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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Trafigura Beheer BV v Navigazione Montanari Spa [2014] EWHC 129 (Comm) (30 January 2014)
URL: http://www.bailii.org/ew/cases/EWHC/Comm/2014/129.html
Cite as: [2014] EWHC 129 (Comm), [2014] 1 Lloyd's Rep 550

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Neutral Citation Number: [2014] EWHC 129 (Comm)
Case No: 2012-395

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL
30/01/2014

B e f o r e :

MR JUSTICE ANDREW SMITH
____________________

Between:
Trafigura Beheer BV
Claimants
- and -

Navigazione Montanari Spa
Defendants

____________________

Jeffrey Gruder QC and Claudia Renton (instructed by Eversheds LLP) for the claimants
Michael Ashcroft QC (instructed by Ince & Co LLP) for the defendants

Hearing dates: 21 January 2014

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Mr Justice Andrew Smith:

  1. I have to determine the proper construction of a charterparty recorded in a recap, under which the claimants chartered a vessel owned by the defendants, the "Valle di Cordoba", for the carriage of a consignment of premium motor oil. Procedurally the questions come before me by way of preliminary issues, but apparently they will in fact determine liability.
  2. The background to the dispute is agreed in the list of issues (at paras 5 to 7):
  3. "5. On 14 December 2010, as ordered by the Claimants, the Vessel loaded a cargo of premium motor spirit ("the Cargo") at Abdijan, Cort d'Ivoire for passage to Lagos, Nigeria for discharge.
    6.
    6.1 On 16 December 2010 at around 2330 hours the Vessel arrived at offshore Lagos and tendered notice of readiness in line with the Claimants' instruction.
    6.2 On or around 21 December 2010 the Master sailed to a position 17nm offshore Cotonou, Benin and about 55nm south-west of Lagos and awaited orders from the Claimants.
    6.3 On or around 24 December 2010, at approximately 2330 hours, the Vessel was attacked by a group of about 15 armed men ("the Pirates"), whilst drifting at about 16.5nm from Cotonou and 60nm from Lagos.
    6.4 The Pirates took control of the Vessel.
    6.5 On 26 December 2010 the Pirates arranged for an STS transfer of approximately 5,300 MT of the Cargo ("the Transferred Cargo") to an unknown lightering vessel, which then departed with the Transferred Cargo.
    6.6 On 27 December 2010, the Vessel was released by the Pirates.
    7. Subsequent to the facts and matters set out in paragraph 6 above: (1) the Claimants say that the Vessel was ordered to discharge part of the Cargo at Atlas Cove Jetty Depot and the balance at Petroleum Wharf Apapa; and (2) the Defendants say that on 31 January 2011 the Vessel was ordered to discharge part of the Cargo at the New Atlas Cove Jetty and the balance at Bulk Oil Plant terminal. Any cargo measurements taken immediately before discharge to the order of the Claimants would or should have shown substantially lower net vessel volumes than the net vessel volumes ascertained after loading, on account of the fact that the Transferred Cargo had already, during December 2010, been forcibly removed from the Vessel by the Pirates."

    (The dispute about where the cargo was discharged is irrelevant for present purposes.)

  4. No witnesses of fact gave evidence, and the only other evidence of fact is the recap and the standard terms to which it referred. The owners called an expert witness, Mr James Gretton, who has considerable experience in the tanker shipping market, and whose evidence was directed to the market understanding of the expression "in-transit loss".
  5. The recap was sent by the charterers and was dated 4 November 2010. It provided for the Beepeevoy 3 form (the "BP form") and Trafigura Chartering Clauses of 1 August 2005 (the "Trafigura terms"), as amended: "Beepeevoy 3 c/p plus Trafigura terms as amended 08.2005, with foll[owing] alterations/additional clauses". The claim is brought under clause 4 of the Trafigura terms, as amended in the recap. Clause 4 (which I shall call the "ITL clause") is headed "In-transit loss clause", and I set it out indicating the changes from the unamended clause:
  6. "In addition to any other rights which Charterers may have, Owners will be responsible for the full amount of any in-transit loss if in-transit loss exceeds 0.3% 0.5% and Charterers shall have the right to deduct from freight claim an amount equal to the FOB port of loading value of such lost cargo plus freight and insurance due with respect thereto. In-transit loss is defined as the difference between net vessel volumes after loading at the loading port and before unloading at the discharge port."

