England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON COUNTY
COURT CIVIL JUSTICE CENTRE –MERCANTILE
DIVISION (HH JUDGE HALLGARTEN QC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		26 March 2004

Lord Justice Mance:

1. This is an appeal by Marine Blast Limited ("Marine Blast") against an order of HHJ Hallgarten QC dated 9^th May (amended on 11^th June) 2003 giving judgment on a preliminary issue in favour of Targe Towing Limited and Scheldt Towage Company N.V. (together "Targe"). The preliminary issue related to Targe's claim for an indemnity under clause 18(2) of a towage contract made between Marine Blast as hirer and Targe as tugowners. The vessel, to be towed from Sweden to Scotland, was a dredger, the "Von Rocks" belonging to a Swedish company, Noas Nordmuddring AB ("Noas"). The tug used in the event was the "Jerome Letzer".
2. The tow, which began as long ago as 17^th June 1994, proved a disaster. The dredger capsized within two days, salvage attempts failed and she became a constructive total loss by early July 1994. Marine Blast acquired the wreck and had it towed to Ireland. Litigation in Sweden, Ireland and England has occupied the ensuing years. Noas was indemnified in the sum of SEK7 million by its hull insurers, Forsikrings AB Skandia ("Skandia"), who (in their own name, as Swedish law permits) claimed against Targe in the Swedish courts. Targe objected to Swedish jurisdiction on the ground that the towage contract contained an exclusive jurisdiction clause in favour of London. Skandia with Noas's support resisted that objection; and both the Stockholm District Court on 3^rd April 1996 and the Court of Appeal on 3^rd October 1996 dismissed it, on the ground that there was no evidence that Noas was a party to the towage contract. Proceedings by Targe to arrest the Von Rocks in Ireland were begun on 14^th November 1996, set aside on 17^th January 1997 and reinstated in the Irish Court of Appeal on 22^nd January 1998. Meanwhile, on 24^th September 1997 Targe settled Skandia's claim for SEK1.1million, and on 4^th February 1998 Targe issued the present English proceedings claiming indemnity. Initially, their case was that not only Marine Blast but also Noas had been party to the towage contract, but since April 2002, this stance has been reversed, and it has been central to Targe's case that Noas was not a party to the towage contract. Marine Blast in contrast asserts that Noas was party, with the consequence that Targe had or should have had, under the towage contract terms, a complete defence to the claim by Noas, which Targe in fact settled for SEK1.1 million.
3. The preliminary issues which HHJ Hallgarten ordered on 18^th July 2002, in the light of the pleadings as by then amended, and which he determined on 9^th May 2003 were (excluding redundant words): (1) Were Noas a party to the towage contract dated 13^th June 1994? (2) If Noas were a party to the contract, then on the true construction of the contract can [Targe] maintain their claim against [Marine Blast]? He answered each claim in the negative. Permission to appeal has been given by the judge on issue (1) on terms not permitting Marine Blast to reopen any findings of fact, and Targe have been given permission to cross-appeal in respect of issue (1) in the event (which has occurred) of Marine Blast pursuing an appeal under the permission given in respect of issue (1).
4. The towage contract, which was dated 15^th but signed on 17^th June 1994, was on Towcon terms, referring to the Bimco and European Tug Owners' Association's recommended International Ocean Towage Agreement (Lump Sum), in existence since 1986. The two front pages of the towage contract consisted of boxes completed in handwriting by one or other party, at the end of which appeared the parties' signatures. The front pages were completed to show Targe as tugowner and Marine Blast as hirer. In respect of the tow, a further box headed registered owners was completed with Noas's name, and two boxes headed classification society and P & I liability insurers were completed with Skandia's name. In respect of the tug, boxes naming her relevant classification society (Bureau Veritas) and P & I insurers (Shipowners Mutual) were also completed. The final three pages were the printed Towcon terms, with one handwritten term.
5. The Towcon terms provided, inter alia, as follows:

"18. Liabilities

….

(2) ….

(b) The following shall be for the sole account of the Hirer without any recourse to the Tugowner, his servants or agents, whether or not the same is due to breach of contract, negligence or any fault on the part of the Tugowner, his servants or agents:

(i) Loss or damage of whatsoever nature, howsoever caused to or sustained by the Tow.

