Emeraldian Ltd Partnership v Wellmix Shipping Ltd & Anor [2010] EWHC 1411 (Comm)

[2010] EWHC 1411 (Comm)Case No 2008 FOLIO NO.286
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 17/06/2010
Before
MR. JUSTICE TEARE
Between
Emeraldian Limited PartnershipClaimant(1) Wellmix Shipping LimitedDefendants(2) Guangzhou Iron &Steel Corporation LimitedDefendant
Michael Coburn QC and Charlotte Tan (instructed by Holman, Fenwick and Willan LLP) for ClaimantLionel Persey QC and David Walsh (instructed by DLA Piper UK LLP) for DefendantsHearing Hearing dates: April 19-21 and 26-28 and May 4-5 2010
Judgment

Mr. Justice Teare:

[1]This is the trial of two claims by the Claimants, the Owners of VINE. The first is a claim against the First Defendants, the Charterers of VINE, for demurrage in the sum of about US$5m. The second is a claim against the Second Defendants, the alleged guarantor of the liabilities of the Charterers. The claims arise out of delay in loading the Capesize bulk carrier VINE in January and February 2008 at an iron ore terminal in Itaguai (also known as Sepetiba) in Brazil when repairs were being carried out to the berth.

The charterparty

[2]The vessel was the subject of a charterparty evidenced by a fixture recap dated 3 December 2007 which provided for a voyage from “1 or 2 safe berths, 1 safe port Itaguai, Brazil, always afloat” to China with a cargo of 120,000 mt. of iron ore.[3]The fixture recap stated that “SCALE terms” were to be part of the charterparty. These were set out in an appendix and were taken from a long term contract for the sale and purchase of iron ore between the Second Defendant and CVRD International SA, subsequently known as Vale SA, a major exporter of iron ore from Brazil.[4]The charterparty provided for about 2 and half days laydays which was to commence 6 hours after tendering notice of readiness.[5]Clause 4.1 of the SCALE terms dealt with Notice of Readiness and, so far as relevant, provided as follows:
“Notice of Readiness (NOR) may be tendered after arrival of the vessel at Loading Port, at any time, ……provided that the vessel is ……cleared by the Port Authorities……. ”
[6]Clause 5 of the SCALE terms dealt with Laytime. Clause 5.10, so far as relevant, provided as follows:
“5.10 Time lost as a result of all or any of the causes hereunder shall not be computed as laytime, unless vessel is already on demurrage: ……… (iv) Accident at the mines, railway or ports; ……… (viii) Partial or Total interruptions on railways or port; ……… (ix) Any cause of whatsoever kind or nature, beyond the control of Seller, preventing cargo preparation, loading or berthing of the vessel.”
[7]The fixture recap also provided that “otherwise C/P to be based on Vine/PML c/p dtd 21 June 2007”. Although this charterparty contained other exceptions from laytime it is unnecessary to mention them further because Mr. Lionel Persey QC, counsel for the Charterers, accepted that there was such overlap between the exceptions in the SCALE terms and the other exceptions in the earlier charterparty that he made no submissions about the other exceptions in his closing submissions. I shall therefore say nothing about them.

The nominated berth

[8]The port of Itaguai, which is referred to in the fixture recap, is known locally as Porto de Sepetiba. It is one of the ports that serves Rio de Janeiro in Brazil. Within the port there are separate terminals for containers, alumina, coal, iron ore and solid and liquid bulk cargoes. The Charterers nominated a berth leased to and operated by Companhia Portuaria Baia de Sepetiba (“CPBS”), a company owned by Vale SA. It is one of three terminals in the bays of Ilha Grande and Sepetiba used for the export of iron ore.[9]Porto de Sepetiba is described by CPBS in their “Notice to Ships” as being “within very sheltered waters without swell influence”. The CPBS berth is only 143m. in length so both Capesize and Panamax vessels are longer than the berth itself. The berth had 3 berthing dolphins known for the purposes of this case as D1, D2 and D3, numbered from east to west. In addition there were several mooring dolphins to both the east and west, set inside the line of the berth. Vessels berthed starboard side to so that D3 was the dolphin furthest forward and D1 the dolphin furthest aft. D2 was about amidships and was designed to have approximately 50% of the energy absorption capacity of D1 and D3. There was no evidence that the lesser capacity of D2 was advertised to mariners. Thus the Notice to Ships issued by CPBS described the berth in these terms:
“The pier and the ore loading system were dimensioned to serve bulk carriers in the range of 40,000 DWT to 230,000 DWT……The berthing pier has a total length of 143 meters and three berthing dolphins equipped with Sumitomo Type fenders spaced 60 meters one from another plus four mooring dolphins..… ”
[10]So long as D1 and D3 remained available for use the lesser capacity of D2 probably mattered little. If a vessel first contacted either D1 or D3 that dolphin would absorb much of the energy imparted by the vessel as it rotated about the contact point so that it was then safe for the vessel’s starboard side amidships to breast D2. Equally if the vessel contacted D1, D2 and D3 simultaneously the energy absorbed by D1 and D3, the primary berthing dolphins, would ensure that the contact with D2 was safe.

The PACIFIC FORTUNE incident and the contingency plan

[11]On 19 July 2007 PACIFIC FORTUNE caused damage to D3 with the result that D3 was no longer in use. The circumstances which gave rise to this damage were not investigated in this action. The Owners referred to a local enquiry which was said to attribute the damage to environmental factors rather than any fault on the part of the ship. The Charterers referred to other local reports which attributed the damage to “irregular berthing” and suggested the fault lay in closing the berth too fast.[12]D3 had to be repaired. Pending the execution of such repairs a contingency plan for berthing was approved by the port authority. At some stage it appears that D3 was removed and the piles severed to a height level with high water.[13]The contingency plan for berthing at the terminal was drawn up on 20 July 2007 by persons associated with the terminal including CPBS, the port captaincy and the senior pilot Mr. Damasco. The minutes of the meeting recorded that the pilots were in favour of resuming operations at the terminal and that the plan was discussed and agreed. The plan was described in these terms:
“Vessels must always berth on the starboard side; the damaged dolphin [D3] will be lit and must not be touched by the vessel during the berthing operation. Four tugs to be used for berthing operations – two of them at least 45 tons tbp. Wind conditions of 15 knots or more must be assessed during the operation by the pilot. …… The vessel’s portside anchor must always be used as an aid in the berthing operation in order to limit the distance from the dolphin and reduce the approach speed. …… During berthing, the vessel must always contact Dolphin D1 first”
During berthing, the vessel must always contact Dolphin D1 first”[14]The following day a “special procedure” was set out in a document signed by others concerned with the operation of the port. The procedure listed 14 steps and included those set out in the contingency plan of the previous day.[15]Although the plan made no mention of D2 the requirement that “during berthing, the vessel must always contact Dolphin D1 first” implied that the final approach of the berthing vessel was expected to be at an angle to permit the vessel’s starboard side aft to contact D1. Only by so doing could a mariner ensure that D1 was contacted first. Having done so the starboard side would then contact D2 and the vessel would then be securely moored.[16]Although D3 required to be repaired and a drawing of the required repairs was issued on 5 September 2007, D3 was not in fact repaired in 2007. Vessels continued to berth using the contingency plan. Between 20 July and 8 December 2007 some 73 vessels berthed, of which 46 were Capesize vessels.[17]One such vessel was CAPE STORK. She was managed by Zodiac who were also the managers of VINE. On 3 November 2007 her master noticed “the sharp edges” of the submerged piles of D3 as his vessel approached the berth. He requested a tug to stand by his vessel after she had berthed. He did not consider that mooring lines and the port anchor were sufficient to keep his vessel away from the sharp edges.[18]On 3 December 2007 the work of “mobilisation and installation of construction job site” commenced in connection with the repairs to D3. It is unclear when, at this time, it was anticipated that the underwater work on D3 would be carried out. A vessel “line-up” dated 3 December 2007 allowed for no vessels to berth between 8 and 15 January but this soon changed. By 7 December 2007 four vessels, the last of which was VINE, were scheduled to berth between 6 and 15 January 2008.

The NORDSTAR incident

[19]On 8 December 2007 NORDSTAR caused damage to D2. There is a dispute between the parties as to the cause of this incident. The Owners say it was the unsafety of the berth. The Charterers say it was negligent navigation of the vessel. On 9 December 2007 CPBS issued a force majeure notice in respect of the incident. Berthing had to be stopped. A stoppage of 10 days was anticipated.[20]On 14 December 2007 the Port Captain agreed that for a period of up to 45 days a further contingency plan using buoys could be operated. This required the use of 5 tugs and involved vessels being moored about 5 metres off the berth using the port anchor and 14 mooring lines.[21]Some work in relation to D3 was carried out between 10 and 27 December 2007. It was described in a schedule of repairs as the “assembling of forms and jointing of ladders” which was understood by Mr. Ball, the Owners’ engineering expert, to mean the fabrication of piles and steel reinforcement. This work probably took place ashore. Between 11 and 15 December 2007 there was work described by Mr. Ball as cleaning some of the existing piles and cutting off and removing others. It is likely that this work was carried out at the berth. The schedule suggests that the mooring of vessels to buoys pursuant to the further contingency plan commenced on 18 December 2007.[22]Drawings of two new dolphins D8 and D9 to replace D2 were issued on 13 and 26 December 2007.[23]On 7 January 2007 mooring of vessels off the berth pursuant to the further contingency plan stopped and underwater work on the D3 repairs commenced.

The arrival of VINE and the delay in berthing her

[24]VINE arrived in the port on 8 January 2008. She did not berth until 15 February 2008. There is no dispute that the reason for the delay in berthing her was the repairs being conducted to the berth. Those repairs are set out in a schedule of repairs which listed the repairs in fact carried out rather than those planned to be carried out. In summary that document recorded the following: 7-13 January 2008 Underwater work to piles of D3 16-20 January 2008 Installation of piles of D3 24-30 January 2008 Further work on piles of D3 5-11 February 2008 Further work on piles and cap of D3 15-16 February 2008 Fitting of fender to D3 17 February 2008 D3 available for berthing vessels[25]The same document records that between 6 and 27 January 2008 work was undertaken ashore to fabricate two additional dolphins, D8 and D9, which were to replace D2. The piles for D8 and D9 were installed between 29 January and 8 February 2008. Thus on a small number of days during this period the repair work on the berth was associated both with the damage to D3 and with the damage to D2, namely, 29-30 January and 5-8 February 2008. Further work on the pile casings for D8 and D9 was carried out between 16 and 19 February 2008. The work associated with D8 and D9 continued in March and April 2008.[26]Although no work on D3 was carried out between 13 and 16 January, between 20 and 23 January and between 30 January and 5 February, berthing operations at the berth were suspended from 8 January to 17 February 2008. Some, though not perhaps all of these periods, may be explained by holidays. From 10-17 February 2008 berthing was again possible a short distance off the berth with vessels moored to buoys pursuant to the further contingency plan. I assume this was how VINE berthed on 15 February 2008.[27]The schedule of work carried out to the berth is cogent evidence that the berthing of the vessel was delayed by the repairs to D3. The underwater work on D3 commenced on 7 January 2008, the day before the vessel arrived. VINE was eventually moored on 15 February 2008 off the berth when all that remained of the repairs to D3 was to fit the fender. In this regard it is also to be noted that Mr. Lima, the Programming Manager of the CPBS terminal, stated (in a statement put in under the Civil Evidence Act by the Charterers) that “in January 2008 [the] CPBS terminal became unavailable for some days due to repairs being performed on dolphin D3.”

