NYK Bulkship (Atlantic) NV v Cargill International SA [2016] UKSC 20 (11 May 2016)

	[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	United Kingdom Supreme Court
You are here: BAILII >> Databases >> United Kingdom Supreme Court >> NYK Bulkship (Atlantic) NV v Cargill International SA [2016] UKSC 20 (11 May 2016) URL: http://www.bailii.org/uk/cases/UKSC/2016/20.html Cite as: [2016] 4 All ER 298, [2016] 1 Lloyd's Rep 629, [2016] WLR(D) 255, [2016] UKSC 20, [2016] 1 WLR 1853, [2016] WLR 1853, [2016] 2 All ER (Comm) 587

LORD CLARKE: (dissenting)

34. I have reached a different conclusion from that reached by Lord Sumption. I would dismiss the appeal. I gratefully adopt the account of the facts given by Lord Sumption in paras 1 to 11 of his judgment. The question for decision is whether the vessel was off hire during the period when she was under arrest and unable to discharge as a result (as Lord Sumption puts it) of a dispute between the receiver of the cargo and a party who appears to have been a sub-sub-charterer which had nothing to do with the owners of the ship. That depends upon whether the owners can show that the arrest was “occasioned by any personal act or omission or default of the Charterers or their agents” within the meaning of clause 49 of the charter.

35. It is common ground that Transclear and IBG were for some purposes the “agents” of the Cargill within clause 49. As Lord Sumption puts it at para 22, the right under the time charter whose exercise by Transclear and IBG is said to have occasioned the arrest of the vessel is the right to call for the discharge of the cargo. The relevant obligation under the time charter was the obligation to carry out such discharging obligations as should be required. As Lord Sumption says, it is not disputed that Transclear and IBG exercised that right and performed that obligation as “agent” for Cargill. The real question, he says, concerns the scope of that “agency”. To what acts or omissions did it extend?

36. Approaching the matter in that way, I am of the opinion that the answer is that it extends to the operation of the vessel from the time that notice of readiness was given (or perhaps earlier) until the completion of discharge. Throughout that time the vessel was complying with the orders of the charterers (ie Cargill) as to proceeding to a berth, waiting to discharge and subsequently discharging. If she had been arrested by Transclear or IBG in the course of the discharging operations themselves there could surely be no doubt that they would be treated as the “agents” of Cargill. To my mind the same is true of an arrest during the period during which she was waiting to discharge.

37. The true construction of the charter, like the construction of any contract, depends on the language used by the parties construed in its context and having regard to the commercial purpose of the clause. In the case of arrest, one would surely expect the vessel to be off hire if she is arrested by reason of some act or default of her owners or, as a result of some event associated with the vessel or her owners. Here, the arrest had nothing to do with NYK. It was a detention or arrest at the instance of Transclear by reason of an alleged failure by IBG to pay demurrage under the agreement between Transclear and IBG. Why then should the vessel be off hire in circumstances where it is common ground (a) that she was not off hire by reason of an earlier failure of IBG to provide a working offloader and (b) the arrest was not caused either by any act or omission on the part of NYK or by any event associated with the owners or the ship?

38. It is convenient to repeat here clauses 8 and 49 of the charter:

“8. Prosecution of Voyages

The Captain shall prosecute his voyages with due despatch, and shall render all customary assistance with ship’s crew and boats. 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 perform all cargo handling at their expense under the supervision of the Captain, who is to sign the bills of lading for cargo as presented in conformity with mate’s or tally clerk’s receipts. However, at Charterers’ option, the Charterers or their agents may sign bills of lading on behalf of the Captain always in conformity with mate’s or tally clerk’s receipts. All bills of lading shall be without prejudice to this Charter and the Charterers shall indemnify the Owners against all consequences or liabilities which may arise from any inconsistency between this Charter and any bills of lading or waybills signed by the Charterers or their agents or by the Captain at their request.