  7. The BP form included these terms, which I introduce with their side-notes:
  8. i) Payment of Freight:

    "Freight shall be payable immediately after completion of discharge …. Payment shall be made in US dollars … less any sum derived from the operation of Clauses 8 and 4 and 5 of Trafigura Shipping clauses 1991 …" (clause 7).
    The words that I have underlined were introduced (in substitution for reference to another clause in the standard BP form) by the Trafigura terms. It is agreed that "Trafigura Shipping clauses 1991" is intended to refer to the Trafigura terms.

    ii) Suspension of Laytime/Demurrage for Loading and Discharge:

    "Time shall not count against laytime or, if the Vessel is on demurrage, for demurrage when spent or lost:-
    (a) on an inward passage … until the Vessel is securely moored at the berth or other loading or discharging place specified by Charterers;
    (b) due, whether directly or indirectly, to breakdown, inefficiency or other cause attributable to the Vessel and/or Owners, including inability of the Vessel to pump out the cargo at the [specified] rate;
    (c) as a result of labour dispute, or strike, involving Master, officers or crew of the Vessel or tugs or pilot;
    (d) in, or in connection with, the handling of ballast …; and
    (e) in cleaning tanks, pumps and pipelines.
    Nothing herein contained shall be affected by the provisions of Clause 46."

    (Clause 20)

    iii) Exceptions:

    "The provisions of Article III (other than Rule 8), IV, IV bis and VIII of the Schedule to the Carriage of Goods by Sea Act, 1971 of the United Kingdom shall apply to this Charter and shall be deemed to be inserted in extenso herein. This Charter shall be deemed to be a contract for the carriage of goods by sea to which the said Articles apply, and Owners shall be entitled to the protection of the said Articles in respect of any claim made hereunder.
    Charterers shall not, unless otherwise in this Charter expressly provided, be responsible for any loss or damage or delay or failure in performance hereunder arising or resulting from Act of God, act of war, seizure under legal process, quarantine restrictions, labour disputes, strikes, riots, civil commotions, arrest or restraint of princes, rulers or people "
    (Clause 46)
    Here the parties incorporated the standard wording of this provision of the BP form: the Trafigura terms provided for additional words at the end of the clause, "or any other cause beyond Charterers' control", but that was overridden by the recap that said of this clause 46 "maintain as printed".

    iv) Clause Paramount:

    "This Bill of Lading shall
    (1) In relation to the carriage of any goods from any port in Great Britain or Northern Ireland to any other port whether in or outside Great Britain or Northern Ireland have effect subject to the provisions of the Carriage of Goods by Sea Act 1971 and to the Rules contained in the Schedule thereto (the Hague/Visby Rules) and nothing herein contained shall be deemed a surrender by Carrier of any of his rights or immunities or an increase of any of his responsibilities or liabilities under the said Act;
    (2) In relation to the carriage of any goods from any port in a state in which legislation similar in effect to the Carriage of Goods by Sea Act 1971 of the United Kingdom is in force to any port in any other state, have effect subject to such legislation and to the Rules contained in the Schedule thereto and nothing herein contained shall be deemed a surrender by the Carrier of any of his rights or immunities or an increase of any of his responsibilities or liabilities under the said legislation;
    (3) In relation to the carriage of any goods between ports in two different states, where this Bill of Lading is issued in Great Britain, Northern Ireland or any state in which legislation similar in effect to the Carriage of Goods by Sea Act 1971 of the United Kingdom is in force have effect subject to such Act or such legislation and to the Rules contained in the Schedule thereto and nothing herein contained shall be deemed a surrender by the Carrier of any of his rights or immunities or an increase of any of his responsibilities or liabilities under the said Act or said legislation;
    (4) In any other case have effect as if the contract of carriage herein contained were a contract of carriage to which the provisions of the Carriage of Goods by Sea Act 1971 of the United Kingdom applied and the Carrier shall be entitled to the benefit of the privileges, rights and immunities conferred by the said Act and the Rules contained in the Schedule thereto as if the same were herein specifically set out.
    Notwithstanding the foregoing provisions of this Clause the Hague/Visby Rules shall not apply to this contract where the goods carried hereunder consist of cargo which by this contract is stated as being carried on deck and is so carried.
    If any term of this Bill of Lading be repugnant to the provisions of the Hague/Visby Rules such term shall be void to that extent but no further."
    (Clause 52)

