Aegean Sea Traders Corporation v Repsol Petroleo SA ('The Aegean Sea') [QBD (Admiralty)]

JurisdictionEngland & Wales
JudgeThomas J.
Judgment Date07 April 1998
CourtQueen's Bench Division (Admiralty)
Date07 April 1998

Queen's Bench division (Admiralty Court).

Thomas J.

Aegean Sea Traders Corp
and
Repsol Petroleo SA & Anor (“The Aegean Sea”)

Richard Aikens QC and Christopher Hancock (instructed by Ince & Co) for the plaintiffs.

Stewart Boyd QC and David Mildon (instructed by Elborne Mitchell) for the defendants.

The following cases were referred to in the judgment:

Aktieselskabet Olivebank v Dansk Svovisyre Fabrik (“The Springbank”)ELR [1919] 2 KB 162

Ann Stathatos, TheUNK (1950) 83 Ll L Rep 228

APJ Priti, TheUNK [1987] 2 Ll Rep 37

Asfar & Co v BlundellELR [1896] 1 QB 123

Breydon Merchant, TheUNK [1992] 1 Ll Rep 373

Caspian Basin Specialised Emergency Salvage Administration v Bouygues Offshore SA [1997] CLC 1463

Compania Naviera Maropan SA v Bowaters Lloyd Pulp & Paper Mills Ltd (“The Stork”)ELR [1955] 2 QB 68

Effort Shipping Co Ltd v Linden Management SA (“The Giannis NK”) [1996] CLC 943 (CA); [1998] CLC 374; [1998] AC 605 (HL)

Erechthion, TheUNK [1987] 2 Ll Rep 180

Evaggelos TH, TheUNK [1971] 2 Ll Rep 200

Fiona, TheUNK [1993] 1 Ll Rep 577

Fothergill v Monarch Airlines LtdELR [1981] AC 251

George C Lemos, TheUNK [1991] 2 Ll Rep 107

Houda, The [1994] CLC 1037

Isabelle, TheUNK [1982] 2 Ll Rep 81

Krüger & Co Ltd v Moel Tryvan Ship Co LtdELR [1907] AC 272

Larrinaga Steamship Co Ltd v RELR [1945] AC 246

Naviera Mogor SA v Société Metallurgique de Normandie (“The Nogar Marin”)UNK [1988] 1 Ll Rep 412

Prometheus, TheUNK [1974] 1 Ll Rep 350

Reardon Smith Line Ltd v Australian Wheat Board (“The Houston City”)ELR [1956] AC 266

Reardon Smith Line Ltd v Ministry of Agriculture, Fisheries & FoodELR [1962] 1 QB 42

Sagona, TheUNK [1984] 1 Ll Rep 194

Sheffield Corp v BarclayELR [1905] AC 392

Society of Lloyd's v Clementson [1995] CLC 117

Tojo Maru, TheELR [1972] AC 242

Shipping — Carriage of Goods — Shipowners' right to limitation of liability — Whether charterers could take advantage of limitation against claims by shipowners — Bills of lading — Whether charterers' parent could be made liable to shipowners on bills of lading — Whether terms as to nomination and safety of port could be implied into bills of lading — Whether parent liable on bill of lading would be “shipper”— Hague-Visby Rules, art. IV, r. 3 — Merchant Shipping Act 1979, s. 17, Sch. 4, Pt. I (Convention on Limitation of Liability for Maritime Claims 1976) — Carriage of Goods by Sea Act 1992, s. 3, 5.

This was the trial of preliminary issues in an action by shipowners against charterers and charterers' parent company after owners' vessel was lost by what owners alleged was charterers' fault.

The Aegean Sea was proceeding to berth at La Coruña, Spain to discharge a cargo of crude oil when she grounded, broke in two and caught fire. The vessel and most of the cargo were lost and there was large scale pollution and damage to property. Claims for pollution damage were made against the plaintiff owners as well as claims for salvage services rendered. The vessel was chartered to the second defendant, “ROIL”, the trading subsidiary of the first defendant state owned oil company, “Repsol”. The owners sought to recover the amounts of claims against them together with the value of the vessel, the bunkers on board and the freight (in total about US$65m) from ROIL and Repsol. The owners claimed against ROIL under the voyage charterparty on the basis that the nomination of La Coruña was an unsafe port. ROIL denied that La Coruña was an unsafe port and attributed the casualty to the negligence of the master. They also contended that in the event they were found liable to the owners they were entitled as charterers to limit their liability under the Convention on Limitation of Liability for Maritime Claims 1976 as given the force of law in the UK by the Merchant Shipping Act 1979. The owners claimed against Repsol on the basis that Repsol became liable under s. 3 and 5 of the Carriage of Goods by Sea Act 1992 under one of the two bills of lading under which the cargo was carried and the bills contained implied terms as to the safety of La Coruña and an implied indemnity.

