E.N.E. 1 Kos Ltd (Respondent/Owners) v Petroleo Brasileiro S.A. (Appellant/Charterers)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lady Justice Smith,Sir Mark Waller |
| Judgment Date | 06 July 2010 |
| Neutral Citation | [2010] EWCA Civ 772 |
| Date | 06 July 2010 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2009/2002 |
[2010] EWCA Civ 772
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Honourable Mr Justice Andrew Smith
Before: The Right Honourable Lord Justice Longmore
The Right Honourable Lady Justice Smith
and
The Right Honourable Sir Mark Waller
Case No: A3/2009/2002
Mr Andrew Baker QC & Mr Henry Byam Cook (instructed by Thomas Cooper) for the Appellant
Mr Bernard Eder QC (instructed by Ince & Co) for the Respondent
Hearing dates: 24 th, 25 th & 27 th May 2010
Lord Justice Longmore:
Introduction
If a shipowner withdraws his vessel from a charterer's service for non-payment of hire while cargo is on board the vessel and the shipowner requires the charterer to remove the cargo from the vessel, is the shipowner entitled to remuneration outside the contract and/or to recover expenses incurred in that operation? Surprisingly this is not a matter which seems to have been decided in any previous case, of which counsel are aware. Andrew Smith J decided that there is no claim under the express employment and indemnity clause (or any other clause) of the charterparty, nor any claim under any implied term of the charter. He also rejected a claim that there was a request by the charterer for further services which created an agreement for remuneration and expenses; he also rejected a yet further claim for a quantum meruit. He upheld, however, a fifth claim made on the basis that the shipowner had a duty to care for the cargo while it continued to be on board the vessel which gave rise to a correlative duty on the charterer to remunerate the owner and pay his expenses while the cargo was being discharged. To achieve this result, the judge relied on what may fairly be called a slender stream of authority beginning in 1873 but utilised by the House of Lords as recently as 1982 in The Winson in order to entitle salvors to recover expenses incurred in storing cargo for cargo-owners between the time when the salvage contract had come to an end and the time when the shipowner notified the cargo-owner that he had abandoned the voyage.
The facts
I can take the facts largely from the judgment below which is now reported at [2010] 1 Lloyd's Rep. 87.
By a charterparty on Shelltime 3 form dated 2nd June 2006, the claimant Owners chartered the M/T KOS to the defendant Charterers for 36 months (plus or minus 15 days at Charterers' option). She is a 300,965 mt, double hulled Very Large Crude Carrier (VLCC) built in 2001, and is of high quality.
Hire under the charterparty was payable monthly in advance, and if it was not paid the Owners had the right to withdraw the vessel “without prejudice to any other claim Owners may otherwise have on Charterers under this charter”. The charterparty had no anti-technicality clause. It did have in clause 13, which has a side-note “Bills of Lading”, a provision that,
“The Master (although appointed by Owners) shall be under the orders and direction of Charterers as regards employment of the vessel, agency or other arrangements … Charterers hereby indemnify Owners against all consequences or liabilities that may arise … from the Master otherwise complying with Charterers' or their agents' orders …”.
Clause 14 provided that the Charterers should accept and pay for all bunkers on board at the time of delivery of the vessel and “Owners shall, on the expiry of this charter, pay for all bunker oil then remaining on board at actual purchase price …”.
The relevant hire payment was due to be paid by midnight on Saturday 31 st May 2008. It was not paid (presumably by oversight). When notice of withdrawal was given, the vessel was at Angra dos Reis, Brazil, where she had been ordered to proceed by the Charterers for discharge and backloading of a cargo of oil. She had tendered Notice of Readiness on 30th May 2008 to backload two parcels of cargo owned and nominated by the Charterers and to take on bunkers arranged by the Charterers. She began to load the first parcel on 31st May 2008, and completed loading it on 1st June 2008. She also took on bunkers on 1st June 2008. The second parcel was not available for loading until (at the earliest) 2nd June 2008 and in the event was not loaded.
On 2nd June 2008, after checking that hire had not been received, the Owners, by their agents, gave the Charterers notice of withdrawal at 14.41 hrs GMT. They wrote
“Accordingly, Owners are instructing Master to stop further cargo operations and Owners now call upon Charterers to make arrangements for receipt ashore at Angra dos Reis their cargo presently on board the vessel”.
