A.Turtle Offshore SA Assuranceforeningen Gard-Gjensidig v Superior Trading Inc [2008] EWHC 3034 (Admlty)

[2008] EWHC 3034 (Admlty)

Case No 2007 FOLIO 574 AND FOLIO 1118

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMIRALTY COURT

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 11/12/2008

Before

MR. JUSTICE TEARE

Between

A.TURTLE OFFSHORE SAClaimants

ASSURANCEFORENINGEN GARD-GJENSIDIGClaimant

SUPERIOR TRADING INCDefendant

A TURTLE

Sean O’Sullivan (instructed by Ince and Co.) for Claimants

Elizabeth Blackburn QC (instructed by Duval Vassiliades) for Defendant

Hearing Hearing dates: 17-21 and 24 November 2008

Judgment

Mr. Justice Teare:

Introduction

[1]A TURTLE was a semi-submersible drilling platform or rig which had been laid up at Macae, about 150 nautical miles north of Rio de Janeiro, for a number of years. MIGHTY DELIVERER was a “pusher” tug which had also been laid up for a long period. She was brought out of apparent retirement in 2006 to tow A TURTLE to Singapore via Cape Town pursuant to the terms (as amended) of the standard form of towage contract known as TOWCON. Unfortunately for all concerned the tug ran out of fuel in the South Atlantic. The towage connection was released and A TURTLE drifted away from the tug. She was later found on the shores of Tristan da Cunha. Salvage attempts failed and the wreck of A TURTLE was later removed from Tristan da Cunha and dumped at sea.

[2]In this action the owners of A TURTLE claim damages from the owners of MIGHTY DELIVERER for the loss of the rig and associated wreck removal expenses. The damages are estimated to be in the region of US$20m. The owners of the tug deny that they are liable for the loss of the rig and, if they are liable, seek to limit their liability to a sum estimated to be about US$1.6m. pursuant to the 1976 Limitation. They also have a counterclaim for 95% of the agreed freight in the sum of US$1,871,500 (5% having been earned on signing TOWCON and paid).

A TURTLE

[3]The rig, which had been built in England in 1967 for use in the North Sea, was supported on 20 vertical columns of about 25m. in height which stood below water on four 75 metre long cylindrical pontoons. By reason of having been laid up the underwater structure of the rig had acquired substantial marine growth.

[4]In about early 2005 Arusha Shipping Limited of Liberia (“Arusha”) purchased the rig from a subsidiary of Petrobas, the Brazilian oil company. In February 2006 Arusha sold the rig to A Turtle Offshore Inc. of Panama for a total price of US$5m. “as is, where is” in Macae, Brazil. Clause 18 of the MOA provided as follows:

“The Sellers are to prepare the Vessel for tow in all respects as per their discussions with the Rio de Janeiro office of Noble Denton. The Sellers are to provide a fitness for tow certificate from Noble Denton. The Sellers are to arrange the disconnection of the Vessel from the present moorings and assist as required in connection to the towing tug whether this is the MIGHTY DELIVERER or a tug controlled by a third party.”

MIGHTY DELIVERER

[5]The tug was built in Savannah in 1981 as a pusher tug, that is, she was designed for use in tug-barge combination units. Her length overall was 50.91m with a moulded beam of 16.16m. Her summer draft was 8.69m. She was powered by B&W diesel engines of 15,200 brake horse power. She required heavy fuel oil and gasoil (or diesel oil). The latter was required for use in a boiler to pre-heat the heavy fuel oil. As a pusher tug she had a high superstructure (to permit visibility over a long barge) and lacked a flared bow.

[6]She was previously known as UNBELIEVABLE and had been purchased in or about February 2005 by Superior Trading Inc. (“Superior”) of the Marshall Islands. She was directed to Santo Domingo in the Dominican Republic for “reactivation” but as there was no dry dock there she could only be temporarily classed with the Panama Classification Society. She then towed a floating dry dock from the USA to Brazil and proceeded to Rio de Janeiro to undertake a complete reclassification process with the Russian Register towards the end of 2005. That process was completed in February 2006.

[7]There is no evidence that the bollard pull was tested as part of the reclassification process. The TOWCON Part 1 Box 18 stated that the certificated bollard pull of the tug was 180 tons. A bollard pull certificate issued by the Russian Maritime Register of Shipping dated 31 March 2006 stated that the pull of the towing winch was 1770 kn which, I was told, equated to a bollard pull of 180.5 tonnes. There is common ground that that was probably the maximum bollard pull. The tug’s continuous bollard pull was stated by Noble Denton in their survey of the tug dated 18 February 2006 as 152 tonnes. It was common ground that that was probably arrived at by a “rule of thumb” calculation of dividing the continuous 15,200 bhp of the engine by 100.

[8]The same survey report stated that the speed of the engines was 180 rpm. However, at trial it was common ground that this was mistaken and that the engine speed is likely to have been in the region of 100-120 rpm.

[9]The length of the tow line was stated in the survey report to be 870 m. In the Bollard Pull Certificate it was stated to be 900m. However, the entry in TOWCON made by Mr. Bush said that it was 700m. During the towage no more than 720m. was paid out and there is no evidence of any complaint from the master that he was unable to use the full length of the tow line. It is therefore unclear what the length of the towline was. What seems clear however is that there was no more than 720m. of available towline. If more had been available it would have been used.

[10]The commercial managers of the tug are Bush Shipping Services Limited (“Bush Shipping”) whose chief executive is Mr. Philip Bush. He describes himself as a tug operator. In addition to MIGHTY DELIVERER he appears to manage or operate other tugs, including RUBY DELIVERER (owned by Bluebottle Navigation Inc.) and CHAMP (owned by Rushmore Marine). Bush Shipping have an office in London but there is a small staff, namely, Mr. Bush and his two daughters. Bush Shipping were also the agent for Arusha Shipping Ltd.

[11]Superior is beneficially owned by a Guernsey trust, the beneficiaries of which are Mr. Bush’s family.

[12]The technical managers of MIGHTY DELIVERER were a Greek company Seawave Maritime Inc. (“Seawave”). However, Seawave ceased to be the technical managers in about July 2007 as a result of a dispute with Bush Shipping. This dispute led to a number of tugs operated by Bush Shipping, including MIGHTY DELIVERER and RUBY DELIVERER, being arrested and sold in South Africa.

[13]Bunkering the tug was within the commercial manager’s sphere of activity, not the technical manager’s sphere of activity. It was therefore a matter with which Mr. Bush concerned himself.

The evidence

[14]Apart from a towage procedures document and some e-mails there was no evidence from Seawave. It is likely that this was because of the disputes which later developed between Bush Shipping and Seawave. Thus there was little evidence from the technical managers of the tug. There was also no evidence from the master of MIGHTY DELIVERER, Captain Sarafanov. It is not clear why the tug owners were unable to adduce even a statement from him.

[15]The only factual witness tendered by the tug owners was Mr. Philip Bush. He had some factual evidence to give but not much. That was because he was in London (save for a routine visit to Brazil). No doubt because there was no evidence from Seawave Mr. Bush sought to give an account of the preparation for the towage and of the towage itself notwithstanding that he had little personal knowledge of the material events. Such evidence as he did give was not reliable. For instance, with regard to the preparation for the tow he referred to Seawave’s calculations as to speed and passage time to Cape Town and asserted that Noble Denton was satisfied, on the basis of such calculations, that the tug’s bunker capacity was sufficient to enable the tug to arrive at Cape Town at the speed range assumed. Yet there were no such calculations of Seawave in evidence and Mr. Bush did not profess to have seen any such calculations. He was also prepared to make statements which documents he had received from Seawave did not support. For example, although Seawave had informed him on 23 May 2006 that the last visual contact with the rig had been on 10 May 2006 he was prepared to say without explanation that visual contact was lost on 16 May 2006. With regard to the notification to the authorities that the towage connection to the rig had been released he was prepared to state that “all relevant information was conveyed to the maritime authorities at Cape Town and the Tristan da Cunha administration”. But he did not explain why the authorities were only informed on 23 May 2006 when the rig had been released on 30 April 2006. Counsel suggested that there was no need to give prompt information because the rig was in a remote area. I do not accept this explanation. Mr. Bush did not suggest that he need not give immediate notice of the release because the rig was in a remote area. An unmanned rig adrift in the South Atlantic was a clear danger to shipping even if the area was remote. In any event, the relative proximity of Tristan Da Cunha demanded that notice be given to the Tristan da Cunha authorities. Further, Mr. Bush said that all relevant information had been conveyed when in fact Bush Shipping had given an untrue account of the circumstances in which the rig had been released. When asked about this in cross-examination, and about his failure to advise the rig owner promptly of the disconnection, he had no explanation. The probable explanation, in the absence of any other explanation, is that he did not wish to reveal to the rig owner that the tug had run out of fuel, fearing that this would bring criticism upon the tug owners. Finally, there are two e-mails dated 22 February 2006 and 29 March 2006 sent by Bush Shipping which, as will become apparent, are important in understanding what happened in the preparation for the voyage and during the voyage. Mr. Bush referred to neither in his statement. Having regard to all these matters I am forced to conclude that Mr. Bush’s evidence was unreliable and that I could not accept it unless it was corroborated by contemporaneous documents or was inherently probable.

Events before TOWCON was agreed

[16]On 9 February 2006 Noble Denton issued a fitness to tow certificate on behalf of Arusha and A Turtle Offshore SA which stated that the rig was considered to be “in good and safe condition for ocean towage from Macae, Brazil to India Ocean.”

[17]On 10 February 2006 Noble Denton assessed the sailing draft of the rig at 14.20m. amidships.

[18]On 14 February 2006 the new owners of the rig, A Turtle Offshore SA, insured the rig for a period of 12 months with Taiwan Fire & Marine Insurance Co.Ltd. One of the clauses provided as follows:

“Agree Noble Denton Associates are instructed as Shift surveyor.”

[19]The role of a shift surveyor is clarified by General Condition 1 of the London Market Offshore Mobile Unit Form, which formed part of the policy. Clause 1 dealt with shifts of mobile units. In respect of a tow or the shift of a semi-submersible barge a survey was required of the towage or shift arrangements. The underwriters agreed that Noble Denton were to be the surveyor who would survey the towage or shift arrangements.

[20]On 16 February 2008 the new owners of the rig informed Mr. Bush that they were “not willing to agree any deal on the tow now subject to ND/underwriters approval. We have to wait for the ND surveys to be done.”

[21]On 20 February 2006 Noble Denton issued a fitness to tow certificate on behalf of Arusha and Turtle Offshore SA stating that:

“based on a survey onboard Ocean Going Tug MIGHTY DELIVERER on 18th February 2006 and additional Class certification supplied by the tug Owners on 20 February 2006, the tug is considered to be suitable for the ocean towage of the [rig] from Macae, Brazil to Indian Ocean.”

[22]Between 21 and 25 February 2006 the tug bunkered in Rio de Janeiro. The log of the tug records that by 0700 on 21 February 2006 180 tonnes of diesel oil had been taken on board. The log further records that fuel oil was taken on board from 1300-1900 on 22 February 2006 and also between 0137 and 0328 on 25 February 2006. The log records the drafts of the tug after 100 tonnes of water had been taken on board on 26 February 2006 as being 8.46m forward and 8.69m aft with a midships or mean draft of 8.57m.

[23]During the time when the tug was being bunkered Mr. Bush sent an e-mail to Seawave dated 22 February 2006 which noted that the terms had been agreed for the towage. He said that it “works out not to be fantastic business but it is important to get her working”. He also referred to a talk that he had that day with David Wells of Noble Denton in Dubai. Mr. Bush reported that Mr. Wells “feels that as the rigs draft is deep that the tug will only be able to utilise max.10,000 hp. I mentioned this to Tonis [who was the Seawave representative in Brazil] and he feels that will be about 72 rpm and will be max 15 tonnes of foil. I would like this rechecked as the consumption will be critical. David felt that the tow should proceed at 2.5/2.75 knots less weather and current. It will be an interesting project and we must make it work. How will we work out the best route bearing in mind the weather and current.?” How will we work out the best route bearing in mind the weather and current.?”