There was a trial of two groups of preliminary issues: (1) whether ROIL as charterers were entitled to limit under the 1976 convention, and if so whether the owners' claims against them were within art. 2 of the convention; and (2) whether Repsol came under any liability under the bills of lading or under a letter of indemnity provided by Repsol on the basis that the cargo would be delivered without production of the bills of lading; and whether any terms were to be implied into the bills of lading as to nomination of a port and its safety and as to an indemnity.

Held, giving judgment accordingly:

1. ROIL was not entitled to limit under the 1976 convention. It followed from the development of the shipowners' right to limit prior to the 1976 convention and the way in which the 1976 convention was structured and its language that it did not provide and was not intended to provide an entitlement to charterers to limit where the shipowner brought the type of claims it did in this case against the charterers. Under the convention all claims arising from a distinct occasion where the owners and charterers were responsible were subject to one limit and, if a fund was constituted, to one fund. That fund was for the benefit of all claimants and protects equally the owner, charterer, manager and operator in respect of those claims. There was no provision for a separate limit or a separately constituted fund through which the charterers could limit their liability to owners. It could not have been intended that either the limitation amount or the fund be reduced by direct claims by the owners against charterers for the loss of the ship or the freight or the bunkers; it was intended for claims by cargo interests and other third parties external to the operation of the ship against those responsible for the operation of the ship. To permit claims of the type advanced by owners against charterers for the direct losses they suffered to come within the scope of the limitation amount or the fund would diminish what was available to others. Nor was it intended that the limitation amount or the fund would be reduced by recourse or indemnity claims by shipowners against charterers of the type here made.

2. On the assumption (contrary to the judge's decision) that the charterers were entitled to limit, the loss of the ship itself and the claim for damages for loss of freight would not be within art. 2(1)(a) of the 1976 convention. The loss of the ship could not be the “loss of property occurring in direct connection with the operation of the ship”, and the claim for freight consequently was also not within art. 2(1)(a). The claim for freight was not a claim within art. 2(1)(c). The loss of the bunkers could be a loss of property occurring in direct connection with the operation of the ship. The recourse or indemnity claims for the sums owners had paid in respect of oil pollution damage would be within art. 2, and would not be excluded by art. 3(b) which excluded claims brought under the Civil Liability Convention on Oil Pollution Damage 1969 as it had the force of law in the UK by virtue of the Merchant Shipping (Oil Pollution) Act 1971. Claims in respect of salvage payments in respect of cargo (but not the ship itself) could properly be characterised as consequential loss resulting from the loss of the cargo within art. 2 (and not excluded by art. 3(a)).

3. The claims against Repsol under the bills of lading could not succeed because Repsol never became subject to the liabilities under the bills. Repsol never became holder of the relevant bill although it had been delivered to Repsol as endorsee in error. Repsol never obtained possession of the bill as the result of completion of an endorsement by delivery of the bill under s. 5(2)(b) of the Carriage of Goods by Sea Act 1992. Possession as a result of the completion by delivery of an endorsement required a consensual element on the part of the endorsee or transferee. There was never any delivery of the bill of lading to Repsol to complete the endorsement. Even if Repsol had obtained possession of the bill of lading, Repsol never accepted delivery of it as the endorsee or transferee. Repsol did not demand delivery of the oil under s. 3(1) of the Carriage of Goods by Sea Act 1992. The letter of indemnity was not in terms a demand for delivery. Repsol did not take delivery of oil from the carrier under s. 3 of the 1992 Act when its refinery received salvaged oil under compulsion from the government. Further it was arguable that the salvaged oil was not as a matter of business the same oil that was shipped under the bills of lading. Repsol was not liable under the letter of indemnity. There was no breach thereunder of any obligation relating to the bills of lading.

4. In any event the bills of lading did not contain the implied terms on which the owners' claim was based. The right to give the instructions to discharge had been reserved to the charterer. The bill of lading gave no right to nominate the discharge port or berth and neither on the business efficacy or officious bystander test was it necessary to imply a term that the other party to the bill of lading had that right. There was therefore no room for the implication of a term that the port so nominated be safe. If there was a right to nominate there might be also an implied term as to safety. There was no general rule that a term as to safety would always be implied into voyage charterparties where there was an unspecified range of ports. If it had been intended to impose obligations as to safety, the bill of lading would have made that express. Similarly no indemnity should be implied into the bill. In any event if there were an implied term as to safety, no implied indemnity would be needed. Repsol would not have been able to rely on art. IV, r. 3 of the...

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