Easter
Term
[2016] UKSC 20
On appeal from: [2014] EWCA Civ 403
JUDGMENT
NYK Bulkship (Atlantic) NV (Respondent) v Cargill
International SA (Appellant)
before
Lord Neuberger, President
Lord Mance
Lord Clarke
Lord Sumption
Lord Toulson
JUDGMENT GIVEN ON
11 May 2016
Heard on 1 December 2015
|
Appellant
Simon Rainey QC
Daniel Bovensiepen
(Instructed by
Holman Fenwick Willan LLP)
|
|
Respondent
Timothy Young QC
Belinda McRae
(Instructed by
Skinitis Maritime Law Firm)
|
LORD SUMPTION: (with whom Lord
Neuberger, Lord Mance and Lord Toulson agree)
Introduction
1.
The Global Santosh was time chartered on terms that the vessel
should be off-hire during any period of detention or arrest by any authority or
legal process, unless the detention or arrest was “occasioned by any personal
act or omission or default of the Charterers or their agents.” She was arrested
as a result of a dispute between the receiver of the cargo and a party who
appears to have been a sub-sub-charterer, and which had nothing to do with the
owners or the ship. The question which arises on this appeal is whether the
arrest can be regarded as having been occasioned by the time charterer’s
“agents” in the sense in which that word is used in the proviso. The answer to
this question turns on the language of the particular charter-party, but it has
wider implications of some importance. Arbitrators appointed under the terms of
the time charter have held by a majority that it cannot. The matter comes
before the courts on an appeal under section 69 of the Arbitration Act 1996.
The facts
2.
The facts can be taken from the arbitrators’ award and the agreed
statement of facts and issues. By a time charter-party dated 11 September 2008,
NYK chartered the vessel Global Santosh to Cargill for one time charter
trip “intention cement via Sweden to West Africa Nigeria. Intended cargo bulk
cement. Duration 35 days without guarantee.” The charter was on the Asbatime
form, which was a variation of the New York Produce Exchange 1946 form. There
were a number of typed additional clauses.
3.
Against the side note “Sublet” the charter reads at lines 31-33:
“Charterers shall have liberty to
sublet the vessel for all or any part of the time covered by this Charter, but
Charterers shall remain responsible for the fulfilment of this Charter.”
By clause 8, NYK undertook that the master would be “under
the orders and directions of [Cargill] as regards employment and agency”, and
Cargill undertook to “perform all cargo handling at their expense”.
4.
There are no less than three off-hire clauses. The printed form includes
an off-hire clause (clause 15) in standard terms covering
“loss of time from deficiency
and/or default and/or strike or sabotage by officers or crew or deficiency of
stores, fire, breakdown of, or damages to, hull, machinery or equipment,
grounding. detention by average accidents to ship or cargo unless resulting
from inherent vice, quality or defect of the cargo, dry-docking for the purpose
of examination or painting bottom, or by any other similar cause whatsoever preventing
the full working of the vessel.”
Typed clause 48 is a further off-hire clause which
largely overlaps with clause 15. It relates to
“loss of time either in port or at
sea, deviation from the course of the voyage or putting back whilst on voyage,
by reason of breakdown of machinery, collision, stranding, fire or any other
accident or damage to the vessel, or dry-docking or periodical survey, or
sickness or accident to the Master, Officers, Crew or any person on board the
vessel other than persons travelling by the Charterers’ requests or by reason
of sending stowaway or salvage, or by reason of the refusal of the Master,
Officers or Crew to do their duties, or any Owners’ matters.”
Typed clause 49 is an additional off-hire clause relating
specifically to detention resulting from capture, seizure or arrest. It provides:
“Should the vessel be captured or
seizured [sic] or detained or arrested by any authority or by any legal process
during the currency of this Charter Party, the payment of hire shall be
suspended until the time of her release, unless such capture or seizure or
detention or arrest is occasioned by any personal act or omission or default of
the Charterers or their agents. Any extra expenses incurred by and/or
during the above capture or seizure or detention or arrest shall be for Owners’
account.” (emphasis added)
5.
On 18 August 2008, before they entered into the time charter, Cargill
had entered into a voyage charter-party as disponent owner with Sigma Shipping
Ltd (“Sigma”) as charterer, under which the performing vessel was to be
nominated. Cargill nominated the Global Santosh. Pursuant to Cargill’s
orders, the vessel carried a cargo of bulk cement from Slite in Sweden to Port
Harcourt in Nigeria. The cargo was one of six shipments of cement sold by
Transclear SA to IBG Investments Ltd on C & FFO terms under a sale contract
dated 14 December 2007. IBG was named as the notify party in the relevant bill
of lading, which also named the discharge port as “Port Harcourt (Ibeto
Jetty)”. The majority arbitrators held that it seemed likely that Transclear
was the sub-charterer of the vessel but, whether by way of charter from Sigma
or by a more indirect link, was not apparent.
6.
The FO element of the sale terms stands for “free out”. Under free out
sale terms, the buyers/receivers (here, IBG) undertake to perform, or procure
and pay for the performance of, the unloading of the cargo from the carrying
vessel. By the sale contract between Transclear and IBG demurrage was payable
by IBG to Transclear for delay in discharge beyond the laytime agreed in that
contract and Transclear was purportedly granted a lien over the cargo in
respect of unpaid demurrage.
7.
The contractual position as regards cargo handling was accordingly as
follows. By clause 8 of the time charter Cargill undertook to perform all cargo
handling at their expense. It follows that, as between Cargill and NYK, it was
for Cargill to perform the discharge operation at its expense. As between
Cargill and Sigma, it was for Sigma to do so. In fact, neither Cargill nor
Sigma themselves carried out any discharging obligations. They were left to
others. It appears that it was ultimately IBG’s obligation, owed to Transclear
under the contract of sale, to carry it out.
8.
