559. Lennard’s Carrying Company, Limited v. Asiatic Petroleum Company, Limited, the “Edward Dawson” [1915] A.C. 705; [1914] 1 K.B. 419

“Actual fault or privity” under the Merchant Shipping Act as applied to corporations – distinction drawn between ordinary servants and management

The Facts

Benzine oil was carried on this vessel, a 21 year old steel screw oil tank steamer from Novorossisk to Rotterdam.

Intensive employment gradually led to a deterioration of the boilers and when she left Novorossisk, the vessel was unseaworthy. Unseaworthiness led to stranding in a gale and eventual fire which destroyed the vessel and her cargo.

Cargo sued the shipowners.

By s 502 of the British Merchant Shipping Act, owners were exempt from liability for fire unless caused by their actual fault or privity.

Findings Continue reading “559. Lennard’s Carrying Company, Limited v. Asiatic Petroleum Company, Limited, the “Edward Dawson” [1915] A.C. 705; [1914] 1 K.B. 419”

558. Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd (the “Great Peace”) [2001] EWHC 529; [2002] 2 Lloyds Rep 653

Voyage charter party – vessel hired to assist another vessel in distress – charterer under misapprehension as to the position of hired vessel – contract not void for mistake. Continue reading “558. Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd (the “Great Peace”) [2001] EWHC 529; [2002] 2 Lloyds Rep 653”

555. Louis Dreyfus and Co. v Lauro (the “Verbania”) [1938] 60 Ll.L. Rep 94

Voyage charter party – vessel missing loading date – owners held liable for damages.

The Facts

On 7 October 1936, the vessel was chartered to load at 1 or 2 safe ports between Karachi and Mormugao, India. She was stated as being expected ready to load “about 15/18 November”. Continue reading “555. Louis Dreyfus and Co. v Lauro (the “Verbania”) [1938] 60 Ll.L. Rep 94”

520. Sino Channel Asia Ltd v Dana Shipping and Trading Pte Singapore [2016] EWHC 1118 (Comm); [2017] EWCA Civ 1703

Notice of arbitration served on employee of associated company – implied actual authority to accept service found on the facts.

 The Facts     

Charterers, a Hong Kong company, entered into an arrangement with a PRC Company, sellers, in terms of which contracts of purchase and sale of commodities would be entered into in the charterers’ name. Charterers’ would be remunerated at $1 per metric tonne. Sellers would be entitled to the profit on the sales. Charterers would be responsible for the negotiations while sellers would handle the operational side. Charterers effectively fronted for the sellers.

Pursuant to the arrangement, charterers entered into a Contract of Affreightment, providing for the carriage of about 275 000 mt of iron ore from Venezuela to China to be carried in five shipments from June to October 2013.

The COA provided for London arbitration. On receipt by one party of the notification of the appointment of an Arbitrator, it had 14 days to appoint its own Arbitrator, failing which the arbitration would continue under the first Arbitrator appointed.

Although the COA was negotiated by the parties’ respective brokers, an employee of sellers played a prominent role in negotiations. He was identified as the “charterers’ guy” by the seller’s brokers.

Notice of arbitration was sent by email to the employee who responded and gave the impression that he had the authority to represent the charterers.

Ship owners obtained an award from their appointee, Mr Christopher Moss, without opposition. The award was sent to Charterers’ registered address by the owners.

Charterers’ immediate reaction was to refer the award to the sellers who promised to take care of it, but never did.

Charterers sought to set aside the award under section 72 of the Arbitration Act, 1996.

Owners argued that the employee had actual implied authority, alternatively, ostensible authority to accept service of the arbitration notice.

Findings

Sir Bernard Eder set aside the award.

The Court of Appeal, Gross and Flaux LJJ, restored the arbitrator.

It was accepted by both courts that authority to accept service stood on a different footing to authority to conduct negotiations and authority to conduct the latter did not imply authority iro the former.

On the special facts of this case, the Court of Appeal considered that implied actual authority to accept service had been shown and, failing that, ostensible authority.

