176. K/S Penta Shipping A/S v Ethiopian Shipping Lines Corporation (The “Saga Cob”) [1991] 2 Lloyd’s Rep 398; [1992] 2 Lloyd’s Rep 545

Safe port – Shelltime 3 form – low level hostilities not causing port to be unsafe

The facts

The vessel was chartered on the Shelltime 3 form containing clause 3 which read as follows:

“3. Charterers shall exercise due diligence to ensure that the vessel is only employed between and at safe ports, places, berths, docks, anchorages and submarine lines where she can always lie safely afloat, but not withstanding anything contained in this or any other clause of this charter, charterers shall not be deemed to warrant the safety of any port, place, berth, dock, anchorage or submarine line and shall be under no liability in respect thereof save for loss or damage caused by their failure to exercise due diligence as aforesaid.”

The charterers were an Ethiopian state owned company and the vessel was chartered to carry aviation fuel to Massawa. While anchored in the roads at Massawa, the vessel was attacked by Eritrean guerrillas in motorboats firing heavy machine guns and rocket grenades. Substantial damage was caused to the vessel.

The demise charterers instituted action for damages against the charterers for breach of clause 3. The question of liability only was referred to trial.

Findings

This was the first time the Shelltime 3 form came up for decision. Deputy Judge Diamond QC found on the facts that at the time of the charterers’ orders of the vessel to the port, it was a characteristic of the port that vessels in the vicinity of the port were subject to seaborne attack by hostile forces.

He recognised that the requirement that a port be prospectively safe at the time of the charterers’ orders and the exception of abnormal circumstances, were opposite sides of the same coin.

He also proposed to give full effect to the proviso in the charterers’ favour that they were only to be liable for failing to exercise due diligence. In the event, he found that the charterers failed to exercise due diligence because, on the facts known to them, they should not have ordered the vessel to Massawa.

Deputy Judge Diamond QC’s judgement was overturned in the Court of Appeal (Parker, Balcombe and Woolf LJJ – judgement by Parker LJ).

Commentary

The finding on the prospective safety of a port is a value judgement and could be said to be a mixed question of fact and law. The Court of Appeal showed no deference to the Commercial Court as the primary trier of fact.

The Court of Appeal also differed on the effect of the due diligence provision. Deputy Judge Diamond QC equated due diligence with prudence or sound judgement. Parker LJ equated due diligence with reasonable care. Charterers who made adequate enquiries would be protected even if it were later to be found that the port was unsafe. Both are right: due diligence extends to obtaining and using knowledge.

A professor in political studies testified at the trial. Deputy Judge Diamond QC considered that land based attacks which had occurred were relevant. Parker LJ found both that they were not relevant and (misreading the judgement) that Deputy Judge Diamond QC had discounted them.

Deputy Judge Diamond QC was probably correct on the facts.

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