![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |||||||||
England and Wales High Court (Commercial Court) Decisions |
||||||||||
PLEASE SUPPORT BAILII & FREE ACCESS TO LAW
To maintain its current level of service, BAILII urgently needs the support of its users.
Since you use the site, please consider making a donation to celebrate BAILII's 25 years of providing free access to law. No contribution is too small. If every visitor this month gives just £5, it will have a significant impact on BAILII's ability to continue providing this vital service.
Thank you for your support! | ||||||||||
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Mercuria Energy Trading PTE v Raphael Cotoner Investments Ltd (m/t Afra Oak) [2023] EWHC 2978 (Comm) (23 November 2023) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2023/2978.html Cite as: [2024] Bus LR 557, [2023] WLR(D) 508, [2023] EWHC 2978 (Comm) |
[New search] [View without highlighting] [Printable PDF version] [Buy ICLR report: [2024] Bus LR 557] [View ICLR summary: [2023] WLR(D) 508] [Help]
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING'S BENCH DIVISION
COMMERCIAL COURT
AND IN THE MATTER OF AN ARBITRATION
Strand, London, WC2A 2LL |
||
B e f o r e :
as a Judge of the High Court
____________________
MERCURIA ENERGY TRADING PTE |
Claimant |
|
- and - |
||
RAPHAEL COTONER INVESTMENTS LIMITED m/t AFRA OAK |
Defendant |
____________________
Timothy Hill KC and Socrates Papadopoulos (instructed by Stann Law Limited) for the Defendant
Hearing dates: 16 November 2023
____________________
Crown Copyright ©
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Thursday 23 November 2023 at 10:00am.
Sir Nigel Teare :
The arbitration
"79. We have already found and held that properly construed the order was 'wait in Singapore EOPL where you consider it safe to do so, using good navigation and seamanship' and that this precluded waiting in Indonesian waters i) due to UNCLOS and ii) since only vessels which had been cleared into Indonesia prior to proceeding to an Indonesian port could anchor in Indonesian waters. In short there was no way of making the vessel compliant with Indonesian law, because what the vessel was doing – waiting for orders in Indonesian territorial waters – was contrary to Indonesian law."
"70. On its true construction the gist of the order was not 'anchor anywhere at all in EOPL', it was 'anchor wherever it is safe to do so in EOPL, using good navigation and seamanship'. To give an extreme example, if the vessel had anchored in a dangerous position in the Ship Traffic Separation lanes, it is obvious that no indemnity would be forthcoming. Equally, if the vessel anchors illegally in Indonesian waters, it cannot claim under the indemnity for the consequences of so doing. The order to proceed to Singapore EOPL and wait for further orders was entirely innocuous, provided only that the Master used good navigation and seamanship in complying with it. In short, the Master's conduct, not the order, caused the loss."
"85. Finally, Charterers also argued that even if they did not establish a failure of due diligence by the Owners to make seaworthy, the Owners were still not entitled to rely upon the exception of "Act, neglect, default of the master… in the navigation or in the management of the ship" because on a true analysis, the Master was making a legal error, not an error in navigation or management. They relied upon cases such as Knutsford v Tillmans [1908] AC 406 where a Master misconstrued the terms of a bill of lading and therefore refused to enter a port on account of ice and the Hill Harmony [2001] 1 AC 638 where the Master chose wrongly in law not to perform his required obligations. It seems to us that these cases are in a different category from the present case, where the Master attempted to comply with the orders given but by simple oversight in the course of navigation anchored the vessel where he should not have done."
The charterparty
"Recap
Charterer's option to discharge/reload part/full cargo within agreed ranges but maximum 2 operations.
…
Charterer has the option to discharge part/full cargo at one safe port within the agreed load/discharge range and reload same or different cargo in the same discharge range for final discharge within agreed discharge ranges. Maximum 4 ports total including the part discharge-reload port and always in geographical rotation. Charterer to be allowed only one part-discharge/reload operation and the port of discharge/reload to be considered as interim port.
