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Case No: QBCMF 1998/1212/3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM The Hon. Mr. Justice Rix.
Royal Courts of Justice
Strand, London, WC2A 2LL
Tuesday 28th March 2000
B e f o r e :
LORD JUSTICE HENRY
LORD JUSTICE BROOKE
and
LORD JUSTICE TUCKEY
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THE
SCINDIA STEAMSHIP NAVIGATION COMPANY LIMITED BOMBAY
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Appellant
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and -
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NIPPON
YUSEN KAISHA LIMITED
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Respondent
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MV "Jalagouri"
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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
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Mr. T. Hill (instructed by Messrs Sinclair Roche &Temperley for the
Appellant)
Mr. P. Edey (instructed by Messrs Jackson Parton for the Respondent)
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Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE TUCKEY:
1. If a vessel is prevented by a port authority from discharging damaged cargo
and ordered off berth until security is provided for the cost of storing that
cargo in or removing it from the port, has the vessel been detained and who is
responsible for providing the security? These questions arise under the terms
of a time charter on an amended 1946 NYPE form between the Appellant owners and
the Respondent charterers on appeal from Rix J, who allowed an appeal from
arbitrators. Both parties say the questions are of importance because the NYPE
form is used extensively.
2. The Facts.
By the charter which is dated 16 July 1993 owners time chartered the vessel the
"Jalagouri" to carry a general cargo from Japan to India. A few days after
sailing from her last loading port the vessel suffered engine damage and
subsequently collided with a breakwater. Water entered No. 3 hold where a
quantity of car components in cases was stowed. Following dry docking the
vessel proceeded to Kandla where she started to discharge on 18 October 1993.
Discharge of the sound cargo was completed in three days but it was then found
that the cargo of car components had been damaged. The port authority would
not allow discharge of this cargo and the vessel was ordered off berth on 21
October. She anchored in the inner anchorage. The reason for the port
authority's action in suspending discharge was that it was not prepared to
allow the damaged cargo to be landed unless it received a guarantee for the
costs of storing or removing it from the port area. There followed exchanges
between the parties about the guarantee. Eventually an acceptable guarantee
was lodged and the vessel was then allowed to re-berth to complete the
discharge of her cargo on 2 November 1993.
3. The terms of the Charter.
The relevant terms of the NYPE form as amended were as follows :
"Clause 2 That whilst on hire the charterers shall provide and pay for
all fuel except as otherwise agreed. Port Charges, Comlpulsory Pilotage Canal
Charges Agencies boatage on Charterers' business for clearance and cargo
purposes only Commissions, Consular Charges (except those pertaining to the
Crew and flag) and all other usual expenses except those before stated, but
when a vessel puts into a port for causes for which the vessel is responsible,
then all such charges incurred shall be paid by the Owners. Fumigation ordered
because of illness of the crew to be for Owners' account. Fumigation ordered
because of cargoes carried or ports visited while the vessel is employed under
this Charter to be for charterers' account. ...
Clause 8 The Captain (although appointed by the owners) shall be under
the orders and directions of the Charterers as regards employment and agency;
and charterers are to load, stow and trim tally at both ends secure and
discharge the cargo at their own expense under the supervision of the
Captain who, if requested to do so by Charterers is to sign Bill of Lading.
... (amendments underlined.)
Clause 15 That in the event of loss of time from deficiency and/or
default or men and/or strike or sabotage by officers/crew or deficiency of
stores, fire, breakdown or damages to hull, machinery or equipment, grounding,
detention by average accidents to ship or cargo, drydocking for the purpose of
examination or painting bottom, or by any other causes preventing the full
working of the vessel, the payment of hire shall cease for the time lost
thereby. ...
Clause 18 Charterers will not suffer, nor permit to be continued, any
lien or encumbrance incurred by them or their agents, which might have priority
over the title and interest of the owners in the vessel. ..."
There were 51 additional clauses including :
"Clause 53 Should vessel be seized or detained or arrested or delayed by
any authority during the currency of this Charter Party, the Charterers'
liability for seizure or detention or arrest or delay is ceased immediately
from the time of her seizure or detention or arrest or delay and all time lost
by this reason shall be treated as off-hire until the time of her release
unless such seizure or detention or arrest or delay is occasioned by any act or
omission or default of Charterers or their Agents. Any extra expenses incurred
by and/or during above seizure or detention or arrest or delay to be for
Owners' account, unless caused by Charterers as above.
