ENE Kos v Petroleo Brasileira SA – "The Kos" – QBD (Comm Ct.) 23rd July 2009
Some interesting issues have been brought up by a dispute involving the VLCC "Kos" which had been chartered out on the Shelltime 3 form. The owners withdrew the vessel for non-payment of hire but at the time the notice was given, at 1441 on 2nd June, the vessel had started loading cargo for the charterers at Angra Dos Reis in Brazil. The case notes do not indicate why the notice was given at that time. It would not be unreasonable to assume that the original intention had been to serve it before loading had commenced.
Charterers claimed the withdrawal was wrongful and then threatened to arrest the ship unless the owners put up security for USD18 million. The owners provided that security. Charterers still wanted the ship and were trying to negotiate with the owners to allow them to continue to use it. The owners refused to allow the charter to continue and eventually the cargo which had been loaded (quantity unknown) was discharged at the load port.
The owners obtained a summary judgment for their claim for hire leading up to the withdrawal. However they also claimed damages for the delays caused by the discharge of the cargo, the value of bunkers consumed as well as the cost of providing the bank guarantee to get the ship released.
The owners invited the Court to give them damages for that time lost as well as the cost of the bunkers used and other expenses. The claim was put as one for damages by way of an indemnity under the charter, or for damages as a result of charterer's breach in failing to pay hire and/or on the basis of an implied term following a valid withdrawal of the vessel.
Andrew Smith J rejected all of these arguments but he was prepared to consider that the owners had remained bailees of the cargo and that they should be paid for that bailment. In addition, the cost of providing the bank guarantee were properly claimable since these costs were entirely within the discretion of the High Court.
The timing of notices of withdrawal need to be very carefully considered. If notice had been given earlier to the charterers they might still have arrested the ship for a highly inflated sum of money - but at least the issues and costs surrounding the discharge of the cargo would have been minimised.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
