Borealis AB v Stargas Ltd

JurisdictionUK Non-devolved
JudgeLORD HOBHOUSE OF WOODBOROUGH,LORD HOPE OF CRAIGHEAD,LORD MACKAY OF CLASHFERN,LORD HOFFMANN,LORD COOKE OF THORNDON
Judgment Date22 March 2001
Neutral Citation[2001] UKHL 17
Date22 March 2001
CourtHouse of Lords

[2001] UKHL 17

HOUSE OF LORDS

Lord Hoffmann

Lord Mackay of Clashfern

Lord Cooke of Thorndon

Lord Hope of Craighead

Lord Hobhouse of Wood-borough

Borealis Ab
(Formerly Borealis Petrokemi Ab and Statoil Petrokemi Ab) (Respondents)
and
Stargas Limited

and Others

(Respondents)
and
Bergesen D.Y. A/S "Berge Sisar"
(Appellants)
Borealis Ab
(Formerly Borealis Petrokemi Ab and Statoil Petrokemi Ab) (Appellants)
and
Stargas Limited

and Others

(Respondents) (Conjoined Appeals)
LORD HOFFMANN

My Lords,

1

I have had the advantage of reading in draft the speech prepared by my noble and learned friend Lord Hobhouse of Woodborough. For the reasons, which he gives, I would dismiss the appeal by Bergesen, and make the other orders that he has proposed

LORD MACKAY OF CLASHFERN

My Lords,

2

I have had the advantage of reading in draft the speech prepared by my noble and learned friend Lord Hobhouse of Woodborough. For the reasons, which he gives, I would dismiss the appeal by Bergesen, and make the other orders that he has proposed

LORD COOKE OF THORNDON

My Lords,

3

I have had the advantage of reading in draft the speech prepared by my noble and learned friend Lord Hobhouse of Woodborough. For the reasons given by him, I would dismiss the appeal by Bergesen and make the other orders that he has proposed.

LORD HOPE OF CRAIGHEAD

My Lords,

4

I have had the advantage of reading in draft the speech to be given by my noble and learned friend Lord Hobhouse of Woodborough. I agree with him that on the agreed primary facts Bergesen have failed to make out an arguable case that Borealis demanded the delivery of the cargo from the vessel into the terminal at Stenungsund within the meaning of section 3(1)(c) of the Carriage of Goods by Sea Act 1992. For the reasons that he has given I would dismiss the appeal by Bergesen, and I make the other orders that he has proposed.

LORD HOBHOUSE OF WOODBOROUGH

My Lords

5

On 23rd October 1993, the Norwegian flag LPG tanker Berge Sisar loaded a cargo of about 42,500 metric tons of liquid propane at the terminal of the Saudi Arabian Oil Company at Yanbu. The vessel sailed to Stenungsund in Sweden arriving there on 6th November. On arrival, the vessel went alongside the intended receivers' jetty and routine samples were taken from the ship's tanks and analysed. The analysis showed that the cargo had been contaminated by corrosive hydrogen sulphide compounds. The intended receivers, Borealis AB, rejected the cargo and the vessel was not allowed to discharge the contaminated propane at Stenungsund. The terminal at Stenungsund was not able to handle the contaminated cargo. The vessel was diverted back to Terneuzen in Holland where the necessary facilities existed for dealing with a contaminated cargo. The cargo was discharged into the Dow terminal at Terneuzen between 17th and 24th November. The vessel's tanks and lines had then to be cleaned so that subsequent cargoes would not be contaminated.

6

The financial consequences were substantial. There were the wasted costs at Stenungsund, the costs of diverting back to Terneusen and discharging there, the delay to the vessel, the reduced value of the contaminated cargo in comparison with a sound cargo and the cost of the clean-up. These events led to the making of claims and cross-claims by and against the various parties involved in the venture and has given rise to disputes between them. Factually, the disputes primarily relate to the time at which and the reason why the propane became contaminated. Legally, the disputes relate to the division of responsibility and risk between those parties. The relevant contracts governing the various relationships were of two different types. Firstly there were the contracts covering the sales and purchases of the propane. Secondly, there were the contracts covering the employment of the vessel and the carriage of the cargo.