[24]After bunkering the tug proceeded to Macae.

[25]The TOWCON was agreed on 27 February 2006. Part 1 Box 20 stated that the estimated daily bunker consumption was about 30 tonnes of fuel oil and about 3 tonnes of diesel oil.

[26]Part 1 ended as follows:

“It is mutually agreed between the party mentioned in Box 2 (hereinafter called “the Tugowner”) and the party mentioned in Box 3 (hereinafter called “the Hirer”) that the Tugowner shall, subject to the terms and conditions of this Agreement which consists of PART I including additional clauses, if any agreed and stated in Box 39, and PART II, use his best endeavours to perform the towage or other service(s) as set out herein. In the event of a conflict of terms and conditions, the provisions of PART I and any additional clauses, if agreed, shall prevail over those of PART II to the extent of such conflict but no further.”

[27]Amongst the additional clauses were:

“44. The tug owners are to prepare and trim the tow and make connection to the tug to the standards required to obtain from Noble Denton, Rio the Towing Approval certificate in order to leave Macae for the tow. The tug owners will obtain clearance and/or other approval procedures required for the rig to leave Brazil. Notwithstanding the above, once the rig has sailed from Macae the Hirer’s normal liabilities as per standard towcon terms shall apply. …………. 47. The tug owners will arrange and pay for any necessary weather forecasting and routing required by tug owners or Noble Denton.”

[28]Part II contained, amongst many clauses, the following:

“13. Seaworthiness of the Tug The Tugowner will exercise due diligence to tender the Tug at the place of departure in a seaworthy condition and in all respects ready to perform the towage, but the Tugowner gives no other warranties, express or implied. ………. 18. Liabilities 1. (a) The Tugowner will indemnify the Hirer in respect of any liability adjudged due or claim reasonably compromised arising out of injury or death occurring during the towage or other service hereunder to any of the following persons: (i) The Master and members of the crew of the Tug and any other servant or agent of the Tugowner; (ii) Any other person on board the Tug who is not a servant or agent of the Hirer or otherwise on board on behalf of or at the request of the Hirer. 2. (a) The following shall be for the sole account of the Tugowner without any recourse to the Hirer, his servants, or agents, whether or not the same is due to breach of contract, negligence or any other fault on the part of the Hirer, his servants or agents: (i) Loss or damage of whatsoever nature, howsoever caused to or sustained by the Tug or any property on board the Tug. (ii) Loss or damage of whatsoever nature caused to or suffered by third parties or their property by reason of contact with the Tug or obstruction created by the presence of the Tug. (iii) Loss or damage of whatsoever nature suffered by the Tugowner or by third parties in consequence of the loss or damage referred to in (i) and (ii) above. (iv) Any liability in respect of wreck removal or in respect of the expense of moving or lighting or buoying the Tug or in respect of preventing or abating pollution originating from the Tug. The Tugowner will indemnify the Hirer in respect of any liability adjudged due to a third party or any claim by a third party reasonably compromised arising out of any such loss or damage. The Tugowner shall not in any circumstances be liable for any loss or damage suffered by the Hirer or caused to or sustained by the Tow in consequence of loss or damage howsoever caused to or sustained by the Tug or any property on board the Tug. (b) The following shall be for the sole account of the Hirer without any recourse to the Tugowner, his servants or agents, whether or not the same is due to breach of contract, negligence or any fault on the part of the Tugowner, his servants or agents: (i) Loss or damage of whatsoever nature, howsoever caused or sustained by the Tow. (ii) Loss or damage of whatsoever nature caused to or suffered by third parties or their property by reason of contact with the Tow or obstruction created by the presence of the Tow. (iii) Loss or damage of whatsoever nature suffered by the Hirer or by third parties in consequence of the loss or damage referred to in (i) and (ii) above. (iv) Any liability in respect of wreck removal or in respect of the expense of moving or lighting or buoying the Tow or in respect of preventing or abating pollution originating from the Tow The Hirer will indemnify the Tugowner in respect of any liability adjudged due to a third party or any claim by a third party reasonably compromised arising out of any such loss or damage but the Hirer shall not in any circumstances be liable for any loss or damage suffered by the Tugowner or caused to or sustained by the Tug in consequence of loss or damage, howsoever caused to or sustained by the Tow. 3. Save for the provisions of Clauses 11, 12, 13 and 16 neither the Tugowner nor the Hirer shall be liable to the other party for loss of profit, loss of use, loss of production or any other indirect or consequential damage for any reason whatsoever. 4. Notwithstanding any provisions of this Agreement to the contrary, the Tugowner shall have the benefit of all limitations of, and exemptions from, liability accorded to the Owners or Chartered Owners of Vessels by any applicable statute or rule of law for the time being in force and the same benefits are to apply regardless of the form of signatures given to this Agreement.”

[29]On 2 March 2006 Seawave issued a document entitled “Procedure for the Towage of Semi-Submersible Unit …from Macae, RJ, Brazil to Singapore.” As its description implies it described such towage procedures as Seawave thought appropriate. It noted that there was a Warranty Surveyor, Noble Denton, who had been “appointed on behalf of Owners [of the rig] to maintain underwriter’s integrity.” It provided for a bunkering location at Cape Town anchorage. It stated that the towing distance to Singapore was 9250 nautical miles which at speeds varying from 2.5 knots to 5 knots would take from 155 days to 77 days, assuming 2-3 days for bunkering. The procedures provided a list of way points which, it is common ground, provided for a Great Circle Route to Cape Town, a distance of 3351 nautical miles.

[30]On 5 March 2006 Noble Denton issued a Certificate of Approval on behalf of Arusha and Turtle Offshore SA stating that the Seawave procedures had been reviewed and that “the vessel, tug, seafastening and towage arrangements by the tug MIGHTY DELIVERER operated by Seawave Maritime, are hereby approved based on the Owners’ representations that the tug has bollard pull of 185 tonnes and that it is generally fit to undertake the tow.”

The Towage

[31]The towage commenced on 6 March 2006. The progress of the towage is evidenced by the tug’s log book and by daily reports sent by the master to Seawave and passed on to Bush Shipping.

[32]The master reported that the tow line was out to a distance of 720 metres and that the tug was pitching. Seawave instructed the tug to proceed initially at low revolutions. The daily reports indicated that 72 rpm were initially being maintained. On 9 March 2006 Seawave gave instructions that the engine speed be increased to 80 rpm. The master reported that he had increased the engine speed to 78 rpm but such revolutions do not appear to have been achieved immediately.

[33]By 12 March 2006, when the engine speed had reached 75 rpm, the log recorded that the average speed of the flotilla was 1.9 knots. The daily reports reported winds of force 3 but increasing to force 7 on 12 March and a swell of 2 metres reaching 5 metres on 12 March. The logged weather is of course more detailed but is to similar effect. On 12 March the master estimated his time of arrival at Cape Town as 6 May 2006 assuming an average speed of 2.2 knots. On 13 March 2006 the wind and swell abated. The log recorded an average speed of 1.7 knots and an ETA of 6 May 2006 at a speed of 2.2 knots was maintained.

[34]Despite the fact that the speed made good was so modest the length of the towline was not increased. This indicates that the available length of towline cannot have been more than 720m. Further, the fact that the engine revolutions never began to reach anything like the available rpm of 100-120 suggests that something was limiting the engine speed. It is unclear what. Various explanations were canvassed in evidence. An engine problem was suggested, but no such problem was reported by the master. It may have been because the tug was pitching heavily, a consequence of the lack of a flared bow. Mr. Bush gave evidence that the tow wire tended to come out of the water causing the master to proceed at reduced revolutions. However, Mr. Bush’s source of information was not stated and was not apparent. The master did not say this in his daily reports. Both parties’ experts agreed that it was difficult to envisage snatch loads or the towline coming out of the water at 78 rpm. I therefore do not accept Mr. Bush’s evidence on this matter.

[35]The engine speed achieved of 72 rpm rising to 78 rpm is very close to the engine speed mentioned in Mr. Bush’s e-mail dated 22 February 2006. I consider it likely that the restricted engine speed was the consequence of the matters mentioned by Mr. Wells of Noble Denton, namely, the rig’s draft and the restricted horse power which the tug in consequence could develop.

[36]The daily reports suggested a diesel oil consumption of about 3.5 tonnes per day. On 13 March 2006 there remained on board some 162.8 tonnes of diesel oil. Thus there were about 46.5 days steaming time remaining before the tug ran out of diesel oil. However, the ETA of 6 May was 54 days away. This information, just one week into the towage to Cape Town, therefore indicated that further bunkers would need to be taken on board somewhere in the South Atlantic.

[37]On 14 March 2006 Bush Shipping reported to the rig owner that they were planning to bunker at Cape Town and that the speed of the convoy was increasing. By 17 March 2006 the master reported that the engine speed had reached 78 rpm. On 20 March 2006 he reported that he had increased engine rpm to 80 rpm. Although 80 rpm was never achieved (or at least never reported) the daily reports recorded that the daily speed of the flotilla was increasing. It reached 2.6 knots on 22 March 2006. However, the average speed over the voyage, as recorded in the log on 22 March 2006, was just 2.02 knots. The ETA at Cape Town remained 6 May 2006 at an average speed of 2.2 knots. Apart from a swell of 5 metres on 15 March 2006, the swell was generally 2.5 metres or less.

[38]From 22-29 March 2006 the reported average daily speed fell from 2.6 knots to 1.5 knots. The average voyage speed on 29 March 2006 as recorded in the log was 1.97 knots. The ETA at Cape Town remained at 6 May 2006 based on a speed of 2.2 knots. As at 29 March 2006 the quantities of fuel oil and diesel oil remaining on board and the reported daily consumption rates suggested that the vessel had 28-30 days steaming time but there were 38 days until the ETA of 6 May at Cape Town; and 2.2 knots was not being achieved which suggested that the ETA would be even later.

[39]An e-mail from Mr. Bush dated 29 March 2006 to Seawave shows that he appreciated the need to bunker in the South Atlantic and planned to do so using RUBY DELIVERER (a 7000hp anchor handling tug operated by Bush Shipping). However, it appears from the terms of that e-mail that RUBY DELIVERER was engaged on a service involving a platform called VINAR and arrangements had to be made for CHAMP, another tug managed by Bush Shipping which was then off Oman, to take over RUBY DELIVERER’s role in the VINAR service. Mr. Bush made clear in that e-mail that the viability of RUBY DELIVERER being able to render effective assistance depended upon RUBY DELIVERER being released quickly from the service involving VINAR.

[40]It is unclear when RUBY DELIVERER was able to leave a position off Madagascar for Durban but her log records her as being en route for Durban on 9 April 2006.

[41]By 10 April 2006 A TURTLE and MIGHTY DELIVERER were in serious difficulties. The speed of the tug’s main engine had been reduced to 42 rpm. There is no direct evidence as to the reason for this. It is probable that the master of the tug decided that he must conserve such fuel as he had since he had insufficient fuel to reach Cape Town. As a result the tug was unable to make headway. Although she was seeking to steer a course she was in fact being towed by A TURTLE in other directions. Thus between 10 and 17 April 2006 the course steered was recorded in the daily reports as 105 degrees but the way made good was variously described as 145, 355, 325, 300, 160, 175 and 170 degrees. On some days the flotilla was going backwards; 25 nautical miles on 13 April, 68 nautical miles on 15 April 2006 and 49 nautical miles on 16 April 2006. The master ceased to give an ETA for Cape Town. On 19 April 2006 the main engine had been stopped for the cleaning of a filter. It appears that during that time, although the towline was out to 680 metres, the distance between tug and tow was only 250 metres, suggesting a very deep catenary. When the engine was restarted only 35 rpm were achieved. On 28 April 2006 the master recorded that for the last 24 hours the way made good had been 120 degrees and he observed that Tristan da Cunha was 148 miles distant, bearing 157 degrees.

