PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT / EXPERT CONSULTANT COMMUNICATION
CALDERWOOD & HARKNESS LLP One Liberty Plaza, 50th Floor New York, NY 10006
February 5, 2024
MEMORANDUM
FROM: Carlos Espinoza, Lead Associate, Calderwood & Harkness LLP, One Liberty Plaza, 50th Floor, New York, NY 10006
TO: Dr. Henrik Sørensen, Principal, Nordic Maritime Consulting Group ApS, Amaliegade 33, 1256 Copenhagen K, Denmark
RE: Factual Background and Scope of Maritime Engineering Assignment — Northwind Maritime Corporation v. Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd., Index No. 655421/2023, Supreme Court of the State of New York, New York County
C&H MATTER NO.: 1044-00006
CONFIDENTIALITY NOTICE: This memorandum is transmitted in furtherance of the expert retention agreement dated February 1, 2024, between Calderwood & Harkness LLP and Nordic Maritime Consulting Group ApS. It is protected by the attorney work product doctrine and is intended solely for Dr. Sørensen's use in connection with this engagement. The contents of this memorandum, including all enclosures and attachments referenced herein, shall not be disclosed, copied, distributed, or otherwise made available to any person or entity without the prior written consent of Calderwood & Harkness LLP.
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I. INTRODUCTION AND PURPOSE
Dear Dr. Sørensen,
This memorandum follows our expert retention letter dated February 1, 2024, which formalized the engagement of you and Nordic Maritime Consulting Group ApS as the maritime engineering expert retained on behalf of the defense in this matter. As set forth in the retention letter, you have been retained to provide expert maritime engineering analysis, opinions, and, if necessary, testimony in connection with the defense of Thalassa Shipping & Logistics SA ("Thalassa" or "TSL") against breach of charter-party claims brought by Northwind Maritime Corporation ("Northwind").
Calderwood & Harkness LLP represents Thalassa and its wholly owned subsidiary, Aegean Fortuna Shipholding Ltd. ("Aegean Fortuna" or the "Registered Owner"), the registered owner of the vessel M/V Aegean Fortuna (IMO No. 9847231), in defending against claims of breach of charter-party, negligent maintenance, and related causes of action. The case is pending in the Supreme Court of the State of New York, New York County, Commercial Division (Part 49), before the Honorable Justice Lorraine K. Chen, J.S.C., under Index No. 655421/2023.
The purpose of this memorandum is threefold:
(a) to provide you with a comprehensive factual background of the dispute, including the identities and roles of the parties, the relevant contractual framework, and the procedural history of the litigation;
(b) to set forth detailed information concerning the vessel and the three mechanical incidents at the heart of Northwind's claims, as well as an additional allegation of route deviation; and
(c) to define the specific scope of the maritime engineering assignment for which you have been retained, including the primary opinions we are requesting, the applicable deadlines for your expert report, and the procedural requirements governing expert disclosure in New York State courts.
We note at the outset that discovery in this matter is underway. The discovery period runs from January 2024 through August 2024, and additional documents, records, and information will be provided to you on a rolling basis as they are collected, produced, and reviewed. The enclosures accompanying this memorandum (described in detail in Section X below) represent an initial set of materials; we anticipate supplementing these materials substantially in the coming months. We encourage you to review the enclosed materials promptly and to contact me with any questions or requests for additional information.
This memorandum is necessarily lengthy and detailed. We have endeavored to provide you with sufficient context to begin your analysis while also flagging areas where additional documentation is forthcoming. Where our client's defense positions are noted, they are provided for your orientation; your independent engineering analysis and conclusions are, of course, what we are seeking.
II. THE PARTIES
A. Thalassa Shipping & Logistics SA (Defendant / Our Client)
Thalassa Shipping & Logistics SA is a Société Anonyme organized and existing under the laws of the Hellenic Republic (Greece). Thalassa's principal headquarters are located at 42 Akti Miaouli, Piraeus 185 38, Greece, which is situated in the heart of the Piraeus maritime district. Thalassa is an established participant in the international commercial shipping industry, with operations spanning dry bulk, tanker, and container shipping across global trade routes.
The company's senior leadership includes the following individuals, who are relevant to this engagement:
• Chairman and Chief Executive Officer: Alexandros Stavridis
• Chief Financial Officer: Elena Papadimitriou
• General Counsel: Markos Theodorakis
Thalassa currently operates a fleet of approximately 34 vessels, encompassing dry bulk carriers, oil and product tankers, and container vessels of various sizes and classes. For the fiscal year ending December 31, 2022, Thalassa reported annual revenues of approximately $612 million and earnings before interest, taxes, depreciation, and amortization (EBITDA) of approximately $98 million.
As is common in the shipping industry, Thalassa holds its vessels through single-purpose subsidiary entities. The vessel at issue in this litigation, the M/V Aegean Fortuna, is registered to Aegean Fortuna Shipholding Ltd., a wholly owned subsidiary of TSL incorporated in the Republic of Liberia under Registration No. LR-C-20167845, with a registered address at 80 Broad Street, Monrovia, Liberia. Aegean Fortuna Shipholding Ltd. is named as a co-defendant in this action in its capacity as the registered owner of the vessel. For purposes of this memorandum and your assignment, unless context requires otherwise, references to "Thalassa" or "TSL" should be understood to encompass both Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd.