49. Capture, Seizure, Arrest

Should the vessel be captured or seizured or detained or arrested by any authority or by any legal process during the currency of this Charter Party, the payment of hire shall be suspended until the time of her release, unless such capture or seizure or detention or arrest is occasioned by any personal act or omission or default of the Charterers or their agents.

Any extra expenses incurred by and/or during the above capture or seizure or detention or arrest shall be for Owners’ account.”

39. Notice of readiness was tendered at 0635 hours local time on 15 October 2008. It seems to me to be a reasonable inference that the notice of readiness was communicated to all of Cargill, Sigma, Transclear and IBG. The next step was for the discharge of the cargo. I would accept that it was not the duty of Cargill as charterers to discharge the cargo at any particular time but, in accordance with lines 31-33 of the charter, they remained responsible for the fulfilment of the charter notwithstanding that the vessel was sub-chartered. Moreover, by clause 8, it was agreed that the master would be “under the orders and directions of the Charterers as regards employment and agency; and the charterers [were] to “perform all cargo handling at their expense”.

40. It is common ground that the vessel remained on hire during the period between her arrival on 15 October and 18 December 2008 when she was instructed to proceed to a berth for discharging. In the meantime she was simply waiting at Bonny Town Anchorage. The delay was caused by congestion which was caused at least in part by the breakdown of IBG’s offloader and thus by the failure of those responsible for the discharge to arrange for the discharging. Under the charter that was of course Cargill, even though the delay was in fact caused in part by IBG. It seems to me that in these circumstances it is appropriate to regard IBG as the “agents” of Cargill during this period for the purposes of the charter, even though they were not agents in the classic Bowstead sense of being appointed by Cargill to perform a particular act or class of act. As I see it that is why it is correctly accepted that Cargill continued to pay hire for the period of delay and was obliged to do so. In these circumstances it was or would have been appropriate to regard IBG as the “agents” of Cargill in respect of the delay caused by congestion which was in turn caused by the breakdown of their unloader.

41. I appreciate that there is no clause similar to clause 49 expressly putting the vessel off hire in that period. But why is that so? The answer must be that the parties appreciated that there was no sensible basis for including the breakdown of sub-charterers’ discharging equipment as an off hire event. That was surely because it was accepted on all sides that (as stated above) the scheme of the time charter was that the vessel would be on hire throughout the time charter period unless there was some reason associated with the vessel or her owners why they should not receive hire during a particular period.

42. I agree that it is necessary for the owners to show that the particular acts which caused the vessel to be arrested were done in the capacity of Cargill’s agents, ie by way of vicarious enjoyment of Cargill’s contractual rights or vicarious performance of its obligations, pursuant to its express rights under clause 8 to give orders and directions as to employment and agency. Further (by reason of lines 31-33) it had a right to sub-charter the vessel under the charter and did so by sub-chartering to Sigma, which in turn sub-contracted in some way with Transclear and/or IBG.

43. I would accept the way the owners put their case as follows. Cargill were enabled to generate the string of contracts referred to above and thus engage the involvement of both Transclear and IBG to discharge the vessel by virtue of the express liberty to sublet the vessel granted by the charter with NYK. Under that liberty, Cargill were expressly to remain “… responsible for the fulfilment of the charter”. Cargill could delegate the performance of the charter to sub-contractors but could not delegate responsibility. The precise form and terms of the sub-contracts which could be concluded pursuant to the liberty to sub-let were a matter entirely for Cargill and their sub-contractors, so long as they did not amount to a breach of the charter. Thus Cargill were entitled to conclude the voyage charter with Sigma (imposing discharge functions and obligations on Sigma) and Sigma (or their intermediate sub-contractors) were entitled to conclude a voyage charter or a sale contract with Transclear (equally imposing discharge functions and obligations on Transclear) and in turn Transclear were entitled to conclude a sale contract with IBG (imposing discharge functions and obligations on IBG). The arrest was intimately linked to the discharge functions thus delegated in turn to both Transclear and IBG. IBG’s failure to discharge the vessel properly (ie within the laytime stipulated in the sale contract) led to it incurring a demurrage liability to Transclear, but, because IBG then failed to discharge the lien on the cargo for that claim, Transclear sought security for it by the arrest of the cargo and (as it transpired) also the arrest of the vessel. The arrest prevented discharge of the cargo. Quite apart from the novelty of a ship being arrested for a claim for demurrage, it is noteworthy that there was no claim against the vessel or NYK as her owners.