The decision to repair and close the berth from 7 January 2008

[28]Although it was the repairs to D3 which caused the berth to be unavailable for use when VINE arrived on 8 January 2008 Mr. Persey submitted that the reason why CPBS chose to repair D3 at that time was the NORDSTAR incident on 8 December 2007. He said that the damage to D2 caused by the NORDSTAR incident made it imperative to carry out all of the required repairs to the berth quickly. Mr. Coburn QC, who appeared for the Owners, said that the burden of proof was on the Charterers in this regard (because it was part of their case that delays caused by the NORDSTAR incident did not count as laytime) and that that burden could not be discharged. He noted that the allegation was not supported by a statement from Mr. Lima, the programming manager. It is also to be noted that on 3 December 2007 the work of “mobilisation and installation of construction job site” had in fact commenced.[29]The line-up schedule dated 7 December 2007, the day before the NORDSTAR incident, showed that there was no intention on that date to have the berth closed before 15 January 2008. Something caused that to change after 7 December 2007. Mr. Persey submits that the obvious candidate is the NORDSTAR incident. That seems to me to be supported by the following considerations: i) Although D3 had been damaged in July 2007 CPBS had not repaired D3 but had permitted berthing to continue pursuant to the (first) contingency plan for a substantial period. ii) Once D2 had been damaged by NORDSTAR the berth could no longer be used. Berthing stopped on 9 December 2007. A second contingency plan was put into operation which involved vessels being moored off the berth but repairs were now immediately required if berthing alongside was to continue.[30]Mr. Persey also relied upon a force majeure notice issued on 8 January which referred to the NORDSTAR incident. However, I do not consider that this advanced his argument. It appears to have been issued following a complaint by the Owners’ agents that when underwater work on D3 commenced on 7 January 2008 no force majeure notice had been issued in respect of it. CPBS appear then to have issued a notice which referred back to an earlier notice issued on 9 December 2007 with regard to the NORDSTAR incident and added to the confusion by dating the later notice 9 December 2007.[31]I am very conscious that no statement evidence has been adduced supporting Mr. Persey’s submission and that some preparatory work did in fact commence on 3 December 2007 before the NORDSTAR incident. Both such matters support Mr. Coburn’s submission that the Charterers have not discharged the burden of proof which lies upon them. However, although some preparatory work commenced on 3 December 2007 there was no intention on 7 December to do the underwater work on and after 7 January 2008, as is apparent from the line-up schedule of that day. Something then caused CPBS to decide to do that underwater work on and after 7 January 2008. I am persuaded that on the balance of probabilities it is likely to have been the NORDSTAR incident. No other cause was suggested.[32]I therefore consider that the delay in berthing VINE on and after 8 January 2008 was caused both by the PACIFIC FORTUNE incident (because it gave rise to the need to repair D3) and by the NORDSTAR incident (because it caused CPBS to commence the underwater work of such repairs on and after 7 January 2008). Had the NORDSTAR incident not occurred it is more likely than not that the berthing of VINE would not have been delayed on and after 8 January by the repair work to D3.

The issues

[33]In broad terms the issues are these. First, when was notice of readiness validly given ? Second, did the delay in berthing count as laytime ? Third, if the delay in berthing does count as laytime, was the cause of that delay a breach by the Charterers of their obligation to nominate a safe berth ?[34]So far as the claim against the Second Defendant as guarantor is concerned there is a dispute as to whether a valid and binding guarantee was given by the Second Defendant and whether it can be enforced having regard to the provisions of Chinese law.

The commencement of laytime

[35]Notice of readiness was tendered at 0038 on 8 January 2008. The port authorities granted clearance at 1020 on 12 January 2008. Relying on clause 4.1 of the SCALE terms the Charterers therefore submitted that laytime only commenced at 1020 on 12 January 2008.[36]The Owners said that CPBS had authority to waive the requirement for clearance by the port authorities and did so. They relied on the decision in The Northgate [2008] 1 Lloyd’s reports 511 at paragraphs 56-115. Mr. Persey accepted in his closing submissions that CPBS had authority to waive that requirement on the basis of the reasoning in The Northgate but submitted that there was no evidence that CPBS had done so. However, Mr. Coburn referred me to a statement of facts signed by two representatives of CPBS which recorded that port clearance was given at 1020 on 12 January but that the notice of readiness was accepted at 0038 on 8 January. That appears to be clear evidence that the requirement for port clearance to be given before notice of readiness was accepted was waived by CPBS.[37]I have therefore concluded that laytime commenced at 0038 on 8 January 2008.

The repairs to D3 and laytime

[38]The SCALE terms contained three exceptions on which the Charterers relied; first, “partial or total interruptions on railway or port”, second, “accident at the mines, railways or ports” and third “any cause of whatsoever kind or nature, beyond the control of Seller, preventing cargo preparation, loading or berthing of vessel”. “Partial or total interruptions on railway or port”[39]Mr. Persey submitted that delay in berthing due to repairs to D3 was a partial interruption “on port”, that is, of the business of the port. Mr. Coburn submitted that the phrase connoted “some fortuitous interference with the business of the port” and “is not apt to cover pre-planned repairs at a particular berth.” He said that was particularly so “in circumstances in which the repairs are long overdue and necessary to ensure the safety of the berth, for which the Charterers are contractually responsible”. Mr Persey said that the cause of the interruption was irrelevant.[40]The phrase partial interruption “on port” is odd but it is common ground that it means a partial interruption “of the business of the port”. As to the meaning of “partial interruption” I consider that the phrase, when contrasted with “total interruption” of the business of the port, is apt to refer to interruption of business at a particular berth within the port. Mr. Coburn submitted that it was not and that “partial” is directed at temporal rather than geographic matters. I disagree. A port is made up of several berths. Where all business in the port is stopped there is a “total interruption” of the business of the port. Where business at a particular berth within the port is stopped there is a “partial interruption” of the business of the port. That seems to me the reasonable and natural meaning of the two phrases.

Must the interruption be fortuitous ?

[41]Mr. Coburn drew a distinction between fortuitous interference with the business of the port and pre-planned repairs. I do not consider that the concept of an interruption of the business of the port requires the interruption to be fortuitous. The concept of an “accident”, the other exception relied upon, plainly does. Interruption of business at a particular berth may have several causes. It may be caused by the need to survey damage to the berth which has just been caused by a vessel. Once it has been decided to repair that damage business at the berth may be interrupted whilst, and because, the repair is being carried out. However, each is an interruption of business at the particular berth. I am not persuaded that the ordinary meaning of “interruption” should be restricted to interruptions which were not planned in advance by the port.[42]I was not referred to any authority on the meaning of “interruption” but the approach of the Court of Appeal in two demurrage cases concerning “hindrances” and “breakdown” is consistent with my approach. Thus in The Radauti [1988] 2 Lloyd’s Reports 416 at p.420 the word “hindrances” was given its ordinary meaning notwithstanding that some degree of hindrance was inevitable. Similarly, in The Afrapearl [2004] 2 Lloyd’s Reports 305 at pp.311-4 the word “breakdown” was contrasted with its cause, which was said to be irrelevant. It had been argued that there came a time when the defect in a sealine (which had suffered a breakdown) was “part of the state of affairs at the port…..or was not fortuitous or was such as to be outside what the parties can have intended to be treated as a breakdown….” This argument was not accepted by the Court of Appeal.[43]I have therefore concluded that the interruption need not be fortuitous.

Must the interruption be “beyond the control of the Seller” ?