B. Northwind Maritime Corporation (Plaintiff)
Northwind Maritime Corporation is a corporation incorporated under the laws of the Republic of the marshall Islands, Entity No. MI-94827. Northwind's principal office is located at 1700 Harbor Gateway, Suite 500, Stamford, Connecticut 06902, United States.
The company's senior leadership includes the following individuals:
• President and Managing Director: Viktor Lindgren
• Chief Financial Officer: Sandra Chow
• General Counsel: Richard Hartnett
Northwind is engaged in commodity trading, shipping logistics, and bulk cargo operations. For the fiscal year ending December 31, 2022, Northwind reported annual revenues of approximately $1.2 billion. Northwind regularly charters vessels from third-party owners to transport bulk commodities for its own trading operations and on behalf of third-party shippers.
In this action, Northwind is represented by Hargrove, Delacroix & Stern LLP, with lead partner Margaret Delacroix serving as lead trial counsel. Hargrove, Delacroix & Stern LLP maintains offices at 600 Lexington Avenue, 28th Floor, New York, NY 10022. We anticipate active and aggressive litigation from Northwind's counsel, and Dr. Sørensen should be aware that his expert report and deposition testimony will be closely scrutinized by experienced maritime litigation practitioners.
C. Key Vessel Personnel
Two individuals employed by Thalassa (through Aegean Fortuna Shipholding Ltd.) serve as key fact witnesses in this matter:
Master of M/V *Aegean Fortuna*: Captain Nikolaos Giannopoulos. Captain Giannopoulos served as Master of the vessel throughout the charter period and was in command during all three mechanical incidents and during the alleged Maputo route deviation. He is employed by Thalassa through Aegean Fortuna Shipholding Ltd. and is anticipated to be deposed during the discovery period. Captain Giannopoulos may serve as a fact witness at trial.
Chief Engineer of M/V *Aegean Fortuna*: Petros Vlahos. Mr. Vlahos served as Chief Engineer throughout the charter period and was the senior engineering officer responsible for the maintenance and operation of the vessel's machinery, equipment, and systems during the relevant timeframe. He prepared incident reports for all three mechanical incidents (copies enclosed as Enclosure E). Mr. Vlahos is also anticipated to be deposed during the discovery period and may serve as a fact witness at trial.
We will provide deposition transcripts for both Captain Giannopoulos and Mr. Vlahos as soon as they become available. Their testimony will be directly relevant to your engineering analysis, particularly with respect to the maintenance practices and decision-making processes surrounding each incident.
III. THE VESSEL — M/V *AEGEAN FORTUNA*
The vessel at the center of this dispute is the M/V Aegean Fortuna, a Supramax-class dry bulk carrier. The following vessel particulars are provided for your reference. A complete vessel particulars sheet is enclosed as Enclosure G.
The vessel's hull and machinery insurance is underwritten by Fortis Marine Underwriters Ltd., with offices at 50 Fenchurch Street, London EC3M 3JY, United Kingdom, under Policy No. FMU-HM-2020-4892. The vessel's protection and indemnity insurance is provided by the Oceanus Mutual Protection & Indemnity Club, located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda, under Policy No. OCE-P&I-2020-TSL-0047.
As a 2016-built Supramax dry bulk carrier of 58,200 DWT, the M/V Aegean Fortuna was approximately six years old at the time of the first incident in March 2022. The vessel was constructed at the Dalian Prosperity Shipyard Co. facility and was classed with the Global Maritime Classification Bureau from delivery. Understanding the vessel's age, class, and construction provenance will be important context for your analysis of the maintenance standards applicable to this type of vessel and for assessing the expected lifecycle of the mechanical components at issue.
Note to Dr. Sørensen: Classification records, maintenance logs, drydock reports, and GMCB survey records for the vessel are being compiled and will be provided as they are collected during discovery. An initial set of maintenance records covering the period from January 2020 through December 2022 is enclosed with this memorandum as Enclosure A. These records are being sent separately under cover letter via secure file transfer due to their volume. Additional maintenance documentation, including any records produced by Northwind or obtained from third parties during discovery, will be forwarded to you on a rolling basis. GMCB classification survey records for the period 2016 through 2022 are enclosed as Enclosure F.
IV. THE CHARTER-PARTY
A. Basic Terms
The contractual relationship between Thalassa (as disponent owner, through Aegean Fortuna Shipholding Ltd.) and Northwind (as charterer) is governed by a time charter-party executed on December 3, 2020. The charter-party is based on the New York Produce Exchange Form 2015 (NYPE 2015), as amended by the parties through various addenda and rider clauses negotiated at the time of execution. A complete copy of the charter-party, including all addenda and rider clauses, is enclosed as Enclosure B.
The essential commercial terms of the charter-party are as follows:
Northwind elected to pursue its claims through litigation rather than arbitration, invoking the Clause 46(b) addendum to file suit in the Supreme Court of the State of New York, New York County.
