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DMC/SandT/04/02
Globe Master Management Ltd. v. Boulos Gad Ltd. (2002)
English Court of Appeal: Pill and Longmore LJJ, Sir Martin Nourse: March 2002
Richard Lord, instructed by Clyde & Co, for Globe Master
Hugo Page, instructed by Shaw & Croft, for Boulos Gad
SHIPPING: CONTRACT: CREW MANAGEMENT CONTRACT ON TIME BASIS: WARLIKE
HOSTILITIES: FRUSTRATION: TEST OF RADICALLY DIFFERENT PERFORMANCE
Summary:
In the context of an agreement to provide crew for a cruise vessel scheduled
to trade in the area of the Eastern Mediterranean and the Red Sea, the fact that
the Al-Asqa Intifada, which commenced in September 2000, had increased the risk
to the security of – particularly – the Israeli passengers on the ship, did
not amount to a frustrating event, in the sense that performance of the contract
in the changed circumstances would involve a fundamental or radical change in
the obligation originally undertaken.
DMC Category Rating: Confirmed
Facts
Boulos Gad, the defendants in the case, appealed against a summary judgment
given in favour of Globe Master as claimants. The parties had entered into an
agreement under which Boulos Gad guaranteed the obligations of an associated
company – Boulos Gad Tourism & Hotels Ltd. (‘BGTH’) - under a crew
management agreement. Under this agreement, Globe Master undertook to provide
catering and leisure facilities staff for the cruise ship ‘Serenade’, which
BGTH had chartered for a period of one year from March 2000, for use between the
ports of Cyprus, Israel, Egypt and the Red Sea. The prime commercial objective
of the charter was to provide facilities for gambling and duty free purchase to
Israelis outside Israeli territorial waters.
With the onset of the Al-Asqa Intifada in September 2000 and the inherent
increased risk of hostilities, passengers began to cancel their bookings, to the
point where, on 27 October 2000, BGTH terminated the crew management agreement
with effect from 31 October 2000 on the grounds that the agreement relating to the hire of the
"Serenade" was frustrated by the warlike hostilities in the area.
Globe Master accordingly brought proceedings against Boulos Gad under the
agreement, claiming – in accordance with clause 9.3. of the agreement – the
expenses of repatriating the crew members and liquidated damages of twice the
monthly lump sum payable under the agreement. Boulos Gad's defence was that the
hostility and dangerous security situation in the area constituted a frustrating
event in the sense that no reasonable cruise operator would have continued to
operate his vessel in the area in the prevailing conditions. In support of that
argument, Boulos Gad relied on academic experts in security and hostilities
whose evidence was that the threat of terrorism made the operation of ships in
the area dangerous and that no government or private agency would have provided
protection at any economic price.
At first instance, the judge had found that that Boulos Gad’s defences had
no real prospect of success and had, in consequence, awarded summary judgment in
favour of Globe Master.
Judgment
The judgment of the court was given by Lord Justice Longmore, who held
1. The test that Boulos Gad sought to apply to establish that the crew
management agreement had been frustrated, namely that ‘no reasonable and
prudent shipping or cruise operation would have continued sailing under the
prevailing warlike conditions’, was not the test to be applied. The test was
whether, if the obligations under the agreement were to be enforced, it would have amounted
to a radically different performance than what was agreed – Davis
Contractors Ltd. v. Fareham Urban District Council [1956] AC 696.
2. In this case the evidence relied on by Boulos Gad did not satisfy that
test. "The deterioration in the security situation within the Eastern
Mediterranean and the area was not a surprising, let alone a radically
different, event." Although War Risk underwriters had required additional
premium for part of that area, "there was no indication that underwriters
would decline cover for shipping in the area entirely. There was no evidence of
any exclusion zone for shipping. The terrorist threat was directed against the
Israelis and there was nothing in the crewing management agreement to suggest
that the crewing arrangements were to be for an exclusively Israeli clientele.
The extracts from the evidence…. are largely predicated on assertions about
the uneconomic cost of providing extra security."
3. It was not for an academic expert to decide what a reasonable ship owner
or charterer would have done and there was no evidence that that such an owner
of charterer would not have operated a vessel in the prevailing conditions.
(4) Accordingly, the defence put forward by Boulos Gad had no real prospect of success and the appeal would be dismissed accordingly.
Comment
For related proceedings, see Boulos Gad Tourism & Hotels Ltd v Uniground
Shipping Co Ltd.
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