7

The chain of sellers and buyers started with the producers of the propane, the Saudi Arabian Oil Company ('Saudi Aramco'). Part of the propane it sold direct to the first buyer, Stargas Ltd of St Helier, Jersey, and part to various intermediaries who on-sold to Stargas. These contracts were on FOB Yanbu terms with a quality/description condition. Stargas on-sold the propane to Borealis AB of Stenungsund (then called Statoil Petrokemi AB) on CFR terms, one safe berth Stenungsund, with the liberty to the buyer to nominate a different discharging port within the range nominated by the seller (with an adjustment to the price). The date of the contract was 13th October 1993 and there was an English law and jurisdiction clause. Title, beneficial ownership and risk were to pass at ship's manifold at the loading port. The contract also provided that, after transfer of title to the buyer, the product was to be carried by the seller as carrier on the terms of the ASBATANKVOY charter party. It is alleged that the specification included a requirement that the cargo should not contain corrosive compounds such as to give rise to a result worse than 1B when measured by the copper corrosion test method ASTM D-1838.

8

Borealis were the intended receivers of the cargo. The terminal at Stenungsund was theirs and had not the contamination been discovered, the cargo would have been discharged there. On the discovery of the contamination, Borealis refused to take the contaminated cargo and sold it to Dow Europe at a much reduced price; the contract was dated 11th November at which time the vessel was lying in the anchorage off Stenungsund, having been ordered off Borealis's jetty the previous day. The terms were CIF Terneuzen with the quality as per the analysis of the Stenungsund samples. The payment terms were essentially cash against documents (letter of indemnity acceptable) and there was an English law and jurisdiction clause.

9

The vessel was owned by Bergesen DY A/S of Oslo. By a voyage charter party dated London 27th September 1993 on the ASBATANKVOY form, Bergesen chartered the vessel to Stargas for a voyage from Yanbu to one or two safe ports at charterers' option, one safe berth each port, out of Le Havre - Hamburg range (including UK and Stenungsund) or other options with a cargo of fully refrigerated propane and/or butane. The charter party included a clause paramount and a London arbitration clause. It also provided that: "The master shall upon request sign bills of lading in the form [printed at the foot of the charter party] for all cargo shipped but without prejudice to the rights of the owner and charterer under the terms of this charter."

10

Five bills of lading were issued at Yanbu dated 23rd October 1993 signed for and on behalf of the master. They acknowledged the receipt on board in apparent good order and condition of various tonnages of A-140 liquefied petroleum gas shipped by Saudi Aramco for carriage to one or more safe ports Netherlands and delivery there. The consignees named in the bills of lading were respectively the parties who had bought the relevant quantity of propane from Saudi Aramco. Thus, two named Banque Paribas for account of Stargas or order, one Banque Indosuez for account of Dendron Ltd BVI or order, one Chevron International or order and one Trammo Gas or order. The bills of lading incorporated the terms of the charter party, including the arbitration clause.

11

The naming of the banks in three of the bills of lading was no doubt because they were the bankers through whom the relevant buyers were to pay Saudi Aramco. The passing of the bills of lading down the line took some time and on 27 October, in the expectation that the vessel would arrive in northern Europe before the bills of lading, the charterers' agents (that is to say Stargas's agents) telexed the shipowners' agents, referring to the charter party and the forthcoming discharge in Stenungsund, stating that the relevant bills of lading had not yet arrived and requesting the shipowners to deliver the cargo to Borealis without production of the bills of lading. In consideration of the shipowners complying with this request, the charterers, Stargas, undertook to indemnify the shipowners for any consequent liability or loss. The charter party gave them this option. By the letter of indemnity, the charterers also gave the usual undertaking "as soon as all the original bills of lading for the above goods shall have arrived and/or come into our possession, to produce and deliver the same to you whereupon our liability hereunder shall cease". The telex concluded by charterers confirming their orders that the vessel was "to proceed to Stenungsund to discharge the entire b/1 quantity for the account of receivers [Borealis]" and requesting the shipowners' agents to instruct the master accordingly. By a telex later the same day, the shipowners confirmed their receipt and acceptance of the charterers' letter of indemnity for discharge of the cargo without presentation of the original bills of lading at the declared discharge port, Stenungsund, and that they, the shipowners, had instructed the master to deliver the cargo to Borealis.

12

The vessel arrived at the anchorage at Marstrand fjord off Stenungsund on the evening of 5th November after darkness had fallen. She proceeded into Stenungsund the following morning arriving at 0923 and finished berthing at 1020. The master's notice of readiness (tendering the vessel to Borealis as being ready to commence discharge) was timed at 1800 on the 5th but was recorded as having been received at 0925 on the 6th. No bills of lading were presented at Stenungsund. The on-carriage of the cargo by the vessel to Terneuzen was arranged by Stargas apparently under the option to nominate a second discharge port given to them in the charter party and Stargas gave the shipowners a further letter of indemnity for the vessel to deliver the cargo there to Dow...

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    • Construction Law. Volume III - Third Edition
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