The vessel arrived at Port Harcourt on 15 October 2008 with a cargo of
30,324 metric tons of cement in bulk (“the cargo”) and tendered notice of
readiness at 0635 hours local time on the same date. However, as the majority
arbitrators held at para 9 of their reasons, due to congestion at Port
Harcourt, she was instructed to remain at Bonny Town Anchorage. The congestion
was caused at least in part by the breakdown of IBG’s off-loader. No discharge
operations took place at the anchorage, and the vessel did not proceed to a
berth until 18 December 2008. During that period the vessel remained on hire
under the charter and Cargill continued to pay hire.
9.
The vessel did not in fact berth on 18 December because she was turned
away by the port authority and ordered to return to Bonny Town inner anchorage.
The authority gave those instructions pursuant to an order dated 17 December
2008 (the day before) made by the Federal High Court of Nigeria. The majority
arbitrators did not spell the facts out in any greater detail than to say at
para 11 of their reasons (as amplified in para 36) that the order arose from an
application brought by Transclear to secure a claim for demurrage against IBG,
that what should have been arrested was the cargo, but that by an obvious
mistake the order directed the arrest of the vessel. The arbitrators added that
the order and subsequent notice of arrest of the same date expressly prohibited
any and all persons from interfering with and/or attempting to discharge the
cargo. Accordingly, the master returned to the anchorage and waited for the
arrest to be lifted. On 18 December 2008, Cargill gave these orders to the
master in writing:
“Dear captain Good Day. Pls do not
commence cargo disch until you get written confirmation from us. Pls call me
back once you receive this message. Best Regards. Ritesh Chandra.”
10.
Subsequently, an agreement in respect of the outstanding demurrage was
reached between Transclear and IBG which allowed the vessel to berth and
discharge her cargo. Following the issuance of an appropriate order by the
presiding judge of the Court of Nigeria authorizing the cargo’s release,
discharging operations began at 2230 hours (local time) on 15 January 2009 and
were completed at 2235 hours (local time) on 26 January 2009.
11.
Cargill withheld hire for the period of arrest but recommenced the
payment of hire when actual discharge began. Cargill relied on clause 49 of the
charter to justify non-payment of hire but, in answer, NYK relied on the
proviso
“unless such capture or seizure or
detention or arrest is occasioned by any personal act or omission or default of
the Charterers or their agents.”
The majority arbitrators held that the proviso did not
apply and that the vessel was off-hire during the period when she was under
arrest. On 23 May 2012, Hamblen J granted NYK leave to appeal under section 69
of the Arbitration Act 1996 on the question “whether the arrest or detention of
a time chartered vessel by or because of the acts or omissions of
sub-contractors, involved to perform the time charterer’s charter-party
obligations, fall within the meaning of an off-hire clause excluding time from
off hire if ‘occasioned by any personal act or omission or default of the
Charterers or their agents’”.
The proviso
12.
Loss of time due to the arrest or detention by authority of a time
chartered vessel is a long-standing problem, aggravated by the difficulty in
obtaining compensation for an arrest or detention which proves to be
unjustified or is made in support of a claim which fails. The problem is
increasingly dealt with by express provision. Clause 49 of this charter-party
is a typed clause, but variants of it are in common use. The main purpose of
such clauses is to protect the time charterer. The proviso for cases where the
arrest or detention is occasioned by the charterer or its agents is generally
narrowly construed, and cases in which it applies are not necessarily expected
to arise very often. The classic cases for its application are those in which
the vessel is arrested in legal proceedings or detained by authority on account
of some characteristic of the cargo that the charterer has caused to be shipped
or something that the charterer has ordered the vessel to do under the
employment clause. Even these cases will often give rise to difficult questions
of causation.
Agency
13.
The extension of the proviso to acts of the time charterer’s “agents”
adds an additional layer of difficulty. There was in this case no personal
default on the part of Cargill as time charterers. Their obligation under
clause 8 to “perform all cargo handling at their expense” did not import any
duty to handle cargo at any particular time, provided that they redelivered the
ship at the end of the time charter term with no cargo on board. It follows
that to avail themselves of the proviso to clause 49, NYK must rely on an act
or omission of Transclear or IBG, as the parties to the dispute which
occasioned the arrest.
14.
Strictly speaking, an “agent” is a person authorised by the principal to
perform some act on his behalf. Neither Transclear nor IBG was an “agent” of
Cargill in this sense. They had no contractual or other legal relationship with
Cargill. However, neither party to this appeal contends that the proviso
applies only to agents in the strict legal sense. Even where a time chartered
ship is traded for the time charterer’s own account, cargo handling on
discharge may be carried out by an independent contractor or a receiver acting
for his own account. But the essence of a time charter on these terms is that
the vessel will not necessarily be traded for the time charterer’s own account.
The ship may be sub-let, as lines 31-33 of this time charter envisage. If so,
the chain of contracts may comprise one or more sub-time charters or voyage
charters and/or a bill of lading. Their terms will not necessarily be back to
back in the relevant respects with those of the time charterer. In such cases,
the charter operates as a contract under which rights are enjoyed and
obligations performed vicariously. The extension of the proviso to the time
charterer’s agent is intended to accommodate that state of affairs.
15.
The legal implications of such arrangements have more often been assumed
than considered. The two decisions which have most fully addressed the point
are the decision of the Court of Appeal in Mediolanum Shipping Co v Japan
Lines Ltd (The Mediolanum) [1984] 1 Lloyd’s Rep 136 and the decision of
Colman J in Merit Shipping Co Inc v T K Boesen A/S (The Goodpal) [2000] 1 Lloyd’s Rep 638.
16.
