Case Studies

547. CMA CGM SA v Classica Shipping Co. Ltd (the CMA Djakarta) [2004] 1 Lloyds Rep 460

Limitation – damage to vessel caused by charterers not subject to Convention on the Limitation of Liability for Maritime Claims, 1976.

The Facts

By charter party on an amended NYPE form, owners chartered their container vessel to the charterers.

During the currency of the charter party, there was an explosion and fire on the vessel causing substantial damage to the vessel and the cargo.

Owners claimed damages from the charterers in the sum of USD 26M.

Findings

Arbitrators found in favour of the owners. David Steel J upheld the arbitrators and followed Thomas J in the Aegean Sea, holding that, to qualify for limitation, charterers had to have been acting qua owners.

Longmore LJ, Waller and Neuberger LJJ concurring, found that the ordinary wording of the Convention meant that the charterers were generally entitled to limitation and that their right was not qualified by having to act as owners.

Charterers could not succeed, however, because the damage to the vessel was not the damage envisaged by the Convention which was, generally speaking, damaged caused by the vessel itself and not damage to the vessel itself.

546. Teekay Tankers Ltd v STX Offshore And Shipbuilding Co. Ltd [2017] EWHC 253 (Comm)

Contract formation – agreement to agree not enforceable – shipbuilding contracts.

The Facts

Teekay Tankers Ltd, incorporated in the Marshall Islands and listed on the New York Stock Exchange, a subsidiary of Teekay Corp, operate a fleet of oil tankers from Vancouver.

Teekay contracted with STX, Korea to build 16 aframax tankers.

The first 4 vessels were purchased on completed contracts. The remaining 12 were purchased in terms that gave Teekay an option of purchasing on predetermined conditions save for delivery dates.

The clause which gave rise to the despute read as follows:

4.1. Delivery dates for each of the optional vessels shall be mutually agreed upon at the time of Teekay’s declaration of the relevant option.

4.2. But STX will make best efforts to have a delivery within 2016 for each of the first optional vessels, within 2017 for the each of the second optional vessels and within 2017 for each of the third optional vessels.”

Findings

In a trial, Walker J found that the delivery dates were an essential term upon which there was no agreement.

Best efforts” qualified the putative obligation to agree and not an obligation objectively ascertainable.

Commentary

The tension between dates “to be mutually agreed upon” and “best efforts” to deliver was decided by Walker J in favour of the absence of agreement.

Walker J referred to Little v Courage Ltd where Lord Millet said as follows: “an undertaking to use one’s best endeavours to obtain planning permission for an export license is sufficiently certain and is capable of being enforced. An undertaking to use one’s best endeavours to agree, however, is no different from an undertaking to agree, to try to agree or to negotiate with a view to reaching agreement; all are equally uncertain and incapable of giving rise to an enforceable legal obligation.”

545. El Greco (Australia) (Pty) Ltd v Mediterranean Shipping Co SA (the “MSC Melbourne”) [2004] 2 Lloyds Rep 537

Hague Visby Rules – substantial quantity of individual prints and posters packed in a container – not “units” for purposes of limitation

The Facts

A cargo of posters and prints were loaded on board the vessel at Port Botany, Sydney in a 20 foot general purpose container. The vessel sailed for Antwerp where the container was transshipped onto the Aquitania bound for Piraeus. From Piraeus the container was transported by road to Aigion.

When packed into the container, the goods had been made up into approximately 2000 packages. The container was carried under a non-negotiable through Bill of Lading.

The description of the cargo on the face of the Bill was “said to contain: 200945 pieces, posters and prints – No. of pkgs.: 1.”

Clause 21 of the Bill of Lading read: “where the goods have been packed into containers or on behalf of the merchant, it is expressly agreed, that each container shall constitute one package for the purpose of application of limitation of the carrier’s liability.”

The Claimant alleged that the goods were damaged on arrival.

Findings

The judge at first instance found that the goods had been damaged by seawater during the voyage and that the carrier was liable.

The judge at first instance found that clause 21 was void as it offended Art.III rule 8.

She found the actual damages suffered to be AUS $ 63 570 which she awarded to the Claimant on the basis that limitation was to be calculated on the basis of 200945 units being enumerated on the face of the Bill of Lading.

