On 15th March 2024, the First Hall of the Civil Court delivered its judgement on the case of ‘Mediterranean Samac Company Limited (C 44907) and La Valletta BTZ Trading Limited (C 59405) vs. Harbour Fuels Limited (C 61920)’ within which the plaintiff companies were the co-owners of the vessel ‘Sun Oil I’ (IMO Number 8861694) and engaged in judicial proceedings against the defendant company for breach of contract.
Facts of the Case
The defendant approached the plaintiffs to provide bunkering services to the abovementioned vessel for a specified period of time, which under maritime law is normally governed by means of a document commonly referred to as a ‘time charterparty agreement’. The parties did not formally engage in a written agreement but instead proceeded by means of the defendant’s unilateral proposal. This unwritten agreement essentially dictated that the defendant bound itself to pay the plaintiffs €32,000 per month. Additionally, the defendant was to also pay the plaintiff a ‘performance bonus’ of €0.005 for every litre of fuel that was carried on board the vessel.
It resulted that only one monthly payment was affected by the defendant, despite multiple reminders and interjections made from the plaintiffs. The co-owners claimed that besides the non-payment of the charter hire resulting in a breach of contract, the defendant also failed to return the vessel back to them. On these matters, the defendant claimed that the plaintiffs:
- are yet to provide concrete evidence that they are truly the legitimate owners of the vessel;
- never entered into a proper contract and that it was merely a unilateral agreement; and
- never lost possession of the vessel given that a time charterparty dictates that the vessel always remains in the owners’ possession.
The defendant also claimed that handing over the vessel to the owners was virtually impossible due to the fact that it was arrested in Libya and seized by the Libyan authorities, as a result of which the defendant raised the defence of ‘impossibilium nulla obligatio est’, which means that one cannot be obliged to carry out an impossible obligation. On this point, the defendant also confirmed that they had nothing to do with the arrest of the vessel and that this was a classic scenario of force majeure. Reference was made to Article 562 of the Code of Organisation and Civil Procedure whereby the defendant stated that the onus of proof falls on the plaintiffs as the alleging parties.
The defendant explained that the vessel was damaged in a thunderstorm, losing both anchors and requiring a tow to Libya as the nearest port. Despite the charterers’ attempt to supply the vessel with fuel, engine damage made this impossible, necessitating the tow. The vessel was later arrested on suspicion of smuggling oil and diesel, but the defendant denied any form of involvement, stating that the smuggling charges were against the vessel and crew, and not against previous charterers or owners. The defendant claimed they were unaware of any smuggling activities and of the vessel’s dodgy past.
In its response to the Court, the defendant held that they were much more active than the plaintiffs vessel vis-à-vis aiding in the release of the vessel from the arrest in Libya, and that the latter were not very co-operative.
Considerations of the Court
With reference to the defendant’s claim that the plaintiffs never presented proof that the vessel was owned by them, the latter presented a certificate of registration issued by the Moldovan ship registry clearly showing that the vessel was indeed owned by the plaintiffs. On this point, the Court verified that the certificate of registry was valid and proceeded to reject the defendant’s plea.
The Court followed up with deciding on the argument as to whether there existed an agreement between the parties due to the lack of a written contract between them as argued by the defendant. Here, the Court proceeded to refer to the case of Pillion Patrick noe v. Smarta Navigation Limited (2011) where reference was made to “Voyage Charters”, a book written by Cooke, Young, Martowski, Taylor and Lambert, which states that:
‘A contract for the chartering of a ship is normally embodied in a printed form of charterparty, agreed by the parties or their agents. Under English law there is no requirement that a contract for the services of a ship or a voyage should be made or recorded in any particular manner. So long as the parties have reached complete agreement, a charterparty signed by or on behalf of the parties is unnecessary: Lidgett vs Williams (1845). The parties agreement may be made in the course of written exchanges or during conversations and may even by inferred from conduct, so long as the inference to be drawn is clear. All that is required is that the parties should have reached a firm agreement upon all essential terms.’
Prior to deciding on this matter, the Court also made reference to two key articles within our Civil Code, these being Articles 960 and 966, which respectively provide that ‘a contract is an agreement […]between two or more person by which an obligation is created, regulated or dissolved’ and that the validity of a contract is determinate on the following matters: consent and capacity of the parties, that the contract has a subject-matter and that lawful consideration forms part of the contractual relationship. The Court therefore rejected the defendant’s second plea and deemed the agreement to be in existence and valid.
Vis-à-vis the last plea presented by the defendant, the Court held that the lack of payment of the monthly charter hire due to the co-owners and the failure to return to the vessel were deemed not to be shortcomings of the defendant but were virtually impossible to satisfy due to the vessel’s arrest. The payments for hire were not due because the vessel was deemed to be in a state of ‘offhire’ whereby it was not possible for the defendant to make use of it. The Court here went further on the concept of a time charterparty and held that the co-owners were always in possession of the vessel because the responsibility ultimately falls on them, as is considered a general concept within the field of maritime law. Reference here was made to Prof. Michael Tsimplis’ Lloyd’s Law Report whereby he wrote that:
‘The owner has to provide the services of the named ship for the agreed period of time. The service starts with the delivery of the vessel, ready to provide the agreed services to the charterers by following their orders. Delivery has to be at the place agreed in the contract and also during the agreed period of time. The time charterparty ends with the redelivery of the vessel to the shipowner at the agreed place or area of the world. […] The shipowner also has the obligation to perform the time charterparty duties, including the loading and discharging operations with the utmost despatch, unless the responsibility for the cargo operations has been transferred to the time-charterers.’
Ultimately, the Court therefore rejected all of the defendant’s pleas save for that concerning the owners’ possession of the vessel, and vis-à-vis the plaintiff’s claims, it held that these are to be rejected in their entirety.
Concluding Remarks
As is held within the field of maritime law, the Court was correct in delivering its judgement on the characteristics of the time charterparty concerning possession and ownership of the vessel. The situation would have been different had the parties entered into a bareboat charter agreement, whereby the owners would lease just the vessel on its own and all the other aspects of the ship’s operation (i.e. bunkers, crew, managers etc…) would be the charterer’s responsibility. This kind of charter views the charterer as the de facto owner for the period of the charter.
It is of quintessential importance that the difference of who retains ownership and who actually has possession in a charter scenario is clearly defined. Thankfully, globally accepted concepts within the maritime law sphere such as the one made use of in this case serve as a guiding light in situations of doubt and uncertainty.
Disclaimer: Ganado Advocates is responsible for contributing this law report but was not in any way involved as legal advisor for the parties in the judgment being covered in this law report. This article was first published in The Malta Independent on 15/08/2024.