Tort and implied contract in Singapore. The case of the ‘Bum Chin’.

 

In Wilmar Trading Pte Ltd v Heroic Warrior Inc (The “Bum Chin”) [2019] SGHC 143, Singapore High Court, an FOB buyer, Wilmar, nominated the ‘Bum Chin’ for shipping palm oil from Indonesia to Jeddah and Adabiyah.  An incident on the vessel caused physical damage to the vessel and loss of and damage to the cargo. Wilmar arranged for a substitute vessel to transport the palm oil purchased under the sale contracts and claimed damages from the registered owner on the grounds of contract and negligence. The registered owner counter claimed asserting that Wilmar was responsible for the damage sustained by the vessel because the loading terminal, as Wilmar’s agent, had improperly loaded the cargo.

Was there a contract between the parties? Wilmar relied on Pyrene v Scindia [1954] 1 Lloyd’s Rep 321, where there was found to be a  contract of carriage between the shipowner and the cargo interest. But Belinda Ang Saw Ean J found that here there was no such contract as the bills to be issued would have been charterers’ bills and the defendant was not the contractual carrier. Turning to tort, although Wilmar had no proprietary interest to found a cause of action in negligence since NTUC Foodfare Co-operative Ltd v SIA Engineering Co Ltd [2018] 2 SLR 588, pure economic loss was claimable under Singapore law and the question was whether the defendant owed a duty of care. The judge found that this was the case. The shipowner as performing carrier would have reasonably foreseen that its negligence would cause economic loss to a buyer of cargo who bore the risk of damage to or loss of the cargo. The requirement of legal proximity was also satisfied. The countervailing policy consideration of indeterminacy did not arise because the plaintiff as FOB buyer bore the risk of loss or damage to the cargo. In the absence of a contract of carriage, the defendant owed the plaintiff a duty to take reasonable care of the cargo loaded on board.

The counterclaim was dismissed on the basis that, absent a contract of carriage between the parties, Wilmar, who was not responsible for the actions in loading of the FOB seller in agency or otherwise, owed no duty of care to the defendant. On the evidence Wilmar’s loss was caused by the shipowner’s negligence as structural weaknesses were a cause of the failure of the tank which had caused leakage and contamination of the cargo.

Hague-Visby Time Bar. Timeous claims by non-parties.

 

How does the Hague-Visby time limit operate when suit is commenced within the one year period, but by the wrong party? Can they amend the statement of claim to add or substitute the correct party? A resounding ‘no’ is the answer recently given in Feyha Maritime Ltd v Miloubar Central Feedmill Ltd and Another – Civil Leave to Appeal 7195/18, Supreme Court of Israel (Hendel J) – 12 May 2019.

MCF alleged that it imported a cargo of corn to Israel from the Ukraine on the defendant’s ship. The Phoenix Insurance Co Ltd (Phoenix) insured the cargo. A fire broke out on the ship on 13 May 2015 and the cargo never reached its destination. On 4 February 2016 MCF filed a claim against Phoenix in the Magistrates’ Court  and on 5 April 2016 MCF amended its statement of claim to add the shipowners as an additional defendant. That same day Phoenix filed a claim against the shipowners in the District Court of Haifa which claim was subsequently settled. MCF continued to pursue its claim against the shipowners on the basis that it had not received a full indemnity from Phoenix in respect of the damage to the cargo. The shipowners filed a motion to dismiss MCF’s claim on the basis that the bill of lading identified the consignee as “Miloubar Cooperative Agricultural Society Ltd” (MCAS) and not MCF.

The Magistrates’ Court agreed that MCF had no cause of action against the shipowners. MCF argued that it was possible to amend the statement of claim to add or substitute MCAS as plaintiff. The Magistrates’ Court agreed and rejected the shipowners’ motion to dismiss MCF’s claim in limine. Adding MCAS as a plaintiff constituted an amendment that was merely technical and formal. The shipowners filed a motion for leave to appeal to the District Court who rejected the motion for different reasons. The shipowners appealed, arguing the Hague-Visby Rules time bar was a substantive limitation that rescinded the right of claim itself.

