Mediterranean Salvage & Towage Ltd v Seamar Trading & Commerce Inc. (The Reborn)

JurisdictionEngland & Wales
JudgeRix,Carnwath L JJ,Lord Clarke of Stone-cum-Ebony MR
Judgment Date10 June 2009
Neutral Citation[2009] EWCA Civ 531
CourtCourt of Appeal (Civil Division)
Docket NumberCase No: A3/2008/2230
Date10 June 2009
Between
Mediterranean Salvage & Towage Limited
Claimant/Appellant
and
Seamar Trading & Commerce Inc
Defendant/Respondent

[2009] EWCA Civ 531

The Hon Mr Justice Aikens

Before : Lord Clarke of Stone-cum-Ebony Mr

Lord Justice Rix

and

Lord Justice Carnwath

Case No: A3/2008/2230

2007/1605

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Mr David Bailey QC (instructed by Jackson Parton) for the Appellant

Mr Simon Croall QC and Mr Stewart Buckingham (instructed by Clyde & Co) for the Respondent

Hearing date: 11 May 2009

Sir Anthony Clarke MR:

Introduction

1

This appeal arises out of a dispute between Mediterranean Salvage & Towage Limited ('the owners') and Seamar Trading and Commerce Limited ('the charterers') arising out of a voyage charterparty dated 10 January 2003 on an amended Gencon form. The chartered vessel was the Reborn. It is an appeal from an order made by Aikens J ('the judge') on 1 August 2008 dismissing an appeal from a final declaratory award on preliminary issues dated 6 November 2007 made by three LMAA arbitrators, namely Bruce Harris, Mark Hamsher and Michael Baker-Harber.

2

The dispute arose out of damage allegedly sustained by the vessel during loading at Chekka in the Lebanon as a result of her hull being penetrated by a hidden underwater projection at the loading berth nominated by the charterers. The appeal arises out of the answer which the arbitrators gave to the first of four questions which they considered as preliminary issues. They formulated the question in this way: was there to be implied into the charterparty a term that there was an absolute duty upon the charterers to nominate a safe berth. The arbitrators answered that question no.

3

The judge expressed the question for decision somewhat differently as follows: if a specific load port is named in a voyage charterparty and there are several possible berths within that port to which a vessel could be directed to load by the charterers and there is no express warranty in the charterparty of the 'safety' of either the port or the berth to which the vessel is to be directed by the charterers, is the charterparty subject to an implied term that the charterers must nominate a 'safe' berth at that load port? The judge observed that his question put the point in slightly more precise terms without altering the nature of the question of law posed. He too answered the question no and accordingly dismissed the appeal. He gave permission to appeal to this court.

The charterparty

4

The charterparty was for a voyage from Chekka to Algiers with a cargo of 8000 metric tons of cement in bulk, 5 per cent more or less at owners' option. The charterparty contained a front page with 26 boxes, two pages with amended standard Gencon clauses numbered 1 to 19 and five pages of typed clauses numbered 20 to 42. Box 10 described the “Loading port or place” as “1 BERTH CHEKKA – 27 FT SW PERMISSIBLE DRAFT”. Box 11 described “the Discharging port or place” as “ALGIERS … (SEE CLAUSE 20). By box 20 and clause 19(a) it was agreed that the charterparty was subject to English law and that any dispute arising out of it would be submitted to arbitration in London.

5

Clause 1 provided, so far as relevant:

“The said Vessel shall … proceed to the loading port(s) or place(s) stated in Box 10 or so near thereto as she may safely get and lie always afloat … and being so loaded the Vessel shall proceed to the discharging port(s) or place(s) stated in Box 11 … or so near thereto as she may safely get and lie always afloat, and there deliver the cargo.”

Clause 20 provided, so far as relevant,

“Owners guarantee and warrant that upon arrival of the vessel to and/or prior its departure from, loading or discharging ports (either in ballast condition prior to loading or laden prior discharging) the vessel including, inter alia the vessel's draft, shall fully comply with all restrictions whatsoever of the said ports (as applicable at relevant time) including their anchorages, berths and approaches and that they have satisfied themselves to their full satisfaction with and about the ports specifications and restrictions prior to entering into this Charter Party.”

