The “Asia Star”

• Jurisdiction: Singapore
• Judgment Date: 29 June 2006
• Date: 29 June 2006
• Docket Number: Admiralty in Rem No 30 of 2004
• Court: High Court (Singapore)

The “Asia Star”

[2006] SGHC 115

Tan Lee Meng J

Admiralty in Rem No 30 of 2004

High Court

Admiralty and Shipping–Carriage of goods by sea–Voyage charterparties–Plaintiff requiring vessel with epoxy-coated cargo tanks–Fixture note for defendant's vessel stating that vessel's tanks epoxy-coated–Charterparty in Vegoilvoy form–Vessel's tanks discovered to be unfit to receive and carry plaintiff's cargo to destination due to severe breakdown of epoxy coating–Defendant cancelling charterparty–Whether defendant breaching term in fixture note stating that vessel epoxy-coated–Whether defendant breaching clause in charterparty to tender vessel fit to carry plaintiff's cargo to its destination–Whether defendant entitled to rely on cancellation clauses in charterparty to avoid liability to plaintiff

The plaintiff chartered the Asia Star (“the vessel”) from the owner of the vessel (“the defendant”) on the basis that it had epoxy-coated cargo tanks as stated in the “Standard Tanker Voyage Chartering Questionnaire 1988” forwarded to the plaintiff by the shipping broker and the fixture note. A pre-loading cargo tank inspection conducted by the plaintiff's surveyor revealed that the vessel's cargo tanks were unfit to receive and carry the plaintiff's cargo of palm oil to its destination as around 40% of the epoxy coating of the vessel's cargo tanks had “broken down”. The defendant cancelled the charterparty, which was in the Vegoilvoy form, (“the Vegoilvoy charterparty”) when it received confirmation that the tanks were not suitable to receive the plaintiff's cargo. The plaintiff then commenced an action against the defendants claiming to have suffered loss and damage as a result. It asserted that the defendant had: (a) breached the term in the fixture note requiring epoxy-coated cargo tanks; and (b) breached its contractual obligation under the Vegoilvoy charterparty to tender a vessel that was fit to carry the plaintiff's cargo to its destination. The defendant denied that the vessel was unfit to carry the agreed cargo and pleaded that it was, in any case, entitled to avoid liability to the plaintiff because of cll 1 (b) and 15 of Part II of the Vegoilvoy charterparty (which allowed the defendant to cancel the charterparty if the vessel turned out to be defective or if rejected by the charterer).

Held, allowing the claim:

(1) A term requiring a vessel to be epoxy-coated obviously meant that the epoxy coating had to be in a sound condition. A vessel whose epoxy coating had broken down by as much as 40% on average could not satisfy such a term in the fixture note. Shipowners whose vessels carry edible oil could not be unaware of the regulations of the Federation of Oils, Seeds and Fats Associations Ltd and other organisations requiring epoxy coating for certain types of liquid cargo to ensure that the cargo would not be oxidised, discoloured or damaged by exposure to the mild steel surface of cargo tanks. It followed that any argument that the words “epoxy coated”, as stated in the fixture note, had no real meaning could not be countenanced: at [22] and [23].

(2) The common law implied obligation of seaworthiness was absolute but it could be modified by contract. In the present case, it was modified by cl 1 (a) of Part II of the Vegoilvoy charterparty, which merely required a shipowner to exercise due diligence to “make the tanks, holds and other spaces in which cargo is carried fit and safe for its carriage and preservation”: at [26].

(3) Considering all the circumstances of the case, the vessel was not cargo-worthy when she was presented to the plaintiff at the loading port and the plaintiff was entitled to refuse to load the agreed cargo onto the vessel: at [37].

(4) The state of the tank coatings suggested that the defendant was either unaware of or had no interest in the state of corrosion and breakdown of the tank coating. As there had been a failure to monitor the state of deterioration of the cargo tank coating or to ascertain the cause of the coating problem in order to determine the appropriate remedial action to be taken, the defendant had breached cl 1 (a) of Part II of the Vegoilvoy charterparty by not exercising due diligence to ensure that the vessel was fit to receive the agreed cargo at the loading port for carriage to its destination: at [42].

