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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> NYK Bulkship (Atlantic) NV v Cargill International SA [2013] EWHC 30 (Comm) (01 February 2013) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2013/30.html Cite as: [2013] EWHC 30 (Comm)

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

		The Rolls Building Fetter Lane London EC4A 1NL
		1/02/2013

B e f o r e :

MR JUSTICE FIELD
____________________

Between:

	NYK Bulkship (Atlantic) N.V.	Claimant (Owners)
	- and -
	Cargill International S.A.	Defendant (Charterers)

____________________

Timothy Young QC (instructed by Maritime Law Office Skinitis) for the Claimant/Owners
Andrew W Baker QC and Daniel Bovensiepen (instructed by Holman Fenwick Willan LLP) for the Defendant/Charterers
Hearing date: 16 November 2012
____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

Mr Justice Field :

1. This is an appeal under s.69 of the Arbitration Act 1996 ("the Act") which is concerned with the meaning and effect of an off-hire clause contained in a time charter dated 11 September 2008 made on amended NYPE terms.
2. Under the Charterparty, the Claimant ("NYK"), as disponent owners, chartered "Global Santosh" to the Defendant ("Cargill") for one time charter trip from Sweden to West Africa. Cargill sub-chartered the vessel to Sigma Shipping Ltd ("Sigma") by way of a voyage charter. The cargo was one of six shipments of cement sold by Transclear SA ("Transclear") to IBG Investment Ltd ("IBG") on C&FFO terms under a contract of sale dated 14 December 2007. IBG were named as the notify party on the relevant bill of lading, which also specified the discharge port as "Port Harcourt (Ibeto Jetty)". Pursuant to the "FO" ("free out") part of the sale terms, IBG were responsible for the unloading of the cargo. IBG were also liable to pay Transclear demurrage if unloading of the cargo was delayed. It seems reasonably clear that Transclear were also a sub-charterer under a voyage charter but whether by way of charter from Sigma or by a more indirect route is not apparent.
3. The vessel arrived at Port Harcourt on 15 October 2008 but was held at anchor due to congestion caused in part by the breakdown of IBG's unloader. On 18 December 2008 she was called in to berth but she was sent back because, on the previous day, Transclear had obtained an Arrest Order made by the Federal High Court of Nigeria on the cargo to secure a claim for demurrage against IBG for US$1,560,000 for the period 24 October 2008 to 15 December 2008. Under this order, any interference with or attempt to remove the cargo from the vessel was prohibited. By an obvious mistake, the order also named the vessel as the object of the arrest. Following an agreement in respect of demurrage and a subsequent court order authorising the cargo's release, discharge of the cargo began on 15 January 2009 which was completed on 26 January 2009.
4. Cargill withheld hire for the period unloading was prohibited by the Arrest Order on the ground that the vessel was off-hire pursuant to clause 49 of the Charterparty, a period off-hire clause, which provided:

Should the vessel be captured or seizured (sic) or detained or arrested by any authority or by any legal process during the currency of this Charter Party, the payment of hire shall be suspended until the time of her release, unless such capture or seizure or detention or arrest is occasioned by any personal act or omission or default of the Charterers or their agents. Any extra expenses incurred by and/or during the above capture or seizure or detention or arrest shall be for Owners' account.