    v) Law: clause 55 provided for the construction, validity and performance of the charterparty to be governed by English law.

  9. The Schedule to the Carriage of Goods by Sea Act, 1971, of course, sets out the Hague-Visby Rules. Article III includes obligations upon carriers, including an obligation, subject to the provisions of article IV, "properly and carefully [to] load, handle, stow, carry,, keep, care for, and discharge the goods carried": article III, rule 2. Article III rule 8, which was not incorporated into the charterparty under clause 46 of the BP form, provides that:
  10. "Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to, or in connection with, goods arising from negligence, fault, or failure in the duties and obligations provided in this article or lessening such liability otherwise than as provided in these Rules, shall be null and void and of no effect. A benefit of insurance in favour of the carrier or similar clause shall be deemed to be a clause relieving the carrier from liability."

    Article IV includes (at rule 2) provision that:

    "Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from … (c) Perils, dangers and accidents of the sea or other navigable waters. … (f) Act of public enemies. … (q) Any other cause arising without actual fault or privity of the carrier, or without fault or neglect of the agents or servants of the carrier, …".
  11. The issues before me, which were directed for determination by way of preliminary issues, are these:
  12. "Are the Defendants liable under the Charterparty to the Claimants for the FOB Port of Loading Value of any proven difference between the net vessel volumes after loading at the loading port and the net vessel volumes before unloading to the order of the Claimants at the discharge port, plus freight and insurance? In particular:
    [1] on a true construction of the In-Transit Loss Clause, does the Transferred Cargo discharged from the Vessel in the circumstances set out in paragraph 6 above constitute "in transit loss" or "lost cargo" for the purposes of that clause?
    and if the Transferred Cargo does so constitute:
    [2] on a true construction of the Charterparty does the In-Transit loss Clause impose strict liability upon the Defendants in respect of such Transferred Cargo, or do the exceptions of Clause 46 of the Charterparty apply to exclude that liability? [Further,
    [2.1] is there a clear and distinct inconsistency between the In-Transit loss Clause and Clause 46 of the Charterparty;
    [2.2] can the Clauses be reconciled?]"

    The dispute is about the specific issues numbered [1] and [2]. I made clear that I shall not deal with the question that I have marked by square brackets discretely, this being simply a consideration potentially relevant to other issues. Neither Mr Jeffrey Gruder QC, who represented the charterers, nor Mr Michael Ashcroft QC, who represented the owners, pressed me to do so.

  13. The charterers submit that the answer to the first issue is that on the true construction of the ITL clause the Transferred Cargo (to adopt the label used in the List of Issues) is (or perhaps more accurately occasions) "in-transit loss" or "lost cargo", and that the answer to the second issue is that the exceptions of clause 46 of the charterparty do not apply to the owners' liability under the ITL clause, and so liability under it is strict. The owners adopt the opposite position on both issues, but they need succeed on only one to defeat the claim.
  14. Commercial considerations