The Supreme Court agreed. To allow amendment of the statement of claim without affecting the limitation period of the claim, the original statement of claim had to demonstrate a cause of action against the defendant, but here MCF’s original statement of claim revealed no cause of action against the defendant. The term “suit” in article III rule 6 related to the existence of a proper claim between appropriate parties. The claim filed by Phoenix against the shipowner could not stop accrual of the limitation period with respect to a claim of the owner of the insured cargo against the carrier.

Parallel claims filed in different forums were capable of stopping accrual of the limitation period (see The Nordglimt), but those cases mostly focused on the question whether a claim filed by a party entitled to do so in a foreign forum with jurisdiction to hear the claim could stop accrual of the limitation period for another claim between the same parties (or between parties with relevant nexus) filed in a different forum. It was not appropriate to conclude from judicial precedents permitting claims filed in another forum to stop accrual of limitations, that a claim filed by another plaintiff could also be permitted to do so. The identity of the parties was an integral part of the term “cause” of the story being heard, for purpose of statutes of limitation, and a rule allowing the identity of the plaintiffs to be changed without such having any implications on the limitation period undermined certainty in the rules of limitation and the principle of claim preclusion.

Leave to appeal was granted, and the appeal accepted, meaning that the claim would be dismissed in limine for having reached its limitation period.

 

 

Of damages and counterfactuals — again

It’s not often that we can say “You read it first on the IISTL blog.” But it seems we may be able to, following the decision of the Court of Appeal (Males, Rose and Haddon-Cave L.JJ.) in Classic Maritime Inc v Limbungan Makmur Sdn Bhd [2019] EWCA Civ 1102.

The facts briefly recap thus. A charterer signed a CoA promising to come up with vast cargoes of Brazilian iron ore that would have netted the shipowner profits of something like $20 million. It didn’t, and in hindsight it was abundantly clear that it it never could have. The contract was subject to a force majeure clause including floods preventing performance. Floods duly materialised; but (as was held both at first instance and on appeal) the charterer couldn’t invoke the clause, since if it had never had any cargoes in the first place the floods hadn’t prevented it doing anything. Nevertheless Teare J held at first instance that even though there was breach the damages were not $20 million, but zilch (or rather nominal). His argument was that, hindsight having shown that the shipowner wouldn’t have had a right to performance even if the cargoes had been there, the value of the lost rights was zero.

We raised an eyebrow here at the idea that a defendant who hadn’t, and never could have, performed should be able to cut damages from $20 million to zero by pointing to a force majeure clause that might have protected him but in fact didn’t. The Court of Appeal has now made it clear that it thinks the same way, and substituted an award of $20 million. If (it was said) a claimant showed that a defendant had failed to perform and the defendant could not invoke any exculpatory provision, there was no reason why damages should not be substantial. The reasons behind the non-performance were irrelevant, as was the fact that had the defendant been able to perform in the first place he would have had an excuse.

In our view, despite the beguiling advocacy of the Institute’s own Simon Rainey QC, this is sensible and logical. Males LJ hit the nail on the head at [89] when he pithily pointed out that the breach was not inability or unwillingness to supply cargoes, but the simple fact that the cargoes, for whatever reason, were not there. Put that way, everything neatly falls into place. If you don’t perform your contract and can’t point to any excuse, you are liable for substantial damages. End of story.

Carriage contracts mean what they say, OK?

Open any contract textbook at the chapter on exception clauses, and you will come across a long list of cases on the restrictive interpretation of such clauses, saying that (for example) they will not lightly exonerate a party from the consequences of his own fault in the absence of clear words; that if a clause could cover both negligence and strict liability it will presumptively only cover the latter; that ambiguities will be construed contra proferentem; and so on.

As usual, however, things are not as they seem. No doubt such matters have formed the stuff of contract lectures and provided law professors with enjoyment for as long as most of us can remember. Outside academia, however, commercial lawyers today can pretty safely treat them as a mere empty ritual incantation and then go on quietly to ignore them.

