England and Wales High Court (Admiralty Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
ADMIRALTY COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		16 August 2002

Mr Justice David Steel:

Introduction

1. These consolidated actions arise out of the loss of the Claimants' tug Borvigilant with consequent loss of life following a collision with the Defendants' tanker Romina G off Kharg Island on 22 July 1998. The claimant owners of the tug are Borkan General Trading ("Borkan"). The defendant owners of the tanker are Monsoon Shipping Limited ("Monsoon"). Borkan claim in contract and in tort for their losses resulting from the collision. Monsoon claim in tort for their losses resulting from the collision.
2. Borkan rely on conditions contained in a Tug Requisition Form both in support of its claim and in defence to the claim brought by Monsoon. This form, together with a document entitled "Conditions of Use of the Terminal at Kharg", contained standard conditions signed on behalf of owners by the masters of all vessels visiting Kharg Island terminal. It was duly signed by the Master of Romina G on 22 July prior to Borvigilant providing tug assistance.
3. Despite the incident having occurred within the jurisdiction of the Islamic Republic of Iran, the parties have agreed that the claims and counterclaims shall be determined in accordance with English law and practice.
4. Pursuant to an order dated 30 January 2002, the court is concerned with the determination of various preliminary issues relating to whether Borkan is entitled to rely on those conditions and whether they afford a cause of action for its losses and/or a defence to Monsoon's claim if it were ultimately held that the collision was due to the negligence of the tug.
5. The preliminary issues are as follows: -

1) in respect of the rights and liabilities of Borkan and Monsoon arising out of and in connection with a collision between the ships Borvigilant and Romina G on 22 July 1998, is Borkan entitled to rely upon and take the benefit of the conditions contained in the "Tug Requisition Form" and/or "Conditions and use of the Terminal of Kharg" both of which were signed by the Master of Romina G on 22 July 1998?

2) if so, and if the collision was caused or contributed to in whole or in part by the negligence of Borkan or its crew:

a) is Borkan exempt from liability for the heads of loss claimed by Monsoon arising out of the collision, comprising 1) detention of the Romina G at Kharg and 2) permanent repairs and related costs and 3) delays during repairs and 4) indemnity in respect of liability for claims brought by dependants of deceased crew members and associated legal costs and expenses?

b) is Monsoon liable for the heads of loss claimed by Borkan arising out of the collision, comprising: 1) loss of the Borvigilant and bunkers on board and 2) loss of the use of the Borvigilant and 3) indemnity against settled crew and related claims and 4) indemnity against miscellaneous costs and expense claims?

Background

6. The Romina G had arrived at Kharg Island to load a cargo of crude oil at the National Iranian Oil Company ("NIOC") terminal. NIOC owns its own tugs but also charters in berthing tugs. Those tugs are chartered by its subsidiary, National Iranian Tanker Company ("NITC").
7. In accordance with standard practice; the Master of Romina G was required by the pilot to sign two forms prior to berthing operations. Romina G had in fact regularly visited Kharg Island and on earlier occasions used Borkan's tugs including Borvigilant.
8. The Tug Requisition Form provided so far as material as follows: -

"I/we hereby request and authorise the Company on behalf of m.v. ROMINA G to supply such tug or tugs as may be considered necessary by the Company for the moving or otherwise assisting of the vessel whilst entering or leaving the port of KHARG, such hiring to be on the terms of the Company's usual conditions printed below.

2. When a tug is engaged in towing operations

(a) The Master and crew thereof become the servants of and identified with the Hirer and are under the control of the Hirer and his servants or agents and anyone on board the Hirer's vessel who may be employed and/or paid by the Company shall be considered the servants of the Hirer.

(b) The company shall not bear or be liable for damage of any description done by or to the tug or done by or to the Hirer's vessel or for loss of the tugs or the Hirer's vessel or for loss of or damage to anything on board the Hirer's vessel or for any personal injury or loss of life arising from any cause whatsoever, including negligence at any time of the servants or agents of the Company, unseaworthiness, unfitness or breakdown of

the tug, its machinery, boilers, towing gear, equipment or hawsers, lack of fuel, stores or speed or otherwise and the Hirer shall pay for and indemnify the Company against all such loss, damage, personal injury and loss of life as a aforesaid and the consequences thereof.