  15. Before coming to these two issues, it is convenient first to consider the distribution of risk between the owners and the charterers on the charterers' case. The owners submit that it would be commercially surprising if the charterers are right on both the issues of construction. I recognise that, of course, as Mr Gruder emphasised, parties are free to enter into contractual arrangements which seem surprising or uncommercial, and, as Saville J said in The "Sea Queen", [1988] 1 Lloyd's Rep 500, 502, "The starting point must be the words and phrases the parties have chosen to use. It is not a permissible method of construction to propound a general or generally accepted principle for sharing the risk … between owners and charterers or seeking in the abstract to determine a reasonable allocation of risk … and then … to seek to force the provisions of the charter into the straightjacket of that principle or into that concept of reasonableness". But equally, if apparently improbable commercial consequences flow from an interpretation of contractual wording and another is properly available, the court takes account of this:
  16. "The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasonable the result, the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear":

    Wickman Machine Tools Sales Ltd v Schuler AG, [1974] AC 235, 251 per Lord Reid.

  17. On the charterers' case the ITL clause would make the owners strictly liable for loss of cargo, and this is unusual in a charterparty. In The "Golden Leader", [1980] 2 Lloyd's Rep 573, 575 Lloyd J said that it was "almost unheard of" for owners to accept absolute liability for cargo loss in a charter, and I do not believe that the position has changed since 1980. Lloyd J made another relevant observation in his judgment: as here, the charter before him required the owners to issue bills of lading subject to the Hague Rules, and he said (at p.575): "The owners would … have the benefit of The Hague Rules exceptions if sued under the bills of lading. I can think of no conceivable business reason why, in those circumstances, they should be under an absolute liability if sued by the charterers."
  18. The charterers' interpretation of the ITL clause would have other surprising results in that the owners would be strictly liable only in respect of differences between vessel measurements after loading and before discharge. Therefore (to refer to just two resulting anomalies):
  19. i) The owners would be strictly liable for loss of cargo, but not for damage to it.

    ii) The owners would be strictly liable for apparent loss occurring between the two measurements, but not if the loss occurred before the earlier measurement (say, during loading) or after the later one (say, during discharge), or if the second measurement was not made (say, because the vessel sank with her cargo).

    The first issue

  20. In essence, the charterers submitted on the first issue that there was a difference between the net vessel volume after loading and the net vessel volume before unloading at the discharge port; that therefore there was an "in-transit loss" and "lost cargo" within the meaning of the ITL clause; and that the clause provides that the owners are responsible for it and the charterers have a claim for it, measured as there provided. In his skeleton argument Mr Gruder argued that the definition of "in-transit loss" in the second sentence of the ITL clause covers the Transferred Cargo, but in his oral submissions he also argued that, even if the definition is not conclusive in the charterers' favour, in any event the Transferred Cargo occasioned an "in-transit loss" or was "lost cargo". Mr Ashcroft advanced two submissions in response: first, he contended that "in-transit loss" covers only loss that occurs "as a direct result of the transit, for reasons internal to the transit, during the course of a routine/ordinary voyage". He relied on Mr Gretton's evidence in support of this. Secondly, he submitted that in any event the clause does not apply when, as here, cargo has been discharged from the vessel before she arrived at her discharge port.
  21. Mr Gruder's first argument about the proper meaning and effect of the second sentence of the ITL clause raises the question whether it defines how the amount of "in-transit loss" is determined or whether it gives an exhaustive definition of in-transit loss, that is to say whether it stipulates a condition that is sufficient for loss to be "in-transit loss" within the meaning of the clause. I consider either interpretation possible as a matter of the ordinary meaning of the words, but, to my mind, they are more naturally understood as specifying how the amount of in-transit loss or lost cargo is determined in that the definition is expressed by reference to an amount (the "difference" between two measured volumes), and not by reference to the loss itself (for example, to "any loss evidenced by the difference …"). Thus the second sentence provides the second part of the formula for measuring the compensation for in-transit loss, the first sentence having said that it is calculated by reference to the FOB port of loading value.
  22. If this be so, the ITL clause does not specify the kinds of loss that qualify as "in-transit loss", and the court will give the expression its natural business sense, that is to say (in the words of Lord Bingham in The "Starsin", [2004] AC 715 para 10) "that which businessmen, in the course of their ordinary dealings, would give to the document". Here Mr Ashcroft relied on Mr Gretton's evidence, but it only confirms what I would in any case understand by the expression. As Parker J explained in The "Olympic Brilliance", [1981] 2 Lloyd's Rep 176, 178, the commercial background to provisions of this kind is that "claims for shortage on the carriage of large quantities of oil are frequent occurrences. It is part of the practice in the trade generally to recognise that there is no absolutely correct measurement and to make allowances of about ½ per cent to account for discrepancies which inevitably take place when measurements are made". In the Court of Appeal Kerr LJ (at [1982] 2 Lloyd's Rep 205, 209) gave a fuller explanation:
  23. "… the ascertainment of any short delivery after a normal voyage is notoriously difficult in the bulk carriage of oil.  It depends on complex calculations comparing the quantity apparently loaded with the quantity apparently discharged, with some additional allowances for undischargable quantities of sediment and for oil remaining in the ship's lines, and also possibly for apparent losses due to evaporation.  At the end of the day, as in the present case, there may remain an apparent, but inexplicable, short delivery.  Such disputes are commonplace, and they are strikingly illustrated by the unexplained disparity of 2420 tonnes in the present case, albeit that this was less than 1 per cent. of the total cargo.  Accordingly what the charterers contend is that the object of cl.7 was that it was designed for a normal voyage in circumstances where the charterers have a refinery at a discharging port mentioned specifically in the charter, as in this case, with consequently little likelihood of negotiation of the bill of lading, and that the clause did not contemplate some major casualty …."

