China Pacific S.A. v Food Corporation of India (Winson)

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Diplock,Lord Simon of Glaisdale,Lord Keith of Kinkel,Lord Roskill,Lord Brandon of Oakbrook
Judgment Date12 November 1981
Judgment citation (vLex)[1981] UKHL J1112-1
Date12 November 1981

[1981] UKHL J1112-1

House of Lords

Lord Diplock

Lord Simon of Glaisdale

Lord Keith of Kinkel

Lord Roskill

Lord Brandon of Oakbrook

China Pacific S.A
(Appellants)
and
Food Corporation of India
(Respondents)
Lord Diplock

My Lords,

1

The Winson, a bulk carrier owned by a one-ship Panamanian Company ("the shipowner") was chartered by the Food Corporation of India ("the cargo-owner") to carry a full cargo of wheat from U.S. Gulf ports to ports in India under a voyage charterparty in the Baltimore Berth Grain Charter form with numerous special conditions. The cargo-owner is a nationalised enterprise possessing separate legal personality which the Government of India uses for purchasing imports of foodstuffs needed for that country.

2

The cargo was loaded in December 1974 and on 21 January 1975, in the course of the voyage to India, the Winson stranded on the North Danger reef in the South China Sea. China Pacific S.A. ("the salvors") who are professional salvors were quickly on the scene and on the following day a salvage agreement with the salvors in Lloyd's open form was entered into on behalf of the shipowner and the cargo-owner. In the course of carrying out the salvage services to both the shipowner and the cargo-owner that the salvors by that agreement had undertaken with each separately to use their best endeavours to render, it was necessary to lighten the stranded vessel by off-loading part of the cargo into barges provided by the salvors and carrying it to a place of safety. This was done, and some 15,429 tonnes of wheat were off-loaded and carried to Manila which, it is not disputed, was a proper place of safety. The carriage was in six separate parcels which arrived in Manila at various dates between 10 February and 20 April 1975. The salvage operations at the site of the stranding were temporarily suspended on 15 April 1975, owing to fighting in the vicinity having broken out between the forces of North Vietnam and South Vietnam. It is not disputed that it never became practicable thereafter to resume the salvage operations and on 20 May 1975 the salvors gave formal notice of termination of their salvage services. The Winson with the remainder of the cargo of wheat still on board her eventually became a total loss.

3

Upon arrival of each parcel of salvaged wheat at Manila, where the salvors had no storage premises of their own, it became necessary for it to be stored in suitable accommodation under cover, if it were not to deteriorate rapidly from exposure to the elements during the period before a decision as to what was to be done with it was reached by whoever at the time that such decision was in fact made was legally entitled to require its removal from the accommodation in which it was stored. The salvors arranged for the storage of the salvaged wheat as to part in a vessel, the Maori, lying in Manila Harbour, and as to the remainder in a bonded warehouse ashore. In doing so they incurred expenses for stevedoring and charter hire of the Maori and warehouse charges ashore and the stored wheat was held to their order by those in whose vessel and warehouse it was stored ("the depositaries"). These expenses which the salvors became personally liable to pay under the contracts that they made as principals with the depositaries, continued to be incurred by them until the cargo-owner had completed taking possession of the salved wheat—which it did not do until 5 August 1975.

4

It is not disputed that storage under cover of the salvaged wheat upon its arrival at Manila was necessary to prevent its rapid deterioration; nor is it disputed that the storage obtained by the salvors at Manila was reasonably suitable for that purpose or that the charges paid for it by the salvors to the depositaries were also reasonable.

