Ocean Tramp Tankers Corporation v V/O Sovfracht ; The Eugenia

JurisdictionEngland & Wales
JudgeTHE MASTER OF THE ROLLS,LORD JUSTICE DONOVAN
Judgment Date21 November 1963
Judgment citation (vLex)[1963] EWCA Civ J1121-1
Date21 November 1963
CourtCourt of Appeal
Ocean Tramp Tankers Corporation
and
V/O Sovfracht

[1963] EWCA Civ J1121-1

Before

The Master of The Rolls

(Lord Denning)

Lord Justice Donovan and

Lord Justice Danckwerts

In The Supreme Court of Judicature

Court of Appeal

MR A. W. ROSKILL, Q.C., and MR J.G. WILLMERS (instructed "by Messrs Constant & Constant) appeared as Counsel on behalf of the Appellants (Claimants).

MR R.E.KERR and MR M.J.MUSTILL (instructed by Messrs Middleton, Lewis & Co.") appeared as Counsel on behalf of the Respondents (Respondents)

THE MASTER OF THE ROLLS
1

On the 26th July, 1958, the Government of Egypt nationalised the Suez Canal. Soon afterwards the United Kingdom and France began to build up military forces in Cyprus. It was obvious to all mercantile men that English and French forces might be sent to seize the Canal, and that this might lead to it becoming impassable to traffic. It was in thisatmosphere that negotiations took place for the chartering of the vessel "Eugenia". She flew the Liberian flag. The proposal was to charter her to a Russian State Trading Corporation called we Sovfracht. The Russians wanted her to carry iron and steel from she Black Sea to India. The negotiations took place in London between the agents of the parties from 29th August to 9th September, 1956. The agents of both sides realised that there was a risk that the Sues Canal might be closed, and each agent suggested terms to meet the possibility. But they came to no agreement. And In the end they concluded the bargain on the terms of the Baltime Charter without any express clause to deal with the matter. That meant that, if the Canal were to be closed, they would "leave it to the lawyers to sort out".

2

The charterparty was concluded on the 9th September, 1956, tut dated the 8th September, 1956. The vessel was then at Genoa. By the charterparty she was let to the Charterers for a "trip out to India via Black Sea". It was a time-charter in this sense, that the Charterers had to pay hire for the vessel at a fixed rate per month from the time of the vessel's delivery until her redelivery. The Charterers had, however, no wide limits at their disposal. They could not direct her anywhere they wished, but only within the following limits "Genoa via Black Sea, thence to India". The charter included the printed War Clause without modification. It was in these terms: "21(A) The vessel, unless the consent of the Owners be first obtained, not to be ordered nor continue to any place or on any voyage nor be used on any service which will bring her within a zone which is dangerous as the result of any actual or threatened act of war, war, hostilities, warlike operations (B) Should the vessel approach or be brought or ordered within such zone…… (1) the Owners to be entitled from time to time to insure their interest in the vessel on such terms as they shall think fit, the Charterers to make a refund to the Owners of the premium on demand; and(2)…… hire to "be paid for all time lost". The "Eugenia:' was delivered at Genoa on the 20th September. The Charterers ordered her to proceed first to Novorossik and then to Odessa (both on the Black Sea) to load. A few days later the Charterers sub-chartered her to two other Russian State Trading Corporations who agreed to pay, "by way of freight, whatever the Charterers had to pay the owners, plus 5 per cent. The two sub-charterers loaded her with iron and steel goods (joists, girders, etc.). The Master signed bills of lading. These made the cargo deliverable to snippers order at Vizagapatam and Madras (both on the East Coast of India), freighter pre-paid.

3

On the 25th October, 1956, the "Eugenia" sailed from Odessa. The customary route at this time to India was still by the Suez Canal. The Charterers told the Master to cable their agent in Port Said when he was within twenty-four hours' sailing of Port Said. He did so. The "Eugenia" arrived off Port Said at 11 a.m. on the 30th October, 1956, and entered the port at 4.30 p.m. At that time Egyptian anti-aircraft guns were in action against hostile reconnaissance planes. It was quite apparent that Port Said and the Suez Canal were zones which were "dangerous" within this War Clause. Indeed on the morning of the 30th October the Owners' London agent called on the Charterers' London agent to take action under the War Clause to ensure that the ship should not enter Port Said or the Suez Canal. The Charterers' agent in London, however, took no action. He let things be. But at Port Said the Charterers' agent had taken action. He boarded the vessel and stated zhat he had made arrangements for the vessel to enter the Canal the next morning. In consequence, the vessel entered the Canal at 9.35 a.m. on the 31st October and proceeded in convoy 56 kilometres south. Then the convoy tied up to allow a northbound convoy to pass. Soon afterwards English and French aircraft began to drop bombs on Egyptian targets. That evening tbe Egyptian Government blocked the Canal oy sinking ships atPort Said and Suez and in the Canal and by blowing up bridges. So the "Eugenia" was trapped where she was. On the 7th November, 1956, there was a cease-fire. Early in January, 1957, a passage was cleared northwards. But there was no hope of southward passage for a long time. So the "Eugenia" started to move north. She anchored in Port Said Roads on the 8th January, 1957, On the 11th January, 1957, she went to Alexandria and arrived there on the 12th January, 1957.