In The Mediolanum, the question arose in the context of the safe
port warranty in the New York Produce Exchange form of time charter. The
charterers had contracted to provide and pay for fuel. They ordered her to a
safe port but she was directed to an unsafe place in that port by the refinery
with whom the charterer had contracted for the supply of bunkers. Kerr LJ,
delivering the judgment of the court, said at p 140:
“Although, in relation to the
charterers, the refinery was in the position of an independent contractor, we
naturally accept that for the purposes of the charterers’ obligation, under clause
2 of the charter-party, to provide the fuel, the refinery was the agent of the
charterers as between the charterers and the owners. The reason is that, in
that respect, the refinery was used by the charterers in order to perform one
of the charterers' obligations under the contract.”
The charterer was nevertheless held not to be in breach of
the safe port warranty because even on the assumption that the refinery’s
authority as agent extended to designating a bunkering place, it was not at
fault in designating this particular bunkering place.
17.
In Trade Star Lines Corp v Mitsui & Co Ltd (The Arctic Trader)
[1996] 2 Lloyd’s Rep 449, the legal status of the shipper was considered in the
context of an argument about the implication of terms. The details of the
argument do not matter. Evans LJ, delivering the judgment of the court,
observed at p 459:
“It is clear, in our judgment,
that when the time charterer instructs the master, pursuant to the employment
provisions of clause 8, to receive certain cargo on board, and the cargo is
loaded at the charterer’s expense, although under the supervision and maybe at
the risk of the shipowner, then the cargo is loaded by or on behalf of the
charterer for the purposes of the charter-party, and a third party shipper should
be regarded as the charterer’s agent accordingly.”
18.
In The Goodpal, the ship had been time chartered and then sub-chartered
for a time charter trip to two successive ports of discharge. The sub-charterer
ordered the vessel to discharge a specified quantity of cargo at the first port
of discharge, but the receivers ordered him to discharge more than that
quantity. As a result, there was a short outturn at the second port, which led
to the arrest of the ship at the suit of the consignee there. The question was
whether the head charterer was liable for the short delivery on the footing
that the receivers’ orders at the first port were given as their “agents”.
Colman J analysed the position as follows, at pp 642-643:
“In order to test the frequently
repeated assertion that, for the purposes of the incidence of the rights and
obligations of the parties to a time-charter, whether on the NYPE or most other
forms, the shipper or receiver, as the case may be, is to be treated as the
charterers’ agent, it is necessary to identify certain basic and, as I believe,
long established principles upon which time charters work.
…
(iv) The process of loading
the cargo is usually carried out and paid for by the shippers. In as much as express
provision is made for the loading to be under the supervision of the master, he
is entitled in his discretion to intervene to require loading to be carried out
in such a way that the seaworthiness of the vessel is not put at risk.
(v) When the vessel is
ordered by the charterers to proceed to a loading port to load a particular
cargo and the process of loading is carried out by the shippers, they are
availing themselves of the facility contractually derived either directly or
indirectly from the charterers of being permitted to place their cargo on board
the vessel for carriage to the port of discharge. They are in one sense the
‘agents’ of the time charterers, as described in the passage cited earlier in
this judgment from The Arctic Trader, sup, but only to the extent that
it is to them that the charterers have delegated the process of loading. Within
that limited area their acts or omissions are, so far as the owners are
concerned, the acts and omissions of the charterers and their knowledge of the
condition of the goods is to be imputed to the charterers.
…
(viii) Just as the charterer can
make available to a third party shipper the facility to load the vessel, so
also there can be extended to a third party receiver the facility to discharge
the cargo at the designated discharging port. … Once again, the receiver is in
the position of a delegate of the charterer and in that limited sense can be
described as the charterers’ agent. If therefore he permits the vessel to be
discharged in such a way as to damage the ship or other cargo on board, the
charterers are obliged to indemnify the owners for loss and damage so caused.”
Colman J went on to hold that the time charterers of The
Goodpal were not responsible contractually for the order given by the
receivers at the first port of discharge, because their “agency” could not
extend to cargo which was not consigned to them but destined for other
consignees at the second port.
“The only relevant instructions
were received from the receivers at the first discharge port who could not
reasonably have been thought by anybody to be standing in the position of the
charterers in relation to the balance of the cargo to be loaded at the second
discharge port.” (p 644)
19.
As these observations, all from experienced specialists in the field,
show, references in a time charter to acts of the charterer’s “agents” in the
course of performance cannot necessarily be limited to persons doing those acts
on his behalf in the strict legal sense of the term, or indeed to those standing
in any direct legal relationship with him. As between the owner and the time
charterer, the rights of the time charterer are made available to those further
down the contractual chain, and some at least of the time charterer’s
obligations are satisfied by the acts of subcontractors. As Colman J put it,
the persons ultimately carrying out the relevant cargo handling operation
(loading or discharging) are “availing themselves of the facility contractually
derived either directly or indirectly from the charterers.” They are, to that
extent, the “agents” of the time charterers in the sense in which that word is
employed in a provision such as clause 49.
The issue
20.
Under the time charter of the Global Santosh, Cargill enjoyed the
facility of directing where and (within the limits of the possible) when to
discharge. The parties who were ultimately entitled to the benefit of
that facility were those interested in the cargo, namely Transclear and IBG. It
is common ground that they were for that purpose “agents” of Cargill.
21.
Nobody suggests that the mere fact that they were Cargill’s agents for
that purpose means Cargill is responsible for anything that they might do which
results in the detention of the ship. The reason is that not everything that a
subcontractor does can be regarded as the exercise of a right or the
performance of an obligation under the time charter. There must be some nexus
between the occasion for the arrest and the function which Transclear or IBG
are performing as “agent” of Cargill. If, for example, Transclear or IBG had
caused the vessel to be arrested in support of a claim to a proprietary
interest in it, it is accepted that she would have gone off-hire. The position
would have been the same if they had caused her to be arrested in support of a
cargo claim in connection with a sister-ship. On the same principle, it was
held in The Goodpal that the owner’s claim against the time charterer
failed because, although the receiver at the first port of discharge was the
“agent” of the time charterer for certain purposes, those purposes did not
extend to the particular acts by which he caused the problem.
