the snow bunting

8/2/14 6:18 amENGLISH SHIPPING LAW

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Collisionnarrow channel ruleThames Navigation Licensing and General Byelaws 1993, Byelaw 31(a)Collision Regulations 1972, r.1(b)B, an experienced rower, was completing a training session on the River Thames and returning downriver to the Reading University Boat Club. The weather conditions were fineand visibility was clear. Having passed under Caversham Bridge, B intended to turn across the river in order to reach the rowing clubs landing stage. She stopped near thesouthern bank, looked over her right shoulder and observed that the upstream channel was clear. She then turned partly to port, which was when she saw the Snow Bunting, a49-ft narrowboat canal and river cruiser, then about eight metres away. B heard the narrowboat sound its horn as the scull was struck amidships on the starboard side by theSnow Buntings bow, which rode over the scull. B argued that, since she had not seen the Snow Bunting when she looked over her right shoulder, it must have been travelling onthe wrong side of the river. The evidence of the Snow Bunting was that it was keeping to the right and had altered to starboard before the collision.

Decision: Claim allowed.

Held: (1) The International Regulations for Preventing Collisions at Sea 1972, to which effect was given by the Merchant Shipping (Distress Signals and Prevention of Collisions)Regulations 1996, provided by r.1(b) that local rules should conform as nearly as possible with the International Regulations. (2) The International Regulations were likely to beapplied by a court as representing a safe and sensible system for general application. (3) The Thames Navigation Licensing and General Byelaws 1993 were the applicable localrules, but the byelaws, in relation to how vessels were to be navigated in narrow channels, derived from the previous version of the International Regulations, which only requiredvessels to keep to the starboard side of the centre line of the channel, and not the latest version of those Regulations, which required vessels to keep as far to the starboard sideof a narrow channel as was practicable. (4) The byelaw should be construed so as to be consistent with the latest version of the International Regulations. (5) On the evidence,

* Faculty of Law, National University of Singapore.1. [2012] EWHC B22 (Admlty); [2012] 2 Lloyds Rep 647 (Jervis Kay QC).2. SI 1996/75.3. Rule 9 of the Regulations. See, generally, S Gault (ed.), Marsden on Collisions at Sea, 13th edn (Sweet & Maxwell, London, 2003), [6.226].

INTERNATIONAL MARITIME AND COMMERCIAL LAW YEARBOOK

the Snow Bunting was being navigated to the left of the centre of the river and failed to keep as far to starboard as practicable. (6) The vessels were approaching nearly end on,requiring the Snow Bunting to make an early alteration to starboard, but the starboard turn by the Snow Bunting did not commence until the two vessels were very close. (7)Either the person in charge of the Snow Bunting failed to keep a proper lookout or ignored the dangerous situation which had been created. (8) To turn across the river in the faceof oncoming traffic was contrary to the byelaws, which required a particularly careful lookout before a vessel turned across the river. (9) B looked over her right shoulder and didnot see the Snow Bunting because it was not navigating on its own side of the river; if she had looked over her left shoulder, she would probably have seen it. (10) B failed to keepa proper lookout and was at fault, but that fault was not causative and the Snow Bunting was therefore wholly to blame for the collision.

Comment: Most collision cases referred to in IMCLY over the years have involved collisions which have occurred on the high seas. This case is relatively unusual in that itinvolved a collision on the River Thames, not that such cases have not occurred before. The consequences of this collision were indeed unfortunate; an experienced andaccomplished rower, said to have prospects of attending the next Commonwealth Games, was injured in the collision and subsequently gave up rowing. For maritime lawyers, theinterest in the case lies in the consideration of the intersection of local byelaws and the International Regulations and it is submitted that the Admiralty Registrar correctly took theview that the byelaws should be construed so as to be consistent with the latest version of the International Regulations.

Voyage charterpartyfreightBPVOY4whether overage freight payableT chartered the tanker Target to BP on an amended BPVOY 4 form. The charterparty provided for a minimum cargo of 80,000mt of fuel oil, and that freight was to be payable atthe Worldscale 135 rate if discharge was in the US Gulf. The fixture recap stated that freight was payable at 50 per cent on overage for Euromed discharge only. The Targetloaded 86,821mt at Odessa before proceeding to Marmara, where a further 26,050mt was loaded. The cargo was discharged at Galveston and Houston and T invoiced BP forfreight at the Worldscale rate in respect of the total 112,871mt carried.

4. See, eg, the notorious case of The Bowbelle [1990] 1 Lloyds Rep 532 (though not concerned with the collision but its limitation consequences under LLMC 1976) and TheGoring [1988] AC 831 (which concerned the question of salvage in non-tidal watersremarkably, at the same place that the events in The Snow Bunting occurred).5. Ie, the Thames Navigation Licensing and General Byelaws 1993. See also the Code of Practice for Rowing on the Tidal Thames above Putney 2009 (published by the ThamesRegional Rowing Council and the Port of London Authority): www.pla.co.uk/pdfs/maritime/THE_ROWING_CODE.pdf.6. [2013] EWCA Civ 196; [2013] 1 Lloyds Rep 561 (Ward, Longmore & Moses LJJ); rvsg in part [2012] EWHC 1590 (Comm); [2012] 2 Lloyds Rep 245; [2012] 2 CLC 336(QBD: Andrew Smith J).7. See Stephen Girvin, Carriage of Goods by Sea, 2nd edn (2011), [22.10].

ENGLISH SHIPPING LAW 115BP paid the invoice but subsequently argued that, on a correct interpretation of the charterparty, this envisaged payment of a lump sum freight or, in the case of a voyage to US

ports, freight at a percentage of the Worldscale rate on the minimum cargo quantity of 80,000mt. BP also argued that freight was payable only on overage for Euromed discharge,and not on overage for discharge in the US, and sought to recover the overpaid sum as having been paid by mistake.

At first instance, the judge held that T were not entitled to freight at the Worldscale rate based on the entire quantity shipped, but that BP were not entitled to pay nothing inrespect of overage. He held that, since the parties had not expressly agreed the amount due on overage in the case of discharge in the US, there would have to be an inquiry intowhat would be a reasonable figure for T to recover.

On appeal, BP submitted that freight was payable only on overage for discharge in the Euromed and that, since the relevant cargo was discharged in the US, no overage freightwas payable. The owners argued that the freight rate was always W135.

Decision: Appeal allowed; cross-appeal dismissed.

Held: (1) In the absence of any agreement to the contrary, BP and T agreed that overage was to be at 50 per cent of the freight rate. (2) If the parties had wanted to agree thatno overage was to be payable, they would have said so in terms. (3) The parties had not expressly said that there would be no freight payable when discharge was not in theEuromed and so BPs construction of the charterparty and recap was incorrect. (4) The charterparty did not require and the parties had not intended that any inquiry as toreasonable freight should be made. (5) The freight provisions, if not extensive, were apt to cover the relationship between the parties and, since BPs construction was impossible,the only reliable alternative was that the agreed Worldscale freight rate applied to all cargo for the relevant voyage. (6) The parties had not specifically referred to overage otherthan for Euromed discharge and so the Worldscale rate was the applicable rate. (7) That was the natural construction of the charterparty and recap, and was why BP had originallypaid the invoice.

Comment: The agreement of the contracting parties to the freight payable is one of the core clauses in most voyage charterparties. In this case there was a lack of clarity as tothe freight payable, namely the amount due for overage, being the amount due and payable once more than a minimum cargo had been loaded. The fixture recap made suchprovision, but that was for Euromed discharge only, whereas actual discharge was made at various US Gulf ports. BP originally paid the full amount assessed on W135 terms butthen sought to recover the overpaid amount as having being paid by mistake. While it was agreed that BP should have to pay freight for the additional cargo shipped, the questionon appeal was how that should be assessed. The first instance judge suggested that this should be by reference to a reasonable figure, which would have to be assessed, but theCourt of Appeal disagreed and held that, as a matter of construction, the agreed freight rate, W135, was payable throughout.

8. Though not a lack of detail. See the freight terms agreed in the recap: [2013] EWCA Civ 196, [8].9. Ie, a surplus, an excess, an additional amount: [1].

[2013] I.M.C.L.Y 113Lloyd's Maritime and Commercial Law Quarterly

ENGLISH SHIPPING LAW

Stephen Girvin *

CASES

126. Barnes v The Charterers of the Motor Vessel Snow Bunting (The Snow Bunting) 1

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3

114

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127. BP Oil International Ltd v Target Shipping Ltd (The Target) 6

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Bills of ladingapparent good order and conditionsteel pipes damaged by rust Retla clausedamages for fraudulent misrepresentationtitle to sueA consignment of steel pipes were shipped on the Saga Explorer from Ulsan (Korea) to various ports on the west coast of North America (Los Angeles, San Francisco, andVancouver) in September and October 2008. The bills of lading, which contained an English jurisdiction clause and incorporated the US Carriage of Goods by Sea Act 1936, statedthat the goods were shipped in apparent good order and condition. They also contained a so-called Retla clause similar to that in Tokio Marine & Fire Insurance Co v Retla SSCo:

RETLA CLAUSE: If the Goods as described by the Merchant are iron, steel, metal or timber products, the phrase apparent good order and condition set out in the precedingparagraph does not mean the Goods were received in the case of iron, steel or metal products, free of visible rust or moisture or in the case of timber products free from warpage,breakage, chipping, moisture, split or broken ends, stains, decay or discoloration. Nor does the Carrier warrant the accuracy of any piece count provided by the Merchant or theadequacy of any banding or securing. If the Merchant so requests, a substitute Bill of Lading will be issued omitting this definition and setting forth any notations which mayappear on the mates or tally clerks receipt.The surveyors who attended the Saga Explorer soon after discharge noted extensive oxidation, described as moderate to severe and severely oxidised. Although the matesreport noted that the cargo was received in the condition noted in the surveyors report, the bills of lading did not and were signed by shipowners agents, S, without beingclaused. The shippers, N, provided the shipowners with a letter of indemnity in exchange for them issuing clean bills of lading. K, the consignee and notify party was indemnifiedagainst its loss by German insurers represented by B, a German insurance agent.

