Motor Oil (Hellas) Corinth Refineries SA v Shipping Corporation of India

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Keith of Kinkel,Lord Brandon of Oakbrook,Lord Templeman,Lord Griffiths,Lord Goff of Chieveley
Judgment Date15 Feb 1990
Judgment citation (vLex)[1990] UKHL J0215-2

[1990] UKHL J0215-2

House of Lords

Lord Keith of Kinkel

Lord Brandon of Oakbrook

Lord Templeman

Lord Griffiths

Lord Goff of Chieveley

Motor Oil (Hellas) Corinth Refineries S.A.
(Original Appellants and Cross-Respondents)
and
Shipping Corporation of India
(Original Respondents and Cross-Appellants)
Lord Keith of Kinkel

My Lords,

1

I agree that this appeal and the cross-appeal should be dismissed for the reasons set out in the speech to be delivered by my noble and learned friend Lord Goff of Chieveley. I also agree with the supplementary observations of my noble and learned friend Lord Brandon of Oakbrook.

Lord Brandon of Oakbrook

My Lords,

2

I have had the advantage of considering in draft the speech prepared by my noble and learned friend, Lord Goff of Chieveley. I agree with it and for the reasons which he gives I would dismiss both the appeal and the cross-appeal.

3

I think it important to observe that, on my noble and learned friend's analysis of the case, the only right which the owners waived was the right to reject the nomination of Kharg Island as uncontractual; and that, if the ship had loaded there and been lost or damaged in a further air raid, the charterers would, despite that waiver, have been liable to the owners for such loss or damage on the ground of their breach of contract in ordering the ship to load at an unsafe port.

4

It seems to me to follow from this that the owners might have been able to succeed in their claim against the charterers for loss of freight if they had pleaded and proved that the ship's master, in refusing to load at Kharg Island, had acted reasonably so as to mitigate the damage for which the charterers would have been liable in the eventuality to which I have referred. For what may well have been good reasons, however, no contention of this kind was put forward for the owners at any stage of the proceedings. That being so, your Lordships are not required to deal with such a point in this case.

Lord Templeman

My Lords,

5

I agree that the appeal and cross-appeal be dismissed.

Lord Griffiths

My Lords,

6

I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Goff of Chieveley. I agree with it and would dismiss both the appeal and the cross-appeal.

Lord Goff of Chieveley

My Lords,

7

This case is concerned with the Kanchenjunga, a very large crude carrier of 272,372 tons dead weight. Her owners at all material times were the Shipping Corporation of India of Bombay (whom I shall refer to as "the owners") and she flew the Indian flag. The owners (the shares in which are owned by the Government of India) are a large shipping company, owning a number of other tankers as well as the Kanchenjunga. The vessel was chartered to Motor Oil (Hellas) Corinth Refineries S.A. of Athens (whom I shall refer to as "the charterers") under a consecutive voyage charterparty dated 8 August 1978, on the Exxonvoy form, for four consecutive voyages with an option for the charterers to extend the period for a further four consecutive voyages. That option was exercised by the charterers, and the present case is concerned with the eighth and last voyage under the charter as so extended. The Exxonvoy standard form of charter contains no safe port warranty in the printed form; however, in completing the form, the loading ports in Part I of the charter were agreed to be "1/2 (one/two) safe ports Arabian Gulf excluding Fao and Abadan" in charterer's option. There was a wide range of discharging ports; these are not material. I shall have later to refer to clause 20, a substantial printed clause contained in part II of the charter, and in particular to clause 20(vi) which is expressed to be concerned with war risks.

8

On the same date as the above charter, the charterers sub-chartered the vessel on a back-to-back basis to an associated company called Varnima Chartering Compania Naviera S.A. ("Varnima"). Throughout this matter, the charterers and Varnima have been treated as having an identity of interest. On 19 November 1980, Varnima sub-sub-chartered the vessel to Refineria de Petroleos del Norte S.A. ("Petronor"). I shall refer to this charter as "the sub-charter," and to the charter between the owners and the charterers as "the head charter." The sub-charter was not on back-to-back terms. It was for a single voyage, on the Asbatankvoy form (for all practical purposes identical to the Exxonvoy form), the loading ports being expressed to be "one/two safe [ports] Arabian Gulf excluding Iran and Iraq but including Kharg, Lavan and Sirri Islands." The rate of freight under the sub-charter was substantially higher than that under the head charter.