Exxonvoy Clauses …
2. (c) COMPLIANCE.
Owner warrants that Vessel shall, during the period described in paragraph (a) of this Clause, be in full compliance with … all applicable law, regulations and/or other requirements of … the countries of the … place(s) to which Vessel may be ordered hereunder … The … laws, regulations and requirements referred to in this Paragraph (c) mean conventions, laws, regulations and requirements concerning … navigation… and other like matters.
4. VOYAGE(S).
(a) Vessel shall proceed with utmost dispatch to any port(s) or place(s) as ordered by Charterer in accordance with Part I (C) and there load a cargo as specified in Part I (E) and (F). On completion of loading, Vessel shall then forthwith proceed to any port(s) or place(s) as ordered by Charterer in accordance with Part I (D) and there deliver said cargo …
…
9. LOADING AND DISCHARGING PORT(S)/PLACE(S)
…
(b) CHANGE OF DESTINATION. After nominating loading and/or discharging port(s) or place(s) pursuant to Paragraph (a) of this Clause, Charterers may nominate new port(s) or place(s), whether or not they are within the range of the previously nominated port(s) or place(s)…
…
27. BILLS OF LADING
…
(b) Notwithstanding anything else in this Charter to the contrary, the carriage of cargo under this Charter and under all Bills of Lading issued for the cargo shall be subject to the statutory provisions and other terms set forth or specified in sub-paragraphs (i) through (vi) of this Clause and all such terms shall be incorporated verbatim or deemed incorporated by reference in any such Bill of Lading. In such sub-paragraphs and in any Act referred to therein, the word "Carrier" includes Owner and Chartered Owner of Vessel.
(i) Clause Paramount. This Bill of Lading shall have effect subject to the provisions of the Carriage of Goods by Sea Act of the United States, approved April 16, 1936
…
Scanports Clauses …
2. ADHERENCE TO VOYAGE INSTRUCTIONS
A. Owner shall be responsible (and indemnify Charterer, its affiliates and associates) for any time, costs, delays or loss suffered by Charterer, its affiliates or associates due to underlift, overlift or other failure to comply fully with charterer's voyage instructions …"
…
12. WAITING/STORAGE
Charterers shall have the option to order the Vessel to wait at safe location(s) at or off loading and/or discharging port(s) and/or en route inside or outside territorial waters and/or port limits as directed by Charterer. However, specific place closest to the nominated location shall be always at Master's discretion at the sole discretion of the Master in respect of vessel safety. The waiting/storage period shall be at the option of the Charterer but shall not exceed 5 days in total. Charterer shall pay for such waiting/storage time at the demurrage rate plus bunkers consumed together with the freight against Owner telex invoice, documentation to follow."
"Section 3 …
2. Subject to the provisions of Article 4, the carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.
Section 4…
2. Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from:
(a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship."
The Charterer's Order
"9. On the afternoon of 7th February, during loading, the Charterers sent the vessel a fateful order: Charterers ordered the Master after completion to "proceed to Spore EOPL for further orders. Discharging plan still not known yet". The Owners' expert mariner stated that 'Spore EOPL' is an acronym for Singapore Eastern Outer Port Limits, but also acknowledged, (as the Charterers' expert mariner stated) that it is commonly understood as Singapore Eastern Off Port Limits, or Outside Port Limits. There is no significant difference between these views of the acronym, since their meaning, and the clear intent of the order, was that the vessel should wait a short time for further orders outside Singapore port limits, a location where port dues and taxes were not payable and vessels cannot be ordered to berth or move out by the Singapore Port Authority. It is very common indeed for vessels to wait in the large area known as Singapore EOPL."
"22 (b) Accordingly, two main areas for anchoring were off the east coast of Malaysia, and off the coast of Bintan, Indonesia, both areas being clear of marine traffic. They were outside the Straits of Malacca and Singapore, but within the territorial waters of Malaysia and Indonesia. Captain White referred to these two areas as "the new EOPL". However, as Captain Todorov, the expert master for the Charterers pointed out, there was also a third EOPL area where large vessels would also anchor, which was simply further away in a more northerly direction in international waters."