B submitted that the Retla clause did not render the words apparent good order and condition meaningless and only excluded surface rust which was likely to be found in anynormal cargo and which would not detract from its overall quality and affect its merchantability. It sought damages from the owners on the basis that the bills of lading contained afraudulent representation as to the condition of the pipes on shipment. The shipowners argued that there was no misrepresentation in the bills of lading and that the effect of theRetla clause was to exclude all surface rust of whatever degree from the representation of apparent good order and condition.

The issues before the court were: (1) the nature of the representation as to the condition of the pipes on shipment and whether it was relied on; (2) whether B was entitled torecover damages in its own name and whether its claims would be admitted under German law.


Held: (1) If there had been no Retla clause, the statement in the bills of lading that the cargo was shipped in apparent good order and condition would amount to a

10. [2012] EWHC 3124 (Comm); [2013] 1 Lloyds Rep 401 (QBD: Simon J).11. [1970] 2 Lloyds Rep 91 (9th Cir).12. As to how this occurs, see eg A Sparks, Steel Carriage by Sea, 3rd edn (LLP, London, 1999), 40.

ENGLISH SHIPPING LAW 117representation of fact which could be relied on as reflecting the reasonable judgement of a reasonably competent and observant master. (2) The Retla clause could and should beconstrued as a legitimate clarification of what was to be understood by the representation as to the appearance of the cargo upon shipment. (3) The Retla clause should not beconstrued as a contradiction of the representation about the cargos good order and condition, but as a qualification that there was an appearance of rust and moisture of a typewhich might be expected to appear on any cargo of steel. (4) It followed that the Retla clause did not apply to all rust, of whatever severity, as such a construction would rob therepresentation as to the good order and condition of the steel cargo on shipment of all effect. (5) The Tokio Marine case had not been consistently followed and had beensubjected to unfavourable analysis on several occasions. (6) In the instant case, it was clear that the surveyors reports and the mates receipts described the appearance andcondition of the cargo, which was not reasonably and honestly represented by the bills of lading as signed. (7) The cargo was not shipped in a normal and unexceptional conditionfor that type of cargo, and did not otherwise fall within the Retla clause. (8) The decision to issue and sign clean bills of lading involved false representations by S, which wereknown to be untrue and intended to be relied on. (9) The representation was not an honest and reasonable non-expert view of the cargo as it appeared, but a deceitful calculationmade to the prejudice of those who would rely on the contents of the bills of lading. (10) S had failed to rebut the presumption that K had been influenced to its detriment by theirfraudulent representation and it was highly unlikely that K would have taken delivery of the cargo if the bills of lading had been claused. (11) B was entitled to bring proceedings inits own name under the agreement, which gave it authority to settle claims and conduct proceedings on behalf of insurers. (12) Under German law, Bs claims would be admittedon the basis of a procedural agency.

Comment: This case highlights the very real danger for shipowners who permit bills of lading to be issued stating that the cargo has been shipped in apparent good order andcondition, when it is known that this is not the case. Requests to issue so-called clean bills of lading typically reflect the desire of shippers to avoid endorsements, particularlywhen an underlying sale contract is financed by a documentary credit from a bank, and often involve the shipper (or buyer) offering a letter of indemnity (LOI). Thoughroutinely used in the trade, their usage is fraught with difficulty, particularly when it is known that the statements made in the bills of lading are false. In this case the contextwas the combination of such an LOI with a Retla clause in the bills of lading. Although the shipowners argued that the Retla clause excluded all surface rust of whatever degreefrom the representation of apparent good order and condition, the judge concluded that such clauses should be limited to superficial rust which would be present on any steelcargo. The court recognised that oxidation was a normal consequence of exposure to the atmosphere and it would cause widespread interference with international trade if visiblerust were to result in the clausing of bills of lading. To hold otherwise would rob the

13. As to this, see The David Agmashenebeli [2003] 1 Lloyds Rep 92.14. See supra, fn.11.15. See UCP 600, Art.27 (Clean Transport Document).16. Also sometimes known as letters of undertaking (LOUs) or back letters.17. See the leading case, Brown, Jenkinson & Co Ltd v Percy Dalton (London) Ltd [1957] 2 QB 621 (CA).18. [2012] EWHC 3124 (Comm), [24].


representation as to apparent good order and condition of the steel cargo on shipment of all effect. Finally, it may be noted, the court recognised that the Tokio Marine casehad not always been consistently followed.

Time charterpartyutmost dispatchslow steamingoff-hireNYPEB, the owners of the Pearl C, a bulk carrier, chartered the vessel to C on amended NYPE terms, for a period of about nine to 12 months. Clause 8, the standard clause NYPE clauseon dispatch, provided that the captain shall prosecute his voyages with the utmost dispatch but cl.15 was amended to read:That in the event of the loss of time from deficiency, sickness, strike, accident or default of Master, Officers or crew, or deficiency of men or stores, fire, breakdown or damages tohull, machinery or equipment, grounding, detention by average accidents to ship or cargo, dry docking for the purpose of examination or painting bottom or by any other causepreventing the full use of the vessel to the Charterers, the payment of hire shall cease for the time thereby lost; and all directly related proven extra expenses incurred includingbunkers consumed during period of suspended hire shall be for Owners account. [first part] and if upon the voyage the speed be reduced by defect in, or breakdown of, any partof her hull, machinery or equipment the time so lost and the cost of any extra fuel consumed in consequence thereof and all extra expenses shall be deducted from the hire.[second part] Provided always the reason that resulted in any of the above events is not due to an act or default or omission of the Charterers, their servants or agents whether byway of negligence or otherwise.

Clause 29 provided that:(B) SPEED AND CONSUMPTION

1. BALLAST SPEED: ABT 13 KNOTS

LADEN SPEED: ABT 13 KNOTS

SPEED AND CONSUMPTIONS IS GIVEN FOR GOOD WEATHER CONDITIONS UP TO BEAUFORT SCALE 4 AND DOUGLAS SEA

STATE 3 AND NO ADVERSE CURRENTSThe Pearl C performed 16 laden or ballast voyages during the currency of the charterparty. C claimed for slow steaming in respect of seven of those voyages. The arbitral tribunalupheld Cs claim in respect of three of the voyages and deducted US$118,974.69 from the amount claimed by B.

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128. Breffka & Hehnke GmBH & Co KG v Navire Shipping Co Ltd (The Saga Explorer) 10

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15 16

17

18

118

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129. Bulk Ship Union SA v Clipper Bulk Shipping Ltd (The Pearl C) 20

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The present appeal from the decision of the arbitral tribunal related, in part, to issues arising under the Arbitration Act 1996, s.69, and under the Late Payment of CommercialDebts (Interest) Act 1998, s.68. However, the final strand of the appeal concerned an argument by B that the arbitrators had found underperformance on the three voyagessolely by virtue of a failure to achieve the speed warranted in the charterparty, and had

19. See supra, fn.11.20. [2012] EWHC 2595 (Comm); [2012] 2 Lloyds Rep 533 (QBD: Popplewell J).21. Emphasis supplied to indicate the part of cl.15 in issue.22. Christopher Spencer and John Schofield.23. Those issues will not, however, be considered in this comment.24. In cl.29B.

ENGLISH SHIPPING LAW 119made an impermissible leap to reach the conclusion that there had been a default by the vessels crew which had resulted in a net loss of time.

Decision: Claim dismissed.

Held: (1) A fair reading of the award did not support Bs criticisms of the deductions from the award relating to performance. (2) As to cl.8, the tribunal reached its decision thatthere was a failure to proceed with utmost dispatch not only on the basis of a failure to achieve the warranted speed on each of the three voyages, but also on the basis that therewas no other realistic explanation for a vessel which was capable of achieving the warranted speed at the moment she was delivered into the charterparty failing to achieve thatspeed on the subsequent voyages. (3) Moreover, the tribunal expressly found that the Pearl C was not operated in a manner which allowed her to proceed with the utmostdespatch. (4) The tribunal had referred to The Hill Harmony and had correctly identified the dichotomy between a breach of cl.8 which involved a deliberate decision not toproceed with utmost despatch (to which the exception in the Hague-Visby Rules, Art.IV, r.2(a) did not apply), and a negligent error in the navigation or management of the shipconcerning a matter of seamanship, to which the exception did apply. (5) As to the off-hire clause, cl.15, the owners submission that the tribunal had made the impermissible leapfrom a failure to achieve the speed described in the performance warranty to reach the conclusion that there had been a default of master, officers or crew resulting in a net loss oftime under the first part of the off-hire clause would be rejected for the same reasons as those given for rejecting the similar argument advanced in relation to the cl.8 claim. (6)The tribunal was correct to hold that a slow steaming claim fell within the first part of the amended form of cl.15.