4. Nothing in the preceding paragraphs shall

(a) Make the Hirer liable to pay for or indemnify the Company against any loss, damage, personal injury or loss of life caused by want of reasonable care on the part of the Company to make the tug seaworthy for the navigation of the tug during towing operations or other services.......

7. The Company shall have the right to perform their obligations under this contract by using a tug or tugs not owned by themselves but made available to the company under charter parties or other arrangement. In such circumstances, without prejudice to the Company's rights, the Hirer agrees to the Owners or Charterers of such tug or tugs have the benefit of and being bound by these conditions to the same extent as the Company.

8. The Expression 'The company' in these conditions means National Iranian Oil Company which is owner of the hired Tug/Tugs."

9. During the course of the berthing operations, the tug was run down with loss of life, ncluding that of the tug's skipper. Each party contends that the collision was occasioned by the fault of the other. In addition, Monsoon contends that the collision was caused by unseaworthiness on the part of the tug.

Agency

10. Borkan are not in a position to pray in aid the Contract (Rights of Third Parties) Act 1999 which only came into force on the 11^th May 2000. Accordingly, the first issue that I have to decide is whether by reason of Clause 7 Borkan can take the benefit of the terms of the tug requisition form under traditional agency principles.
11. The Claimants advance two propositions:-

a) By virtue of the course of dealing between Borkan and NIOC, the latter were authorised to contract with Monsoon as agents for Borkan; and/or

b) Borkan ratified the terms of the agreement that NIOC purported to have entered into on its behalf with Monsoon.

12. It is convenient first to refer to the relevant authorities and to start with the well known observation of Lord Reid in Midland Silicones Ltd v Scruttons Ltd ...1962] AC 446 as to the circumstances in which stevedores, being strangers to the contract in question, might be able to take advantage of provisions in the contract which were intended to benefit them. The relevant clause read:-

".........If it shall be adjudged that the United States Lines Co or any person other than the owner or demise chatterer is the carrier or bailee of the goods, all rights, exemption, immunities and limitations of liability provided by law and all terms of this bill of lading shall be available to it or such other person."

13. Lord Reid commented as follows at p.474:-

"I can see a possibility of success of the agency argument if (first) the bill of lading makes it clear that the stevedore is intended to be protected by the provisions in it which limit liability, (secondly) the bill of lading makes it clear that the carrier, in addition to contracting for these provisions on his own behalf, is also contracting as agent for the stevedore that these provisions should apply to the stevedore, (thirdly) the carrier has authority from the stevedore to do that, or perhaps later ratification by the stevedore would suffice, and (fourthly) that any difficulties about consideration moving from the stevedore were overcome."

14. In New Zealand Shipping Co.Ltd v A.M. Satterthwaite and Co. Ltd [1975] AC 154 (The "Eurymedon"), the relevant clause was rather more elaborate:-

"......every right, exemption from liability, defence and immunity of whatsoever nature applicable to the carnet or to which the carrier is entitled hereunder shall also be available and shall extend to protect every such servant or agent of the carrier acting as aforesaid and for the purpose of all the foregoing provisions of this clause the carrier is or shall be deemed to be acting as agent or trustee on behalf of and for the benefit of all persons who are or might be his servants or agents from time to time (including independent contractors as aforesaid) and all such persons shall to this extent be or be deemed to be parties to the contract in or evidenced by this bill of lading."

15. The decision of the Board was given by Lord Wilberforce. He stated at p.166 as follows:-

"Clause 1 of the bill of lading, whatever the defects in this drafting, is clear in its relevant terms. The carrier, in his own account, stipulates for certain exemptions and immunities: among these is that conferred by Article III Rule 6 of the Hague

Rules which discharges the carrier from all liability from loss or damage unless suit is brought within one year after delivery. In addition to these stipulations on its own account, the carrier as agent for, inter alios, iindependent contractors stipulates for the same exemptions........

The carrier was, indisputably, authorised by the appellant to contract as its agent for the purposes of Clause 1. All of this is quite straight forward and was accepted by all the judges in New Zealand. The only question was, and is, the fourth question presented by Lord Reid, namely that of consideration.....

