Contract analysis

1. Clause 28 of the Charter-Party provides, in relevant part, that upon the Owner's material breach of its maintenance and seaworthiness obligations set forth in Clauses 2 and 6 of the Charter-Party, the Charterer shall be entitled to liquidated damages equal to one hundred and fifty percent (150%) of the aggregate off-hire days multiplied by the daily hire rate, "subject to a cap of $4,500,000 for any single continu

2. In its Complaint, Northwind claims aggregate liquidated damages of $13,500,000, asserting that each of the three mechanical incidents giving rise to off-hire periods during the charter term — specifically, Incident 1 (March 12, 2022 through April 2, 2022, approximately 22 days), Incident 2 (July 8, 2022 through July 29, 2022, approximately 21 days), and Incident 3 (November 15, 2022 through December 10, 2022, appr

3. Defendants assert that Northwind's interpretation of Clause 28 is erroneous as a matter of law and contrary to the plain language, structure, and commercial purpose of the Charter-Party. Properly construed under New York contract law, the phrase "single continuous period of breach" refers to the entire charter period or, at a minimum, any uninterrupted pattern of alleged maintenance deficiency or seaworthiness fai

4. Moreover, even applying the mathematical formula set forth in Clause 28, the liquidated damages calculation yields a sum substantially below the $4,500,000 cap. Specifically, sixty-eight (68) total off-hire days (being the sum of 22 + 21 + 25 days across the three incidents) multiplied by the daily hire rate of $14,750, multiplied by 150%, equals $1,504,500.00. This figure represents the maximum liquidated damages

5. To the extent that Northwind seeks liquidated damages exceeding $4,500,000, such excess constitutes an unenforceable penalty under New York law, as it would bear no reasonable relationship to Northwind's anticipated or actual damages at the time of contracting. It is well established under New York law that a liquidated damages provision is enforceable only where (a) the amount liquidated bears a reasonable propor

6. Defendants further reserve the right to challenge the enforceability of Clause 28 in its entirety on the ground that it constitutes a penalty rather than a reasonable pre-estimate of anticipated damages, should the evidence developed in discovery so warrant. SECOND AFFIRMATIVE DEFENSE Latent Defect — Incident 1 (Turbocharger Failure)

7. Incident 1 arose on or about March 12, 2022, when the main engine turbocharger of the M/V Aegean Fortuna suffered a catastrophic failure while the vessel was transiting the Indian Ocean en route from Paradip, India to Mombasa, Kenya, on a voyage undertaken at Northwind's direction and for Northwind's commercial benefit.

8. As a result of the turbocharger failure, the vessel was unable to maintain its service speed and was required to proceed to Colombo, Sri Lanka for emergency repair. The vessel was off-hire for approximately twenty-two (22) days, from March 12, 2022 through April 2, 2022, during which time the turbocharger assembly was repaired and the vessel was restored to full operational capability.

9. Defendants assert, as an affirmative defense, that the turbocharger failure was caused by a latent defect — specifically, a manufacturing or metallurgical defect in the turbocharger assembly, including but not limited to defects in the rotor shaft material composition, blade root stress concentration points, and/or bearing housing tolerances — that was not discoverable through the exercise of due diligence, routin

10. At all relevant times, Defendants exercised due diligence in maintaining the M/V Aegean Fortuna in a thoroughly efficient state of hull, machinery, and equipment throughout the charter period, in full compliance with the Owner's obligations under Clause 6 of the Charter-Party and all applicable GMCB classification society requirements, International Maritime Organization ("IMO") conventions, and flag state regula

11. The M/V Aegean Fortuna was built in 2016 by Dalian Prosperity Shipyard Co., Ltd. at its facility in Dalian, People's Republic of China, and was delivered with a full suite of class certificates from GMCB. The vessel has been properly maintained, surveyed, and classed throughout its operational life, and has at all times held valid certificates of class, Safety Construction Certificates, Safety Equipment Certifica