[42]At 0900 on 30 April 2006 the main engine was stopped and the towage connection to A TURTLE was released. There were only 5.3 tonnes of diesel oil left and at that time the daily rate of consumption was 3.1 tonnes per day. It seems likely that the master decided to disconnect at a time when he could still power his winch. He commented in his daily report that Tristan da Cunha was now distant 87 miles bearing 155 degrees.

[43]It is a remarkable feature of this saga that neither Bush Shipping nor Seawave informed the rig owner that the towage connection had been released. On 3 May 2006 Bush Shipping advised the rig owner that “the rig and tug are basically drifting in order to ensure that the tug does not run out of fuel oil.” They further advised that RUBY DELIVERER was expected to arrive on about 9 May 2006 to take over the tow and allow MIGHTY DELIVERER to return to Cape Town for bunkers and cleaning of her turbo charges. On about 12 May 2006 Mr. Bush’s daughter sent an e-mail to the rig owner advising that RUBY DELIVERER was to meet up with MIGHTY DELIVERER and that a full report of the “hook up and onward journey” would follow. Mr. Bush suggested that this was a reference to a connection with the rig being re-established. I doubt that that was intended. If it was intended there had in any event been no clear statement by Mr. Bush to the rig owner that the connection to the rig had been released. On 20 May 2006 Mr. Bush sent an e-mail saying that after the arrival of RUBY DELIVERER and completion of bunkering operations on 17 May 2006 “the tugs went towards the position of the rig and since that time there has been no sign of the rig on the radars of either tug.” This e-mail did not state that the towage connection had been released almost three weeks earlier. Indeed, as is apparent from an e-mail dated 23 May 2006 from the rig’s underwriters, they were left with the impression that the disconnection had occurred as part of the bunkering operations.

[44]On 23 May 2006 Bush Shipping notified the Tristan da Cunha authorities and, probably, the South African authorities that the tug had “encountered heavy weather and was forced to release platform in lat 35 48S long 13 35W at 0900, Apr 30.” This was an untrue account of the circumstances which had led to the release of the towage connection. The disconnection was not the result of heavy weather. It was the result of the tug running out of fuel.

[45]It is necessary to return to the events in the South Atlantic after the towage connection had been released. The master’s daily reports recorded that on 1 May 2006 A TURTLE was one and half miles distant from the tug. By 3 May 2006 the distance had increased to 4 miles. By 6 May 2006 the distance was 12 miles and by 10 May 2006 it was said to be 25 miles. Seawave later reported that eye contact was lost on 10 May 2006. It is unclear when radar contact was lost but a “drifting log” suggests it was on 14 May 2006.

[46]On 15 May 2006 RUBY DELIVERER met up with MIGHTY DELIVERER. She had had an eventful journey. She had arrived in Durban on about 12 April and, according to an invoice, bunkered there on 14 April taking 95 tonnes of IFO and 50 tonnes of diesel oil. She left on 15 April to rendezvous with CHAMP and to deliver stores to her. Having done so, and having stood off Durban in view of bad weather RUBY DELIVERER re-entered Durban on 19 April. It is not clear why. Mr. Bush suggests it was to take on board gas oil but no mention of that is made in the tug’s log. She left on 21 April. By 23 April her ETA at MIGHTY DELIVERER was said to be 7 May. Her log recorded that she was proceeding to High Sea. But she met heavy weather and suffered storm damage to her deck causing sea water to enter her fuel tanks. She was then instructed by Seawave to proceed towards Cape Town. She arrived in Cape Town on 27 April. It would seem that repairs were carried out (though no repairs are mentioned in the tug’s log) and she left for MIGHTY DELIVERER on 1 May.

[47]Mr. Bush gave evidence that attempts were made to obtain further supplies of diesel oil in Cape Town but that this proved not to be possible. In his oral evidence he said the refinery in Cape Town had been “down for repairs”. However, this had not been mentioned in his written statement. It is surprising that there were difficulties in obtaining diesel oil in a port such as Cape Town. Mr. Bush said that he had stemmed or ordered bunkers in Cape Town but that they proved not to be available. Remarkably there were no documents disclosed evidencing such stemming. Had they been stemmed there would surely have been some documentary record. It is also to be noted that Mr. Bush made no mention in his statement of the heavy weather damage sustained by RUBY DELIVERER and the need to have repairs carried out in Cape Town. I therefore do not accept that bunkers were stemmed in Cape Town. If there had been a difficulty in obtaining bunkers because of problems with the refinery in Cape Town this would surely have been mentioned in Mr. Bush’s statement but it was not. So unsatisfactory is Mr. Bush’s evidence on this topic that I am unable to accept his evidence that there was a shortage of diesel oil in Cape Town.

[48]RUBY DELIVERER arrived off MIGHTY DELIVERER on 15 May 2006. This was over two weeks after the rig had been disconnected from the tow and over a month from when the tug had reduced its main engine revolutions to such an extent that the tug ceased to make progress on the tow. The voyage from off Madagascar had taken about 36 days from about 8/9 April of which 3 days had been spent in Durban, 4 days meeting up with CHAMP, a further 2 days in Durban, and 4 days in Cape Town undergoing repairs of heavy weather damage. Plainly, if RUBY DELIVERER was to arrive before the date on which, as it transpired, the rig was disconnected from the tow, the voyage from off Madagascar to MIGHTY DELIVERER had had to proceed without any form of delay at all.

[49]Having arrived at the casualty RUBY DELIVERER transferred bunkers to MIGHTY DELIVERER and then both tugs attempted to search for the rig. The search lasted from about 17-22 May 2006. MIGHTY DELIVERER conducted a search which involved, in part, re-searching the same area. RUBY DELIVERER proceeded on a south easterly course and then drifted from about 0900 on 18 May until 22 or 23 May. A TURTLE was not found. The tugs, with RUBY DELIVERER towing MIGHTY DELIVERER, departed for Cape Town but on 24 May 2006 altered course for Abidjan, and later Dakar.

[50]By e-mail dated 5 June 2006 Mr. Bush informed the rig owner that the tug owners considered that they had fulfilled their obligations under TOWCON, were not liable for any loss and damage and were relieved of all further obligations under TOWCON.

[51]On 7 June A TURTLE was found on the shores of Tristan da Cunha off Trypot Beach. She was found by islanders on a winter fishing trip. The beach is named after a trypot erected in the early nineteenth century to “try” the fat from the thousands of Antarctic Fur Seals and Southern Elephant Seals hunted and killed by early settlers on Tristan Da Cunha. The location was described as one of Tristan da Cunha’s most inaccessible stretches of coastline. There were sheer cliffs rising some 500m. from a narrow boulder beach.

[52]On 12 June 2006 solicitors acting for the rig owner asked Bush Shipping what arrangements were being made to perform their obligations under the towage contract. By e-mail dated 12 June 2006 Mr. Bush stated that as far as the tug owners were concerned the towage contract came to an end on or about 22 May 2006 when the search was called off. By e-mail dated 13 June 2006 solicitors acting for the rig owner said that the rig owner saw nothing in the towage contract which entitled the tug owners to walk away from the rig and that it was not clear how the situation could fall within clause 18 of the towage contract. The solicitors said that in order to mitigate its loss the rig owner was negotiating with a salvage company to recover the rig. On 16 June 2006 the tug Zouros Hellas, with a salvage team on board, departed from Cape Town for Tristan da Cunha. It arrived on 22 June.

[53]Salvage operations were not successful and by 10 August 2006 the operations were abandoned and the underwriters of A TURTLE accepted that she was a constructive total loss. Wreck removal contractors were engaged in December 2006 but it was not until February 2007 that the rig was refloated, towed to an approved dumping site offshore and scuttled. It was reported that A TURTLE had turned turtle.

Criticism of the preparation for the towage

[54]Pursuant to TOWCON the tug owners were obliged to exercise due diligence to tender the tug at the place of departure in a seaworthy condition and in all respects ready to perform the towage (see Part II clause 13). They were also obliged to exercise their best endeavours to perform the towage (see the final printed clause in Part I).

[55]The essential complaint of the rig owner is that no proper consideration was given by the tug owners to the question whether the tug would have enough bunkers to reach Cape Town. It was said that as a result the tug and tow left Macae with insufficient bunkers to reach Cape Town. Both parties called expert evidence. The rig owners called Captain Holloway and the tug owners called Captain Hammond. They agreed that the tow procedures issued by Seawave and approved by Noble Denton “are open to criticism for providing no reference to fuel capacity, fuel consumption or fuel range of the Tug.” They also agreed that they would not include a refuelling at sea in the South Atlantic, as winter approached, as part a plan to tow an oil rig across the South Atlantic. Captain Holloway said that he would avoid bunkering in the southern seas in winter. He said that if it were proposed, and he were a warranty surveyor, he would throw it out. The activity of bringing two vessels alongside in such seas would be fraught with danger and he would never accept it. Captain Hammond agreed that he would not plan to take fuel en route.

[56]I accept this evidence and conclude that a prudent tug owner would plan to reach Cape Town without refuelling. It follows that a prudent tug owner would have to assess the likely speed of the flotilla and hence the likely duration of the tow in order to assure himself that the tug had enough bunkers on board to reach Cape Town. If he did not do so and in consequence the tug commenced the towage with insufficient bunkers to enable her to tow the rig to Cape Town without refuelling he would have failed to exercise due diligence to tender the vessel in a seaworthy condition and in all respects fit for the towage.

[57]The experts were agreed, assuming a speed of 3-4 knots, and taking into account the reserve of 5 days mentioned in Noble Denton’s General Guidelines for Marine Transportations at paragraph 12.12.1, there were sufficient bunkers on board at the commencement of the towage. It was not suggested by the tug owners that if the speed were 2-3 knots there were sufficient bunkers on board.

[58]It is therefore necessary to decide whether the tug owners reasonably assessed the likely speed of the flotilla as 3-4 knots.

[59]Mr. Bush gave evidence that Noble Denton’s estimated fair weather speed was about 3-4 knots. He said that based on Seawave’s calculations Noble Denton was satisfied that the tug’s bunker capacity was sufficient to enable the tug to arrive at Cape Town at the speed range assumed. There is no evidence from Noble Denton that their surveyor made this assessment or calculation. Nor is there evidence from Seawave that they made this assessment or calculation. The only evidence that either or both did was given by Mr. Bush. For the reasons which I have already given I cannot accept his evidence unless it is corroborated or inherently probable.

[60]There is only one document which considers the question of speed and bunkers and that is Mr. Bush’s e-mail dated 22 February 2006. That records a conversation between Mr. Bush and Mr. Wells of Noble Denton and a further conversation between Mr. Bush and Mr. Tsihlakis, the principal engineering superintendent at Seawave. The latter expressed the opinion, based upon what Mr.Wells had said as to the likely horse power to be utilised when pulling the rig with a “deep” draft, that the tug was likely to achieve 72 rpm. Mr. Bush said he would like this to be rechecked “as the consumption will be critical.” Mr. Wells is also recorded as saying that the “tow should proceed at 2.5/2.75 knots less weather and current.” Thus, far from corroborating the evidence of Mr. Bush, this e-mail, sent at about the time the tug was being bunkered, suggests that Noble Denton, and possibly Seawave, considered that a speed of less than 3 knots was likely to be achieved, before taking weather and current into account.