There is possibly more than one way of analysing this business transaction into the necessary components; that which their Lordships would accept is to say that the bill of lading brought into existence a bargain initially unilateral but capable of becoming mutual between the shipper and the appellant, made through the carrier as agent, This became a full contract when the appellant performed services by discharging the goods. The performance of these services for the benefit of the shipper was the consideration by the shipper that the appellant should the benefit of the exemptions and limitations contained in the bill of lading"

16. The Eurymedon was reconsidered by the Privy Council in Port Jackson Stevedoring Pty Ltd v Salmond and Spraggon (Australia) Pty Ltd [1981] 1WLR 138 (The "New York Star"). The relevant clause was in all material respects the same. Lord Wilberforce again gave the decision of the board and, whilst questions of agency and consideration on the facts were not controversial, observed at p. 143:-

"It may indeed be said that the significance of Satterthwaite's case lay not so much in the establishment of any new legal principle, as in the finding that in the normal situation involving the employment of stevedores by carriers, accepted principles enable and require the stevedore to enjoy the benefit of contractual provisions in the bill of lading. Although, in each case, there will be room for evidence to the precise relationship of carrier and stevedore and as to the practice at the relevant port, the decision does not support, and their Lordships would not encourage, a search for fine distinctions which would diminish the general applicability, in the light of established commercial practice, of the principle."

17. Finally I refer to the third and the most recent decision of the Privy Council in The Mahkutai [1996] A.C.650, where a similar clause was under consideration. The judgment of the board was given by Lord Goff of Chieveley. His judgment contained the following passage:-

"Nevertheless there can be no doubt of the commercial need of such principle as this, and not only in cases concerned with stevedores; and the bold step taken by the Privy Council in The Eurvmedon [1975] A.C.154, and later developed in The New York Star [1981] 1 WLR 138, has been widely welcomed. But it is legitimate to wonder whether that development is yet complete. Here their Lordships have in mind not only Lord Wilberforce's discouragement of fine distinctions, but also the fact that the law is now approaching the position where, provided that the bill of lading contract clearly provides that (for example) independent contractors such as stevedores are to have the benefit of exceptions and limitations contained in that contract, they will be able to enjoy the protections of those terms as against the cargo owners. This is because (1) the problem of consideration in these cases is regarded as having been solved on the basis that a bilateral agreement between the stevedores and the cargo owners, entered into through the agency of the shipowners, may, though itself unsupported by consideration, be rendered enforceable by consideration subsequently furnished by the stevedores in the form of performance of their duties as stevedores for the shipowners; (2) the problem of authority from the stevedores to the shipowners to contract on their behalf can, in the majority of cases, be solved by recourse to the principle ratification; and (3) consignees of the cargo may be held to be bound on the principle in Brandt v Liverpool, Brazil and River Plate Steam Navigation Co. Ltd [1924] 1 K.B. 575. Though these solutions are now perceived to be generally effective for their purpose, their technical nature is all too apparent; and the time may well come when, in an appropriate case, it will fall to be considered whether the courts should take what may legitimately be perceived to be the final, and perhaps inevitable, step in this development, and recognise in these cases a fully- fledged exception to the doctrine of privity of contract, thus escaping from all the technicalities with which courts are now faced in English law."

18. Romina G was berthed with the assistance of four tugs. It was the Claimants' submission in the light of the authorities cited above that the technicalities of privity of contract should not be allowed to impede the obvious commercial expectations of the parties whereby owners of tugs other than NIOC should take the benefit of the very same terms on which NIOC could rely in respect of its own tugs.

Actual authority

19. I take the issue of authority first. On this, I accept the Claimants' case that the course of dealing between Borkan and NIOC gave rise to implied authority on NIOC's part to contract with shipowners on the same terms as obtained for their own tugs:-

a) The Claimants rightly emphasised the fact that there was no opportunity for direct negotiation between Borkan and the individual tanker owners given that Kharg Island terminal was under the operational control of NIOC.

b) The arrangements were that the tug was chartered to NITC which in turn supplied the tug to NIOC as required. NIOC would then obtain the relevant tanker owners' agreement to the Tug Requisition Form.

c) The forth contained terms as to liabilityand indemnity that albeit in the form of an early edition were commonplace in the industry.

d) This process had been followed on numerous previous occasions with Borkan tugs over a period four years.