Comment: The practice of slow steaming, initially in the liner trades, has become a prevalent feature in shipping, with the impact of the severe economic downturn on freightrates and volatile bunker prices. The impact of the practice led to the drafting of BIMCO clauses to assist owners and charterers. These clauses were not, however, incorporatedin this charterparty and so, for the first time, the court had to consider the impact of slow steaming in the context of the fundamental obligation to proceed with reasonabledispatch and in relation to an amended off-hire clause. In finding against B on both grounds, the judge highlighted the importance of the performance clause and noted thefailure of the vessel to achieve the warranted speed on each of the three relevant voyages. The tribunal had correctly reached its decision that there was a failure to proceed withutmost dispatch, not only on the basis of a failure to achieve the warranted speed on each of the three voyages but also on the evidence before it in relation to this vessel and theconditions which this vessel encountered. In relation to the off-hire clause, cl.15, the judge noted that this was a net loss of time clause, which could cover the additional time bywhich the service has been extended in cases where there has not been a total interruption

25. [2000] 1 AC 638; digested S Girvin & H Bennett, English Maritime Law 2000 [2002] LMCLQ 76, 104.26. BIMCO Slow Steaming Clause for Time Charter Parties 2011; BIMCO Slow Steaming Clause for Voyage Charter Parties 2012.27. Generally, see Girvin, Carriage of Goods by Sea, 2nd edn (Oxford University Press, 2011), ch.26.28. Which in effect operates as an exception to the charterers primary obligation to pay hire continuously throughout the charter period.29. As to which, see Girvin, Carriage of Goods by Sea, 2nd edn (Oxford University Press, 2011), [33.69]. See also Minerva Navigation Inc v Oceana Shipping AG (The Athena),post, 146.


to the service. It was difficult to see why it should be inapposite to apply the clause to a deficient performance so far as speed is concerned, which involved the continuation of thecharter service but a loss of time because the duration of that service has been extended.

Time charterpartyvessel damaged in course of time-chartered servicecost of repairs exceeding sound market value of vesselfrustrationNYPE 1946The Kyla, a Capesize bulk carrier, was on time charter to B for a period of 12 to 15 months at Bs option. By cl.41, K, her owners, warranted that the Kyla would be fully coveredthroughout the charterparty against hull and machinery risks in the sum of US$16 million. Soon after delivery, however, the Kyla was damaged while in berth loading a cargo ofsoya beans at Santos (Brazil); another ship, the Zhen Hua 27, struck her port side causing her to make contact with the UBC Tampico.

Over a period of months, K obtained quotations for repairs but it appeared that the cost of repairs of US$9 million would far exceed the sound value of the vessel of US$5.75million. K accordingly tendered notice of abandonment to the hull and machinery insurer asserting that the Kyla was a constructive total loss and informed B that the charter wasfrustrated. The hull and machinery underwriters rejected the notice of abandonment and K subsequently sold the vessel for scrap for US$3,300,000.

The arbitrator found, as K submitted, that there was a general principle that a charterparty would usually be frustrated where the vessel was damaged such that the cost ofrepair exceeded the value of the vessel and that a very clear provision would be required to oblige an owner to repair in such circumstances. He accordingly held that the charterhad been frustrated at the date of the collision.

On appeal, B submitted that, even if there was such a principle in cases where there was no warranty as to the level of hull insurance, the warranty in the present charter waspart of a scheme whereby K was obliged to repair the vessel up to the insured value of US$16 million, which was far more than the cost of repair, and K could not rely on the factthat the cost of repair exceeded the sound value as a matter which frustrated the charter.


Held: (1) The earlier cases were capable of being subsumed within the modern doctrine of frustration and should be treated not as establishing an inflexible rule that, where thecost of repair exceeded the value of the vessel, the charter would be frustrated but, rather, as an application of a principle that if a vessel was a commercial loss the charter wouldgenerally be frustrated, just as it would be if the vessel was physically lost. (2) The tendency in the modern law of frustration had been to move away from inflexible rules, suchas cost versus value, to a multi-factorial approach. (3) The correct approach was to

30. [2012] EWHC 2595 (Comm), [67].31. [2012] EWHC 3522 (Comm); [2013] Lloyds Rep 565; [2012] 2 CLC 998 (QBD: Flaux J).32. Simon Rainey QC.33. See Kulukundis v Norwich Union Fire Insurance Soc Ltd (No 1) [1937] 1 KB 1; Blane Steamships Ltd v Minister of Transport [1951] 2 KB 965.34. See Edwinton Commercial Corp v Tsavliris Russ (Worldwide Salvage & Towage) Ltd (The Sea Angel) [2007] EWCA Civ 547; [2007] 2 Lloyds Rep 517, [67].

ENGLISH SHIPPING LAW 121consider whether the contract provided for the event or contingency which had occurred or allocated the risk of that event or contingency to one or other of the parties. (4)Clause 41 was a comprehensive insurance provision which went a good deal further than cl.1 and cl.26 of the standard NYPE 1946 form in relation to the insurance obligations ofthe owner. (5) It was clear that K was warranting that full hull and machinery cover would be in place throughout the charter in the sum of US$16 million. (6) The fact that thecharter contained an express continuing warranty as to the hull insurance and its amount made it impossible for K to contend that there had been a frustrating event where thecost of repairs was substantially less than the insured value. (7) The charter allocated to K the risk that, if a casualty occurred and the cost of repair was within the insured value,the vessel required repair. (8) The presence of the insurance warranty also meant that K could not argue that repairing the vessel and continuing with the charter werecommercially impossible or that the vessel was a commercial loss. (9) At the date of the collision a reasonable person would have taken the view that the casualty did not makeperformance by K radically different from what it had promised, because it had warranted that hull insurance up to an insured value of US$16 million would be in place and it wasin place and the cost of repairs would be amply covered by that insurance. (10) Accordingly, contrary to the arbitrators conclusion, the contract was not frustrated, as cl.41created an assumption of risk and responsibility on Ks part to repair the hull damage up to the insured figure of US$16 million.

Comment: It has been said that the doctrine of frustration is not lightly to be invoked to relieve contracting parties of the normal consequences of imprudent commercialbargains. This case confirms that the courts will always look carefully at the agreed allocation of risk as expressly reflected in the charterparty terms and will be loath to permitthe parties to walk away from performance simply because performance has become much more commercially onerous for one of them.

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120

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130. Bunge SA v Kyla Shipping Co Ltd (The Kyla) 31

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131. Carboex SA v Louis Dreyfus Commodities Suisse SA 37



Voyage (berth) charterpartyWIBONstrike clausedemurrageAmWelsh formC entered into a contract of affreightment (COA) on amended AmWelsh voyage terms with L, owners of the Co-op Phoenix, Alpha Glory, C Young and Royal Breeze, for thetransportation of coal from Indonesia to Spain. The contract provided that C was liable to pay demurrage if the discharge of cargo took longer than the specified rate of discharge.Clause 40 provided that:At port of discharge if the berth is not available when vessel tenders Notice of Readiness, but provided vessel/Owners not at fault in relation thereto, then laytime shall commencetwelve (12) hours after first permissible tide, Notice of Readiness received and accepted, whether in berth or not, whether in free pratique or not, whether in customs clearance ornot, unless no customs clearance

35. Applying The Sea Angel, [6871].36. BTP Tioxide Ltd v Pioneer Shipping Ltd (The Nema) [1982] AC 724, 752 (Lord Roskill); Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1962] AC 93, 124 (Viscount Radcliffe).37. [2012] EWCA Civ 838; [2013] 2 WLR 754; [2012] 2 Lloyds Rep 379; [2012] 2 CLC 416; [2012] 2 All ER (Comm) 1039 (CA: Lord Neuberger of Abbotsbury MR, Moore-Bick& Toulson LJJ); affg [2011] EWHC 1165 (Comm); [2011] 2 Lloyds Rep 177; [2011] 1 CLC 954; [2011] 2 All ER (Comm) 365 (QBD: Field J); noted S Girvin [2012] IMCLY 172.


or no free pratique due to vessels fault, unless sooner commenced in which case only time actually used to count.Clause 9 provided that:In Case of strikes, lockouts, civil commotions or any other causes included but not limited to breakdown of shore equipment or accidents beyond the control of the Charterersconsignee which prevent or delay the discharging, such time is not to count unless the vessel is already on demurrage.

At the discharge port, Puerto de Ferrol (Spain), C served notices of readiness (NOR) but discharge was delayed because other vessels were ahead in the line-up for dischargeowing to a strike at the port. The arbitrators found that C could not rely on cl.9 because the strike had ended by the time the vessels berthed. Pursuant to the ejusdem generisrule, the words other causes in the last sentence of cl.9 did not include congestion caused by strikes.

On appeal, the court held that the words in case of strikes beyond the control of the Charterers which prevent or delay the discharging in cl.9 covered delay in dischargingcaused by congestion due to the after-effects of a strike that had ended and also covered delay in discharging caused by congestion due to a strike where the vessel arrived afterthe strike had ended. The arbitral tribunal had erred in law in deciding that C did not have the protection of cl.9.

