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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> BP Oil International Ltd v Target Shipping Ltd [2013] EWCA Civ 196 (14 March 2013) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2013/196.html Cite as: [2013] EWCA Civ 196

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION COMMERCIAL COURT
MR JUSTICE ANDREW SMITH
2010-728

		Royal Courts of Justice Strand, London, WC2A 2LL
		14/03/2013

Lord Justice Longmore :

1. This appeal is about "overage" in the context of freight payable under a voyage charterparty. "Overage" is defined in the Oxford English Dictionary as:

"A surplus, an excess, an additional amount"

Charterparties often specify that a minimum quantity of tons of cargo is to be loaded in any event but that charterers are to have an option to load more than that minimum. If the freight rate is stated to be for a minimum quantity, a question may arise whether freight is to be payable on any quantity of cargo additional to that minimum or, in other words, the "overage". That is the issue before us.

2. On 26 February 2010 BP Oil International Ltd ("BP") chartered the vessel "Target" from her owners, Target Shipping Ltd ("the owners") on the Beepeevoy 4 form. The vessel was to load a cargo of fuel oil at 1 or 2 ports in the Ukraine or Black Sea and discharge at 1 or 2 ports in the European Mediterranean (not east of but including Greece) and/or in the charterers' option ports in the Singapore/Japan range.

"or in the charterers' option 1/2 port (s) US Gulf excluding Florida/ Mississippi"

3. The cargo was to be a minimum of 80,000 metric tons with, in charterers' option, an entitlement to load a full cargo of fuel oil and it was further agreed

"Owners warrant vessel loads 87,000 metric tonnes basis 12.5m. Odessa, 112,000 metric tonnes basis no restrictions"

The freight rate was to be Worldscale 135 if discharge was in the US Gulf.

4. BP nominated Odessa as the first loading port and the vessel loaded 86,821.957 metric tons as it was warranted she could. BP exercised their option for a further loading port at Marmara where she loaded a further 26,021.543 metric tons. The vessel then proceeded to the US Gulf, discharging at Galveston and Houston.
5. The Worldscale rate for loading at Odessa and Marmara with discharge at Galveston and Houston was $23.17 per metric ton and in due course the owners rendered an invoice in the sum of US $3,651,251.32 calculated on the basis of the full amount of the cargo x 23.17 x 135. BP paid that invoice but subsequently sought to argue (inter alia) that they should have only paid freight on the minimum quantity of cargo as stated in section C of Part 1 of the charter -party by reason of the terms of clause 31.1 in Part 2 of the charterparty. They therefore sought to recover the overpaid sum as having been paid by mistake.
6. The judge held that the owners were not entitled to freight at WS 135 based on the entire quantity shipped but that BP were not entitled to pay nothing in respect of freight for tonnage carried in excess of the minimum of 80,000 tons; since the parties had not made any express agreement as to the amount due in that respect, there would have to be an inquiry as to what would be a reasonable figure for owners to recover over and above the amount of freight calculated on the minimum quantity of 80,000 metric tons. Both the owners and BP now appeal.
7. The charterparty was formed partly by an e-mail recapitulation (or "recap" as it is termed in the trade) and partly by the standard BPVOY4 form as referred to and amended or added to in that recap. That form begins with a Preamble and then has two parts. The first part consists of sections A-M with titles such as "C. Cargo Quantity" and "H. Freight Rate" but largely left blank and intended to be filled in by reference to the recap. The second part consists of 49 enumerated clauses which may or may not be amended or added to by reference to the recap. The recap and the standard form are intended to be read together.
8. The recap deals with sections C and D of Part I of the BPVOY4 Form under the heading of "Cargo Quantity, Description" as follows:-

"Minimum 80,000 Mts Chopt up to full cargo of fuel oilOwners warrant vessel loads 87,000 metric tonnes basis 12.5m Odessa, 112,000 metric tonnes basis no restrictions"

9. Section H of the recap is headed "Freight rate /Overage/Commission" and provides, so far as relevant:-

"Basis load Odessa /Singapore: USD 3,000,000 lump sum 1 to 1 Euromed: WS 120 Basis MFR Augusta USG WS 135 USAC/CARIBS WS 140

If discharge east of Singapore Charterers to pay lump sum rate agreed for Singapore minus USD 20,000 plus additional freight coming out of following formula: 80.000 MT x Flat rate spore to actual discharge port (s) x WS 110 with no overage

Suez Canal transit costs to be for owners account

All lump sum freight rates basis 1st load to last discharge only

Overage: Overage 50PCT applicable for Euromed discharge only"

This is intended to be inserted and read with section H of the BPVOY4 form which in blank provides

"H._Freight ________________________________________

_____________________________________("Freight rate")

Increase of Freight Rate applicable to increased speed per knot, or pro rata, between Charter Speed and Maximum Speed:-

____________________________________________Overage (if any) at 50% of Freight Rate"

10. Clause 31 of the printed conditions in Part 2 of the BPVOY4 form provides:

"31 Freight Rate

31.1 The Freight Rate shall be that stated in Section H of PART 1. If the cargo quantity stated in Section C of PART 1 is a minimum quantity, then the freight

payable on any cargo loaded in excess of the said minimum quantity shall, notwithstanding this Clause 31, be at the Overage rate in Section H of PART1, unless a lump sum freight has been agreed in which case no Overage

shall be payable".