B. Key Charter-Party Provisions Relevant to the Assignment
While the charter-party contains numerous provisions governing the parties' respective rights and obligations, the following clauses are of particular relevance to the engineering issues on which your opinion is sought. We summarize these provisions below for your convenience. The full text of each clause is set forth in the enclosed charter-party (Enclosure B), and we encourage you to review the relevant provisions in full.
Clause 2 and Clause 6 — Maintenance and Seaworthiness
Clause 2 and Clause 6 of the charter-party, read together, impose upon the Owner (Thalassa, through Aegean Fortuna Shipholding Ltd.) the obligation to maintain the vessel in a "thoroughly efficient state of hull, machinery, and equipment" throughout the entire charter period. This obligation encompasses all aspects of the vessel's mechanical systems, structural integrity, and operational equipment. Additionally, the Owner is required to ensure that the vessel complies at all times with all requirements imposed by the vessel's classification society, in this case the Global Maritime Classification Bureau (GMCB).
This maintenance and seaworthiness obligation is the central contractual provision at issue in Northwind's claims. Northwind alleges that Thalassa breached these provisions by failing to maintain the vessel's main engine turbocharger, ballast water treatment system, auxiliary boiler, and main engine cylinder liners in a state of operational readiness and thorough efficiency. Your engineering analysis will be directed primarily at evaluating whether TSL met this contractual standard with respect to each of the three incidents.
Clause 5 — Trade Limits
Clause 5 of the charter-party permits worldwide trading, subject to certain exclusions. Specifically, the vessel is excluded from calling at:
(a) ports subject to sanctions administered by the U.S. Office of Foreign Assets Control (OFAC);
(b) ports or areas designated as war-risk zones under the London Joint War Committee Hull War Risks Listed Areas; and
(c) ice-bound waters north of latitude 68° North.
The trade limits provision is relevant to Northwind's allegation that TSL improperly directed the vessel to deviate from its agreed Durban-to-Qingdao voyage to call at Maputo, Mozambique, in September 2022. Notably, Maputo is not an excluded port under any of the Clause 5 restrictions.
Clause 11 — Off-Hire
Clause 11 governs the circumstances under which the charterer is entitled to cease paying hire. Under this provision, the charterer is entitled to deduct hire for periods during which the vessel is "off-hire" due to the owner's default, including periods of mechanical breakdown attributable to the owner's failure to maintain the vessel in the required efficient state.
Northwind has invoked Clause 11 in connection with all three mechanical incidents. Additionally, Northwind withheld hire payments for the period of October 1, 2022 through December 31, 2022 — a total of approximately 92 calendar days (though Northwind characterizes the withholding as covering 110 days of hire to account for earlier off-hire periods as well) — totaling $1,620,000 in withheld hire. Northwind claims that this withholding was justified under Clause 11's off-hire provisions and under principles of equitable setoff. TSL vigorously disputes the propriety of this withholding. TSL's position is that Northwind was not entitled to withhold hire beyond the specific off-hire periods attributable to the three incidents (totaling 68 days), and even then, only to the extent that the off-hire was properly attributable to the Owner's default. TSL has filed a counterclaim seeking recovery of the $1,620,000 in improperly withheld hire.
Clause 28 — Liquidated Damages
Clause 28 of the charter-party provides that, upon the Owner's material breach of the maintenance and seaworthiness obligations set forth in Clauses 2 and 6, the Charterer is entitled to liquidated damages calculated as follows:
Liquidated damages = 150% × (aggregate off-hire days) × (daily hire rate)
The clause further provides that such liquidated damages are "subject to a cap of $4,500,000 for any single continuous period of breach."
This provision gives rise to a significant interpretive dispute between the parties. TSL's position is that the $4,500,000 cap applies once to the entire charter period, establishing a maximum aggregate exposure of $4,500,000 for all liquidated damages claims arising under the charter-party. Northwind, by contrast, contends that the cap applies on a per-incident basis, meaning that each of the three incidents could theoretically give rise to up to $4,500,000 in liquidated damages, for a potential total of up to $13,500,000. In practice, Northwind has claimed $4,500,000 in aggregate liquidated damages under this provision.
For reference, the mathematical application of the Clause 28 formula to the 68 total off-hire days yields the following result:
68 days × $14,750/day × 150% = $1,504,500
Northwind nevertheless claims the full $4,500,000 cap amount, asserting that the cap represents a minimum liquidated amount rather than a computational ceiling. The interpretation of Clause 28 is primarily a legal question, but Dr. Sørensen's engineering analysis regarding the nature and causes of each incident, and particularly whether each incident constitutes a separate and independent breach, will inform the parties' legal arguments on this issue.
V. THE ALLEGED BREACHES — DETAILED FACTUAL BACKGROUND
This section sets forth the detailed factual background of each of the three mechanical incidents underlying Northwind's breach of charter-party claims. For each incident, we describe the nature and circumstances of the failure, identify the relevant timeframe and off-hire period, summarize Thalassa's defense position, explain the relevance of the incident to your engineering assignment, and identify the key documents that will be provided for your review. As noted above, certain documents are enclosed with this memorandum, while others will be provided on a rolling basis as discovery progresses.
