174. Kodros Shipping Corporation v Empresa Cubana De Fletes (The “Evia” 2) [1981] 2 Lloyd’s Rep 613; [1982] 1 Lloyd’s Rep 334; [1982] 2 Lloyd’s Rep 307

Safe port – unsafety arising after order to port – charterers not liable

The facts

The vessel was chartered on the Baltime Form and ordered by the charterers to load a cargo of cement in Cuba for carriage to Basrah, an Iraqi port situated on the west bank of the Shatt-al-Arab waterway. After discharge of the cargo, war broke out between Iran and Iraq and the vessel was trapped in the waterway. Most of the crew were repatriated and only the master and a skeleton crew remained aboard. The vessel was delayed for a period in excess of 6 months.

Three issues were referred to arbitration: 1. Whether clause 21 of the contract contemplating employment in an area known to be dangerous excluded the operation of the doctrine of frustration; 2. If it did not, whether the frustration of the contract was due to the breach of the safe port warranty on the part of the charterers and therefore not open to the charterers as a defence. 3. The date when the frustration occurred.

Findings

The umpire, Basil Eckersley (counsel in the Sussex Oak), held in favour of the charterers on the first two points. He found that frustration occurred at a point two weeks after the war broke out.

The owners appealed to the Commercial Court and were successful before Robert Goff J. Basing his reasoning on the exposition of the safe port warranty by Mustill J in the Mary Lou, he found that the safe port warranty was near absolute and that the exception for abnormal circumstances was applicable to situations totally extraneous to conditions of the port e.g. arson. Both charterers and owners contended that the arbitrator’s date for the inception of the frustration was wrong, the owners favouring a later and the charterers an earlier date. Robert Goff J upheld the umpire’s award on this point.

The Court of Appeal (Lord Denning MR and Sir Sebag Shaw – Ackner LJ dissenting) upheld the charterers on appeal on the basis that the war was an abnormal occurrence. On this basis they were not in breach of the safe port warranty and could rely on frustration. The Court of Appeal refused to interfere with the umpire’s decision on the inception date of the frustration.

The House of Lords (Lords Diplock, Elwyn-Jones, Keith of Kinkel, Roskill and Brandon of Oakbrook – main speech by Lord Roskill) upheld the majority decision in the Court of Appeal. The formulation of the safe port warranty by Mustill J in the Mary Lou which found favour with Robert Goff J in the court of first instance was rejected by Lord Roskill.

Commentary

The difficulty lies with the content given to the “abnormal circumstances” exception. If “abnormal circumstances” were given its natural, wide meaning, both camps would arrive at the same result from opposite directions: by definition, a port prospectively safe could only become unsafe if conditions arose which were not in the contemplation of the parties at the time of the nomination: conversely, if abnormal circumstances were found to be the cause of the damage, they could not have been in the contemplation of the parties at the time of nomination of the port. It is doubtful whether the hostilities were an abnormal circumstance in this sense.

The important points made by the House were 1. that unsafety occurring after orders to the port does not make the charterers liable and 2. there was no authority for Mustill J’s conclusion that supervening danger remained for the charterers’ account. These points are supported by the leading cases, notably, the Stork.

Although Lord Denning MR did not reject the reasoning of Mustill J, he decided the matter on the basis that the hostilities which damaged the ship were an abnormal circumstance.

Both he and Sir Sebag Shaw thought that clause 21 allowing the owners to recover from their insurers in case of war also excused the charterers. On this aspect they were supported by the House of Lords.

Lord Brandon was assisted in preparing his speech by Lord Eustace Roskill (not Ashton Roskill, father- in- law of Lord Hobhouse, counsel in the Sussex Oak). Lord Roskill held that the safe port clause was not a “warranty”.

Arguably, the owners lost because they consented to the vessel being traded in a war zone (the effect of clause 21).

The finding that the port was safe when the orders were issued is questionable – the arbitrators found that the general area was unsafe before the orders were issued. One of the reasons advanced by Lord Roskill for not adopting the, arguably sounder, Mustill approach was precedent stretching over 25 years. The same question was left open by the Privy Council in Houston City and by Devlin J in the Sussex Oak.

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