House of Lords - Whistler International Limited v. Kawasaki Kisen Kaisha Limited On 7 December 2000

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Judgments - Whistler International Limited v. Kawasaki Kisen Kaisha Limited On 7 December 2000

Lord Bingham of Cornhill Lord Nicholls of Birkenhead Lord Hope of Craighead Lord Hobhouse of Wood-borough

HOUSE OF LORDS

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE
WHISTLER INTERNATIONAL LIMITED

(RESPONDENTS)

v.

KAWASAKI KISEN KAISHA LIMITED

(APPELLANTS)

ON 7 DECEMBER 2000

LORD BINGHAM OF CORNHILL

My Lords,

    I am in full agreement with the opinion of my noble and learned friend Lord Hobhouse of Woodborough, which I have had the opportunity to read in draft. I gratefully adopt his summary of the facts, the history of these proceedings and the submissions of the parties.

    A time charterparty such as the present represents a complex commercial bargain between owner and charterer. The owner undertakes for the period of the charter to make his vessel available to serve the commercial purposes of the charterer. To this end the hull, machinery and equipment of the vessel are to be in a thoroughly efficient state, the capacity and fuel consumption of the vessel are specified and the vessel is to be ready to receive the charterer's intended cargo. The owner undertakes these obligations in consideration of the charterer's undertaking to pay for the hire of the vessel at an agreed rate.

    The charterer agrees to pay hire for the vessel because he wants to make use of it. Crucial to the bargain, for him, are the terms which require the master to prosecute his voyages with the utmost despatch, which provide that the master (although appointed by the owner) shall be under the orders and directions of the charterer as regards employment and which require the charterer to furnish the master from time to time with all requisite instructions and sailing directions.

    The complexity of a time charterparty derives partly from the fact that ownership and possession of the vessel, which remain in the owner, are separated from use of the vessel, which is granted to the charterer, and partly from the peculiar characteristics and hazards of carriage by sea. As one would expect, the safety and security of the vessel, her crew and her cargo are treated as matters of the highest importance. The charterers may only (under the present charter) send the vessel to safe berths, safe ports and safe anchorages, always afloat and always within Institute Warranty Limits, and the parties in this case agreed a long list of further exclusions. The owners are to remain responsible for the navigation of the vessel. The scope of this last, very important, stipulation is the main issue argued in this appeal.

    The starting point in the present case is, in my opinion, the master's obligation to prosecute his voyages with the utmost despatch. Irrespective of any express orders by the charterer, that would ordinarily require him to take the route which is shortest and therefore quickest, unless there is some other route which is usual or there is some other maritime reason for not taking the shortest and quickest route. Helpful guidance on the correct approach in law was given by Lord Porter in Reardon Smith Line Limited v. Black Sea and Baltic General Insurance Company Limited [1939] A.C.562 at 584, a case concerned with deviation under a voyage charterparty:

"The law upon the matter is, I think, reasonably plain, though its application may from time to time give rise to difficulties. It is the duty of a ship, at any rate when sailing upon an ocean voyage from one port to another, to take the usual route between those two ports. If no evidence be given, that route is presumed to be the direct geographical route, but it may be modified in many cases for navigational or other reasons, and evidence may always be given to show what the usual route is, unless a specific route be prescribed by the charter party or bill of lading."

    The majority arbitrators referred to evidence before them that in the period 1 March to 31 May 1994 Ocean Routes had provided advice to some 360 vessels routed from the Pacific north west of North America to northern China, Korea or Japan, all of which had sailed on a northern route save for vessels heading for destinations far to the south of Japan. From that it would seem that the great circle route, which was the shortest and quickest route, was the usual route, although the arbitrators made no express finding to that effect. There was (so far as we know) no evidence to suggest that the rhumb line route was the usual, or a usual, route, and no finding to that effect. So, in the absence of what Lord Porter called "navigational or other reasons" for not taking the shortest and quickest route, the master was contractually obliged to take it.

    The majority arbitrators concluded that the master had no good reason for not taking the shortest and quickest route. The dissenting arbitrator concluded that because the master was influenced by his previous bad experience of the great circle route and by his concern for safety he was "absolutely entitled" to decide as he did. The majority, however, in paragraph 21 of their reasons,

"considered that the Disponent Owners were prima facie in breach of their obligation under Clause 8 to ensure that the Master prosecuted his voyages with the utmost despatch . . . ."