(ii) Loss or damage of whatsoever nature caused to or suffered by third parties or their property by reason of contact with the Tow or obstruction created by the presence of the Tow.

(iii) Loss or damage of whatsoever nature suffered by the Hirer or by third parties in consequence of the loss or damage referred to in (i) and (ii) above.

(iv) Any liability in respect of wreck removal or in respect of the expense of moving or lighting or buoying the Tow or in respect of preventing, or abating pollution originating from the Tow.

The Hirer will indemnify the Tugowner in respect of any liability adjudged due to a third party or any claim by a third party reasonably compromised arising out of any such loss or damage but the Hirer shall not in any circumstances be liable for any loss or damage suffered by the Tugowner or caused to or sustained by the Tug in consequence of loss or damage, howsoever caused to or sustained by the Tow.

….

22. Warranty of Authority

If at the time of making this Agreement or providing any service under this Agreement other than towing at the request, express or implied, of the Hirer, the Hirer is not the Owner of the Tow referred to in Box 4, the Hirer expressly represents that he is authorised to make and does make this Agreement for and on behalf of the Owner of the said Tow subject to each and all of these conditions and agrees that both the Hirer and the Owner of the Tow are bound jointly and severally by these conditions"

6. Marine Blast and Noas were, the judge found, both organisations whose operations were primarily coastal and domestic, and Marine Blast had only once previously encountered the Towcon terms (on a prior hire with Targe in 1993), while Noas had never encountered them. The judge further found that "…there was no evidence that the Towcon terms were so well known that someone in Noas's position – concerned primarily with coastal business – might be presumed to be aware of their contents".
7. The only claim ever pursued by Targe against Marine Blast has been for an indemnity under clause 18(2)(b). There has never been any claim for breach of warranty of authority. Targe's case has been and is that, if Marine Blast had no such authority from Noas as represented by clause 22, then Noas constituted a "third party" for the purposes of the indemnity provision in clause 18(2)(b). There was no contrary plea or suggestion by Marine Blast at any stage prior to the hearing before us. Before us Mr Timothy Young QC for Marine Blast floated a possible contrary argument, while recognising that, had it been or were it even now to be sought to be raised, Targe's likely response would have been to apply to re-amend to assert breach of warranty of authority; Mr Young indicated that his clients would be minded to waive any time bar point to enable such a re-amendment to be made. None of this is before us. The wording of the preliminary issues with which we are alone concerned derives from the present form of the pleadings. In response to Targe's claim to be indemnified, Marine Blast's defence as amended on 7^th August 2002 at present simply asserts that Noas was a party to the towage contract, and that Targe was entitled on that basis to the benefit of the exclusions in it as against Noas.
8. The hire of the Von Rocks (with a possible option to purchase) was discussed between Mr Patrick Murphy of Marine Blast and Messrs Nordstrom (senior and junior) at a first meeting in Sweden on about 18^th February 1994. Noas itself owns two tugs, and indicated that it would be prepared to undertake the towage of the Von Rocks to Scotland for £36,000. Mr Murphy regarded this as too high a figure, and Noas was evidently unprepared to accept Mr Murphy's suggestion that Noas should perform the towage at cost. At some point Mr Nordstrom senior suggested and Mr Murphy agreed that Mr Murphy could seek alternative quotations, always on the basis that Noas was satisfied that any proposed tug was capable of performing the job and acceptable to insurers. Mr Murphy obtained alternative quotations, including one from Mr Nick Dorman of Targe, who by fax on 24^th April 1994 proposed the Jerome Letzer for £29,500 on "Terms Towcon". Mr Murphy did not ask for a copy of these terms, but passed the fax without comment to Noas by fax. A second meeting in Sweden took place on 2^nd May 1994, when Mr Nordstrom indicated the need for insurers' approval – and that he wished Marine Blast to bear the cost of insurance.
9. On 18^th May 1994 Targe faxed to Marine Blast a specification sheet for the tug (with an ETA in Sweden of 6^th June 1994). Mr Murphy faxed this on to Noas, noting on his copy "Details of Tug Jerome – fax to Noas". Noas on the same day received an insurance quotation from Skandia to "come into force the first day of the towage", referring to Noas's own tug "or other similar or larger tug boat accepted by Skandia". Noas passed this to Marine Blast, with copies of provisional permissions for the Von Rocks to be towed, on 6^th June 1994, and the suggestion "Perhaps you can fix a tug-insurance cheaper?" On 8^th June 1994 Targe by fax updated its quotation, reducing it to £26,000, asking for Marine Blast's acceptance and stating "we will draft out Towcon contract". This fax was not passed on to Noas, although the judge records that Mr Murphy's recollection was that he told Noas of the reduction in price over the telephone.
10. In the meantime, the judge found, Marine Blast's solicitor, Mr McGuinness, was working on the draft charter and by 15^th June 1994 its terms had been in principle agreed. They were very much tailored to the particular engagement which Marine Blast and Noas had in mind, and the unarticulated mutual understanding was that the "Jerome Letzer" was poised to be in position to pick up the "Von Rocks" within a very short time. The charter contained, inter alia, the following terms:

