Appeal dismissed in dispute over vessel’s failure to meet charterparty performance warranty

Arab Maritime Petroleum Transport Co v Luxor Trading Corporation and Geogas Enterprise SA

The Court of Appeal has now given its verdict on the interpretation and intent to be placed upon the words “about” and “average” as contained in a Standtime form of tanker time charter (revised July 1955). Concerned were lines 7-9 which provided, inter alia, that the vessel was to be ’’''capable of maintaining under normal working conditions an average speed of about 15.5 knots in moderate weather... on an average consumption of 53 metric tons IFO 1,500fully laden and 50 metric tons in ballast... per 24 hours...” Clause 50 provided, “Details of vessel... regarding vessel's specifications and gas specifications are as per attached Form С (Gas) which forms part of this charter- party. These specifications to be considered as representations by the owners. Form С (Gas): Specifications of the vessel and the gas installation which are representations of the owners... Speed: 19.90 knots. Guaranteed average speed on a year period about 15.5 knots. Consumption - IFO at sea average consumption 52m/tons fully laden and 50m/tons in ballast.”

Such then were the material terms of the charterparty between the owner of the vessel, Arab Maritime Petroleum Transport and the charterers, Luxor Trading Corporation of Panama and Geogas Enterprise, the vessel Al Bida being chartered for consecutive one-year periods. The dispute giving rise to this legal action arose out of the allegation of the charterers that the vessel consumed more fuel at considerably higher speeds than she would have done if she had been capable of performing the warranted speed at the warranted consumption figure, and they claimed for excess consumption of fuel oil in 24 voyages over two years.

The arbitrators found in favour of the charterers, holding that the word “about” had to be tailored to the ship’s configuration, size, draft and trim etc, and that here the starting point was 15.5 knots at 53 tonnes laden, 50 tonnes per day in ballast, and no other.

The shipowner appealed, contending that the word “about” imported a margin on either side of 15.5 knots so that the owner warranted that the vessel was capable, on a consumption of 53 (or 50) tonnes per day, of a speed which fell within the range established and that the margin was either 5 per cent, ie 3/4 knot, or 1/2 knot, so that the owner was not in breach unless for the stated consumption the average speed fell below 14.75 or 15 knots. It was the argument of the charterers that the starting point should be 16 or 16.25 knots in all conditions of moderate weather and that if the consumption was greater than the warranted consumption figure then the owner was in breach of the warranty.

The owner was granted leave to appeal and the issue came before the Commercial Court when it was held that a contracting party was not to be held liable in damages for failing to achieve more than the minimum obligation it undertook by its contract. The court said that the construction of the words was plain enough and that “about” clearly did import some margin below and above the stated figure of 15.5 knots; when it was sought to hold the shipowner liable in damages for breach of this undertaking, it was held that the owner was entitled to have its liability measured by reference to the lower end of the range and that the owner’s contention was correct. (The proceedings in the Commercial Court were reviewed in Fairplay on June 26, 1986, and we now turn to the opinion of the Court of Appeal on the issues involved.)

The court stated that the margin imported by the word “about” which qualified the stated speed both in the preambles to the charters and in Form С Gas, could not be fixed as a matter of law; but must, as the arbitrators rightly held, be tailored to the ship’s configuration, size, draft and trim and that there was no ground upon which the arbitrators could be required to state what margin they had adopted.

Turning now to the dispute concerning the meaning of the word “average”, the court commented that the averages did no more that recognise that both normal working conditions and moderate weather may so vary that, from day to day, the consumption and sea speed may move either side of the specified figures, and that the only fair thing to do would be to take a running average over a reasonable period.

Such then were the views of the Court of Appeal and, in dismissing the appeal and cross-appeal, the court said that the vessel was incapable of meeting the performance warranty for the periods specified, and in those periods consumed excess fuel. She was not any less incapable during those periods because she performed better than warranted in other periods, and there was no basis for saying that the owner was entitled to credit for fuel saved during such other periods. The court added that if there were, it would seem to follow that if the vessel performed better than warranted throughout the charter, the owner would be entitled to be paid for all fuel saved. But the court pointed out that it was not, and that it could not be suggested that this was so.

Case № 10