The latest demonstration of this point comes in a case decided six weeks ago but only just reported, Aprile SpA v Elin Maritime Ltd [2019] EWHC 1001 (Comm). On the facts as assumed, steel fabrications were carried on deck from Thailand to Algeria under a straight bill stating that they were so carried and continuing: “ The Carrier shall in no case be responsible for loss of or damage to the cargo, howsoever arising prior to loading into or after discharge from the Vessel or while the cargo is in the charge of another Carrier, nor in respect of deck cargo or live animals.” The cargo did not arrive in one piece, and cargo — or its insurers — wanted to bring a claim. Faced with the unpromising terms of the bill of lading (which was unaffected by the Hague Rules because of the statement of deck carriage), they argued, with a touching hope, that for all its wideness the exemption did not cover any damage caused by negligence or unseaworthiness.

The deputy judge, Stephen Hofmeyr QC, was having none of it. In line with a series of recent authorities such as Persimmon Homes Ltd v Ove Arup & Partners [2017] EWCA Civ 373, he held that the exception clause had to be read, like any other contract term, with a view to seeing what it would mean to a reasonable businessperson, taking into account the circumstances surrounding the contract. He saw no reason to interpret the words “howsoever arising” as meaning anything other than what they said, or to regard claims alleging negligence or unseaworthiness as raising any special issue in this connection. He expressed the view that Langley J had been right to suggest as much in The Imvros [1999] 1 Lloyd’s Rep 848, and saw no justification in criticisms later made of that case. Equally he joined in the general tendency to sideline Canada SS v R [1952] AC 192 and its suggestions for cutting down the presumptive meaning of clauses that did not mention negligence in so many words. The argument that there might be strict liability as a common carrier and that the exception clause might have been intended to be limited to that he treated with the disbelief it richly deserved.

In short, in carriage as elsewhere commercial contracts mean what they say; complex rules of interpretation, and outdated presumptions about exoneration for fault, have little part to play. And rightly so. Carriers and cargo interests alike are keen on English law and jurisdiction precisely because they know their contracts will be read in a common sense and businesslike way. The deputy judge here needs, if one may say so, to be commended for approaching this case with a realistic and hard-headed attitude, and not disappointing them.

When is a bill of lading ‘spent’?

 

In The Yue You 9023 [2019] SGHC 106 the High Court of Singapore has considered the issue of title to sue when spent bills of lading are involved under section 2(2)(a) of the Bills of Lading Act (equivalent to UK COGSA 1992). The bank held bills of lading as security for a loan to the buyer and sued the shipowner for misdelivery in delivering the cargo to a party nominated by the seller before the loan was made without production of a bill of lading. The court held that delivery of cargo to a party that was not entitled to delivery did not cause a bill of lading to be spent (a point noted obiter by the Court of Appeal in The Erin Schulte).

If, however, the bill had been spent the bank would have obtained title to sue under s.2(2)(a) as the loan facility agreement made several years earlier between the bank and the buyer was the contractual arrangement in pursuance of which the transaction had been effected for the purpose of section 2(2)(a). Further the bank had become the holder of the bills in good faith as required by s.5(2) of the Bills of Lading Act and its decision to grant the loan to the buyer against security over the bills, even on the assumption that it knew that the cargo had been discharged, could not be said to have been dishonest; nor could the bank be said to have consented to delivery of the cargo without production of the bills of lading.

‘Howsoever caused’ in exception clause in bill of lading covers loss due to negligence and unseaworthiness.  

 

The Elin (Aprile S.PA. v Elin Maritime Ltd) [2019] EWHC [1001] (Comm) involved a claim under a bill of lading for damage to a cargo carried on deck which was stated to be so carried, and was therefore not subject to the Hague Rules. Owners sought to rely on two clauses.

1- the provision on page 1 of the Bill of Lading that “The Carrier shall in no case be responsible for loss of or damage to the cargo, howsoever arising … in respect of deck cargo”

2- the provision on page 2 of the Bill of Lading that the 70 packages identified on the attached list were “loaded on deck at shipper’s and/or consignee’s and/or receiver’s risk; the carrier and/or Owners and/or Vessel being not responsible for loss or damage howsoever arising”.

Owners argued that these two provisions must be interpreted as excluding all liability for carriage of deck cargo, including liability for negligence and unseaworthiness.. The phrase “howsoever arising”, which appeared in each of the clauses referred to all causes of loss or damage. The Owner relied on the decisions of Saville J,  Langley J and Hamblen J in The Danah [1993] 1 Lloyd’s Rep 351, The Imvros [1999] 1 Lloyd’s Rep 848 and The Socol 3 [2010] 2 Lloyd’s Rep 221, respectively.