"2. The said letting and hire shall not exceed a period of 6 calendar months from the commencement of the hire and shall be for a minimum period of 3 calendar months from commencement of the hire...

3. For the purposes of this agreement "commencement of the hire " shall be 10 days from the date upon which the vessel, its equipment and tackle leaves from the port of Örnsköldsvik in Sweden for direct delivery to the works site and furthermore "the hire period" will be the time "from the commencement of hire" until the charterer has returned the vessel to Ornsköldsvik minus 10 days for return transportation from the site of the dredging.

4. The charterers shall arrange and pay for the delivery of the vessel from the port of Örnsköldsvik, Sweden, to the works site and the return transportation to Sweden with independent carrier of the charterers choice. The charterers pay for the transportation insurance the whole charterperiod.

12. The charterer shall pay to the owner the sum of 3.000 SEK per week during the hire period to cover the insurance for the vessel. As to the extent and conditions of the insurance, see insurance policy from Skandia …

…..

15a. The charterers shall provide the owner with a bank guarantee for the sum of 275.000 SEK, valid until all commitments of the charterer have been paid to the owner.

15b. The charterer shall pay 275.000 SEK to the owner on taking charge of the vessel in Ornsköldsvik as an advanced payment for the rates to be incurred under this agreement...

…..

18. That the law governing this agreement shall be that of Sweden and should there be any dispute arising as a result of this agreement, the terms thereof or relating to this charter party, that the matter shall be resolved by arbitration by an independent arbitrator appointed by mutual agreement between the parties hereto and in default of such agreement by an arbitrator nominated by a partner in the law offices of Mannheimer & Swartling of Göteborg in Sweden. . . . "

11. The judge commented on this document:

"13. It is noteworthy that this document, which formalised terms between Defendants and Noas, made no reference to any relationship with the Claimants, although this would have been the place for that to be resolved. It may also be said, that whereas clause 4 referred to there being an "independent carrier of the charterers choice", at this stage plainly the Defendant and Noas had only the "Jerome Letzer" in mind for the outward leg from Sweden to the Firth of Forth."

