Boulos Gad

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DMC/SandT/46/01
Boulos Gad Tourism & Hotels Ltd. v Uniground Shipping Company Ltd. 
English High Court: Commercial Court: Tomlinson J: November 2001 16/11/2001
Mr. H. Page, instructed by Penningtons, for Boulos Gad
Mr. R. Lord, instructed by Clyde & Co., for Uniground
SHIPPING: ARBITRATION: TIMECHARTERPARTY: CRUISE SHIPS: HOSTILITIES: WARLIKE ACTIVITY: FORCE MAJEURE CLAUSE: FRUSTRATION: UNSAFETY: WHETHER PREVENTED PERFORMANCE: QUESTION OF FACT: ARBITRATOR’S CONCLUSION FINAL: NO ORAL HEARING: CIRCUMSTANCES WHERE ORAL HEARING ADVISABLE: ARBITRATION ACT 1996

Summary:
In the context of a one-year timecharter of a cruise ship for operations in the Eastern Mediterranean and Red Sea area, the question whether continued performance had become unsafe - in the sense of being extremely hazardous because of warlike activity arising from the Palestinian Intifada that commenced in September 2000 - so as to prevent performance of the charterparty, was one of fact, not law, and an arbitrator's
decision on it was final.

DMC Category Rating: Confirmed

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Facts
This case concerned an Application by the charterers, Boulos Gad, under s.69 Arbitration Act 1996 seeking leave to appeal from an arbitrator's award in favour of Uniground, the owners of the cruise ship, "The Serenade". The Serenade had been chartered to Boulos Gad, an Israeli company, for a 12-month period from 31 March 2000 for employment as a floating hotel, a casino and for entertainment purposes, with the Charterers having the right to use the ship between the ports of Cyprus, Israel, Egypt and the Red Sea. - both for the purposes of provisioning the ship and for performing cruises sold by Boulos Gad.

On 11 October 2000 the charterers notified the owners that in their view, the charterparty was frustrated due to warlike hostilities in Israel and stated their intention to redeliver the ship at the end of that month. The owners declined to accept this. The dispute then went to arbitration in London, under the Rules of the London Maritime Arbitrators Association. The charterparty contained a clause, no.16, headed ‘Force Majeure/Frustration’, which read in part as follows: Notwithstanding anything herein to the contrary…. neither the Vessel nor her Master or Owners or Charterers, shall be liable for delay or failure to fulfil their obligations hereunder if such delay or failure is due to Acts of God…war or warlike activities… riot, civil commotion… The arbitrator approached the matter on the basis that clause 16 required him to apply a test akin to, if not the same as, the test which traditionally applies when the common law doctrine of frustration is invoked. Whilst he accepted - on the basis of the charterers' unchallenged evidence, and without an oral hearing - that the warlike conditions made it more onerous for the charterers to continue to perform the charterparty, he found that it did not prevent them from doing so. Accordingly, he held that the charterers were not entitled to terminate the charterparty.

The charterers sought leave to appeal on the question whether, if performance had become unsafe in the sense of being extremely hazardous, that amounted, as a question of law, to prevention of the performance of the charterparty.

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Judgment
1. The judge held that the real question that the charterers sought to raise was whether a demonstration of unsafety amounted of itself to a demonstration of prevention of performance. But that was not a question of law but a question of fact. ‘It is a question of fact, no doubt, in every case whether the unsafety which has been demonstrated can amount to a prevention from performance, or a prevention of performance… Safety is a relative concept. All maritime adventures… are subject to some degree of risk.’

2. The judge went on to hold that ‘the arbitrator here directed himself entirely properly in concluding that the question he had to resolve was whether the charterers had been prevented from fulfilling their obligations. That was an inquiry of fact. The arbitrator’s conclusion on that is final and cannot properly be made the subject of an appeal.’

3. The judge went on to add, however, that in his judgment ‘the arbitrator reached not just a conclusion to which he was entitled to come, but reached the right conclusion in that the evidence deployed before him, whilst it did indeed show that the carrying out of cruises of the type envisaged would be extremely hazardous, fell far short of demonstrating that the operation of those cruises had thereby been prevented.’

The charterers’ application was accordingly dismissed.

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Comment
The judge commented that in a case where a substantial amount of money was involved, the arbitrator might have been unwise to proceed without an oral hearing, although he was acting well within his discretion in doing what he did. The judge added; ‘the opportunity for presentation of oral argument can often serve not just to clarify the issues, but also can serve to lessen the prospect of any later misunderstanding as to the basis upon which matters were proceeding.’

 

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