Stephen Hofmeyr QC, sitting as a Judge of the High Court agreed. Nothing in the authorities to justify departing from that point of construction. The same or similar words of exclusion have been held to be effective to exclude both liability for negligence causing the loss of cargo (Travers v Cooper [1915] 1 K. B. 73 and  [1993] 1 Lloyd’s Rep. 351) and liability for unseaworthiness causing the loss of cargo (The Imvros). It would be difficult to imagine words of exemption which are wider in effect than “howsoever caused”. Over the last 100 years, they had become “the classic phrase” whereby to exclude liability for negligence and unseaworthiness. Accordingly on a true construction of the Bill of Lading, the Owner was not liable for any loss of or damage to any cargo carried on deck, including loss of or damage to any cargo carried on deck caused by the unseaworthiness of the Vessel and/or the Owner’s negligence.

Brandt v Liverpool implied contract falls outside art. 25 of Brussels Regulation (Recast).

 

In Pan Ocean Co. Ltd v China-Base Group Co. Ltd & Anor [2019] EWHC 982 (Comm) (16 April 2019) Christopher Hancock QC (Sitting as a Judge of the High Court) has held that an implied contract arising out of the conduct of the parties at the port of discharge did not fall within art.25 of the Brussels Regulation (Recast) 2012.

A cif contract was concluded between Gunvor and China-Base, loadport to be any port in Indonesia, Malaysia, or the Philippines with delivery in China.  A bill of lading was issued recording the loading of about 36,360 mt of light cycle oil and gas oil at Zhoushan, China and Taichung, Taiwan. Pan Ocean, the demise charterer of the vessel voyage chartered the vessel to Clearlake shipping a company said to be associated with Gunvor. The charterparty provided for English law and Jurisdiction. Pan Ocean issued bills of lading which accurately reflected the loadports and nature of the cargo and the vessel then loaded further cargo of gasoil in the Philippines. No bills of lading were issued for this cargo but in accordance with Clearlake’s instructions, it is said that an agent of Pan Ocean issued switch bills of lading falsely naming the loadport for the entire cargo as Subic Bay, Philippines and mis-describing the entire cargo as light cycle oil. The Vessel discharged the cargo into bonded shore tanks in Nansha, China. China-Base/Beihai neither presented any bills of lading nor gave any letter of indemnity to Pan Ocean or their agents. The cargo was impounded by the Chinese authorities on grounds of customs irregularities.

The buyers arrested the vessel in Singapore claiming damages for alleged misrepresentations in the cargo documentation. The demise charterers sought an anti-suit injunction in the English High Court to prevent the buyers proceeding with their claim in Singapore and claimed that the English court had exclusive jurisdiction over their claim under art. 25(1) of the Brussels Regulation (Recast) which provides

  1. If the parties, regardless of their domicile, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction, unless the agreement is null and void as to its substantive validity under the law of that Member State. Such jurisdiction shall be exclusive unless the parties have agreed otherwise. The agreement conferring jurisdiction shall be either:

(a) in writing or evidenced in writing;

(b) in a form which accords with practices which the parties have established between themselves; or

(c) in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned.”

The demise charterers argued that an implied contract had come into existence between themselves and the buyers at the discharge port on the terms of the bill of lading. The Judge addressed this issue on the assumption that there was an implied contract between the parties. He held that although the bill of lading which would constitute the terms of the putative implied contract was in writing, the agreement itself had to be in writing in accordance with Art 25(1)(a) ““The agreement conferring jurisdiction shall be … (a) in writing or evidenced in writing”).” This was not the case where the agreement contended for was an implied contract based on the actions of the parties in taking delivery of the cargo at the port of discharge.

Had it been established that the English court had exclusive jurisdiction, the court, applying the approach laid down in Ecobank v. Tanoh [2016] 1 WLR 2231. would not have granted an interim anti-suit injunction. The application for an injunction had neither been sought promptly, nor before the proceedings were too far advanced. Over 9 months had passed since the warrant of arrest in Singapore was served, with several hearings in Singapore during that period.

The Hague Rules fire exception and barratry.