5. In the ensuing arbitration before a Tribunal of three arbitrators, NYK contended that the seizure and/or detention of the vessel as a result of the Arrest Order was occasioned by the personal act or omission of IBG and/or Transclear who were agents of Cargill and accordingly the proviso to clause 49 applied. In support of this contention, NYK relied on the approach taken by Rix LJ in The Doric Pride [2006] 2 Lloyd's Rep 175 based on the line drawn within the charter between matters which are the owner's responsibility and matters which are the charterer's responsibility. In NYK's submission to the Tribunal, the expression "agents" in clause 49 included sub-charterers (whether or not they were sub-contractors) and receivers performing Cargill's obligations as Charterers, including in particular the obligation of discharge. IBG as receivers of the cargo were accordingly Cargill's agents in respect of unloading the cargo and the arrest of the vessel had been occasioned by IBG's failure: (i) to unload within the stipulated time (due in part to the breakdown of their unloader), thereby giving rise to Transclear's demurrage claim; (ii) to pay the resulting demurrage; and/or (iii) to secure Transclear's demurrage claim.
6. NYK further contended that Transclear as a sub-charterer was also Cargill's agent in respect of unloading the cargo and the Arrest Order was occasioned by Transclear's procuration of that order to secure its demurrage claim.
7. The majority of the Tribunal rejected NYK's argument that the arrest of the vessel fell within the proviso to clause 49. Although at an earlier point in their reasons they recited NYK's argument as set out above, when they came to give their reasons for rejecting NYK's case on clause 49 they made no mention of NYK's argument founded on IBG being the relevant agent. Instead, they concentrated on the further and alternative submission that the arrest had been caused by the personal act or omission of Transclear as Cargill's agent.
8. In paragraph 41 of their reasons the majority cited part of the definition of Agency at para 1-001 of Bowstead on Agency (19^th ed)^[1] and concluded that there was no evidential basis on which they could find that Cargill expressly or impliedly consented to Transclear detaining or arresting "GLOBAL SANTOSH" or her cargo. In paragraph 42, they found that there was no evidence that Transclear was performing Cargill's obligation to load or discharge, and, if it was so acting, it was not doing so as Cargill's agent but as its sub-contractor or sub-sub-contractor. Further and in any event, in arresting the vessel or her cargo, Transclear was not acting as Cargill's agent but on its own behalf: Transclear had a claim for demurrage against IBG but Cargill did not. Rix LJ's approach in The Doric Pride was applicable to a different proviso to the one in issue in the instant case and was therefore not helpful in construing the words "occasioned by any personal act or omission or default of the Charterers or their agents".
9. In this appeal, Mr Young QC for NYK advanced essentially the same case as he advanced in the arbitration. He drew attention to the standard liberty in the charter to sublet on terms that the charterer will remain responsible for the fulfilment of the charter and to the many provisions that contemplated the parties acting by agents. These latter provisions included: (i) the liberty that Charterers or their agents could direct in which lawful trades between safe ports the vessel was to be employed; (ii) the payment of cash advances by Charterers or their agents; (iii) loading or discharge at any safe berth or place directed by Charterers or their agents; (iv) the signing of bills of lading by the Charterers' agents (clause 59); (v) the obligation on Owners to furnish Charterers, their agents or supercargo, when required, deck and engine logs; (vi) the obligation on Charterers not to suffer or permit to be continued any lien or encumbrance incurred by them or their agents that might have priority over the title and interest of Owners; (vii) Owners to appoint agents to attend to all Owners' matters and Charterers' agents to attend to such matters if Owners are unable to attend to such matters (clause 42); (viii) delay, expenses and/or fines incurred on account of smuggling to be for Charterers' account if caused by Charterers' supercargo and/or their staff or agents (clause 50); and (ix) Charterers to keep Owners informed as regards the itinerary of the vessel and names of their agents at port of call.
10. Mr Young also relied on the Court of Appeal's opinion in The Mediolanum [1984] 1 Lloyd's Rep 136 at 140, that a refinery with whom the charterers had made an arrangement to supply bunkers was the charterers' agent for the purpose of the charterers' obligation to provide fuel even though the refinery was in the position of an independent contractor.^[2]