A. Incident 1: Main Engine Turbocharger Failure (March 12 – April 2, 2022)
Date Range: March 12, 2022 to April 2, 2022 (22 days off-hire)
Location at Onset: The vessel was transiting the Indian Ocean, en route from Paradip, India to Mombasa, Kenya, when the turbocharger failure occurred. The vessel was operating in open-ocean conditions at the time of the initial failure event.
Nature of Failure: On or about March 12, 2022, the M/V Aegean Fortuna experienced a failure of the main engine turbocharger. The failure resulted in the vessel's inability to maintain its contractual service speed. Chief Engineer Vlahos determined that continued operation at full power presented a risk of further damage to the main engine, and the vessel was required to reduce speed and proceed to the nearest suitable port for emergency repair.
Repair Location: Following the turbocharger failure, the vessel diverted to the Port of Colombo, Sri Lanka, which was the nearest port with adequate repair facilities and the capacity to source the required replacement components.
Repair Duration: The total off-hire period for Incident 1 was 22 days, encompassing the following phases: transit to Colombo at reduced speed, port entry and berthing, diagnosis and inspection by shore-side engineers, procurement of replacement turbocharger components (including international shipment of parts from the manufacturer's facility), installation and commissioning of the replacement components, and post-repair sea trials to verify the vessel's operational readiness. Chief Engineer Vlahos's incident report (Enclosure E) details the repair timeline.
Thalassa's Position / Defense Theory: Thalassa's position with respect to Incident 1 is that the turbocharger failure was caused by a latent defect in the turbocharger component — that is, a defect that was inherent in the component's manufacture or materials and that was not detectable through the exercise of reasonable maintenance, inspection, and monitoring protocols. TSL maintains that it exercised due diligence in maintaining the main engine and all of its components, including the turbocharger, in accordance with the manufacturer's recommended maintenance schedule and the classification requirements imposed by GMCB. Under well-established principles of maritime law, an owner is generally not liable for off-hire caused by a latent defect that could not have been discovered through the exercise of due diligence. TSL's defense on Incident 1 rests on establishing both the latent nature of the defect and the adequacy of TSL's maintenance regime.
Relevance to Dr. Sørensen's Assignment: Your analysis of Incident 1 is critical to TSL's defense. Specifically, you are asked to:
(i) examine the turbocharger's maintenance history, including all inspection, service, and replacement records, as well as the manufacturer's recommended maintenance schedule;
(ii) analyze the nature of the failure to determine whether it is consistent with a latent defect (i.e., a defect not detectable through reasonable inspection and maintenance protocols) as opposed to a failure attributable to inadequate maintenance, wear and tear, or operational misuse;
(iii) opine on whether TSL's maintenance practices with respect to the turbocharger met applicable industry standards and GMCB classification requirements; and
(iv) assess whether the 22-day repair period, including transit to Colombo, was reasonable for a failure of this nature and in this geographic location.
Key Documents to Be Provided: The following documents relevant to Incident 1 are either enclosed with this memorandum or will be provided as they become available:
• Main engine maintenance logs covering the period prior to and following the turbocharger failure (partially included in Enclosure A; additional records forthcoming)
• GMCB classification survey records for the vessel's main engine and turbocharger (Enclosure F)
• Turbocharger manufacturer's maintenance manual and specifications (Enclosure H)
• Repair reports from the Colombo repair facility (to be provided when received during discovery)
• Chief Engineer Petros Vlahos's incident report for Incident 1 (Enclosure E)
• Spare parts procurement records, including shipping manifests and delivery receipts (to be provided when received during discovery)
B. Incident 2: Ballast Water Treatment System (BWTS) Malfunction and Auxiliary Boiler Failure (July 8 – July 29, 2022)
Date Range: July 8, 2022 to July 29, 2022 (21 days off-hire)
Location at Onset: The vessel was alongside at Richards Bay, South Africa, engaged in cargo loading operations, when the dual failure events were identified.
Nature of Failure: Incident 2 involves two concurrent but distinct mechanical failures:
First, the vessel's ballast water treatment system (BWTS) malfunctioned, rendering the vessel unable to comply with ballast water management requirements. The BWTS malfunction was identified during ballast water exchange operations at Richards Bay. Without a functioning BWTS, the vessel could not lawfully discharge ballast water in compliance with the International Maritime Organization's Ballast Water Management Convention and applicable port state regulations, effectively preventing the vessel from proceeding on its intended voyage.
Second, the vessel's auxiliary boiler failed. The auxiliary boiler is used for various shipboard heating and operational purposes, and its failure further contributed to the vessel's inability to maintain operational readiness.
Cargo on Board: At the time of Incident 2, the vessel was loading a cargo of iron ore at Richards Bay. Northwind claims that the prolonged port stay caused by the BWTS malfunction and auxiliary boiler failure, combined with exposure of the partially loaded iron ore cargo to ambient humidity and precipitation during the extended loading period, led to oxidation of the iron ore. Northwind has asserted a cargo damage claim of $3,420,000 in connection with this alleged iron ore deterioration.
