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REEFER & GEN. SHIPPING CO. v. GREAT WHITE FLEET

April 17, 1996

REEFER AND GENERAL SHIPPING CO., INC., Plaintiff, against GREAT WHITE FLEET, LTD., Defendant.


The opinion of the court was delivered by: KRAM

 SHIRLEY WOHL KRAM, U.S.D.J.

 In this maritime contract dispute, plaintiff Reefer and General Shipping Co., Inc. ("Reefer") seeks damages against Great White Fleet, Ltd. ("GWF") in the amount of $ 2,405,712.52 plus interest and costs for the wrongful termination of a charter party. GWF counterclaims that it is entitled to losses resulting from Reefer's material breaches in the amount of $ 497,857.66 together with interest and costs. On October 11 through October 23, 1995, the Court held a bench trial on these claims. *fn1" As set forth fully in the following findings of fact and conclusions of law, the Court finds in favor of defendant GWF in the amount of $ 347,163.68.

 FINDINGS OF FACT

 I. The Charter

 On December 7, 1990, GWF, the chartering arm of Chiquita Brands food company, chartered the Kinaros V (the "Vessel") from Reefer under a refrigerated vessel time charter (the "Charter"). The Vessel is equipped with three diesel-powered auxiliary generators. One generator is sufficient to propel the Vessel if no cargo is being carried, but with a full cargo, a second generator is necessary, while the third generator operates in stand-by condition. The Charter originally covered a two-year period beginning January 12, 1991, but during the first year of operation of the Vessel, the parties executed an addendum, dated October 4, 1991, extending the Charter for an additional two years through January 12, 1995. This addendum provided for a higher charter rate, but all other terms remained the same.

 Under the terms of the Charter, GWF was required to supply fuel for the Vessel meeting certain explicit specifications. Pl.'s Trial Exh. ("PX") 1 at P 4. Reefer retained broad discretion to inspect and sample the fuel furnished by GWF. PX 1 at P 5.

 The chief negotiators of the Charter's terms were John R. Webber ("Webber"), GWF's director of operations, and Anthony Axentios ("Axentios"), Reefer's chartering manager. GWF relied on the "Baltime 39" charter form, widely used in the shipping industry, in drafting its own pro forma charter. Trial Tr. at 18, 344, 375. GWF's pro forma breakdown clause states: "If, during the terms of this charter, the vessel or its refrigeration machinery and equipment break down for any reason whatsoever and such breakdown occurs on two occasions, then Charterer shall have the right to terminate this charter." Def.'s Trial Exh. ("DX") 2 at P 51.

 In negotiating the terms of the Charter with Reefer, GWF sought the ability to terminate the agreement in the event that a number of breakdowns hindered the proper functioning of the Vessel. The inclusion of a breakdown clause in the Charter was meant to prevent a recurrence of a situation similar to that experienced by an earlier-chartered vessel, the Royal Reefer, which encountered numerous problems on its voyages. Trial Tr. at 372. Axentios, Reefer's negotiator, stated with respect to this provision: "This was the clause I just didn't want to be in the charter party. I saw no reason for it to be in the charter party at all. So I just didn't want it in at any price, if at all possible." Id. at 78-79; see also id. at 25-26.

 After extensive negotiations, Reefer agreed to the inclusion of the breakdown provision only after its applicability was limited to three breakdowns within a twelve-month period. The final provision included in the Charter as paragraph 51 (the "Breakdown Clause") thus read: "If, during the term of this Charter, the vessel or its refrigeration machinery and equipment breakdown [sic] for any reason whatsoever and such breakdown occurs on three occassions [sic] within a 12 month period, then Charterers shall have the right to terminate this Charter." PX 1 at P 51.

 At trial the parties presented widely varying accounts of what constitutes a breakdown under the Breakdown Clause. Testifying on behalf of Reefer, Axentios stated:

 
For me a breakdown on a ship is a very, very serious matter and it would have to be something really whereby either the solution would be time consuming, would be expensive and would cause real great harm to the charterer, whether it be GWF or anybody else. For me it would have to be really something catastrophic which we wouldn't sort of envisage during the period of the charter.

 Trial Tr. at 27. Based on this interpretation, Axentios concluded that although the various problems experienced were "regrettable accidents," none were breakdowns within the meaning of the Breakdown Clause. Id. at 34, 35. In contrast, James Parker, GWF's vice president and general maritime counsel, testified that a relatively short sea stoppage to repair a part would constitute a breakdown under the Breakdown Clause. Id. at 374.

 Webber, GWF's chief negotiator, testified equivocally in describing what constitutes a breakdown under the Breakdown Clause. Webber testified in his deposition that the term refers to an event hindering a vessel's performance, and that unless a voyage is frustrated, its performance is not hindered. *fn2" At various other times, however, Webber described a breakdown as "a malfunction of any part of the ship's equipment which is at the Charterer's disposal," "a failure that hinders the vessel's performance [or] the ability of the Vessel to perform under the terms of the Charter Party," and "a mechanical cessation of the essential functions of the vessel. The machinery, the auxiliary machinery, refrigeration." Webber Dep. at 14-16, 21-22. In testifying that frustration was required, Webber added that the time in which a Vessel must be delayed for a voyage to be frustrated would have to be analyzed on a "case-by-case basis." Id. at 18. At any rate, Webber's testimony that a breakdown must "frustrate" a voyage does ...


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