferences". In my view, that phrase cannot have been intended to encompass a state-sponsored port authority acting in the ordinary course of discharging its port or berth administrative function (in the same manner as any other, private port authority), as distinct from a government entity acting specifically/peculiarly in a sovereign capacity which is independent of that ordinary administrative function. The need to acknowledge the division of responsibility on the part of a port authority in this manner has long been recognised (see, for example, The Isabelle [1982] 2 Lloyd's Rep. 81 per Robert Goff J at p. 86 LHC where the distinction was drawn between a port authority acting in the exercise of its own administrative function, on the one hand, and fulfilling some other function or acting on instructions from the charterers, on the other hand).
34. While in The Forum Craftsman [1991] 1 Lloyd's Rep. 81 (which concerned Clause 28 in embryonic form: see p. 86 LHC), the charterers sought to rely upon the exception in respect of "government interferences" where a vessel was advised by port control in Bandar Abbas that the vessel was to be shifted from the berth to the anchorage and then remained at anchor for a further 79 days, that was in circumstances where it was found as a fact that the intervention of the Ministry of Health of the Islamic Republic of Iran through the Hormozgan Province Regional Health Department had had some causative effect in delaying the re-berthing of the vessel (see pp. 83 RHC to 84 LHC). Thus, it was arguably a paradigm case of government interference, unlike the present. As it was, the application of the exception was never considered on its facts in that case.
35. As it is, it would in many cases be very difficult to determine whether, in any given case, a port authority is or is not a government entity for the purposes of "government interferences". Challenging and subtle distinctions would arise between ports which are plainly state-operated (openly, through a ministry) and ports which are operated by private companies which are themselves state-owned or state-operated. As submitted by Mr Phillips, it seems to me that the need to wrestle with such distinctions confounds the certainty for which commercial parties would be expected to provide. For that reason, it is my conclusion that it cannot have been their intention that "government interferences" would apply to the acts of port authorities in the manner for which the Charterers contend.
36. In light of the observations above, it does not matter what is encompassed within "government interferences"; it suffices that the facts of the present case are not. However, the Tribunal was plainly right in concluding that: "That phrase was suggestive ... of an embargo or export ban, rather than simply an administrative re-scheduling of cargoes due to a fire" (paragraph 69 of the Award). What was required, at the least, was an act by a port authority (which was also a government entity) which amounted to the discharge of a sovereign function and which differed from an ordinary administrative act of which any port or berth authority (state-owned/operated or otherwise) would be capable in the day-to-day management of a berth. There was no such act in the present case (nor any finding in that regard).

Conclusion

37. In conclusion, although I have accepted the Charterers' submissions in relation to the "safe berth point", I am unable to accept their further submissions in relation to the other points. On that basis, I dismiss their appeal and affirm the Award. Counsel are requested to seek to agree a draft order for my approval (including costs) failing which I will deal with any outstanding issues.