11. In Mr Young's submission, construing the proviso in clause 49 in the context of the Charterparty as a whole, parties such as sub-charterers or sub-sub-charterers or receivers to whom Cargill, by subletting the vessel, had delegated or sub-delegated the performance of its responsibilities under the Charterparty, were Cargill's agents for the purposes of the proviso. This was so, irrespective of the precise contractual relationship existing between the delegate and the party above him in the contractual chain. Accordingly, it mattered not that under this contractual relationship the delegate was a sub-contractor or an independent contractor or was employed to provide services under the direction of the counterparty.
12. As he had done in the arbitration, Mr Young relied on Rix LJ's observations in the Doric Pride (above). There, a time chartered vessel on an amended NYPE form was prohibited for five days from entering the lower Mississippi by the US Coast Guard on the ground that it was a "High Interest Vessel" for the purposes of security procedures enacted in the wake of the 9/11 terrorist outrage. The charterers contended that the vessel was off-hire for this period pursuant to clause 85 of the charterparty which was essentially in the same terms as clause 49 in the instant case, save that it contained the words "or by reason of cargo carried or calling port of trading under this charter" by way of an additional proviso. The owners contended that this was a case of detention by reason of calling port of trading. Rix LJ observed^[3] that within the express wording of various clauses in the charterparty a basic distinction is made between those matters which lie upon the owners' side of responsibility and those matters relating to the charterers' employment of the vessel for trading purposes. Examples of such clauses were clause 2 that provided that whilst the vessel was on hire the charterers were obliged to pay port charges and clause 84 under which normal quarantine time and expenses were for charterers' account but any quarantine time and expenses due to pestilence or illness of the master, officers and crew were for owners' account^[4]. Rix LJ then asked on which side of the line of either owners' responsibility or charterers' responsibility did the facts of the case fall. Did they fall on owners' side of responsibility because the problem lay with the vessel's status or did they fall on the charterers' side of responsibility because the problem lay with the trading of the vessel by charterers to New Orleans?^[5] And in asking that question, one had to ask why were the US authorities invoking their legal powers.
13. Mr Young submitted that pursuant to Rix LJ's approach the court should discern without any particular preconceptions how the dividing line of responsibilities has been drawn and should ask why was there a demurrage claim. It should then answer that question in this way: because IBG, at the end of the chain of Cargill's delegates of the duty to discharge, omitted to discharge the cargo; instead, they kept the vessel waiting at anchor, in part because their unloader was not working, and then failed to pay or secure the demurrage that accrued under their sale contract with Transclear. The demurrage claim was accordingly occasioned by the acts or omissions of IBG and the Arrest was likewise occasioned by the acts or omissions and/or default of IBG in that the Arrest was in aid of the demurrage claim which had not been paid or secured by IBG.
14. Mr Young further argued that the Arrest was occasioned by the acts of Transclear who was also Cargill's agent for the purposes of the proviso because it was a sub-delegate of Cargill to carry out the responsibility of discharge as a result of Cargill's employment of the vessel. It had that responsibility by virtue of its contract with Sigma (or whomsoever) and it had secured the performance of its discharge obligations by contracting with IBG on C&FFO terms.
15. However, Mr Young made it clear that his primary case was founded on the acts, omissions and default of IBG. The case founded on the acts of Transclear as Cargill's agent was "icing on the cake".
16. Mr Baker QC for Cargill advanced two broad propositions: (i) the proviso in clause 49 refers to acts, omissions or defaults committed by or on behalf of the charterers; and (ii) the arrest and detention in this case were not themselves, nor were they occasioned by, acts, omissions or defaults committed by or on behalf of the charterers. Proposition (i) was a pure matter of the construction of the wording of the proviso. Proposition (ii) involved the application of the proviso (properly construed) to the facts. These propositions, argued Mr Baker, had also been advanced in the arbitration and the majority of the Tribunal are to be taken to have proceeded on the basis that proposition (i) was correct without giving their reasons for so doing, and to have concentrated on determining whether the parties whose conduct was the focus of NYK's argument were acting on behalf of the charterers in doing what they did. The majority concluded that in doing what they did those parties were not performing any obligations of the charterers and had rightly treated this as sufficient to dismiss NYK's claim.
