Naming Of Ports and Safe Port Warranty - Recent Decisions

Steamship Mutual

Published: September 01, 2007

Introduction

The High Court has recently considered in quick succession two cases relating to the impact of an express safe port warranty where the port is named in the charterparty.

The position following these two cases, which are considered in detail below, is that where a charterparty includes a named port and a safe port warranty, the risk of safety is on the charterers.

The position is not finally settled as the AIC Limited case is the subject of an appeal.

AIC Limited v Marine Pilot Limited [2007] EWHC 1182 (Comm)

Background

The vessel was due to load at Ventspils. The Asbatankvoy charterparty contained an additional clause which stated; “Load one safe port Ventspils. Discharge 1/2 safe ports United Kingdom Continent Bordeaux/Hamburg range.” The vessel could not load a full cargo and sail, because of draft restrictions in force at Ventspils due to the weather and the necessity to dredge the channel. The vessel loaded up to her maximum draft and sailed.

At arbitration, the Tribunal were asked to determine a number of preliminary issues, including whether or not there was a safe port warranty and whether a port could be legally unsafe in these circumstances.

The Tribunal concluded that; (1) the charterers had warranted the safety of the loadport; and (2) a port could be unsafe because of a need for lightering to get into or out of it notwithstanding that it was not ‘unsafe’ in the ordinary usage of the word.

The appeal

The charterers appealed to the High Court on, amongst others, the findings of the Tribunal in relation to the safe port warranty. The relevant points for determination by the High Court were framed as follows:-

1. Whether the wording in the Charterparty, referring to the sole loadport as “1 safe port Ventspils”, constituted a warranty by the Charterer of the safety of the port, as opposed to an agreement by both parties that the port was safe; and

2. Whether features of a loadport which might mean that a vessel “could not proceed to, load the contractual cargo and depart from the port” by reason of a draft restriction as a matter of law render the port prospectively unsafe”.

In relation to the first question, the charterers submitted that there was no warranty of safety in this case because Ventspils was a known port and the Owners took the risks of a named port. The wording ‘one safe port’ was nothing more than an agreement between the parties that the port was safe and the obligation in this case was on the owner to satisfy itself as to the safety of the port.

The High Court decision

Mrs Justice Gloster agreed with the Tribunal and found against the charterers on both of points 1 and 2. She made the following points in support of her decision;

1. It was common ground between the parties that the term appearing in the charterparty in relation to the vessel’s discharge “1/2 safe ports in the UK Continent Bordeaux/Hamburg range” (i.e. a range rather than a single named port) involved a safe port warranty by the charterer of the discharge port. The charterer’s construction required the words ‘safe port’ to mean something differently depending on whether they are being read in the context of the loading port or the discharge port.

2. The charterers’ argument gave no effect to the words “1 safe port”, since exactly the same result would be reached (if the charterers were correct) by simply referring to Ventspils with no reference to the adjective “safe”.

3. The words “1 safe port” were not part of the standard printed form, they were expressly agreed and typed into the contract. It is well established that parties who expressly insert chosen words into standard printed terms are presumed to have agreed that those expressly chosen words are to have some effect, not no effect.

4. If the word “safe” is used in a charteparty to describe a port, whether named or unnamed, it does indeed result in the charterer warranting the safety of the port named, or subsequently nominated by him.

5. There were two previous arbitration decisions on similar points in both of which it was held that there was no warranty of safety. The first, (1986) 181 L.M.L.N 18/86, described the port as “one time charter-trip via safe port or ports and safe berths, including [named]”, and the second, (1997) 463 L.M.L.N. 11/97, described the port as “one [named] safe port”. The Judge held that the reasoning in both decisions, as reported, was unpersuasive. There was no justification as a matter of law or construction for excluding the operation of an express term that provides that a port is safe, simply because it is named, whether as one of a range of ports, or as a single port.

6. The Tribunal were correct in their finding that, even though the vessel could avoid any unsafety due to draft restriction by not loading the minimum cargo, the port could still be unsafe if lightering was needed to get in or out of it safely.

7. The judge agreed with the argument put forward by the owners that ‘safely’ means, ‘safely as a laden ship’.

8. There is no realistic distinction between loading and discharging. If the chartered vessel, laden with the chartered cargo, cannot undertake those operations in safety, then prima facie, there may be a breach. There is a plain danger, since the vessel would otherwise go aground.

(Update, May 2008 - see a review of the Court of Appeal decision in Named Ports, Safe Ports and Dead Freight)

The “LIVANTIA” - STX Pan Ocean Co Ltd v Ugland Bulk Transport A.S. [2007] EWHC 1317 (Comm)

Background

The parties entered into a trip time charter on an amended NYPE form. The charter was expressed to be for one trip “via St Petersburg, Baltic/Conti to the far east …”” The safe port warranty in lines 24-31 of the standard form charter was deleted, but additional clause 67, the Trading Exclusions clause, provided “trading to be worldwide between safe ports, safe berths and safe anchorages and places ….”

The vessel loaded steel coils at St Petersburg on 12 January. Due to ice at the port, the vessel joined an outbound convoy in order to sail out. During the outbound convoy the hull of the Vessel was damaged by ice.

At arbitration, the Tribunal held that the charterers were liable for breach of the express safe port warranty in clause 67. The cause of damage to the hull was held to be ice blocks and not negligent navigation.

The appeal

The charterers appealed to the High Court on the following grounds;

1. Where a charterparty expressly names a loading port and also contains a safe port warranty, does that safe port warranty apply to the named loading port?

2. If it does, is the owner entitled to rely on the safe port warranty in circumstances where the owner knew or should reasonably have known that the named port was unsafe at the time the charterparty was entered into?

3. Does the charterer act in breach of the safe port warranty in circumstances where the nominated port is, at the time the vessel uses it, ‘unsafe’ in a reasonably predictable and expected way?

The High Court decision

Mr Justice Langley agreed with the Tribunal and found against the charterers on both of points 1 and 2. He made the following points in support of his decision;

1. There is no inherent inconsistency between a safe port warranty and a named loading or discharge port.

2. The charterers submissions were substantially the same as those in the AIC v Marine Pilot case, where the charterers lost, as they should in this case.

3. There was no evidence that either party knew or ought reasonably to have anticipated anything about the likely conditions at St Petersburg more than the other, nor that either knew or should reasonably have known that St Petersburg was unsafe at the time the charter was entered into, nor that it was unsafe in a reasonably predictably and expected way. There was therefore no factual matrix to support an appeal on grounds two or three.

Conclusions

The legal clarification of these recent decisions is welcome in circumstances where they represent the first binding authority on the question of the effect of an express safe port warranty where there is a named port.

The decisions support the thinking set out in the relevant textbooks, for example Cooke on Voyage Charters (3rd Edition) which states at para 5.8 “… there is no reason as a matter of law for excluding the operation of an express term relating to safety merely because the port is named: the result is simply that by virtue of the parties’ express agreement, the risk of unsafety of the named port or berth falls on the charterer, although it would, in the absence of agreement, fall upon the owner.”

The decisions again highlight the necessity for careful consideration by those responsible for agreeing charter terms of the port descriptions and safe port warranties in the charterparty. If owners want charterers to bear the burden of the safety of the port (or vice versa), they should say so explicitly to avoid subsequent disputes.

With thanks to Jessica Pollock, Eversheds, for prearing this article.