L appealed, submitting inter alia that the case of Central Argentine Railway v Marwood was binding authority on the meaning and effect of cl.9; alternatively, that cl.9operated only during the continuation of the strike and did not extend to delay caused by congestion.

Decision: Appeal dismissed.

Held: (1) The purpose of including the expression WIBON (whether in berth or not) in a berth charter was to transfer the general risk of congestion from the owner to thecharterer, but it was equally true to say that its function was to start the laytime clock running. (2) However, the establishment of a general regime of that kind did not give rise toa presumption that the parties did not intend to transfer the risk of delay from specific causes back to the owner. (3) Clause 40 did not point to a narrower construction of cl.9 thanit would naturally bear. (4) Clause 9 was clearly intended to transfer the risk of some delay caused by strikes from the charterer to the owner and there was nothing in thelanguage of the clause to indicate that its operation was restricted to time lost while the vessel was alongside the berth. (5) Even if the discharging was to be understood asreferring to the physical operations involved in handling cargo, those could be delayed just as much by a strike which prevented the vessel getting into berth as by one whichinterrupted the handling of cargo. (6) The natural meaning of cl.9 showed that it was concerned only with the consequences of the excepted causes, not with their duration, andthere was nothing in cl.9 to support the conclusion that its operation was limited to interruptions and delays occurring during the period of the excepted causes. (7) Central

38. The underlined words were inserted in type in the printed form.39. [1915] AC 981.40. See Leonis Steamship Co Ltd v Joseph Rank Ltd (No 2) [1908] 1 KB 499; Reardon Smith Line Ltd v Ministry of Agriculture, Fisheries and Food [1962] 1 QB 42 (CA).41. See London and Northern Steamship Co Ltd v Central Argentine Railway Ltd (1913) 108 LT 527.

ENGLISH SHIPPING LAW 123Argentine Railway Ltd v Marwood was authority for the proposition that such time in cl.9 meant time lost to the vessel in completing discharging by reason of one of theexcepted causes. (8) In order to obtain the protection of cl.9, the charterer had to establish that the event on which he relied fell within the clause and was the effective cause ofdelay to the vessel. (9) The case was not authority for the proposition that cl.9 protected the charterer only once the vessel had reached the discharge berth. (10) The owners inthat case did not argue for such a narrow construction and it would be surprising if their Lordships had intended to decide such an important question without inviting argumentand without making it clear in their speeches that they intended to do so. (11) Accordingly, if and to the extent that C could establish that the strike was the effective cause ofdelay to the discharge of any of the vessels, the time lost as a result would not count against laytime. (12) Whether the strike was the effective cause of delay was a question offact and the necessary causal connection could be established even in relation to vessels arriving after the strike had ended, as had occurred in Leonis Co Ltd v Joseph Rank Ltd.

Comment: As was noted in last years IMCLY, congestion can have a critical impact on employments of vessels but, until now, the intersection of strike clauses and laytimeclauses in this context has been relatively little explored. The Court of Appeal has confirmed that a waiting delay at the loading or discharging port does not preclude theinvocation of a strike clause, even where laytime has already started to run. On the facts of the case, the strike was causative of the delay (even though it was over) and so Ccould rely on the exception.

Bills of ladingHague Rulesdue diligencedelaydamage to goodsThe Devon was chartered to carry a consignment of corn belonging to C from Bulgaria to Spain. The bills of lading for the carriage incorporated an amended Synacomex 90charterparty, which provided, by cl.3, for the vessel to proceed with all convenient speed to one safe port Barcelona-Cadiz range and was expressly governed by English law.There was also a General Paramount Clause (also incorporated into the charterparty) and so the Hague Rules applied to the carriage.

Shortly after leaving the loading port, Varna (Bulgaria), the vessel suffered a main engine breakdown. She was towed back to Varna the next day, but the necessary repairs tookseven weeks to complete. The Devon eventually arrived in Tarragona (Spain) 59 days later than she would have done in the absence of an engine breakdown. The effect of thedelay was that some of the corn arrived at its destination caked and mouldy. C sought damages from the Devons owners, F, for the corns diminution in value.

C contended that F were responsible for their loss because the Devons breakdown was attributable to unseaworthiness at the start of the voyage by reason of the poor conditionof its engine lubrication and lubrication cooling systems. Accordingly, they had failed to exercise due diligence within the meaning of the Hague Rules, Art.III, r.1 and there was

42. [1915] AC 981.43. [1908] 1 KB 499.44. [2012] IMCLY 172.45. [2012] EWHC 3747 (Comm) (QBD: Cooke J).46. See generally Girvin, Carriage of Goods by Sea, 2nd edn (Oxford University Press, 2011), [19.52].


a failure to proceed with the voyage with all convenient speed as required by the contract of carriage. F submitted that the loss claimed was irrecoverable because the damage tothe corn was so limited that it should have been mixed with sound grain and sold without any diminution in price at all.


Held: (1) On the evidence, the Devon had been unseaworthy at the commencement of the voyage by reason of the condition of the saltwater cooling system and its dirty andpartially blocked state, which led to a failure in the low-temperature freshwater cooler which manifested itself within three hours of sailing in the form of high temperatures in theluboil for the main engine. (2) F had no system in place for the proper monitoring of temperatures in the engine luboil or pressures in the saltwater cooling system and inspectionin the three hours preceding the incident should have revealed the developing problem. (3) The Devon was unseaworthy by virtue of that lack of system also, which meant thatthe cooling system was prone to fail and the luboil to heat. (4) Cs allegations as to the poor condition of the vessels engine lubrication and lubrication cooling systems were madeout: there was a lack of adequate systems on board to ensure that the temperature of the engine lube oil was properly regulated, the cooling system did not become blocked, andthe engine was adequately lubricated. (5) The same feature that constituted unseaworthiness also constituted lack of due diligence in that respect, to which the owners had no

122

38

39

40

41

42

43

44

132. CHS Inc Iberica SL v Far East Marine SA (The Devon) 45

46

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defence. (6) Given that finding, it was unnecessary to determine whether there had been a failure to proceed with all reasonable speed as required by the contract of carriage. (7)The repairs which were undertaken had been necessary for the prosecution of the voyage and there was no unreasonable delay in effecting them. (8) The cause of the delayedvoyage was the breakdown of the vessel which resulted from her unseaworthiness and that was the operative causative breach which led to delay on the voyage and cargodamage. (9) The only practical way to have mixed the damaged corn with sound grain would have been by moving the damaged grain to a bulk silo of sufficient capacity toaccommodate it and enough sound grain to dilute it. (10) Even then, the mixed grain could not have been sold as good corn and in the absence of any buyer being prepared tooffer a price with a discount for the substandard features, the only option had been the competitive salvage sale which had taken place. (11) The price subsequently obtainedproperly reflected the damaged cargo. (12) C had incurred extra expense from additional stevedoring and warehouse costs, charges for the salvage sale, and Spanish lawyers feesfor arresting the vessel in order to obtain security for the claim and those losses, together with the corns diminution in value, were recoverable as a foreseeable and sufficientlydirect consequence of Fs breach.

Comment: This was a reasonably straightforward case on unseaworthiness and the due diligence obligation under the Hague (and Hague-Visby) Rules. Much of the case wasconcerned with the assessment of the evidence as to the damage but the court concluded that the Devon was unseaworthy at the commencement of the voyage because of thecondition of the saltwater cooling system and the fact that the owners had no system in place for the proper monitoring of temperatures in the engine. None of the Hague Rules,Art.IV, r.2 defences raised availed the owners.

47. Art. IV, r.2(p) and r.2(q). As to these, see Girvin, Carriage of Goods by Sea, 2nd edn (Oxford University Press, 2011), [29.41; 29.45].

ENGLISH SHIPPING LAW 125

Collisioncatamaran colliding with Westminster Bridgeliability in negligence of the bridge ownerC were the operators of a passenger catamaran, the Millennium City. One night, as the Millennium City passed downstream under the centre arch of Westminster Bridge, she madecontact with one of the piers under the arch and sustained a serious gash to her starboard side. After the collision, a piece of jagged steel was found to be protruding from thebuttress of the pier. C argued that the damage to the vessel had been caused by Ts negligence or breach of duty in that T had failed to properly maintain the bridge, or to mark orlight it so as to enable vessels to line up with the arch. C further claimed that T was responsible for the protruding piece of steel and that it had failed to give any warning of itspresence. In addition, C claimed that T ought to have fendered the bridge. T denied any negligence or breach of duty, claiming that the accident had been caused by the mastersnegligent navigation of the Millennium City and that the protruding piece of steel had not been there before the accident.

The issues before the Admiralty Registrar were: (1) when and how the vessel had collided with the bridge; (2) who, if anyone, was responsible for the collision; (3) whether theexistence of the protruding piece of steel had materially increased the nature of the damage suffered; (4) how the steel had come into existence; and (5) whether, if the steel hadpre-existed the accident, it should have been noticed and rectified.