[44]Mr. Coburn submitted that on the true construction of the SCALE terms the interruption had to “beyond the control of the Seller”. He argued that those words, which are to be found in sub-clause (ix), extend to the other named exceptions, including (viii), partial interruptions. The seller was Vale SA one of whose wholly-owned subsidiaries was CPBS, the operator of the berth. The timing of the repairs to D3 and the consequential interruption of the business of the berth was therefore not beyond the control of the Seller. Mr. Persey submitted that the SCALE terms did not require the interruption to be “beyond the control of the Seller”, that if they did “Seller” meant “Charterer” and that the interruption was beyond the control of the Charterer. In any event, Vale SA was to be distinguished from its subsidiary CPBS and therefore the interruption was “beyond the control of the Seller.”[45]The SCALE terms refer to the “Seller’s loading facilities” and to “its pier at the Port of Itaguai” (see clause 1.3). Those references appear to reflect the circumstance (which I understand not to be disputed) that the berth operator, CPBS, is a wholly owned subsidiary of the Seller, Vale SA. I therefore accept the Owners’ submission that when considering whether a cause is within clause 5.10 (ix) of the SCALE terms as being “beyond the control of the Seller” it is appropriate to consider whether it beyond the control of CPBS. Having regard to the SCALE terms it cannot have been intended that the Seller could say that the berth was not “its berth”.[46]I do not accept the Charterers’ submission that “Seller” should be read as “Charterer”. Reliance was placed on the phrase “in accordance with main terms as fixed and logical alterations” in the fixture recap. It was said that altering “seller” to “charterer” was logical. However, the reference to logical alterations was not in relation to the incorporation of the SCALE terms but in relation to the incorporation of the provisions of an earlier charterparty of VINE. In any event I am not persuaded that altering “seller” to “charterer” would be logical and inevitable. Where loading under a charterparty is to take place at a berth operated by a wholly owned subsidiary of the seller of the cargo there is sense in a provision which states that time lost by reason of a cause beyond the control of the seller will not count as laytime.[47]Mr. Coburn submitted that clause 5.10 must be interpreted as a whole and in accordance with business common sense. He argued that it makes far better sense for the phrase “beyond the control of the Seller” to be applicable to all the sub-clauses of clause 5.10 and in that context he relied upon reasoning of mine in The Cape Equinox [2005] 1 Lloyd’s Reports 390 concerning a differently worded clause. Mr. Persey submitted that sub-clause (ix) provided for an exception from laytime which was additional to those listed in the earlier sub-clauses and could not be construed as applying to them or qualifying them. He submitted that the language of the clause in The Cape Equinox was materially different.[48]Clause 5.10 lists a number of “causes” in respect of which it is agreed that time lost as a result of them shall not be “computed” as laytime. Sub-clauses (i)-(viii) specify several such causes or events. They do not contain within them a qualification that the listed causes must be “beyond the control of Seller”. Sub-clause (ix) does contain that express qualification. There are no words which state expressly that that qualification is intended to apply to the causes listed in clauses (i)-(viii). It is therefore arguable that the phrase “beyond the control of the Seller”, having regard to its position within sub-clause (ix), is not capable of applying to the earlier sub-clauses.[49]I consider that each of the sub-clauses should be given its ordinary meaning and that there is no good reason, in the absence of words manifesting an intention that the phrase “beyond the control of the Sellers” in sub-clause (ix) should be extended to each of the other sub-clauses, to regard the phrase as extending to each of the other sub-clauses.[50]Clause 5.10 is materially different from the clause which fell to be construed in The Cape Equinox which provided:
“In case of strikes, lockouts, civil commotions, or any other causes or accidents beyond the control of the consignee which prevent or delay the discharging, such time is not to count unless the vessel is already on demurrage…”
[51]With regard to that clause I said:
“…by reason of the word “other”, the words “beyond the control of the consignee” are capable of referring both to the specified events and to the unspecified causes.”
[52]The clause in the present case does not contain the word “other”. It was however submitted that to rely upon the absence of the word “other” or of any other word linking the phrase “beyond the control of the Seller” with the specified events in sub-clauses (i)-(viii) as indicating an intent that the phrase does not apply to the specified events was “too literalistic an approach”.[53]The charterparty must, of course, be construed in accordance with the principles summarised by Lord Hoffman in Investors Compensation Scheme Ltd. v West Bromwich Building Society [1998] 1 WLR 896 one of which is:
“The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean.”
[54]The phrase “beyond the control of the Seller” in clause Clause 5.10(ix) does not as a matter of grammar apply to sub-clauses (i)-(viii). I have asked myself whether a construction that does not apply that phrase to sub-clauses (i)-(viii) “flouts business common-sense”; see The Antaios [1984] AC 191 at p.201.[55]I am not persuaded that it does. Some of the named causes are events are of a character which are unlikely to have any connection with actions of the Seller eg war (sub-clause (i)), landslides and floods (sub-clause (v) and (vi)) or bad weather (sub-clause (vi)). Others may do so eg strikes (sub-clause (iii)), accidents (sub-clause (iv)) or interruptions (sub-clause (ix)). In those circumstances I consider that clause 5.10 would be reasonably understood to mean that where the parties intended that the cause must be beyond the control of the Seller, they made that intention clear. They did so only with regard to the cause named in sub-clause (ix). I do not consider that such a construction flouts business common-sense notwithstanding that there would also be business common-sense in a clause which only permitted reliance upon events which were not beyond the control of the Seller (or, as in The Cape Equinox, beyond the control of the consignee.)[56]I have therefore concluded that the interruption need not be “beyond the control of the Seller.”[57]Where any of the named events are brought about by a breach by the charterers of another of their obligations under the charterparty, such as to provide a cargo or to nominate a safe berth, different considerations will arise. I address them later in this judgment when considering the Owners’ submission that the events relied upon by the Charterers were caused by a breach of their safe berth warranty.

Must the interruption be beyond the control of the Charterers ?

[58]Mr. Coburn further submitted that quite apart from any express term it is necessary “for a party invoking exceptions such as are invoked by the Charterers to show that the event in question was beyond his control and there were no reasonable steps he could have taken to avoid or mitigate the event or its effects”. Reliance was placed on B&S Contracts v G. Publications (1984) ICR 419 at pp.426 and 427.[59]B&S Contracts v G. Publications has been referred to without criticism in subsequent cases and textbooks; see CIF v Sealink [1988] 1 Lloyd’s Reports 323 at 328, Cooke on Voyage Charters 3rd.ed at para.85.323 and Chitty on Contracts 30th.ed. at para.14-140. I do not doubt that the statement of principle applies to exceptions from liability and in particular to force majeure clauses. However, clause 5.10 is not, strictly speaking, such a clause. The effect of clause 5.10 is to define the Charterers’ obligation to load within the laydays and therefore it answers the question whether or not there has been a breach of the obligation to load within the laydays; cf The Forum Craftsman [1991] 1 Lloyd’s Reports 81 at p.87. It does not excuse or relieve the Charterers from liability for breach of that obligation.[60]I shall however assume that the statement of principle applies to clauses which state which events do not count as laytime.[61]Mr. Coburn submitted that the Charterers were unable to say that the partial interruption of the business of the port was beyond their control or that they could not have avoided it or its consequences because “charterers” includes those to whom they had delegated their obligation to load the cargo. Reliance was placed upon the decision in The Apostolis (No.2) [2000] 2 Lloyd’s Reports 337 at p.349. In that case cargo owners brought a claim for damages against shipowners arising out of a fire which had broken out in one of the holds of the ship after loading had commenced. There was a counterclaim for demurrage in respect of which the issue was whether the delay in loading had been caused “by any other cause beyond the control of the Merchant”. The cause of the fire had not been determined. It might have been welding by the ship’s crew (in which case it would have been beyond the control of the merchant) or it might have been a stevedore’s cigarette. The Court of Appeal said:
“In our view the clause refers to clauses which, by the contract, are under the control of the merchant; the effect of clause 3 is that, as between the owners and the merchant, the stevedores are under the control of the merchant. The situation then is that the cause of the delay may or may not have been caused by something which was not under the control of the merchant. We cannot tell which. The defence is therefore not made out and the claim for demurrage succeeds.”
[62]Mr. Coburn submitted that the Charterers were bound to load the cargo and that they had delegated the performance of that duty to the operators of the berth. They were therefore unable to maintain that the partial interruption of the port was beyond their control or that they could not prevent its consequences. He relied upon the agreement of the engineering experts that the delay in repairing D3 was excessive and that the repairs to D3 could have been completed well before November 2007 and with greater effort and initiative on the part of CPBS much earlier.[63]Mr. Persey submitted that reliance on The Apostolis was misplaced. He said there was nothing in the charterparty to suggest that either Vale or CPBS were under the control of the Charterers in the same way as the merchant in The Apostolis was contractually responsible for stevedores.[64]The charterparty placed on the Charterers the duty to load the cargo and to do so within the laydays. The berth was operated by CPBS and not by the Charterers. The Charterers therefore had to delegate the performance of their duty to CPBS. That was the only way in which they could discharge their duty to load. Thus, as between the Owners and the Charterers CPBS was under the control of the Charterers.[65]However, the duty which the Charterers delegated to CPBS was the duty to load a cargo of iron ore on VINE when she issued her Notice of Readiness on 8 January 2008. I accept that if during the course of such loading CPBS delayed in completing loading the Charterers would not be permitted to say that the delay was beyond their control. But it does not follow that an earlier failure to repair D3 by November 2007 must be attributed to the Charterers. When failing to repair D3 by that date CPBS was not performing a duty, or failing to perform, a duty delegated to them by the Charterers.[66]For these reasons I accept Mr. Persey’s submission that the partial interruption was beyond the control of the Charterers.[67]My understanding of the agreement between the experts is that it refers to the nature of the repairs and the time which would ordinarily be required for such repairs. This is discussed by Mr. Ball in his report at paragraphs 6.1.3 – 6.1.10. However, it does not appear that either he or the other engineering expert Mr. Wilson investigated why it took CPBS as long as it did to get round to repairing D3. Mr. Ball said:
“However, for reasons which have not been made clear, but which would appear to relate to commercial rather than engineering issues, CPBS appear to have chosen not to repair/replace dolphin D3 immediately.”
[68]No evidence was adduced on this issue by the Charterers. They were therefore unable to show why there was delay in repairing D3 until December-February 2008. It may or may not have been practicable for CPBS to repair D3 before November 2007. Therefore, were it relevant, I would have decided that the Charterers were unable to show that the delay in repairing D3 before January 2008 was beyond the control of CPBS.[69]Mr. Coburn further submitted that the Charterers might have mitigated the effects of the interruption by sending the vessel to another berth at the nearby CSN or GIT terminals and that the Charterers had not shown that this was beyond their control. However, an email dated 27 December 2007 informed Zodiac, the managers of VINE, that some vessels (not including VINE) had been changed to the CSN terminal and that Vale was doing what it could to minimise the “queue”. Mr. Lima, the programming manager of the CPBS berth said that for this purpose a special conveyor belt connection was built between the CPBS and the CSN terminals. In those circumstances it seems unlikely that there was an untaken opportunity to divert VINE to either the CSN or GIT terminal.[70]It is therefore not strictly necessary for me to decide whether each event listed in clause 5.10 must be beyond the control of the Charterers. However, in case I am wrong in concluding that the partial interruption was beyond the control of the Charterers I shall state my opinion on the prior question whether the events listed in clause 5.10 must be beyond the control of the Charterers.[71]B&S Contracts v G. Publications did not concern a laytime clause. Rather, it concerned a force majeure clause which stated in express terms that “every effort will be made to carry out any contract”. The observations relied upon in that case were therefore not a necessary part of the decision; see p.426 E. Although B&S Contracts was not a laytime case the case on which it was based, Bulman & Dickson v Fenwick & Co. [1894] 1 QB 179, was. No submissions were made to me with regard to the latter case. Notwithstanding the dicta of Lord Esher on which reliance may be placed the actual decision in the case, having regard to the findings of fact in the case (see p.181), may not be regarded as clearly supporting the proposition for which it was cited in B&S Contracts. The claim for demurrage failed notwithstanding that the strike could have been avoided by the charterers had they redirected the vessel as the jury found they could reasonably have done. The Afrapearl [2004] 2 Lloyd’s Reports 305 was a case which involved a laytime and demurrage clause. That clause provided that delays or demurrage incurred by reason of “breakdown of machinery or equipment in or about the plant of the charterer ….shall count as half laytime”. Clarke LJ said of such clause that “it did not import any reference to a necessity for the relevant breakdown to be beyond the charterers’ control”; see p.315 lhc. However, he accepted that there would be implied a term to the effect that the clause did not apply to breakdowns caused by the fault of the charterer. The issue of fault, in the sense of an actionable breach of duty, is an issue with which I deal later in this judgment.[72]I consider that I should concentrate on the proper construction of clause 5.10 as incorporated into this charterparty rather than on observations in other cases concerning differently worded clauses. Clause 5.10 specifically addressed the question of “control” in one place, namely, sub-clause (ix) – albeit control of the Seller rather than the Charterer. The reasonable meaning of clause 5.10 is that control is not a relevant aspect of any of the causes in the sub-clauses other than that in sub-clause (ix). Of course, where delay is caused by an actionable breach by the charterer of another of his obligations under the charterparty, eg his obligation to nominate a safe berth, other considerations will arise. But, for the reason I have expressed, I do not consider that there is to be implied in all sub-clauses of 5.10 a requirement that the event in question be beyond the control of the charterer.[73]I have therefore concluded that the delay in berthing VINE was caused by a “partial interruption …on port”. “Accident at the mines, railways or ports”[74]In view of my conclusion that time was lost by reason of a “partial interruption ….on port” it is not necessary to consider the other exceptions relied upon but I shall do so briefly.[75]Mr. Persey submitted that both the PACIFIC FORTUNE and NORDSTAR incidents were accidents. I agree that they were. The question is whether time was lost by reason of such accidents. Time was lost in berthing VINE after her arrival on 8 January 2008. For the reasons set out above at paragraphs 28-32 that loss of time had two causes; first, the need to repair the damage to D3 caused by PACIFIC FORTUNE and, second, the NORDSTAR incident which, on the balance of probabilities, appears to have been the reason why D3 was repaired on and after 7 January 2008.[76]The work of repair to D3 was of a type which could have been carried out in 2007. There is no evidence before the court that practical, commercial or logistical difficulties prevented the work from being carried out in 2007, though they may have done. It may therefore be said that the PACIFIC FORTUNE accident was not a cause of time lost in January 2008. Rather, a state of affairs in the port was the cause, namely, the continuing need to repair D3. The burden on the Charterers to show that the time was lost by reason of “accidents” required the Charterers to adduce evidence that the repair work to D3 could not realistically have been done before January 2008 with the result that, notwithstanding the passage of time, the PACIFIC FORTUNE accident in July 2007 was a cause of the lost time in January 2008. No such evidence was adduced.[77]I have therefore concluded that time was lost in berthing VINE in January 2008 by the continuing need to repair D3 and by the NORDSTAR accident. The continuing need to repair was not, or has not been shown to be, an accident. In those circumstances the Charterers are unable to bring the loss of time within the accident exception because one of the two effective causes of the lost time was not an accident. “Any cause of whatsoever kind or nature, beyond the control of Seller, preventing cargo preparation, loading or berthing of vessel.”[78]For the reasons given above in paragraphs 44-56 the Charterers are unable to show that the time lost in January 2008 was beyond the control of the Seller. The “Seller” was Vale SA and the berth was operated by its subsidiary CPBS. There is no evidence that CPBS could not have repaired the berth in 2007 had it wished to do so.