12. On 13^th June 1994 Targe faxed to Marine Blast a draft towage contract, signed by Mr Dorman, leaving Marine Blast to complete the boxes relating to the tow. In addition to the front page and attached printed Towcom terms, the additional hand-written term written in read: "Tow to be in all respects ready for towage on arrival at Sundsvall of the Jerome Letzer". On 15^th June 1994 Targe chased up Marine Blast. At 1130 hours on 16^th June 1994 Mr Murphy faxed to Noas a copy of this draft, which he had completed save as to signature. This last fax only emerged after the hearing before the judge (Mr Nordstrom's previous recollection having been that he was given a copy of the towage contract on the next day in Sweden). There was no covering note and no evidence of any request by Noas to see this document or any discussion of its significance or terms at any time between Marine Blast and Noas. Mr Murphy flew out to Sweden a third time on 17^th June 1994, signed the charter with minor amendments, provided an unconditional bank guarantee in the sum of SEK275,000 "valid until all commitments of the charterer have been paid to the owner" as required by the charterparty. He also made an advance payment of E£25,000 and paid the amount of the Skandia insurance premium. After surveys and formalities the Von Rocks was allowed to depart under tow at 1800 hours on the same day. No receipt or other document passed between Noas and anyone else.
13. The judge considered the implications of the Swedish courts' decision, in the context of jurisdiction, that Noas was not party to the towage contract and so not bound by its exclusive jurisdiction clause. In so far as Targe had made any enquiry at all of Marine Blast about Noas's position, it consisted in a question put by Mr Woolley, Targe's managing director, at the instance of Targe's P & I Club, which was "far too general and ambiguous to elicit a definitive answer". Marine Blast was not, until that moment, even aware of the Swedish proceedings, and the matter was not followed up with it. In consequence, if Targe have failed to establish that Noas was party to the towage contract when Noas in reality was party, Targe have themselves to blame and not Marine Blast.
14. The judge found that little weight could be attached to oral evidence given by Mr Murphy and by Mr Nordstrom to the effect that Marine Blast had authority from Noas. Mr Nordstrom's evidence was far from reliable and Mr Murphy was "an engaging but altogether unconvincing witness, who frequently elided matters, i.e. he treated approval of the "Jerome Letzer" as equivalent to authority to make a contract binding Noas as a party". The judge said that there was no evidence of any express authority and that Marine Blast's case "must therefore rest upon some implied authority, i.e. an authority that one can deduce from all the surrounding circumstances as something necessarily incidental to the commercial venture upon which [Marine Blast] and Noas were to engage". What mattered was "the circumstances which existed on the ground at the time and the inferences [to be drawn] from the proven exchanges between Noas and [Marine Blast]".
15. The judge pointed out that the communication of information about the proposed towage and tug made sense to ensure that Noas and its insurers would have no objections thereto (a point which Mr Murphy himself had made in his evidence) and perhaps also in the commercial hope that Noas might consider matching or bettering Targe's rate, but did not justify any inference of authority to contract on Noas's behalf. In the judge's view, the reference in the fax of 20^th April 1994 passed on to Noas to "Terms Towcon" was no notice that Marine Blast were to act on behalf of and bind Noas, since the fax was not presented as governing the relationship between Marine Blast and Noas, but that between Marine Blast and Targe. The judge made in this context the finding set out in paragraph 6 above. For similar reasons, he must also have concluded that the faxing to Noas on 16^th June 1994 of a full copy of the Towcon contract was insufficient notice that Noas was intended to become party to such terms or that Marine Blast was to sign them on Noas's behalf.
