Mediterranean Salvage v. Seamar Trading (CofA)

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Mediterranean Salvage & Towage Ltd v Seamar Trading & Commerce Inc (The "Reborn")
English Court of Appeal: Lord Clarke MR, Rix and Carnwath LJJ: [2009] EWCA Civ 531: 10 June 2009
Available on BAILII at 
David Bailey QC (instructed by Jackson Parton) for the Owner, MS&TL
Simon Croall QC and Stewart Buckingham (instructed by Clyde & Co) for the Charterer, ST&CI

Confirming the judgment of the Commercial Court in this case, the Court of Appeal held that there was no implied warranty as to the safety of the berth nominated by the charterer in relation to an expressly named port of loading within a voyage charter where the named port was not subject to an express safe port and/or berth warranty.

DMC Category Rating: Confirmed

Case note contributed by Jim Leighton, BSc (Hons), LLB (Hons), LLM (Maritime Law), Trainee Solicitor of Hill Dickinson LLP and International Contributor to DMC’s CaseNotes

This was an appeal from an order made by Aikens J dismissing an appeal from a final declaratory award on preliminary issues made by three LMAA arbitrators (Bruce Harris, Mark Hamsher and Michael Baker-Harber). The appeal arose out of a dispute concerning a voyage charterparty dated 10 January 2003 on an amended Gencon form. The underlying dispute arose following damage allegedly being sustained by the vessel during loading at Chekka in the Lebanon as a result of her hull being penetrated by a hidden underwater projection at the loading berth nominated by the charterer.

Box 10 of the charter described the "Loading port or place" as "1 BERTH CHEKKA – 27 FT SW PERMISSIBLE DRAFT". Box 11 described "the Discharging port or place" as "ALGIERS … (SEE CLAUSE 20). Clause 1 provided, so far as relevant: "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." Clause 20 provided, so far as relevant: "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."

It was common ground that the charterer was to nominate a berth at the port and that there was no express safe port and/or berth warranty in the charter. The charterer’s case was that without an express safe port/berth warranty the loss was to lie where it fell, on the shipowner. The shipowner’s case was that where the charterer had to nominate a berth within the port, when there were a number of berthing options available (as there were in the case of Chekka), there was to be implied in the charter a term that the charterer would nominate a safe berth.

The arbitrators formulated the question for determination as follows: was there to be implied into the charter a term that there was an absolute duty upon the charterer to nominate a safe berth. The arbitrators answered that question "no". On appeal to the Commercial Court the judge formulated the question in slightly more precise terms: if a specific loadport is named in a voyage charter and there are several possible berths within that port to which a vessel could be directed to load by the charterer and there is no express warranty in the charter of the ‘safety’ of either the port or the berth to which the vessel is to be directed by the charterer, is the charter subject to an implied term that the charterer must nominate a ‘safe’ berth at that loadport? The judge also answered the question "no". 

The leading judgment was given by Lord Clarke MR, with whom Rix and Carnwath LJJ concurred. Their Lordships upheld the decisions of the Commercial Court and the arbitrators.

In relation to determining if a term is to be implied into a contract, Lord Clarke highlighted that the (now) leading decision was that of the Judicial Committee of the Privy Council in A-G of Belize v Belize Telcom Ltd [2009] UKPC 11. He indicated for present purposes that "sufficient to say that the implication of a term is an exercise in the construction of the contract as a whole". Therefore, "if a term is to be implied, it could only be a term implied from the language of [the contract] read in its commercial setting" (cited from leading authorities). In circumstances where no term was to be implied (which was the default position when no express term existed) the loss and/or damage was to lie with the party that suffered it.

The leading authorities for determining the implication of terms (requiring such terms to be both reasonable and necessary to make the contract work) were reviewed by Lord Clarke. For him, the best way to put the test was to ask: "Is the proposed implied term necessary to make the contract work?" He considered this to be an entirely appropriate question to ask in considering whether a term should be implied on the assumed facts of the present case.

While he recognised that there was force in some of the shipowner’s more general submissions and that, "somewhat surprisingly", the principles had not been fully worked out by case law, there was no case that supported the shipowner’s approach to the present charter. In addition, "to my mind the appeal fails by reference to the particular terms of the charter".

Before considering the particular terms of the present charter, Lord Clarke stated: "It is important to note that the cases stress the importance of the particular terms of each charterparty or other contract, just as [was done] in the Belize case." Having reviewed the authorities, he concluded that "there are no absolute rules but that much depends upon the terms of the particular charterparty."

As to Clause 1, Lord Clarke indicated that "the fact that the word ‘safely’ in the printed Gencon terms was struck out by agreement was relevant to the true construction of the charterparty. It is the only place in the printed terms that there is any reference to safety. The fact that it was struck out seems to me to be a pointer to the fact that the parties did not intend there to be any express term requiring the port or berth to be safe. It is, however, no more than a pointer."

As to Box 10 and Clause 20, Lord Clarke agreed with the Commercial Court judge in that when "read together [Box 10 and Clause 20] indicated that the owners agreed that they would either investigate Chekka, that is the berths at Chekka, or take the risk of any dangers getting to whatever berth was nominated, using it (ie loading at it) and departing from it."

In summarising, Lord Clarke stated: "When clauses 1 and 20 are read together, the owners undertook that the vessel would proceed to the nominated berth at Chekka or so near thereto as she may get and lie afloat and load the cargo and that that obligation was not contingent on the vessel’s safety." He added: "This case is quite unlike those charterparties where the charterers have the right to nominate a port out of a range of unnamed ports."

The Court of Appeal opinion in effect confirms the commonly understood position in relation to named port voyage charters that do not contain a safe port and/or berth warranty. The common assumption in such a case is that the shipowner has satisfied itself that the particular ports nominated for loading and discharge are safe and suitable for the particular vessel before agreeing the charter.

The position will ordinarily be different (though not always so) where there is a wide range of ports that the vessel may be required to go to by the charterer. This is perhaps more often the case for time charters or contracts of affreightment, rather than voyage charters. The reason for this difference is that the shipowner cannot reasonably be expected to investigate fully the safety of a wide range of unknown potential load and discharge ports before agreeing the charter. In such cases the charterer is taking the benefit of being able to exploit the vessel commercially in a very flexible way, so will correspondingly bear the greater majority of the trading risks that flow from the voyage orders made.

As Rix LJ noted, the position may be different in relation to very large ports, such as Rotterdam. This would presumably be on the basis that Rotterdam has a very large number of berths, making thorough investigation of the safety of each and every berth by the shipowner unfeasible. Lord Clarke too could "well understand that in some cases that might be so". However, that was not the case here and it was not necessary to decide the point for the purposes of this case. Hence, it may be arguable that a safe berth warranty could be implied in other cases in future, given that this depends on the terms of the charter as a whole and the material facts of the case.

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