20. In my judgment, authority to contract on the terms of the form was implicit in this arrangement. Such was indeed the position as perceived by Captain Askarpour of NIOC who in two statements affirmed that the form was being tendered to masters on behalf of all the tugs involved.
21. The Defendants sought to challenge this approach on the grounds that Borkan were not shown to be aware of the terms of the form. This is wholly improbable given the long history to the arrangement. Indeed a copy of the form was to be found on the sister vessel Borverve. Although there was some evidence that the managing director of Borkan, Mr Sharief Zaman, based in Sharjah, might possibly been unaware of the terms of the form, it is inconceivable, in my judgment, that the general manager, Mr John Alban who was based in Kharg Island and in sole charge of the tugs (having been inherited from the previous owners Semco) was not fully aware of its terms and its mode of use.
22. It is right to record that there were terms of the charterparties previously concluded with NITC which dealt with issues of liability as between NITC and the tugowners. For instance

"28 The owners shall .........

28.8 Be liable for or in respect of any damage or compensation payable at law in respect or in consequence of death or injury to any one of its employees and in respect of any loss or damage to the property

31 Liabilities and insurance.

31.1 The owners are responsible for damages to the vessel and take care of the liabilities towards the charterers and third parties concerning the nautical management of the vessel. ............."

23. However such was not inconsistent with the tanker owners, on engaging the tug, agreeing by separate contract with NIOC, acting on behalf of Borkan, to bear the risks of damage to the tug and loss of life. Indeed such was demonstrated by the new clause which was included in the formal charter party executed after the casualty:-

"31.3 The Charterers shall procure for the benefit of the Owners that when the vessel is employed in berthing, or unberthing operations at Kharg Island, the National Iranian Oil Corporation will obtain the signature of the Master or Agents for and on behalf of ships and their owners to which the vessel is providing services, of a tug requisition form substantially in the wording annexed hereto with the intent that the Owners and/or the Charterers of the vessel shall have the benefits of and be bound by the conditions of hire of tugs to the same extent as National Iranian Oil Corporation ("the Company" as referred to in the tug requisition for)."

24. If and to the extent, as contended by the Defendants, it was necessary that Clause 7 should state that NIOC was contracting also as agent, such was clearly implicit in the provision that, the owners of non-NIOC tugs were to have the "benefit" of and to be "bound" by the conditions. Such could only arise if NIOC was indeed acting as agent with at least the appropriate degree of authority.

Ratification

25. In the absence of authority, the Claimants ran an alternative case of ratification. After the incident, Mr Sharief Zaman sought and obtained confirmation from both NIOC and NITC that the tug had been "covered" by the Tug Requisition Form and this led, in turn, to the inclusion of Clause 31 (3) in the Supply Time Charter as quoted above.
26. It was not seriously in issue that such constituted acts of purported ratification. The Defendants' primary response was that it was too late for such ratification to be effective. In this regard, the relevant principles are set out in Article 19 in Bowstead on Agency (16^th Ed.) as follows:

"Ratification is not effective where to permit would unfairly prejudice a third party, and in particular -

1. here it is essential to the validity of an act that it should be done within a certain time, the act cannot be ratified after the expiration of that time, to the prejudice of any third party;

2. the ratification of a contract can only be relied on by the principal if effected within a time after the act ratified was done which is reasonable in all the circumstances."

27. I reject the defendant's submission that, if permitted, ratification of the form would be unfairly prejudicial to the Defendants:

a) Borvigilant was one of four tugs engaged to assist Romina G

b) All four tugs were engaged on the basis of the terms of the form.

c) Accordingly Borvigilant was engaged on the basis that the Defendants would have no cause of action if their vessel was damaged in the mooring process.

d) No prejudice can conceivably arise from allowing the Claimants to ratify the very terms that excluded that cause of action since it could not be (and is not) suggested that the Defendants took any step in the mistaken belief that the Claimants would not ratify the agreement.

28. As regards the implications of delay, both parties placed reliance on the decision in Presentaciones Musicales SA v Secunda [1994] 2 W.L.R.660 where it was held that a plaintiff could ratify proceedings issued without his authority after the expiration of the relevant limitation period. The decision turned upon the contrast, on the facts, with cases such as Bird v Brown (1850) 4 Exch. 786 where notice of stoppage in transit had been given without authority on behalf of a shipper. It was later ratified by the shipper, but only after the transit had been ended by the formal demand of the consignees and therefore it was held that the purported ratification was too late and ineffective. As Dillon LJ put it:-

"The ratio of these cases seem to be that, if a time is fixed for doing an act, whether by statute or by agreement, the doctrine of ratification cannot be allowed to apply if it would have the effect of extending that time............"