"22(c) The effect of this notice was that vessels anchored yet further away off the coast of Malaysia. They also anchored east of the Middle Channel off Bintan Island, Indonesia, often up to 15 nautical miles away, but in many cases 10 miles or less. They also anchored further away still in international waters. All three areas, (off Malaysia, off Bintan and further afield) fell within the phrase Singapore EOPL."
"27. However, making allowance for this missing information, on any common sense view, we find that in the year up to 9th February 2019, as a matter of ordinary practice, many ships must have responded to an order to wait at Singapore EOPL by anchoring in Indonesian waters, without having obtained permission from Indonesian authorities to do so."
"31. On 7th February Charterers emailed Owners' operations department "Pls ask master proceed to Spore EOPL for further orders. Discharging orders not known yet". This is a standard instruction for this area. At around this time, on any one day, perhaps 60-100 ocean-going vessels would be waiting in the EOPL areas having received similar instructions for one reason or another (eg. waiting for employment, waiting for loading/discharging orders, or waiting to receive supplies). It will be noted that the instruction did not specify waiting only in international waters EOPL."
"On the face of matters, Charterers exercised due diligence by giving a conventional order, which had been given many hundreds if not many thousands of times before, to wait at Singapore EOPL, one of the major shipping areas in the world. Accordingly, on analysis the Owners' case has to be that the Charterers should have warned the Master not to anchor in Indonesian waters. Prima facie, taking full account of the fact that Charterers are a large organisation which is based primarily in Singapore, we cannot see how due diligence compels such a result. The evidence of Mr Z (who was called by the Owners) and other witnesses confirmed that at the date of the order (7th February) and even at the date of detention (12th February) it was unknown to the shipping community at Singapore that Indonesia had embarked upon a campaign of detention. It was also of course unknown to Charterers that the vessel would anchor in Indonesian waters, since the place of anchorage was left to the Master's discretion."
"67(b) [The master] decided while on passage to anchor instead in Indonesian waters and he selected a location to anchor which was within the range of ordinary practice for Singapore EOPL."
"70. On its true construction the gist of the order was not 'anchor anywhere at all in EOPL', it was 'anchor wherever it is safe to do so in EOPL, using good navigation and seamanship'. To give an extreme example, if the vessel had anchored in a dangerous position in the Ship Traffic Separation lanes, it is obvious that no indemnity would be forthcoming. Equally, if the vessel anchors illegally in Indonesian waters, it cannot claim under the indemnity for the consequences of so doing. The order to proceed to Singapore EOPL and wait for further orders was entirely innocuous, provided only that the Master used good navigation and seamanship in complying with it. In short, the Master's conduct, not the order, caused the loss."
"79. Charterers argued that if their order to proceed to Singapore EOPL and wait was to be construed as an order to wait in Indonesian territorial waters then Owners were in breach of this clause, because the vessel was not in compliance with relevant laws. However, in paragraph 6 of their Closing Submissions Charterers rightly accepted that if the order was not so to be construed then Indonesia was not a place "to which Vessel may be ordered hereunder" and so they could found no claim for breach upon it. We have already found and held that properly construed the order was 'wait in Singapore EOPL where you consider it safe to do so, using good navigation and seamanship' and that this precluded waiting in Indonesian waters i) due to UNCLOS and ii) since only vessels which had been cleared into Indonesia prior to proceeding to an Indonesian port could anchor in Indonesian waters. In short, there was no way of making the vessel compliant with Indonesian law, because what the vessel was doing – waiting for orders in Indonesian territorial waters – was contrary to Indonesian law. If it is of any slight relevance, consideration of this clause simply confirms once more that the Master in the exercise of good navigation should not have chosen to anchor in Indonesian territorial waters."
