Total Transport Corporation v Arcadia Petroleum Ltd
| Jurisdiction | England & Wales |
| Judge | Rix J. |
| Judgment Date | 06 February 1996 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 06 February 1996 |
Queen's Bench Division (Commercial Court).
Rix J.
Richard Jacobs (instructed by Holman Fenwick & Willan) for the shipowners.
Simon Rainey (instructed by Clifford Chance) for the charterers.
The following cases were referred to in the judgment:
Actis Co Ltd v Sanko Steamship Co Ltd (“The Aquacharm”)UNK [1980] 2 Ll Rep 237.
Athanasia Comninos, TheUNK [1990] 1 Ll Rep 277.
Australian Coastal Commission v GreenELR [1971] 1 QB 456
Compania Financiera Soleada SA v Hamoor Tanker Corp Inc (“The Borag”)UNK [1981] 1 Ll Rep 483.
Compania Naviera Maropan SIA v Bowater's Lloyd Pulp and Paper Mills Ltd (“The Stork”)UNK [1955] 1 Ll Rep 349.
Czarnikow v Koufos (“The Heron II”)ELR [1969] 1 AC 350.
Dodd Properties Ltd v Canterbury City CouncilWLR [1980] 1 WLR 433.
Erechthion, TheUNK [1987] 2 Ll Rep 180.
Fiona, TheUNK [1993] 2 Ll Rep 257, QBD; [1994] CLC 808; [1994] 2 Ll Rep 506, CA
Galoo Ltd v Bright Grahame MurrayUNK [1994] BCC 319; [1994] 1 WLR 1360.
Hadley v BaxendaleENR (1854) 9 Exch 341.
Hanen Tangen Rederi III (AIS) v Total Transport Corp (“The Sagona”)UNK [1984] 1 Ll Rep 194.
Haynes v HarwoodELR [1935] 1 KB 146.
Helsingfors Steamship Co (AIB) v Rederiaktiebolaget Rex (“The White Rose”)UNK [1969] 2 Ll Rep 52.
Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha LtdELR [1962] 2 QB 26.
Knightley v JohnsUNK [1982] 1 All ER 851.
Kruger & Co Ltd v Moel Tryvan Ship Co LtdELR [1907] AC 272.
Lamb v Camden London Borough CouncilELR [1981] 1 QB 625.
Larrinaga Steamship Co Ltd v The Crown (“The Ramon de Larrinaga”)UNK (1944) 78 Ll L Rep 167.
Liesbosch (Owners of Dredger) v Edison (Owners of Steamship)ELR [1932] P 52, AC; [1933] AC 449, HL.
MacKay v DickELR (1881) 6 App Cas 251.
Monarch Steamship Co Ltd v Karlshamns Oljefabriker AIBELR [1949] AC 196.
Naviera Mogor SA v Sociètè Metaalurgique de Normandie (“The Nogar Marin”)UNK [1988] 1 Ll Rep 412.
Oetker v Ifa Internationale Frachtagentur AG (“The Almak”)UNK [1985] 1 Ll Rep 557.
Parsons (H) (Livestock) Ltd v Uttley, Ingham & Co LtdELR [1978] QB 791.
Perry v Sidney Phillips & Son (a firm)WLR [1982] 1 WLR 1297.
Polemis, ReELR [1921] 3 KB 560.
Quinn v Birch Bros (Builders) LtdELR [1966] 2 QB 370.
Reischer v BorwickELR [1894] 2 QB 548.
Rio Claro, TheUNK [1987] 2 Ll Rep 173.
Robinson v HarmanENR (1848) 1 Exch 850.
Royal Greek Government v Minister of TransportUNK (1950) 83 Ll L Rep 228.
St Quentin Shipping Co Ltd v Anglo-Soviet Shipping Co LtdUNK (1932) 44 Ll L Rep 88.
State Trading Corp of India Ltd v M Golodetz LtdUNK [1989] 2 Ll Rep 277.
Strathlorne Steamship Co Ltd v Andrew Weir & CoUNK (1934) 50 Ll L Rep 185.
Telfair Shipping Corp v Inersea Carriers SA (“The Caroline P”)UNK [1984] 2 Ll Rep 466.
Toplis v GraneENR (1839) 5 Bing NC 636.
Tor Line AB v Alltrans Group of Canada Ltd (“The TFL Prosperity”)UNK 1 Ll Rep 123; [1984] 1 WLR 48.
Triad Shipping Co v Stellar Chartering & Brokerage Inc (“The Island Archon”)UNK [1993] 2 Ll Rep 388, QBD; [1994] 2 Ll Rep 227, CA.
Vardinoyannis v Egyptian General Petroleum Corp (“The Evaggelos Th”)UNK [1971] 2 Ll Rep 200.
Victoria Laundry v NewmanELR [1949] 2 KB 528.
Wagon Mound, TheELR [1961] AC 388.
Walumba, The (Owners) v Australian Coastal Shipping Commission (“The Walumba”)UNK [1965] 1 Ll Rep 121.