What was important to the Court of Appeal was the supine attitude displayed by the charterers. Everything, including the award, once it arrived, was simply referred to the sellers. Also, the specific contact employee of the sellers played a prominent role in the negotiations and execution of the Contract of Affreightment.

Commentary

To have found actual implied authority, even on these facts, was still a long shot. Actual implied authority is normally only found where the agent’s authority for completed jural acts is questioned. Here the agent did nothing and was the mere recipient of service. The finding of ostensible authority stands on firmer gorund.

553. Evera SA Comercial v North Shipping Company Ltd (the “North Anglia”) [1956]

Voyage charter party entered into while already engaged on another voyage charter party – risk of delay provided for in earlier voyage charter party not to be borne by new charterers.

The Facts

On 30 July 1953, the vessel left the United Kingdom for Fort Churchill, a port on the Hudson Bay, in ballast to load grain for a return voyage to the United Kingdom pursuant to a voyage charter party.

On 6 August 1953, before the vessel had reached Fort Churchill to load, the owners fixed her on a second charter from Fort Churchill to the United Kingdom, stating an expected time of arrival as 27 September 1953.

As matters turned out, the vessel was delayed at the UK discharge port of Leith by congestion with the effect that the vessel would only have been able to reach Canada by 20 October 1953, ie 3 weeks late.

On being informed of the delay at Leith, new charterers cancelled and claimed damages.

Findings

Devlin J, after setting out the ordinary rule in Samuel Sanday and Co v Keighley, Maxsted and Co, that missing a cancelling date for arrival at a load port does not give rise to a claim for damages, held that this does not apply where the owners miss the date by binding themselves to another charter.

The rationale which he provided for liability was that the owners were bound to commence the approach voyage of the charter when they could reasonably be expected to arrive in time.

Commentary

Devlin J’s rationale is but a different way of saying that the cause of the delay cannot reside in the owners’ further contract with a third party.

Devlin J referred to the Wythburn but accepted counsel’s argument that the case was decided on its own facts which happened to be materially identical.

552. Monroe Borthers Ltd v Ryan (the “Wythburn”) [1935] KB 28 (CA)

Breach of loading date caused by owners own deliberate act – not entitled to rely on exceptions in voyage charter party

The Facts

By a voyage charter party on the “Merseycon” form, owners, on 2 August 1933, agreed as follows:

  1. That the said steamer being tight, staunch, strong, and every way fitted for the voyage, shall with all convenience proceed to Hamburg … and there load from the said charterers a full and complete cargo of 330 tons of sugar and 140 tons of salt … and being so laden shall proceed with all convenience and speed to merchants quay, Kilrush, and Bally Longford, or so near there too as she may safely get. ..On 31 August 1933, the owners entered into a second charter party pursuant to which the vessel was sent to Porthoustock to a load a cargo of stone for carriage to Felixstowe.Because of the delay, charterers incurred demurrage for loading barges and lighterage.
  2. Owners attempted to rely on the “unavoidable accidents or hindrance” exception.
  3. Bad weather at Porthoustock delayed loading which caused the vessel to arrive in Hamburg on 14 September 1933.
  4. 10.     Charterers or owners not to incur liability for loss arising from frosts, floods, strikes, lock-outs of seamen, work people or other persons necessary for the performance of this charter party, disputes between masters and men, and other unavoidable accidents or hindrances of what kind so ever, beyond charterers’ or owners’ control.

Findings

Atkinson J held against the owners and awarded damages.

He was upheld by Greer, Maugham and Roche LJJ.

Commentary

The result was dictated by a proper analysis of causation of the loss. Although bad weather was a factor, the actual cause of the delay was the owners’ decision to interpose the later charter party.

551. MT Højgaard A/S v EON Climate and Renewables 2014 [EWHC] 1088 (TCC); 2015 [EWCA] Civ 407; 2017 [UKSC] 59

Design and build contract – minimum lifespan provision taking precedence over specific design requirements agreed upon

The Facts

The employer, EON, accepted the tender of the contractor, MTH, to design and build the generators for two adjacent windfarms in the Solway Firth.