"85. Finally, Charterers also argued that even if they did not establish a failure of due diligence by the Owners to make seaworthy, the Owners were still not entitled to rely upon the exception of "Act, neglect, default of the master… in the navigation or in the management of the ship" because on a true analysis, the Master was making a legal error, not an error in navigation or management. They relied upon cases such as Knutsford v Tillmans [1908] AC 406 where a Master misconstrued the terms of a bill of lading and therefore refused to enter a port on account of ice and the Hill Harmony [2001] 1 AC 638 where the Master chose wrongly in law not to perform his required obligations. It seems to us that these cases are in a different category from the present case, where the Master attempted to comply with the orders given but by simple oversight in the course of navigation anchored the vessel where he should not have done."
(i) In paragraph 31 of the Award the Tribunal found that the Charterer's Order was a standard instruction in this area.
(ii) In paragraph 22 (b) and (c) of the Award the Tribunal found that the three anchorage areas mentioned in that part of the Award, one of which was in the territorial waters of Indonesia, were within Singapore EOPL.
(iii) In paragraph 31 of the Award the Tribunal noted that the Charterer's Order did not specify waiting only in international waters EOPL.
(iv) In paragraph 67(b) of the Award the Tribunal found that the master decided while on passage to anchor instead in Indonesian waters and he selected a location to anchor "which was within the range of ordinary practice for Singapore EOPL".
(iv) That is consistent with the finding of the Tribunal in paragraph 27 of the Award that in the year up to 9th February 2019, as a matter of ordinary practice, many ships must have responded to an order to wait at Singapore EOPL by anchoring in Indonesian waters, without having obtained permission from Indonesian authorities to do so.
Section 4 2(a)
"…..the deliberate choice, while in harbour, of one of two routes to be pursued cannot, I think, be an error in the " management " or in the " navigation " of the ship. There is no doubt sometimes great difficulty in drawing the line between what is and what is not "navigation," but I think the line ought to be drawn in the way I have indicated and as excluding the deliberation by the master in port regarding the route by which he will proceed to his port of destination. I think the umpire was entitled to hold that there was a breach of contract and that the error of judgment by the master is not excepted by cl. 14."
"The decision was no doubt correct but the reasoning is certainly confusing. The character of the decision cannot be determined by where the decision is made. A master, whilst his vessel is still at the berth, may, on the one hand, decide whether he needs the assistance of a tug to execute a manoeuvre while leaving or whether the vessel's draft will permit safe departure on a certain state of the tide and, on the other hand, what ocean route is consistent with his owners' obligation to execute the coming voyage with the utmost dispatch. The former comes within the exception; the latter does not. Where the decision is made does not alter either conclusion."
"By a charterparty in an amended New York Produce Exchange form the disponent owners chartered their vessel to the charterers for a period between seven and nine months. On two trans-Pacific voyages from Vancouver, one to Yokkaichi and the other to Shiogama, the master, having experienced very bad weather which caused some damage to the ship on a previous voyage, refused to take the shorter northern great circle route recommended to the charterers by a weather routeing service, taking instead the longer more southerly rhumb line route. In consequence the voyages covered an additional 1,311 and 866.1 miles and took an extra 6.556 and 3.341 days respectively. The charterers deducted hire in respect of the additional days at sea and the cost of the extra bunkers consumed."
"The dispute therefore raised a question of the scope of the contrasting terms "employment" and "navigation" as used in this type of charterparty."
"In October 1993, under a previous charterparty, the vessel had encountered heavy weather on a voyage from near San Francisco to a port in southern Japan and had suffered heavy weather damage. It was apparently this experience which had led the master in the following January and April to choose to follow a more southerly route from Vancouver to the east coast of Japan. Indeed, in January 1994, he gave this as his reason for refusing to obey the charterers' order to proceed by the shortest route, that is to say the "great circle" or more northerly route, and preferring to go further south along the "rhumb line" where he might expect easier weather conditions. Having considered the evidence, the (majority) arbitrators stated: "We did not consider that this amounted to a satisfactory reason in itself for disregarding the charterers' instructions. As regards the April voyage, the only reason which the master gave was that the vessel's auxiliary boiler was inoperative as it had broken down and not been repaired. This excuse if factually correct would have raised obvious difficulties for the owners as it involved saying that the vessel was not seaworthy. But the arbitrators rejected the master's excuse as spurious since the problem with the auxiliary boiler had been dealt with at Vancouver before the vessel sailed and no question of unseaworthiness could arise. The arbitrators suspected that his true reason was the same as before. They said:. "In the case of the second disputed voyage, if the master's decision had indeed been based upon the experience of [the 1993 vovage] it was even more difficult to justify than his decision in relation to the first voyage given the fact that the voyage commenced in late April when the weather could be expected to have been significantly better on the recommended [shorter] route." They concluded that "the evidence . . . had failed to demonstrate that the master had acted reasonably having regard to all the relevant circumstances in rejecting the charterers' orders on both these voyages."