Clause 72. Should the Vessel be detained or threatened to be detained at
any port or place by reason of arrest or any other reason during the currency
of the said Charter Party, the Owners shall provide security to release the
Vessel or to prevent such detention under any circumstances, but if the Owners
cannot take, in the absolute judgment of the charterers, the immediate steps
for release of the Vessel, the Owners to agree that the Charterers shall at his
[sic] discretion have right to arrange adequate security for the Owners in
order to make the Vessel be released immediately from such detention, and the
Owners further to undertake and agree to indemnify the Charterers against any
and all costs, expenses and consequences relating to the said arrangements."
4. The Arbitration.
Charterers deducted US$67,872 .87 from the hire due to Owners on the ground
that the vessel was off-hire under clause 53 between 21 October and 2 November
1993. Owners disputed this deduction and the matter was referred to
arbitration by three experienced maritime arbitrators, Messrs. O'Donovan,
Schofield and Kazantzis. In an interim award they found in favour of Owners.
Their reasoning was as follows:
a) The vessel was not detained so clause 72 did not apply; but
b) the vessel was delayed so clause 53 did.
c) However, the delay was caused by Charterers' omission or default for not
providing the security because this was an expense of discharge which they were
required to meet by clause 8:
d) and so the vessel was not off-hire under clause 53 and Charterers deduction
of hire was unjustified.
The arbitrators were not asked to decide the underlying question as to whether
Owners were liable for the damage to the cargo.
5. Rix J's Decision.
In allowing the appeal Rix J's conclusions were as follows:
a) the vessel was detained so Owners were required to provide the security and
the vessel was off-hire under clause 53
b) and in any event the vessel was off-hire under clause 53 because she was
delayed and this was not caused by Charterers' omission or default because
clause 8 did not require Charterers to provide the security as an expense of
discharge, but
c) even if clause 8 did require Charterers to provide the security Owners could
not bring themselves within the proviso to clause 53 if they were liable for
the damage to the cargo.
6. The Issues on this Appeal.
Clause 72 - Detention.
It is convenient to deal with this issue first because if the Judge was right
it is determinative of the appeal. At the end of his submissions Mr. Hill,
Counsel for Owners, suggested that it was not, but that submission is not open
to him in the light of his solicitors' affidavit asking for permission to
appeal which said :
"It is not disputed that should the Court of Appeal uphold the finding of the
Honourable Mr. Justice Rix on the meaning of "detention", this would be
determinative of this appeal".
In any event clause 72 expressly deals with the provision of security. The
suggestion that if it applies its requirements are in some way subordinate to
other more general provisions in the charter is untenable.
7. The Judge took the meaning of the word "detained" from the OED and the
decision of Kerr J. in The Mareva AS (1977) 1 Lloyds Reports 368. The
OED defines detain as including " To keep from proceeding; to keep waiting; to
stop." In The Mareva cargo damage made discharge more difficult. It
was accepted that the vessel had been delayed, but Kerr J held that time had
not been lost due to "detention by average accident to cargo" within clause 15
of the NYPE form. At page 382 he defined detention as some "physical or
geographical constraint upon the vessel's movements in relation to her service
under the charter." He supported this view by reference to Vogemann -v-
Zanzibar Steamship Co., Ltd. (1901) 6 COM. CAS. 253, 7 COM. CAS. 254 (CA)
another case under clause 15 where the vessel had sustained damage by "average
accident to the ship". Commenting on this case Kerr J (at page 383) said:
"It was evidently common ground that she was detained on the way back to the
port of repair in the sense in which I have sought to explain i.e. that there
was a constraint upon her movements in the charterers' service, since she was
going back on her tracks. But once she again set off on her voyage, albeit
still delayed as a result of the accident, there was no longer any
detention."