Accordingly, in contrast, where a writ was issued without authority, the cases showed that the writ was not thereby rendered a nullity. The nominal plaintiff, in order to adopt the writ or ratify its issue, did not need to make any application to the court and, accordingly, the plaintiff must be entitled to adopt the action notwithstanding the expiration of the limitation period.

29. As regards the interference with property rights, the Defendants placed undue reliance upon the judgment of Roch LJ in Presentaciones. At p.673, he said this:

"The other exception which has to be considered in the present case is that indicated by Cotton LJ in the passage cited by the words "an estate once vested cannot be divested." I would suggest that that exception ought to be stated in these terms: that the putative principle will not be allowed the ratify the acts

of his assumed agent, if such ratification will affect adversely rights of property in either real or personal property including intellectual property, which have arisen in favour of the third party or others claiming through him since the unauthorised act of the assumed agent."

The defendants sought to contend that ratification should not be permitted since thereby the defendants would be deprived of an accrued property right in the form of a cause of action against the Claimants. But the cited passage was all in the context of considering the impact of a putative principal seeking to ratify an act done by an assumed agent, not the conclusion of a contract where different considerations arise.

30. In any event it was a minority view. Dillon LJ, with whom Nolan LJ agreed, said in this connection at 668:-

"I would add this. I have had the advantage of reading the judgment of Roch LJ. I do not, for my part, accept that the only justification for the Bird v Brown line of cases is to regard them as an aspect of property law, viz, that an interest in property which has become vested or indefeasible cannot be divested by the retrospective effect of a subsequent ratification of a previously unauthorised act..... On the one hand it is well established that ratification is retrospective; on the other hand there are authorities decided over a long period which show that in certain circumstances "ratification" may come too late to be effective. What the logic of the dividing line between the two should be is not easy to discern."

31. In the context of ratification of a contract, the decision in Bolton Partners v Lambert (1889) 41 Ch D 295 is more in point. In that case an offer was made by the defendant to an agent of the plaintiff to purchase a property of the plaintiff. The agent purported to accept the offer on behalf of the plaintiff, but in fact he had no authority to do so. Within a reasonable period of time the plaintiff ratified the acceptance, but in the meantime the defendant had withdrawn the offer. It was held that ratification was effective notwithstanding the withdrawal of the offer.
32. The point at issue, as here, was the effect of a purported ratification where there was no final date for acceptance. In those circumstances, there is an offer and an acceptance of that offer by the agent which is valid subject to ratification. Once accepted, the offer cannot be withdrawn and any ratification dates back to the date of acceptance. As Lindley LJ put it at p. 309:-

"If we look at Mr Brice's argument closely it will be found to turn on this - that the acceptance was a nullity, and unless we are prepared to say that the acceptance of the agent was absolutely a nullity, Mr Brice's contention cannot be accepted.

The acceptance by the assumed agent cannot be treated as going for nothing is apparent from the case of Walter v James L R 6 Exch 124 ."

33. Walter is authority for the proposition that if the act which the putative principal later seeks to ratify has been undone or cancelled by the assumed agent there can be no effective ratification. But on the facts of the present case, there has been nocancellation by the agent. As Lopes LJ put it in Bolton Partners the Defendants' submission if correct would "deprive the doctrine of ratification of its retrospective effect."
34. These conclusions make it unnecessary to consider two further propositions advanced by the Claimants with regard to the first preliminary issue: -

a) that NIOC was trustee for Borkan of the Defendants' promise to indemnify Borkan and not to hold Borkan liable for the loss,

and

b) that Borkan owed no duty of care to the Defendants to avoid negligently causing damage because of the terms of the contract between the Defendants and NIOC which provided that the Defendants were to bear such risks and, accordingly, it would not be fair, just and reasonable to impose any such duty.

Unseaworthiness

35. The second preliminary issue raises a matter of much smaller compass. The Claimants submitted that the proviso in Clause 4 had no application to the exclusion in the first part of Clause 2b and was only pertinent to the indemnity in the second part. I disagree. The first part of Clause 2b excludes responsibility for loss and damage and the second part gives an indemnity in respect of "such" loss or damage. Accordingly in the event of causative unseaworthiness attributable to the want of due diligence, neither the defence nor the indemnity are available.

Conclusion

36. Accordingly the answers to the preliminary issues are:

i) Yes

ii) Yes, unless caused by want of reasonable care to make the tug seaworthy.