In paragraph 24 of their reasons the majority arbitrators again referred to "the Master's breach in failing to prosecute the voyage with due despatch." With those conclusions, on the findings of the majority arbitrators, I agree. In the absence of evidence that the rhumb line route was the usual route or a usual route, and in the absence of any satisfactory navigational or other reason for taking a longer and slower route, the master's obligation of utmost despatch required him to take the shortest and quickest route. This conclusion is in my view inescapable irrespective of any express orders given by the charterers.

    But the decisions at all three levels below, and the argument at all levels including the House, primarily concentrated not on the master's duty of despatch but on the legitimacy of the charterers' express instructions to the master, following advice from Ocean Routes, to take the great circle route. Relying on clauses 11 and 8, the charterers contended that these were instructions concerning the employment of the vessel which they were entitled to give and with which the master was bound to comply. The owners relied on their responsibility, under clause 26, for the navigation of the vessel and on their exemption, under clause 16, from liability for errors of navigation, as grounds for resisting the charterers' contention.

    The majority arbitrators concluded that the master had no good reasons for rejecting the charterers' instructions to take the great circle route. Impliedly, therefore, they accepted that the charterers were entitled to give such instructions. They did not find that the navigation exception availed the master, since he "had decided at the outset not to follow the course recommended by the weather routing service." The dissenting arbitrator did not find that the charterers' instructions did not relate to the employment of the vessel but held that the master was entitled not to comply because he "has to have the ultimate decision and responsibility for navigation."

    Oral argument before the judge no doubt led to a refinement of the issues, and his conclusion ([1999] QB 72 at 82) was clear and unequivocal:

"In my judgment these considerations lead to the conclusion that a decision whether to proceed across the Pacific by taking the great circle route or the rhumb line route or course would also be a decision in and about the navigation of the vessel and not in and about her employment."

The merits of that decision did not matter because "it was not, in my judgment, a decision as to the employment but as to the navigation of the vessel"(p. 82). In the Court of Appeal, Potter LJ was more guarded than the judge, but held that since the master's reasons for taking the rhumb line route were based on the safety of the vessel and were not shown to be other than bona fide (despite his lack of candour concerning his reasons for taking the rhumb line route on the second disputed voyage) it was a decision as to navigation: [2000] QB 241 at 261.

    The judge's decision was trenchantly criticised by the late Mr. Brian Davenport Q.C. in an article ("Rhumb Line or Great Circle? - That is a Question of Navigation" [1998] LMCLQ 502) which brings home the loss which English commercial law has suffered by his death and the cruelty of an affliction which denied him the judicial eminence he would surely have achieved. Both the judge's decision and that of the Court of Appeal were criticised as "regrettable" by Mr. Donald Davies, now the doyen of London maritime arbitrators: [1999] LMCLQ 461. In Reefer Express Lines Pty Ltd v. Cool Carriers AB (24 January 1996) New York arbitrators considered a charterparty containing clauses similar to clauses 8 and 11 of the present charter, it being accepted that the master was the final authority with respect of matters of navigation and safety. On facts indistinguishable from the present, save that the master had somewhat better reasons for refusing to comply with the charterers' instructions to take the great circle route from Seattle to northern China, the arbitrators unanimously held that the master had breached his duty under the charterparty by not following the charterers' directions.

    Clause 8 of the present charterparty, providing that the master (although appointed by the owners) shall be under the orders and directions of the charterers, gives the charterer his key right under the contract: to decide where the vessel shall go and what she shall carry, how (in short) she shall be used, always subject to the terms of the charterparty. The language used is general, and the power correspondingly wide.

    Caution is called for in reading earlier authorities in which the meaning of "navigation" has been considered, since the expression has been construed in different contracts and different factual contexts, but the cases nonetheless give valuable guidance. In Good v. The London Steam-Ship Owners' Mutual Protecting Association (1871) LR 6 CP 563 a sea-cock and a bilge-cock were left open, permitting the entry of water which damaged cargo. A claim was made against the owners of the vessel by consignees of the cargo, and the question was whether the damage had been caused by improper navigation, against which the owners were entitled to be indemnified. Willes J (at page 569) said:

"Improper navigation within the meaning of this deed is something improperly done with the ship or part of the ship in the course of the voyage."