[61]When cross-examined Mr. Bush said that Mr. Theophanatos, a surveyor at Noble Denton, had mentioned a speed of 3-4 knots in 2005 when Noble Denton had considered trim and stability calculations with regard to the rig. He said that he did not go back to Noble Denton in 2006 to ask if their estimate of speed remained good. With regard to the e-mail dated 22 February 2006 (which he had not mentioned in his written statement) he said that, having sent the e-mail to “George” at Seaway, George told him that the comments of Noble Denton in that e-mail were based upon a towing draft of the rig of over 17m. whereas the towing draft was in fact 14.2m. It was therefore of no concern to him.

[62]This is an improbable account. Firstly, Noble Denton stated in their Report on the proposed towage that when they had checked the stability and motions of the rig in 2005 it was agreed to tow the rig at a draft of about 14m. Secondly, the ballast condition for the towage prepared by Noble Denton and dated 10 February 2006 stated that the draft was 14.2m. Thirdly, the question of consumption was “critical” and therefore one would have expected that, had Mr. Bush been informed that Noble Denton had assumed an incorrect draft, he would have gone back to Mr. Wells and required a revised speed estimate. Mr. Bush did not say that he did and there is no documentary evidence that he did. Fourthly, it is difficult to see how or why “George” would have known that Mr. Wells had a draft of 17m. in his mind when speaking to Mr. Wells. Fifthly, if this was known to “George” one would have expected that it would have been known to Mr. Tsihlakis as well. Yet instead of making that point Mr. Tsihlakis expressed the opinion that the likely rpm would be 72.

[63]I therefore do not accept Mr. Bush’s explanation of his e-mail dated 22 February 2006. The e-mail shows that at about the time that the tug was being bunkered for the towage Noble Denton had advised Mr. Bush that the speed of the towage “should” be 2.5/2.75 knots without allowing for weather and current. I am persuaded that I must reject Mr. Bush’s evidence that Noble Denton estimated the fair weather speed for the towage at about 3-4 knots.

[64]The tug was bunkered between 21 and 25 February 2006. There is evidence from the log that 180 tonnes of diesel oil were taken on board. It is likely that there was some on board before bunkering began. The daily report for 4 March recorded that 195.6 tonnes of diesel oil were on board. It is unclear how much fuel oil was taken on board. No figure is stated in the log. Mr. Bush states that 1,140 tonnes were taken on board. That figure cannot be verified because the invoice on which it is likely to have been based is illegible. But he was correct in saying that 180 tonnes of diesel oil were taken on board. The daily report for 4 March states that 1203 tonnes were on board. Ordinarily there would be no reason to doubt this figure. However, the daily reports for 20 and 21 March 2006 evidence a reduction in fuel oil from 950 tonnes to 740 tonnes. That reduction is unexplained because the daily consumption was about 20 tonnes. The reduction suggests the possibility that less than 1203 tonnes were taken on board.

[65]There are other indications that the tug did not bunker to her full capacity. Firstly, the mean or amidships draft on 26 February 2006 after completion of bunkering was 8.57m., which was less than the tug’s summer draft. Secondly, Noble Denton’s survey report dated 18 February 2006 states that the tug’s bunker capacity was 1600 tonnes of fuel oil and 200 tonnes of diesel oil which would suggest that more fuel oil could have been taken on board. (The same report suggests figures for quantities on board on 18 February. However, these are difficult to accept. It is stated that she had 1068 tonnes of fuel oil and 212 tonnes of diesel oil on board before bunkering.) An e-mail from Mr. Bush dated 10 February 2006 states that the fuel oil capacity was 950 tonnes and the diesel oil capacity 250 tonnes which would suggest that more diesel oil could have been taken on board. Thirdly, Mr. Bush stated in his oral evidence that instructions from the local authorities based upon environmental restrictions prevented the tug from loading to full capacity. But this was not mentioned in his statement and is not corroborated. I do not accept that there was an environmental restriction though of course the tug could not load beyond her load line marks; but the amidships draft does not suggest that she had reached her marks. However, Mr. Bush’s evidence suggests that the tug’s bunker tanks were not filled to capacity.

[66]It was agreed between the experts that the towage to Cape Town would take about 54 days at an average speed of 2.5 knots (the low end of the band mentioned by Mr. Wells of Noble Denton). With 196 tonnes of diesel on board the tug had, at a rate of 3 tonnes per day as stated in the TOWCON, sufficient diesel oil for 65 days. The actual consumption during the voyage was about 3.5 tonnes per day. At that rate the bunkers were only sufficient for 51 days, allowing for the 5 days reserve.

[67]Basic calculations of this type suggest that Bush Shipping or Seawave, one or both of whom decided to proceed with the tow, must have done so in the expectation, however such expectation was formed, that the towage would achieve a speed of 3-4 knots. (At a speed of about 3 knots the towage to Cape Town would have taken about 45 days.) That is because it is improbable that they permitted the towage to commence without an expectation that the tug and tow would reach Cape Town and any such expectation required the towage to make 3-4 knots. Moreover, later events are consistent with that having been their expectation. Thus on 7 March 2006 Bush Shipping informed the rig owner that the towage would commence at low main engine revolutions and then, at the manager’s direction, power would be increased until “the optimum speed” was achieved. On 9 March 2006 Seawave gave instructions that rpm be increased to 80. It seems likely that Bush Shipping and/or Seawave expected that a greater engine speed than the 72 rpm mentioned in the e-mail dated 22 February 2006 could be achieved, sufficient to enable the towage to proceed at 3-4 knots.

[68]However, if Bush Shipping and Seawave expected a speed of 3-4 knots it does not appear that such expectation was based upon any reasonable grounds. There is no evidence that Seawave or Bush Shipping carried out the sort of careful analysis which both experts agreed should have been done. Had this been done both Captain Holloway and Captain Hammond agreed that the required towing power to pull the rig ought to have been assessed (including the “resistance” of the rig) and such required power ought then to have been compared with the tug’s bollard pull. The required calculation is described in Noble Denton’s guidelines at section 12.2 and is referred to in paragraph 9.4 of the IMO Guidelines for Safe Ocean Towing. It was common ground at the trial that if that had been done the likely “towline pull required” (having regard to the rig’s resistance which does not appear to have been calculated) would have been of the order of 180 tonnes and that the likely bollard pull of the tug (it was not measured when the tug was reclassed) was, at most, 130 tonnes. There was a dispute as to whether the likely bollard pull was as low as 97 tonnes. But that dispute was not material because the disparity between a required pull of 180 tonnes and a bollard pull of 130 tonnes was sufficient to indicate a lack of power on board the tug.

[69]In those circumstances, and having regard to the importance of ensuring that the tug and tow would reach Cape Town without refuelling, there ought to have been a very careful assessment of the likely speed and duration of the voyage to Cape Town in order to see whether Noble Denton’s fair weather estimate of 2.5-2.75 knots could realistically be improved upon. Consideration would then have to be given to the likely weather and appropriate weather routing. Yet, as agreed between the experts, the tow procedures issued by Seawave on 2 March 2006 provide no reference to fuel capacity, fuel consumption or fuel range. There is no reference to the likely speed of the tow, the likely duration of the towage to Cape Town, or the sufficiency of bunkers. At paragraph 5.5 it merely notes the towage distance to Singapore (9250 nautical miles) and the likely passage time based upon speeds varying from 2.5 – 5 knots. There is no suggestion in the towage procedures that any proper attempt had been made to assess the likely speed. If there had been such an attempt it is likely that some reference to it would be found there. But there is none and I must therefore conclude that no proper attempt to assess the likely speed was made.

[70]Thus, if, as seems likely, Bush Shipping and Seawave assumed that the towage would be effected at a speed of 3-4 knots, they had no reasonable grounds for making such an assumption. Moreover, it was contrary to views expressed by Mr. Wells of Noble Denton as recorded by Mr. Bush in his e-mail dated 22 February 2006. It follows, subject to a point to be discussed in the following paragraphs, that the tug owners failed to exercise due diligence to ensure that the tug carried sufficient bunkers and was therefore seaworthy and fit for the towage in breach of Part II clause 13 of the TOWCON.

[71]Captain Hammond expressed the opinion that Noble Denton had failed to investigate with sufficient care the adequacy of the tug’s fuel supplies. On the evidence available in this action (which did not include any statements from Noble Denton) there is support for that criticism. Whilst the e-mail dated 22 February 2006 shows that Mr. Wells of Noble Denton addressed the question of speed and consumption on or before that date there was no evidence of what if any further investigations or checks were made between then and 5 March when Noble Denton approved Seawave’s towing procedures. It appears that Noble Denton approved the towage procedures without drawing attention to the omission in Seawave’s towing procedures of any consideration of the likely speed and duration of the towage and the sufficiency of the tug’s fuel supplies. Neither the certificate approving the towing procedures dated 5 March 2006 nor Noble Denton’s report dated 23 March 2006 suggested that consideration had been given to the likely speed of the tow, the likely duration of the voyage or the sufficiency of bunkers. It was not suggested that the representations made by the tug owners and recorded in the certificate as to bollard pull and the fitness of the tug to undertake the tow could explain this omission. The report of the survey of the tug dated 18 February 2006 annexed to the report contains an apparent calculation that with 1068 tonnes of fuel oil and a daily consumption of 24 tonnes the tug had a range of 40 days (allowing for a margin of about 5 days) but the report does not indicate what, if any, speed was assumed. In any event the survey report would be an unlikely place to find such an assumption and it pre-dated the views of Noble Denton reported in the e-mail dated 22 February.

[72]In approving the towage procedures of Seawave Noble Denton were acting as warranty surveyors pursuant to the policy of insurance on the rig. In my judgment, any errors or omissions by Noble Denton would not provide the tug owners with a defence to the charge that they failed to exercise due diligence to tender the tug in seaworthy condition and fit for the towage. However, counsel for the tug owners submitted any such errors or omissions of Noble Denton did provide the tug owners with a defence. It was said that, having regard to the terms of the TOWCON, as construed in the light of the factual matrix, the tug owners ought not to be held to have acted in breach of their obligations with regard to the preparation for the tow in circumstances where Noble Denton approved the tug and the towage procedures. The factual matrix relied upon was an e-mail dated 16 February 2006, that is about 11 days before the TOWCON was agreed, from Kennedy Marr Limited to Mr. Bush passing on a message from the rig owner as follows:

“[The rig owner] is not willing to agree any deal on the tow now subject to ND [Noble Denton]/underwriters approval. We have to wait for the ND surveys to be done.”

[73]Noble Denton issued a Fitness to Tow Certificate in respect of the tug on 20 February 2006 and on 27 February 2006 the TOWCON was agreed. Thereafter, on 5 March 2006 Noble Denton issued a Certificate of Approval in respect of Seawave’s towing procedures.

[74]It was submitted that Part II clause 13 of the TOWCON must be construed in the context of the e-mail dated 16 February 2006 with the result, it was said, that it is common ground between the parties that the tug was seaworthy and ready to perform the towage.

[75]Clause 13 provides that the tug owner shall exercise due diligence to tender the tug in a seaworthy condition and ready to perform the towage. Counsel did not state in terms how this clause was to be construed in the context of the e-mail dated 16 February. I understood the submission to be that, in circumstances where the rig owner was only willing to agree to the TOWCON if Noble Denton gave its approval, it followed that in the event that Noble Denton gave its approval it must have been agreed that the tug was seaworthy and ready to perform the towage.

[76]I am unable to accept this submission. Clause 13 clearly obliges the tug owners to exercise due diligence to tender the tug in a seaworthy condition and in all respects ready to perform the towage. I assume that the import of the e-mail dated 16 February 2006 is that the rig owner would not agree to a towage contract on the terms of TOWCON unless and until Noble Denton had approved the tug and/or towage procedures. By the time the TOWCON had been agreed on 27 February Noble Denton had certified that the tug was suitable for the proposed towage. That approval having been granted it appears that the rig owner was content to agree to the TOWCON. However, one of the agreed terms was clause 13 which obliged the tug owners to exercise due diligence to tender the tug in a seaworthy condition and in all respects ready to perform the towage. There is, in my judgment, no basis upon which it can be said, as a matter of construction of the TOWCON, that as a result of the e-mail dated 16 February and Noble Denton’s approval of the tug on 20 February and/or of the towage procedures on 5 March, the obligation under Part II clause 13 was agreed to have been performed.