    In-transit loss clauses seek to cut through these difficulties: they stipulate a cut-off point above which the owners may not explain or excuse differences in volumetric measures simply on the basis that they reflect such incidents of carriage (or transit) that are not attributable to fault on their part. It might be that contrariwise they also provide a cut-off point below which the charterers cannot present a claim for lost cargo simply on the basis of a difference between volumetric measures, but that question does not arise in this case and I say nothing about it in relation to the ITL clause in this case or more generally.

  24. This being the commercial background to provisions of this kind, it seems to me that such expressions as "in-transit loss" connote loss that is incidental to the carriage of oil products, and does not extend to losses such as those that occurred in this case because of the action of the pirates. It would follow that if the charterers are correct the heading to the in-transit loss clause would be misleading in that it would cover, and put the owners under strict liability for, losses very different from those generally understood by the expression. Mr Gruder accepted that the headings may, and I would add should, be considered when interpreting the charterparty, and this is further support for the owners' interpretation.
  25. I recognise that the limits of "in-transit loss" that I have described are not precisely defined: it is easy to imagine uncertainties about whether particular losses would fall within the expression. Mr Gretton's evidence illustrated this: he said that in general terms the oil industry considers that there are two kinds of "in transit losses", namely:
  26. i) "The inevitable/unavoidable difference between the volumes of a liquid as measured at 2 separate occasions (load and discharge port(s))". He referred in this context to measurements differing because of temperature, as well as to differences attributable to how the measurements are taken and to evaporation.

    ii) "Physical loss due to causes internal to the ship/owners". He gave as examples cargo leakage into ballast tanks or the void spaces between a vessel's double hull, and losses attributable to a jammed pressure release valve causing excessive cargo venting.

    The second category is less readily seen as directly incidental to carriage of oil than the first. Further, Mr Gretton said in his report that in-transit loss clauses do not cover "external interventions and fortuities that would generally be expected to be covered by a Marine All-risks insurance policy", but in cross-examination Mr Gruder demonstrated, and Mr Gretton accepted, that losses that the industry would regard as "in-transit losses" do not fully correspond with those generally covered by such insurance. (For example, he said that there would be in-transit loss if owners used cargo as bunkers or caused loss through errors in operating the valves, but did not know whether such losses would usually be covered by charterers' insurance.) At most, the usual scope of charterers' insurance provides only a rough rule of thumb about what is "in-transit loss".

