Total Transport Corporation v Arcadia Petroleum Ltd
| Jurisdiction | England & Wales |
| Judge | Staughton,Auld L JJ,Sir John Balcombe |
| Judgment Date | 18 November 1997 |
| Court | Court of Appeal (Civil Division) |
| Date | 18 November 1997 |
Court of Appeal (Civil Division).
Staughton and Auld L JJ and Sir John Balcombe.
Simon Rainey (instructed by Clifford Chance) for the charterers.
Richard Jacobs (instructed by Holman Fenwick & Willan) for the owners.
The following cases were referred to in the judgments:
Australian Coastal Shipping Commission v GreenELR [1971] 1 QB 456.
Chandris v Isbrandtsen-Moller Co IncELR [1951] 1 KB 240.
Dreyfus (Louis) et Cie v Parnaso Cia Naviera SAELR [1959] 1 QB 498; [1960] 2 QB 49 (CA).
Galoo Ltd v Bright Grahame MurrayUNK [1994] BCC 319; [1994] 1 WLR 1360.
Harrison v WrightENR (1811) 13 East 343; 104 ER 402.
Helsingfors Steamship Co Ltd (A/B) v Rederiaktiebolaget RexUNK [1969] 2 Ll Rep 52.
Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] CLC 1243.
Mediterranean Freight Services Ltd v BP Oil International Ltd (“The Fiona”)UNK [1993] 1 Ll Rep 257; [1994] CLC 808 (CA).
Momm v Barclays Bank International LtdELR [1977] QB 790.
Monarch Steamship Co Ltd v Karlshamns Oljefabriker A/BELR [1949] AC 196.
Novorossisk Shipping Co v Neopetro Co LtdUNK [1990] 1 Ll Rep 425.
Quinn v Burch Bros (Builders) LtdELR [1966] 2 QB 370.
Royal Greek Government v Minister of TransportUNK (1949) 83 Ll L Rep 228.
Tor Line AB v Alltrans Group of Canada LtdWLR [1984] 1 WLR 48.
Victoria Laundry (Windsor) Ltd v Newman Industries LtdELR [1949] 2 KB 528.
Walumba (Owners) v Australian Coastal Shipping CommissionUNK [1965] 1 Ll Rep 121.
Yorkshire Dale Steamship Co Ltd v Minister of War TransportELR [1942] AC 691.
Shipping — Charterparty — Indemnity — Damages — Remoteness — Foreseeability — Charterparty provided that owners were responsible for loss due to failure to comply with charterers' voyage instructions — Master started loading earlier than charterers' orders allowed — Bill of lading backdated in accordance with Nigerian practice — Charterers paid higher price than if loading had finished later — Whether charterparty provided indemnity to charterers — Whether charterers' could recover even if loss not reasonably foreseeable — Whether Nigerian practice of backdating bill as existing circumstance could be cause of loss.
This was an appeal from a judgment of Rix J ([1996] CLC 1084) concerning the meaning and effect of a clause in a voyage charterparty relating to adherence to voyage instructions. The clause (cl. 36) was an amended version of a Scanport clause and provided that owners were responsible for an time, costs, delays or loss suffered by charterers due to failure to comply fully with charterers' voyage instructions, provided that such instructions were in accordance with the charterparty and custom of the trade. The charterers of the Eurus claimed in an arbitration against the vessel's disponent owners. The charterers' case was that the owners, in breach of contract, did not comply with the instructions which the charterers gave.
The charterers had a long term contract for the supply of oil by the Nigerian National Petroleum Corporation to “be paid for at the price applicable as at the date on the bill of lading”. The charterers nominated the Eurus to lift a cargo under the supply contract, for loading between 29 and 31 January, with an ETA of 31 January at the port of Forcados. Then the Nigerian Corporation announced its prices for February. They were lower than the January prices, and so it was in the interest of the charterers that the vessel should not complete loading before 1 February. The charterers' orders, accepted by the owners, were that the owners might tender notice of readiness to them at 0001 on 31 January, and if they did so time would count from 0600 on that day; but they were to tender a second notice of readiness to the terminal operators at 1100. The master complied with those orders in their literal sense. He sent a notice of readiness to the charterers at 0001. At 0030 the Eurus left the anchorage, and reached her berth at 0300. Loading commenced at 0636. The master gave notice of readiness to the terminal operators at 1100. The arbitrators' finding was that properly understood the instruction not to tender a notice of readiness before 1100 amounted to an instruction not to present or berth for loading prior to that time. Loading was completed at 0130 on 1 February. Thereupon the terminal operators presented a bill of lading to the master for signature dated 31 January 1992 in accordance with a rule laid down by the Ministry of Petroleum Resources in Lagos under which if loading was completed prior to 8 a.m. on the first day of a new month, the bill of lading should be dated the last day of the old month.