22.
In the present case, the right under the time charter whose exercise by
Transclear and IBG is said to have occasioned the arrest is the right to call for
the discharge of the cargo, and the relevant obligation under the time charter
was the obligation to carry out the discharge operation. It is not disputed
that Transclear and IBG exercised that right and performed that obligation as
“agent” for Cargill. The real question concerns the scope of that “agency”. To
what acts or omissions did it extend?
The scope of the agency
23.
This issue is a great deal more difficult than it is in the simple case
where the vessel has been arrested because of something that the vessel has
been ordered to do under the employment clause. It is a measure of that
difficulty that the courts below have given divergent answers to it.
24.
The appeal from the arbitrators’ award was heard in the first instance
by Field J. In summary, he considered that Cargill were responsible for any
“act or omission or default in the course of the performance by the delegate of
the delegated task”, ie in the course of discharging: [2013] 1 Lloyd’s Rep 455,
para 19. He held that Transclear’s arrest of the cargo and the vessel was not
done as part of the performance of the discharging operation, and was
irrelevant. However, he considered that IBG’s failure to discharge the cargo
within the laydays allowed by its contract of sale with Transclear and its failure
to pay the resultant demurrage arising under that contract, were omissions in
the course of their performance of the discharging operation. This was because
“it was Cargill after all who set in train the process of delegation and gave
delegating parties a free hand to agree terms with delegates” (para 23). He
therefore allowed the appeal, but remitted the award to the arbitrators to
determine whether the failure to pay demurrage could be regarded as the cause
of the arrest and the resultant delay.
25.
Both parties appealed to the Court of Appeal, which dismissed both the
appeal and the cross-appeal. The substantive judgment was given by Gross LJ,
with whom Gloster LJ and Sir Stanley Burnton agreed: [2014] 2 Lloyd’s Rep 103. They
substantially affirmed Field J’s order, but on different grounds and with a
variation to the terms of the remission to the tribunal. Gross LJ rejected the
requirement imported by the judge that the act or omission causing the delay
must occur in the course of performance of the delegated task. He also disputed
the relevance of the demurrage terms agreed between Transclear and IBG. But he
took a wider view than Field J of the scope of the “agency” of Transclear and
IBG. He sought the answer in the “basic distinction” pointed out by Rix LJ in Hyundai
Merchant Marine Co Ltd v Furnace Withy (Australia) Pty (The Doric Pride)
[2006] All ER (Comm) 188, para 33, between matters such as the management of
the vessel and its crew which lay within the owner’s sphere of responsibility,
and the trading arrangements for the use of the vessel which lay within the
charterer’s sphere of responsibility. In Gross LJ’s view, the delay caused to
the vessel in this case fell within Cargill’s sphere because NYK was not
involved in the dispute between Transclear and IBG, which did not arise out of
anything that the ship was alleged to have done or failed to do, but only to
IBG’s alleged failure to pay demurrage under a contract with which NYK were not
concerned. Gross LJ considered that the dispute arose out of Cargill’s “trading
arrangements concerning the vessel”. (para 41). By this I take him to have
meant that by sub-chartering to Sigma, Cargill made possible trading
arrangements between parties further down the chain of contracts under which
such disputes might arise.
26.
I regret that I am unable to accept the reasoning of either of these
judgments. On the facts found by the arbitrators, which I have summarised, I
think that their conclusion was correct.
27.
The time charter did not specify what cargo handling operations were to
occur, but under clause 8, Cargill was required to perform or procure to be
performed whatever cargo handling operations occurred. This imported a right to
direct the vessel in accordance with Sigma’s requirements and indirectly those
of Transclear and IBG. It also imported an obligation to ensure that cargo
handling was done properly and to pay for it. But, as I have observed, as
between themselves and NYK, Cargill had no contractual obligation to procure
the vessel to be discharged at any particular time, and no contractual interest
in the timing of the operation. They were obliged to pay hire regardless of
when it occurred. That was subject to clause 49, but the off-hire event for
which clause 49 provided was the capture, seizure or arrest of the vessel,
irrespective of any effect on discharge. Transclear and IBG did have
obligations as to the timing of discharge, which arose from the laytime and
demurrage provisions of their contract of sale, but neither NYK nor Cargill was
a party to that contract. This state of affairs gives rise, as it seems to me,
to two problems for NYK’s claim in these proceedings.
28.
The first is that the effect of these arrangements, as between NYK and
Cargill, was that such cargo handling operations as occurred, although carried
out by IBG, were carried out on Cargill’s behalf, at their orders and expense
under clause 8 of the time charter. It was the vicarious exercise of a right of
Cargill under the time charter, which Cargill indirectly made available to IBG.
But the defective performance of cargo handling operations is one thing. An
absence of cargo handling operations is another. Whatever its cause, IBG’s
failure to discharge the cargo between the giving of notice of readiness on 15
October 2008 and the commencement of discharge on 15 January 2009 cannot
meaningfully be regarded as the vicarious exercise by IBG of some right of
Cargill under the time charter. IBG were doing nothing in this period, as far
as the vessel was concerned, and were therefore doing nothing on behalf of
Cargill. Their inactivity could be relevant to the question of responsibility
posed by clause 49 only if it amounted to the vicarious breach of some
obligation of Cargill under the time charter, which it did not. It follows that
any responsibility of Cargill under the time charter for IBG’s acts or
omissions in the conduct of cargo handling operations at the port of discharge,
extended only to acts or omissions in the actual performance of those
operations while they were in progress.
29.
Field J thought otherwise, because the laydays under IBG’s purchase
contract began with the service of the notice of readiness three months earlier
and, by sub-chartering the vessel to Sigma, Cargill had set in train the chain
of transactions which culminated in the appropriation of the cargo of the
Global Santosh to that contract. Like Gross LJ in the Court of Appeal, I do not
think that the terms of IBG’s purchase contract have any bearing on the present
issue. We are not concerned with the question whether the delay was a breach of
the purchase contract. The question is whether IBG, by omitting to discharge at
any time before 15 January 2009, were vicariously exercising rights or
vicariously infringing obligations under the time charter between NYK and
Cargill. That can only depend on the terms of the time charter.