Claimant appealed with regard to the extent of the damages fixed by the judge. The carrier cross appealed on 2 bases: clause 21 was not void and, in any event there was no proper enumeration of the packages/units in the container.

Allsop J, Black CJ concurring, and Beaumont J, dissenting upheld the cross appeal on the basis that there had been no proper enumeration of units on the face of the Bill of Lading.

To arrive at his conclusion, Allsop J made extensive reference to Sturley, The Legislative History of the Carriage of Goods by Sea Act and Professor Berlingieri and the Comite Maritime International (CMI), travaux préparatoires of the Hague Rules and the protocols of February 23, 1968 and December 21, 1979.

On the approach to the interpretation of the Hague Visby Rules as enacted in Australia, Allsop J referred to Lord Diplock in Fothergill v Monach Airlines Ltd as follows:

The language of that convention that has been adopted at the International Conference to express the common intention of the majority of the States represented there is meant to be understood in the same sense by the Courts of those States which ratify or accede to the Convention. Their national styles of legislative draftsmanship will vary considerably as between one another. So will the approach of their judiciaries to the interpretation of written laws and to the extent which recourse maybe had to travaux préparatoires, doctrine and jurisprudence as extraneous aids to the interpretation of the legislative text.

The language of an International Convention has not been chosen by an English parliamentary draftsman. It is neither couched in the Conventional English Legislative Idiom nor designed to be construed exclusively by English judges. It is addressed to a much wider and more varied judicial audience than is an Act of Parliament that deals with purely domestic Laws. It should be interpreted as Lord Wilberforce put it … “unconstrained by technical rules of English Law, or by English Legal Precedent, but on broad principles of general acceptation”.

The principles enshrined in the Vienna Convention were considered to be the “broad principles of general acceptation”: CMA CGM SA v Classica Shipping Co. Ltd.

Allsop J referred to an American decision, one of a number, Binladen BSB, which held that live plants packed loose in a container were not “units” for the purposes of limitation.

Although Allsop J agreed with the judge at first instance that clause 21 was void, he found that there had been no proper enumeration of units on the bill of lading and therefore that the default position, that the container was to be seen as the package, applied.

He said as follows:

Before the advent of containerization it followed from the practical everyday business of shipping goods that packages or units were as packed or as stowed. Shippers did not approach a carrier with loose bottles, loose posters or the like and ask it to carry them as they might do so with a car, a boiler or some article capable of being shipped as such, unless they were also requesting that the carrier make the goods up for transport prior to carriage. Thus, as I said earlier, before the advent of containerization, it was unlikely “except in the context of a debate about whether cargo was really bulk cargo or numerous pieces, or articles, or units of cargo” that there would arise for debate the question whether “unit” meant any article of cargo, however small and however unsuitable for transportation without being made up for transport or as to whether it meant an article of cargo suitable for carriage as such.”

He held further that:

An enumeration on the face of the bill of a number of pieces of cargo that could be packed in a variety of ways and therefore not showing the packages or units as packed, that is, how or in what number they are packed, will not be an enumeration called for by Art. IV rule 5(c).”

Accordingly the description of the cargo as 200945 “pieces, posters and prints” did not qualify as an enumeration of units for the purposes of The Hague Visby Rules.

Allsop J also dealt with, in passing, the question of a mistaken enumeration. In this regard he favoured the approach of Diamond QC in his famous article on The Hague Visby Rules that rule 5(c) only applies to the packages or units enumerated for which there is liability. – Diamond QC “The Hague Visby Rules [1978] LMCLQ 225.

544. Kyokuyo Ltd v AP Møller – Maersk A/S t/a “Maersk Line” [2017] EWHC 654 (Comm)

Hague/Hague Visby Rules – limitation as applied to containerized frozen fish.

The Facts

Twelve containers of frozen tuna were shipped on Maersk Tangier on 24 November 2012.

The vessel sailed from Cartagena, Spain to Yokohama. En route, at Valencia, nine of the twelve containers were transshipped onto Maersk Emden.

The three remaining containers A, B and C were transshipped onto Maersk Eindhoven which left Valencia only a month later.

At Barcelona, container C was de-stuffed, its contents re-stuffed into a Replacement Container and shipped on Maersk Tangier.

Container B and the Replacement Container were carried by road from Yokohama to Shimizu.