  27. However, I do not have to determine in this case such uncertainties about quite what is and what is not covered by the expression "in-transit loss" as a matter of general trade usage (and in the charterparty that I am considering). Loss from the pirates' activities clearly is not covered. Nor do I accept that because of such uncertainties the parties must have intended the expression to be fully defined by the second sentence of the ITL clause.
  28. The second issue

  29. If I am right about the first issue, the second issue does not arise in respect of the Transferred Cargo, but I shall consider, on the basis that I am wrong and the loss of the transferred Cargo is in-transit loss, whether liability under the ITL clause is strict or whether it is subject to the exceptions in clause 46. Mr Gruder submitted that it is strict because the ITL clause, being a term amended by the parties, should prevail over clause 46; because clause 46 is not a clause paramount and the ITL clause was intended to confer on the charterers benefits that they would not otherwise have had under the charterparty; and because they include the benefit that the owners are "responsible" for in-transit losses.
  30. Generally, as Mr Gruder submitted, where there is a conflict between contractual terms that the parties have negotiated and standard terms, more weight is given to the negotiated terms. I doubt whether this principle is applicable here: Mr Gruder characterised clause 46 as "merely a standard proforma term", but the parties had apparently considered clause 46 in their negotiations because the recap stipulated that the amendment which would have been introduced by the Trafigura terms should not be made and that clause 46 should be "maintain[ed] as printed". But in any case, as I shall explain, I do not see a real conflict between the ITL clause and clause 46.
  31. Clause 46 is not a clause paramount: Mr Ashcroft did not submit that it is. Clause 46 itself states that article III rule 8 of the Hague-Visby rules is not applicable to the charterparty; unlike clause 52, clause 46 is not described as paramount; and the ITL clause states that its provisions are "In addition to any other rights which the Charterers may have". However, in my judgment the second issue is not answered simply because the ITL clause provides that the owners be "responsible" for "any claim" in respect of in-transit loss: that is about who is responsible, but says nothing about the nature of the responsibility. I do not accept that the word "responsible" in itself necessarily means strictly responsible (any more than in The "Eternity", [2008] EWHC 2480 (Comm) where David Steel J considered a clause that owners "undertake" that a vessel had equipment necessarily imported an absolute undertaking).
  32. As I have said, absolute undertakings by owners are unusual in charterparties, but parties are entitled to agree to them. Mr Gruder contended that they have done so here. He submitted that, if the ITL clause is given the owners' interpretation, it adds nothing of value to the charterers to the rights that they would in any event have under the charterparty, and so is "emasculated" (a dramatic metaphor itself almost neutered through legal repetition): that article IV of the Hague-Visby Rules would always protect the owners and negate any benefit that a claim falls under the ITL clause. If this is so, it would, I accept, indicate that the parties intended the ITL clause to import strict liability: the court should seek an interpretation of the charterparty as a whole which gives consistent and harmonious effect to all its terms. But I do not think that this is the implication of the owners' interpretation. First, the ITL clause allows the charterers to rely upon the difference between measurements to establish conclusively that cargo has been lost, provided that the difference exceeds 0.5%. Secondly, it allows the charterers to recover for in-transit loss so established by reference to the FOB value port of loading value (plus freight and insurance) (i) regardless of market value (which would otherwise be the measure of compensation) and (ii) regardless of whether they had rights of ownership, immediate possession or under bills of lading.
  33. However, Mr Gruder had another argument with which I should engage. It starts with the decision in The "Olympic Brilliance" (cit sup), which was about a clause allowing charterers to deduct from freight in respect of short delivery if there was more than 0.5% difference between the amount of cargo recorded on the bills of lading and the delivered cargo as ascertained by the Custom Authorities at the discharging port. The issue was whether the clause (clause 7 of the charterparty) allowed the charterers to make a permanent deduction from freight or only to withhold freight as security for claims for short delivery. It was held (by Parker J and in the Court of Appeal) that it allowed permanent deduction, and the courts rejected an argument of the owners (represented by Mr Stewart Boyd QC) that were superficially similar to a point made by Mr Ashcroft. Eveleigh LJ explained it (at [1982] 2 Lloyd's Rep 205, 207):
  34. "Mr. Boyd enumerated a number of anomalies, or inconsistencies, which he said would result if the charterers were not accountable in any way subsequently for the sum deducted. He said that, properly read, cl.7 is in effect a retention clause allowing charterers to retain the particular amount against a future determination of owners' liability for short delivery. Among the anomalies which he mentioned was that this clause, construed in the way contended for by the charterers, would amount to imposing absolute liability upon the owners, and yet Part II of the charter-party incorporated The Hague Rules, which rules provided defences for the owners; so that the effect of cl.7 would be to impose a liability when, in accordance with Part II, the owners would not be liable. Mr. Boyd said that consistency requires the Court to construe cl.7 in the way that he submitted; …".

