Mediterranean Salvage v. Seamar Trading

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Note: the decision in this case has been upheld by the Court of Appeal in a judgment delivered on 10 June 2009. For a note on the Court of Appeal decision, click here

Mediterranean Salvage & Towage Ltd v. Seamar Trading & Commerce Inc.
English High Court: Queen’s Bench Division: Commercial Court: Aikens J.: [2008] EWHC 1875 Comm.; 1 August 2008
David Bailey QC, instructed by Jackson Parton, for the Claimant
tewart Buckingham, instructed by Clyde & Co, for the Defendant
In this case, the court held that a voyage charterparty was not subject to an implied term that charterers were to nominate a safe berth at the named loading port, since that term would have been plainly inconsistent with the express terms of the charterparty. In particular, owners had agreed an additional clause in the charter which stated that they had satisfied themselves fully, before entering into the charter, "with and about the ports specifications and restrictions".

DMC Category Rating: Confirmed

The vessel "Reborn" was chartered by her owners, Mediterranean Salvage, on an amended Gencon 1994 form of charterparty dated 10 January 2003, to Seamar Trading as charterers, for the carriage of a cargo of cement from Chekka, Lebanon to Algiers. The owners alleged that the vessel’s hull had sustained damage as a result of contact with an underwater projection at the loading berth at Chekka, and pursued a claim for damages against the charterers in London arbitration. The key issue was whether, under the terms of the charterparty, charterers were obliged to nominate a safe berth for the vessel at Chekka.

The charterparty, as amended, provided inter alia:

Box 10: Loading port or place (Cl.1) 1 BERTH CHEKKA – 27 FT SW PERMISSIBLE DRAFT

Clause 1: The said Vessel shall … proceed to the loading port(s) or place(s) stated in Box 10 or so near thereto as she may safely get and lie always afloat …and being so loaded the Vessel shall proceed to the discharging port(s) or place(s) stated in Box 11 … or so near thereto as she may safely get and lie always afloat, and there deliver the cargo. [Note the deletion of the word ‘safely’]

Clause 20: Owners guarantee and warrant that upon arrival of the vessel to and/or prior its departure from, loading or discharging ports (either in ballast condition prior to loading or laden prior discharging) the vessel including, inter alia the vessel’s draft, shall fully comply with all restrictions whatsoever of the said ports (as applicable at relevant time) including their anchorages, berths and approaches, and that they have satisfied themselves to their full satisfaction with and about the ports specifications and restrictions prior to entering into this Charter Party.

The arbitrators, Mr Bruce Harris, Mr Mark Hamsher and Mr Michael Baker-Harber, rejected the owners’ argument that, because the charterers had the choice of berth at Chekka, this choice carried with it a warranty that the nominated berth would be safe. The arbitrators assumed (as they were invited to do) that there were several berths at Chekka to which the vessel could have been directed to load by the charterers but they concluded that the owners’ argument faced the insuperable difficulty that the owners had accepted the "port" of Chekka; the berths at that port were just as much a part of it as the approach channel or the tugs or the pilotage service. All of them were constituent elements of the "port" which the owners had agreed to accept. Owners’ claim accordingly failed.

The owners appealed to the High Court.

The Submissions
The key submission of the owners was the fact that the charterparty gave the charterer the right to choose one berth out of any number of potential berths for loading at Chekka. In permitting the charterer to identify and nominate a berth, the shipowner had handed to the charterer a degree of control over where the vessel would go. So the shipowner lost control over the safety of the vessel to that extent. Accordingly, it was necessary, to give the charterparty business efficacy, that there should be an implied term in it that any berth nominated by the charterer within Chekka, should be "prospectively safe". [for the meaning of this phrase, see later in the judgment]

The charterers made three main submissions. First, given the rationale for the warranty of safety, as set out in the dissenting judgment of Dixon CJ in the "Houston City" – see later - the shipowner’s agreement to the named port of Chekka, without any warranty of safety, precluded the implication of any term as to the safety of a berth nominated within that port. Secondly, as this was a berth charter, the nomination of the load berth by the charterer acted as an election [not a selection]. That meant that the berth was to be treated as having been written into the charter as from the outset. It was as if the shipowner had specifically chosen it. Therefore there was no room for an implied term as to the safety of that retrospectively identified berth. Thirdly, the shipowners could not demonstrate that, using the "officious bystander test", it was obvious that the parties intended that there should be a term as to the safety of the berth nominated by the charterers.