[77]It is to be noted that the certificate of approval of the tug and of the towing procedures were both addressed to Arusha and A Turtle Offshore (the then past and present owners of the rig). But if, as this suggests, there was a formal instruction by Arusha and A Turtle Offshore to Noble Denton, it does not follow that the rig owner was in some way waiving the obligations owed to it by the tug owners under the TOWCON.

[78]In Counsel’s Skeleton Argument the argument was put differently. It was said that in the context of the e-mail dated 16 February and the later approvals by Noble Denton the rig owner confirmed that the tug was seaworthy and fit for the towage and that the tug owner was entitled to rely upon that confirmation by concluding that he had done everything reasonably necessary to comply with his obligations under Part II clause 13. So expressed this was an argument based upon estoppel. However, this argument did not in my judgment have any sure foundation.

[79]Noble Denton were warranty surveyors, that is, they were required by the underwriters of the rig to carry out certain surveys. In this case the rig’s insurance policy noted that the underwriters agreed to Noble Denton being instructed as shift surveyor. General Condition 1 of the London Market Offshore Mobile Unit Form, which formed part of the policy, dealt with shifts of mobile units. In respect of a tow or the shift of a semi-submersible barge a survey was required of the towage or shift arrangements. This was Noble Denton’s task.

[80]It is understandable that the rig owner might wish to delay binding himself to the TOWCON until Noble Denton had approved the tug but it does not follow that the rig owner thereby represented, on signing the TOWCON following Noble Denton’s approval of the tug, that the tug owners had performed their duties under Part II clause 13 of the TOWCON. The rig owner had contracted with the tug owner and secured the latter’s obligation to exercise due diligence to tender the tug in a seaworthy condition and in all respects ready to perform the towage. In any event any representation of fact on the signing of the TOWCON on 27 February 2006 cannot have applied to the towage procedures because they were not approved by Noble Denton until 5 March 2006.

[81]Mr. Bush gave evidence to the effect that “the tug owners relied upon Noble Denton totally for the planning of the voyage.” If they did it is unclear why they did. Noble Denton was not acting on behalf of the tug owners. Mr. Bush accepted that there was no contract between the tug owners and Noble Denton. It is true that Arusha (for whom Bush Shipping acted) as seller of the rig was obliged, pursuant to clause 18 of the MOA, to prepare the rig for tow “in all respects as per their discussions with the Rio de Janeiro office of Noble Denton” and that Superior (for whom Bush Shipping also acted) as owner of the tug was obliged, pursuant to clause 44 of the TOWCON, to prepare and trim the tow and make the connection to the tug to the standards required to obtain from Noble Denton the towing approval certificate. But neither obligation can, in my judgment, detract from the obligation of Superior, pursuant to Part II clause 13 of the TOWCON, to exercise due diligence to ensure that the tug had sufficient bunkers for the towage to Cape Town and was therefore seaworthy and fit for the towage.

[82]If Superior did rely upon Noble Denton with regard to the sufficiency of bunkers they did so in circumstances in which Seawave’s towage procedures did not address the sufficiency of bunkers and there was nothing in Noble Denton’s approval of those procedures to suggest that Noble Denton had addressed the question. There is nothing in those circumstances which enables Superior to say that its own analysis of the bunker question was approved by Noble Denton, an acknowledged expert on the subject of towage procedures, and that therefore it had exercised due diligence to ensure that the tug had sufficient bunkers. That is because the evidence in this case does not reveal that Seawave or Bush Shipping made any proper analysis of the bunker question. In any event the obligation under Part II clause 13 is personal to the tug owners and cannot be delegated to another. If the tug owners had considered themselves to be unable to assess such matters as the tow’s resistance, the required towing power, the available bollard pull and the likely achievable speed and in consequence instructed an expert in towage procedures to advise them, they would still be in breach of their duty under Part II clause 13 if that expert failed to carry out a proper analysis. They cannot be in better position if, instead of instructing their own expert, they chose to rely upon the approval by Noble Denton of the tug and of Seawave’s towage procedures, which themselves contained no proper analysis of the bunker question.

[83]I have therefore concluded that the tug owners failed, in breach of Part II clause 13 of TOWCON, to exercise due diligence to tender the tug in a seaworthy condition and ready for the towage.

Criticism of the performance of the voyage

[84]It was submitted on behalf of the rig owner that once the towage was underway but achieving, at best, a speed of about 2 knots it must have been obvious to the tug owners that the tug would run out of diesel oil before tug and tow reached Cape Town. It was said that this must have been apparent at an early stage, by about 13 March, and that the tug owners’ duty of best endeavours required it either to return to South America or, if it was certain that additional bunkers could be supplied by another vessel en route, to carry on to rendezvous with that vessel. It was said that in breach of its duty of best endeavours the tug owner made arrangements for RUBY DELIVERER to supply bunkers in circumstances where it was uncertain whether RUBY DELIVERER could do so before MIGHTY DELIVERER ran out of bunkers.

[85]It is common ground that a time came when it must have been apparent to the tug owners that the tug would run out of bunkers before reaching Cape Town and that action was accordingly required. That time can have been no later than 29 March 2006 when it is known that Mr. Bush was actively considering the diversion of RUBY DELIVERER. Indeed, Mr. Bush’s oral evidence would suggest that it must have been earlier because he said that he had given instructions to RUBY DELIVERER on 26, 27 or 28 March. By that time the master’s efforts to increase speed had been made. Whilst the daily speed had reached 2.6 knots on 22 March the average speed on that day was still only 2.02 knots. The daily speed fell thereafter. I do not consider that the tug owners’ duty of best endeavours required it to take action on 13 March. The tug master was still seeking to increase speed and he succeeded in doing so to some extent. But by a day or so after 22 March, when the average speed remained at just over 2 knots despite the increase in daily speed, it must have been apparent that the desired speed of 3-4 knots was not going to be achieved and that alternative action was required.

[86]Mr. Bush states that he sought to obtain the services of a tug in South Africa but none was available. In his statement he said that he spoke to Godfrey Needham (a tug broker based in South Africa) who advised him that there were no tugs in the area available to undertake the task of supplying bunkers to MIGHTY DELIVERER. In his oral evidence he elaborated on this account by saying that he had been in discussions with Marint and London Offshore, two firms of tug brokers. He said that they referred him to Geoffrey Needham. He also said that he checked on available tonnage in Brazil and West Africa. It is remarkable that no document was disclosed evidencing such enquiries. Counsel said that this was not surprising given that the result of the enquiries was that no tug was available. However, the situation in which Mr. Bush found himself was very serious indeed. If Mr. Bush made enquiries of Marint, London Offshore or Geoffrey Needham I would expect there to be some documentary record of them and their results. I accept that there would be telephone discussions as well but I have real difficulty in accepting that Mr. Bush would confine himself to telephone enquiries and not send out enquiries of tug brokers by e-mail as well. He would have wanted to be certain that all possible tug brokers responded to his enquiries. Equally, I have real difficulty in accepting that no tug broker replied by e-mail to Mr. Bush’ enquiries. Even if they had no tug available to fit whatever time-scale Mr. Bush had in mind a tug broker is likely, by reason of the nature of his trade, to send to Mr. Bush a list of tugs which might be available, albeit later than requested. The absence of a single e-mail or telephone note evidencing enquiries by Mr. Bush of tug brokers suggests that no such enquiries were made.

[87]However, no evidence was adduced by the owners of the rig showing what tugs were available in March 2006 to assist MIGHTY DELIVERER in the South Atlantic. Tugs may or may not have been available. If there were any tugs available tug brokers are likely to have records of them. None were put in evidence. The burden of showing that there were tugs available to assist MIGHTY DELIVERER in the required time scale is on the owners of the rig. They have not discharged that burden.

[88]Mr. Bush gave instructions that RUBY DELIVERER divert from her work off Madagascar to assist MIGHTY DELIVERER. He must have done so at some time before 9 April 2006 because by that date RUBY DELIVERER was en route to Durban. He said in oral evidence that he gave instructions on 26, 27 or 28 March. However, both his e-mail dated 29 March 2006 and later events show that there was no certainty that RUBY DELIVERER would reach MIGHTY DELIVERER before she ran out of fuel. At the time she was engaged on a service to another rig, VINAR, in northern Madagascar. She had to be released from that and the tug chosen to take over, CHAMP, had to come from off Oman. There can have been no certainty that RUBY DELIVERER would be released in time. In the event she did not arrive until 15 May. Even if the heavy weather damage which had to be repaired in Cape Town had not occurred she would not have arrived earlier than 10 May.

[89]There being no certainty as to whether RUBY DELIVERER could be released and, if she could be released, no certainty that she could arrive before MIGHTY DELIVERER had run out of diesel oil, the only alternative course of action was to instruct MIGHTY DELIVERER to return to South America. By 29 March 2006 the tug and tow were, as indicated by the marked chart put in evidence, about one third of the way across the South Atlantic. There was no dispute that she had sufficient bunkers to return to Brazil. Mr. Bush said in his oral evidence that he considered sending the tug and tow back to Brazil but rejected it because he said he had been told that the rig could not go back. This was a reference to a statement by the port captain at Macae before the rig left, reported to Mr. Bush by his agent in Rio De Janeiro, that the rig would not be permitted to return. However, Mr. Bush accepted that there was no discussion at that time as to whether the rig would be permitted to return in an emergency and he did not suggest that he had any further discussions on the subject when the problems with the towage developed. Both experts agreed that it was unlikely that the tug and tow would have been denied entry in an emergency.

[90]It is more likely than not that the tug and tow could have been ordered to return to the safety of a port in South America (whether in Macae or somewhere else) or to a point off the coast where the rig could be held in safety. The tug’s bunkers could then be replenished. In commercial terms this would be very costly for the tug owners but they had a duty to exercise their best endeavours to perform the towage. The tug owners are entitled to take into account the cost of returning to South America in deciding what action to take pursuant to their duty of best endeavours. But they must also take into account whether there is any viable alternative course of action. If there was no tug available in Cape Town to proceed to MIGHTY DELIVERER with bunkers the only other alternative method of assisting MIGHTY DELIVERER was to despatch RUBY DELIVERER from Madagascar but in circumstances where it was not known whether and if so when she could be released from her existing commitment. In my judgment, in those circumstances the tug owners’ duty of best endeavours required that the expense of returning to South America be borne by the tug owners. That is because the alternative course of action risked the tug running out of bunkers and having to release the connection to the rig in the South Atlantic as winter approached.

[91]If I am wrong in so concluding and reliance on RUBY DELIVERER was the better course of action that course of action ultimately failed. The tug owners cannot escape responsibility for that failure because they were forced to take that course of action by reason of their own prior breach of clause 13 in commencing the towage without sufficient bunkers.

Criticism of the disconnection and search

[92]I do not consider that the disconnection of the rig was a further breach of the obligation to exercise best endeavours to perform the towage. The disconnection appears to have been carried out when the tug was almost out of diesel oil. It seems likely that the tugmaster released the towage connection because he feared for the safety of the tug in circumstances where the tug had no power and was still connected to the rig. Of course, the tug ought never to have found itself in the position of having to do this but the disconnection was not in my judgment a further breach of duty.

[93]The disconnection of the towage connection exposed the rig to great danger. On 30 April RUBY DELIVERER had not yet left Cape Town. Captain Holloway made a number of criticisms of the tug master. He suggested that the tug master ought to have released the towline earlier at a time when the tug had sufficient diesel oil to keep close to and in sight of the rig. However, it is understandable that the tug master kept hold of the rig until the last possible moment. I do not consider that he failed to exercise best endeavours in this regard.