Held: (1) When a moving object collided with a stationary one, there was a rebuttable presumption that the responsibility lay with those in charge of the moving object. (2)The evidence of the master of the Millennium City was confused, and it was seriously doubtful that he had a clear or coherent recollection of the events leading up to the collision.(3) The court could not accept that he had properly lined up the vessel to pass under the arch and the Millennium City had passed under the arch at a speed that was greater thanwas sensible or acceptable. (4) That was poor seamanship on the part of the master because it reduced the amount of time he had to ensure that the Millennium City was properlyaligned and was causative of the collision: the evidence showed that the vessel had been on a broadly straight course but had moved to her starboard before passing under thearch. (5) There was no evidence of a current or eddy that had caused the Millennium City to drift to her starboard but, even if there had been, that would not have helped C toestablish liability on Ts part. (6) As far as lighting or markers to assist in navigation under the bridge were concerned, that was the responsibility of the Port of London Authorityand not T. (7) Even if there had been a failure to mark or light the bridge, it was not causative of the accident, the bridge being clearly marked on local charts. (8) Whether or notthe accident had been caused or contributed to by the masters negligence, the question remained whether the damage had been exacerbated by the protruding piece of steel. (9)It had not and C had failed to prove that the steel was in place prior to the collision. (10) Rather, it was probable that it had been formed during the collision. (11) Moreover, therewas insufficient evidence to show that the bridge had been

48. [2012] 1 Lloyds Rep 471 (Jervis Kay QC).49. Bowditch (Owners of the) v Owners of the Po [1991] 2 Lloyds Rep 206.


in such a state as to have materially affected the level of damage to the Millennium City, and T had demonstrated that it operated a reasonable system of inspection at thematerial time it. (12) Cs fendering argument was unrealistic as there was no credible evidence that underwater parts of bridges should be fendered and, in any event, fenderingwas not designed to offer any protection at the type of speed that the vessel had been doing in the instant case.

Comment: In this case the root cause of the collision involving contact damage between the Millennium City and Westminster Bridge was the poor seamanship of her master. It islong established that there is a general duty to use reasonable skill and care in navigating ships at sea or in navigable rivers and this would certainly extend to ensuring that avessel is being navigated at a safe speed.

Sale of shipsimplied term as to satisfactory qualitySale of Goods Act 1979, s.14(2)Norwegian Saleform 1993, cl.11D, the owners of the Calafuria, a tanker built in 1994, entered into an MOA with M, her buyers, for her purchase for US$7m. The first sentence of cl.11 (condition on delivery) ofthe Saleform provided that the tanker, now renamed Union Power, was to be delivered and taken over as she was at the time of inspection, fair wear and tear excepted. A monthafter delivery of the Union Power her main engine broke down because of a defective crankpin. The arbitrators held that the engine had been likely to fail within a short period ofnormal operation after delivery, that there was a breach of the implied term as to satisfactory quality implied into the sale contract by the Sale of Goods Act 1979, s.14(2), asamended, and that M was entitled to damages accordingly. On appeal, D submitted that the s.14(2) term was excluded by virtue of s.55(2), because it was inconsistent withcl.11, which provided that the vessel was sold as she was.


Held: (1) The correct starting point was that the s.14 implied terms would apply to the sale contract as to any other English law contract, unless the parties had contracted out ofs.14. (2) Second-hand ships were goods within the Act like any other piece of machinery or equipment; and, if commercial parties did not want to be subject to the statutoryimplied terms, they could contract out of them, as provided for by s.55(1). (3) The words as she was in the first sentence of cl.11 were a necessary part of a sentence whichrecorded the obligation to deliver the vessel in the same condition as she was when inspected. (4) However, those words did not say anything about what Ds obligations were,either on inspection or delivery, as regards the quality of the vessel, and

50. Brown v Mallett (1848) 5 CB 599; 136 ER 1013.51. See the Collision Regulations, Rule 6.52. [2012] EWHC 3537 (Comm); [2013] 1 Lloyds Rep 509; [2013] 2 All ER 870 (QBD: Flaux J).53. Simon Crookenden QC, Michael Baker-Harber, and Simon Gault.54. This provides that where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory quality.55. This provides that an express term does not negative a term implied by this Act unless inconsistent with it.56. See line 219 of Saleform 1993.57. Behnke v Bede Shipping Co Ltd [1927] 1 KB 649.

ENGLISH SHIPPING LAW 127so they did not exclude the implied term as to satisfactory quality under s.14(2). (5) The words as she was, in context, were incapable of bearing the same meaning as the free-standing words as is, where is in a sale contract, assuming that those words did exclude the statutory implied terms. (6) Even if a possible meaning of the words as she waswas to exclude the implied terms, that was not their only meaning in context, and the fact that they had more than one meaning was fatal to Ds case, since it could not be saidthat they were inconsistent with the implied term, as s.55(2) required. (7) The obligations in the second sentence of cl.11 relating to class complemented or supplemented theobligation to deliver the vessel in a satisfactory condition rather than being inconsistent with it. (8) The first sentence of cl.11 did not exclude the implied term as to satisfactoryquality. (9) It was not necessary to decide whether the first sentence of cl.11 should be read down as excluding the right to reject the vessel whilst not precluding M from claimingdamages for breach of the implied term as to satisfactory quality, but the court would have accepted that argument. (10) Nor was it necessary to decide whether the words asis were apt to exclude the statutory implied terms, but it was difficult to see how, in the absence of some customary meaning, the words as is could be said to be sufficientlyclear and unequivocal to exclude them.

47

133. City Cruises Plc v Transport for London 48

49

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134. Dalmare SpA v Union Maritime Ltd (The Union Power) 52

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56

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Comment: This important case, recognised by the judge as being one on which there was no decision of the courts directly on the point, provides a buyer-friendly outcome inan area which has always been regarded as controversial. Nevertheless, the conclusion that the words as she was did not exclude the implied terms of the Sale of Goods Act1979 is likely itself to be controversial and may be contrary to market expectations. Moreover, the judges further, obiter view, that as is, where is was not sufficiently clear toexclude the statutory implied terms, is likely to be of wider interest in sale of goods cases generally. Shipowner sellers of second-hand ships might avoid the difficulties created bythis case by using Saleform 2012, cl.11 of which is similar to its counterpart in Saleform1993, but which also expressly excludes all implied terms.

Voyage charterpartydelaydemurragefrustrationGenconD were the voyage charterers and S, owners, of the Andra. The charterparty was fixed on the Gencon form for the carriage of a cargo of frozen chicken from a loadport in the USto St Petersburg. During discharge, when the Andra was already on demurrage because of a delay in berthing, certain cargo in the No 2 hold was found to be stained and wet fromgasoil, which had leaked from an adjacent deep bunker tank. At St Petersburg discharge

58. See Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441.59. Mariola Marine Corp v Lloyds Register of Shipping (The Morning Watch) [1990] 1 Lloyds Rep 547; Indigo International Holdings Ltd v Owners of the Brave Challenger[2003] EWHC 3154 (Admlty).60. [2012] EWHC 3537 (Comm), [58]. See too Malcolm Strong & Paul Herring, Sale of Ships, 2nd edn (Sweet & Maxwell, London, 2010), [14.10].61. Although, as the judge himself noted, the market did not speak with one voice: [30].62. Cf cl.4 of the Singapore Ship Sale Form 2011 (SSF 2011).63. See cl.18 of Saleform 2012.64. [2012] EWHC 1984 (Comm); [2012] 2 Lloyds Rep 587 (QBD: Popplewell J); refd NYK Bulkship (Atlantic) NV v Cargill International SA (The Global Santosh) [2013] EWHC30 (Comm); [2013] 1 Lloyds Rep 455 (to be discussed in [2014] IMCLY).


was completed, apart from the cargo in the No 2 hold. From this point, Ds liability for demurrage was interrupted because the delay was due to Ss fault, namely theunseaworthiness of the vessel.

The cargo receivers demanded a cash settlement of US$2 million in relation to the damaged cargo and S offered security in the form of a P&I Club letter of undertaking. TheRussian veterinary authority then imposed a suspension on movement of the remaining cargo. Six months later, S agreed to pay the receivers a cash settlement of US$2.3 million.The veterinary service granted permission authorising the re-export of the cargo and the Andra left St Petersburg.

The arbitrators found that the gasoil leak was caused by the unseaworthiness of the Andra, for which S were responsible under the terms of the charter, irrespective of theexercise of due diligence. They also found that the receivers should have been prepared to agree to a P&I Club letter of undertaking within about 10 days from discharge of thevessel; until the end of that period Ss breach was still causative and D was not liable for demurrage. Ss breach had foreseeably caused the intervention of the veterinary servicebut the latter could reasonably have been expected to resolve the position within about three weeks. After the end of that further period, the delay was not the fault of S and thevessel was on demurrage. The arbitrators concluded that the charterparty was not frustrated by the continuation of the veterinary services order suspending movement of thecargo.

D submitted that, on the proper interpretation of the award, the tribunal had found that the charterparty had been frustrated by reason of the veterinary services order, but hadheld that the plea of frustration failed on the basis that such frustration was self-induced in that the charterers were vicariously liable for the acts of the receivers in insisting upona cash settlement. That was an error of law because the receivers conduct was to be characterised as pursuing their own commercial interests, or preventing re-export of thecargo, as opposed to its discharge. Where delay was caused by receivers acts or omissions other than in carrying out discharge, they were not to be attributed to the charterersso as to make what would otherwise be a frustrating event self-induced.