Thalassa's Position / Defense Theory: Thalassa's defense on Incident 2 involves distinct arguments for each of the two failed systems:
Regarding the BWTS malfunction: TSL contends that the BWTS failure was caused by contaminated ballast water loaded at a prior port of call under Northwind's operational direction. Specifically, TSL alleges that ballast water taken on at a port earlier in the voyage contained excessive sediment, foreign biological material, and particulate contamination that compromised the BWTS filtration components, including the UV treatment chamber and the pre-filtration screen assembly. TSL maintains that the BWTS was properly maintained in accordance with the manufacturer's specifications and GMCB classification requirements, and that the contamination event was outside TSL's control. Under the charter-party, the charterer (Northwind) directs the vessel's commercial operations, including the selection of ports and, by extension, the conditions under which ballast water is loaded. TSL's position is that the BWTS malfunction was caused by factors attributable to the charterer's operational decisions, not by the owner's failure to maintain.
Regarding the auxiliary boiler failure: TSL acknowledges that the auxiliary boiler required repair and does not dispute that the boiler failure constituted a mechanical issue attributable to the owner. However, TSL disputes that the auxiliary boiler failure, standing alone, would have caused the full 21-day off-hire period. TSL's position is that the boiler repair could have been completed in a substantially shorter timeframe, and that the majority of the 21-day off-hire period is attributable to the BWTS malfunction — for which, as noted above, TSL disclaims responsibility.
Relevance to Dr. Sørensen's Assignment: Incident 2 presents the most technically complex issues in this case and will likely require the most detailed engineering analysis. Specifically, you are asked to:
(a) evaluate the BWTS failure mode and conduct a detailed analysis of whether contaminated ballast water loaded at a prior port under Northwind's operational direction is a plausible and scientifically supported cause of the BWTS malfunction — this will require review of the BWTS maintenance and operational logs, the ballast water exchange records from prior ports, the composition and condition of the filtration components at the time of failure, and any available water quality data;
(b) review the BWTS maintenance records and assess whether TSL's maintenance of the BWTS was in compliance with GMCB classification requirements and with the requirements of the International Maritime Organization's Ballast Water Management Convention (BWM Convention);
(c) evaluate the auxiliary boiler failure as a separate issue — conduct a root cause analysis of the boiler failure, review the boiler maintenance history, and determine whether the boiler failure was an independent mechanical event or was in any way related to the BWTS issue;
(d) opine on whether TSL met its maintenance obligations under the charter-party with respect to both the BWTS and the auxiliary boiler; and
(e) assess the reasonableness of the 21-day off-hire period for the combined repairs, and specifically address whether and to what extent the off-hire period is attributable to the BWTS malfunction versus the auxiliary boiler failure.
Key Documents to Be Provided: The following documents relevant to Incident 2 are either enclosed with this memorandum or will be provided as they become available:
• BWTS maintenance and operational logs (partially included in Enclosure A; additional records forthcoming)
• BWTS manufacturer's operating and maintenance manual (Enclosure I)
• Ballast water exchange records from prior ports of call (to be provided; these records are a priority item in our document requests to Northwind, as Northwind's agents directed the vessel to the ports where the allegedly contaminated ballast was loaded)
• Richards Bay port agent reports (to be provided when received during discovery)
• GMCB survey records specific to the BWTS (included in Enclosure F)
• Auxiliary boiler maintenance logs (partially included in Enclosure A; additional records forthcoming)
• Repair invoices from Richards Bay (to be provided when received during discovery)
• Chief Engineer Petros Vlahos's incident report for Incident 2 (Enclosure E)
• Cargo surveyor reports regarding the alleged iron ore oxidation (to be provided when received during discovery)
C. Incident 3: Main Engine Cylinder Liner Failure (November 15 – December 10, 2022)
Date Range: November 15, 2022 to December 10, 2022 (25 days off-hire)
Location at Onset: The vessel was at sea when the cylinder liner failure occurred. The precise geographic location at the time of the initial failure event is to be confirmed from the vessel's voyage logs, which are being compiled for production. We will provide this information as soon as it becomes available.
Nature of Failure: On or about November 15, 2022, the M/V Aegean Fortuna experienced a failure of the main engine cylinder liner. The nature and severity of the cylinder liner failure required the vessel to cease normal trading operations and proceed to a shipyard for drydock repair, as the failure could not be adequately addressed through afloat repairs.
Repair Location: The vessel was directed to the Keppel Verolme Shipyard in Rotterdam, Netherlands, which is a major repair facility with the capability to perform main engine overhauls and cylinder liner replacements on vessels of this class and size.
Repair Duration: The total off-hire period for Incident 3 was 25 days, encompassing transit to Rotterdam, drydocking, detailed diagnosis and inspection of the main engine, removal and replacement of the failed cylinder liner(s), reassembly, commissioning, and post-repair sea trials to verify the vessel's operational readiness.
