Judge clarifies meaning of ‘light ballast condition’ in English law

Legal firm Hill Dickinson has commented on a recent decision in which Phillips J clarified the meaning of ‘light ballast condition’ and defined the scope and effect of a delay claim under the TOWCON form.

In Regulus Ship Services PTE Ltd -v- Lundin Services BV [2016] EWHC 2674 (Comm), the claimant Regulus agreed that its tug, the AHTS Harmony 1, would tow FPSO Ikdam from Sousse, Tunisia to Labuan, Malaysia, on behalf of defendants Lundin, for the lump sum of $2.75m.

It was an express term of the contract that the Ikdam would be in ‘light ballast condition’. Regulus claimed that, in breach of this obligation, Lundin provided the Ikdam in heavy ballast condition, causing the voyage to take longer and the tug to use more fuel than should have been required.

Regulus therefore claimed delay payments for those days in excess of the anticipated duration of the voyage and damages to reflect the cost of excess fuel, port demurrage and miscellaneous expenses.

Lundin counterclaimed damages on the basis that Regulus was in breach of an implied obligation under the contract that the convoy would maintain an average speed of 4.5 knots. Towards the end of the voyage, Regulus diverted the convoy to Singapore in order to assert a lien over the Ikdam in respect of its delay claim.

Each party claimed to have accepted the other party’s repudiation of the contract whilst at Singapore. Lundin entered a new towage contract to complete Ikdam’s voyage to Labuan.

The only previous authority on the definition of ‘light ballast condition’ was the Ease Faith Ltd -v- Leonis Marine Management Ltd [2006] 1 Lloyd’s Rep 673 relating to the Kent Reliant, in which Andrew Smith J held that the term meant that the tow would carry the minimum ballast that would enable her to proceed safely and in a seaworthy condition on her intended voyage.

Lundin sought to reformulate the test by reference to another passage of Smith J’s judgment and argued that the tow should not only be physically safe but also legally fit for towage. This would include being insured for the voyage which would also entail compliance with the requirements of the marine warranty surveyor.

Phillips J rejected this. He said that the proper test was that the light ballast condition was concerned with ensuring physical fitness, primarily stability, for the tow’s voyage. The attempted reformulation of the test from one of the minimum ballast required for physical safety and seaworthiness to one based on the wishes of a third party, the judge noted was capable of multiple solutions, was rejected.

Regulus claimed delay payments at the contractual daily rate on the basis that the Ikdam was incapable of being towed at the original speed contemplated, asserting this entitlement arose regardless of the cause of the slow speed.

Phillips J rejected this. He said that there was no evidence that Regulus made a decision to slow steam: in fact, the tug had attempted to reach the intended speed and had, on occasion, done so. Secondly, Ikdam was not incapable of being towed at the intended speed: it was the tug that could not average that speed using only two of its four engines.

Phillips J rule that the exchanges on which Lundin relied for its counterclaim were part of the negotiation and agreement of the contractual price, based on anticipated fuel consumption, not an agreement as to a guaranteed speed/duration. No collateral agreement had been made. Further, neither party intended that Regulus should guarantee a particular speed. Regulus had repudiated the contract and Lundin had accepted that repudiation, and was entitled to recover as damages the costs and expenses of engaging an alternative tug to complete the voyage.

Hill Dickinson commented that the case confirmed the proper test for the meaning of ‘light ballast condition’ and provided useful guidance on how this could be interpreted in practice. The case also illustrated the steps a tug-owner should consider when anticipating a potential claim for delay under the BIMCO Towcon form. Further, it confirmed the Court’s long standing position regarding the circumstances where terms would or would not be implied to a commercial contract. http://www.hilldickinson.com/insights/articles/regulus-ship-services-pte-ltd-v-lundin-services-bv-2016-ewhc-2674-comm