In Carmichael & Co. v. The Liverpool Sailing Ship Owners' Mutual Indemnity Association (1887) 19 QBD 242 damage was caused to cargo because water entered the vessel through a port in the side of the vessel which had not been securely closed. It was held to have been caused by "improper navigation of the ship." A different conclusion was reached in Canada Shipping Co. v. British Shipowners' Mutual Protection Association (1889) 23 QBD 342 where cargo was contaminated through failure to clean the hold after a previous cargo. Bowen LJ (at page 344) said:

"Navigation must mean something having to do with the sailing of the ship; that is, of course, the sailing of the ship having regard to the fact that she is a cargo-carrying ship. Here the damage was caused by something which had nothing to do with the sailing of the ship."

    The Renée Hyaffil (1915) 32 TLR 83; (1916) 32 TLR 660 concerned a vessel bound for London from Gandia with a cargo of fruit and vegetables. The master put into Corunna where he remained for 23 days, for several reasons, including his reluctance to face the Bay of Biscay in winter. It was held that damage to the cargo had not been caused by a neglect, default or error of judgment in the navigation or management of the vessel within the meaning of the exceptions in the bills of lading.

    In S.S. Lord (Owners) v. Newsum Sons and Company Limited [1920] 1 KB 846 the dispute was between owner and charterer. The master had decided to remain in port for some time, despite advice to continue the voyage by a prescribed route. Bailhache J. held that the master's deliberate choice, while in harbour, of one of two routes to be pursued could not be an error in the management or navigation of the ship within the meaning of an exception in the charterparty. While the judge, in my opinion, erred in his formulation of principle, I would not question his conclusion. The decision is inconsistent with the view that the choice of route from one port to another is a navigational matter within the sole discretion of the master.

    The time-charterers in Suzuki and Co. Limited v. J. Beynon and Co. Limited (1926) 42 TLR 269 complained that the master had not prosecuted a voyage with the despatch required by clause 9 of the charterparty, apparently through insufficient consumption of coal. The issue was whether the master's failure fell within clause 14 exempting the owner from liability for negligence or default of the master in the management or navigation of the steamer. There was a difference of opinion in the Court of Appeal and in the House of Lords. At page 274 Lord Sumner said:

"I see no ground for bringing the captain's action or inaction under the head of navigation. I speak with humility after what has just been said, but I still think that there is a real field in which the captain's shortcomings would not fall within the exception clause 14, and yet would constitute a breach of his obligation to use dispatch under clause 9. The maintenance of full speed may often be part of the duty which those responsible for navigation have to perform, directly or by others, as, for example, in order to save a tide at a bar or to correct excessive leeway or deflection by currents, or to make the ship quick to answer her helm, or to make a course good against head winds, or what not. Here, however, it is not pretended that the ship was handled in an unseamanlike manner, or that either ship or cargo was imperilled by the navigation that took place. The term "management" may better fit the present case, but it is not a term of art; it has no precise legal meaning, and its application depends on the facts, as appreciated by persons experienced in dealing with steamers. There is a management which is of the shore, and a management which is of the sea. I do not think the award states the facts sufficiently to enable us to say that the evidence is all one way to show mismanagement of the steamer, in the sense of clause 14, and without more facts before us we could not in any case deal with the question as a practical matter. Clause 9 is emphatically a merchants' clause. Its object is to give effect to the mercantile policy of preferring a saving of time to a saving of coal."

    The facts of Larrinaga Steamship Company v. The King [1945] AC 246 were unusual. The vessel, discharging at St. Nazaire, was ordered by charterers to return to Cardiff. Despite severely deteriorating weather conditions a Sea Transport Officer instructed the vessel to sail on completion of discharge to Quiberon Bay to join a convoy bound for the Bristol Channel. The master protested but complied. The vessel grounded and suffered damage. The owners claimed against the Crown as charterers, contending that the damage had resulted from the charterers' order to return to Cardiff. Lord Wright (as page 256) said:

"The view of the judge was that what he described as the 'sailing orders to Quiberon Bay to be obeyed forthwith . . .' were orders as to employment within cl. 9. With the greatest respect, I cannot agree with that view. These sailing orders which the judge found were given were, in my opinion, merely dealing with matters of navigation, in regard to carrying out the orders to proceed to Cardiff".