[94]Captain Holloway expressed the opinion that the tug master ought to have prepared for the need to release the towage connection by boarding the rig when the swell conditions permitted and switching on the rig’s EPIRB (an Emergency Position Indicating Radio Beacon) which Mr. Bush believed to have been on board the rig and the rig’s deck lights. It was suggested by counsel (though not by Captain Hammond) that this was no more than hindsight. In my judgment, such was the danger facing the rig that I consider that the boarding of the rig to switch on the EPIRB (if there was one and the tug master knew of its existence) was a step which the tug master ought to have taken. I am not confident that switching on the deck lights falls into the same category because it would be necessary to reboard the rig from time to time to ensure that the rig’s generator was supplied with fuel. However, whilst the position of the rig might have been capable of being tracked by means of the EPIRB it seems to me to be no more than speculation to suggest that the grounding would have been prevented. It is known that the rig was aground on 7 June 2006 but it is not known when she first took the ground. The location of the grounding was one of Tristan da Cunha’s most inaccessible stretches of coastline. It would be necessary to show that at some stage after 17 May 2006, when RUBY DELIVERER had met up with MIGHTY DELIVERER and supplied her with diesel oil, the tugs would have located the rig and taken her in tow before she grounded. No attempt was made to prove this.

[95]It was also suggested that use ought to have been made of the rig’s emergency towline and other mooring lines on board the tug. But such a connection could not be expected to hold in bad weather. I do not consider that the tug master failed to exercise his best endeavours in this regard.

[96]The search carried out by MIGHTY DELIVERER and RUBY DELIVERER was criticised on the basis that it was not a structured search at full sea speed in a pattern which expanded outwards. Instead RUBY DELIVERER went south and drifted and MIGHTY DELIVERER carried out a search but in an irregular pattern. The extent to which tug masters ought to be familiar with appropriate search patterns was not a matter explored in evidence and as a result I am not satisfied that it can be said that best endeavours were not exercised in the search for the rig.

[97]The search was called off on 22 May. Mr. Bush claims that it was called off because the tugs only had enough fuel to enable them to reach a mainland bunkering port. There is no evidence to this effect from the tugs. What is known is that RUBY DELIVERER towed MIGHTY DELIVERER towards Cape Town and then to Dakar, a considerably greater distance than Cape Town. That would suggest that RUBY DELIVERER had the capacity to search for longer and then return to Cape Town. MIGHTY DELIVERER had 40 tonnes of diesel oil and 215 tonnes of fuel oil on 17 May, having received diesel oil from RUBY DELIVERER. Diesel oil and fuel oil would have been consumed in the search. Some diesel oil would have been left, perhaps over 20 tonnes. However, this would not have been much. In these circumstances I am not satisfied that by calling off the search when they did the tug masters can be criticised. In any event, had both tugs continued to search for longer, it could not have been for many days longer.

[98]Counsel accepted that he could not establish on the balance of probabilities that, had the search been better constructed or had the search continued after 22 May, the rig would have been found and the grounding prevented. He suggested that a chance of finding and recovering the rig had been lost but that seems to me to be no more than speculation.

Protection from liability for breach; Part II clause 18 of TOWCON

[99]On behalf of the rig owner it was submitted that despite the wide words of clause 18 there are nevertheless some breaches of duty against which clause 18 cannot have been intended to provide protection. An example is suggested by the judgment of Atkin LJ in The Cap Palos [1921] P. 458. at p. 471-2 who postulated the case of a tug owner who cast off the tow in a storm on a lee shore for the purpose of engaging in a more profitable salvage operation.

[100]Relying upon the speech of Lord Wilberforce in Suisse Atlantique

[1967] 1 AC 361

at p. 432 it was submitted that the correct approach was to ask whether the breaches found to have been committed by the tug owners were of a type for which the parties have agreed to exclude liability. “In application to more radical breaches of contract, the courts have sometimes stated the principle as being that a “total breach of the contract” disentitled a party to rely on exceptions clauses. This formulation has its use so long as one understands it to mean that the clause cannot be taken to refer to such a breach but it is not a universal solvent for this purpose: for it leaves to be decided what is meant by a “total” breach for this purpose – a departure from the contract? but how great a departure?; a delivery of something or a performance different from that promised? but how different? No formula will solve this type of question and one must look individually at the nature of the contract, the character of the breach and its effect upon future performance and expectations and make a judicial estimation of the final result.”

[101]It was submitted that the breaches of duty by the tug owner in the present case, commencing the towage when there was an obvious risk that the tug’s bunkers would not enable tug and tow to reach Cape Town and continuing the towage when there was an obvious risk that RUBY DELIVERER might not arrive before MIGHTY DELIVERER had run out of fuel, were not of a type for which the parties had agreed to exclude liability. The breaches were inconsistent with the main purpose of TOWCON and would not have been recognised by the parties as representing the performance bargained for. Clear words were required to exclude liability for such breaches and such words were not to be found in clause 18.

[102]On behalf of the tug owners it was submitted that clause 18 is a mutual exemption clause and that its commercial purpose was to allocate the risk of specified types of loss and damage between the parties in a straightforward and clear manner. Risk and responsibility were divided on a no fault basis. It makes clear who is to insure what. Thus the tug owner must insure the tug and the rig owner must insure the rig. The clause should be construed in a manner which gives effect to that commercial purpose. Reliance was placed on the Smit International v Josef Mobius GmbH [2001] CLC 1545 per Morison J. and the discussion in The Law of Tug and Tow 2nd.Ed by Rainey pp.120-124.

[103]I have found that the tug owners breached the TOWCON by failing to exercise due diligence to ensure that when the towage commenced the tug carried sufficient bunkers to enable tug and tow to reach Cape Town. As a result the tug was neither seaworthy nor ready for the voyage. Although the tug owners knew, prior to the completion of bunkering, that Noble Denton considered that the likely speed was between 2.5-2.75 knots in fair weather, they assumed that the towage could and would take place at an average speed of 3-4 knots. However, they had no proper basis for so assuming. In those circumstances there was a risk that the tug might not in fact have sufficient bunkers for the towage to Cape Town. The tug owners must have thought that they could avoid that risk by increasing the speed of the tug’s main engines from the 72 rpm discussed on 22 February to a speed which was sufficient to enable tug and tow to make good a speed of 3-4 knots.

[104]I have also found that when during the towage it became apparent that the speed of the towage was such that the tug would run out of bunkers before arrival at Cape Town the tug owners failed to use their best endeavours to perform the towage. Instead of returning to South America they relied upon RUBY DELIVERER to replenish the bunkers of the tug in circumstances when it was not certain that RUBY DELIVERER would reach the tug before the tug had run out of bunkers. The risk that RUBY DELIVERER might arrive too late was one which the tug owners must have appreciated.

[105]My approach to the construction of clause 18 is follows. Clause 18 was intended by the parties to identify which of them was to bear the risk of the various types of loss, damage and liabilities set out in the clause. That is apparent from the phrase “The following shall be for the sole account of…without any recourse to…”. Further, the allocation of risk was on a no fault basis. That is apparent from the phrase “whether or not the same is due to breach of contract, negligence or any fault” and from the words “howsoever caused”. The provisions of clause 18 in the TOWCON are very similar to the provisions of clause 18 of the TOWHIRE form of contract. In Alexander Tsavliris & Sons v OSA Marine Limited (The Herdentor), an unreported decision dated 19 January 1996, Clarke J. described clause 18 of TOWHIRE as containing a “code apportioning liabilities between the parties.” In Smit International v Josef Mobius [2001] CLC 1545 Morison J. described clause 18 of TOWHIRE as a “crude but workable allocation of risk and responsibility.” I consider that the commercial purpose of clause 18 is to make clear to the parties which one of them is to bear the risk of the loss, damage and liabilities which might arise during the towage and enable each to insure against them.

[106]It follows, notwithstanding that the TOWCON places obligations upon the owners of the tug to exercise due diligence to tender the tug in seaworthy condition and ready for the towage and to exercise their best endeavours to perform the towage, that clause 18 exempts the tug owners from liability for breach of those obligations where the loss, damage or liabilities thereby caused are within the loss, damage and liabilities which the rig owner has agreed to accept for his sole account. Thus in Smit International v Josef Mobius the tugowner was entitled to claim an indemnity from the owners of the tow pursuant to clause 18 of TOWHIRE notwithstanding that the tug may have been unseaworthy in breach of clause 13.

[107]There is no dispute that the losses claimed by the rig owner fall within the type of losses which the rig has agreed to accept for its own account. It would therefore appear to follow that the rig owner must bear those losses himself and cannot claim compensation from the tug owners on the grounds that they were caused by the tug owners’ breach of contract. He knows that if he requires protection against such losses he must insure against them.

[108]However, it has been submitted that clause 18 would not protect the tug owners where the rig was lost because the tug owners chose to perform another towage and therefore abandoned the tow at sea in order to perform a more lucrative towage. It is said that consideration of such a case shows that there is a limit on the apparently wide words of clause 18. Although those are not the facts of the present case this question has to be addressed because it is contended that if there is such a limit the events of the present case are sufficiently extreme to fall within it. It is therefore necessary to consider whether there is a limit to the wide words of clause 18 and if so whether the facts of the present case fall within that limit.

[109]The words used in clause 18 are of such wide ambit that, construed literally, the owner of the tow must take for his sole account any damage whatsoever suffered by the tow. Thus if the tug owner chose to disconnect the tow and to abandon it at sea in order to perform a more lucrative towage contract and in consequence thereof the tow was lost, that loss would appear to be for the sole account of the owner of the tow and the tug owner would be exempted from liability for his failure to exercise his best endeavours to perform the towage. However, contracts are not construed literally but, as it has been put in the past, with regard to the main purpose of the contract or, as it is now frequently put, in the context of the contract as a whole. Thus, however wide the literal meaning of an exemption clause, consideration of the main purpose of the contract or of the context of the contract as a whole may result in the apparently wide words of an exemption clause being construed in a manner which does not defeat that main purpose or which reflects the contractual context; see for example Mitsubishi v Eastwind Transport (The Irbenskiy Proliv) [2005] 1 Lloyd’s Rep. at paragraphs 28-34 per Ian Glick QC and, for a recent summary of the general principles of contractual construction, see Pratt v Aigaion Insurance

[2008] EWCA Civ 1314

at paragraphs 9-12 per Sir Anthony Clarke MR.

[110]In considering the true construction of clause 18 I have borne in mind (as did Bingham J. in Swiss Bank v Brink’s-Mat [1986] 2 Lloyd’s Rep.79) the following guidance of Lord Wilberforce in Suisse Atlantique, at pp.431-2:

“[An exception clause] must, ex hypothesi, reflect the contemplation of the parties that a breach of contract, or what apart from the clause would be a breach of contract, may be committed, otherwise the clause would not be there; but the question remains open in any case whether there is a limit to the type of breach which they have in mind. One may safely say that the parties cannot, in a contract, have contemplated that the clause should have so wide an ambit as in effect to deprive one party’s stipulations of all contractual force; to do so would be to reduce the contract to a mere declaration of intent. To this extent it may be correct to say that there is a rule of law against the application of an exceptions clause to a particular type of breach. But short of this it must be a question of contractual intention whether a particular breach is covered or not and the courts are entitled to insist, as they do, that the more radical the breach the clearer must the language be if it is to be covered. ………………No formula will solve this type of question and one must look individually at the nature of the contract, the character of the breach and its effect upon future performance and expectation and make a judicial estimation of the final result.”

[111]Whilst that guidance applies specifically to exception clauses there is no reason, in my judgment, why it should not also apply to a clause such as clause 18 which mutually allocates risk. That is because such a clause has the effect of an exception clause; it exempts the parties from liability they would otherwise incur for breach of contract.