30.
The second difficulty in NYK’s way is that we are not in this case
concerned with responsibility for delay generally, but with responsibility for
loss of time caused by the arrest of the vessel. The arrest was occasioned by a
dispute between Transclear and IBG about demurrage. Incurring or enforcing a
liability for demurrage under a sub-contract could not possibly be regarded as
the vicarious exercise of any facility made available to Cargill under the time
charter.
31.
It remains to consider the wider basis on which the matter was dealt
with in the Court of Appeal. Gross LJ asked himself whether the arrest was
occasioned by matters lying within the owner’s or the time charterer’s sphere
of responsibility. If it was occasioned by matters lying within the time
charterer’s sphere of responsibility, ie those relating to the charterer’s
employment of the vessel, then it was in principle within the scope of the
functions delegated down the chain of contracts. I do not find this distinction
helpful in the present context. It is no doubt true that the proviso to clause
49 is broadly speaking concerned with matters for which the time charterer may
be regarded as responsible. But that does not tell us what those matters are.
Where the range of matters for which the time charterer is responsible depends
on what functions he has delegated to a subcontractor, it is as I have pointed
out necessary to identify the extent of the delegation. Gross LJ seems to have
regarded the delegation as extending to everything that arose out of Cargill’s
“trading arrangements concerning the vessel”. The only sense in which the
arrest of the Global Santosh can be said to have been occasioned by Cargill’s
trading arrangements concerning the vessel, is that by sub-chartering her to
Sigma Cargill made it possible for Transclear and IBG to become involved
further down the chain. That in turn provided the occasion for their dispute to
lead to the arrest and detention of the vessel. What this amounts to is that
anything that the sub-charterers or receivers may choose to do which results in
the arrest of the vessel, becomes the responsibility of the time charterer if
the occasion for doing it would not have arisen but for their having come in at
the tail end of a chain of contracts which the time charterer initiated. Such a
test is impossible to justify, since it depends simply upon the status of the
sub-charterer or receiver, and would not necessarily require any nexus between
the acts leading to the arrest and the performance of functions under the time
charter. At para 40(ii), Gross LJ thought that the “agency” would not extend to
some act of a sub-charterer or receiver which was “wholly extraneous or
unrelated to sub-letting under the [sub-charter] or inconsistent with its
scheme”. This must of course be correct, but it is difficult to see how it can
be accommodated within the basic principle which Gross LJ adopted.
32.
It is right to add that clause 49 does not readily lend itself to the
dichotomy suggested by Gross LJ. While the other off-hire clauses in Cargill’s
time charter (clauses 15 and 48) relate broadly to matters relating to the
owner’s management of the vessel which prevent him from making the contractual
services available to the time charterer, this is not true of clause 49.
Capture, seizure or arrest will not necessarily lie within the spheres of
responsibility of either party. In The Doric Pride, supra, from
which Gross LJ derived his dichotomy, Rix LJ was concerned with a proviso for
cases where the capture, seizure or detention arose from the charterer’s choice
of loading or discharging port, and it was in that context that he made the
observations cited by Gross LJ.
Conclusion
33.
I would allow the appeal, set aside the orders of both courts below and
dismiss NYK’s appeal under section 69 of the Arbitration Act 1996.
LORD CLARKE: (dissenting)
34.
I have reached a different conclusion from that reached by Lord
Sumption. I would dismiss the appeal. I gratefully adopt the account of the
facts given by Lord Sumption in paras 1 to 11 of his judgment. The question for
decision is whether the vessel was off hire during the period when she was
under arrest and unable to discharge as a result (as Lord Sumption puts it) of
a dispute between the receiver of the cargo and a party who appears to have
been a sub-sub-charterer which had nothing to do with the owners of the ship. That
depends upon whether the owners can show that the arrest was “occasioned by any
personal act or omission or default of the Charterers or their agents” within
the meaning of clause 49 of the charter.
35.
It is common ground that Transclear and IBG were for some purposes the
“agents” of the Cargill within clause 49. As Lord Sumption puts it at para 22,
the right under the time charter whose exercise by Transclear and IBG is said
to have occasioned the arrest of the vessel is the right to call for the
discharge of the cargo. The relevant obligation under the time charter was the
obligation to carry out such discharging obligations as should be required. As
Lord Sumption says, it is not disputed that Transclear and IBG exercised that
right and performed that obligation as “agent” for Cargill. The real question,
he says, concerns the scope of that “agency”. To what acts or omissions did it
extend?
36.
Approaching the matter in that way, I am of the opinion that the answer
is that it extends to the operation of the vessel from the time that notice of
readiness was given (or perhaps earlier) until the completion of discharge. Throughout
that time the vessel was complying with the orders of the charterers (ie
Cargill) as to proceeding to a berth, waiting to discharge and subsequently discharging.
If she had been arrested by Transclear or IBG in the course of the discharging
operations themselves there could surely be no doubt that they would be treated
as the “agents” of Cargill. To my mind the same is true of an arrest during the
period during which she was waiting to discharge.
37.
The true construction of the charter, like the construction of any
contract, depends on the language used by the parties construed in its context
and having regard to the commercial purpose of the clause. In the case of
arrest, one would surely expect the vessel to be off hire if she is arrested by
reason of some act or default of her owners or, as a result of some event
associated with the vessel or her owners. Here, the arrest had nothing to do
with NYK. It was a detention or arrest at the instance of Transclear by reason
of an alleged failure by IBG to pay demurrage under the agreement between
Transclear and IBG. Why then should the vessel be off hire in circumstances
where it is common ground (a) that she was not off hire by reason of an earlier
failure of IBG to provide a working offloader and (b) the arrest was not caused
either by any act or omission on the part of NYK or by any event associated
with the owners or the ship?