16. The judge considered it most unlikely that Noas would have agreed to undertake any primary liability under the towage contract, even though primary liability would be on Marine Blast and Noas had received a substantial advance and bank guarantee. However, although the point had not been canvassed before him in argument, he raised the possibility that this objection might be answered by a purposive construction of clause 22 based on its reference to "conditions" (in contrast, for example, to "terms and conditions" just above the parties' signatures and to "terms, conditions and exceptions" in clause 23 headed "General" - cf also clause 19, the Himalaya clause). If conditions in clause 22 were limited to conditions regulating liability, Noas would incur no primary liability, but would be bound by all conditions regulating liability, such as clauses 18, 21 (Lien) and probably 24 (Time for Suit) and 25 (Jurisdiction) - just as a bailor may in English law be bound by similar conditions in a sub-bailment on terms to which he has consented: cf The Pioneer Container [1994] AC 324.
17. The judge rejected the submission that the charterparty provision whereby "commencement of hire" was postponed until 10 days after the dredger's departure under tow (clause 3) was a reason why Noas would need to be party to the towage contract, in order to be able to hold someone responsible. The person responsible to Noas would in the judge's view be Marine Blast. The judge concluded his judgment on the first issue by saying that Marine Blast had not discharged the onus of proof upon it of showing that Noas was party to the towage contract.
18. Mr Young submits that the judge's reasoning and conclusions on the issue of authority were in error. He submits that clause 4 in the charterparty requiring Marine Blast to "arrange and pay for the delivery of the vessel ….. with independent carrier of the charterers choice" conferred, was indicative of or was at least consistent with agency, and that a conclusion that Marine Blast was authorised to act on Noas's behalf anyway follows from (a) Noas's agreement to delivery of the Von Rocks to Targe, (b) Noas's knowledge that such delivery was to take place on Towcon terms, (c) receipt of a copy of such terms by Noas on 16^th June 1994, (d) the inclusion among such terms of express provision (clause 22) that Marine Blast should act on Noas's behalf in entering into the towage contract and (e) the delivery by Noas of the Von Rocks to Targe on that basis on 17^th June 1994. In view of the references to and sending of the Towcon terms, Noas cannot, he submits, be treated as ignorant of their contents, including clause 22. The first thing that any owner in Noas's situation would be expected to do would be to look at its provisions, particularly the lien clause, which was clause 21 immediately preceding clause 22.
19. In Mr Young's submission that judge made at least three errors of law, which affected his analysis. First he wrongly reversed the burden of proof, by considering that it was for Marine Blast to show any authority. Second, he erred in the test he applied, in that the word "necessarily", which he deployed as mentioned in paragraph 12 above, was not appropriate to an issue of implied authority. It is a test used to determine when terms fall to be implied into an contract, but implied authority depends on consent not contract. Third, Mr Young submits that the judge was influenced by considerations of subjective knowledge and intention, when what was relevant was the law's objective analysis of their conduct and communications.
20. In the absence of any permission to appeal in respect of the judge's factual findings, it is necessary for Marine Blast to establish one or other of these suggested errors, in order to be able to pursue any case on appeal. As to the first, the judge was in my view right to treat Marine Blast as carrying the onus of proving that Noas was party to the towage contract. The fact that Targe is seeking an indemnity on the ground that Noas is a third party does not alter this. On the face of it Noas is a third party, and it is for Marine Blast to establish some authority or ratification. But, even if this were not so, I see no prospect that the onus of proof can have been determinative with the judge or that it should be determinative with us. Mr Young in his reply accepted this.
21. As to the second submitted error, I accept Mr Young's submission that it was inappropriate for the judge to use the word "necessarily" in the present context. The correct test is that stated in Bowstead and Reynolds on Agency (17^th ed) article 8:

"Implied Agreement

Agreement between principal and agent may be implied in a case where one party has conducted himself towards another in such a way that it is reasonable for that other to infer from that conduct consent to the agency relationship."

The commentary further explains the position:

"Comment

2-031 No special rules of law peculiar to agency are involved here: this Article simply represents, in the sphere of agency, the obvious proposition that contracts are not always expressly made, but often inferred by the court from the circumstances. The same principle applies to non-contractual liability. "While agency must ultimately derive from consent, the consent need not necessarily be to the relationship of principal and agent itself (indeed the existence of it may be denied) but it may be to a state of fact upon which the law imposes the consequences which result from agency.

…..

2-032 Consent of the principal. This may be implied when he places another in such a situation that, according to ordinary usage, that person would understand himself to have the principal's authority to act on his behalf: or where the principal's words or conduct, coming to the knowledge of the agent, are such as to lead to the reasonable inference that he is authorising the agent to act for him. But where one person purports to act on behalf of another, the assent of that other will not be presumed merely from his silence, unless there is further indication that he acquiesces in the agency. The substance of the matter is more important than the form: a contract describing the parties as principal and agent is not conclusive that they are such, and conversely there may be an agency relationship though the agreement creating it purports to exclude the possibility."

22. Mr Rainey QC for Targe seeks to justify the judge's phrasing of his test, by suggesting that the judge, when using the word "necessarily" was not concerned with the nature of the factual relationship between Marine Blast and Noas, but with a further question whether, even if the parties may have thought otherwise, their factual relationship "necessarily" involved agency. To my mind, the judge was clearly using the word as part of the test by which he proposed to decide whether there was a factual relationship enabling Marine Blast to act on Noas's behalf. The judge was therefore in error. It is true that his subsequent discussion is in terms by themselves consistent with the true test. Nevertheless, it is possible that he continued to have in mind and apply the test with which he began his discussion. I consider that we are in these circumstances bound to re-assess his conclusions for ourselves in the light of his unchallenged findings of fact. As to the third suggested error, I need say no more than that the judge did in places make findings about the parties' subjective states of mind, and that it will be necessary to put them on one side and to consider whether his other findings support his conclusions, applying the correct legal test to which I have already referred.
23. Starting with the charterparty in respect of the Von Rocks, I do not consider that its terms either authorised Marine Blast to act on Noas's behalf, or make it likely that such authorisation was contemplated or later given. Nothing in clause 4 speaks of agency. Its aim is simply to make Marine Blast responsible for arranging and paying for the towage and for the choice of tug as well as the relevant insurance premium. Noas had been prepared to tender to tow the dredger to Scotland. Their proposal having been declined, the matter was put squarely within Marine Blast's organisational and financial sphere. Clause 4 simply fails to disclose any intention that Noas should be made a (further and additional) party to the towage contract, with the unknown rights and liabilities that that might involve. Mr Young submitted that Noas would have found value in some of such rights, e.g. the right to have the tug present itself punctually, so that the charter hire period would start without delay, or the right to a contractual claim, if anything went wrong during the tow. In fact the tug was, to Marine Blast's and Noas's knowledge, very close or in to Sundsvall on 16^th/17^th June 1994. I also agree with the judge that, if the tug had failed to arrive, Noas would on the face of it have had a claim against Marine Blast under clause 4 (who might in turn have a claim against Targe). Even if this were wrong, it would not be surprising to find a loophole in the relatively informally drafted documentation. More significantly, even if one assumes that Noas might have had some motive in some circumstances for wishing to be able to pursue the tugowner contractually (and ignores the fact that the towage conditions would then have excluded any claim by Noas for damage to the dredger), there are also obvious reasons why objectively Noas might have wished not to be party to the towage contract. Noas did not, so far as appears, know anything about the tugowner (save for its identity), and had had no part in arranging the towage. The tugowner was in some sense fact a rival, having been chosen by Marine Blast for its own account in preference to Noas. Despite the security and guarantee put up by Marine Blast, the towage contract might (as it did) contain all sorts of potential liabilities, which it would require time and care to understand.
