Kuwait Petroleum Corporation v I & D Oil Carriers Ltd ('The Houda')
| Jurisdiction | England & Wales |
| Judge | Neill,Leggatt,Millett L JJ. |
| Judgment Date | 21 July 1994 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 July 1994 |
Neill, Leggatt and Millett L JJ.
Court of Appeal (Civil Division).
Shipping — Time charterparty — Hire — Vessel loading oil in Kuwait when invaded by Iraq — Vessel sailed part loaded leaving behind bills of lading — Charterers moved from Kuwait to London — Delay by owners in carrying out charterers' instructions — Whether vessel off-hire — Whether shipowners obliged to comply immediately with charterers' instructions — Whether charterers entitled to demand delivery of cargo without production of bills of lading.
This was an appeal by shipowners from a declaration granted by the Commercial Court that the vessel was off-hire for a substantial part of August and September 1990. It raised two questions of general importance: first, whether the owners of a vessel under a time charter were obliged immediately to comply with a charterers' order or were entitled to a reasonable time for consideration, where the source or lawfulness of the orders was in doubt; and secondly, whether time charterers could lawfully demand that shipowners deliver the cargo without production of the bills of lading.
The vessel “Houda”, which was chartered under a time charterparty dated 2 August 1990 on the Shelltime 4 form, was loading oil at Min Al Ahmadi on 2 August 1990 when Iraq invaded Kuwait. The vessel sailed part loaded, leaving behind in Kuwait the bills of lading, which subsequently disappeared. Before the invasion the vessel operated under standing instructions issued by the charterers in Kuwait. After the invasion the charterers moved their management to London, from where on 8 August the shipowners received instructions to proceed urgently to the Red Sea for further instructions, privacy being stressed. The shipowners were unwilling to comply with instructions until satisfied that the London office had authority to act for the charterers in the matter, and that the vessel was not to take part in an illegal scheme to avoid United Nations sanctions against Iraq. The charterers were granted an interlocutory injunction restraining the shipowners from permitting the vessel to sail to a destination other than that directed by the charterers, on their undertaking not to seek delivery of the cargo without the owners' consent or a court order. By 27 September the parties had reached an agreement, allowing the vessel to discharge her cargo.
The charterers issued the writ on 20 August 1990 claiming that they were deprived of the use of the vessel for most of August and September 1990 because of the owners' refusal to comply with orders lawfully given. The owners' case was that they were entitled to seek further information before they complied with any orders, and were under no duty to discharge the cargo except on presentation of bills of lading. Saville ordered that the trial should take place in two stages, the first to determine all issues save for reasonableness, which would be reserved for the second hearing. At the first trial Phillips J granted a declaration that the vessel was off-hire for a substantial part of August and September 1990, holding that the owners had no right to delay in complying with the charterers' orders, and that the charterers were able to order the discharge of the cargo without production of the bills of lading. The owners appealed.
Held, allowing the owners' appeal and ordering that the issues of reasonableness be determined at a second trial:
1.A master of a vessel, on receiving orders relating to the cargo, was under a duty not to obey instantly but to act reasonably, and whereas orders ordinarily required immediate compliance, the circumstances in which an order was received or the nature of it might make it unreasonable for the master to comply without further consideration or enquiry. The question to be asked in each case was how a man of reasonable prudence would have acted in those circumstances, not whether the facts fell within certain categories of exception to the general rule that owners were to obey lawful orders from charterers at once.
2.In a war situation circumstances could arise which entitled or obliged the shipowners to pause before complying with orders, to ascertain the source of and validity of any orders received, even if there were no immediate physical threat to the cargo or ship. The present circumstances were accordingly capable as a matter of law of constituting reasonable grounds for delay.
3.On the facts, the cause of the late discharge of the cargo was not the owners' failure to comply at once with the charterers' orders, but the charterers' undertaking to the court not to order discharge without the owners' consent and the unwillingness of the owners to discharge without presentation of the bills of lading. Further, the owners were under no contractual obligation (under cl. 13 and 50 of the charterparty) to discharge a cargo in the absence of a bill of lading.
4.(Per Millett LJ) The owners were in breach of contract by extracting from the charterers an undertaking not to give the order for the vessel to be discharged without the owners' consent. Prima facie the measure of damages was the amount of hire during the period when the charterers were in a position to give a lawful order to discharge but were prevented by the undertaking and lack of the owners' consent from doing so.