All twelve containers were shipped pursuant to the Maersk terms containing an implied term entitling shippers to demand that Bills of Lading be issued by Maersk Line.

Maersk Line issued a draft Bill of Lading to the Claimant who was named in the draft bill as the consignee.

No Bills of Lading were issued for the three containers in question.

To avoid delay, Maersk Line agreed to issue three sea waybills, one for each of the containers, A, B and Replacement Container, to the Claimant.

Container A contained 206 frozen tuna loins and 460 bags of tuna parts. The frozen loins were enumerated on the sea waybill but the bags were not.

Container B and the Replacement Container contained 520 and 500 frozen loins respectively, both quantities enumerated on the relevant sea waybills.

On arrival in Japan, the tuna in all three containers was found to be damaged.

Findings

The matter was decided on documents.

It was unclear who the parties to the underlying contract were. In any event, by virtue of section 2(1)(b) of COGSA, 1992, Claimant, as the recipient of the waybills, became a party to the contract.

Preliminary issues were ordered to be tried:

First issue: which a set of rules applied, Hague or Hague Visby;

Second Issue: was limitation to be applied to all three containers collectively or to each container individually;

Third issue: if Hague Rules applied, were the containers to be regarded as the package/unit or the individual pieces of tuna stuffed inside them.

Although not explicitly stated in the judgment, it appeared to be common cause that English Law applied.

On the first issue, Andrew Baker J held that section 1(2) of COGSA 1971 read with the Hague Visby Rules themselves, Art.I(b), 1(e), Art. II and Art.X(b), the Hague Visby Rules applied.

To decide whether the contract was “covered by a Bill of Lading” for the purposes of the definition of a contract of carriage in Art.1(b), Baker J referred to a number of authorities, most importantly, Pyrene v Scindia, where Devlin J said as follows:

Wherever a contract of carriage is concluded, and it is contemplated that a Bill of Lading, in due course, be issued in respect of it, that contract is from its creation “covered” by a Bill of Lading, and is therefore from its inception a contract of carriage within the meaning of the rules and to which the rules apply.”

The fact that, in this case, sea waybills were issued, did not affect matters because the sea waybills were not variations of the original contract/s of carriage: the original contract was still “covered” by Bills of Lading.

The third issue, whether the individual pieces of tuna were packages or units or whether the containers were, vis à vis the Hague Rules, was considered before the second issue.

Baker J referred to the River Gurara as authority for the proposition that when the shipper has described individual packages or units within a container, it is not permissible for the shipowner to stipulate that the container itself will be the package or unit as this would offend Art. III rule 8 even though the carrier was unable to verify the contents of the container.

That the River Gurara was decided under the Hague Rules was immaterial because the packages and units for both sets of rules are the same.

Although the frozen tuna loins, stuffed into the containers, as is, could not be called “packages” they were “units” in terms of both the Hague and the Hague Visby Rules.

As the tuna loins were enumerated on the sea waybills, the package limitation applied to each loin as a unit.

Because of the bags of tuna parts were not enumerated, damage to them was limited by reference to the container as the package.

With regard to the second issue, Baker J held that the inquiry was misconceived, the package limitation applied directly to each unit, and damage to each unit had to be considered individually. It was not permissible to aggregate the potential limitation per container, or containers, by multiplying the number of units and to extract a value for the damage as a percentage value of the contents of the container or containers.

Commentary

Even though cargo owners did not take the point, it is arguable that the issuing of the sea waybills did constitute a variation of the original contract, so eliminating the application of the Hague and /or the Hague Visby Rules – despite Art III rule 8.

The judgment is in line with the trend of protecting cargo interests, which was one of the objectives of the Convention which gave rise to the Hague Rules.

543. The River Gurara [1998] 1 Lloyd’s Rep 225

Hague Rules – containers are not “packages” for the purposes of limitation – parties’ agreement to treat containers as packages hit by Art.III rule 8.

The Facts

The vessel sank off the coast of Portugal with loss of life and total loss of cargo.

Clause 9 (B) of the Bills of Lading provided:

Shipper packed containers

If a container has not been packed or filled by or on behalf the carrier …(B) notwithstanding any provision of Law to the contrary, the container shall be considered a package or unit even though it has been used to consolidate the goods the number of packages of units constituting which have been enumerated on the face hereof as having been packed therein by or on behalf of the merchant and the liability of the carrier (if any) shall be calculated accordingly.