Held: (1) If the continued existence of the veterinary order would otherwise have been a frustrating event, D was not entitled to rely on it, because it was the conduct of thereceivers, being unwilling to procure its lifting, which was the effective cause of it remaining in place. (2) The relevant conduct of the receivers, which precluded the veterinaryservices order operating as a frustrating cause, was their failure to discharge the cargo for so long as they were maintaining an attempt to be paid US$2 million or more in respectof the alleged damage to the cargo. (3) The charterparty provided for the cargo to be discharged by D or its agents and they were under a non-delegable duty to discharge thecargo, however they chose to fulfil it. (4) D would be liable in demurrage or damages for detention if the cargo was not discharged, notwithstanding that the function ofdischarging had been delegated to the receivers as its agent. (5) The instant case was not one in which the vessel was prevented from sailing away or the delay was caused bysomething preventing the re-export of the cargo. (6) The receivers failure to discharge

65. See generally Lauritzen AS v Wijsmuller BV (The Super Servant Two) [1990] 1 Lloyds Rep 1 (CA).66. Distinguishing Adelfamar SA v Silos E Mangimi Martini SpA (The Adelfa) [1988] 2 Lloyds Rep 466.

ENGLISH SHIPPING LAW 129the cargo prevented D from relying on what would or might otherwise have been a frustrating event that relieved it from the obligation to pay demurrage.

Comment: In this second case involving an argument as to frustration in the year under review, the argument as to frustration was again turned down by the court. The caseunderlines the importance of the charterers obligation to discharge the cargo even where, as in this case, discharge fell on the receivers, who declined to discharge until they werepaid for the alleged damage to the cargo. Though the outcome was in the owners favour, it was ultimately to their cost, having incurred a liability to the receivers of US$2.3million (following a claim of just S$2 million).

Time charterpartywithdrawal for failure to pay hirelien on sub-freights and sub-hireNYPE 1946D was the owner, and C the time charterer, of the Bulk Chile. D chartered the vessel, on Cs account, to an intermediate charterer, K, on back-to-back terms. Clause 18 of the NYPE1946 charterparty provided that the Owners shall have a lien upon all sub-freights for any amounts due under this Charter . K sub-chartered the Bulk Chile to F for a timecharter trip and F sub-sub-chartered her to M on voyage charterparty terms.

M, the voyage charterer of the Bulk Chile, was also the shipper of 47,000mt of steel products from Sevastopol and Odessa to Jakarta and Klang. The terms of their voyagecharterparty provided at cl.30 that bills of lading were to be marked Freight Prepaid, and that Charterers were authorised to issue Bill(s) of lading on behalf of master, subjectfreight payment. Three bills of lading on the Congenbill 1994 form were issued, stating that Freight payable as per Charterparty dated 19.01.11, while the reverse side containedthe standard Congenbill term incorporating all terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf . The bills of lading also stated freightprepaid on their face, but none had been.

K became insolvent and was unable to pay outstanding hire charges to D. D sent a first notice to F and M on 1 February 2011, claiming a lien over any balance of freight(s)and/or hire(s) due under any charters, bills of lading, or other contracts of carriage relating to the voyage(s) and cargo(es) covered by the above bills of lading. In a subsequent,second notice, dated 5 February, D extended the lien to the cargo. D withdrew the Bulk Chile from Ks service on 26 February. F gave D notice of redelivery, instructed the masterof the vessel to continue the voyage, and discharged the cargo at Jakarta. M paid freight to F on 12 April.

D brought a series of claims: (1) bill of lading claims against M, claiming freight under the bill of lading contracts; (2) lien claims, in which they claimed hire from F andfreight from M in respect of the period to 26 February; and (3) post-withdrawal claims, in which they argued that F and M were liable in respect of the period after the withdrawal

67. See Bunge SA v Kyla Shipping Co Ltd (The Kyla), ante, 130.68. [2013] EWCA Civ 184 (CA: Pill, Toulson, & Tomlinson LJJ); affg [2012] EWHC 2107 (Comm); [2012] 2 Lloyds Rep 594; [2013] 1 All ER (Comm) 177 (QBD: Andrew SmithJ).


of the vessel up to 10 March, either because they agreed to pay hire for the voyage to be completed or by way of a quantum meruit claim in unjust enrichment.

The court allowed Ds bill of lading and lien claims against M, and allowed a claim against F for use of the Bulk Chile after its withdrawal.

60

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62 63

135. DGM Commodities Corp v Sea Metropolitan SA (The Andra) 64

128

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66

67

136. Dry Bulk Handy Holding Inc v Fayette International Holdings Ltd (The Bulk Chile) 68

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The issues on appeal were: (1) whether D was entitled to require M to pay bill of lading freight direct to it, even though the bills of lading directed payment to F; (2) whether Dsnotices were effective to require payment of bill of lading freight to D; (3) whether Fs notice of redelivery and message to the Bulk Chiles master constituted a request tocomplete the voyage, such as to oblige it to pay reasonable remuneration to D. Decision: Appeal dismissed.

Held: (1) It had long been recognised that a shipowner could intercept and claim freight direct from the shipper at any time before it was paid. (2) If the shipowner permittedhis charterer to commit him to contracts of carriage made with cargo interests, it was hardly surprising that he should reserve to himself the right to receive the contractualremuneration for those obligations. (3) Construing the contract evidenced by the bill of lading directing payment to a third party as one to pay the third party or to pay as theowner might direct seemed intuitively correct. (4) There was no reason why the contract should preclude the shipowner from cancelling his agents authority to act on his behalfin receiving the freight, before such payment had been made, and requiring it to be made to himself. (5) As between the shipowner and the shipper, it could not be suggested thatthe shipowners right to require payment to himself was conditional upon default by an intermediate charterer. (6) A time charterer who was not in default could, arguably, restraina shipowner from demanding direct payment on the ground that, until there was a default, the shipowner had, by reason of cl.8 of the NYPE form, agreed to delegate collection offreight to the charterer. (7) Ds two notices were sufficient to put M on notice that they were required to pay freight to D and not to F. (8) The first contained two requests, one forconfirmation of any amount due from M under any bills of lading or other contracts of carriage relating to the voyage and cargo covered by the bills of lading, and the other forpayment of any such freights due directly to D. (9) Both were repeated in the second notice and, together with a warning in the first notice about running the risk of being obligedto pay twice, they could scarcely have been more explicit. (10) The redelivery notice was consistent only with F treating itself as entitled to give instructions as to the employmentof the ship, having been sent in the knowledge that the ship had been withdrawn from Ks service. (11) The message to the vessels master was even more explicit and bothmessages had to be read in the context of Ds having made it clear that it expected the sub-charter hire to be paid to it. (12) It was no impediment that D was contractuallyobliged to carry the cargo to destination and discharge it. (13) There was no reason why a request, giving rise to a right to remuneration, could not be made for performance ofservices that the recipient of the request was obliged to perform under a contract with a third party.

Comment: This case (and its appeal) is one of two in the year under review involving the invocation of the NYPE lien clause by the shipowner. In a strong endorsement of theshipowners rights under a time charterparty, the Court of Appeal confirmed what has long

69. At [13].70. Tradigrain SA v King Diamond Marine Ltd (The Spiros C) [2000] 2 Lloyds Rep 319 (CA).71. See Western Bulk Shipowning III A/S v Carbofer Maritime Trading APS, post, 151.

ENGLISH SHIPPING LAW 131been regarded as hornbook law, namely that a shipowner can intercept and claim freight direct from the shipper at any time before it is paid. As Tomlinson LJ expressed it, it washardly surprising that a head owner would reserve the right to receive the contractual remuneration for obligations which he had agreed to undertake. He agreed with Rix LJin Tradigrain SA v King Diamond Marine Ltd (The Spiros C) that it was possible for the shipowner to require payment of freight to himself where there was no default on the partof the intermediate charterer, provided that it was made before the freight was paid to that charterer. In an obiter comment, he suggested that it was arguable that a timecharterer not in default might restrain the shipowner from collecting bill of lading freight because by NYPE, cl.8 the shipowner had agreed to delegate the collection of freight to thecharterer.

Voyage charterpartydemurragewhether delay caused by mechanical breakdown or government interferenceSugar Charter Party 1999, cl.28E were the voyage charterers of the Ladytramp, a bulk carrier, and T, her owners. The charterparty was on the Sugar Charter Party 1999 and provided that the vessel should sailand proceed to 12 safe berth(s), 1 safe port (intention Santos) but not south of Paranagua . Clause 28 of the charterparty provided that:In the event that whilst at or off the loading place the loading of the vessel is prevented or delayed by any of the following occurrences: strikes, riots, civil commotions, lockouts of men, accidents and/or breakdowns on railways, stoppages on railway and/or river and/or canal by ice or frost mechanical breakdowns at mechanical loading plants,government interferences, vessel being inoperative or rendered inoperative due to the terms and conditions of appointment of the Officers and crew time so lost shall not count aslaytime.On the date of the fixture, E declared Paranagua (Brazil) as the loading port. The CBL terminal where E had initially scheduled the Ladytramp to load had, however, suffered firedamage which destroyed the conveyor belt system linking it to the warehouse and rendering the terminal inoperable. The Ladytramp tendered notice of readiness (NOR) at 23.30on 20 June 2010 but, in the absence of an available berth, remained off the port until 14 July, when she weighed anchor and entered the inner roads of the port awaiting berthinginstructions. On 15 July she berthed and loaded at an alternative terminal, the Centrosul terminal.