"The (majority) arbitrators found that the owners were in breach of their obligation under the charterparty to ensure that the master prosecuted the voyages with the utmost dispatch and followed the charterers' orders regarding the employment of the vessel. They then considered the defence "error" in navigation (sic). Following what they understood was the effect of the decision in SS Lord (Owners) v Newsum Sons and Co Ltd [1920] 1 KB 846, they concluded that the planning of the voyage was not a matter of navigation; it was not a case where the master had decided to alter course at sea."
"The choice of ocean route was, in the absence of some overriding factor, a matter of the employment of the vessel, her scheduling, her trading so as to exploit her earning capacity.":
"The meaning of any language is affected by its context. This is true of the words "employment" in a time charter and of the exception for negligence in the "navigation" of the ship in a charterparty or contract of carriage. They reflect different aspects of the operation of the vessel. "Employment" embraces the economic aspect—the exploitation of the earning potential of the vessel. "Navigation" embraces matters of seamanship. Mr. Donald Davies in the article I have referred to suggests that the words "strategy" and "tactics" give a useful indication. What is clear is that to use the word "navigation" in this context as if it includes everything which involves the vessel proceeding through the water is both mistaken and unhelpful. As Lord Sumner pointed out, where seamanship is in question, choices as to the speed or steering of the vessel are matters of navigation, as will be the exercise of laying off a course on a chart. But it is erroneous to reason, as did Clarke J, from the fact that the master must choose how much of a safety margin he should leave between his course and a hazard or how and at what speed to proceed up a hazardous channel to the conclusion that all questions of what route to follow are questions of navigation.
The master remains responsible for the safety of the vessel, her crew and cargo. If an order is given compliance with which exposes the vessel to a risk which the owners have not agreed to bear, the master is entitled to refuse to obey it: indeed, as the safe port cases show, in extreme situations the master is under an obligation not to obey the order. The charterers' submissions in the present case and the arbitrators' reasons and decision did not controvert this."
"In the present case, the exception did not provide a defence. First, the breach of contract was the breach of both aspects of the owners' obligations under clause 8 of the time charter—to prosecute the voyage with the utmost dispatch and to comply with the orders and directions of the charterers as regards the employment of the vessel. As a matter of construction, the exception does not apply to the choice not to perform these obligations: Knutsford Steamship Co v Tillmanns & Co [1908] AC 406; Suzuki and Co Ltd v J Beynon and Co Ltd 42 TLR 269. In the words of Lord Loreburn LC [1908] AC 406, 408: the master "simply broke his contract, interpreting it erroneously". In the same case, at p 410, Lord Dunedin said, referring to the exception of error of judgment in navigating the ship or otherwise: "It seems to me fantastic to extend it to the idea of a captain forming a wrong legal opinion on the meaning of a clause in the bill of lading and then proceeding to act upon it." (See to the same effect Kennedy LJ in the Court of Appeal (1908] 2 KB 385,406-407.) Secondly, any error which the master made in this connection was not an error in the navigation or management of the vessel; it did not concern any matter of seamanship. Thirdly, the owners failed to discharge the burden of proof which lay upon them to bring themselves within the exception. This was clearest with regard to the second of the two relevant voyages where the arbitrators could only guess at, "suspect", why it was that the master acted as he did."