Breach of the safe berth warranty

[79]Mr. Coburn submitted that even if time was lost by an event within clause 5.10, which I have held to be the case, the Charterers are nevertheless liable because that time was lost by reason of the berth being unsafe in breach of the Charterers’ warranty. There was a dispute as to whether, assuming that there was breach of the safe berth warranty, this was right in law.[80]Mr. Coburn submitted that it was obvious that the Charterers could not escape a liability in damages for delay caused by a breach of a safe berth warranty even though such delay did not cause the Charterers to have breached their obligation to load within the laydays. He said that damages for such delay would be calculated at the demurrage rate which was the agreed rate of damages for delay. When I formally gave judgment for the Claimants Mr. Coburn said that this summary of his argument did not precisely reflect the legal analysis which he had advanced which was that where an event was caused by a breach of the safe port warranty such an event could not, as matter of construction, fall within an exception to laytime upon which the Charterers might otherwise rely. Mr. Persey submitted that Mr. Coburn’s submission was wrong. If time was lost due to an event within clause 5.10 the Owners have suffered no loss. When I formally gave judgment for the Claimants Mr. Persey said that I had not dealt with his written submissions on this point. My summary of his submissions was short but I had them in mind. His written submissions were longer than this summary suggests.[81]I accept Mr. Coburn’s submission. The Charterers have a number of obligations under the charter party. One is to load within the laydays. If that is breached demurrage is payable. Another is to nominate a safe berth. If that is breached it may cause damage to the vessel or it may cause delay; see The Count [2008] 1 Lloyd’s Reports 72 at paragraphs 24-30. If delay is caused damages for such delay are to be measured by the demurrage rate which is the agreed rate of damages for delay; see Inverkip Steamship v Bunge [1917] 2 KB 193 at p.203. The fact that there may have been no breach of the obligation to load within the laydays does not disable the Owners from claiming the agreed rate of damages for delay caused by breach of another obligation. If the correct analysis is, as submitted by Mr. Coburn, that where an event was caused by a breach of the safe port warranty such an event cannot, as matter of construction, fall within an exception to laytime then the same result follows. There is no difference in substance.[82]It is therefore necessary to consider whether there was a breach of the safe berth warranty and whether such breach was the, alternatively an, effective cause of the time lost in berthing VINE in January 2008.[83]The Owners’ case is that the CPBS berth was nominated before the NORDSTAR incident. The Charterers do not accept that the berth was nominated before the NORDSTAR incident.[84]There is no evidence of any communication passing directly from Charterers to Owners nominating the CPBS berth. However, the vessel line-up schedules show that CPBS was aware on 4 December 2007 (the day after the fixture recap agreeing the charterparty) that VINE was to berth at its berth. The Charterers must therefore have nominated the CPBS berth on 3 or 4 December 2007. That is a nomination which would reasonably be expected to be brought to the attention of the Owners. I consider that that was a sufficient nomination; see Cooke on Voyage Charters 3rd.ed. para.5.17. There is no evidence that nomination was expected in any other way.[85]The Charterers therefore warranted on 3 or 4 December 2007 that the CPBS berth was prospectively safe for VINE’s expected visit. The Owners said that it was not safe and that as a result of that unsafety the NORDSTAR incident was caused which in turn led to delay in berthing VINE. This somewhat unusual use of the safe berth warranty, which applied the warranty to events concerning a vessel other than that in respect of which the warranty was given, was not challenged as a matter of law. When I formally handed down judgment Mr. Persey said this use of the safe berth warranty had been challenged and he referred me to paragraph 155 of his Closing Submissions. The objection in that paragraph was not, however, developed.

The berth

[86]There were three main aspects to the alleged unsafety of the berth:(i) the suggested difficulty of a stern-on berthing;(ii) the “set-up” at the port; and(iii) the condition of the fender on D2. I shall consider each in turn but ultimately any finding of safety or unsafety must depend upon a consideration of all three in aggregate because they are interlinked.