Thalassa's Position / Defense Theory: Unlike Incidents 1 and 2, TSL concedes that Incident 3 was a maintenance failure attributable to the Owner. TSL does not dispute that the cylinder liner failure resulted from inadequate maintenance and that, with respect to this particular incident, TSL failed to meet its obligations under Clauses 2 and 6 of the charter-party.
However, TSL vigorously disputes the quantum of damages claimed by Northwind in connection with Incident 3. TSL contends that Northwind has overstated the consequential losses flowing from the 25-day off-hire period, including in particular the substitute charter costs, the alleged lost sub-charter profit, and the third-party shipper cargo claims that Northwind attributes to this incident. TSL's position is that Northwind's damages calculation fails to account for mitigation opportunities and includes speculative and unsubstantiated consequential losses.
Relevance to Dr. Sørensen's Assignment: Although TSL has conceded liability on Incident 3, your engineering analysis remains relevant and important in several respects. You are asked to:
(a) conduct a root cause analysis of the cylinder liner failure, determining whether the failure resulted from wear, a material defect, inadequate maintenance, improper operation, or some combination of factors;
(b) assess whether TSL's pre-failure maintenance of the main engine cylinder liners was consistent with industry standards and GMCB classification requirements — this analysis will be relevant to the broader question of TSL's overall maintenance regime and will provide context for the disputed damages issues;
(c) provide context regarding the typical lifecycle and recommended replacement intervals for cylinder liners on engines of the class and type installed in the M/V Aegean Fortuna (a 2016-built 58,200 DWT Supramax dry bulk carrier), including any industry data or manufacturer guidance on expected service life under normal operating conditions;
(d) even though TSL concedes that this was a maintenance failure, identify and opine on any mitigating factors that may bear on the severity or foreseeability of the failure — for example, whether the failure occurred earlier than would be expected under the manufacturer's recommended maintenance schedule, whether there were any contributing external factors, or whether the failure was of a type that can occur even with a generally adequate maintenance program; and
(e) assess the reasonableness of the 25-day repair period at Keppel Verolme Shipyard, Rotterdam, including whether the repair timeline was consistent with industry norms for a drydock cylinder liner replacement on a vessel of this type, and whether any portion of the 25-day period could have been avoided through different repair strategies or alternative facilities.
Key Documents to Be Provided: The following documents relevant to Incident 3 are either enclosed with this memorandum or will be provided as they become available:
• Main engine cylinder liner inspection and replacement history (partially included in Enclosure A; additional records forthcoming)
• GMCB class survey records, including any special survey or condition-of-class records relating to the main engine (Enclosure F)
• Drydock reports from Keppel Verolme Shipyard, Rotterdam (to be provided when received during discovery)
• Chief Engineer Petros Vlahos's incident report for Incident 3 (Enclosure E)
• Engine manufacturer's recommended maintenance intervals and cylinder liner replacement guidance (to be provided; we are in the process of obtaining these from TSL's technical department)
D. Summary of Off-Hire Days
The following table summarizes the off-hire periods for the three incidents:
As noted above, these 68 off-hire days form the basis for Northwind's claims for off-hire deductions, liquidated damages under Clause 28, substitute charter costs, and various consequential loss claims. The reasonableness and proper attribution of these off-hire periods is a central issue in the case and a key element of your engineering assignment.
VI. THE ALLEGED ROUTE DEVIATION (SEPTEMBER 2022)
In addition to the three mechanical incidents described above, Northwind alleges that Thalassa improperly directed the M/V Aegean Fortuna to deviate from its agreed voyage route in September 2022.
Background: In September 2022, the M/V Aegean Fortuna was engaged in a voyage from Durban, South Africa to Qingdao, China. Northwind alleges that TSL directed the vessel to deviate from the agreed Durban-to-Qingdao route to call at the Port of Maputo, Mozambique, for the purpose of loading cargo on TSL's own account. According to Northwind, this deviation added approximately four days to the overall voyage time.
Consequences Alleged by Northwind: Northwind contends that the four-day delay caused by the Maputo call resulted in the vessel arriving at Qingdao after the expiration of a cargo laycan window (October 1–5, 2022). The missed laycan allegedly caused Northwind to incur demurrage charges and dead freight costs totaling $1,230,000. Northwind asserts that these costs are attributable to TSL's unauthorized deviation and constitute a separate breach of the charter-party.
Thalassa's Position: TSL disputes Northwind's characterization of the Maputo call. TSL's position is as follows:
(a) The decision to call at Maputo was made by Captain Giannopoulos in the exercise of his professional seamanship judgment, based on weather and routing conditions prevailing in the Mozambique Channel and the western Indian Ocean at the time. The call was necessitated by conditions that made the direct routing impracticable or imprudent.
(b) The Maputo call did not constitute a breach of Clause 5 (trade limits) of the charter-party, as Maputo, Mozambique is not an excluded port under any of the Clause 5 restrictions (OFAC sanctions, London Joint War Committee war-risk zones, or ice-bound waters).
(c) The Master's decision was within the scope of his discretionary authority under the charter-party and applicable maritime law, and was made in the interest of the safety of the vessel, crew, and cargo.