24. I turn to other circumstances outside the terms of the charterparty itself, particularly the communications and conduct of Marine Blast and Noas in relation to the proposed towage contract. In my view the judge was on firm ground in treating as very material the fact that the Towcon terms were not at any stage put forward by Marine Blast as terms of or relevant to any proposed contract between Targe and Noas. There is a clear distinction between a case where terms are put forward as contractual terms proposed to form part of a contract with their recipient and a case where reference is made to terms on the basis that they form a proposed part of a contract to which he is to be a stranger. In the former case, he normally neglects to read them at his peril. In the latter, he may decide to read them or not as he chooses. I do not consider in this context that the judge committed the error which Mr Young suggests of concentrating on the parties' subjective states of mind, rather than their objective conduct and exchanges. The judge's findings regarding Towcon terms mean that, because of their essentially domestic and coastal businesses, neither Marine Blast nor Noas can be treated as having been aware in the first half of 1994 of the contents of the Towcon terms, particularly clause 22. Mr Young's response that neither knew of the other's ignorance fails to meet the point. For the detail of the Towcon terms to be relevant to establish consent, Marine Blast needs to be able to say positively that someone in Noas's position must be taken to have understood what the contents of such terms involved. That is negatived by the judge's finding set out in paragraph 6 above. The bare reference to such terms in Targe's quotation of 20^th April 1994 therefore carries the matter nowhere.
25. Even when the full towage contract terms were sent to Noas by Marine Blast on 16^th June 1994, under five hours before Marine Blast signed them, Noas was not told that they were being sent as a contractual document by which Noas was to be bound, or that they contained any authority for Marine Blast to act to that effect. This was certainly not obvious from the general nature of the draft contract, or from any words on its front pages, and the subsequent three pages consist of the closely and minutely printed Towcom terms. It is not pleasant reading even a top copy of these terms. No-one could sensibly assume that their legibility and accessibility to the reader would be improved in the faxing process. Even in the copy reaching Mr Murphy on 13^th June 1994, parts of the Towcon terms appear barely legible. Inspection of the copy of this refaxed fax as it reached Noas and appears in the bundles before us suggests that it was, predictably, reduced in large parts (including much of clause 22) to a state of effective substantial illegibility or at best to a state in which the significance of such parts could only be deduced by a most painstaking labour of reconstruction, probably using a magnifying glass. In solicitors' correspondence in February 2003, after the copy faxed to Noas came to light, Marine Blast's solicitors accepted the illegibility of both the fax to Mr Murphy and his fax to Noas. To speak of complete illegibility of the whole documents would be putting the position far too high, but Mr Murphy cannot sensibly have thought that it was likely that Mr Nordstrom would be likely to read, or would in fact, read through the detailed Towcon terms. Nor can or should Noas have thought that they were expected to do so. As a matter of fact, although this is strictly irrelevant, Mr Murphy never did this himself either. Had he done so, he might have realised that Marine Blast was expected to act on Noas's behalf, that it was important to ensure that Noas received a legible copy of the Towcon tems providing this and that their attention should be drawn to clause 22.
26. Noas by its silence in the five or so hours after it received Mr Murphy's fax of the proposed towage contract cannot be treated as authorising Marine Blast to act on its behalf by signing the towage contract. Nor, in the circumstances, can Noas by its subsequent silence and/or delivery of the Von Rocks into Targe's hands on 17^th June 1994 day be treated as ratifying Marine Blast's signature of the towage contract on the previous day. Noas's silence and conduct is equally, if not more, consistent with ignorance of or indifference to the precise terms of the towage contract, and fulfilment of the charterparty terms.
27. Before us, though not before the judge, Mr Young invoked the assistance or analogy of the principle in The Pioneer Container. Its potential relevance first occurred to the judge when writing his judgment, in which he speculated that it might give rise to another way, outside the terms of the Preliminary Issues, in which Noas could have been bound by the terms of the towage contract, so as to preclude it or Skandia from holding Targe liable for the loss of the Von Rocks. Under the doctrine of bailment on terms, a bailor may become bound by the terms of a sub-bailment to which he has expressly or impliedly consented: The Pioneer Container at p.341 per Lord Goff. The argument canvassed by Mr Young treats Noas as bailing the dredger to Marine Blast under the charterparty for the purposes of the tow and Marine Blast as then sub-bailing it to Targe under the towage contract. However, even if one were to discard the suggested bailment for towage purposes by Noas to Marine Blast, it might be possible to treat the circumstances as involving a direct, non-contractual, bailment, by Noas to Targe, in which case also the towage contract terms might perhaps limit Targe's responsibility as direct bailees: see per Lord Goff in The Pioneer Container at p.339H-340A (although Elder, Dempster & Co. Ltd. v. Paterson, Zochonis & Co. Ltd. [1924] AC 522 is not factually on all fours with the present case) and per Lord Hobhouse in The Starsin [2003] UKHL 12; [2003] 1 AER (Comm) 625, at paragraph 136.
28. The judge pointed out in relation to sub-bailment on terms that: "This alternative approach was not canvassed by evidence or in submissions at the hearing and indeed was not within the ambit of the Preliminary Issues". Mr Young accepts this, but he argues that, if a goods owner may become bound by consent to a sub-bailment on terms, then, why should not Noas here have become bound by such consent to clause 22, authorising Marine Blast to act as its agent? Mr Rainey raised various objections to the analogy. It assumes the application of English law, whereas Swedish law might, he suggests, have relevance, bearing in mind that the charterparty was subject to Swedish law and possession of the dredger passed from Noas to Targe in Sweden. He also submits that English authority has not as yet firmly recognised the relationship between a tugowner and an unmanned tow as one of bailment, although there is a first instance decision to that effect (Lukoil v. Tata [1999] 1 Ll.R. 367, in which Mr Rainey suggests, I think, that there may not have been a full citation of authority). Be that as it may, it