Stern-on berthing

[87]The classic definition of a safe port is one which the particular ship can reach, use and return from without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship; see The Eastern City [1958] 2 Lloyd’s Reports 127 at p.131. “Good” and “ordinary” navigation and seamanship are the same; see The Carnival [1994] 2 Lloyd’s Reports 14 at p.30.[88]It was submitted that the requirement to berth by the stern at a slight angle by contacting D1 first was unsafe because ordinary navigational skill and care could not guarantee that it would always be achieved.[89]On this issue there was a difference of opinion between the navigational experts. The opinion of Captain Cooper, who has been the master of a Capesize bulk carrier, is that it would always be possible to ensure a safe berthing by contacting D1 first. The opinion of Captain Pockett, who has not been the master of a Capesize bulk carrier, is that “it is unrealistic to expect Capesize vessels, or indeed other vessels visiting the terminal berth, to berth stern first on every occasion even if pilots planned to achieve this objective. There are too many variables which preclude the same berthing manoeuvre each time.”[90]Captain Cooper’s opinion demands close attention because he has had much experience of berthing Capesize bulk carriers. Captain Pockett has had no such experience. His service as master was limited to chemical tankers for a short period though he has witnessed the berthing of Capesize vessels in Western Australia and Brazil and is familiar with the use of tugs having acted as towmaster. Moreover, his reasoning in support of his opinion was erroneous, or at any rate of doubtful validity, in one respect. He said that “no master or pilot likes to get the “expensive end” close to a hard obstruction.” He also said that masters and pilots would be “conscious of the risk of the superstructure making contact with the shiploader”. But aerial photographs of Capesize vessels at the berth showed that neither would be a problem. The stern and accommodation would be well aft of D1 and the shiploader.[91]There was some discussion of the berthing “pocket”. CPBS’s “notice to ships” refers to it as being 400m. in length, 100 metres and 20 metres depth. This suggests that it followed the line of the berth which was Captain Pockett’s opinion when cross-examined. Captain Cooper said that that would be so at most berths but that at the CPBS berth there was deep water inshore of the berthing line as indicated by the 10 metre contour line. He therefore did not consider that there was a danger in the stern getting a “little bit over” the berthing line. The Admiralty chart appears to confirm that, although the pecked line of the dredged area roughly follows the line of the berth, the 10 metre sounding contour extends inshore of the berthing line to the mooring buoys. Thus there was sufficient water for a vessel to close the berth at an angle by the stern. (NORDSTAR’s draft aft was 8.30 metres and her draft in ballast was probably typical of many Capesize vessels.) Nevertheless, although the design of the berth allowed for vessels to berth at an angle of up to 10 degrees, Captain Cooper accepted that his preference, like that of other mariners, would be to berth at a fine angle (assuming that first contact was to be with D1).[92]A vessel berthing at the CPBS berth in its designed condition would aim to berth parallel to the berth and would land on all dolphins simultaneously. However, despite that intention the vessel may adopt a slight angle either by the bow or by the stern, as she approaches the berth. Thus, in The Carnival [1994] 2 Lloyd’s Reports 14 at p.29 Sheen J., whose understanding of ship manoeuvres was second to none, said:
“A master will endeavour to bring his ship to her berth parallel to the quay and moving very slowly. Nevertheless there are many occasions when a ship approaches a berth slightly angled to the quay and moving sideways under the force of high wind or as a result of tug pushing…..”
[93]At the CPBS berth, as designed, an approach at a slight angle would cause no difficulty because the vessel would land on either D1 or D3. The master and pilot would not need to correct any slight angle which developed. However, with D3 out of action, the master and pilot must ensure that the vessel adopts and maintains a fine angle by the stern. If the vessel in fact adopts an angle by the bow that must be corrected. This possibility appears to have been recognised by item 12 of the contingency plan which referred to the need to monitor the mooring “to prevent yaw motion of the ship.”[94]The berthing manoeuvre required by the contingency plan was, therefore, out of the ordinary, at any rate for vessels berthing at the CPBS berth. Captain Cooper considered that lining up a vessel for a stern-on berthing required the master and pilot “to look down over the side and visually line the side of the vessel up with the line of the jetty”. He thought the steps required were part of ordinary, normal seamanship. Captain Pockett said that the master and pilot had to form a view as to the required fine angle by the stern and judge how far off that meant the bow could be when the stern landed on the dolphin. The gyro heading would require to be constantly monitored and very careful control of the vessel’s heading would be required by the use of tugs and the port anchor. Captain Pockett concluded that the skill required went beyond the ordinary skills of seamanship.[95]A safe berthing on D1 requires the vessel to be brought transversally alongside the berth at an angle by the stern so that contact is first made with D1. The means which the master and pilot have available to achieve this are four tugs and the port anchor as set out in the contingency plan. Captain Cooper explained in his oral evidence that if, during the vessel’s transverse approach, she is seen to be parallel or at a slight angle by the bow, whether 50 metres off or 1 metre off the berth, she can be stopped and repositioned before the final approach. However, I asked Captain Cooper whether that is possible where, for example, the vessel is pushed by a tug rather more heavily than was intended just as the vessel is about to contact the berth. He said that that was a “good argument” but that his experience suggested it was possible to berth safely every time. He emphasised that those on board had the tools with which to control the approach of the vessel to the berth. Those tools included not only a tug pulling off the port bow but also the use of the port anchor.[96]There is no evidence that difficulties were encountered on any of the many other vessels (73) berthed during the contingency period. There was a photograph of CAPE STORK when a short distance off the berth in November 2007 approaching the berth at a slight angle by the bow. This may have been corrected prior to berthing. The master said in response to questions in September 2009 that the manoeuvre “was done quite much professional” and that “the vessel went alongside parallel with the existing dolphins”. But I do not consider that these answers almost two years after the event (when no damage occurred) can be regarded as reliable evidence as to how CAPE STORK berthed.[97]It is common ground that NORDSTAR probably contacted D2 first with an angle of no more than 2 degrees by the bow. If the angle had been greater D3 would have been contacted and it was not. However, it is difficult to derive much assistance from the berthing of NORDSTAR as to whether something more than good navigation and seamanship was required to berth safely by contacting D1 at a fine angle by the stern. That is because the pilot suggests that his plan was not to berth at a fine angle by the stern contacting D1 first but was to come alongside parallel to the berth. The pilot does not say that he tried to berth stern first and failed. Although, as will appear later in this judgment, I do not feel able to accept his evidence in this regard (or his evidence that the pilots did not agree to the contingency plan) the NORDSTAR incident itself, by reason of the unreliable evidence given in respect of it, is an unsure basis for founding a conclusion as to the safety or unsafety of the berth.[98]Mr. Persey relied upon the circumstance that the master of NORDSTAR at one stage in his cross-examination appeared to accept that berthing stern-to was “a straightforward and entirely acceptable manoeuvre”. However, this was probably the result of a misunderstanding. His re-examination also suggested that.[99]There is considerable force in the Charterers’ argument that no more than ordinary navigation and seamanship was required to berth NORDSTAR safely by contacting D1 first at a slight angle by the stern. The contingency plan had been introduced in July 2007. It necessarily required vessels to berth at a slight angle by the stern. Many vessels must have done so thereafter. Of the experts Captain Cooper had experience of berthing Capesize vessels whereas Captain Pockett did not. Captain Cooper’s answers as to the required “set-up” in the port (see below) showed that he willingly gave answers which damaged the Charterers’ case. But he maintained that those berthing a Capesize vessel at the CPBS berth had the tools to do so safely and, in particular, to ensure that D1 was contacted first. He himself had conducted many stern-on berthings himself without incident.[100]On the other hand there is force in Captain Pockett’s opinion that to berth a vessel stern on requires “very careful control” and that tugs may be “overzealous or underzealous in their response”.[101]On balance I am persuaded that more than ordinary seamanship was required to achieve a safe berthing by contacting D3 at a fine angle. The required manner of berthing was out of the ordinary, at any rate at the CPBS berth. It is true that the master and pilot had the “tools” of four tugs and the port anchor to assist in berthing and that the contingency plan had been in operation for several months. But the question is whether, in circumstances where the vessel may adopt a fine angle by the bow very shortly before contacting the berth (as a result of a tug pushing for a little longer than expected or of a tug beginning to pull a little later than expected) such an angle could always be corrected in time. If such an angle were not corrected in time there would be a risk that the vessel would suffer damage by contact with D3 or that D2 would be damaged as a result of being the dolphin first contacted and sustaining greater force than it could bear.[102]I do not consider that the required correction of a fine angle which develops very late in the manoeuvre could always be guaranteed by the exercise of ordinary navigational skill and care. Captain Cooper considers that it could be guaranteed. But his skills may be exceptional. The usual manner of berthing at the undamaged CPBS berth did not require a very late adoption of a slight angle by the bow to be corrected.

The “set-up” at the berth

[103]The “set-up” in the berth, namely the system in the port or berth for ensuring that vessels may reach, use it and return from it in safety, is an essential aspect of safety; see The Evia (No.2) [1982 1 Lloyd’s Reports 334 at p.338 quoted in The Carnival.[104]In this case it was said that the set-up was defective in several respects: i) There was no means by which masters were informed that D3 was a potential hazard, that D2 was not adequate to receive the first contact from a Capesize bulk carrier and that the mooring plan was to contact D1 first. ii) There was no means by which the pilots were aware that D2 was not adequate to receive the first contact from a Capesize bulk carrier and therefore that this was an additional reason for contacting D1 first. iii) The pilots were not satisfied with the contingency plan and determined to implement it. iv) There was no guidance to the berthing vessel from those on the terminal as to the position and alignment of the vessel as she approached the berth.[105]The Owners’ case in this regard was supported by the evidence of Captain Cooper. He was asked in cross-examination whether the matters mentioned in the last paragraph were required during the period that the contingency plan was in operation. He agreed that they were.[106]The question therefore arises whether the set-up was defective as alleged and if so whether that would expose VINE to a danger which could be avoided by ordinary navigation and seamanship.

Informing the master

[107]The IMO code of practice for the safe loading and unloading of bulk carriers (resolution A.862(20)) provides that the terminal should give the ship as soon as possible “features of the berth or jetty the master may need to be aware of, including the position of fixed and mobile obstructions, fenders, bollards and mooring arrangements”; see clause 3.3.1(3). That D3 was a potential hazard, that D2 was not adequate to receive the first contact from a Capesize bulk carrier and that the mooring plan was to contact D1 first are features of the CPBS berth which, in my judgment, ought to have been made known to the master of those Capesize vessels that berthed whilst the contingency plan was in operation. Without such knowledge the master would be unable to berth safely. The fact that the pilot may have such knowledge does not detract from the importance of the master having such knowledge. For the master is responsible for the safe berthing of his vessel even though he may be advised by the pilot.[108]There is no evidence of any system whereby masters were made aware of these matters. The obvious person to inform the master would be the pilot but the evidence from the master and pilot of NORDSTAR does not suggest that such information was passed on by the pilot to the master prior to berthing. Thus neither the master nor the pilot made reference to such information being communicated by the pilot prior to the berthing. Of course a master may observe during berthing that D3 is damaged (as the master of CAPE STORK did) but that is too late and in any event he would remain unaware of the contingency plan and the lesser capacity of D2 unless informed of those matters by the pilot. I find that there was no system whereby masters of Capesize vessels were informed of these matters prior to berthing.[109]If the master, who has ultimate responsibility for the safe berthing of his vessel, is unaware that D3 is a potential hazard, that D2 is not adequate to receive the first contact from a Capesize bulk carrier and that the mooring plan is to contact D1 first there must be a clear risk that he will fail to give the appropriate orders required for a safe berthing. Of course, orders will be “advised” by the pilot who in reality will determine the appropriate orders but the master must be in a position to reject the pilot’s advice if he considers it to be unsafe. Without knowing D3 is a potential hazard, that D2 is not adequate to receive the first contact from a Capesize bulk carrier and that the mooring plan is to contact D1 first he could not be in such a position.

The pilots’ knowledge of D2

[110]There is no evidence that pilots were aware that D2 was not adequate to receive the first contact from a Capesize bulk carrier and that this was an additional reason for contacting D1 first. Neither the pilot of NORDSTAR nor the chief pilot mention it in their statements. I find that they were unaware of it.[111]They were obviously aware of the damage to D3 and the need to avoid it. They were thus aware of one danger, namely, the risk of contacting the damaged D3. But they were not aware that there was an additional danger, namely, contacting D2 in circumstances where it had only half the energy absorption capacity of D1.[112]It is true that the contingency plan implicitly required that D2 would be ordinarily be contacted after D1. But, as Captain Cooper accepted, it is necessary for the pilot to know that D2 does not have the capacity to act as the primary berthing dolphin when a Capesize bulk carrier is berthing. Armed with such knowledge he would be alerted to the danger of contacting D2 first. Without such knowledge he would only be alert to the danger of contacting the damaged D3.

The contingency plan and the pilots

[113]It is an obvious requirement of a safe berthing during the period that the contingency plan was in operation that the pilots were aware of it and accepted it.[114]The pilot of NORDSTAR said in his statement that the contingency plan was never agreed by the pilots. I am unable to accept this evidence. It is contrary to the minutes of the meeting held after the PACIFIC FORTUNE incident which recorded that the pilots were in favour of resuming operations at the terminal and that the plan was discussed and agreed. The chief pilot said in his statement that all the pilots were happy with the contingency plan. This evidence is consistent with the minutes and is to be preferred. There was evidence that pilots had expressed concern as to night time operations but not as to operations during the day.

Guidance from those on the terminal

[115]Captain Cooper accepted that there should be guidance to the berthing vessel from those on the terminal as to the position and alignment of the vessel. This is also supported by the contingency plan which contemplated (as item 12) that persons on the terminal would “monitor the mooring in order to prevent yaw motion of the ship.”[116]However, there was a foreman on the terminal one of whose duties was “communicating with Pilots”. He was Mr. Peres. In his statement he said that he informed the pilot of NORDSTAR by vhf that the vessel was “going to hit”. His statement therefore suggests that there was a system whereby guidance could be provided from those on the terminal. I therefore find that the system at the berth did provide for guidance from the terminal.[117]I therefore conclude that the “set-up” at the CPBS berth at the time when the berth was nominated, shortly before the NORDSTAR incident, was unsafe in two respects. First, there was no system for advising the master of VINE that D3 was a potential hazard, that D2 was not adequate to receive the first contact from a Capesize bulk carrier and that the mooring plan was to contact D1 first. Second, the pilots were not aware of the danger to D2 in contacting it first. These defects in the set-up of the berth made the safe execution of a stern-on berthing less likely than it would otherwise have been.