17. Mr Baker did not argue that a sub-charterer or some other delegate or sub-delegate who is responsible for performing the responsibilities of the charterer under the charterparty in question cannot be an agent of that charterer for the purposes of the clause 49 proviso. Instead, the burden of his submission was that the act or omission or default must have occurred in the course of the performance by the delegate of the delegated task, for otherwise the delegate will not having been acting on behalf of the charterer and for that reason he would not have been an agent of the charterer for the purposes of the proviso.
18. Mr Baker relied on The Vestland [1980] 2 Lloyd's Rep 171, The Mozart [1985] 1 Lloyd's Rep 239, The Adelfa [1988] 2 Lloyd's Rep 466 and The Andra [2012] 1984 (Comm) for providing indirect authority for his approach to the proviso. However, I found these authorities to be of little assistance because the question in each was not the effect of an off-hire clause but whether, in the first two cases, the charterer was in breach of a positive obligation imposed on him by the charter and, in the latter two cases, whether the charterers had made out a case of frustration.
19. The proviso in the off-hire clause in issue in The Doric Pride was quite different from the proviso that features in this case. The question there was whether the detention of the vessel resulting from the actions of the US Coast Guard was "by reason of …. calling port of trading", and one can, with respect, readily see the cogency of Rix LJ's enquiry as to whether the detention of the vessel was because of something on the owners' side of responsibilities or because of something on the charterers' side of responsibilities. In the instant case, however, the court has to determine the meaning and effect of the words "occasioned by any personal act or omission or default of the Charterers or their agents." In my judgement, construed in the context of the Charterparty as a whole, including the many provisions that contemplate the charter being operated by each of the parties through "agents", the proviso is not limited to cases where parties who are specifically instructed by the charterers to carry out functions that are the charterers' responsibility "occasion" a capture, seizure, detention or arrest of the vessel. In short, I accept Mr Young's submission that parties such as sub-charterers or sub-sub-charterers or receivers to whom Cargill, by subletting the vessel, had delegated or sub-delegated the performance of its responsibilities under the Charterpary can be Cargill's agents for the purposes of the proviso, irrespective of the precise contractual relationship existing between the delegate and the party above him in the contractual chain. However, I also accept Mr Baker's submission that the proviso will only apply where the act or omission or default of such a delegate occurs in the course of the performance by the delegate of the delegated task. Mr Young argued that it was enough for there to have been an act, omission or default by a delegate of the charterer which is causally linked to the capture, seizure, detention or arrest of the vessel. After due consideration, I reject this submission and accept that of Mr Baker because the object of the proviso is to attribute to the charterers responsibility for the acts, omissions or defaults of others and I think that in adopting the word "agent" the draftsman intended that there should be a closer causal relationship between the act, omission etc and the charterer than that contended for by Mr Young.
20. In my judgement, Transclear's arrest of the cargo and (by mistake) the vessel was not an act done by Transclear as part of carrying out any responsibility delegated to it by Cargill. Accordingly, whilst the majority erred in rejecting NYK's claim based on Transclear having been Cargill's agent on the ground that Transclear was acting as a subcontractor rather than an agent, they did not err in rejecting this claim on the ground there was no evidence that Transclear was performing Cargill's obligation to discharge.
21. What of that part of NYK's case that the majority failed to consider, namely the contention that the arrest of The Global Santosh was occasioned by the act, omission or default of IBG? Resolution of this issue involves the determination of the following questions: (i) Did the acts omissions and defaults of IBG relied on by NYK occur whilst IBG was under an obligation as a delegate of Cargill to unload the vessel so that they (or any of them) can be said to have occurred in the course of IBG's performance of that obligation? (ii) To the extent that the answer to (i) is yes, did the act, omission and/or default in question "occasion" the arrest of The Global Santosh at the material time?
22. As already recorded, the acts, omissions and/or defaults of IBG relied on by NYK are IBG's failure to unload the cargo within the lay days stipulated in the sale contract with Transclear and the subsequent failure to pay the resulting demurrage and/or to provide security. Clause 8 of the Charterparty provides "Charterers are to perform all cargo handling at their expense …." and Mr Baker argued that none of the alleged acts, omissions or defaults relied on occurred in the course of "cargo handling" and therefore none occurred in the course of performance of the delegated task of cargo handling. In support of this submission, he relied on The Jalagouri [2000] 1 Lloyd's Rep 515 where it was held by the Court of Appeal, upholding Rix J, that provision of security to the port for the cost of storing damaged cargo which had been unloaded from a vessel time chartered on the NYPE form was for the account of owners since under Clause 8 charterers had to meet the expense of cargo handling which did not extend to ensuring that a third party did not prevent cargo handling from being performed.