38.
It is convenient to repeat here clauses 8 and 49 of the charter:
“8. Prosecution of Voyages
The Captain shall prosecute his
voyages with due despatch, and shall render all customary assistance with
ship’s crew and boats. The Captain (although appointed by the Owners) shall be
under the orders and directions of the Charterers as regards employment and
agency; and Charterers are to perform all cargo handling at their expense under
the supervision of the Captain, who is to sign the bills of lading for cargo as
presented in conformity with mate’s or tally clerk’s receipts. However, at
Charterers’ option, the Charterers or their agents may sign bills of lading on
behalf of the Captain always in conformity with mate’s or tally clerk’s
receipts. All bills of lading shall be without prejudice to this Charter and
the Charterers shall indemnify the Owners against all consequences or
liabilities which may arise from any inconsistency between this Charter and any
bills of lading or waybills signed by the Charterers or their agents or by the
Captain at their request.
49. Capture, Seizure, Arrest
Should the vessel be captured or
seizured or detained or arrested by any authority or by any legal process
during the currency of this Charter Party, the payment of hire shall be
suspended until the time of her release, unless such capture or seizure or
detention or arrest is occasioned by any personal act or omission or default of
the Charterers or their agents.
Any extra expenses incurred by
and/or during the above capture or seizure or detention or arrest shall be for
Owners’ account.”
39.
Notice of readiness was tendered at 0635 hours local time on 15 October
2008. It seems to me to be a reasonable inference that the notice of readiness
was communicated to all of Cargill, Sigma, Transclear and IBG. The next step
was for the discharge of the cargo. I would accept that it was not the duty of
Cargill as charterers to discharge the cargo at any particular time but, in
accordance with lines 31-33 of the charter, they remained responsible for the
fulfilment of the charter notwithstanding that the vessel was sub-chartered. Moreover,
by clause 8, it was agreed that the master would be “under the orders and
directions of the Charterers as regards employment and agency; and the
charterers [were] to “perform all cargo handling at their expense”.
40.
It is common ground that the vessel remained on hire during the period
between her arrival on 15 October and 18 December 2008 when she was instructed
to proceed to a berth for discharging. In the meantime she was simply waiting
at Bonny Town Anchorage. The delay was caused by congestion which was caused at
least in part by the breakdown of IBG’s offloader and thus by the failure of
those responsible for the discharge to arrange for the discharging. Under the
charter that was of course Cargill, even though the delay was in fact caused in
part by IBG. It seems to me that in these circumstances it is appropriate to
regard IBG as the “agents” of Cargill during this period for the purposes of
the charter, even though they were not agents in the classic Bowstead sense of
being appointed by Cargill to perform a particular act or class of act. As I
see it that is why it is correctly accepted that Cargill continued to pay hire
for the period of delay and was obliged to do so. In these circumstances it was
or would have been appropriate to regard IBG as the “agents” of Cargill in
respect of the delay caused by congestion which was in turn caused by the breakdown
of their unloader.
41.
I appreciate that there is no clause similar to clause 49 expressly
putting the vessel off hire in that period. But why is that so? The answer must
be that the parties appreciated that there was no sensible basis for including
the breakdown of sub-charterers’ discharging equipment as an off hire event. That
was surely because it was accepted on all sides that (as stated above) the
scheme of the time charter was that the vessel would be on hire throughout the
time charter period unless there was some reason associated with the vessel or
her owners why they should not receive hire during a particular period.
42.
I agree that it is necessary for the owners to show that the particular
acts which caused the vessel to be arrested were done in the capacity of
Cargill’s agents, ie by way of vicarious enjoyment of Cargill’s contractual
rights or vicarious performance of its obligations, pursuant to its express rights
under clause 8 to give orders and directions as to employment and agency.
Further (by reason of lines 31-33) it had a right to sub-charter the vessel
under the charter and did so by sub-chartering to Sigma, which in turn
sub-contracted in some way with Transclear and/or IBG.
43.
I would accept the way the owners put their case as follows. Cargill
were enabled to generate the string of contracts referred to above and thus
engage the involvement of both Transclear and IBG to discharge the vessel by
virtue of the express liberty to sublet the vessel granted by the charter with
NYK. Under that liberty, Cargill were expressly to remain “… responsible for the
fulfilment of the charter”. Cargill could delegate the performance of the
charter to sub-contractors but could not delegate responsibility. The precise
form and terms of the sub-contracts which could be concluded pursuant to the
liberty to sub-let were a matter entirely for Cargill and their
sub-contractors, so long as they did not amount to a breach of the charter. Thus
Cargill were entitled to conclude the voyage charter with Sigma (imposing
discharge functions and obligations on Sigma) and Sigma (or their intermediate
sub-contractors) were entitled to conclude a voyage charter or a sale contract
with Transclear (equally imposing discharge functions and obligations on
Transclear) and in turn Transclear were entitled to conclude a sale contract
with IBG (imposing discharge functions and obligations on IBG). The arrest was intimately linked to the discharge functions
thus delegated in turn to both Transclear and IBG. IBG’s failure to discharge
the vessel properly (ie within the laytime stipulated in the sale contract) led
to it incurring a demurrage liability to Transclear, but, because IBG then
failed to discharge the lien on the cargo for that claim, Transclear sought
security for it by the arrest of the cargo and (as it transpired) also the
arrest of the vessel. The arrest prevented discharge of the cargo. Quite
apart from the novelty of a ship being arrested for a claim for demurrage, it
is noteworthy that there was no claim against the vessel or NYK as her owners.
44.