(5) Clause 1 (b) of the charterparty had to be viewed in its proper context and not in isolation. It had to be read together with cl 1 (a) of the charterparty. If cl 1 (b) of Part II of the Vegoilvoy charterparty was construed as giving the shipowner a right to cancel whenever his cargo holds were not fit to carry cargo, cl 1 (a) of Part II of the charterparty, which imposed an obligation on the shipowner to exercise due diligence to ensure that the cargo tanks were fit to carry the agreed cargo, would have no room to operate. It must, without more, be assumed that the parties did not intend to include meaningless terms in the contract: at [46].

(6) The importance of the obligation to ensure seaworthiness could never be overstated and any trimming of this obligation was strictly construed. It followed that unless the obligation to exercise due diligence under cl 1 (a) of the Vegoilvoy charterparty had been fulfilled, the question of relying on cl 1 (b) did not arise. As the defendant had not fulfilled its obligation to exercise due diligence to ensure that the vessel was cargo-worthy when she was tendered at the loading port, the defendant could not avoid liability to the plaintiff under cl 1 (b) of Part II of the Vegoilvoy charterparty: at [47] and [48].

(7) The same hurdle that barred the defendant from relying on cl 1 (b) of the Vegoilvoy charterparty, namely its breach of cl 1 (a) stood in the way of any reliance on cl 15. The effect of cl 15 was also affected by cl 5 of the fixture note which provided that the shipowner was to clean the vessel's tanks to the charterer's surveyor's full satisfaction. It was trite that in the face of an inconsistency between the clauses of a standard form charterparty, such as the Vegoilvoy charterparty, and printed or handwritten provisions agreed upon between the parties, the latter would prevail. As no amount of cleaning of the tanks could rectify their fundamental defect, the defendant's argument that cl 15 of the Vegoilvoy charterparty entitled it to cancel the charterparty without incurring any liability to the plaintiff did not have a leg to stand on: at [50] to [52].

AIC Ltd v ITS Testing Services (UK) Ltd [2006] 1 Lloyd's Rep 1 (refd)

Brabant, The [1967] 1 QB 588; [1965] 2 Lloyd's Rep 546 (folld)

Brown Jenkinson & Co Ltd v Percy Dalton (London) Ltd [1957] 2 QB 633 (refd)

Ford v Beech (1848) 11 QBD 852; 116 ER 693 (folld)

Sleigh v Tyser [1900] 2 QB 333 (folld)

Sunlight Mercantile Pte Ltd v Ever Lucky Shipping Co Ltd [2004] 1 SLR (R) 171; [2004] 1 SLR 171 (folld)

Virginia Carolina Chemical Company v Norfolk and North American Steam Shipping Company [1912] 1 KB 229 (folld)

R Govintharasah (Gurbani & Co) for the plaintiff

P Jeya Putra and Magdalene Chew (AsiaLegal LLC) for the defendant.

Judgment reserved.

Tan Lee Meng J

1 This case, which concerns a voyage charterer's claim for damages from a shipowner for losses suffered as a result of the alleged unfitness of the chartered vessel to carry the agreed cargo from the loading port to its destination, raises important questions regarding the interpretation of charterparties in the Vegoilvoy form.

Background

2 The plaintiff, Pacific Inter-Link Sdn Bhd (“Pacific”), a Malaysian company that trades in refined palm oil products, chartered the Asia Star from the defendant (“OAS”), the owners of the vessel, to carry 21,500mt of refined palm oil from Belawan, Indonesia, and from Pasir Gudang, Malaysia, to Turkey.

3 Pacific required epoxy-coated cargo tanks to carry the refined palm oil and the “Standard Tanker Voyage Chartering Questionnaire 1988” (“Questionnaire 88”) forwarded to it by the shipping broker stated as follows in relation to the Asia Star's cargo tanks:

1. 2.16 Cargo tanks fully coated/type of coating Yes/Epoxy [emphasis added]

4 The fixture note specifically stated that the Asia Star was “epoxy coated/coiled”. The voyage charterparty, which was dated 15 November 2003, was in the Vegoilvoy form.

5 The Asia Star...