The condition of the fender on D2

[118]The Owners said that at some stage before the NORDSTAR incident the fender on D2 had been compressed beyond its maximum design condition and as a result was “broken” in the sense that although it looked basically the same it no longer worked properly.[119]This case was based upon an examination of marks on the inside of the fender on D2 as revealed by photographs taken shortly after the NORDSTAR incident. In November 2009 the engineering experts, Mr. Ball and Mr. Wilson, were agreed that “there is photographic evidence of indentations in the western fender leg consistent with compression of the fender beyond its maximum design deflection that are not related to the NORDSTAR incident.” Mr. Wilson agreed in his oral evidence that if that had happened the fender was “broken” (a term used by the manufacturers, Sumitomo) and that “one wouldn’t then start to bring vessels alongside, because it wouldn’t provide you with the rated capacity in deflection for the next berthing.”[120]Mr. Ball had identified in his report a set of indentations related to the NORDSTAR incident (known as no.1). These had been caused when the fender buckled (or compressed) outwards which was not as designed. The indentations were caused by the fender being compressed against the bolts at the seaward end of the fender. He also identified three other sets of indentations (known as nos. 2,3 and 4). Nos.2 and 3 were not in line with no.1 and therefore, he said, were not related to the NORDSTAR incident. The fender had buckled outwards which was not as designed. No.4 had been caused when the fender had buckled inwards and were therefore not related to the incidents which caused nos. 1,2 and 3. They had been caused by the fender being compressed against the bolts at the shoreward end of the fender. (In his oral evidence he explained that although inwards buckling was as designed the indentations were a sign that the fender had been overcompressed.) He concluded that the fender must have buckled inwards and outwards beyond its maximum design capacity on possibly three occasions between the PACIFIC FORTUNE incident and the NORDSTAR incident. They could not have occurred before the PACIFIC FORTUNE incident because before that incident D2 was protected by the stronger fender units on D1 and D2.[121]Mr. Wilson, in his second supplementary report served less than two weeks before the trial, reported on his examination of the D2 fender on 9 March 2010. He remained of the opinion that indentations no.4 were caused during an incident other than the NORDSTAR incident when the fender had compressed “inwards” in the manner in which it was designed to operate. He said that other indentations, nos.1, 2 and 3, were caused during the NORDSTAR incident when the fender had compressed “outwards”. He did not articulate why this was his opinion but stated that he did not share the opinion of Mr. Ball that at the time of the NORDSTAR incident the fender was “broken”.[122]Mr. Wilson expressed the view in his oral evidence, for the first time, that indentations no.4 may have been caused by the NORDSTAR incident in that the fender first compressed inwards before “collapsing outwards”. However, he also thought they could have been caused during a previous incident “because they are relatively minor”.[123]As to nos. 2 and 3 he suggested that they may have been caused in the NORDSTAR incident after indentations no.1 had been caused by the fender “twisting” and “moving again”. I inferred that this further movement explained why indentations 2 and 3 were out of line with no.1. If indentations no.4 had been caused in the NORDSTAR incident they would have been the first to be caused when the fender compressed inwards before “collapsing outwards” leading to indentations no.1 and, a little later, nos.2 and 3.[124]This sequential account of the indentations and their causes was not clearly put to Mr. Ball in cross-examination though elements of it were. Thus it was put that indentations nos. 2 and 3, which were nearer to the pile cap face than indentations no.1, “required a greater degree of both twisting and compression”. It was also put that indentations no.4 were caused when the fender first compressed inwards before being compressed outwards. I therefore gained the impression that the formulation of Mr. Wilson’s theory was a fluid process which was continuing during the trial. Indeed, this was a common feature of the engineering evidence. Mr. Ball, when being cross-examined, referred to the apparent presence of iron dust inside one of the indentations and concluded that those indentations with iron dust in them, in particular no.2, must have pre-dated the NORDSTAR incident. This had not been mentioned in his report.[125]Mr. Wilson developed the views he expressed in the days before the trial. I consider that he was doing his best to analyse fairly the available evidence. He fairly accepted that the fact that indentations nos. 2 and 3 were out of line with indentations no.1 indicated that there had been an outward deflection previous to the NORDSTAR incident but believed that there was a “counter-argument” that the fender had not been subject to a precise horizontal compression but had been subject to a twist by virtue of the upward lift of the cap. He had visited the berth in March 2010 and examined the remains of the fender. I do not feel able to dismiss his views simply on the ground that in November 2009 he had agreed that the photographic evidence was consistent with the fender having been compressed beyond its maximum design deflection in an incident other than the NORDSTAR incident. Nor do I consider his “counter-argument” inconsistent with his agreement that the fender remained substantially vertical during contact with NORDSTAR.[126]Mr. Ball was a rather more combative and argumentative witness than Mr. Wilson, and perhaps less objective. However, as I have stated, his initial reason for considering that indentations nos. 2 and 3 had been caused on an earlier occasion than indentation no.1, namely, the fact that they were not in the same vertical line (rather then the suggested presence of iron ore dust) was accepted by Mr. Wilson as a good (though not conclusive) reason.[127]Mr. Persey, in his closing submissions, put forward an elaborate mechanism to explain how all four areas of indentations were caused in the NORDSTAR incident. His account owed something to Mr. Wilson’s evidence but made use of other matters in evidence not relied upon by Mr. Wilson in his written or oral evidence, in particular, a diagram in the Sumitomo manual, the fact that the engines of NORDSTAR were kicked astern and the absence of bolt marks on the eastern leg of the fender. I was not persuaded by it. It was an elaborate mechanism which had not been articulated or developed by Mr. Wilson.[128]Mr. Coburn invited me to accept Mr. Ball’s evidence. However, whilst his account was that there were up to three prior incidents when the fender was compressed beyond its maximum design capacity and thereby “broken”, there is no evidence of the berth operators noting or complaining about any such incident. I accept that the outward shape and appearance of the fender would look the same after such events but this is nevertheless a point to bear in mind.[129]In the result I am persuaded that indentations no.4 were probably caused on an occasion prior to the NORDSTAR incident. This was Mr. Wilson’s view even after his visit to the berth in March 2010 and his suggestion in oral evidence that they were caused at the commencement of the NORDSTAR incident was put forward only tentatively.[130]I am not however persuaded that indentations nos. 2 and 3 were caused by previous incidents. I consider that the alternative explanations put forward by Mr. Ball and Mr. Wilson are equally plausible. I was not persuaded that it was more likely than not that they were caused in one or more previous incidents.[131]D2 did not therefore possess its original capacity to absorb force. The extent of the reduction caused by the incident which gave rise to the no.4 indentations is not known but Mr. Wilson accepted that there was likely to have been “excessive force.” It follows that, in the event that a berthing vessel made contact first with D2, the risk of damage to D2 was greater than it would otherwise have been. This added to the unsafety of the berth.[132]I conclude that the CPBS berth was unsafe. The need to berth stern on to D1 required more than ordinary navigation and seamanship to avoid the danger of any contact with D3 and first contact with D2. The absence of a system for informing masters and pilots of all that required to know of the berth made it less likely that the required stern on berthing would be safely executed. The risk of damage to D2 was increased by the circumstance that it had previously been subject to excessive force.

(a) The manner in which NORDSTAR was berthed

[133]The written evidence of the pilot was that he sought to bring the vessel in parallel to the berth. I have already noted why the pilot’s evidence was unreliable, namely, that he said that the pilots had not agreed to the contingency plan when the contemporaneous minutes suggested that they had. The oral evidence of the master (who gave evidence by video link) was to the same effect as that of the pilot. But I was not impressed by the master’s evidence. With regard to the vessel’s distance off the berth (when first parallel to the berth) his evidence was different from his initial account. This suggested that his evidence owed something to reconstruction rather than recollection. Some of his evidence, with regard to berthing stern first, had the appearance of being designed to argue that the berth was unsafe. Both the master and pilot emphasised the risks to the stern gear from D1 when in fact the stern gear would be well aft of D1.[134]I therefore have difficulty in accepting the evidence of the master and pilot that they attempted to berth parallel to the berth. The pilot knew of the contingency plan. There is no evidence that he had protested about it before (at any rate so far as daylight berthing were concerned). He had four tugs and the use of the port anchor as required by the contingency plan. It seems more likely that he attempted to berth in accordance with the contingency plan but failed to do so. It is common ground that whilst he succeeded in avoiding contact with D3 he caused the vessel to contact D2 first at an angle of no more 2 degrees by the head.[135]The deck bell book records that the port anchor was dropped at 0849. The engine bell book records that the engines were put to dead slow and slow ahead at the same time and then stopped at 0850. The deck bell book records that the first lines were ashore (two aft spring lines) were ashore at 0853 and the engine bell book records that the engines were put to dead slow ahead at the same time and then stopped at 0854. The deck bell book records that the “shore dolphin” was “broken” at 0855 and the engine bell book records that at the same time the engines were put dead slow astern and half astern. (b). Did NORDSTAR berth in a negligent manner ?[136]The case of the Charterers was that NORDSTAR was berthed in a negligent manner, in particular at an excessive speed, and that this was the cause of the damage to D2.[137]The Charterers’ case on speed may be summarised as follows. “Admiralty mathematics”, based upon the vessel moving laterally over a distance of 150m. in about 6 minutes from 0849 to 0855 (as evidenced by the master, pilot and the deck bell book), suggest, even allowing for a margin of error as to distance and time, that the transverse speed of the vessel towards the berth was not less than 23 cm. per second and may have been more. The normal berthing speed was about 6 cm. per second.[138]I was not persuaded by this argument because the distance on which the Admiralty mathematics is based derives from the unreliable evidence of the master and pilot. It is also significant that the navigational experts agreed that “the final approach speed cannot be defined with any degree of certainty”. Neither proffered the view that the speed of the vessel was not less than 23 cm. per second.[139]The Charterers submitted that the pilot did not use the tug on the port bow to pull and did not make effective use of the port anchor. Instead of letting the anchor out little by little on the brake, 8 shackles were let into the water which would have piled up on the bottom. In the result the berthing energy imparted by NORDSTAR to D2 was greater than the fender could withstand. I accept that there is evidence that the master and pilot failed to make proper use of the tug on the port bow and the port anchor but the effect of this failure is likely to have been more on the vessel’s heading than on the vessel’s transverse speed.[140]None of the other evidence relating to speed assisted the Charterers’ case. The master estimated in his evidence that the transverse speed of his vessel was about half a knot, which is about 25.5 cm. per second. But an estimate of transverse speed must be difficult, as the experts agreed. Indeed, the master himself said:
“Maybe half a knot, but how can I measure it?”
This was not an estimate on which reliance could be placed.[141]Mr. Peres, the foreman on the berth, said in a written statement that the speed was “far too fast”. However, he also said that the vessel contacted D2 in way of hold no.9 and that he thought the vessel’s accommodation would crash into the shiploader above D1. It is now agreed that the vessel contacted D2 in way of hold no.6 and that the accommodation was well aft of D1. He does not therefore appear to be a reliable witness.[142]It was calculated that the speed at which NORDSTAR (with her displacement at the time in question) would break the fender on D2 (if it was in pristine condition) was 15.5 cm. per second. But it does not follow that the speed of the vessel must have been at least 15.5 cm. per second, for the fender was probably not in pristine condition and it is probable that its energy absorption capacity was less than it ought to have been by reason of a previous incident when excessive force was applied. Thus it is likely that NORDSTAR would have broken the fender at a speed less than 15.5 cm. per second.[143]The burden of proof is on the Charterers to establish that the vessel was brought alongside the berth at an excessive and negligent speed. I am not persuaded that the transverse speed of NORDSTAR was excessive and negligent.