In Glencore Energy UK Ltd v Freeport Holdings Ltd, “The Lady M”,  [2019] EWCA Civ 388, the Court of Appeal has today upheld Popplewell J’s decision https://iistl.blog/2017/12/30/barratry-and-the-hague-visby-rules/   that article IV rule 2(b) of the Hague-Visby Rules is capable of exempting the carrier from liability to the cargo owner for damage caused by fire if that fire were caused deliberately or barratrously. Cargo owners argued that at common law a term which excluded liability for ‘fire’ would not have provided a defence if it were caused by the negligence or barratry of the crew; and consequently the exception in article IV.2(b) did not have the effect of excluding liability for fires which were caused either negligently or deliberately. The owners argued that the Judge’s interpretation of article IV.2(b) was correct. The words are clear and emphatic, and set out an exception for all loss or damage arising or resulting from fire, subject to the proviso: where the fire is caused with the actual fault or privity of the carrier. There is no proper basis for implying  a further proviso by adding the words ‘or the barratry of master or crew’, not least because ‘barratry’ is not a relevant concept in the Hague Rules.

The Court of Appeal agreed with owners’ contention. There was no sound policy reason for reading the word ‘fire’, both in isolation and in context, in a way that excludes fire where deliberately caused by the crew, from the carrier’s defence under Article IV.2(b). In cases of barratry the carrier’s agents are acting contrary to the carrier’s interests and in breach of the trust reposed in them. The construction of the fire exception was not affected by the Supreme Court’s decision in Volcafe in relation to the construction of the inherent vice exception. It was important not to lose sight of Lord Sumption’s observation that there is ‘no unifying legal principle’ behind the list of exceptions in article IV.2. The correct approach was to construe the exceptions in their own terms, while bearing in mind that they fall under a general heading and have to be construed as part of the overall scheme of obligations, liabilities and exceptions set out in articles III and IV. 66.    Lord Sumption’s observations that the carriers bore the legal burden of disproving negligence for the purposes of invoking an exception under article IV.2 did not address any argument in relation to article IV.2(b), and did not  assist on the assumed facts where there has been a deliberate act by a crew member to the prejudice of the carrier and without the carrier’s actual fault or privity.

None of the common law cases on construction of exceptions clauses assisted. There was no pre-Hague Rules judicial interpretation of ‘fire’ as a term which had a clearly assigned meaning that excluded fire caused by the crew, so that it must be presumed that it was used in article IV.2(b) in the same way. Nor did the travaux preparatoires to the Hague Rules support such a construction. Simon LJ was very doubtful as to whether the threshold for consideration of the travaux préparatoires came close to being met. This was not a provision in respect of which there were ‘truly feasible alternative interpretations’ of the words, nor was it one of those ‘rare’ cases where the travaux ‘clearly and indisputably’ pointed to a definite legal intention.

Simon LJ added: “To adopt Lord Steyn’s analogy, Glencore’s argument not only failed to hit the bullseye, it should not have been aimed at the target.”

 

Actionable fault and general average. Due diligence and unseaworthiness.

Actionable fault and general average. Due diligence and unseaworthiness.

 

In The CMA CGM Libra  [2019] EWHC 481 (Admlty), a container vessel grounded on leaving Xiamen on a shoal in an area in which there is a risk of uncharted shoals. Salvors refloated the vessel which then proceeded on her voyage. The shipowners funded the salvage and declared general average. 8% of cargo interests refused to pay their share on the grounds of actionable fault on the part of the shipowners. The vessel’s primary means of navigation was intended to be paper charts published by the United Kingdom Hydrographic Office (UKHO). Before leaving Xiamen the Second Officer prepared a passage plan which the Master approved. The plan was inadequate in that it did not refer to the existence of a crucial Preliminary Notice to Mariners (NM6274/P10) that had been issued by the UKHO approximately 5 months before the grounding, alerting mariners to the presence of numerous depths less than charted in the approaches to Xiamen and confirming that the charted depths within the dredged channel were sufficient for the vessel. Nor did the passage plan refer to any “no-go areas” which had not been marked or identified on the chart. At trial the Master confirmed that had the chart been marked up with the appropriate “no-go areas” he would not have attempted to execute the manoeuvre that ultimately led to the stranding of the vessel.