5.The general rule that shipowners were contractually obliged to deliver cargo only on presentation of a bill of lading, applied equally to voyage and time charterparties. Although it was open to a shipowner to deliver in the absence of a bill of lading should he consider that he was adequately protected by a letter of indemnity, a time charterer was not entitled to insist that cargo be discharged without production of a bill of lading. Since the owners' refusal to deliver the cargo was due to the charterers' failure to produce the bill of lading, the refusal was justified. The claim for off-hire therefore failed.
6.(Per Millett L J) Since the charterers were unable to produce the bill of lading they were not able to require the owners to discharge the cargo. It followed that no loss flowed from the owners' breach of contract in preventing the charterers from giving instructions without their consent.
The following cases were referred to in the judgments:
Barclays Bank Ltd v C & E Commrs [1963] 1 LI Rep 81.
Carlberg v Wemyss Coal Co LtdENR 1915 SC 616.
Chappell v BrayENR (1860) 6 H & N 145.
Glyn Mills Currie & Co v East and West India Dock CoELR (1882) 7 App Cas 591.
Hansard v RobinsonENR (1827) 7 B & C 90.
Kuwait Petroleum Corp v I & D Oil Carriers Ltd [1993] 1 LI Rep 333.
Midwest Shipping Co Ltd Inc v D I Henry (Jute) Ltd [1971] 1 LI Rep 375.
Pole v CetcovitchENR (1860) 9 CB(NS) 430.
Read v AndersonELR (1884) 13 QBD 779.
Sagona, The [1984] 1 LI Rep 194.
San Roman, TheELR (1873) LR 5 PC 301.
Strathlorne Steamship Co Ltd v Andrew Weir & Co (1934) 49 LI L Rep 306; 50 LI L Rep 185 (CA).
Sze Hai Tong Bank Ltd v Rambler Cycle Co LtdELR [1959] AC 576.
Teutonia, TheELR (1872) LR 4 PC 171.
Stephen Boyd QC and D Joseph (instructed by Ince & Co) for the owners.
Richard Aikens QC and R Lord (instructed by Shaw & Croft) for the charterers.
Neill LJ: This is an appeal by I & D Oil Carriers Ltd (“the owners”) from the order of Phillips J first made on 8 October 1992 and perfected on 12 January 1993. By his order Phillips J granted a declaration that the owners' vessel (the “Houda”) was off-hire for a substantial part of the period between 8 August 1990 and 27 September 1990. The declaration was made at the instance of Kuwait Petroleum Corporation (“the charterers”) to whom the owners had chartered the Houda under a time charterparty, dated 2 April 1990 on the Shelltime 4 form. The judge's judgment is reported at [1993] 1 LI Rep 333. The appeal raises two questions of some general importance:
(1) Are the owners of a vessel under time charter obliged to comply with an order from the charterers immediately, or are they entitled to a reasonable time to consider the implications of doing so if they have reasonable doubts about the source or lawfulness of the orders?
(2) Can time charterers lawfully demand that the owners of the vessel deliver the cargo without production of the bills of lading?
On 2 August 1990 Iraq invaded Kuwait. On that day the Houda was loading oil at Min Al Ahmadi. On the announcement of the invasion the Houda sailed part loaded. Before her departure blank bills of lading had been issued pursuant to the Early Departure Procedure, but these bills of lading were left behind in Kuwait. The bills of lading named the charterers as the shippers of the cargo and stated that the cargo was to be delivered at the port of Ain Sukhna to the order of the charterers. The master had signed the bills of lading but it had been arranged that the charterers would complete the documents when the amount of cargo was known. By the time of sailing about 150,000 tonnes of crude oil had been loaded. The bills of lading have disappeared.
By 8 August 1990 the Houda had proceeded to an anchorage off Fujairah, which lies just outside the Gulf. The charterers do not complain about this deviation from the orders given on 3 August to proceed to Dubai. Before the invasion of Kuwait the Houda was operating under standing instructions which had been issued by the charterers in these terms:
“All instructions relating to the voyages of your vessel will be issued by Kuwait Petroleum Corp in Kuwait.”
After the invasion the management of the charterers was moved to London. It was from the charterers' office in London that the orders were given on which the charterers rely in the present proceedings.
At 1645 GMT on 8 August the charterers sent a telex through Davies and Newman, the brokers who had fixed the vessel, to the owners' managers in Athens instructing the vessel to proceed to the Red Sea for...
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