12. Under established principles of New York maritime law, including the law governing charter-party disputes in this Court, and consistent with the NYPE 2015 form and prevailing industry practice, an owner is not liable for losses resulting from latent defects in the vessel's hull, machinery, or equipment, provided the owner exercised due diligence to make the vessel seaworthy and to maintain the vessel in good orde

13. Defendants accordingly deny liability for any and all off-hire, damages, losses, costs, or expenses arising from or related to Incident 1, including but not limited to the claimed liquidated damages, repair costs, delay damages, and any other consequential or incidental damages alleged by Northwind in connection therewith. THIRD AFFIRMATIVE DEFENSE Charterer Causation — Incident 2 (Ballast Water Treatment System

14. Incident 2 arose on or about July 8, 2022, when the ballast water treatment system ("BWTS") of the M/V Aegean Fortuna malfunctioned and the vessel's auxiliary boiler simultaneously failed while the vessel was loading iron ore cargo at the port of Richards Bay, Republic of South Africa, under Northwind's commercial direction.

15. As a result of the BWTS malfunction and auxiliary boiler failure, the vessel was unable to complete loading operations and was off-hire for approximately twenty-one (21) days, from July 8, 2022 through July 29, 2022. During this period, the BWTS was repaired, the auxiliary boiler was restored to operational condition, and the vessel was subsequently cleared to resume commercial operations.

16. Defendants assert, as an affirmative defense, that the BWTS malfunction was directly and proximately caused by Northwind's agents, who, acting under Northwind's operational direction and control, loaded contaminated ballast water at a prior port of call — specifically, at the port of Tuticorin (V. O. Chidambaranar Port), India — thereby introducing harmful contaminants, including elevated concentrations of sulfat

17. Under the terms of the Charter-Party, Northwind, as Charterer, had full operational control over the vessel's trading pattern, employment, and loading operations, including the selection of ports of call, the engagement and supervision of port agents responsible for ballast exchange and cargo handling operations at such ports, and the issuance of voyage orders to the Master. Clause 8 of the Charter-Party expressl

18. The auxiliary boiler failure was a direct and consequential result of the BWTS malfunction. The auxiliary boiler's cooling water intake system shared certain piping and filtration components with the BWTS, and the contamination introduced through the BWTS propagated to the boiler's cooling system, causing scale buildup and thermal stress that led to the boiler's failure. The auxiliary boiler failure would not hav

19. To the extent that Northwind's own acts or omissions, or those of its agents, servants, employees, or representatives, caused or contributed to Incident 2, Northwind is barred from recovering any damages arising therefrom under well-established principles of causation and contributory fault under New York law. A party may not recover damages for a breach that was caused by or materially contributed to by its own

20. Defendants deny liability for any and all off-hire, damages, losses, costs, or expenses arising from or related to Incident 2, including but not limited to the $3,420,000 in cargo damage allegedly arising from iron ore oxidation during the period of off-hire at Richards Bay. To the extent Northwind seeks to recover such cargo damage as an element of charter-party breach damages, Defendants further assert the defe

21. In its Complaint, Northwind alleges that in or about September 2022, TSL improperly directed the M/V Aegean Fortuna to deviate from its agreed voyage from Durban, Republic of South Africa to Qingdao, People's Republic of China, in order to call at the port of Maputo, Republic of Mozambique, purportedly to load TSL's own cargo of chrome ore. Northwind alleges that this deviation added approximately four (4) days t

22. Defendants deny that the call at Maputo constituted an unauthorized or improper deviation from the vessel's agreed voyage. Defendants assert, as an affirmative defense, that the decision to call at Maputo was necessitated by prevailing weather conditions in the Mozambique Channel, including Tropical Cyclone Warning No. 2022-MC-17 issued by the South African Weather Service on or about September 14, 2022, and by r