The contract contained a provision regulating the hierarchy of documents, with the contract provisions placed first and the employer’s requirements, including its technical requirements, placed fourth.

The employer’s technical requirements required the contractor to prepare a detailed design of the foundations in accordance with the prevailing industry standard (“J101”) formulated by Det Norske Veritas (DNV), an independent classification and certification agency.

The same clause provided:

The design of the foundations shall ensure a life time of 20 years in every aspect without planned replacement. The choice of structure, materials, corrosion protection system operation and inspection program shall be made accordingly.”

A further provision stated: “All parts of the works, except wear parts and consumables shall be designed for a minimum service life of 20 years.”

The contractor designed the foundations: steel piles driven into the seabed with steel sleaves placed over them. The space between the outer sleave and the pile was filled with grout.

Shortly after construction, the foundations failed with the sleaves slipping down over the piles.

It was discovered that a component of the J101 specification was erroneous which led to the under design of the foundations.

The parties agreed to carry out remedial works to the value of approximately €26m and to refer the question of liability to the court.

Findings

After an 8 day trial, Edwards-Stuart J in the Technology and Construction Court, found in favour of the employer.

Relying on a passage in the 8th edition of Hudson (repeated in the current, 12th edition) and Canadian cases, he held that the contractor had warranted a minimum lifespan. This was not inconsistent with the specified design regimen (J101) because J101 was only a minimum requirement.

The Court of Appeal, per Jackson LJ (Patten and Underhill LJJ concurring), thought otherwise.

In a convincing analysis, Jackson LJ pointed out that the contractor had employed the design standard expressly required by the contract. There was therefore a conflict between this obligation and the undertaking to provide a design with a minimum life of 20 years.

He quoted Lord Collins in Re Sigma Corp (UKSC) 2009:

In complex documents of the kind in issue, there are bound to be ambiguities, infelicities and inconsistencies. An over-literal interpretation of one provision without regard to the whole may distort or frustrate commercial purpose.”

An illuminating passage in Jackson LJ’s judgment is:

In essence, a court seeking to construe the contract between EON and MTH must postulate a reasonable person (X) having all the knowledge available to those two parties. The Court must consider what (X) would have understood [by the specific provisions]. This is an iterative process, which involves checking each of the rival meanings against the other contractual provisions and investigating its commercial consequences. The Court must accept that there are likely to be ambiguities and inconstencies within the documents [my emphasis]. It must not allow itself to be led astray by those ambiguities and inconsistencies. Approaching matters in that way the Court must determine whether or not clause 8.1 of the contract conditions in conjunction with TR paragraph 3.2.2.2 (2) required MTH not only to comply with J101 but also to achieve a result, namely, foundations with a service life of 20 years.”

Jackson LJ concluded as follows:

A reasonable person in the position of EON and MTH would know that the normal standard required in the construction of offshore windfarms was compliance with J101 and that such compliance was expected by not absolutely guaranteed, to produce a life of 20 years. If one adopts an iterative approach to the construction of TR paragraphs 3.2.2.2 (2) and 3b 5(1) it does not make sense to regard them as overriding all over provisions of the contract and converting it into one with a guarantee of 20 years life. Put another way, there is an inconsistency between TR paragraph 3.2.2.2 (2) and 3b 5 (1) on the one hand and all the other contractual provisions on the other hand. The Court must not be led astray by that inconsistency.”

The UKSC, Lord Neuberger (Lords Mance, Clarke, Sumption and Hodge concurring) preferred and restored the judge at first instance.

Commentary

At one level, the outcome in the Court of Appeal is more realistic. It recognizes that there are inconsistencies in complex, multi authored contracts such as this. The default position where there is no fault on either side is that a loss lies where it falls. In a case such as this, there was no sound reason to prefer one of the conflicting provisions over the other.

On another level, the case illustrates the hazards of litigation: among the finest judges in the world there was stark disagreement and the outcome in the Court of Appeal could easily have been the last word on the dispute.