Note to Dr. Sørensen: The deviation issue is primarily a legal and factual question regarding the Master's discretion and the interpretation of the charter-party's trade limits and voyage provisions. However, depending on the development of the case, you may be asked to provide a supplementary opinion on whether the weather and sea conditions in the Mozambique Channel and the western Indian Ocean in September 2022 — including monsoon patterns, current conditions, wave heights, and any relevant weather advisories — could have justified Captain Giannopoulos's routing decision as a matter of prudent seamanship. If we determine that such an opinion is needed, we will provide you with the relevant weather data, voyage logs, and routing records for the September 2022 period. We classify this as a secondary assignment at this time and will advise you if it becomes a primary focus.
VII. NORTHWIND'S CLAIMED DAMAGES (OVERVIEW)
For your contextual understanding of the overall case, we provide below a summary of the damages claimed by Northwind in its Verified Complaint. Northwind's total claimed damages amount to $18,300,000, broken down as follows:
We note that the quantification of damages is the primary province of TSL's separately retained damages expert, Dr. Constance Albright of Clearwater Economics LLC, who will be providing economic and financial analysis of Northwind's claimed losses. However, Dr. Sørensen's engineering opinions will directly inform and support certain damages-related arguments, particularly with respect to:
(a) the reasonableness of the off-hire periods for each incident (bearing on the quantum of off-hire deductions and the calculation of liquidated damages);
(b) the causation of the iron ore cargo damage (bearing on the $3,420,000 cargo damage claim — if the BWTS malfunction is determined to have been caused by contaminated ballast loaded under Northwind's operational direction, then the resulting cargo damage may be attributable in whole or in part to Northwind rather than TSL); and
(c) the technical justification for the Maputo call (bearing on the $1,230,000 deviation claim, if you are asked to address this issue).
We anticipate close coordination between your engineering analysis and Dr. Albright's damages analysis, and we will facilitate appropriate information sharing as the engagement progresses.
VIII. LITIGATION STATUS
To provide you with an understanding of the current procedural posture of the case and the upcoming litigation timeline, we summarize the key events and deadlines as follows:
Complaint Filed: Northwind filed its Verified Complaint on October 2, 2023, asserting causes of action for breach of charter-party, breach of the implied warranty of seaworthiness, negligent maintenance, indemnification for third-party cargo claims, and unjust enrichment. A copy of the Verified Complaint is enclosed as Enclosure C.
Retention of Counsel: Calderwood & Harkness LLP was retained by Thalassa and Aegean Fortuna Shipholding Ltd. on October 16, 2023.
Answer and Counterclaim: TSL's Verified Answer and Counterclaim was filed on November 17, 2023. In the counterclaim, TSL seeks recovery of $1,620,000 in hire payments improperly withheld by Northwind for the period of October 1 through December 31, 2022. TSL contends that Northwind's withholding of hire was unauthorized, exceeded the scope of any legitimate off-hire deduction, and constitutes a breach of Northwind's payment obligations under the charter-party. A copy of the Verified Answer and Counterclaim is enclosed as Enclosure D.
Motion to Dismiss: TSL filed a motion to dismiss on December 15, 2023, seeking dismissal of Count III (third-party shipper cargo claims, on the grounds that Northwind lacks standing to assert claims on behalf of third-party shippers absent proper assignment or subrogation) and Count V (unjust enrichment, on the grounds that an adequate remedy at law exists under the charter-party). At the time of this memorandum, the motion is fully briefed and pending before Justice Chen. We will advise you of the outcome when a decision is rendered. (Note: The motion was subsequently granted in part on March 8, 2024, as will be communicated to Dr. Sørensen in a supplemental letter.)
discovery Period: The parties have agreed to a discovery schedule running from January 2024 through August 2024. Document discovery, interrogatories, and depositions are all underway or scheduled during this period.
Expert Report Deadlines: The Court's scheduling order establishes the following expert disclosure deadlines:
• TSL Expert Reports Due: August 5, 2024
• Northwind Expert Reports Due: August 19, 2024
• Rebuttal Expert Reports Due: September 9, 2024
Anticipated Depositions: Depositions of the following key witnesses are anticipated during the April through July 2024 timeframe:
• Alexandros Stavridis (Chairman and CEO, Thalassa)
• Captain Nikolaos Giannopoulos (Master, M/V Aegean Fortuna)
• Chief Engineer Petros Vlahos (Chief Engineer, M/V Aegean Fortuna)
• Viktor Lindgren (President and Managing Director, Northwind)
• Sandra Chow (CFO, Northwind)
Deposition transcripts will be provided to Dr. Sørensen as they become available, as the testimony of these witnesses — particularly Captain Giannopoulos and Chief Engineer Vlahos — will be directly relevant to your engineering analysis.
IX. SCOPE OF MARITIME ENGINEERING ASSIGNMENT
This section defines the specific scope of the engineering analysis and opinions we are requesting from Dr. Sørensen. We have organized the assignment into primary opinions, expert report requirements, and potential testimony obligations.