23. Clause 5 of the Charter-Party permits worldwide trading of the vessel, excluding only (a) ports and territories subject to sanctions administered by the United States Office of Foreign Assets Control ("OFAC"), the European Union, or the United Nations Security Council; (b) war-risk zones as defined in the London Joint War Committee ("LJWC") Hull War Risks Listed Areas, as updated from time to time; and (c) ice-bo

24. The Master, Captain Nikolaos Giannopoulos, who holds a Master Mariner certificate issued by the Hellenic Republic and has over twenty-five (25) years of experience commanding dry bulk carriers in worldwide trade, exercised reasonable professional judgment in determining the vessel's route and in deciding to call at Maputo. The Master's authority to determine the vessel's route and to deviate for reasons of safety

25. The Maputo call does not constitute a breach of the Charter-Party, and Defendants deny liability for the alleged deviation, the missed Qingdao laycan window, or any resulting demurrage, dead freight, or other costs and damages claimed by Northwind in connection therewith. FIFTH AFFIRMATIVE DEFENSE Inter-Club Agreement — Bar to Cargo Damage Claims

26. In its Complaint, Northwind claims $3,420,000 in cargo damage arising from alleged oxidation and moisture damage to a cargo of iron ore loaded aboard the M/V Aegean Fortuna at Richards Bay, Republic of South Africa, which Northwind attributes to the BWTS malfunction and auxiliary boiler failure that occurred during Incident 2.

27. Defendants assert, as an affirmative defense, that as between Owner and Charterer under a time charter, cargo damage claims are properly governed by the Inter-Club New York Produce Exchange Agreement, as most recently amended (the "Inter-Club Agreement" or "ICA"), which establishes the framework for the allocation of liability for cargo claims as between owners and charterers under NYPE form time charters. The Ch

28. Under the Inter-Club Agreement, cargo claims are allocated between owners and charterers based on the cause of the damage. Specifically, claims arising from the loading, stowage, lashing, discharge, or delivery of cargo, or caused by the acts or omissions of the Charterer or the Charterer's agents, stevedores, or representatives, are allocated one hundred percent (100%) to the Charterer's account. Claims arising

29. To the extent the iron ore oxidation and moisture damage was caused by or contributed to by the BWTS malfunction — which itself was caused by the introduction of contaminated ballast water by Northwind's agents, as set forth more fully in the Third Affirmative Defense above — the cargo damage claim is allocable, in whole or in substantial part, to the Charterer's account under the Inter-Club Agreement. The contam

30. Defendants further assert that Northwind may not recover cargo damage as a separate and independent head of charter-party breach damages outside the framework of the Inter-Club Agreement. The Charter-Party's incorporation of the Inter-Club Agreement establishes the exclusive mechanism for the allocation and settlement of cargo claims as between the parties, and Northwind's attempt to circumvent that framework by

31. In Count III of the Complaint, Northwind claims $5,634,400 in damages representing the aggregate amount of three separate cargo claims asserted against Northwind by third-party shippers whose cargo was carried aboard the M/V Aegean Fortuna during the charter period. Northwind seeks to pass through these third-party claims as an element of its charter-party breach damages against Defendants.

32. Defendants assert, as an affirmative defense, that third-party shipper cargo claims are not recoverable by Northwind as damages for breach of the Charter-Party. The contractual relationships giving rise to the third-party shipper claims are separate and distinct from the Charter-Party. Specifically, the third-party shippers' claims arise under bills of lading, booking notes, or other contracts of carriage entered

33. Northwind's liability to third-party shippers, if any, arises under the terms and conditions of those separate contracts of carriage and is governed by the applicable carriage-of-goods regime, including the Carriage of Goods by Sea Act, 46 U.S.C. § 30701 et seq. ("COGSA"), or the Hague-Visby Rules, as incorporated into the relevant bills of lading. Such liability is not a foreseeable, direct, or natural consequen