In these circumstances, while I agree with Lord Sumption in his para 27
that Cargill had no contractual obligation to the owners NYK to procure that
the vessel be discharged at any particular time, I do not think that it is
right to say that they had no contractual interest in the timing of the
operation. As Lord Sumption observes, they had a contractual obligation to pay
hire, so that the longer the delay before discharge the more hire would have to
be paid.
45.
It seems to me to be a reasonable inference that Cargill were either
aware of the arrangements between Sigma and Transclear or were aware that it
was open to Sigma to make arrangements with Transclear (and Transclear with
IBG). In such circumstances they were certainly aware of the demurrage
provisions in their sub-charter with Sigma (and must know whether they had a
claim for demurrage). Equally they must have known that there was a real possibility
of similar provisions down the line of sub-charters. As I see it, it is
reasonable to hold that they must have appreciated that there might well be
liabilities for demurrage down the line. I do not think that it is fair to say
(as Lord Sumption does) that the chain might have included a quite different
sort of contract to which Cargill were not a party and of which they would not
necessarily have had any knowledge. It seems to me that it must have been clear
to Cargill that there was every possibility that there would be
sub-sub-charters on voyage terms and that some party other than them (or indeed
Sigma) would ultimately be responsible.
46.
Further, Lord Sumption draws a distinction between defective performance
of the cargo handling operations on the one hand and the absence of cargo handling
operations on the other. He says this, in the context of what he calls the
first problem facing NYK arising out of the arrangements:
“28. The first is that the effect of these
arrangements, as between NYK and Cargill, was that such cargo handling
operations as occurred, although carried out by IBG, were carried out on
Cargill’s behalf, at their orders and expense under clause 8 of the time
charter. It was the vicarious exercise of a right of Cargill under the time charter,
which Cargill indirectly made available to IBG. But the defective performance
of cargo handling operations is one thing. An absence of cargo handling
operations is another. Whatever its cause, IBG’s failure to discharge the cargo
between the giving of notice of readiness on 15 October 2008 and the
commencement of discharge on 15 January 2009 cannot meaningfully be regarded as
the vicarious exercise by IBG of some right of Cargill under the time charter.
IBG were doing nothing in this period, as far as the vessel was concerned, and
were therefore doing nothing on behalf of Cargill. Their inactivity could be
relevant to the question of responsibility posed by clause 49 only if it
amounted to the vicarious breach of some obligation of Cargill under the time
charter, which it did not. It follows that any responsibility of Cargill under
the time charter for IBG’s acts or omissions in the conduct of cargo handling
operations at the port of discharge, extended only to acts or omissions in the
actual performance of those operations while they were in progress.”
47.
As stated above, and as Lord Sumption accepts in para 8, the vessel was
not off hire during the period between 15 October and 18 December because of
delay caused by defects in IBG’s unloader. That must be because at that time
IBG was acting as “the agent” of Cargill because there was a sufficient causal
nexus between the delay caused by congestion and the failure of IBG to provide
an unloader for the purpose of discharging the cargo, which was of course the
obligation of Cargill under the charter which had been delegated to others. It
is an example of the point made by Lord Sumption in the first sentence of his
para 28. The delay arose out of the vicarious exercise of the discharging
operations by IBG carried out on Cargill’s behalf. It was the vicarious
exercise of a right of Cargill under the time charter, which Cargill indirectly
made available to IBG.
48.
The distinction between “the defective performance of cargo handling
operations” and “the absence of cargo handling operations” altogether seems to
me to be too narrow. It would surely logically lead to the conclusion that NYK
should not be paid hire while waiting to discharge because of breakdown of
IBG’s offloader. The reason why it is not so suggested is surely that the
charter is drawn up on the basis that the vessel will be on hire while carrying
out the owners’ obligations under the charter. Those obligations include
waiting to discharge cargo in accordance with the “orders and directions of [Cargill]
as regards employment and agency” in clause 8. The whole period of waiting
during the period of congestion, including that caused by the breakdown of the
IBG’s offloader falls within clause 8. That makes commercial sense for the
reason already given, namely that the delay arose out of the vicarious exercise
of the discharging operations by IBG carried out on Cargill’s behalf. As I see
it, the discharging operations include the period of waiting after the notice
of readiness and the period of actual discharge because the vessel is
throughout complying with the charterers’ orders under clause 8. Moreover, the
vessel was also complying with Cargill’s instructions in their letter to the
master of 18 December (para 9) when she did not commence cargo discharge because
of the court order obtained by Transclear.
49.
For these reasons, I do not think that it is right to distinguish
between the time when the vessel is waiting for discharge and the time when she
is in fact discharging. In both cases the vessel is engaged in the actual
performance of the owners’ obligations and/or in the performance of the owners’
rights. The vessel is waiting as instructed by the charterers or their
“agents”, who include for this purpose sub-charterers and those who become
responsible for discharge, as for example here Transclear and IBG. This
analysis seems to me to lead to the conclusion that, when the vessel was
instructed not to commence discharging in Cargill’s letter to the master quoted
above as a result of the order of the court in Nigeria, she was complying with
charterers’ orders under clause 8. Moreover when Transclear took action to
delay cargo discharge which resulted in the detention of the vessel (albeit as
a mistake) its claim arose out of arrangements made (or not made) for the
discharge of the vessel as between itself and IBG.
50.
I respectfully disagree with Lord Sumption when he says that the
responsibility of the charterers after the service of the notice of readiness
was limited to acts or omissions in the actual performance of cargo handling
operations. It extended throughout the period when the vessel, as stated above,
was acting under the “orders and directions of [Cargill] as regards employment
and agency”. That was throughout the period when she was at anchor waiting for
instructions to discharge the cargo, when she remained at anchor after the
order of the Court, and thereafter when she proceeded to a berth and discharged
the cargo. It seems to me to be of some significance that (as quoted above) the
proviso in clause 49, which reads
“unless such capture or seizure or
detention or arrest is occasioned by any personal act or omission or default of
the Charterers or their agents”,
expressly covers personal omissions and defaults of the
charterers’ agents. Nothing in clause 49 requires a positive act that is a
specific breach of the charter, whether vicarious or otherwise. As I see it,
the failure to discharge within the laydays in the sub-charter or
sub-sub-charters (or the like) entered into by or with the authority of Cargill
are omissions or defaults of the charterers’ “agents” within clause 49. An
absence of cargo handling operations is just as much defective performance of
them.