The tribunal upheld Ts claim for demurrage in respect of a one-month period when the vessel had had to wait at the loading port. The tribunal held that E had been obliged,when

72. [2013] EWCA Civ 184, [24].73. Described ibid, along with Colman J at first instance ([1999] 2 Lloyds Rep 91), as two judges of great experience in the field.74. Ante, fn.70.75. [2013] EWCA Civ 184, [25].76. At [28].77. [2012] EWHC 2879 (Comm); [2012] 2 Lloyds Rep 660; [2013] 1 All ER (Comm) 955 (QBD: Eder J).


the terminal became unusable due to the fire, to nominate an alternative berth. They were entitled to nominate any safe berth in the port of Paranagua and the fact that the CBLterminal was unusable did not mean that they were unable to perform their obligation to nominate any safe berth. They were not, however, entitled to invoke cl.28 because theonly sense in which loading was prevented or delayed was that it became impossible to load at the berth originally intended. Clause 28 made no mention of fires as anexcepted peril and the inoperability of the conveyor belt system appeared to have been the result of physical damage due to the fire rather than any mechanical breakdown. Anyrefusal of permission by the port authority for vessels to load at the terminal were not government interferences within the meaning of cl.28, as that term related to such thingsas embargoes and export bans, and not to simple administrative rescheduling of cargoes due to a fire.

On appeal, E submitted that a mechanical breakdown was still a mechanical breakdown, whatever its cause, and the conveyor belt system was inoperable and had brokendown. E moreover argued that the words mechanical breakdown were wide enough to include the destruction of a mechanism and submitted that there had been no sound basisfor the tribunals gloss on the words government interferences.


Held: (1) The tribunal had approached the safe berth issue by asking the wrong question, namely whether E had a relevant legal obligation to nominate an alternative loadingberth when the terminal became unusable. (2) There was no reason in principle nor in the wording of the charterparty which, as a matter of law, required E to nominate a berth asa precondition to the operation of cl.28. (3) The correct question for the tribunal to answer was simply whether there had been prevention or delay in loading caused by a relevantexcepted peril. (4) As a matter of ordinary language and common sense, the destruction or partial destruction of an item was not within the scope of the term breakdown, stillless within mechanical breakdown. (5) Although the judgment in Olbena SA v Psara Maritime Inc (The Thanassis A) appeared to support Es argument that the cause of themalfunction was to be regarded as irrelevant, the conclusion in that case turned on the particular wording of the clause under consideration, which referred to breakdown ofmachinery and equipment. (6) Had the judge been considering only a clause encompassing breakdown of machinery, he would have been content to apply the colloquialmeaning to which he referred, namely some inherent defect of the machinery which resulted in the item breaking down. (7) It was only the inclusion of the words and equipmentwhich compelled a different and broader construction. (8) The wording mechanical breakdowns at mechanical loading plants in the present case pointed in favour of the narrowercolloquial meaning rather than the much broader construction for which E contended. (9) The inclusion of the word mechanical served to restrict the scope of the breakdownwhich must be established for the purposes of the

78. Relying on Portolana Compania Naviera Ltd v Vitol SA Inc (The Afrapearl) [2004] EWCA Civ 864; [2004] 1 WLR 3111.79. (22 March 1982) Unreported.

ENGLISH SHIPPING LAW 133exception. (10) There was no finding in the award to the effect that the port authority was a government entity, or that permission to berth at the terminal was suspended by theport authority or any other party. (11) As a matter of construction, the phrase government interferences was not intended to encompass an administrative rescheduling ofcargoes due to a fire. (12) What was required, at the least, was an act by a port authority, which was also a government entity, which amounted to the discharge of a sovereignfunction and which differed from an ordinary administrative act of which any port or berth authority, state-owned and operated or otherwise, would be capable in the day-to-daymanagement of a berth. (13) There was no finding of any such act in the instant case.

Comment: Many charterparties, of which the Sugar Charter Party 1999 is a particularly well-known example, make provision for circumstances in which laytime will not run.

69

70

71

72 73

74

75

76

137. ED & F Man Sugar Ltd v Unicargo Transportgesellschaft mbH (The Ladytramp) 77

132

78

79

80



Exceptions clauses, such as cl.28, are not of course applicable to demurrage unless they are specifically so worded. The difficulty faced by E in this case was that an alternativeloading terminal was available. Their attempted reliance on the wording of cl.28 soon ran into difficulty as the court held that a fire, leading to the unavailability of the terminal,was not covered by mechanical breakdowns at mechanical loading plants or government interferences.

Time charterpartybunkers on redeliveryprice actually paidSHELLTIME 4, cl.15E chartered the Bonnie Smithwick from T on amended Shelltime 4 terms. Clause 15 provided that:Charterers shall accept and pay for all bunkers on board at the time of delivery, and owners shall on redelivery accept and pay for all bunkers remaining on board, at the priceactually paid, on a first-in-first-out basis. Such prices are to be supported by paid invoices.E sub-chartered the vessel for a time charter trip to C. The sub-charter provided for payment for bunkers at fixed prices on the basis IFO US$625 pmt both ends. C paid E forbunkers on board on delivery under the sub-charter. Following completion of the voyage, C redelivered the vessel to E and E was obliged to buy back the bunkers on board at thesame stipulated prices. There remained a relatively short unexpired period under the head charterparty with T and it was agreed that, following completion of the charterparty withC, E would relet the vessel back to T for one time-charter trip. The sub-charter back to T was on the terms of the head charter. Following that voyage, the Bonnie Smithwick wasredelivered by T to E under the sub-charter and also simultaneously by E to T under the head charter. The prices under the charterparty with C were used for the purpose of

80. See eg Compania Naviera Aeolus SA v Union of India [1964] AC 868.81. [2012] EWHC 202 (Comm); [2012] 1 Lloyds Rep 407; [2012] 2 All ER 100 (QBD: Eder J).82. ie IFO (High Sulphur Fuel Oil) at US$625 per metric ton on delivery and redelivery.


calculating the price of bunkers on board on delivery of the vessel by E to T under the sub-charter and on redelivery by T to E.

The issue was the price of bunkers payable by T to E on redelivery under the head charter. The arbitrators agreed with T that the words price actually paid in cl.15 of thecharterparty referred to the prices actually paid for the bunkers which had been put on board and remained on board the vessel on redelivery assessed on a first-in-first-out basis,as supported by invoices paid by T to the bunker suppliers when the bunkers were stemmed.

On appeal, E argued that the price actually paid was the price actually paid by the party seeking payment under cl.15, namely the prices with C which E had been obliged topay T on redelivery under the sub-charter. T argued that the price actually paid referred to the price that it had paid to the bunker suppliers.


Held: (1) The arbitrators had specifically addressed Es argument that Ts construction of cl.15 was unworkable and concluded that, although a charterer might have difficulty inobtaining copies of relevant invoices, it was not impossible. (2) Es submissions with regard to unworkability would be rejected as would their argument that, as a matter ofbusiness common sense, cl.15 was intended to provide reimbursement of the party seeking payment. (3) On the contrary, it seemed most unbusinesslike that the head ownershould be taken to have agreed to pay a price for bunkers on redelivery over which he had no control and which was not necessarily related to any particular market price or priceactually paid to a bunker supplier. (4) As the arbitrators recognised, the Shelltime 4 form was not well suited to being the source document in a chain or sequence of time chartersand cl.15 was more appropriate where there was a long-term charter between two parties who could be expected to have copies of all invoices paid for bunkers supplied to thevessel. (5) E had raised a plea in the arbitration that an estoppel by convention prevented T from arguing that price actually paid meant the price paid when the bunkers werestemmed but failed to prove any of the relevant facts. (6) Clause 15 was badly drafted and was potentially open to more than one interpretation but the conclusion reached by thearbitrators was correct principally because of the specific requirement in the clause for first-in-first-out assessment. (7) That wording seemed to refer to the physical acts ofstemming bunkers and consuming them and the structure of the wording seemed to link the price actually paid to that physical movement of fuel, in particular the price paid forthe fuel being taken in at any particular moment in time. (8) The answer to the question of law was therefore that in cl.15 the words price actually paid meant the price paidwhen the bunkers were stemmed.

Comment: This was a case where between the date of a sub-charter for a time charter trip and redelivery the market in charterparty rates and bunker prices droppedconsiderably. The difficulties in which T found itself occurred, in part, because cl.15 was designed for the simpler chartering case where there were just two parties. Nevertheless,it was possible to construe the clause and, in particular, the wording price actually paid as the price paid when the bunkers were stemmed.

83. Ie, when the IFO was ordered and pumped on board the vessel.

ENGLISH SHIPPING LAW 135

Time charterpartywithdrawal of vesseldamages for detentionowners entitlement to recovery as baileesrecovery of expenses in providing a bank guaranteeSHELLTIME 3K, the owners of a VLCC, the Kos, chartered her to P on the Shelltime 3 form. Hire under the charterparty was payable in advance and if it was not paid the owners had the rightto withdraw the vessel without prejudice to any other claim owners may otherwise have on charterers under this charter. There was, however, no anti-technicality clause in thecharterparty. Clause 13 of the charterparty provided that:

The Master (although appointed by Owners) shall be under the orders and direction of Charterers as regards employment of the vessel, agency or other arrangements. Charterershereby indemnify Owners against all consequences or liabilities that may arise from the Master otherwise complying with Charterers or their agents orders.