(c) Cause of damage to D2

[144]It follows that the cause of the damage to D2 was the unsafety of the berth.[145]If, contrary to my decision, the transverse speed of the vessel can be reliably assessed and was in excess of what it ought to have been I consider that the unsafety of the berth remained the, alternatively, an effective cause of the damage to D2 (cf The Polyglory [1977] 2 Lloyd’s Reports 353 at p.366 and County Ltd. v Girozentrale Securities [1996] 3 AER 834 at p.857.) Had the pilots at the port been aware that first contact with D2 was a danger to D2 because it had a lesser capacity than D1 and D3 the pilot of NORDSTAR is likely to have taken greater care to avoid contacting D2 first (by making proper use of the tug on the port bow and the port anchor to ensure first contact with D1) and to have kept the vessel’s transverse speed to the minimum. Similarly, if the pilot in fact intended to berth parallel to the berth as he and the master said was his intention, the unsafety of the berth remained the, alternatively an, effective cause of the damage to D2. For if he had known of the danger to D2 he surely would have sought to ensure that he berthed on D1 first. Put another way I would not have regarded the negligence of the pilot as breaking the chain of causation between the breach of the safe berth warranty and the damage to D2. Further, if the master had been informed that D2 was not adequate to receive the first contact from a Capesize bulk carrier and that the mooring plan was to contact D1 first it is likely that he would have intervened in the event that the pilot sought to berth either parallel to the berth or with an angle by the bow.

Conclusion on the demurrage claim

[146]The Owners’ claim must therefore succeed on the grounds that the delay in berthing was caused by the unsafety of the berth and that the demurrage rate is the agreed rate of damages for delay. Credit must be given for the Charterers’ despatch claim at the discharge port which I understand is not in dispute. The parties will, I assume, be able to agree the sum in respect of which judgment will be given.

The claim on the guarantee

[147]The fixture recap evidencing the charterparty of VINE provided for the Second Defendant, Guangzhou Iron and Steel Corporation Limited (“GIS”), to guarantee the Charterers’ performance of the charterparty. Since GIS had purchased the cargo on FOB terms GIS had to provide the ship onto which the cargo would be loaded. It would appear that GIS procured VINE for that purpose although GIS was not the charterer. It therefore made commercial sense for GIS to guarantee the performance of the Charterers.[148]The requirement for a guarantee had been mentioned in the prefixture correspondence. The main terms of the charterparty were agreed on 30 November 2007. The form of the guarantee was provided by Zodiac, the vessel’s managers, on the same day. Mr. Wang of the Charterers spoke to his “contact” at GIS who was Mr. Tao Shijun and requested that GIS provide a guarantee in the form required by Zodiac. Mr. Tao agreed to do so.[149]GIS provided a Letter of Guarantee by fax dated 30 November 2007 in the required form. It was signed by Mr. Tao, described as “manager of business management”, on behalf of GIS, and addressed to Zodiac. It provided as follows:
“Subject: Vine c/p dated December 2007 Account: Wellmix Shipping Ltd.,……Hong Kong We, [GIS] hereby guarantee the full and complete performance execution and fulfilment of charterers obligations under the said charterparty VINE cp dated December 2007 and the payments of all amounts due to you thereunder.”

Account: Wellmix Shipping Ltd.,……Hong Kong

[150]GIS say that Mr. Tao was not authorised to issue the letter of guarantee and so they have denied liability under it. GIS also say that it was issued in breach of Chinese exchange control laws.[151]The evidence as to Chinese law was that an overseas guarantee required the approval of the State Administration of Foreign Exchange (“SAFE”). In the absence of such approval the guarantee was null and void and a penalty of 30% of the amount of money unlawfully involved could be imposed. However, despite these provisions it appears that civil liability in respect of the guarantee could still be imposed on the guarantor, creditor and debtor “according to their respective fault”. If the guarantor and creditor are both at fault the portion of liability borne by the guarantor shall not exceed half of the portion that the debtor is unable to discharge.[152]Mr. Coburn submitted that Mr. Tao simply overlooked the need to go through the formality of seeking approval from SAFE. This submission is consistent with the facts that he was requested to produce the guarantee on 30 November 2007 and did so that day without obtaining approval to do so from SAFE.[153]Those acting for the Owners in this regard were Mr. Kunzer and Ms. Deng of Zodiac in Shanghai who were the Owners’ chartering brokers. Mr. Kunzer was the Chief Representative of Zodiac and had been such since 2002. Ms. Deng was a chartering representative in Zodiac and had been such since 2002. Mr. Kunzer stated that because he had had no experience of the Charterers before he decided to obtain a performance guarantee from GIS who he was informed was the receiver of the cargo to be loaded on board VINE. He said that in the past he had had no problems with Chinese guarantees. When the letter of guarantee was provided on 30 November 2007 he asked Ms. Deng to speak to Mr. Tao at GIS to verify that the letter was not a forgery. She did so though it took 12 calls before she succeeded in speaking to Mr. Tao. He confirmed that the letter was genuine. Ms. Deng said that she trusted Mr. Tao because GIS’ chop or stamp was on the letter. However, Mr. Kunzer did not say that. He appears to have relied upon Mr. Tao’s confirmation.[154]Mr. Wang, the Chartering Manager of the Charterers, who had been servicing the demands of Chinese customers for iron ore since 2002, gave evidence that he also spoke to Mr. Tao on 30 November 2007 and requested that he produce the letter of guarantee which he agreed to do. When cross-examined he accepted that he thought at the time that the letter of guarantee was valid notwithstanding that in his third statement he said that a letter of guarantee issued on the same day on which it had been requested could not have been a valid guarantee.[155]Mr.Persey submitted that it is inconceivable that Mr. Kunzer and Ms. Deng did not know the relevant rules of Chinese law or the means to find out what they were. He submitted that in circumstances where they had not been called to give evidence appropriate adverse inferences should be drawn by the Court. However, in circumstances where neither Mr. Tao nor Mr. Wang appear to have appreciated the need for the consent of SAFE to the issue of the guarantee I do not consider that I can accept Mr. Persey’s submission that Mr. Kunzer and Ms. Deng must have appreciated the need of the consent of SAFE to the issue of the guarantee.[156]The position therefore appears to have been that nobody involved in requesting, giving and receiving the letter of guarantee on 30 November 2007 appreciated the need under Chinese law for there to be consent by SAFE to the issue of the guarantee.

Actual authority

[157]It was common ground that Chinese law governed the relationship between Mr. Tao and his employer GIS.[158]The letter of guarantee, subject to the question of illegality, binds GIS if Mr. Tao was authorised by GIS to sign it. Such authority was denied by GIS. It is a very striking feature of this litigation that GIS has given very limited disclosure of documents relevant to Mr. Tao’s authority, the circumstances in which the guarantee was signed and the dealings between GIS and the Charterers. The disclosure was so limited that the Claimants put GIS on notice long before the trial that they would ask for an adverse inference to be drawn. It is a further striking feature of this litigation that GIS adduced no evidence from Mr. Tao.[159]Instead, GIS adduced evidence from Mr. Zhang Ruosheng, who was the “legal representative” and chairman of the board of GIS. He gave evidence by video link from Hong Kong. He said that Mr. Tao was authorised to negotiate and manage business contracts but had no authority to sign guarantees. Any guarantees had to be signed by Mr. Zhang. He was unaware of the guarantee signed by Mr. Tao until April 2008 when a claim was made under it. He said that it was rare for GIS to guarantee the obligations of third parties. Guarantees of obligations in foreign currencies required the approval of the State Administration of Foreign Exchange and no such approval had been obtained in respect of it. He said that over the past 5 years GIS had only issued one guarantee of other parties’ obligations.[160]When cross examined he said that he had not seen the contract by which GIS had purchased iron ore from Vale SA. He also said that he was not involved in the transport arrangements for the cargo which was carried by VINE. He said that the contract for the purchase of iron ore from Vale SA had been signed by Mr. Tao who would have had to have got approval before doing so. Mr. Tao would not have taken the decision to sign that contract. At the time of the material events Mr. Tao was head of the Operation Management Department of GIS but had since been demoted. That demotion was connected with his signing the guarantee which has given rise to the claim in this case. Mr. Zhang said that a GIS internal investigation revealed that Mr. Tao signed the guarantee without reading it and that he thought the document was intended to prove that GIS were the buyers of the cargo. He said that there was no formal record of this investigation but that those who investigated the matter must have made notes in their notebooks.[161]He was asked why Mr. Tao had not made a statement. He said that Mr. Tao was reluctant to give a statement and that GIS could not force him to do so.[162]Mr. Zhang said that GIS usually purchased materials C and F and that it was only in the last two years that GIS had purchased FOB. He was asked three times which department in GIS was responsible for procuring a ship when material was bought on FOB terms. He said there was no such department but that a company called Jun Jin made the arrangement.[163]I am bound to say that I was not impressed by Mr. Zhang’s evidence. I have borne well in mind that he was giving evidence through an interpreter in what was probably an unfamiliar proceeding. But several features of his evidence persuaded me that it was unsafe to rely upon his evidence: i) He appeared to wish to say as often as he could that GIS never issued the letter of guarantee even though that was not an answer to the question asked. ii) It was surprising that in circumstances where he had determined to give evidence in support of GIS defence to the claim brought against it that he had never seen the contract between GIS and Vale SA for the purchase of iron ore which had been signed by Mr. Tao. iii) His inability to identify the department responsible for finding a ship to carry cargo purchased by GIS on FOB terms was most surprising. Even assuming that Jun Jin made the arrangements that company had to be contacted by a department within GIS. iv) His unwillingness to explain the contractual relationship between GIS and the Charterers, save to say that the Charterers were a third party, was also surprising. v) It seemed to me, even allowing for possible differences in company administration and employer/employee relationships between the PRC and this country, very unlikely that in circumstances where, according to Mr. Zhang, there had been an internal investigation into the signing of the guarantee by Mr. Tao who had been demoted in consequence, there was no report of that investigation and no letter of reprimand to Mr. Tao explaining that that he was being demoted because of the issue of the guarantee. vi) His explanation as to why there was no statement from Mr. Tao was surprising. In circumstances where his employer apparently knew why he had signed the guarantee and where Mr. Tao had been demoted as a result it is difficult to understand why he would be reluctant to give a statement. A statement saying that he had no authority to sign the letter of guarantee, as Mr. Zhang said was the truth, would support GIS’ case and one would expect Mr. Tao to do what he could to assist GIS. vii) Finally, Mr. Zhang signed GIS’ List of Documents dated 23 July 2009. No correspondence or other documents concerning the charterparty or guarantee had been disclosed other than the guarantee itself. When asked about this he said that whatever should have been disclosed had been disclosed. It is improbable that GIS had no other documents, emails or notes concerning the charterparty and guarantee. Mr. Persey was constrained to see the force of that observation.[164]I consider that it is appropriate to draw an adverse inference from GIS’ failure to give full disclosure. In this regard it is very significant that Professor Gao, the expert on Chinese law called by GIS, accepted that he was unable to say whether Mr. Tao had authority to sign either the long term contract for the purchase of iron ore or letter of guarantee (both of which he signed) without seeing his authorisation from GIS. He accepted that he must have had a “general authorisation”. Yet no such document was disclosed. I am, I regret to say, forced to conclude that someone within GIS decided not to give full disclosure of documents relating to Mr. Tao’s authority to sign the letter of guarantee. The adverse inference that I draw is that in fact Mr. Tao had authority to sign the letter of guarantee where, as in the present case, it was necessary to secure the vessel that GIS needed to procure as fob buyers of iron ore. The evidence of Mr. Zhang does not dissuade me from drawing that inference.