is sufficient for the present to concentrate on the distinction between consent to a sub-bailment (or to a simple non-contractual bailment) on terms and consent to the making of a contract by which the original bailor is bound. The two are conceptually different. Consent to a sub-bailment (or to a non-contractual bailment) is by definition different from consent to the creation of a direct contractual relationship between the bailor and sub-bailee. Furthermore, for a bailor to be bound by terms in a sub-bailment (or in a contract to which he is not party), the bailor must have consented to such terms. That does not mean that he must know of them in detail, but they must be of a nature such that he impliedly consents to them. Even if they appear in a contract of sub-bailment, they may be so unusual or so unreasonable that they could not reasonably be understood to fall within the consent granted: The Pioneer Container, 346, D per Lord Goff. There is no authority suggesting that consent to a sub-bailment can confer authority to act as agent if the sub-bailee so stipulates, and nothing to make this remotely usual. Indeed, the rationale of the doctrine of bailment on terms is that the bailor may be bound by conditions regulating liability in a sub-bailment, without becoming party to any contract with the sub-bailee. If that might have been so in this case, as the judge speculated, then it is a separate point to any before us under the present preliminary issues, and one which like so many other points in this whole unhappy saga appears, until the judge raised it, to have been overlooked.
29. Mr Young's primary submission before the judge and before us was that there was good reason why Noas would have wished to be a party to the towage contract. I have already given the reasons why I do not accept that the circumstances can be analysed on such a basis. In the alternative Mr Young supported another of the judge's thoughts, to the effect that clause 22 might be read as intended only to make the owner party to the extent of the conditions in the towage contract regulating the tugowner's liability. The judge said that that reading would "certainly make good commercial sense". I agree that it would make the inference or super-imposition of a contract between Noas and Targe in the circumstances of this case much more palatable. It would also assist the argument based on the analogy of bailment on terms; after all, if that doctrine binds a towowner by conditions regulating the tugowners' liability, it would amount effectively to the same thing to treat the towowner as bound contractually by such conditions. This would not however get over the basic problem that the fact that one result may be achieved by one conceptual route is not a reason for saying that it can be, or has been, achieved by a different conceptual route. (Indeed, it might be regarded as a positive reason why one should not say this.)
30. Quite apart from this, however, and more fundamentally on the facts of this case, I am unable to accept that clause 22 can be limited in the way in which the judge mooted. Although the language of the Towcon clauses is irregular, there is no fixed distinction between "conditions" regulating liability and terms or provisions involving positive liability. The Towcon clauses contain a number of positive obligations on the hirer, not merely relating to payment of hire (clause 2), but bearing and paying port expenses, pilotage charges, etc. (clause 3), providing security "if required" (clause 6, though there was a note that the provision of security was not applicable in this case, as a result of Marine Blast's provision of security), readiness of the tow to sail (clause 7(c)), permits and certification (clause 11), seaworthiness of the tow (clause 12) and cancellation and withdrawal upon payment (clause 16). There would be good reason for the tugowner to wish to bind the towowner by such obligations. Clause 22 expressly provides for the hirer "to make this Agreement for and on behalf of the Owner of the said Tow subject to each and all of these conditions". The reference to "this Agreement" is general, as is the reference to "each and all of these conditions". The last phrase providing for hirer and towowner to be bound "jointly and severally by these conditions" also points to positive liabilities being under consideration, since it makes little or no sense to talk of binding someone jointly and severally by negative conditions regulating liability. Different language would clearly have been used throughout, if the intention had merely been to bind the towowner negatively by conditions relating to the towowner's liability.
31. Viewing the matter afresh in the light of the correct legal test, I for my part can in these circumstances see no possibility of any different result to that which the judge in fact reached. His findings simply do not support a conclusion that Noas ever or in any way consented to the creation of an agency relationship, or consented to Marine Blast making all or any part of the towage contract with Targe on its behalf.
32. I have not forgotten Mr Young's general point that it is strange if Marine Blast has to carry the burden of a loss, for which it was not at fault and in respect of which it paid the insurance premium. It is perhaps possible that the insurance would have covered Marine Blast or that there would have been an implied exclusion of liability in respect of any direct claim that Noas or Skandia might have sought to mount against Marine Blast. But Targe and indirectly Marine Blast would remain exposed, unless Marine Blast obtained Noas's authority to bind Noas to the towage contract (or unless Targe could rely on the doctrine of bailment on terms, which is not a matter falling within the preliminary issues before us). If Marine Blast did not obtain Noas's authority to bind Noas to the towage contract and Targe remained as a result exposed to claims from Noas, that was, as the judge effectively concluded and as I agree, due to Marine Blast's own failure to understand and act upon the implications of the towage contract which it knew was to be binding as between Targe and it. I would dismiss this appeal accordingly.

Lord Justice Peter Gibson:

33. I agree.