51.
Further, in his para 30 Lord Sumption says that the second difficulty in
NYK’s way is that we are not in this case concerned with responsibility for
delay generally, but with responsibility for loss of time caused by the arrest
of the vessel. An arrest occasioned by incurring or enforcing a liability for
demurrage under a sub-charter could not possibly be regarded as the vicarious
exercise of any facility made available to Cargill under the time charter. I respectfully
disagree. As stated above, it seems to me that the cause of the arrest of the
vessel was action taken by Transclear as a result of a failure of IBG to
discharge the vessel within the lay days. It makes no difference that this was
a failure as between IBG and Transclear. That failure was a failure on the part
of an “agent” of the charterers, whether IBG or Transclear, or indeed Sigma, to
discharge the vessel timeously, with the result that the vessel was arrested
and delayed.
52.
On this basis I would hold that the failure to discharge the cargo was
caused by the acts or omissions of the charterers’ “agents” and that when the
vessel was arrested by Transclear she was arrested by the charterers’ agents
within the meaning of clause 49. This makes commercial sense because (as stated
earlier) there is no reason why the vessel should be off hire for a reason
outside the control of the vessel or her owners. On the contrary, she should be
on hire and clause 49 construed accordingly. After all, the charter expressly
provided at lines 31-33 that the charterers had liberty to sublet the vessel
but that “Charterers shall remain responsible for the fulfilment” of the
charter. It may well be that the charterers have rights over against Sigma on
the basis that IBG and Transclear were delegates of Sigma’s discharge functions
under the sub-charter between Cargill and Sigma. We are not however concerned
with those, although it would to my mind be bizarre if Cargill were entitled to
demurrage at a time when the vessel was off hire, so that Cargill were not
paying hire to the owners.
53.
As I see it, the purpose of clause 49 is achieved by carving out of the
clause the case of “… arrest … occasioned by any personal act or omission or
default of the Charterers or their agents”. For the reasons I have given, I
would hold that Transclear and/or IBG were for this purpose the “agents” of
Cargill when the vessel was arrested because the arrest was closely related to
the discharge of the cargo and there is no suggestion that the vessel or her
owners were in any way responsible. The owners had no control over the process
of delegation or sub-delegation. The delegation included delegation of the
obligation to discharge, which was ultimately passed to IBG. But IBG did not
perform it at all. Looking at the matter from the perspective of the commercial
risks involved, it was Transclear who subcontracted with IBG. The demurrage
dispute was entirely a matter between those two parties. Why should the owners
be responsible for non-performance of the obligation, in circumstances where it
had no way of assessing the commercial risks attaching to the delegation? As it
turned out, those commercial risks crystallised into IBG’s failure to secure
Transclear’s claim. This had nothing to do with NYK. In all these circumstances
there is no good commercial reason why the vessel should not remain on hire.
54.
I agree with Lord Sumption in para 21 that nobody suggests that the mere
fact that Transclear and IBG were for some purposes “agents” of Cargill means
that Cargill is responsible for anything they might do which results in the
detention of the ship. I further agree that that is because not everything a
subcontractor does can be regarded as the exercise of a right or the
performance of an obligation under the time charter. I agree that, if
Transclear or IBG had caused the vessel to be arrested in support of a claim to
a proprietary interest in it or in support of a cargo claim in connection with
a sister ship, the vessel would have gone off hire. It appears to me that in
those cases the proviso in clause 49 would not have applied because the arrest
would not have been occasioned by Cargill or their “agents” because neither
Transclear nor IBG would have caused the arrest in their capacity as Cargill’s
“agents”. The vessel would therefore have gone off hire under clause 49. By
contrast, on the facts here, Transclear did occasion the arrest in their
capacity as Cargill’s “agent” for the reasons explained above.
55.
I recognise that my construction of clause 8 (and clause 49) is wider
than that proposed by Lord Sumption. However, I do not think that it is as wide
as that of the Court of Appeal. The essence of my view is that stated in para
43 above. Cargill were in charge of the discharging operations, which they
arranged though Sigma, Transclear and IBG. The vessel was throughout under the
orders of the charterers. A decision to this effect makes sense and will not
open the floodgates.
56.
Finally, I do not regard my view as inconsistent with any of the decided
cases. In The Mediolanum a refinery was engaged by charterers as an
independent contractor but was held by Kerr LJ (in the passage quoted by Lord
Sumption in para 16) to be the agent of the charterers because it was used by
the charterer to perform one of the charterers’ obligations under the contract.
The claim failed for an unconnected reason, namely that the refinery was not
responsible for designating the particular bunkering place. The decision in The
Arctic Trader (referred to by Lord Sumption in para 17) carries the issue
no further.
57.
In The Goodpal in the passages from the judgment of Colman J
quoted at para 18 he referred to the position of the shippers and receivers as
agents of charterers in connection with the process of loading and discharging respectively.
As Lord Sumption observes, Colman J held that the time charterers were not
responsible contractually for the order given by the charterers at the first
port of discharge because their “agency” could not extend to cargo which was
not consigned to them but for other consignees at the second port. He quotes
this passage:
“The only relevant instructions
were received from the receivers at the first discharge port who could not
reasonably have been thought by anybody to be standing in the position of the
charterers in relation to the balance of the cargo to be loaded at the second discharge
port.”
I would entirely accept those statements as applied in
that case.
58.
There is in my opinion no conflict between any of those principles and
those which I would apply in this case. For the reasons given above I would
hold that the vessel was on hire throughout and would dismiss the appeal.