Shipping — Charterparty — Damages — Causation — Remoteness of damages — Charterers ordered master not to proceed to berth at Nigerian port until 1100 hours on 31 January — Vessel berthed earlier in day — Loading completed by 0130 on 1 February — January prices obtained until 0800 hours on first of month by custom of Nigerian ports — Charterers charged higher January prices by suppliers — Cause of charterers' loss — Whether standard clause in charterparty was indemnity clause — Whether owners liable in damages for breach of charter — Whether owners liable to indemnify charterers for loss under terms of charter — Whether Nigerian “8 o'clock Rule” foreseeable — Whether damages too remote — Whether foreseeability relevant to causation — Whether compliance with custom of trade obligatory.
This was a shipowners' appeal against an arbitration award of damages. The issues concerned a clause in a charterparty said to contain either or both an indemnity and an obligation, causation and remoteness of damage.
The disponent owners of the oil tanker “The Eurus” chartered the vessel on a charterparty in the Asbatankvoy form dated 17 January 1992 for a single voyage to carry crude oil from Nigeria to discharging ports. The charterers of the vessel ordered the master not to proceed to berth at a loading terminal at a Nigerian port until 1100 on 31 January 1992. The master failed to comply, moving the vessel into berth earlier that day. The charterers did not want loading to be completed until 1 February because the suppliers” oil price for February shipments would be lower than the price for January shipments. Neither the charterers nor the disponent owners knew of the ‘8 o'clock” rule which operated throughout Nigeria, by which any oil shipment completed before 8 a.m. on the first day of any month was treated as though it had been completed on the last day of the preceding month. On discovering that the vessel had moved into berth the charterers asked that loading be slowed down so that loading would run into the next day but being unaware of it, did not point out the importance of delaying until 8 a.m. The vessel completed loading at 0130 hours. If the vessel had not berthed until 1100 on 31 January loading would not have been completed before 8 a.m. on 1 February. As a result of the 8 o'clock rule the charterers were compelled to request the master to sign, and the master was compelled to sign a bill of lading dated 31 January. In consequence the charterers had to pay an extra US$681,934.05 for their oil to their suppliers.
The charterers claimed that extra expense from the owners under cl. 36 in the bill of lading either as damages for breach of contract or as an indemnity. Clause 36 provided: “Owners shall be responsible for any time, costs, delays or loss suffered by Charterers due to failure to comply fully with Charterers” voyage instructions provided such instructions are in accordance with the Charter Party and custom of trade.” The arbitrators, by a majority, held that the claim in damages failed because the 8 o'clock rule was not foreseeable and therefore damages were too remote, but the claim for an indemnity succeeded because that was a pure question of causation and the master's failure to follow his instructions had indeed caused the loss. The dissenting arbitrator found that the delay in entering berth was not “in accordance with the…custom of the trade” within the relevant clause, and therefore there could be no indemnity under that clause.
The owners appealed on the grounds that the clause relied on was not an indemnity clause, or if it were an indemnity clause, the same rules of remoteness applied and accordingly the claim failed. Further, the arbitrators had reached the wrong conclusion on causation in view of the 8 o'clock rule and the charterers' request that the master sign a bill of lading dated 31 January. The charterers contended that the arbitrators ought to have found that the damages were not too remote, both because the 8 o'clock rule, which the arbitrators found to be a custom of the Nigerian oil export trade, was to be imputed to the parties under their charter as a custom of the tanker trade and because, having found that the change of pricing at the month end was foreseeable, the arbitrators should have gone on to find that the loss caused by the application of the 8 o'clock rule was a loss of the same kind and therefore in law to be treated as equally foreseeable.
Held, allowing the owners' appeal, dismissing the charterers' cross-appeal and their claim:
1. Clause 36 was a standard term containing no express indemnity. The words “responsible for” did not mean “indemnify” but “answerable for”. No indemnity was to be implied because the clause was not concerned with the terms on which rights, freedoms or requests were granted or made by one party to the other but was expressly concerned with a prohibition. The clause simply meant that owners were to comply fully with charterers” voyage instructions (provided they accorded with the charter and custom), and if they failed to comply they would be responsible for any time, costs, delays or loss suffered as a result.
2. Clause 36 was therefore not an indemnity clause. Accordingly the charterers' claim failed.
3. Even on the assumption that cl. 36 was an indemnity, it would not cover consequences caused or contributed to by the negligence of the party in whose favour the indemnity was granted.
4. An indemnity, at least where the indemnity was triggered by a breach of contract, was as a matter of construction subject to the same rules of remoteness as damages unless it contained an express contrary provision. It followed that if cl. 36 were an indemnity, it covered only foreseeable consequences of the breach of contract.
5. Foreseeability was always relevant to the issue of causation in relation to breach of contract, and applied equally to a claim for an indemnity. Even if cl. 36 were an indemnity it would only provide for loss within the reasonable contemplation of the parties.
6. The relevance of the unforeseeability of the subject matter of a claim for an indemnity remained even though the reason for the unforeseeable loss predated what was relied on as the trigger of the indemnity.
7. The words “in accordance with” in the proviso to cl. 36 meant “not inconsistent with”. The proviso therefore did not positively require an order to comply with a custom of the trade, but obliged an owner to obey a proper or valid order given by the charterers. Failure to comply with an order allowed either by the terms of the charter or by any applicable custom of the...
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