34. To the extent Northwind seeks to pass through third-party shipper claims as a component of charter-party damages, such claims are too remote, speculative, derivative, and unforeseeable to be recoverable under New York contract law. Under the well-established rule of Hadley v. Baxendale, 9 Ex. 341 (1854), and its New York progeny, see Kenford Co. v. County of Erie, 67 N.Y.2d 257 (1986), consequential damages are r

35. Defendants note that this defense is the subject of Defendants' Motion to Dismiss Count III of the Complaint pursuant to CPLR 3211(a)(7), filed December 15, 2023, which is currently pending before this Court. Defendants respectfully incorporate by reference the arguments set forth in their memorandum of law in support of that motion. SEVENTH AFFIRMATIVE DEFENSE Failure to Mitigate Damages

36. Defendants assert, as an affirmative defense, that Northwind failed to take reasonable steps to mitigate its damages arising from the alleged charter-party breaches, as required under New York law. A party claiming damages for breach of contract has a duty to take reasonable steps to minimize the consequences of the breach, and may not recover damages that could have been avoided through the exercise of reasonabl

37. With respect to the three mechanical incidents (Incidents 1, 2, and 3), Northwind failed to arrange timely substitute tonnage or alternative transportation to minimize off-hire losses, substitute charter costs, and cargo delays. The dry bulk carrier market during the relevant periods (March through December 2022) was characterized by adequate vessel availability in the Supramax and Handymax segments, and substitu

38. Northwind claims substitute charter costs of $471,600, calculated on the basis of seventy-two (72) days at a substitute charter rate of $21,300 per day, representing a premium of $6,550 per day over the Charter-Party rate of $14,750 per day. Defendants assert that Northwind did not exercise reasonable commercial diligence in procuring substitute tonnage at the most competitive rate available in the market at the

39. With respect to the alleged Qingdao laycan miss (October 1–5, 2022), Northwind failed to negotiate an extension of the laycan window with the Qingdao receivers, Harborview Group, or to arrange alternative discharge logistics at Qingdao or a nearby alternative port, notwithstanding that a four-day delay was commercially manageable and that laycan extensions are routinely granted in the dry bulk trade. Northwind's

40. With respect to the cargo damage claims arising from Incident 2, Northwind failed to take adequate protective measures for the iron ore cargo during the period of BWTS malfunction at Richards Bay. Specifically, Northwind failed to direct the deployment of hatch covers, moisture barrier sheeting, or other protective measures to prevent oxidation and moisture ingress into the cargo holds during the off-hire period,

41. Northwind's sub-charter with Eastbourne Bulk Carriers Ltd. ("Eastbourne"), entered into at a sub-charter rate of $17,200 per day, contained provisions for off-hire and force majeure that, if properly invoked, would have relieved Northwind of a portion of its hire obligations to Eastbourne during the periods of vessel off-hire. Northwind's failure to invoke those provisions to mitigate its exposure to Eastbourne c

42. Accordingly, any damages awarded to Northwind must be reduced to the extent that Northwind could have avoided or minimized such damages through the exercise of reasonable commercial diligence, prudent business judgment, and the invocation of contractual protections available to it. RESERVATION OF RIGHTS

43. Defendants expressly reserve the right to assert any additional affirmative defenses that may become available through the course of discovery, investigation, or further legal analysis, including but not limited to defenses based on: (a) waiver; (b) estoppel, including equitable estoppel, promissory estoppel, and quasi-estoppel; (c) unclean hands; (d) laches; (e) comparative or contributory fault; (f) set-off and

44. Defendants further reserve the right to assert their counterclaim for $1,620,000.00 in unpaid hire for the period of October 1, 2022 through December 31, 2022 (ninety-two (92) chargeable days at the daily hire rate of $14,750.00, after deduction of agreed off-hire periods, totaling 110 days × $14,750/day = $1,622,500, rounded by the parties to $1,620,000 pursuant to the parties' commercial settlement discussions)