a. "The selection of the place to anchor within OPL was a navigational decision for the master. Had he anchored in the vicinity of the site shown on the Passage Plan no problem would have occurred.
b. He decided while on passage to anchor instead in Indonesian waters and he selected a location to anchor which was within the range of ordinary practice for Singapore EOPL. Many ships before February 9th had anchored in this vicinity, although many others, and probably the majority chose either international or Malaysian waters where there was a system which allowed waiting ships to notify a local agent of their presence. In contrast, there was no such system in Indonesian waters, if the vessel was not being cleared into an Indonesian port. Here, it was not possible to anchor legally unless the vessel was waiting to enter an Indonesian port and had been cleared for entry.
c. Absent knowledge of the Indonesian Navy's campaign, the risk of illegal anchoring in Indonesian waters leading to adverse consequences for the vessel could fairly be assessed as small in early February 2019, which is no doubt why it was within the range of ordinary practice to anchor in this locality. But it does not follow that it was "good navigation and seamanship" to court a small danger of suffering consequences of illegal anchoring for no good reason, even if it was ordinary practice. In another field, many cars as a matter of ordinary practice drive down the motorway at 71-75 miles an hour, because the drivers consider that there is little or no chance of being penalised for exceeding the speed limit slightly, even though they appreciate that they are breaking the law. If an objective, prudent observer, was asked if this was an exercise of "good" driving, the obviously correct answer would be 'no'.
d. We have accepted the evidence of Captain Todorov that a prudent master should appreciate that once a vessel is within 12 miles of land it is probably in the territorial waters of a country under UNCLOS regime and would be anchoring there illegally, or at least risking acting illegally, if simply waiting for orders. The Master chose to anchor within 6 miles of Indonesian land to wait for orders. Territorial waters are expressly a matter which a master was told to consider when preparing his Passage Plan by the Witherbys manual which was required to be on board. In an area with a geography like the Singapore Straits, territorial waters should be an issue for the Master to consider.
e. A prudent Master in the position of Captain Kumar would have realised that if he anchored in Indonesian territorial waters he was taking a small but unnecessary risk, in exposing the vessel and the cargo to the sovereign authority of Indonesia. This did not call for any detailed knowledge of the law of the sea, nor of local laws. There was no compelling countervailing reason to take that risk, and it would have been simple to anchor in international waters, or legally in Malaysian waters, as many ships did. While it would have appeared a small risk, a prudent Master would have realised that it exposed the vessel/cargo to unpredictable consequences in relation to local laws, and possible investigation/detention, and as a result, a prudent Master would not have taken it. In particular, whether or not anchoring in Indonesian territorial waters to await orders was technically illegal as a matter of Indonesian law, a prudent Master would have appreciated that such anchoring would expose the vessel and cargo to a risk, which could not be dismissed as inconsequential, that the authorities would contend that the anchoring was illegal, giving rise to a risk of detention for an indeterminate period and possible fines or other consequences.
f. Conversely, it is a flawed argument to contend that Indonesia had not yet asserted its rights and so it must be assumed that it never would do so and it was therefore good navigation to trespass into their territorial waters to await orders.
g. We find that it did not cross the Master's mind to consider whether he was entitled to anchor within Indonesian territorial waters during the passage on 9th February. He made a spur of the moment decision to depart from the Passage Plan and select Indonesian waters simply because it was a slightly easier place to anchor. The failure to take due account of the risk of anchoring in territorial waters was a mistake and cannot be characterised as good navigation and seamanship. Furthermore, the Master was specifically told in the VTIS exchange with the Singapore Port Authorities that Singapore did not control the anchorage of vessels 12 miles beyond the Horsburgh lighthouse and this should have made him all the more alert to the implications of anchoring in the territorial waters of some other state. Indeed the Master's so-called "spinning a line" to the Indonesian authorities after detention may have been a belated recognition that he should not have been anchoring where he did."
"It seems to us that these cases are in a different category from the present case, where the master attempted to comply with the orders given but by simple oversight in the course of navigation anchored the vessel where he should not have done."