Lord Porter (at page 261) said:

"Three answers to this argument have been made by the respondent. (1) That though an order specifying the voyage to be performed is an order as to employment, yet an order as to the time of sailing is not. That order, it is contended, is one as to navigation, or, at any rate, not as to employment. My Lords, this distinction seems to me to be justified: an order to sail from port A to port B is in common parlance an order as to employment, but an order that a ship shall sail at a particular time is not an order as to employment because its object is not to direct how the ship shall be employed, but how she shall act in the course of that employment. If the word were held to include every order which affected not the employment itself but any incident arising in the course of it almost every other liability undertaken by the charterer would be otiose, since the owners would be indemnified against almost all losses which the ship would incur in prosecuting her voyages."

Then (at page 262) Lord Porter continued:

"(2) The second answer of the respondents was that even if it were conceded that orders to sail in a storm were orders in respect of which an indemnity is due, they must still be orders of the charterers as charterers and such as under this charterparty they are entitled to give. The mere instruction to sail may be such an order, but such an instruction leaves it to the discretion of the master who is responsible for the safety of his ship to choose the time and opportunity for starting on his voyage. I know of no right on the part of a charterer to insist that the safety of the ship should be endangered by sailing at a time when seamanship requires her to stay in port."

    Lastly, I would refer to Newa Line v. Erechthion Shipping Co. SA [1987] 2 Lloyd's Rep. 180, in which Staughton J. at page 185 said:

"(2) Orders as to employment.

It is well settled that the orders which a charterer is entitled to give, and an owner bound to obey, are orders as to the employment of the vessel. They do not include orders as to navigation, which remains in the control of the owner through his master - at any rate in the absence of special and unusual terms. It follows that a charterer, again in the absence of such terms, is only bound to indemnify the owner against the consequences of orders as to employment, and not of orders as to navigation. That is established by Weir v. The Union Steamship Company Ltd., [1900] A.C. 525, Larrinaga Steamship Co. Ltd. v. The King, (1945) 78 Ll.L.Rep. 167; [1945] A.C. 246, the Stag Line case, Scrutton on Charterparties (19th ed.) p. 376, Carver on Carriage by Sea (13th ed.) par. 669, Wilford on Time Charters (2nd ed.) pp. 197-198.
"The question here is whether the order to proceed to Dawes Island anchorage was an order as to employment or as to navigation. Seeing that the manifest intention was for the vessel to lighten there by discharging part of her cargo, I am of opinion that it was plainly an order as to employment. By contrast the advice of the pilot as to precisely where the vessel should anchor, if it had been an order and if (which is not suggested) it had been given on behalf of the charterers, would have been an order as to navigation."
    It is not hard to think of orders which plainly relate to the employment of the vessel and others which plainly relate to its navigation. It is much less easy to formulate any test which clearly distinguishes between the two. The charterer's right to use the vessel must be given full and fair effect; but it cannot encroach on matters falling within the specialised professional maritime expertise of the master, particularly where the safety or security of the vessel, her crew and her cargo are involved. He is the person, on the vessel, immediately responsible. Technical questions concerning the operation of the vessel are for him. Thus a decision when, in the prevailing conditions of wind, tide and weather, to sail from a given port is plainly a navigational matter, as held in the Larrinaga case. By contrast, a decision without good reason to remain in port instead of continuing with a voyage (as in The Renée Hyaffil and The S.S. Lord) or to economise on bunkers for no good maritime reason (as in the Suzuki case) were properly regarded as falling outside the navigational area reserved to the master's professional judgment.

    Despite the judgments below, I am of the clear opinion that the majority arbitrators were right to hold that the orders to take the great circle route on both the disputed voyages were orders which the charterers were entitled to give and with which (on the arbitrators' findings) the owners were bound to comply. This does not mean that the charterers usurped the owners' navigational responsibility. As pointed out in Lenfestey's Dictionary of Nautical Terms at page 196,

"To sail a perfect circle route would require continuous course changes, because a great circle intersects each meridian at a different angle (except when sailing straight along the equator). Since this is not practical, a series of points are established along the course, and the rhumb lines between them are sailed."

The responsibility for making good, so far as practicable, whatever course is chosen of course remains with the master and crew, as does that for navigating the vessel safely into and out of port, and responding to maritime problems encountered in the open sea. But subject to safety considerations and the specific terms of the charter, the charterers may not only order a vessel to sail from A to B but may also direct the route to be followed between the two.

    For these reasons, as well as those given by Lord Hobhouse of Woodborough, I would allow the appeal and make the order which he proposes.