In this regard, chartereres pointed to the warranty given by the owners to the effect that they had "satisfied themselves to their full satisfaction (sic) with and about the ports specifications and restrictions prior to entering into this Charterparty". This showed, so the charterers argued, that the shipowners had taken on all risks in relation to the port of Chekka including all risks relating to all berths within it to which the vessel might be directed by the charterers.

Charterers also pointed to the fact that clause 1 of the Gencon standard terms had been modified by the parties, so as to delete the word "safely" in the phrase "or so near thereto as she may safely get and lie always afloat….". This also indicated, so charterers submitted, a clear intention against any implied agreement between the parties that the charterers undertook to warrant the safety of the vessel within the port at all.

The judge noted that the arbitrators had correctly stated in their award that there was no direct authority on this particular issue. The question of when precisely a "safe port" or "safe berth" warranty should be implied in a voyage charterparty had been the subject of debate in the textbooks and amongst shipping lawyers for many years. The present question was, therefore, of interest and perhaps importance to the shipping industry.

The judge slightly redefined the issue in the appeal, as follows:

"if a specific load port is named in a voyage charterparty and there are several possible berths within that port to which a vessel could be directed to load by the charterers and there is no express warranty in the charterparty of the "safety" of either the port or the berth to which the vessel is to be directed by the charterers, is the charterparty subject to an implied term that the charterers must nominate a "safe" berth at that load port?"

Before going on to answer that question, the judge set out in summary form the general legal background. In the present case, counsel had agreed that the charterparty was a "berth charter". The significance of that concerned

"the right of the charterers to nominate a berth to which the vessel must go to load or discharge cargo. In the present case, no specific berth had been identified in the charterparty to which the vessel was to go to load the cargo of cement at Chekka. It was common ground that when a berth charterparty does not originally identify a specific berth to which the vessel is to proceed, whether to load or discharge, the charterer has an implied right and obligation to nominate a specific berth and give orders to the master accordingly. The master is, generally, obliged to obey that order. When the charterer nominates a specific berth, that berth or place has to be treated as if it had originally been written into the charterparty. This nomination is an election, as opposed to a selection. In other words, the charterer cannot change the nomination of the berth chosen without the agreement of the shipowners. In my view this is of significance in the present case."

"The other background legal principles to note concern the nature of the "safe port" or "safe berth" warranty in voyage charterparties and the rationale for the warranty. When there is an express "warranty of safety" in a voyage charterparty, whether it be of a port or a berth, the nature of the warranty by the charterer is that the port or berth will be "prospectively safe" at the time that the nomination is made. Broadly speaking, a port or berth is "prospectively safe" if, during the relevant period of time when she should be doing so, the vessel can reach, remain at and depart from the port/berth without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship. Where a charterer has given a warranty of the safety of the berth or port in a voyage charter, it is not entitled to nominate a berth or port that is not safe in the sense described above."

The judge then referred to the rationale for a warranty of safety in a voyage charterparty enunciated in the dissenting judgment of Dixon CJ. in the case of Reardon Smith Line Ltd v. Australian Wheat Board (the "Houston City")1. In the case where the charterer cannot (or does not) identify, at the time the charter is concluded, the place where the cargo is to be loaded or discharged, then:

"…the shipowner must agree to submit his ship to the charterer’s orders…..When the charter limits the choice to safe ports or safe berths, the purpose is to impose upon the charterer the necessity of doing in the interests of the ship what the shipowner would have done if the charterer had been prepared to nominate to him a port of loading or discharge at the time of proposing the charter, namely, avoiding an unsafe port. The fulfillment of the duty of naming the port of loading is inseparably connected with the fulfillment of the duty of providing the cargo."

Noting that, in the "Houston City", there had been an express warranty in the charterparty as to the safety of the port, the judge then went on to make two general points about the implication of a warranty of safety.