6

It was thus common ground that Chekka was agreed as the load port. It was further common ground that it was for the charterers to nominate the berth at which the vessel was to be loaded and that there was no express warranty of safety in respect of either the port or the berth. It follows that, in order to succeed, it was necessary for the owners to establish that an appropriate term was to be implied into the charterparty as to the safety of the berth. Mr Bailey QC submitted for the owners that the obligation on the charterers to nominate the berth was itself an implied term and that the only question therefore was as to the precise form of the implication.

7

Although the judge's formulation of the question might suggest that there were several possible berths which might be nominated at Chekka, we were told on behalf of the charterers by Mr Croall QC that there are only two. Mr Bailey said that there was no finding of the arbitrators to that effect but that he was willing to argue the appeal on that assumption. This might be a relevant factor on the facts of some cases but, in my opinion, it is not critical in this case.

Implied terms

8

The correct approach to the question when to imply a term into a contract or other instrument, including therefore a charterparty, has recently been considered by Lord Hoffmann, giving the judgment of the Judicial Committee of the Privy Council, which also comprised Lord Rodger, Baroness Hale, Lord Carswell and Lord Brown, in Attorney General of Belize v Belize Telecom Limited [2009] UKPC 11. I predict that his analysis will soon be as much referred to as his approach to the construction of contracts in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 at 912–3. His analysis in the Belize case is extensive: see [16] to [27].

9

It repays detailed study but for present purposes it is I think sufficient to say that the implication of a term is an exercise in the construction of the contract as a whole: see Trollope & Colls Limited v North West Metropolitan Hospital Board [1973] 1 WLR 601, 609 per Lord Pearson, with whom Lord Guest and Lord Diplock agreed and Equitable Life Assurance Society v Hyman [2002] 1 AC 405, 459, where Lord Steyn said:

“If a term is to be implied, it could only be a term implied from the language of [the instrument] read in its commercial setting.”

See Belize at [19] and [20].

10

At [17] Lord Hoffmann made the important point that the question of implication arises when the instrument does not expressly provide for what is to happen when some event occurs. The most usual inference in such a case is that nothing is to happen. If the parties had intended something to happen, the instrument would have said so. Otherwise, the express provisions of the instrument are to continue to operate undisturbed. If the event has caused loss to one or other of the parties, the loss lies where it falls. As appears below, that seems to me to be of particular significance here because this is not a case in which each party needs to establish a competing implied term if it is to succeed. Put another way, it is not a two way test. Absent an implied term, the default position is that the owners must bear their own loss.

11

The charterers do not need to establish an implied term. It is their case that the loss should lie where it falls and that, if the parties had intended the charterers to warrant the safety of the loading berth, they could and would have said so, as is very common in voyage charterparties. Sometimes the printed clauses provide for express safe port and safe berth warranties and sometimes typed clauses do so. The charterers say that whether or not to do so is a matter of choice and there is no warrant for the conclusion that it is necessary to do so in the particular circumstances of this case.

12

The central part of Lord Hoffmann's reasoning is from [21] to the first part of [25], where he focused on some of the tests which have historically been used to identify when a term is to be implied into a contract. He said this:

“[21] It follows that in every case in which it is said that some provision ought to be implied in an instrument, the question for the court is whether such a provision would spell out in express words what the instrument, read against the relevant background, would reasonably be understood to mean. It will be noticed from Lord Pearson's speech that this question can be reformulated in various ways which a court may find helpful in providing an answer – the implied term must “go without saying”, it must be “necessary to give business efficacy to the contract” and so on – but these are not in the Board's opinion to be treated as different or additional tests. There is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?

[22] There are dangers in treating these alternative formulations of the question as if they had a life of their own. Take, for example, the question of whether the implied term is “necessary to give business efficacy” to the contract. That formulation serves to underline two important points. The first, conveyed by the use of the word “business”, is that in considering what the instrument would have meant to a reasonable person who had knowledge of the...

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