The arbitrators found that, if the vessel had presented herself for loading only at 1100 hrs on 31 January, then loading would have extended beyond 0800 hrs on 1 February. It would follow that the charterers would have had to pay the lower, February, price to the Nigerian Corporation. In the event, with the bill of lading which they did receive, they were obliged to pay the January price, which cost them the additional sum of $681,934.05. The arbitrators found that neither the charterers nor the owners knew of the 8 a.m. rule.
The charterers' loss was claimed either as damages or as money payable under a contractual indemnity, cl. 36. The claim for damages failed before the arbitrators because it was too remote; they found that the loss was not foreseeable. But the claim for an indemnity succeeded, by a majority. On appeal Rix J set aside the award and dismissed the charterers' claim, see [1996] CLC 1084. The charterers appealed.
The charterers' case was that cl. 36 was an indemnity clause requiring proof that the loss was caused by failure to obey the charterers' orders, but not that the loss should be within the reasonable contemplation of the parties. That was the route which the arbitrators adopted. They further found that the cause of Arcadia's loss was the master's failure to comply with the charterers' instructions. The further held that as a matter of law the existence of the 8 a.m. rule, which had existed for 18 or 20 years, could not be an effective or intervening cause of the charterers' loss.
The issues were whether cl. 36 was an indemnity provision, and if so whether it was confined to reasonably foreseeable loss; and whether as a matter of law an event occurring before the wrongful act (i.e. the 8 a.m. rule could not be the cause of loss).
Held dismissing the appeal:
1. Clause 36 did not provide that the charterers could recover even if the loss suffered was not within the reasonable contemplation of the parties. There was no reason why the parties would have wished to provide that, for some breaches of contract by the owners, the charterers' loss would be recoverable whether or not it was within the reasonable contemplation of the parties, whilst for all other breaches the ordinary rule as to damages in a contract case would apply. It was not the intention of the parties to provide, by cl. 36, that a particular kind of breach of contract by the owners should attract liability even for unforeseeable consequences, whilst in the case of all other breaches of contract the ordinary rule of remoteness would apply.
2. It was common to refer to a chain of causation between the wrongful act and the plaintiff's loss, and to an intervening act which might or might not break the chain. But the chain metaphor was not always appropriate for causation in contract. It was better to ask whether in common sense the wrongful act was a cause of the plaintiff's loss, or whether something else was. Common sense was not fettered by rules of law. It was very likely that the arbitrators would have regarded the 8 a.m. rule as a serious candidate for the cause of the charterers' loss, had they not been persuaded that the law did not allow them to reach such a conclusion. If the court had not held that cl. 36 did not give the charterers the remedy of an indemnity which the arbitrators awarded them, it would be necessary to remit the award on the issue of causation on the basis that pre-existing events were not outlawed as a cause of the plaintiffs' loss. At that stage the question of foreseeability would be relevant.
Staughton LJ: Despite the title to these proceedings, Arcadia Petroleum Ltd are the party claiming a remedy. They were charterers of a vessel called EURUS and claimants in an arbitration, where they were awarded (by a majority) $681,934.05 and interest at 51/2 per cent. Whether that sum was technically debt or damages was part of the issue which the arbitrators decided. The respondents in the arbitration, Total Transport Corporation, were disponent owners of the Eurus. I shall call them the owners.
On appeal Rix J set aside the award and dismissed the charterers' claim, see [1996] CLC 1084. They now appeal to this court.
The contract was a voyage charterparty dated 17 January 1992; it provided for the carriage of a minimum quantity of 122,000 metric tons of crude oil from one safe port Nigeria, in the charterers' option, to one or two safe ports in a number of different ranges, again in charterers' option. The freight was to be calculated under the New Worldwide Tanker Nominal Freight Scale, which no doubt has regard to the particular ports chosen for loading and discharge.
The critical clause in the contract was this, which I reproduce exactly as written:
“36. Adherence to voyage instructions
Owners shall be responsible for any time, costs, delays or loss suffered by Charterers due to failure to comply fully with Charterers voyage instructions. Owners shall be responsible for any time, costs, delay or loss associated with vessel loading cargo quantity in excess of voyage orders. Additionally, Charterers shall not be responsible for any deadfreight for Owner's failure to lift minimum quantity specified in voyage orders.
Provided such instructions are in accordance with the Charter Party...
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