Can a LNG cargo be injurious to the vessel?

American Overseas Marine Corporation v. Golar Commodities Ltd (LNG Gemini) [2014] EWHC 1347

In this case, the Court was asked to consider the meaning of the words “injurious to the Vessel” in a time charter provision that was in the terms of clause 28 of the standard Shelltime form, and on which there appeared to be no relevant authority.

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The Owners of a LNG carrier entered into a time charter, clause 30 of which was headed “Injurious Cargoes” and provided as follows:

“NO ACIDS, EXPLOSIVES OR CARGOES INJURIOUS TO THE VESSEL SHALL BE SHIPPED AND WITHOUT PREJUDICE TO THE FOREGOING ANY DAMAGE TO THE VESSEL CAUSED BY THE SHIPMENT OF ANY SUCH CARGO, AND THE TIME TAKEN TO REPAIR SUCH DAMAGE, SHALL BE FOR CHARTERERS’ ACCOUNT.”

The Owners alleged that the Charterers had loaded a cargo of LNG at the Cameron Terminal in Louisiana that was injurious to the vessel in that it contained debris, in particular metal particles.

As a result, the Owners contended that the vessel required major repairs after her cargo pumps and tanks were found to be contaminated. The Owners eventually accepted that there was no evidence that any of the debris caused abrasion or rust or physical damage to the vessel, but argued that a cargo might be “injurious to the Vessel” within the meaning of clause 30 without causing any physical damage to her.

The Court held that the clause was directed to physical damage, pointing out that since it expressly covered two types of cargo that might cause physical damage to the vessel, acid and explosives, the inference was that it also covered other cargoes that might cause physical damage. The Court considered that this interpretation was corroborated because: (i) the clause was particularly concerned with repairs of damage caused by such cargoes, and the word “repairs” connoted physical damage; and (ii) the clause provided for an indemnity for time lost to do repairs, but not for time lost by the vessel for other reasons, such as cleaning.

Nevertheless, the Court went on to hold that a cargo could be “injurious” to a vessel without actually causing damage to her, if it is of a kind that has a tendency or propensity to cause damage.

On the facts, however, the Court held that the Owners had not proved that the Charterers shipped a cargo injurious to the vessel. This was because although some of the particles that formed part of the debris found in the cargo tanks during the dry dock in the Philippines were likely to have been from the Louisiana cargo, the distribution of debris suggested that it was not predominantly from the Louisiana cargo.

Further, as the vessel had used unusually fine 100 mesh filters in its manifold (which would block particles of more than 0.149mm), any Louisiana cargo debris particles that found their way into the cargo tanks would be ultra small. The Court accepted expert opinion that the LNG industry did not contemplate that ultra small particles of up to 0.25mm were going to cause any damage to the LNG system.

The Court considered it unrealistic to think that the equipment in the cargo system of a LNG tanker was designed to operate without any metallic contamination at all, and instead accepted expert evidence that small metallic particles were unlikely to cause short-circuiting in LNG or LPG tankers, nor was there any evidence that the particles would damage the ball bearings or other parts of the cargo pumps.

The cargo system of a LNG tanker was more robust than argued for by the Owners, and the Louisiana LNG shipped by the Charterers did not create potential dangers to the vessel as the Owners contended, and was not a cargo injurious to the vessel.

This case provides useful judicial guidance on the scope of clause 28 of the standard SHELLTIME form. Although the cargo in question does not have to have caused physical damage to the vessel, it must be of a kind that has the propensity to cause damage. An LNG cargo with ultra small metallic particles will not meet this test.