Findings

Colman J held that as a matter of interpretation, the containers were not “packages” and the parties could not agree to make them so.

He followed American decisions which applied the Hague-Visby amendments to USA COGSA, despite the fact that USA COGSA had not been amended in line with Hague- Visby i.e. he held that when the Bills of Lading did not enumerate the packages on the bill of lading, the containers were to be treated as packages.

The majority of the Court of Appeal, Phillips and Mummery LJJ, held that Art.III rule 3 was determinative – carriers are not bound to record details which they have no means of checking – therefore the onus is on cargo to prove the packages in a container.

Qualifying cargo/shipper’s description by “said to contain” did not affect presumption in Art.III rule 4 – this finding was contrary to a concession made by Counsel for cargo viz that the onus remained on cargo to prove the packages in the situation where the packages were enumerated but qualified by “STC”.

Hirst LJ – despite the objections to the American approach- – would have followed Colman J exactly on this point in the interests of international uniformity.

Commentary

Phillips LJ relied on the approached followed by Leggatt J in Bekol BV v Terracina Shipping Corporation (July 13, 1988, unreported) where Leggatt J referred to the Oxford English definition of “package”: “a bundle of things packed up, whether in a box or receptacle, or merely compactly tied up – A huge metal container stuffed with goods which will normally themselves be made up in individual packages is not naturally described as a package.

Phllips LJ also referred to a dictum of an American Judge, Judge Beeks: “Bills of lading, though, are hardly appropriate vehicles for such expressions of mutual intent [ the intent of the parties with regards to the question of what the packages were to be] because their contractual terms are commonly the product of unilateral draftsmanship by the carrier incorporating largely self-serving provisions.

542. Navelmar UK Ltd v Kale Maden Hammaddeler Sanayi Ticaret AS (“the MV Arundel Castle”) [2017] EWHC 116 (Comm)

Port charterparty – “within port limits” defined.

The Facts

A fixture recap contained the following clause:

15. Notice of readiness to be tendered at both ends even by cable/telefax on vessel’s arrival at load/discharging ports within port limits. The notice of readiness not to be tendered before commencement of laydays.

  1. … Otherwise Gencon 94 printed form charterparty with logical amendments on the terms as per fixture recap.

Clause 6(c) of Gencon 94 included the following under the sub heading “commencement of laytime (loading and discharging)”.

If the loading/discharging berth is not available on the vessel’s arrival at/off the port of loading/discharging, the vessel shall be entitled to give notice of readiness within ordinary office hours on arrival there … laytime or time on demurrage shall then count as if she were in berth and in all respects ready for loading/discharging provided that the master warrants that she is in fact ready in all respects. Time used in moving from the place of waiting to loading/discharging berth shall not count as laytime”.

Due to congestion, the vessel anchored outside the port limits of Krishnapatnam as depicted on the relevant Admiralty Chart.

Despite this, owners tendered notice of readiness and claimed demurrage.

Findings

Messrs Williamson and Schofield found for the charterers.

Owners were given permission to appeal on the definition of “port limits

Referring to Johanna Oldendorff, and the Martha Envoy, Mr Justice Knowles CBE, upheld the arbitrators’ award.

He held that where there is a national local law that defines the limits of the port in question, those are the limits that will apply in the case of that port. Where there is not such a law, then a good indication of what the port limits are is given by the area of exercise by the port authority of its powers to regulate the movements of conduct of ships.

Here the arbitrators did the best they could with material offered to them: the Admiralty Chart.

Commentary

The outcome seems fairly obvious.

The value of “port limits” as a criterion for an arrived ship remains questionable.

All that should matter is the quality of the vessel’s position and the readiness of access to a berth when one becomes available.

 

541. Patel v Mirza [2016] UK SC 42

Claim for recovery of money paid under an illegal contract

The Facts

Patel paid £620 000 to Mirza to bet on Royal Bank of Scotland shares, using inside information.

The purpose of the contract was never carried out and Patel sued for the return of his money.

Findings

Deputy Judge David Donaldson QC refused the claim on the ground that it was based on an illegal agreement.