While the Kos was at Angra dos Reis (Brazil), K served notice of withdrawal of the vessel on P following non-payment of hire. P sought to persuade K to revoke the withdrawal butK refused and P had the cargo removed from the ship.

P argued that the withdrawal was wrongful and demanded that K provide a bank guarantee for its potential damages claim before they would release the ship to K. K assertedthat the withdrawal had been lawful but agreed to provide the guarantee subject to its right to claim that the demand was unjustifiable and the right to recover the costs ofproviding it.

K claimed compensation for the use or detention of the ship between notice of withdrawal and discharge of the cargo, for fuel consumed during that time and used to unload thecargo, and for the costs of providing and maintaining the guarantee. K argued that it was entitled to compensation for use or detention of the Kos because the charterpartyprovided in cl.13 an indemnity from all consequences arising from the masters compliance with Ps orders, and its claim was a consequence of Ps order to load the cargo. K alsoargued that it was entitled to damages for failure to pay hire and that it was an implied term that P would forthwith discharge the cargo after notice of withdrawal and pay for useof the ship until discharge. Finally, K argued that it was entitled to its expenses as bailee of the cargo.

84. [2012] UKSC 17; [2012] 2 AC 164; [2012] 2 WLR 976; [2012] 2 Lloyds Rep 292; [2012] 4 All ER 1; [2013] 1 All ER (Comm) 32 (UKSC: Lords Phillips, Walker, Mance,Clarke & Sumption); noted S Baughen [2012] LMCLQ 343; Alvin W-L See & Ken TC Lee [2012] JBL 549; L Zhao (2012) 18 JIML 121; refd Dry Bulk Handy Holding Inc v FayetteInternational Holdings Ltd (The Bulk Chile), ante, 136 ; Taokas Navigation SA v Komrowski Bulk Shipping KG (GmbH & Co), post, 149; rvsg [2010] EWCA Civ 772; [2010] 2Lloyds Rep 409; [2010] 2 CLC 19; [2011] 2 All ER (Comm) 57 (Longmore & Smith LJJ & Sir Mark Waller); noted S Girvin [2011] IMCLY 117; Ken TC Lee & Alvin W-L See[2011] LMCLQ 178; F D Rose (2011) 127 LQR 514; partly affg [2009] EWHC 1843 (Comm); [2010] 1 Lloyds Rep 87; [2010] 1 All ER (Comm) 669 (QBD: Andrew Smith J);noted G McMeel [2010] LMCLQ 226; S Girvin [2010] IMCLY 121; folld in Metall Market OOO v Vitorio Shipping Co Ltd [2012] EWHC 844 (Comm).85. Ie, a grace period for the charterer during which late payment, provided it is made within the number of days specified in the charterparty, will amount to a regular andpunctual payment for the purposes of the charterparty. See Girvin, Carriage of Goods by Sea, 2nd edn (Oxford University Press, 2011), [33.75].86. Unlike Shelltime 4, cl.9(a).87. Cf the more detailed clause in the Shelltime 4 form.


The judge at first instance rejected all of these arguments but accepted Ks argument that it was entitled to recover in respect of the guarantee as costs.

The Court of Appeal rejected Ks appeal but allowed the owners to recover the value of bunkers consumed in actually discharging the cargo. The claim under cl.13 failed becausethe withdrawal of the vessel was an independent cause of the owners loss, breaking the chain of causation between the order to load the cargo and the detention of the vesselafter withdrawal. The claim for remuneration in bailment failed because the owners were doing no more than required of a gratuitous bailee. There was no element of accident,emergency or necessity.

K appealed on the ground that it was entitled to the payments under both the indemnity clause and bailment.

80

138. Eitzen Bulk A/S v TTMI SARL (The Bonnie Smithwick) 81

82

134

83

139. ENE Kos v Petroleo Brasileiro SA (The Kos) 84

85

86

87

136



Decision: Appeal allowed in part.

Held: (1) The scope of the indemnity in cl.13 was very wide, but not unlimited and had to be read in the context of the owners obligations under the charterparty as a whole. (2)Its purpose was to protect the owners against losses arising from risks or costs which they had not expressly or impliedly agreed to bear. (3) The clause also limited the indemnityto losses which were caused by complying with the charterers orders and was sensitive to the legal context in which it arose. (4) The question was whether the charterers orderwas an effective cause of the owners having to bear a risk or cost which he had not contractually agreed to bear. (5) In the instant case, the relevant order of P was the order toload the cargo which was on board the vessel when it was withdrawn. (6) The loss claimed by K was the consequence of that order. (7) The need to discharge the cargo in Ks owntime arose from the combination of the cargos being loaded and the fact that the purpose for which it had been loaded had come to an end with the termination of thecharterparty. (8) This was not an ordinary incident of the chartered service and was not a risk that K assumed under the contract. (9) The detention of the Kos fell within theindemnity and K was entitled to the market rate of hire and the value of the bunkers consumed during the 2.64 days when the vessel was detained. (10) K was also entitled tosucceed at common law as non-contractual bailee of the cargo after the withdrawal of the vessel. (11) That entitlement arose from the same circumstances which were decisive inThe Winson: the cargo was originally bailed to K under a contract which came to an end while the cargo was still in its possession. (12) As a matter of law, Ks obligation to lookafter the cargo continued notwithstanding the termination of the charterparty and the only reasonable or practical option open to K was to retain the cargo until it could bedischarged. (13) Although The Winson was a claim for expenses, the same principle should be applied to a claim for remuneration where the claimant stored and handled thegoods with his own facilities. (14) (Per Lord Mance, dissenting) The appeal should be allowed under the law of bailment, but not in relation to cl.13. (15) The indemnity clauseapplied to consequences or liabilities that might arise from the master complying with the charterers orders. (16) It was necessary to search for the proximate or determiningcause, but in the instant case there was no direct or unbroken causal link. (17) The loss suffered by K was not caused by compliance with Ps instructions but was caused becausethe charterparty was at an end. (18) There was no justification or need to apply the express

88. China-Pacific SA v Food Corp of India (The Winson) [1982] AC 939.89. See also Gaudet v Brown (1873) LR 5 PC 134.

ENGLISH SHIPPING LAW 137charter indemnity beyond any previous decision and to do so would disregard the potential uncertainty of ever more ambitious claims.

Comment: This important decision by the Supreme Court is notable on a number of fronts. On the one hand, there are the unique facts which took the case to the highest courtand required consideration of the scope of the charterparty express indemnity in the Shelltime 3 form.

On the other hand, there is the stark disagreement between the majority, led by Lord Sumption and Lord Mance (dissenting) on the indemnity point. In reiterating the purposeof the indemnityto protect owners against losses arising from risks or costs which they had not expressly or impliedly agreed to bear and only those losses which were caused bycompliance with the charterers ordersit was clear that the discharge of the cargo in Ks own time arose from the combination of the cargos being loaded and the fact that thepurpose for which it had been loaded had come to an end with the termination of the charterparty. The majority approach to the indemnity point, however, goes much further thanearlier cases on indemnities; and, although Lord Clarke agreed with Lord Mance that a direct causal link was required to trigger the indemnity clause, this does not seem tobe reflected in the approach taken by the majority. It is submitted that the better view is that Ks decision to withdraw led to an event which was not part of the chartered serviceand should not have been covered by the indemnity. The bailment point in the case is less controversial (and Lord Mance did not dissent on this point) and, indeed, points to thecontinuing vitality of bailment reasoning in shipping cases.

Voyage charterpartydischargingSTS transferBPVOY4The Falkonera was chartered by her owners, F, to D to perform a single voyage to carry crude oil from the Yemen to 12 ports far east. The charterparty was never signed but,as set out in the recap, was on BPVOY4 terms with certain additions and amendments. D chose to discharge at Pasir Gudang (Malaysia) by way of a ship-to-ship (STS) transfer,in accordance with cl.8.1, which provided that:Charterers shall have the option of transferring the whole or part of the cargo to or from any other vessel including, but not limited to, an ocean-going vessel, barge and/orlighter All transfers of cargo to or from Transfer Vessels shall be carried out in accordance with the recommendations set out in the latest edition of the ICS/OCIMF Ship to ShipTransfer Guide (Petroleum).

90. See Larrinaga Steamship Co Ltd v The King (The Ramon de Larrinaga) [1945] AC 246; Royal Greek Government v Minister of Transport (1949) 83 Ll L Rep 228; A/BHelsingfors Steamship Co Ltd v Rederiaktiebolaget Rex (The White Rose) [1969] 1 WLR 1098.91. Cf the more detailed wording in Shelltime 4, cl.13(a) (lines 225234).92. Incidentally, also his first reported decision after taking up his seat as a Justice of the Supreme Court.93. Including cases expressly cited, such as Royal Greek Government v Minister of Transport (The Ann Stathatos) (1949) 83 Ll L Rep 228; Triad Shipping Co v Stellar Chartering& Brokerage Inc (The Island Archon) [1994] 2 Lloyds Rep 227.94. [2012] UKSC 17, [75].95. [2012] EWHC 3678 (Comm); [2013] 1 Lloyds Rep 582 (QBD: Eder J).


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