They went on to say, “wholly without prejudice” to that, that they would perform the voyage ordered by the Charterers at the time of the notice of withdrawal on the terms of the charterparty other than the contractual rate of hire. Perhaps it hardly needs to be said that the market rate of hire at the time of withdrawal was considerably higher than the rate of hire which had been agreed in the contract.
In subsequent exchanges, the Charterers sought to persuade the Owners to revoke the withdrawal, but the Owners declined to do so. Then on 2nd June 2008 at 20.12 hrs the Charterers wrote: “We would … kindly ask Owners cancel the message withdrawing the vessel from service. Indeed we would like to meet with you at your convenience to confirm our wish to build good working relations for the future between our companies”. On 3rd June 2008 at 11.30 hrs the Owners wrote this:
“The present position is that the vessel has been withdrawn and Charterers must decide if they wish to reinstate the time charter or continue with the voyage instructions on a voyage charter basis. If they do wish to continue on one of these bases then they must do so at the current market rates which Owners have indicated to Charterers. If Charterers consider the market rate to be different then please advise so Owners can consider.
Alternatively if Charterers do not wish to reinstate the time charter or continue on a voyage basis then they must make prompt arrangements for receipt back of their cargo.
While Charterers are deciding how they wish to proceed or (if that is what they decide to do) making arrangements for off-loading of their cargo, Owners will proceed on the basis that Charterers have requested that Owners store Charterers' cargo on board and reserve the right to claim remuneration at current market rates for such storage.”
At 15.02 hrs on 3rd June 2008 the Charterers repeated their request:
“… Charterers once again expect Owners to reconsider latest decision and keep vessel on service and the [charterparty] in force. Charterers look forward to hearing asap from Owners in order to decide next steps, considering we have cargo on board, to decide if we authorize terminal to receive it back or proceed loading operation”.
At 16.16 hrs the Owners confirmed their decision to withdraw the vessel. At 18.25 hrs on 3rd June 2008 the Charterers wrote asserting that the Owners had waived their right to withdraw the vessel, and continued,
“In view of Owners' clear breach of Charter, unless Owners are now prepared to confirm that they will continue with the charter as it stands, Owners should contact the terminal to arrange for discharge of the cargo and discharge of Charterers' bunkers. Please note that in such circumstances, Charterers will immediately be taking such steps as are open to them to secure all losses suffered as a result of Owners' unjustified withdrawal of the vessel”.
The Owners replied at 20.22 hrs that they were no longer under any obligation to perform the charterparty and therefore it was for the Charterers to make arrangements with the terminal: they requested the Charterers to “take the necessary steps without delay”. At 21.36 hrs the Charterers wrote that they would contact the terminal to arrange for it to receive the cargo and that they would consider the Owners' request about bunkers. The Charterers then went about arranging for the discharge of the cargo shortly thereafter, some 1.29 days after the vessel was withdrawn from service.
At 02.23 hrs on 4 th June 2008 the Owners were informed by the brokers that the Master was refusing to discharge the cargo without authority from the Owners to do so, but at 03.07 hrs the Owners confirmed to the Master that he had that authority. The cargo was thereafter discharged and disconnection of the hoses occurred at 06.00 hours on 5 th June 2008.
The Owners have made a claim for detention between 14.41 hours on 2 nd June and 06.00 hours on 5 th June (2.64 days) at the (now agreed) market rate of $158,864 per day. They have a further claim for 80.11 mt bunkers consumed during the period of 2.64 days costing $40,415. Of this amount, 57 mt bunkers were consumed in discharging the cargo costing $28,756.
The Claims
It will be convenient to discuss the various ways in which the Owners put their claim in the same order as the judge since most of the claims which failed are the subject of a cross-appeal. But it is, at the outset, worth emphasising the dearth of authority supporting the claim. Mr Eder QC for the Owners somewhat ambitiously asserted in his skeleton argument that Scrutton on Charterparties (21 st ed Art. 175) supported what he called “the general proposition in favour of recovery”. This reference is to a passage which appeared in the 11 th edition of this famous work published in 1923 and has...
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