5

The cargo-owner has accepted liability for and paid the expenses incurred by the salvors for the storage of the wheat in Manila after the date on which the shipowner gave notice to the cargo-owner on 24 August 1975 that he had abandoned the chartered voyage. By that date it was obvious that the completion of the carriage of the cargo in the Winson to its destination under the charterparty, even if it were to become physically possible (which, in the event, it did not) would involve such long delay as would frustrate the adventure for which the charterparty provided. Assuming that this stranding was caused by an excepted peril (as to which I understand there may be doubt) the shipowner had in law an option either to abandon the chartered voyage or to on-carry the salvaged wheat from Manila to its contractual destination in other bottoms. By giving formal notice of abandonment of the voyage the shipowner was divested of this latter option and it is undisputed that the contract voyage terminated on 24 April 1975. For some reason, which is not clear, the cargo-owner paid the expenses incurred by the salvors for the storage of the wheat in Manila from 15 April instead of 24 April, from which later date alone it acknowledges that it was under any legal liability to do so; but, so far as concerns any issue that your Lordships have to determine in this appeal, the relevant period for which the cargo-owner disclaims liability to reimburse the salvors for the expenses that they incurred in providing covered storage for the salvaged wheat is from 10 February, when the first barge-load of salvaged wheat arrived in Manila Harbour, until 24 April 1975 when, upon receipt by the cargo-owner of the shipowner's notice of abandonment, the contract voyage terminated. The action was brought by the salvors against the cargo-owner to obtain reimbursement of the expenses incurred by them during this period and the amount at stake is agreed at $110,982.

6

I hope that I do no injustice to the detailed and at times elaborate arguments addressed to your Lordships in this interesting and novel case if I say that, put in a nutshell, the main propositions on which the cargo-owner's case was based were:—

(1) that since by virtue of the contract of carriage created by the charterparty the immediate right to possession as between shipowner and cargo-owner vested in the shipowner for so long as that contract of carriage had not been terminated by performance or otherwise, it was the shipowner and not the cargo-owner to whom the salvors were under a duty to deliver each separate parcel of the cargo upon its arrival at Manila (subject to the provision to the Committee of Lloyd's of security for salvage remuneration if this were demanded by the salvors); and

(2) that, accordingly, it was the shipowner, and not the cargo-owner, who was liable to reimburse the salvors for any expenses reasonably incurred by them in preserving the cargo from deterioration during the period while the contract of carriage remained unterminated, if they were entitled to be reimbursed by anyone at all.

7

My Lords, the way in which I have ventured to summarise the cargo-owner's main propositions which were rejected by Lloyd J. in the Commercial Court, but appear to have been accepted by the Court of Appeal, reflect an assumption that the salvage services rendered to the cargo-owner under Lloyd's open salvage agreement came to an end separately in respect of each individual parcel; upon arrival of the barge on which it was being carried at a place of safety in Manila Harbour. In each of the three courts through which it has progressed the case has throughout been argued on that basis and, in the result, nothing that your Lordships have to decide in the instant appeal turns on whether this assumption was correct or not. I should not, however, wish to be taken as necessarily accepting that, in the absence of subsequent variation either express or to be implied from the conduct of the parties, where a Lloyd's open form of agreement is signed by the Master on behalf of a single owner of the whole of a bulk cargo and the salvage services involve unloading it in whole or part and taking it to a place or places of safety separately from the carrying ship, there is a "termination" of the salvage services within the meaning of Lloyd's open form until either the whole of the cargo has been brought to places of safety or further attempts to salve cargo that has not yet been brought to any place of safety have been justifiably abandoned by the salvor.

8

The instant case came on for trial before Mr. Justice Lloyd in July 1978. No oral evidence was tendered and the details as to what occurred between the time of stranding of the Winson and the completion of delivery to the cargo-owner of the salved wheat from the depositaries, have to be gleaned in the main from a series of contemporaneous telexes from persons on or near the spot reporting to the shipowner and the cargo-owner through their respective agents, what was going on. The learned judge's findings of fact based on this material are set out in his judgment, including citations of those passages in various telexes which he regarded as important to his decision. I do not find it necessary to repeat them here or to add to the brief summary that I have already given of them; except to add that throughout the relevant period from the arrival of the first parcel of salved wheat at Manila Harbour on 10 February 1975, until notice by the shipowner of abandonment of the charter voyage was received by the cargo-owner on 24 April 1975, both shipowner and cargo-owner were well aware that the cargo on its arrival in Manila Harbour had been put in store by the salvors to preserve it from deterioration and that neither shipowner nor cargo-owner had made any request to the salvors for the delivery of the salved cargo or any part of it to either of them.

9

My Lords, it is not suggested that there is any direct authority on the question of law that is posed in this appeal. In my opinion the answer is to be found by applying to the unusual...

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