8. Applying these definitions of detention in this case the Judge said :
"The charterers here required the vessel to discharge, not to sail away to some
other port. It is therefore irrelevant that the vessel might have sailed away,
just as it did not prevent the vessel being detained in Vogemanns that
it did in fact sail for a port of repair. In both cases there was a "physical
or geographical constraint upon the vessel's movements in relation to her
service under the charter" or "a constraint upon her movements in the
charterers' service", to adopt and apply the words of Kerr J. It seems to me
that an order by authorities, which can presumably be backed up by force or
the imposition of sanctions, may be a physical constraint in itself. But in
any event, a legal restraint is also clearly within the logic of the concept of
detention. ..."
The Judge then considered and rejected Mr. Hill's further submissions based
upon the language of clause 72 saying :
"As for the clause's focus on arrest, the provision of security, and release,
it seems to me that that can be over-emphasised. After all, the clause also
refers to "any other reason" and as an alternative therefore to the provision
of security it also says "or to prevent such detention under any
circumstances". That is strong and broad language. In any event, this case is
itself an example of a requirement of security in circumstances other than
those of arrest or even threatened arrest. On the basis of the facts found in
the award, it seems to me that a finding of detention is inevitable."
9. In his submissions to us, Mr. Hill stressed that the vessel had proceeded to
berth and discharged for three days before it was ordered off berth. The
vessel was free to leave for any other port. It could not be said that there
was a physical or geographical constraint upon her movements or a constraint in
relation to her service under the charter as the Judge held. The vessel had
followed Charterers' instructions. It was for them to discharge the cargo.
Accordingly, the service required of the vessel had been performed and
Charterers cannot complain that the vessel did not continue to discharge if
they did not provide the means to enable her to do so. Furthermore Mr. Hill
submits that detention in clause 72 takes its meaning from the rest of the
clause with its references to "arrest", "security" and "release". The vessel
was not detained in this sense.
10. I cannot accept these submissions. I can see no reason why the word
"detained" should be given a restricted meaning. Clause 72 covers detention or
threatened detention for any reason and requires Owners to provide security to
prevent such detention under any circumstances. Applying the OED definition to
the facts of this case: until security was provided the vessel was not
permitted to stay at her berth; she was kept from proceeding with her discharge
and sent out to the anchorage; she was kept waiting there outside the berth;
she was stopped. This amounted to a physical and geographical constraint upon
the vessel's movements in relation to her service under the charter. That
service required the vessel to be at her discharging berth to enable Charterers
to discharge the whole of her cargo. The port authorities' actions imposed
constraints upon this happening which could only be alleviated by the provision
of security. Until security was provided and the vessel was allowed to return
to the discharging berth she was detained. Accordingly clause 72 required
Owners to provide the security and the vessel was off-hire under clause 53
until this was done.
11. It follows that I agree with the Judge's conclusions on this issue. In
giving permission to appeal Potter LJ said that what Kerr J said in The
Mareva deserved reconsideration. Neither party to this appeal seriously
suggested that Kerr J was wrong. His definition of detention is consistent
with the OED definition and has been regarded as good law for many years. I
agree with it and I see no reason to alter or elaborate the definition.
12. Clause 8 - Expense of Discharge.
Although the clause 8 obligations on Charterers have been extended to include
discharge by amendment to the standard NYPE form, this is frequently done so
the point under clause 8 is likely to be of some importance and is not governed
by authority. The Judge said :
"The issue therefore, is ... does the obligation to discharge render charterers
in breach of clause 8 merely because the authorities make something which is
not a matter of discharge into a condition precedent of permission to
discharge?
I do not think that clause 8 has the far reaching results for which owners
contend. I agree ... that the storage costs and removal costs of goods, once
those goods have been discharged, are not costs of discharge. They do not
therefore fall to be charterers' responsibility under clause 8."
13. Owners submit that the Judge should have upheld their submission that as
clause 8 imposed the responsibility for discharge upon Charterers it was for
them initially to meet all the expenses necessary to effect discharge which in
this case included the provision of the security. If Owners were liable for
damaging the cargo then in due course the expenses incurred could be recovered
as damages for breach of contract. Any other rule would leave it entirely
uncertain who was to provide the security. In other words the rule which made
commercial sense was "Pay now, claim later." Mr. Hill supported his arguments
by pointing out that the charter imposed no obligation on Owners relating to
the discharge of cargo. This was consistent with the position at common law
where owners were required merely to get the goods out of the ship's hold and
put them on deck or alongside.