Ostensible authority

[165]It is not necessary to deal with this aspect of the case but I shall state my conclusions briefly. Mr. Kunzer appears to have relied, not on Mr. Tao’s position in GIS or on the use of a chop (or stamp) in the name of GIS, but on Mr. Tao’s confirmation that the guarantee was valid. He asked Ms. Wang to obtain that confirmation. If ostensible authority is determined by English law then I am not satisfied that GIS held out Mr. Tao as having the required authority either by reason of his position in the company or by his use of a chop (or stamp) with the company’s name. In any event Mr. Kunzer relied on neither of those matters. He relied upon Mr. Tao’s confirmation that he had authority but that does not amount to a holding out by GIS in English law. If ostensible authority is governed by Chinese law then the question is whether the Owners had “reason to trust” that Mr. Tao had the required authority. It was not suggested by Mr. Coburn that confirmation by Mr. Tao himself was sufficient to establish the required “trust” in Chinese law.

Illegality

[166]It was common ground that the applicable law of a contract was that chosen by the parties and that such choice could be either expressed or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case; see Article 3.1 of the Rome Convention as scheduled to the Contracts (Applicable Law) Act 1990.[167]Mr. Coburn submitted that the guarantee and the charterparty were very closely connected and that therefore, in circumstances where the applicable law of the charterparty had been expressly chosen as English law, there was an implied choice of English law as the applicable law of the guarantee. In this regard reliance was placed on Dicey on The Conflict of Laws 14th.ed para.32-093.[168]Mr. Persey submitted that the other circumstances surrounding the guarantee suggested that the parties’ implied choice must have been of Chinese law. Those circumstances were:(a) GIS is a Chinese company listed on the Shanghai Stock Exchange,(b) Mr. Tao operated from GIS’ Guangdong office from where the letter of guarantee was issued,(c) the letter of guarantee was received by Zodiac’s Shanghai office and(d) the guarantee purported to guarantee the liability of the Charterers who were a company based and incorporated in Hong Kong, a special administrative region of the PRC.[169]The letter of guarantee purported to guarantee the obligations of the Charterers under a charterparty which contained a “High Court Dispute Resolution Clause”. That clause appears to be set out in the Vine/PML charterparty (where it is entitled High Court Dispute Clause) which was incorporated into the charterparty and provided as follows:
“This Charter Party shall be governed by English Law and any dispute arising out of or in connection with Charter shall be submitted to the exclusive Jurisdiction of the High Court of Justice of England and Wales.”
[170]Thus GIS agreed to guarantee the performance of obligations governed by English law and subject to English jurisdiction. In GIS’ company accounts for 2008 the Charterers are described as “the shipping agency appointed by” GIS. There was no evidence that the Charterers chartered VINE for any reason other than that they had been requested to do so by GIS. It is further to be inferred that GIS was willing for the Charterers to charter VINE on the basis of English law and English jurisdiction. In that context I do not consider that the connections between GIS, the Charterers, Mr. Tao and Zodiac on the one hand and the PRC on the other hand can be regarded as demonstrating an intention to choose the law of the PRC as the applicable law of the guarantee. For, notwithstanding those connections, all parties were content for the charterparty itself to be expressly governed by English law and jurisdiction. Since the guarantee purported to guarantee obligations expressly governed by English law and subject to English jurisdiction I consider that the reasonable and objective inference to be drawn from the circumstances of the case is that the parties to the guarantee, GIS and the owners of VINE, a Liberian registered company, impliedly chose English law as the applicable law of the guarantee.[171]If no choice can be implied then I consider that the guarantee is most closely connected with England for the reasons set out above, notwithstanding that the place of business or residence of GIS, the guarantor, is in the PRC and that its performance is characteristic of a guarantee. Accordingly the applicable law of the guarantee is English law; see Article 4 of the Rome Convention.[172]Mr. Persey submitted that Chinese exchange control laws were nevertheless relevant either because of Article 3.3 of the Rome Convention or because of English public policy.[173]Article 3.3 of the Rome Convention provides as follows: “The fact that the parties have chosen a foreign law, whether or not accompanied by the choice of a foreign tribunal, shall not, where all the other elements relevant to the situation at the time of the choice are connected with one country only, prejudice the application of rules of the law of that country which cannot be derogated from by contract, hereinafter called “mandatory rules”.[174]It does not appear to me that that article applies because this is not a case where all the other elements are connected with China. One such element is that the obligations of the Charterers under the charterparty, which are the subject of the guarantee, are governed by English law. Another is that the Owners, the beneficiary of the guarantee, are a Liberian company. Mr. Persey submitted that these elements did not count as other relevant elements but I do not see why they do not so count.[175]Mr. Persey submitted that the guarantee was unenforceable against GIS because it would be contrary to English public policy for the Court to order the parties to enforce an obligation which was unlawful in a friendly foreign state. Reliance was placed on Regazzoni v KC Sethia [1958] AC 301.[176]In response Mr. Coburn submitted that in the absence of evidence that it was the object of a contract to violate the laws of the foreign country, the mere fact that a contract, not made with the “wicked intention” to break those laws, involves the doing of something which they prohibit, will not invalidate the contract, unless the contract forms part of the governing or applicable law. Reliance was placed on Dicey, paragraph 32-240.[177]In response to that Mr. Persey submitted that I should rely on Regazzoni and that the English Court should not act as a “handmaiden to a criminal offence in China”. But it is to be noted that Regazzoni was a case where there was an intention to break the laws of the foreign country; see [1958] AC 301 at p.317 and [1958] 2 QB 490 at p.522.[178]I heard little argument on this aspect of the case. The authorities relied on by Dicey and listed in the footnote to the passage relied upon by Mr. Coburn were not the subject of submissions. I therefore did not hear any argument as to whether the distinction between cases where the parties intended to break the laws of a foreign state and cases where they lacked that “wicked intention” was well-founded.[179]However, the present case appears to me to be somewhat special. In China the fact that an overseas guarantee is issued without the authorisation of SAFE does not result in the unenforceability of the civil liability otherwise arising from the guarantee, notwithstanding that the issue of the guarantee is an offence and that the guarantee is “null and void”. That civil liability is still enforceable where the guarantor is at fault. If the creditor is also at fault the guarantor’s liability will be no more than 50% of the liability in question. The liability may not in a strict sense be “classified as guarantee liability in nature” (as Professor Gao, the Chinese law expert called by GIS, said) but it appears to be a liability which is, in a real sense, “based on the guarantee contract” (as Mr. Sun, the Chinese law expert called by the Owners, said). In these circumstances it does not appear to me that English public policy requires the court to refuse to enforce a guarantee governed by English law which was issued in China in breach of the local law. If Chinese law does not regard the civil liability otherwise arising from the guarantee to be unenforceable there is no reason why English law should so regard it. It would not, it seems to me, be contrary to the principles of comity to enforce it. I therefore consider that there is no reason why this court should refuse to enforce GIS’ guarantee. In enforcing the guarantee the court should have regard to English law (because it is the applicable law of the guarantee) which provides for 100% liability rather than to Chinese law which provides for a lesser liability in the event of fault of the creditor.[180]If, contrary to my opinion, this court should only enforce the guarantee to the extent that the civil liability otherwise arising from the guarantee is enforceable in China then it should be enforced to the extent of 50% of GIS’ liability under the guarantee, for these reasons: i) GIS will have civil liability under the guarantee in Chinese law if it were at fault. It seems inevitable that it must have been at fault. No submission was made to the effect that it was not. Indeed Professor Gao accepted that GIS was at fault. He expressed the opinion that the Owners were also at fault on the basis that they “should have known of the laws and regulations of China.” He referred to judgments in China where the guarantor and creditor had been held at fault for the invalidity of a letter of guarantee due to a failure to obtain the approval of SAFE. Mr. Sun, the Chinese law expert called by the Owners, accepted that both GIS and the Owners would be regarded as being at fault. ii) There was a dispute between the experts as to whether GIS’ liability could be ascertained before the Owners had attempted to enforce the charterparty against the Charterers and the Charterers had failed to discharge some or all of their liability. Mr. Sun said that that this was possible when a claim was brought against both the debtor (in this case the Charterers) and the guarantor (in this case GIS). In his reports Professor Gao disagreed. iii) However, when cross-examined on this particular point Professor Gao agreed that it was possible for a Chinese court, if claims were made against both the Charterers and GIS at the same time, to decide the extent of liability to be borne by GIS. Thus there was in fact no disagreement between the experts on this point. iv) I therefore conclude that under Chinese law GIS would bear civil liability for 50% of its liability otherwise arising under the guarantee, notwithstanding that the guarantee was “null and void” and that the issue of the guarantee in the absence of approval of SAFE was an offence.

Conclusion on both claims

[181]There will be judgment against the Charterers for the sum claimed in demurrage (less the despatch claim) and judgment against GIS pursuant to the guarantee in an amount equal to 100% of the Charterers’ liability under the charterparty.

Cited in 3 later judgments