The Court of Appeal (Rimer, Vos and Gloster LJJ) found in favour of Patel. Gloster LJ found that in reality, Patel was not relying on the illegal contract but seeking to undo it. Rimer and Vos LJJ held that they had a discretion to allow the claim to carry out justice even if Patel was relying on an illegal contract.

A nine member panel of the UKSC was divided: Lords Toulson, Kerr, Wilson, Hodge, Neuberger and Lady Hale wished to lay down rule that the courts had a discretion to allow claims tainted with illegality, while Lords Sumption, Clarke and Mance favoured a stricter approach referred to as the “reliance rule”: the court would only assist those litigants who could base their claim on a separate untainted ground e.g. ownership. All agreed that Patel should succeed.

Discussion

Those in favour of a discretion were of the view that the situations which arose were too diverse to be solved by the reliance rule. Lord Toulson (who delivered the main judgment): “The rule as stated [does] not permit differentiation between minor and serious illegality and between central or peripheral illegality.

On the other hand, Lord Sumption: “[there is a] tendency of any test broader than the reliance test to degenerate into a question of instinctive judicial preference for one party over another.


Commentary

Although Lord Toulson considered other common law jurisdictions: Australia, New Zealand, Canada and the USA, he did not consider South Africa where the leading judgment is Jajbhay v Cassim.

In Jajbhay v Cassim the Roman Law roots of the complementary maxims, ex turpi causa non oritur actio and in pari delicto potior conditio defenditis were considered.

In Jajbhay v Cassim the state of English Law, as it then was, was criticized for blurring the distinction between the two maxims.

In Jajbhay v Cassim, a landlord entered into a lease prohibited by law. Without cancelling the lease, he sought to recover possession by asking the court to, in effect, undo the illegal contract.

The Court applied the maxim, in pari delicto and refused the relief.

In so doing, Watermeyer JA examined Roman law and Roman Dutch Authorities as well as English Law. He concluded that in our law there should be a discretion based on public policy to administer simple justice between man and man.

He rejected the reliance theory in English Law, noting that it was confined to enforcement of collateral transactions connected with the illegal contract and, of uneven application, because of the rules of pleading: a plaintiff who had to rely on an illegal contract to rebut a plea of illegality would fail.

Watermeyer JA quoted Wilmot LCJ as follows: “All writers upon our law agree on this, no polluted hand shall touch the pure fountains of justice. Whoever is a party to an unlawful contract, if he hath once paid the money stipulated to be paid in pursuance thereof, he shall not have the help of a court to fetch it back again. You shall not have a right of action when you come to a court of justice in this unclean manner to recover it back – “procul, o procul, este profani”.

He also quoted Street, quoting Reynell v Sprye: “where the parties to a contract against public policy or illegal are not in pari delicto (and they are not always so), and where public policy is considered as advanced by allowing either, or at least the more excusable of the two, to sue for relief against the transaction, relief is given.

Jajbhay v Cassim overruled and earlier Cape Case, Brandt v Bergstedt where the in pari delicto rule was strictly applied which had the result of allowing a party to an illegal sale to retain the purchase price without delivering the cow sold.

On the development of the common law, Stratford CJ in Jajbhay v Cassim said as follows:

Now the Roman Dutch Law, which we must apply, is a living system capable of growth and development to allow adaptation to the increasing complexities and activities of modern civilized life. The instruments of that development are our own courts of law. In saying that of course I do not mean that it is permissible for a court of law to alter the law; its functions are to elucidate, expound and apply the law. But it would be idle to deny that in the process of the exercise of those functions rules of law have slowly and beneficially evolved. That evolution, to be proper, must come from, and be in harmony with, sound first principles which are binding upon us.” In these sentiments, he echoes the insight of Cardinal Newman in the Development of Christian Doctrine, where he compares development of a system of thought to that of a human being: the baby grows into an adult but remains the same person.

Lord Sumption said as follows:

“[This case] raises one of the most basic problems of a system of judge-made customary law such as the common law. The common law is not an uninhabited island on which judges are at liberty at to plant whatever suits their personal tastes. It is a body of instincts and principles which, barring some radical change in the values of our society, is developed organically, building on what was there before. It has a greater inherent flexibility and capacity to develop independently of legislation than codified systems do. But there is a price to be paid for this advantage in terms of certainty and accessibility to those who are not professional lawyers. The equities of a particular case are important. But there are pragmatic limits to what law can achieve without becoming arbitrary, incoherent and unpredictable even to the best advised citizen, and without inviting unforeseen and undesirable collateral consequences.