44. In these circumstances, while I agree with Lord Sumption in his para 27 that Cargill had no contractual obligation to the owners NYK to procure that the vessel be discharged at any particular time, I do not think that it is right to say that they had no contractual interest in the timing of the operation. As Lord Sumption observes, they had a contractual obligation to pay hire, so that the longer the delay before discharge the more hire would have to be paid.

45. It seems to me to be a reasonable inference that Cargill were either aware of the arrangements between Sigma and Transclear or were aware that it was open to Sigma to make arrangements with Transclear (and Transclear with IBG). In such circumstances they were certainly aware of the demurrage provisions in their sub-charter with Sigma (and must know whether they had a claim for demurrage). Equally they must have known that there was a real possibility of similar provisions down the line of sub-charters. As I see it, it is reasonable to hold that they must have appreciated that there might well be liabilities for demurrage down the line. I do not think that it is fair to say (as Lord Sumption does) that the chain might have included a quite different sort of contract to which Cargill were not a party and of which they would not necessarily have had any knowledge. It seems to me that it must have been clear to Cargill that there was every possibility that there would be sub-sub-charters on voyage terms and that some party other than them (or indeed Sigma) would ultimately be responsible.

46. Further, Lord Sumption draws a distinction between defective performance of the cargo handling operations on the one hand and the absence of cargo handling operations on the other. He says this, in the context of what he calls the first problem facing NYK arising out of the arrangements:

“28. The first is that the effect of these arrangements, as between NYK and Cargill, was that such cargo handling operations as occurred, although carried out by IBG, were carried out on Cargill’s behalf, at their orders and expense under clause 8 of the time charter. It was the vicarious exercise of a right of Cargill under the time charter, which Cargill indirectly made available to IBG. But the defective performance of cargo handling operations is one thing. An absence of cargo handling operations is another. Whatever its cause, IBG’s failure to discharge the cargo between the giving of notice of readiness on 15 October 2008 and the commencement of discharge on 15 January 2009 cannot meaningfully be regarded as the vicarious exercise by IBG of some right of Cargill under the time charter. IBG were doing nothing in this period, as far as the vessel was concerned, and were therefore doing nothing on behalf of Cargill. Their inactivity could be relevant to the question of responsibility posed by clause 49 only if it amounted to the vicarious breach of some obligation of Cargill under the time charter, which it did not. It follows that any responsibility of Cargill under the time charter for IBG’s acts or omissions in the conduct of cargo handling operations at the port of discharge, extended only to acts or omissions in the actual performance of those operations while they were in progress.”

47. As stated above, and as Lord Sumption accepts in para 8, the vessel was not off hire during the period between 15 October and 18 December because of delay caused by defects in IBG’s unloader. That must be because at that time IBG was acting as “the agent” of Cargill because there was a sufficient causal nexus between the delay caused by congestion and the failure of IBG to provide an unloader for the purpose of discharging the cargo, which was of course the obligation of Cargill under the charter which had been delegated to others. It is an example of the point made by Lord Sumption in the first sentence of his para 28. The delay arose out of the vicarious exercise of the discharging operations by IBG carried out on Cargill’s behalf. It was the vicarious exercise of a right of Cargill under the time charter, which Cargill indirectly made available to IBG.