[112]Nevertheless, a strained construction must not be placed on words which are clear and fairly susceptible of one meaning only. “In commercial contracts negotiated between business-men capable of looking after their own interests and of deciding how risks inherent in the performance of various kinds of contract be most economically borne (generally by insurance) it is, in my view, wrong to place a strained construction upon words in an exclusion clause which are clear and fairly susceptible of one meaning only even after due allowance has been made for the presumption in favour of the implied primary and secondary obligations.” Photo Production v Securicor

[1980] AC 827

per Lord Diplock at p.851”

[113]It is helpful to refer to a previous towage case where the ambit of an exemption clause was in issue, The Cap Palos [1921] P. 458. As a result of the tugs’ negligence the tow, a schooner, had been taken into a bay at night, the tugs had gone aground and the towage connection parted. The tugs subsequently refloated and left the bay. The schooner drifted onto rocks and became a constructive total loss. The tug owner had sent another tug to assist but cancelled the order believing, erroneously, that the Salvage Assistance had sent tugs to the assistance of the schooner. The towage contract exempted the tug owner from “the acts, neglect, or default of the masters, pilots or crews of the steam tugs………..or any damage or loss that may arise to any vessel or craft being towed, or about to be towed, or having been towed………..whether such damage arise from or be occasioned by any accident or by any omission, breach of duty, mismanagement, negligence, or default of the steam tug owner, or any of his servants or employees.” At first instance it was held that the clause was as wide as possible and protected the tug owner from his failure to continue to carry out his contract by sending assistance to the schooner. On appeal it was held that the clause did not protect the tug owner from liability for that failure. Lord Sterndale said at p.468:

“…….I think that the whole clause points to the exceptions being confined to a time when the tug owner is doing something or omitting to do something in the actual performance of the contract, and do not apply during a period when, as in this case, he has ceased even for a time to do anything at all and has left the performance of his duties to someone else. In other words, I think the exception extends to cover a default during the actual performance of the duties of the contract, and not to an unjustified handing over of those obligations to some one else for performance.”

[114]Atkin LJ agreed. He made reference to the concept of deviation but made clear that a contracting party can be protected from liability even for wilful default if he used clear words to that effect; see pp.470-472. Younger LJ also agreed that the towage conditions provided no protection.

[115]Clause 18 of TOWCON must be construed to give effect to the commercial purpose of allocating risk between the parties on a no-fault basis but in the context of the TOWCON as a whole. In this regard it is necessary to keep in mind that TOWCON places certain obligations upon the tug owners, in particular, to exercise due diligence to tender the tug in seaworthy condition and ready for the towage and to exercise their best endeavours to perform the towage.

[116]Had it been intended that the tug owners were not responsible for loss, damage and liabilities (of the categories listed in clause 18) occurring after the tug owner had chosen not to perform the towage contract by, for example, releasing the towage connection in order to perform a more profitable contract, then very clear words would be required because that would be a very radical breach indeed. Whilst the wide words of clause 18 are literally capable of applying to such a radical breach I do not consider that clause 18, if it is to be construed in the context of the TOWCON as a whole and to give effect to the main purpose of the TOWCON, is fairly susceptible of only one meaning, namely, that it applies however radical the breach. The words, when read in the context of the TOWCON as a whole, are also susceptible of applying so long as the tug owners are actually performing their obligations under the TOWCON, albeit not to the required standard. That ensures that the obligations of the tug owners are more than a mere declaration of intent. My approach to the construction of clause 18 therefore reflects the approach of Lord Sterndale in The Cap Palos notwithstanding that the clause in that case was differently worded and was not a mutual allocation of risk clause.

[117]It may be argued that such a construction is not required to ensure that the obligations of the tug owners are more than mere declarations of intent because those obligations will be of full effect where loss or damage of a class not within the classes listed in clause 18 is suffered. However, the classes of loss or damage listed in clause 18 are so wide that the construction to which I have referred is realistically required to ensure that the obligations of the tug owners are more than mere declarations of intent.

[118]It may also be argued that such a construction is inconsistent with the approach of Bingham J. in Swiss Bank v Brink’s Mat [1986] 2 Lloyd’s Rep.79. Bingham J. held at paragraph 93 that the words “under no liability whatsoever howsoever arising” were susceptible of one meaning only. However, that was a case where there was an express limit on the ambit of the clause. It did not extend to wilful default.

[119]It is now necessary to return to the facts of the present case. The failure by the tug owners to exercise due diligence to ensure that the tug had sufficient bunkers at the commencement of the tow occurred whilst the tug owners were performing their obligations under the TOWCON. They did so negligently in circumstances where there was a risk that the tug might not in fact have sufficient bunkers for the towage to Cape Town. But they had not ceased to do anything at all in the performance of their obligations. The tug had sufficient bunkers for a towage at 3-4 knots and the tug owners must have thought that such a speed was achievable by increasing the rpm of the tug’s engines beyond 72 rpm.

[120]Similarly, the failure by the tug owners during the towage to return to South America occurred whilst the tug owners were performing their obligations under the TOWCON by relying upon RUBY DELIVERER to replenish the bunkers of the tug. Whilst it was not certain that RUBY DELIVERER would reach the tug before the tug had run out of bunkers the tug owners had not ceased to do anything at all in the performance of their obligations.

[121]Since there was no dispute that the loss and damage claimed by the rig owner fell within the types of loss and damage listed in clause 18(2)(b) it follows, in my judgment, that such loss and damage is for the sole account of the rig owner and that the tug owners are exempt from liability in respect thereof.

[122]When the search for the rig was called off by the tugs on 22 May 2006 the owners of the tug remained bound to exercise their best endeavours to perform the towage. However, they did not seek to perform that obligation. The tugs simply left the scene and the tug owners made no attempt to send another tug. Mr. Bush later said, by e-mails dated 5 and 12 June 2006, that as far as the tug owners were concerned they were relieved of all further obligations after 22 May 2006. That was wrong. The tug owners’ obligations had not come to an end on 22 May 2006. Had the tug owners’ failure to perform their obligations after 22 May been an effective cause of the grounding and subsequent loss of the rig the tug owners would not in my judgment have been protected by clause 18. But it was accepted that that could not be established. At most it was said that a chance of finding and recovering the rig had been lost. But that, as I have said, was no more than speculation. In this regard the facts of the present case are different from the facts of The Cap Palos. In that case the tug which the tug owners had sent to the casualty but then cancelled would have reached the casualty in time to be of use; see the judgment of Lord Sterndale at p. 464.

[123]For the reasons which I have endeavoured to explain the Defendants, the owners of the tug MIGHTY DELIVERER, are exempted by the terms of TOWCON from liability for the loss of A TURTLE and the expense thereby caused.

[124]The rig owner had alternative claims against the tug owners for breaches of implied terms and for breach of duty as bailee of the tug. It is not necessary to deal with these alternative claims because it was not suggested that liability for such claims was not exempted by clause 18 in circumstances where liability for breach of the express terms of TOWCON was exempted.

Limitation of Liability

[125]In the light of my decision this matter does not strictly arise. I shall however briefly deal with the issue of limitation. Article 4 of the Limitation Convention 1976 provides as follows:

“A person shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.”

[126]The burden lies upon the rig owner to establish on the balance of probabilities that the loss of the rig, and the associated expense, resulted from a personal act or omission of the tug owners and that it was committed recklessly and with knowledge that such loss would probably result. The language emphasised reflects two of the matters addressed by Lord Phillips in The Leerort 2001 2 Lloyd’s Rep. 291 at paragraphs 13-19.

[127]It was submitted that Mr. Bush had full discretion or autonomy with regard to the acts or omissions which caused the loss of the rig and therefore that his acts or omissions were the personal acts or omissions of the tug owners. It would appear that he had full discretion and autonomy with regard to certain matters, including bunkering. However, so little is known about the circumstances in which the towage was ordered to be commenced that I am not satisfied that it was Mr. Bush who formed the view that the speed of the towage would be 3-4 knots. He may have been but it is not clear. The view may have been taken by an employee of Seawave who were the technical managers. The extent to which such person’s acts or omissions amounted to personal acts or omissions of the tug owners was not explored in evidence.

[128]But assuming that the view was formed by Mr. Bush the rig owner must show that he did so recklessly and with knowledge that the grounding and resulting expense of wreck removal would probably result. It is improbable that Mr. Bush was reckless in the sense of not caring whether there were sufficient bunkers on board. It is more likely that he thought that increasing the speed of the tug’s main engines beyond 72 rpm was possible and that therefore a towage speed of 3-4 knots could be achieved, on which basis the bunkers were adequate. But even if he had been reckless the rig owner is unable to establish that Mr. Bush acted with knowledge that the very loss that actually occurred, that is the grounding of the rig and the resulting expense of wreck removal, would probably result. His e-mail dated 22 February 2006 indicates his state of mind:

“It will be an interesting project and we must make it work.”

[129]That suggests, as one would expect, that he wanted the towage to be successful. Whilst the risk of the tug running out of fuel may have been in his mind on 22 February (he described the consumption as “critical”) it is improbable that when he took the decision to instruct the towage to commence (assuming he did so) he did so knowing that the rig would probably be lost as a result of grounding and that in consequence very substantial wreck removal expenses would be incurred by the owners of the rig. It is much more probable that if the risk of the tug running out of fuel was still in his mind when the towage commenced he thought that some means would be found to replenish the tug enabling the towage to be completed.

[130]So far as the decision to rely upon the services of RUBY DELIVERER is concerned that appears to have been the decision of Mr. Bush. His e-mail dated 29 March certainly suggests it was his decision and in his oral evidence he never suggested that it was not his decision. I accept that his decision in that regard amounted to the personal fault of the tug owners.

[131]It is likely that when the decision was taken Mr. Bush appreciated that there was a risk that the tug might run out of fuel before RUBY DELIVERER arrived. It may be that he can be said to have been reckless with regard to that risk because he chose to run that risk rather than to avoid it by ordering the tug and tow back to South America. But the rig owner cannot show that when the decision was taken it was taken with knowledge that the rig would probably be lost as a result of grounding and that in consequence very substantial wreck removal expenses would be incurred by the rig owner. It is much more probable that Mr. Bush thought that if the risk materialised the towage would nevertheless be continued and completed after RUBY DELIVERER had arrived and replenished the tug’s bunkers.

[132]I would therefore have held, had it been necessary, that the tug owners were entitled to limit their liability pursuant to the Limitation Convention.

The counterclaim

[133]The counterclaim concerns the question whether the tug owners are entitled to 95% of the agreed freight notwithstanding that the tow was lost in the circumstances already described.

[134]Part 1 Box 32 provided that the lump sum towage price was US$1,970,000 for towage to Singapore. 5% was due and payable on signing the Agreement and 95% was due and payable on arrival of tug and tow at the place of destination.

[135]Part 1 also contained several additional clauses as follows:

“40. Freight as per Box 32 is deemed earned whether the tug or rig is lost or not lost. ……… 46. The Hirer will instruct its insurance company to insert a “loss payable clause” into the hull policy stating that: “In case of total loss of the rig, insurance proceeds shall be payable to (Tugowners) up to the amount of US$1,871,500 representing 95% of the freight, with balance to be payable to (Rig Owners)”.”

[136]Part II clause 2 provided as follows:

“…….. (b) The Lump Sum and all other sums shall be payable as set out in Boxes 32 and 33. (c) The Lump Sum and other sums payable to the Tugowner under this Agreement shall be payable without any discount, deduction, set-off, lien, claim or counter-claim, each instalment of the Lump Sum shall be fully and irrevocably earned at the moment it is due as set out in Box 32. Tug and/or Tow lost or not lost, and all other sums shall be fully and irrevocably earned on a daily basis.”