A. Primary Opinions Requested
1. Incident 1 — Latent Defect Analysis (Turbocharger Failure)
With respect to the main engine turbocharger failure that occurred on March 12, 2022 (Incident 1), Dr. Sørensen is requested to:
(a) Examine the turbocharger's complete maintenance history, including all inspection records, servicing intervals, component replacement records, and any condition monitoring data, together with the manufacturer's recommended maintenance schedule and specifications as set forth in the manufacturer's maintenance manual (Enclosure H);
(b) Determine whether the March 2022 turbocharger failure was caused by a latent defect in the turbocharger component — that is, a defect inherent in the component's manufacture, materials, or design that was not detectable through the exercise of reasonable maintenance and inspection protocols available to the vessel's crew and management. In conducting this analysis, Dr. Sørensen should consider the failure mode, the condition of the failed component(s), the maintenance history, and any available metallurgical or forensic data;
(c) Opine on whether TSL exercised due diligence in maintaining the turbocharger prior to the failure, including an assessment of whether TSL's maintenance practices were consistent with the manufacturer's recommendations, GMCB classification requirements, and generally accepted industry standards for the maintenance of turbochargers on main engines of this class and type; and
(d) Assess whether the repair period of 22 days — including transit to Colombo at reduced speed, diagnosis, procurement of replacement parts, installation, and post-repair sea trials — was reasonable for a turbocharger failure of this nature and in this geographic location, taking into account parts availability, repair facility capabilities, and the logistical constraints associated with an emergency repair in the Indian Ocean region.
2. Incident 2 — BWTS Causation and Boiler Failure
With respect to the dual failure of the ballast water treatment system and the auxiliary boiler at Richards Bay, South Africa (Incident 2), Dr. Sørensen is requested to:
(a) Evaluate the BWTS failure mode in detail and conduct a causation analysis to determine whether contaminated ballast water loaded at a prior port of call under Northwind's operational direction is a plausible and scientifically supported cause of the BWTS malfunction. This analysis should consider the design and operating parameters of the BWTS installed on the M/V Aegean Fortuna, the types of contamination (sediment, biological material, particulate matter) that could compromise the system's filtration and treatment components, the ballast water exchange records from prior ports, and any available water quality data or sampling results;
(b) Review the BWTS maintenance records comprehensively and assess whether TSL's maintenance of the BWTS was in compliance with (i) the manufacturer's recommended maintenance schedule and operating procedures, (ii) GMCB classification requirements for ballast water treatment systems, and (iii) the requirements of the International Maritime Organization's Ballast Water Management Convention (BWM Convention) and its implementing regulations;
(c) Evaluate the auxiliary boiler failure as a separate and independent mechanical event. Conduct a root cause analysis of the boiler failure, review the boiler's maintenance history, and determine whether the boiler failure was entirely independent of the BWTS malfunction or whether there is any causal or circumstantial connection between the two events;
(d) Opine on whether TSL met its maintenance obligations under the charter-party — specifically, the "thoroughly efficient state of hull, machinery, and equipment" standard of Clauses 2 and 6 — with respect to both the BWTS and the auxiliary boiler, taking into account industry standards, classification requirements, and the manufacturer's recommendations for each system; and
(e) Assess the reasonableness of the 21-day off-hire period for the combined repairs, and specifically address the allocation of the off-hire period between the BWTS repair and the auxiliary boiler repair. If the BWTS malfunction and the auxiliary boiler failure had been addressed separately, what would have been the expected repair duration for each? This allocation analysis is important because, as noted above, TSL's defense is that the majority of the off-hire period is attributable to the BWTS malfunction (for which TSL disclaims responsibility), while the auxiliary boiler repair could have been completed in a shorter timeframe.
3. Incident 3 — Cylinder Liner Failure
With respect to the main engine cylinder liner failure that occurred on November 15, 2022 (Incident 3), Dr. Sørensen is requested to:
(a) Conduct a root cause analysis of the cylinder liner failure, determining whether the failure resulted from (i) normal wear and tear, (ii) a material defect in the cylinder liner, (iii) inadequate maintenance or failure to adhere to recommended inspection and replacement intervals, (iv) improper operation of the main engine, or (v) some combination of these or other factors;
(b) Assess whether TSL's pre-failure maintenance of the main engine cylinder liners was consistent with industry standards and GMCB classification requirements. This assessment should consider the maintenance records, the inspection history, the engine's operating hours, and the manufacturer's recommended maintenance intervals;
(c) Provide context regarding the typical lifecycle and recommended replacement intervals for cylinder liners on engines of the class and type installed in the M/V Aegean Fortuna — specifically, cylinder liners on the main engine of a 2016-built 58,200 DWT Supramax dry bulk carrier. This contextual information should draw upon industry data, manufacturer guidance, and your professional experience with vessels of this class;
(d) Notwithstanding TSL's concession that this was a maintenance failure, identify and opine on any mitigating factors that may bear on the assessment of TSL's culpability or the foreseeability of the failure. For example, you should consider whether the failure occurred significantly earlier than would be expected under the manufacturer's recommended maintenance schedule, whether there were any contributing external factors (fuel quality, operating conditions, load patterns), and whether the failure is of a type that can occur even within a generally adequate maintenance program; and