Does a reference in a charterparty to "all cargo tanks" include a vessel's slop tanks? Not according to Hamblen J in the recent decision of VTC v PVS [2012].
The Facts
The case involved a 10 year charterparty on an amended Shelltime 4 form. Five years into the period, Charterers entered into a sub-charter for the carriage of a cargo of gasoline from Rotterdam. It was Charterers' intention to bunker at Falmouth, before proceeding to Rotterdam for loading. However, before arriving at Falmouth, oil was found on the surface of the ballast water in one of the ballast tanks.
Investigations revealed a 12mm crack in the port side slop tank. Owners assured Charterers that permanent repairs would be carried out at Rotterdam. Repairs could not be completed before the sub-charterparty cancelling date. Sub- Charterers cancelled the sub-charter.
Charterers subsequently deducted US$455,432 from hire, on the basis that Owners were in breach of Rider Clause 64 of the Charterparty, which provided that:
"64) Tanks, Lines and Pumps Suitability
Owners warrants (sic) that vessel will arrive at each load port with all cargo tanks, pumps and lines suitable to load the intended cargo as per Charterers' representative and/or independent surveyor's satisfaction..."
The Charterparty also contained a general maintenance obligation (Clause 3(i)). Charterers claimed that Owners breached Clause 64 when they informed Charterers that the vessel would not meet her cancelling date under the Sub-Charter due to the required repairs. Owners brought arbitration proceedings in order to recover the sums Charterers had deducted.
The Tribunal's Decision
The Tribunal found that Owners were not in breach of Clause 64 and awarded them US$455,432, interest and costs. Charterers appealed that decision to the High Court, arguing that "all cargo tanks" included the vessel's slop tanks, and Owners were in breach of Clause 64 because of the crack in the port side slop tank.
The Commercial Court's Decision
Hamblen J, in finding in favour of the Owners, agreed that there was no breach of Clause 64. In his judgment, he made it clear that "the natural reading of Clause 64 is... that it is referring to cargo tanks in contradistinction to other ship's tanks". Accordingly, the wording "cargo tanks" did not encompass ballast tanks or slop tanks.
Comment
This case highlights the importance of precise drafting, as well as consistency of terms within a Charterparty. Had Charterers wanted Clause 64 to cover slop tanks as well as cargo tanks, "it would have been the easiest thing to delete the word cargo" or include the wording "and slop tanks", as in Clause 110 of the Charterparty where a distinction was drawn between the vessel's "cargo tanks" and "slop tanks". Clause 64 could have been worded similarly.
It is a salutary lesson to all involved in charterparty negotiation to remember how essential it is carefully to record the precise terms the parties have agreed during the negotiation process and allocate risk accordingly.
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