48. The distinction between “the defective performance of cargo handling operations” and “the absence of cargo handling operations” altogether seems to me to be too narrow. It would surely logically lead to the conclusion that NYK should not be paid hire while waiting to discharge because of breakdown of IBG’s offloader. The reason why it is not so suggested is surely that the charter is drawn up on the basis that the vessel will be on hire while carrying out the owners’ obligations under the charter. Those obligations include waiting to discharge cargo in accordance with the “orders and directions of [Cargill] as regards employment and agency” in clause 8. The whole period of waiting during the period of congestion, including that caused by the breakdown of the IBG’s offloader falls within clause 8. That makes commercial sense for the reason already given, namely that the delay arose out of the vicarious exercise of the discharging operations by IBG carried out on Cargill’s behalf. As I see it, the discharging operations include the period of waiting after the notice of readiness and the period of actual discharge because the vessel is throughout complying with the charterers’ orders under clause 8. Moreover, the vessel was also complying with Cargill’s instructions in their letter to the master of 18 December (para 9) when she did not commence cargo discharge because of the court order obtained by Transclear.

49. For these reasons, I do not think that it is right to distinguish between the time when the vessel is waiting for discharge and the time when she is in fact discharging. In both cases the vessel is engaged in the actual performance of the owners’ obligations and/or in the performance of the owners’ rights. The vessel is waiting as instructed by the charterers or their “agents”, who include for this purpose sub-charterers and those who become responsible for discharge, as for example here Transclear and IBG. This analysis seems to me to lead to the conclusion that, when the vessel was instructed not to commence discharging in Cargill’s letter to the master quoted above as a result of the order of the court in Nigeria, she was complying with charterers’ orders under clause 8. Moreover when Transclear took action to delay cargo discharge which resulted in the detention of the vessel (albeit as a mistake) its claim arose out of arrangements made (or not made) for the discharge of the vessel as between itself and IBG.

50. I respectfully disagree with Lord Sumption when he says that the responsibility of the charterers after the service of the notice of readiness was limited to acts or omissions in the actual performance of cargo handling operations. It extended throughout the period when the vessel, as stated above, was acting under the “orders and directions of [Cargill] as regards employment and agency”. That was throughout the period when she was at anchor waiting for instructions to discharge the cargo, when she remained at anchor after the order of the Court, and thereafter when she proceeded to a berth and discharged the cargo. It seems to me to be of some significance that (as quoted above) the proviso in clause 49, which reads

“unless such capture or seizure or detention or arrest is occasioned by any personal act or omission or default of the Charterers or their agents”,

expressly covers personal omissions and defaults of the charterers’ agents. Nothing in clause 49 requires a positive act that is a specific breach of the charter, whether vicarious or otherwise. As I see it, the failure to discharge within the laydays in the sub-charter or sub-sub-charters (or the like) entered into by or with the authority of Cargill are omissions or defaults of the charterers’ “agents” within clause 49. An absence of cargo handling operations is just as much defective performance of them.

51. Further, in his para 30 Lord Sumption says that the second difficulty in NYK’s way is that we are not in this case concerned with responsibility for delay generally, but with responsibility for loss of time caused by the arrest of the vessel. An arrest occasioned by incurring or enforcing a liability for demurrage under a sub-charter could not possibly be regarded as the vicarious exercise of any facility made available to Cargill under the time charter. I respectfully disagree. As stated above, it seems to me that the cause of the arrest of the vessel was action taken by Transclear as a result of a failure of IBG to discharge the vessel within the lay days. It makes no difference that this was a failure as between IBG and Transclear. That failure was a failure on the part of an “agent” of the charterers, whether IBG or Transclear, or indeed Sigma, to discharge the vessel timeously, with the result that the vessel was arrested and delayed.

52. On this basis I would hold that the failure to discharge the cargo was caused by the acts or omissions of the charterers’ “agents” and that when the vessel was arrested by Transclear she was arrested by the charterers’ agents within the meaning of clause 49. This makes commercial sense because (as stated earlier) there is no reason why the vessel should be off hire for a reason outside the control of the vessel or her owners. On the contrary, she should be on hire and clause 49 construed accordingly. After all, the charter expressly provided at lines 31-33 that the charterers had liberty to sublet the vessel but that “Charterers shall remain responsible for the fulfilment” of the charter. It may well be that the charterers have rights over against Sigma on the basis that IBG and Transclear were delegates of Sigma’s discharge functions under the sub-charter between Cargill and Sigma. We are not however concerned with those, although it would to my mind be bizarre if Cargill were entitled to demurrage at a time when the vessel was off hire, so that Cargill were not paying hire to the owners.