4

Meanwhile, however, the Charterers, on the 1+th January, 1957, claimed that the charterparty had been frustrated by the blocking of the Canal, The Owners denied that it had been frustrated and treated the Charterers' conduct as a repudiation. So on either view the charter was at an end. On the 15th January, 1957, the Owners entered into a new charterparty direct with the original sub-charterers. This new charter was an ordinary Gencon voyage charter by which the Owners agreed to carry the cargo already on board via the Cape of Good Hope to India, The freight was very high, for the freight market had risen rapidly. So much so that the Owners did well out of the new charter, Indeed, they might not have suffered any loss were it not for the long spell during which the ship was trapped in the Canal, the Owners wish to claim hire so as to cover the period in the Canal, but the Charterers dispute I t. Hence their claim that the charter was frustrated.

5

On the 20th January, 1957, under this new oharterparty the "Eugenia" left Alexandria and went round the Cape, She arrived at Vizagapatam about the 5th April, 1957 > unloaded part of her cargo there, then went to Madras and unloaded the rest there, and finished discharging on the 22nd May, 1957- The southern exit from the Canal was not cleared until April, 1957. So the "Eugenia" arrived at her destination earlier by going northward out of the Canal than if she had waited to get out by the southern exit.

6

Such being the facts, the first guestion is whether the Charterers, by allowing the "Eugenia" to go into the Canal on the31st October, 1956, were in breach of the War Clause. Both the arbitrator and the Judge held they were in breach. Mr Kerr challenged this finding. He said that the War Clause 21(A) was of very limited application. It did not apply, he said, to the contract voyage itself. That was specified in the charterparty. It was "strip out to India via Black Sea",and impliedly "by the customary route. The Charterer had no power to alter that trip or to give any orders to the ship to deviate from I t. The War Clause only applied, he said, to the places in respect of which the Charterer had power to direct her, such as the orders to load at a named pert in the Black Sea or to discharge at a named port in India. If the Charterer ordered her to such a port when it was dangerous, the War Clause, he admitted, would apply. But it did not apply, he said, when the ship was just carrying out the contract voyage. Her route in that case was, he said, determined by the contract itself and not by any orders of the Charterer. In support of this argument, Mr Kerr urged that, although the charterparty was on a printed form applicable to a time-charter, nevertheless the "paramount feature" of it was a voyage, and it was to be construed accordingly. He cited Glynn -v- Margeton, 1893 Appeal Cases, 351, and Temple Steamship Co. -v- wC Sovfracht (1945) 79 Lloyd's List, 1. He said that the "Eugenia" entered the Canal by reason of the contract and not by reason of any orders of the Charterer and, therefore, the War Clause did not apply.

7

I cannot accept this argument. This is a time charterparty, the essence of which is that the shipowners place the ship at the disposal of the Charterers for a time – the Charterers paying hire for that time. In some time-charters the time is fixed beforehand, such as six months or twelve months. In other time-charters the time is uncertain, and is to be measured by the time occupied "by a particular voyages But in either case the charterparty is a time charterparty and the ship is under the Charterer's orders throughout. The Charterer must, of course, give his orders withinthe limits permitted by the contract – if a particular voyage is contracted for he must give orders consistent with it – "but still the ship is under his orders none the less So here the "Eugenia" Has, I think, under Charterer's orders when she approached the Canal, and she was underCharterer's orders when she arrived off port said on the 30th October, 1956; and also when she entered it, port Said and the Suez Canal were at that time zones which were dangerous within the War Clause. So they were in "breach of it. But even if they did not "order" her to enter the Suez Canal, they allowed her to "continue" when it was obviously dangerous and were thus in breach of it. Mr Kerr argued further that, even if the Charterers were in breach of Clause 21(A), the only...

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