14. The starting point for consideration of these submissions is the language
of the clause. The words used are apt to describe the physical acts involved
in loading and unloading the cargo. In other words the clause is concerned
with the expenses involved in cargo handling. This is made clearer in the 1993
revision of the NYPE form which requires charterers to perform "all cargo
handling including, but not limited to, loading, stowing, trimming, lashing,
securing, dunnaging, unlashing, discharging and tallying........" but is I
think also the natural meaning of the words in the 1946 form. Nothing in the
wording of the clause suggests that it imposes a wider responsibility for
ensuring that a third party does not prevent cargo handling from being
performed. The costs of storing or removing damaged cargo after it has been
discharged are not costs of discharge and the clause is not wide enough to make
them so simply because a third party has made security for their payment a
condition precedent of discharge. As Mr. Edey, Counsel for Charterers pointed
out, on the facts of this case the timing of the demand for security is
critical. If it had not been made until discharge had been completed, Owners
accept that it would not have been a cost of discharge which fell within clause
8. Furthermore, Owners' construction of clause 8 is inconsistent with clause
18 which defines the situations in which Charterers may have to provide
security and clause 2 which lists what Charterers must pay for.
15. It follows that, like the Judge, I do not think that Charterers were in
breach of clause 8 for failing to provide the security required by the port
authority. Before the arbitrators and the Judge Owners contended that the
vessel was not delayed within the meaning of clause 53. This contention was
rejected and has not been pursued on this appeal. The vessel was therefore
delayed even if she was not detained and as this was not caused by Charterers'
act, omission or default the vessel was off-hire.
16. In dealing with clause 8 (although he said he did not have to decide the
point) the Judge added :
"I suspect that it is also true however, that charterers are not responsible
under clause 8 for extra costs which are costs of discharge but which are only
caused by owners' breach........"
He gave as examples discharge made more difficult and expensive because of
cargo damage and fumigation necessitated by insect infestation from a
pre-charter cargo.
If all the Judge was saying is that ultimately charterers would not be liable
for such costs because they could be recovered from owners as damages for
breach of contract I would agree. But if he was saying that they should not
initially have to be met by charterers as costs of discharge falling within
clause 8, I do not agree. If the parties had to argue at the time of discharge
whether or not the costs concerned were caused by owners' breach of contract
this would give rise to unnecessary uncertainty. If the costs are costs of
discharge and therefore fall within clause 8 "Pay now, claim later" makes good
commercial sense.
17. So I think the obligations imposed on Charterers by clause 8 are clear
which probably explains why there is no authority on the point which Owners
have taken in this case. Of course where the charter is on the 1946 NYPE form
but does not contain an additional clause like clause 53, the only off-hire
provision in the contract is clause 15. In this case I think Charterers could
have relied on detention by average accident to goods but in many cases the
situation will not be so clear cut and charterers may find that they have to
put up money if the cargo receivers will not do so to ensure that discharge is
completed to avoid their continuing liability to pay hire.
18. Finally, as I have said, the Judge concluded that even if clause 8 did
require Charterers to provide the security in the first instance, it did not
follow that any delay caused by the port authority's demand was "occasioned by
any act, omission or default of charterers" within the meaning of the proviso
to clause 53 if the underlying reason for the delay was owners' breach of
contract which damaged the cargo. He supported this conclusion by an analysis
of the structure of clause 53. I do not think it is necessary to consider
whether that analysis is correct, given that clause 53 was an additional clause
and both parties agreed that it was not very well drafted.
19. Conclusion.
The Judge was right for the reasons he gave that the vessel was detained within
the meaning of clause 72 and/or delayed and so was off-hire for the disputed
period under the terms of clause 53. Charterers were not in breach of clause
8. I would therefore dismiss this appeal.
LORD JUSTICE BROOKE:
20. I agree.
LORD JUSTICE HENRY:
21. I also agree.
Order: Appeal dismissed with Respondents costs.
(Order does not form part of the approved judgment)
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