In Patel, as in Brandt v Bergstedt, Lord Mansfield’s dictum in Holman v Johnson is repeated:

The objection, that a contract is immoral or illegal as between plaintiff and defendant, sounds at times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident if I may so say. The principle of public policy is this; ex dolo malo non oritur actio. No Court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If, on plaintiff’s own stating or otherwise, a cause of action appears to arise  ex turpi causa, or the transgression of a positive law of this country, there the court says he has no right to be assisted.

An inconsistent aspect of Lord Sumption’s speech is his reference to St. Thomas Aquinas’ solution in the case of serious illegality e.g. conspiracy to murder: the proceeds are forfeited to the state irrespective of whether the contract is carried out.

The degrees of illegality which inevitably arise, is a factor which militates against a fixed rule, one size fits all, and is, as pointed out by Lord Toulson, one of the reasons why a discretion is necessary.

Also, it usually involves some artifice to separate out one good element and to ignore an unlawful fundamental purpose.

 

 

540. Transgrain Shipping (Singapore) Pte Ltd v Yangtze Navigation (Hong Kong) Co Ltd (the “MV Yangtze Xing Hua”) [2016] EWHC 3132 (Comm)

Interpretation of clause 8(d) of the Inter-Club Agreement, 1996

The Facts

Soya bean meal was shipped from South America to Iran under a trip time charter on the NYPE form.

The vessel arrived off the discharge port in Iran in December 2012. Not having been paid for the cargo, charterers ordered the vessel to wait off the discharge port for over 4 months.

Upon discharge, part of the cargo in holds 5 and 6 was found to be damaged. The cause of the damage was the prolonged delay ordered by the charterers themselves.

Clause 8 of the ICA provided as follows:

“(8) Cargo claims shall be apportioned as follows: …

(d) All other cargo claims whatsoever (including claims for delay to cargo):

50% charterers;

50% owners.

Unless there is clear and irrefutable evidence that the claim arose out of the act or neglect of one or the other (including their servants or subcontractors) in which case that party shall then bear a 100% of the claim

Findings

Colin Sheppard, Roger Rookes and Michael Baker-Harber, found that the charterers were 100% liable insofar as their “act” in delaying discharge was the cause of the damage.

Teare J agreed.

He rejected an argument that the phrase in question should be interpreted as it was in Anglian Water Service v Crawshaw Robins, where Burnton J, in the context of a civil engineering contract, said that the word “act’ must take its colour from the context and that the act needed to be culpable.

On the other hand, in the Fiona, HHJ Diamond QC came to a different conclusion in the context of the shipment of dangerous goods.

The Inter-Club Agreement was intended to be a pragmatic division of risk and liability. As such, there was no reason to limit the operation of the word “act” to culpable acts.

Commentary

The decision appears to be clearly right.

539. Volcafe Ltd v Compania Sud Americana de Vapores SA (trading as “CSAV”) [2016] EWCA Civ 1103

Hague Rules – proof of excepted peril in Article IV rule (2) shifting burden to cargo to prove negligence of the carrier

The Facts

Nine consignments of washed Columbian green coffee beans were carried in 20 dry, unventilated 20 foot containers, each loaded with 275 hessian 70kg bags from Buenaventura, Columbia to Northern Germany.

The bare corrugated containers were lined with kraft paper and stuffed by the carrier’s stevedores before being loaded onto the vessels.

The bills of lading incorporated the Hague Rules and recorded the shipment in apparent good order and condition.

On outturn, the bags in all the containers, save two, suffered some degree of condensation damage.

Condensation was the natural and inevitable effect of transporting the beans from a warm to a cold climate.

The overall loss was agreed at 2.6% of the total value of the consignments.

Owners pleaded inherent vice (Article IV rule (2)(m)), alternatively, inevitability of damage i.e. a denial of causation.

Findings

David Donaldson QC, sitting as a deputy High Court Judge, found that on proof of delivery of the goods in a damaged condition, the onus of disproving negligence was on the carriers which they failed to discharge.