23. Mr Baker's submission was very attractively advanced but I am unable to accede to it. IBG became Cargill's delegate of the obligation to unload under clause 8 by reason of the sale contract, including its demurrage provisions and in my judgement, for the purposes of the Clause 49 proviso, the failure to unload within the lay days was an act, omission or default that occurred in the course of performing the obligation to discharge as delegated to it by Cargill. It was Cargill after all who set in train the process of delegation and gave delegating parties a free hand to agree terms with delegates. I am also of the view that IBG's failure to pay demurrage or to secure Transclear's claim occurred in the course of IBG's performance of IBG's delegated task because IBG's obligation to carry out the process of unloading included the obligation to meet all necessary expenses to clear obstacles to performing that task that resulted from IBG's own failure to get on and unload the cargo.
24. Did the failures to unload within the lay days and to pay the resulting demurrage or provide security "occasion" the arrest of The Global Santosh? In my judgement, the words "occasioned by" import a notion of causation which is broader than the concept of "the effective cause" (as contended for by Mr Baker) but is not so broad as to include "but for" causation. Instead, the causal relationship between the act, omission or default with the postulated clause 49 event (seizure, detention etc) has to be such that it can be said as a matter of commercial common sense that the latter was caused by or brought about by the former.
25. Mr Baker submitted that, since the arrest of The Global Santosh (as distinct from an order directed at the cargo) was the result of mistaken and wrongful conduct on the part of third parties, it was too plain for argument that the arrest was not occasioned by the postulated acts, omissions and defaults of IBG. I reject this submission. In my judgement, it is plainly arguable that the failure to unload within the lay days caused the claim for demurrage and, of itself and/or in combination with the failure to pay demurrage and/or security, caused the subsequent application to the court and thereby caused the mistaken arrest of the vessel.
26. Mr Baker argued that if I answered question (i) in the affirmative and went on to reject his submission that it was beyond argument that the matters relied on by NYK did not cause the arrest, I should remit the question of causation to the Tribunal. Whether I should accede to this proposal involves the exercise of a broad discretion conferred by s. 69 (7) of the Act which provides that on appeal under s. 69 the court may: (a) confirm the award; (b) vary the award; (c) remit the award to the tribunal, in whole or part, for reconsideration in the light of the court's determination; or (d) set aside the award in whole or in part. Mr Young on the other hand contended that I should decide the question of causation because: (i) all the relevant facts for determination of the issue had been determined by the tribunal and were not the subject of challenge; (ii) the issue was a straightforward one; and (iii) there was likely to be an appeal to the Court of Appeal on the matters of law the court was deciding and a decision on the causation issue would ultimately speed up the final resolution of the dispute.
27. In the event, I have decided with some hesitation to remit the question of causation to the Tribunal. I have come to this view because I have held that causation in this case is a matter of commercial common sense and the Tribunal, being three commercial men conversant with shipping matters^[6], are very well placed to determine it.

Note 1   The“fiduciary relationship which exists between two persons, one of whom expressly or impliedly consents that the other should act on his behalf so as to affect his relations with third parties, and the other of whom similarly consents so to act or so acts.” (The definition contains the word “manifests” after “impliedly” but the omission of this word by the majority does not affect the substance of the words quoted.)    [Back]

Note 2   This agency did not, however, extend to indicating or selecting the ultimate place to which the vessel was to proceed for bunkering.    [Back]

Note 3   Para 33    [Back]

Note 4   Further examples of such clauses those providing that fines originating from the master, officers and crew contravening local port regulations were to be for Owners’ account and fumigations ordered because of cargoes carried or ports visited while the vessel is employed under the charter were to be for Charterers’ account.    [Back]

Note 5   Para 35    [Back]

Note 6   As required by the arbitration agreement contained in clause 17 of the Charterparty.     [Back]