    Eveleigh LJ was not persuaded by Mr Boyd's arguments (loc cit at p.208):

    "The absurdities, or inconsistencies, of which Mr. Boyd speaks are only seen as such if we assume that cl. 7 is designed to deal with liability for loss; then of course the conflict with The Hague Rules would be apparent. But in my opinion cl.7 deals with freight. Nowhere in the Hague Rules, or in the charter-party, is freight dealt with, except in cl.21, and that deals with the owners' lien for freight, and it is in the printed form. It does not apply to this case, where freight is only due after discharge….".

    Stephenson LJ agreed with Eveleigh LJ's reasoning, and, although his judgment is less explicit, I do not understand Kerr LJ to have disagreed.

  35. Mr Ashcroft therefore contended that the judgments in The "Olympic Brilliance" support the owners' contentions in this case: he submitted, and I accept, that the implication of the passage of the judgment of Eveleigh LJ that I have cited is that, had the clause provided not only for a deduction from freight but (as in this case) for a claim for short delivery, he would have seen force in Mr Boyd's arguments about so-called absurdities and inconsistencies. But this does not meet Mr Gruder's point: he submitted that in this case the parties incorporated into their charterparty the Trafigura terms, albeit subject to amendments, and the proper approach to interpreting the amended ITL clause is (i) to recognise that, had the parties incorporated the unamended clause, it would have been given a similar interpretation to the clause in The "Olympic Brilliance", and then (ii) to consider what intention the parties evinced when they amended the clause; and that, accordingly, the parties, in accepting the Trafigura clauses, adopted a clause that would have allowed the charterers to deduct from freight for lost cargo regardless of whether the owners would otherwise be liable for it, and to that extent imposing strict liability on the owners. They then amended the ITL clause (as shown at para 4 above) by way of:
  36. i) Increasing, to the advantage of the owners, the proportion of the cargo that was to be lost (according to the vessel readings) to trigger claims to over 0.5%; but

    ii) Giving the charterers greater rights if more than 0.5% of the cargo was lost by allowing them not only to deduct from freight (in accordance with the amended payment of freight clause in the BP form), but also to make a claim.

    The parties are not to be taken, Mr Gruder argued, to have intended when agreeing upon those changes to the standard Trafigura clause to have abandoned the strict nature of the owners' responsibility for the loss. After all, if their responsibility is not strict in the context of a claim under the ITL clause, then (as Mr Ashcroft accepted) neither is it strict in the context of a deduction under the payment of freight clause, notwithstanding The "Olympic Brilliance".