Teare J considered the burden of proof. The Supreme Court’s decision in Volcafe related to the burden of proof in relation to Article III.2 of the Hague Rules and did not deal with the burden of proof for Article III.1. There had been actionable fault through a breach of Article III.1 of the Hague Rules Article IV r.1 provides that where loss or damage results from unseaworthiness the burden of proving the exercise of due diligence shall be on the carrier. Thus it deals with the burden of proof for the purposes of Article III r.1. It is implicit in Article IV r.1 that the burden of proving causative unseaworthiness must lie upon the cargo owner for the article assumes that such unseaworthiness has been established.

Teare J then found that cargo interests had established a breach of Article III.1 in that the absence of an adequate passage plan was a cause of the grounding.. The presence on board a vessel of the appropriate chart is an aspect of seaworthiness. Where the Admiralty gives notice of a correction to the appropriate chart a vessel will not be seaworthy unless the chart has been corrected. If the vessel’s navigating officer fails, before the commencement of the voyage, to correct the chart the vessel is thereby rendered unseaworthy. The production of a defective passage plan is not merely “an error of navigation” but involves a breach of carrier’s obligation that the vessel is seaworthy “before and at the beginning of the voyage.” If there is a causative breach of Article III r.1 the fact that a cause of the subsequent casualty is also negligent navigation will not protect the carrier from liability. Passage planning by the master before the beginning of the voyage is necessary for safe navigation.

The carrier’s duty under Article III r.1 was not discharged by putting in place proper systems and ensuring that the requisite materials were on board to ensure that the master and navigating officer were able to prepare an adequate passage plan before the beginning of the voyage. As set out in Scrutton on Charterparties and Bills of Lading 23rd.ed at paragraph 14-046:

“The due diligence required is due diligence in the work itself by the carrier and all persons, whether servants or agents or independent contractors whom he employs or engages in the task of making the ship seaworthy; the carrier does not therefore discharge the burden of proving that due diligence has been exercised by proof that he engaged competent experts to perform and supervise the ask of making the ship seaworthy. The statute imposes an inescapable personal obligation.”

Due diligence was not exercised because the Owners’ SMS contained appropriate guidance for passage planning and that the auditors of the vessel’s practices were competent. To comply with Article III r.1, which imposes a non-delegable duty on thecarrier, it is not enough that the owner has itself exercised due diligence to make the ship seaworthy. It must be shown that those servants or agents relied upon by the owner to make the ship seaworthy before and at the beginning of the voyage have exercised due diligence. Negligence by the master or chief engineer or other officer before the commencement of a voyage can amount to a failure by the carrier to make the vessel seaworthy.

 

Accordingly there had been actionable fault by the shipowners and cargo were not required to contribute to general average.

 

Bill of lading shipper liable for sums due under incorporated head charter.

 

In Singapore Arbitration 1/19 a fraudulent broker purported to charter to shipowners on behalf of X and then sub-chartered to Z. Under the charter to X 100% freight was to be paid within six days of signing and release of bills of lading. The cargo was loaded and a bill of lading was issued to Z as  Z, incorporating all the terms and conditions of the charter and stating ‘freight payable as per charterparty dated 9 November 2010’.  Both charters bore that date. The broker received 95% freight from Z and paid part of that to owners in respect of freight under the X head charter. Owners later claim the unpaid balance of freight, and loading port demurrage, under the X charter from Z as bill of lading shipper. The owners had discharged into a port authority warehouse but had lost their lien when receivers managed to take delivery without payment of sums due under the charter with X. Owners commenced arbitration in Singapore against Z under the bill of lading.

The tribunal held that it did have jurisdiction to determine which of two charters with the same date was incorporated into the bill of lading. Both charters were subject to English law. Applying the San Nicholas it was the head charter that was incorporated.  Notwithstanding the transfer of the bill of lading, the shipper’s liability remained due to section 3(3) COGSA 1992.  Owners did not have to give credit for what Z had paid, but only for what they had received. Owners could not be criticised for having failed to act with due diligence once the balance due under the charter with X came due and had not been received. Owners acted reasonably in discharging into a port authority warehouse. The unfortunate Z was liable for the sums claimed by owners.