"First, the test by which to decide whether a warranty of safety should be implied at all into the voyage charter must be the generally applicable one of "necessity". In considering whether the implied term passes this test, it is useful to apply the "business efficacy" or "officious bystander" test as an aid to this task, bearing in mind always the express terms of the charterparty."  

        "Secondly, in general the courts will consider the following factors when deciding whether
         to imply a warranty of "prospective safety" in a voyage charter where none is expressed:

(a) Does the charter provide for the ship to go a named port or berth or to one of a number of named ports or berths? If so it is less likely that a warranty of safety will be implied.

(b) Does the charter provide for the ship to go to a port or berth to be nominated out of a range of ports or berths? If so, it is more likely that a warranty of safety will be implied.

(c) Whether there should be an implied term as to safety at all and, if so, the precise formulation and the effect of the term to be implied may depend on the other terms in the charter itself. Even if a warranty of safety is not to be implied into a voyage charterparty, the charterer is probably nonetheless under an implied obligation not to nominate an "impossible" port or berth.

The judge held that, in the absence of an express warranty of the safety of either the port of Chekka as a whole or any berth nominated by the charterers within Chekka, the burden lay on the owners to demonstrate that one had to be implied because it was "necessary", or to give the charterparty "business efficacy". That meant that the owners had to demonstrate that, notwithstanding that they took the risk of dangers that affected the port as a whole or all the berths within it, it was nonetheless necessary to imply a term in the charterparty that the charterers promised that any berth which they nominated would be "prospectively safe" with regard to dangers that were unique to that berth. [Emphasis added]

In the Court’s view, this was a classic case where an officious bystander would get different answers from the two parties to the contract if he asked the question: "do the charterers give a warranty that any berth that they nominate in Chekka is to be prospectively safe at the moment that they nominate it?". The owners would doubtless say "yes", but the charterers would, with the same certainty, say "no".

Equally, he held, there was no need, in terms of "business efficacy", to imply a warranty by the charterers that the berth nominated by them would be "prospectively safe" as to its unique features. There were several reasons for this:

(1) the express provisions in box 10 and clause 20 indicated that the owners agreed that they would either investigate the port or take the risk of any dangers getting to it, using it (that is, loading at a berth as nominated within it), and departing from it;

(2) the only "choice" that the charterers had was to nominate a specific load berth within the identified load port of Chekka; once the berth was nominated it was treated as having been identified in the charterparty at the outset. Thus, the owners were accepting that the charterers had the right to elect a berth of their choice, the only limitation being that a vessel of 27 feet salt water draft could berth there;

(3) there was considerable significance in the guarantee and warranty in clause 20, when read with the amended wording of clause 1 of the standard Gencon clauses, where the parties had crossed out the word "safely" in the phrase "…or so near thereto as she can safely get and lie always afloat". This meant that the owners had undertaken that the vessel would proceed to the nominated berth in Chekka or so near thereto as she might get and lie afloat and load the cargo: that obligation on the owners was not contingent on the vessel’s safety;

(4) given the express terms of the charter, in particular the lack of an express warranty of the safety of the port, the deliberate amendment to the terms of clause 1 and the clear wording of the guarantee and warranty in additional clause 20, an implied warranty of safety would be inconsistent with the express terms.

The judge distinguished both the decision of Donaldson J. in Vardinoyannis v. The Egyptian General Petroleum Corporation (The "Evaggelos Th") [1971] 2 Lloyd’s Rep 200 and that of Thomas J. in the "Aegean Sea" [1998] 2 Lloyd’s Rep. 39. He concluded:

"In the present case,… I think that the express wording of the charterparty is crucial to the question of whether there is an implied warranty of safety of the berths at Chekka. They lead to the conclusion that there is no such term in the present case. However, in agreement with the reasoning of Thomas J, I would be prepared to accept that even if there is no implied warranty that the berth nominated will be prospectively safe, there will be an implied warranty that the berth nominated must be one that it is possible for the vessel to reach."

Accordingly, the judge dismissed owners’ appeal.

Given the rather unusual provisions of the charterparty in this case, it is doubtful to what extent the judgment represents a useful precedent. If that is so, then the circumstances in which a general warranty of safety should be implied in any voyage charterparty are still to be further determined.

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