  37. Mr Gruder presented the argument attractively, but I cannot accept it. It invites the court to approach the interpretation of the ITL clause by examining what the parties intended by the amendments to the standard Trafigura clauses. This is not, I think, the proper "unitary exercise" that Lord Clarke explained in The "Rainy Sky", [2011] UKSC 50 at para 21. Instead, it involves an examination (on an assumed basis, and on which evidence would not be permitted) of how the contract was negotiated. After all, there is no reason to suppose that the parties ever contemplated a charterparty incorporating the unamended Trafigura terms and then negotiated amendments, and it is wrong to interpret the charterparty on the basis that they did. Furthermore, adopting Mr Gruder's approach and, as he urged, taking the contracting parties to have known what was said in The "Olympic Brilliance", they must be taken to have known that, by agreeing that the charterers might claim under the ITL clause, they were agreeing to a term under which strict liability would give rise to inconsistencies and absurdities; and therefore to have intended that the owners' responsibility under the clause should not be strict.
  38. I reject the charterers' contention that the ITL clause imposes strict liability in respect of the Transferred Cargo: the owners' responsibility is subject to the exceptions in clause 46. Clause 46 provides that the owners are entitled to the protection of the relevant articles of the Hague-Visby Rules "in respect of any claim made" under the charterparty, and there is no good reason to limit the natural meaning of "any claim" by excluding claims under the ITL clause. When this was intended (in clause 20 of the BP form), this was made explicit.
  39. Contra proferentem

  40. I therefore uphold the owners' contentions on both issues. I do so without resort to the principle of interpretation contra proferentem, which Mr Ashcroft invoked. Mr Ashcroft submitted that the charterers are the proferens both in that the ITL clause derives from the charterers' standard terms and in that the charterers are asserting a claim based on it. I am not persuaded that the charterers are the preferens in contrahendo: the parties did not adopt the charterers' standard ITL clause but adjusted it, and I am not convinced (and Mr Ashcroft produced no authority) that the principle of construction applies in these circumstances. I accept that the owners can properly invoke the principle on the basis that the charterers are proferens coram iudice, but they need not rely on what was described in The "Olympic Brilliance" as "usually a rule of, if not last, very late resort" (per Eveleigh LJ, loc cit at p.208).
  41. Mr Gretton's evidence

  42. I have referred to Mr Gretton's evidence in paragraph 16 above in order to explore whether it might assist the charterers, although Mr Gruder contended that his evidence was wholly or largely inadmissible. He submitted that the only part of Mr Gretton's evidence that might be admissible was his views about what differences in cargo measurements might be attributable to explanations such as described by Kerr LJ in The "Olympic Brilliance" (and comparable explanations such as temperature variations). Mr Gretton considered that in a well-run ship such losses should not exceed 0.3%, and therefore a fortiori certainly should not exceed 0.5%. I am not satisfied that this evidence was admissible: Mr Gretton's expertise was about commercial matters and he does not have technical expertise, and I doubt whether this evidence is covered by the permission for evidence "in relation to the alleged common understanding". However this may be, Mr Gruder sought to rely on this evidence to support his submission that on the owners' interpretation the ITL clause would be "emasculated", and I have rejected that submission for reasons unaffected by Mr Gretton's evidence. I need not further consider Mr Gruder's challenge to the inadmissibility of Mr Gretton's evidence. I do not question Mr Gretton's expertise or the reliability of his evidence, but I did not find it useful in determining the issues of interpretation.
  43. Conclusion

  44. I therefore answer the specific preliminary issues as follows:
  45. i) On the true construction of the ITL clause, the Transferred Cargo was not (and did not occasion) "in transit loss" or "cargo loss" within the meaning of the clause.

    ii) If (contrary to i)) the Transferred Cargo was (or occasioned) "in transit loss" or "cargo loss" within the meaning of the ITL clause, on the true construction of the charterparty the clause imposed liability on the owners subject to the exceptions of clause 46.

    I understand that the parties agree that therefore the answer to the more general preliminary issue is that the defendants are not liable under the charterparty, and that judgment should be entered for the defendants, but I am willing to hear further submissions about this.


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URL: http://www.bailii.org/ew/cases/EWHC/Comm/2014/129.html