53. As I see it, the purpose of clause 49 is achieved by carving out of the clause the case of “… arrest … occasioned by any personal act or omission or default of the Charterers or their agents”. For the reasons I have given, I would hold that Transclear and/or IBG were for this purpose the “agents” of Cargill when the vessel was arrested because the arrest was closely related to the discharge of the cargo and there is no suggestion that the vessel or her owners were in any way responsible. The owners had no control over the process of delegation or sub-delegation. The delegation included delegation of the obligation to discharge, which was ultimately passed to IBG. But IBG did not perform it at all. Looking at the matter from the perspective of the commercial risks involved, it was Transclear who subcontracted with IBG. The demurrage dispute was entirely a matter between those two parties. Why should the owners be responsible for non-performance of the obligation, in circumstances where it had no way of assessing the commercial risks attaching to the delegation? As it turned out, those commercial risks crystallised into IBG’s failure to secure Transclear’s claim. This had nothing to do with NYK. In all these circumstances there is no good commercial reason why the vessel should not remain on hire.

54. I agree with Lord Sumption in para 21 that nobody suggests that the mere fact that Transclear and IBG were for some purposes “agents” of Cargill means that Cargill is responsible for anything they might do which results in the detention of the ship. I further agree that that is because not everything a subcontractor does can be regarded as the exercise of a right or the performance of an obligation under the time charter. I agree that, if Transclear or IBG had caused the vessel to be arrested in support of a claim to a proprietary interest in it or in support of a cargo claim in connection with a sister ship, the vessel would have gone off hire. It appears to me that in those cases the proviso in clause 49 would not have applied because the arrest would not have been occasioned by Cargill or their “agents” because neither Transclear nor IBG would have caused the arrest in their capacity as Cargill’s “agents”. The vessel would therefore have gone off hire under clause 49. By contrast, on the facts here, Transclear did occasion the arrest in their capacity as Cargill’s “agent” for the reasons explained above.

55. I recognise that my construction of clause 8 (and clause 49) is wider than that proposed by Lord Sumption. However, I do not think that it is as wide as that of the Court of Appeal. The essence of my view is that stated in para 43 above. Cargill were in charge of the discharging operations, which they arranged though Sigma, Transclear and IBG. The vessel was throughout under the orders of the charterers. A decision to this effect makes sense and will not open the floodgates.

56. Finally, I do not regard my view as inconsistent with any of the decided cases. In The Mediolanum a refinery was engaged by charterers as an independent contractor but was held by Kerr LJ (in the passage quoted by Lord Sumption in para 16) to be the agent of the charterers because it was used by the charterer to perform one of the charterers’ obligations under the contract. The claim failed for an unconnected reason, namely that the refinery was not responsible for designating the particular bunkering place. The decision in The Arctic Trader (referred to by Lord Sumption in para 17) carries the issue no further.

57. In The Goodpal in the passages from the judgment of Colman J quoted at para 18 he referred to the position of the shippers and receivers as agents of charterers in connection with the process of loading and discharging respectively. As Lord Sumption observes, Colman J held that the time charterers were not responsible contractually for the order given by the charterers at the first port of discharge because their “agency” could not extend to cargo which was not consigned to them but for other consignees at the second port. He quotes this passage:

“The only relevant instructions were received from the receivers at the first discharge port who could not reasonably have been thought by anybody to be standing in the position of the charterers in relation to the balance of the cargo to be loaded at the second discharge port.”

I would entirely accept those statements as applied in that case.

58. There is in my opinion no conflict between any of those principles and those which I would apply in this case. For the reasons given above I would hold that the vessel was on hire throughout and would dismiss the appeal.

United Kingdom Supreme Court