[137]The last sentence of Part 1 provided that in the event of conflict the provisions of Part 1 and any additional clause were to prevail over those of Part II.

[138]It was submitted on behalf of the tug owners that the effect of additional clause 40 was that 95% of the lump sum freight was deemed earned once the tug or rig was lost. It was submitted on behalf of the rig owner that the effect of Part 1 Box 32 and clause 40 and Part II clause 2 was that the lump sum freight was due and payable as provided in Box 32 and that once any part of the freight became due and payable pursuant to Box 32 it was deemed earned whether the tug or rig was lost or not.

[139]I consider that the freight provisions are clear. Part 1 Box 32 states when the freight is due and payable. There is nothing in either Part 1 clause 40 or Part II clause 2 which seeks to override that. Both clauses make specific reference to Box 32. Moreover, both make provision for the loss of the rig. The freight will be “deemed earned” or “ fully and irrevocably earned” as provided in Box 32 whether or not the rig is lost. The effect of such a clause is that if part of the lump sum freight becomes due and payable it remains due and payable notwithstanding that the rig is lost.

[140]When those provisions are applied to the facts of the present case 5% of the lump sum freight became due and payable on the signing of the Agreement but the 95% never became due and payable because tug and tow never arrived at the destination. However, the 5% remained payable notwithstanding the loss of the rig.

[141]Clause 46 provides the tug owners with insurance against the event that they fail to earn 95% of the lump sum hire by the loss of the rig before arrival of the tug and tow at the place of destination.

[142]The argument of the tug owners was that clause 40 provided that the freight was earned on the loss of the tug or rig and that the reference in clause 40 to Box 32 was simply to the amount of the freight. It was said that if the freight provisions were construed in the manner which I have indicated Part 1 clause 40 will have added nothing to Part II clause 2. I agree that on my construction of the freight clauses that is so and that one would perhaps expect an additional clause to the standard form to add something to it. However, repetition or surplusage is not unknown in commercial contracts and in any event the words used in clause 40 are not capable of meaning that the freight, notwithstanding the provisions of Box 32, will be due and payable on the loss of the rig or tug. It was suggested that there was a conflict between Box 32 and clause 40 and that Box 32 must yield to clause 40. But I do not consider that there is any such conflict. It was also suggested that there should be implied a term to the effect that the freight was due and payable on the loss of the rig or tug. But such a term would be contrary to the expressly agreed Box 32 and so cannot be implied.

[143]Perhaps aware of the difficulty of construing the freight provisions in the manner suggested by the tug owners, the tug owners had an alternative case. They relied upon the exchanges between the parties leading up to the agreement to TOWCON. They did not seek rectification of TOWCON but said that the exchanges showed that the parties had negotiated on the basis that the words used in clause 40 had an agreed meaning, namely, that “it was not tenable to consider that freight would only be earned on arrival at Singapore and if the rig or tug was lost freight would be deemed to have earned”.

[144]The exchanges relied begin on 20 February 2006 with an e-mail from Bush Shipping for transmission to Kennedy Marr who were said to be the rig owners’ brokers:

“Ref payment we accept 5% on signing towcon. Regarding the further payment this is very unusual. We would request hirers to consider to at least pay for the bunkers as they are consumed. Normally all freight is payable before releasing of the tow rather than on right and true delivery. Secondly there is the question of when freight is deemed earned. It would not be tenable to consider the freight earned on arrival of the rig in Singapore. What would the situation [be] if there was an accident 12 hours prior to arrival of the rig in Singapore ? If significant credit is agreed then I feel tug owners interest should be noted on the insurance policy.”

[145]Kennedy Marr passed this on to the rig owner in slightly different terms. I shall quote these terms because the rig owner does not accept that Kennedy Marr were its brokers. The material part was as follows:

“However they say it has to be clear that this clause is about when the money is paid and not whether the money is paid. Ie It is simply a cash flow situation not them inheriting more risk. Also he says “if significant credit is agreed then I feel tug owners interest should be noted on the insurance policy.”

[146]The rig owner replied:

“Confirm 5/95% payment was offered by other tug, however we are willing to accept “freight deemed earned whether the tug lost or not” – accordingly freight will be added into ins by rig owners. Pls confirm this is accepted by tug owners.”

[147]On 21 February 2006 Bush Shipping replied:

“Should read “freight deemed earned whether tug or rig is lost or not lost”

Please confirm tug owners will be joint insured as far as amount due under the towcon.”

[148]The rig owner replied:

“confirm “freight deemed earned whether the tug or rig is lost or not lost” confirm insurance policy will bear the name of tug owners up to usd1.97 mill.”

[149]On 22 February 2006 Mr. Bush sent an e-mail to Kennedy Marr with further comments, one of which was:

“Cls 40 suggest add “as per Box 32” after word Freight”

[150]On 23 February 2006 the rig owner replied:

“we prepare to instruct insurance company to insert a “loss payable clause” into hull policy stating that: in case of total loss of the rig, insurance proceeds shall be payable to (tugowners) up to the amount of usd1,871,500 representing 95pct of the freight, with balance to be payable to the (rig owners). Hopefully the above meet tug owners requirement.”

[151]Later on 23 February Mr. Bush replied to Kennedy Marr as follows:

“I discussed the insurance and we are willing to accept the loss payable for the insurance but we must clarify that the freight is deemed earned on sailing and payable as agreed on arrival at Singapore. This may be done by deleting 32(e) words “due and”.”

[152]The towage agreement was finally agreed on 27 February.

[153]These exchanges show that Mr. Bush wanted to agree terms pursuant to which freight was earned on sailing but payable on arrival. In that way he would not take the risk of not earning the freight by reason of the loss of the rig or tug before arrival. He made this intention tolerably clear in his e-mail dated 20 February. When Kennedy Marr passed the-email on that was made very clear. However, the rig owners did not reply in the terms which had been sought. Instead they offered a term to the effect that the freight was deemed earned tug lost or not lost and they offered to add the freight to the rig’s insurance. This reply did not state that the freight would be earned on shipment and payable on arrival. Nevertheless it was acceptable to Mr. Bush so long as the clause also referred to the loss of the rig and the tug owners were named as “joint insured in respect of the amount due under the towcon”. The rig owners accepted the reference to the loss of the rig and confirmed that “insurance policy will bear the name of tug owners up to usd1.97 mill”. That figure was the total lump sum freight.

[154]I do not consider that there was by this stage an agreement that the phrase “freight deemed earned whether the tug or rig is lost or not lost” bore the meaning suggested by the tug owners. On 23 February the rig owner proposed a loss payable clause in respect of 95% of the lump sum freight. That was acceptable to Mr. Bush. But he returned to his request that the freight be earned on sailing though payable on arrival; “we must clarify that the freight is deemed earned on sailing and payable as agreed on arrival at Singapore.” This need for clarification confirms that such terms had not yet been agreed and further that it had not been agreed that the terms which had been agreed bore the meaning now suggested by the tug owners. There was no response to the request for clarification. It follows that there was no agreement as to the meaning of the words used in clause 40.

[155]Finally, reliance was placed on certain exchanges in May 2007 which it was said demonstrated an admission on the part of the rig owner that the freight was due and owing. I have read the correspondence relied upon. It evidences an offer to pay US$500,000 in settlement. It does not evidence the suggested admission. Mr. Bush considers that Mr. Robert Tsai, on behalf of the owner of the rig, agreed to pay $500,000 on account at a meeting. It seems that there was a discussion about making such a payment but I am not satisfied that Mr. Tsai made an admission of liability in respect of the balance of the freight such that the rig owner is now to be prevented from defending the claim. Indeed, the suggested “admission” was not developed in this manner either in written or oral argument.

[156]I must therefore dismiss the counterclaim for 95% of the lump sum freight. That freight was only due and payable on arrival of the tug and tow at Singapore. That never happened and so the balance of the freight is not due and payable. The tug owners do however have the benefit of being loss payees under the insurance policy on the rig in respect of a sum equal to 95% of the lump sum freight.

[157]In the light of my conclusion it is not necessary for me to consider the further question which arose on the counterclaim, namely, if the balance of the freight was agreed to be earned on the loss of the rig, was the rig lost before or after the towage contract had been terminated. If it was lost after such termination then, even on the tug owners’ construction of clause 40 the balance was never earned.

[158]I shall therefore deal shortly with these matters. The tug owners’ case was that the rig was lost on 22 May 2006 when the tugs called off the search and proceeded back to Africa; alternatively it was lost on 7 June 2006 when it was found ashore on Tristan da Cunha; and in the further alternative it was lost by 1 July 2006 when it should be assumed that the rig owner had formed the view that the rig was a constructive total loss. The rig owner’s case as presented in argument was that the rig was lost when it became apparent that she was a constructive total loss. That was at some stage between 25 July and 15 August 2006.

[159]The rig was actually lost in February 2007 when she was dumped at sea. However, by 15 August 2006 the underwriters had accepted that the rig was a constructive total loss. By this time salvage efforts had failed and the rig was ballasted down for the winter. The rig doubtless sustained damage not only on grounding but also over the subsequent days and weeks as she lay aground. But quite when the rig had suffered so much damage as a result of grounding and/or of lying aground that the costs of refloating her and bringing her to a safe place exceeded her value is not known. The rig owners have not disclosed any documents which enable this question to be answered. It is possible that the rig was a constructive total loss immediately after grounding, notwithstanding that attempts were made to salve her. Indeed the rig owners have pleaded that the damage suffered by the rig as a result of grounding meant that the rig was a constructive total loss. In the absence of documents from the rig owners concerning the assessment of the damage suffered by the rig and in the light of the rig owners’ own pleading the only finding which I can make on the meagre material before me is that the rig became a constructive total loss on or about the date on which she grounded, which must have been on or before 7 June 2006. That is to be distinguished from the date on which it was possible to form a judgment that she was a constructive total loss which was no doubt later, probably in late July or early August 2006.

[160]The earliest date on which the rig owner was able to say that the towage contract was terminated was on or about 13 June 2006. By their e-mails dated 5 June and 12 June the tug owners had renounced their obligations under the towage contract. On 13 June the rig owner said that the tug owners were not entitled to “walk away” from the rig. The rig owner advised that it was negotiating with a salvage company for the recovery of the rig. It was said that that amounted to an acceptance of the tug owners’ renunciation of the towage contract. I agree. Although the earlier part of the e-mail reserved the rig owner’s position as to the right of the tug owners to walk away from the rig and to rely upon clause 18 it seems to me that the rig owner’s conduct in engaging salvage assistance was only consistent with a recognition that the contract was at an end. If it were not at an end they would be relying upon the tug owners to engage salvage assistance pursuant to their obligation to exercise best endeavours to perform the towage contract.

[161]Thus, had it been necessary to make findings, I would have found that the rig was constructively lost on or before 7 June 2006 and that the towage contract came to an end on or about 13 June 2006.

Conclusion

[162]

(i) The grounding of the rig was caused by the tug owners’ breach of their contractual obligations to exercise due diligence to make the tug seaworthy and ready for the towage and to use their best endeavours to perform the towage. But, by Part II clause 18 of TOWCON, the losses caused by that grounding are for the sole account of the rig owner and the tug owners are exempted from liability for such losses.

(ii) Tug and tow never arrived at Singapore and so 95% of the lump sum freight did not become due and payable.

(iii) It follows that claim and counterclaim must be dismissed.

A.Turtle Offshore SA Assuranceforeningen Gard-Gjensidig v Superior Trading Inc [2008] EWHC 3034 (Admlty)

A TURTLE

MIGHTY DELIVERER

The evidence

Events before TOWCON was agreed

The Towage

Criticism of the preparation for the towage

Criticism of the performance of the voyage

Criticism of the disconnection and search

Protection from liability for breach; Part II clause 18 of TOWCON

Limitation of Liability

The counterclaim

Conclusion

Cited in 2 later judgments