LORD NICHOLLS OF BIRKENHEAD

My Lords,

    I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Bingham of Cornhill and Lord Hobhouse of Woodborough. For the reasons they give, and with which I agree, I would allow this appeal.

LORD HOFFMANN

My Lords,

    I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Bingham of Cornhill and Lord Hobhouse of Woodborough. For the reasons they give, and with which I agree, I would allow this appeal.

LORD HOPE OF CRAIGHEAD

My Lords,

    I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Bingham of Cornhill and Lord Hobhouse of Woodborough. I agree with them, and for the reasons which they have given I too would allow the appeal and make the order which Lord Hobhouse proposes.

LORD HOBHOUSE OF WOODBOROUGH

My Lords,

    This is an appeal under the Arbitration Act 1979 from a reasoned award of arbitrators appointed under a time charter dated Tokyo 21 October 1993. It was one of a chain of charterparties relating to the Liberian motor ship Hill Harmony described as being of 15,622 tons gross and 9,017 tons net register, having a deadweight capacity of 24,683 metric tons and a laden service speed of about 13 knots in good weather conditions. She had been built in 1985 and was a bulk carrier with 5 holds. The parties to the relevant charterparty were the respondents Whistler International Ltd of the British Virgin Islands as disponent owners and the appellants Kawasaki Kisen Kaisha Ltd of Tokyo as charterers: I will call them respectively the 'owners' and the 'charterers'.

    The time charter which was for 7/9 months at charterers' option was on the New York Produce Exchange form with amendments. It contained a London arbitration clause (clause 17) referring disputes to the arbitration of three commercial and shipping men in London in accordance with English law, the decision of any two of them to be final. The disputes between the owners and charterers was referred to arbitration in accordance with this clause. The arbitrators by a majority decided substantially in favour of the charterers. The owners obtained leave to take the award to the Commercial Court under the Act and Clarke J reversed the decision of the arbitrators, [1999] QB 72, but certified that the award raised a question of law of general public importance and gave leave to appeal. The charterers' appeal to the Court of Appeal was dismissed, [2000] QB 241, and they have now appealed with leave to your Lordships' House.

    The relevant dispute relates to two laden voyages performed by the vessel from Vancouver to Japan in respectively January/February and April/May 1994. The actual cargoes carried are immaterial and were presumably non-perishable. The respective voyages should only have taken about 16¾ and 13¾ days. But on neither voyage did the vessel go by the shortest route. As a result, on one voyage she took 6½ days longer to get to her destination and consumed some 130 tons more fuel and on the other she took 3? days longer and consumed some 69 tons more. The loss to the charterers was about US$ 89,800. The owners denied liability for the charterers' loss. They contended that they were not obliged to send the vessel on the shortest route and furthermore were entitled to reject orders from the charterers to take the shortest route.

    So far as presently relevant, the charterparty provided as follows. The vessel was let to the charterers for worldwide trading via safe ports, berths or anchorages always within Institute Warranty Limits. These limits are the geographical limits contained in the standard terms of marine H&M policies so this provision has the effect of precluding the charterers from requiring the vessel to go outside the geographical limits permitted by the owners' insurance cover assuming that that cover is on the ordinary terms. (The charterparty also excluded a list of other areas or countries which are not material to the present dispute, mostly relating to political and cognate risks. Similarly there were clauses relating to ice which are likewise not relevant.) The owners undertook that the vessel when delivered would be seaworthy and in every way fit for the charter service and she was to be so maintained during the service. (cl.1) (A similar obligation of due diligence arose under the clauses paramount incorporated in the charterparty.) The owners had also to provide and pay for the crew. Nothing in the charterparty was to construed as a demise of the vessel to the charterers and the owners were to remain responsible for the navigation of the vessel, acts of pilots and/or tugboats, insurance, crew and all other matters as when trading for their own account. (cl.26)

    The charterers were to provide and pay for the bunkers whilst the vessel was on hire and to pay for port charges, pilotages, agencies and all other usual charges. (cl.2) The charterers were to pay the hire half-monthly in advance at the agreed rate, the liability accruing from day to day except when the vessel was off-hire. (cl.4) The charterparty contained an off-hire clause (cl.15) which is not material to the present appeal since the arbitrators rejected the charterers' claim under that clause on a point of construction and that part of their decision was not the subject of an appeal. I express no view upon it.

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