11. The contentions of the parties can be simply stated. BP submit that the cargo quantity stated in Section C was a minimum quantity. Freight payable for any cargo loaded in excess of that minimum quantity is to at the "Overage rate stated in Section H", unless a lump sum freight had been agreed which it was not. When one looks at Section H incorporating the relevant part of the recap one finds a printed provision for overage saying "Overage (if any) at 50% of Freight Rate" and a typed (or e-mailed) provision saying "Overage 50 percent applicable for Euromed discharge only". The 50% provision is only applicable if discharge occurs on the European coast of the Mediterranean and, if (as happened) discharge was elsewhere (e.g. the US Gulf), no overage rate is stated in Section H and there is, therefore, no freight payable for any cargo loaded in excess of the minimum quantity.
12. The owners submit, by contrast, that the freight rate was always WS 135. If the printed provision of 50% in relation to overage is to apply only to Euromed discharge, that means the freight rate for all the cargo (both the stated minimum and the excess over that minimum) for other voyages is WS 135. It cannot be supposed that the owners were to carry any cargo in excess of the minimum rate for nothing.
13. The question has been admirably argued but is not capable of much elaboration. Two matters immediately strike one. First, in the absence of any agreement to the contrary, the parties agreed that overage was to be 50% of the freight rate. Mr John Russell for BP accepted that, if nothing had been said about overage in the recap and one was just dealing with section H of Part I and clause 31 of Part 2 of the charter, overage would be payable. That means that the words ("if any") in section H do not require a rate to be stated elsewhere in the charter for 50% to apply. So even in the absence of a stated rate, overage will be payable. Secondly, if the parties wanted to agree that no overage was payable, they said so in terms. Thus the printed clause 31 says that there is to be "no overage" if a lump sum freight is agreed and the e-mail recap provides that, if discharge takes place east of Singapore, freight will be payable according to a formula incorporating worldscale "with no overage". The parties have not expressly said that there is to be no overage in other circumstances and yet BP's construction says that is the position in all cases other than Euromed discharge. That is a surprising result which, as Mr Steven Berry QC for the owners put it (and the judge recorded in para.160), "confuses the absence of specification with the specification of zero".
14. In these circumstances I agree with the judge that BP's construction cannot be right.
15. The judge also held, however, that the parties did not agree that BP should be liable to pay full freight on any cargo loaded in excess of the minimum quantity. It followed from that that, since the owners must be entitled to recover, some freight for the excess cargo, they could only charge a reasonable freight. He therefore ordered an inquiry as to what such reasonable freight should be.
16. For my part, I cannot accept that the contract requires or parties intended any such inquiry should be made. The freight provisions are, if not extensive, at least apt (or not inapt) to cover the relationship between the parties. Once one concludes that BP's construction is impossible, the only reliable alternative is that the agreed freight rate applies to all the cargo for the relevant voyage. That is, to my mind, the natural construction of the recap and the printed form of BPVOY4 when construed together and is, no doubt, why BP paid the invoice when it was submitted.
17. The Judge felt (para 169) that the "literal wording" of the terms as to freight in the context of section H of the recap did not support either side's contention. It is true that the parties had not made any specific reference to overage other than for "Euromed discharge" but "WS 135" is the applicable rate and, if one is applying the "literal wording", I see no reason why that stated rate should not apply to voyages other than those to the European coast of the Mediterranean.
18. It is possible that the judge may have been influenced by evidence (which he recorded in para 153) that for charterers to pay full overage freight on as much as 32,000 tons would "certainly not [be] common occurrence" and that a Mr Rickwood who worked for BP for some 20 years "had never seen 100% overage on any fixture". But, however admissible that evidence might have been on any of the many issues which the judge decided and which have not been challenged in this Court, I cannot see that it is admissible on the narrow question of construction with which the Court is concerned.
19. A middle way between two potential constructions has its attraction in some ways but, in this case, it amounts, with respect, to making a contract for the parties which they have not made for themselves. When they have taken elaborate trouble and set out their agreement over many pages, the idea that there is a lacuna which the court has to fill is inherently unlikely. If filling the lacuna leads to an inquiry which is likely to be the subject of evidence and potential dispute, I would accept that one or other of the constructions put forward by the parties is likely to be right. In this case it is the owners' construction which is correct.
20. In these circumstances it is not necessary to express any final view about the owners' second ground of appeal that even if the owners' construction of the freight clause was wrong, it was still for BP to plead and prove that the reasonable amount of freight was something different from the amount of freight they had in fact paid; in the absence of such a plea and success upon it, BP could not show that they paid the freight under any relevant mistake. I would only observe that both parties thought that one round of litigation would determine their differences and that the owners might well have had a legitimate grievance, if they were to be exposed to yet further litigation.
21. I would therefore allow the owners' appeal and dismiss BP's claim.

Lord Justice Moses

22. I agree.

Lord Justice Ward

23. I also agree.