9

The vessel had been waiting at Mina al Fahal in the Arabian Gulf since 8 October 1980 for loading port orders for the final voyage under the head charter. It was following the making of the Petronor fixture, on 19 November, that the charterers ordered the vessel to proceed to Kharg Island. The order was given on 20 November, and repeated on 21 November, on which day the owners instructed the master of the vessel to proceed to Kharg Island. He did so, arriving at Kharg Island on 23 November, when notice of readiness was given. On 1 December there occurred an air raid by Iraqi aircraft upon Kharg Island, which caused the master of the vessel to weigh anchor and proceed away; from Kharg Island to a place where she could wait in safety. There then followed an exchange of telex messages between the parties which led first to impasse and ultimately to the termination of the charter in early January 1981.

10

When the head charter was entered into, in August 1978, Iraq and Iran were not at war. It was not until 22 September 1980 that border hostilities between Iran and Iraq, which had been simmering for some months, erupted into full-scale war. The general position in the vicinity of Kharg Island, and the owners' reaction to it, are described in detail in paragraphs 7 to 10 of the arbitrators' reasons for their award. It appears that, following the outbreak of war, among the targets for Iraqi air attack were the oil installations at Kharg Island. The natural reaction of shipowners on the eruption of fighting was to keep their vessels out of areas where they might suffer damage. However, at this time India was very short of crude oil and pressure was put on the owners by the Indian authorities (the Oil Co-ordination Committee — "O.C.C.") to load from Iranian ports, including Kharg Island, in spite of the risks which would be incurred. Paragraphs 9 and 10 of the arbitrators' reasons (in which the owners are referred to as "S.C.I.") read as follows:

"9. Up to 19 November, Iran admitted that there had been air raids on Kharg Island on the following dates: 24, 27 September, 5, 10, 13, 14, 15 October. These air raids were not of the concentrated type so familiar in the 1939-45 war; indeed, Iraq did not have the bombers to operate such attacks. Rather they appear to have been of a hit and run type operated by one, two or three fighter-bombers. It is possible that air raids in addition to those admitted by Iran took place. In spite of the risks involved, five tankers belonging to S.C.I, loaded at Kharg in the first half of October. To minimise the risks, the vessels anchored about five miles off until they were called in to berth; a strict black-out was enforced by the Iranian authorities and there were restrictions on the use of radio and V.H.F. The S.C.I. vessels observed that oil tanks had been damaged and were on fire; frequent anti-aircraft firing was observed. The raids would appear to have been directed at the oil storage tanks, rather than at the actual loading installations or at ships. However, on 10 October, two bombs fell in the water in close proximity to S.C.I.'s vessel B. R. Ambedkar which was waiting to load (this vessel was diverted to Lavan Island to load). Their Lok Manya Tilak also reported heavy attacks on 14 and 15 October; as a result of these reports, S.C.I, decided not to send further tankers to Kharg Island until such time as 'reasonably safe conditions for loading' were restored.

10. Towards the end of October and the beginning of November, the Iranian Oil suppliers National Iranian Oil Co. ('N.I.O.C.') were pressing O.C.C. to take up cargo from Kharg and on or about 5 November the Government of India agreed to S.C.I, sending the C. P. Shivaji to Kharg 'subject to ship's captain local assessment of the situation.' At the same time, S.C.I, went into the market with a view to chartering a v.l.c.c. to load at Kharg which it could put in under its contract(s) of affreightment with O.C.C. S.C.I. ordered the C. P. Shivaji to Kharg on 6 November and the Barauni on 8 November. The C. P. Shivaji reported that "the situation was dangerous with attempted air raids, although she encountered no difficulties in loading. As a result on 9 November the Barauni was ordered to stay at Mina al Ahmadi pending further orders. In the meantime, the negotiations for chartering in a v.l.c.c. had apparently been proceeding and on or about 15 November the Venus was fixed to load some 210,000 metric tons. That vessel was expected to berth on 15 or 16 November and on 17 November S.C.I, decided to order the Barauni to sail from Mina al Ahmadi at daybreak on 18 November for Kharg so that she could load immediately after the Venus. At or shortly after this time, S.C.I, also ordered the N. S. Bose and the Satyamurti to Kharg to load."

11

Meanwhile, in September, October and the first half of November telex exchanges took place between the owners and the charterers about the employment of the vessel on her last voyage under the charter. She completed discharge on her seventh voyage at Brunsbuttel in West Germany, and was ordered by the charterers to proceed at slow speed to the Arabian Gulf for orders. Ultimately, following the fixture with Petronor on 19...

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