Flaux J, sitting in the Court of Appeal with Gloster and King LJJ, held that on proof of the excepted peril, inherent vice, the full onus shifted to cargo to prove negligence, which cargo failed to do. In any event, the defence of inevitable damage would have succeeded.

Flaux J relied on a number of authorities for his finding on onus including the judgment of Lord Esher MR in the Glendarroch, 1894.

On the facts, which included photographs, he held that he was in as good a position as the judge to make a finding.

He held that the judge had erred in not accepting unchallenged evidence that an industry standard existed in terms of which raw coffee beans were stuffed in unventilated containers, lined with absorbent paper. This was a less expensive alternative to using ventilated containers which were preferable.

The judge also erred in not finding that the carrier had met the standard.

Commentary

Flaux J held that the judge was right on one point (of academic interest in this case) that the carrier’s liability included the activity of its stevedores which occurred before the containers passed the ship’s rail. He quoted Devlin J in Pyrene v Scindia as follows:

the division of loading into two parts is suited to more antiquated methods of loading than are now generally adopted and the ship’s rail has lost much of its 19th century significance. Only the most enthusiastic lawyer could watch with satisfaction the spectacle of liabilities shifting uneasily as the cargo sways at the end of the derrick across a notional perpendicular projecting from the ship’s rail.

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538. Marks & Spencer PLC v BNP Paribas Securities Services Trust Company (Jersey) [2015] UKSC 72

Implied terms – Lord Hoffmann’s analysis is Belize Telecom qualified – scope for implying terms in a comprehensive written agreement is limited

The Facts

A written lease between the parties gave the tenant the option of premature termination on a certain date.

Rent was to be paid quarterly in advance.

A condition for the exercise of the option was that the rent payments were to be up to date.

As matters turned out, the tenant terminated shortly after paying its quarterly payment of rent in advance.

It sought to recover a portion of the advance payment for that period for which it would have no enjoyment of the premises.

Findings

Tenants’ argument for an implied term succeeded at first instance but not in the Court of Appeal and not in the Supreme Court.

Lord Neuberger relied principally on the approach set out by Sir Thomas Bingham in Phillips Electronique Grand Public SA v British Sky Broadcasting Ltd as follows:

The Courts’ usual role in contractual interpretation is, by resolving ambiguities or reconciling apparent inconsistencies, to attribute the true meaning to the language in which the parties themselves have expressed their contract. The implication of contract terms involves a different and altogether more ambitious undertaking: the interpolation of terms to deal with matters for which, ex hypothesi, the parties themselves have made no provision. It is because the implication of terms is so potentially intrusive that the Law imposes strict constraints on the exercise of this extraordinary power …

[It is] difficult to infer with confidence what the parties must have intended when they entered into a lengthy and carefully drafted contract but have omitted to make provision for the matter in issue [because] it may well be doubtful whether the omission was the result of the parties’ oversight or of their deliberate decision [or indeed the parties might suspect that] they are unlikely to agree on what is to happen in a certain eventuality and may well choose to leave the matter uncovered in their contract in the hope that the eventuality will not occur …

The question of whether a term should be implied, and if so what, almost inevitably arises after a crisis has been reached in the performance of the contract. So the Court comes to the task of implication with the benefit of hindsight, and it is tempting for the Court then to fashion a term which will reflect the merits of the situation as they then appear. Tempting but wrong … [I]t is not enough to show that had the parties foreseen the eventuality which in fact occurred they would have wished to make provision for it, unless it can also be shown either that there was only one contractual solution or that one of several possible solutions would without doubt have been preferred.

Lord Hoffmann’s statement in Belize Telekom that deciding on implied terms was an exercise in construction was superficially wrong – construction decides what terms mean that are there – implication, on terms that are not there.

Commentary

The test was put in a nutshell by Lord Sumption during argument as follows: “a term can only be implied if, without the term, a contract would lack commercial or practical coherence.

The tenant’s argument was weakened by the fact that the common law in England is that rent paid in advance (as opposed to rent paid in arrears where the position is regulated by Statute) is not apportionable in respect of time.

While a strong argument that rent paid in advance should be apportionable in respect of time, can be made, this cannot affect the context in which the argument for an implied term had to be considered in this case.

Lord Carnwarth was unwilling to criticize Lord Hoffman in Belize Telekom.

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