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

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    The charterers were also under an obligation to furnish the captain of the vessel from time to time with all requisite instructions and sailing directions. (cl.11) The captain was to prosecute his voyages with the utmost dispatch and was, although appointed by the owners, to be under the orders and directions of the charterers as regards employment and agency. (cl.8) The vessel was to have the liberty to deviate for the purpose of saving life and property (cl.16) and by reason of the incorporation of the amended Hague Rules (v. inf.) any other reasonable deviation was permitted. (Art.IV r.4)

    The charterparty also incorporated no fewer than three clauses paramount but no point arose on their application (Adamastos Shipping Co. Ltd. v Anglo-Saxon Petroleum Co. Ltd. [1959] AC 133) nor as to which one was relevant. It was accepted that their effect was to incorporate an exception for loss or damage arising from the act, neglect or default of the master in the navigation or management of the ship in Article IV rule 2(a) of the amended Hague Rules.

    The charterers' allegation was that the owners had been in breach of their obligation to prosecute the relevant voyages with the utmost dispatch and to comply with charterers' orders to proceed by the shortest route. The owners' response was that the orders and the choice of route did not relate to the employment of the vessel but to its navigation and all matters of navigation were within the sole province of the master to decide and, if he was in any way at fault, owners' liability was excluded under Article IV rule 2(a). The dispute therefore raised a question of the scope of the contrasting terms "employment" and "navigation" as used in this type of charterparty.

    The arbitration was at the wish of the parties conducted on documents without an oral hearing. The arbitrators described the principal issue in the arbitration as being whether the master's decision to disregard the charterers' instructions as to the course which he was to take on the two voyages in question was unjustifiable. They referred to what appeared to be the background to the master's attitude. In October 1993, under a previous charterparty, the vessel had encountered heavy weather on a voyage from near San Francisco to a port in southern Japan and had suffered heavy weather damage. It was apparently this experience which had led the master in the following January and April to choose to follow a more southerly route from Vancouver to the east coast of Japan. Indeed, in January 1994, he gave this as his reason for refusing to obey the charterers' order to proceed by the shortest route, that is to say the 'great circle' or more northerly route, and preferring to go further south along the 'rhumb line' where he might expect easier weather conditions. Having considered the evidence, the (majority) arbitrators stated: "We did not consider that this amounted to a satisfactory reason in itself for disregarding the Charterers' instructions." As regards the April voyage, the only reason which the master gave was that the vessel's auxiliary boiler was inoperative as it had broken down and not been repaired. This excuse if factually correct would have raised obvious difficulties for the owners as it involved saying that the vessel was not seaworthy. But the arbitrators rejected the master's excuse as spurious since the problem with the auxiliary boiler had been dealt with at Vancouver before the vessel sailed and no question of unseaworthiness could arise. The arbitrators suspected that his true reason was the same as before. They said: "In the case of the second disputed voyage, if the master's decision had indeed been based upon the experience of [the 1993 voyage], it was even more difficult to justify than his decision in relation to the first disputed voyage given the fact that the voyage commenced in late April when the weather could be expected to have been significantly better on the recommended [shorter] route." They concluded that "the evidence . . . had failed to demonstrate that the master had acted reasonably having regard to all the relevant circumstances in rejecting the charterers' orders on both these voyages".

    The evidence to which the arbitrators were referring included independent evidence which they clearly accepted and which, as appears from the recitation in their Reasons, was uncontradicted by any other evidence. The charterers' orders as to the route were given after taking the advice of Ocean Routes. Ocean Routes are a well established specialist commercial organisation of which the business is to assemble and record information about weather and sea conditions in the oceans of the world at different times of year and accordingly to advise those involved in the marine transportation industry as to the most favourable routes to follow when crossing oceans. Thus when the arbitrators refer to the 'recommended' route they are referring to the route recommended by Ocean Routes. The evidence accepted by the arbitrators was that in the period March to May 1994 Ocean Routes had provided advice to some 360 vessels routed from the Pacific north west to northerly China Korea or Japan. All of these vessels had sailed on a northerly route. The only vessels that did not do so were vessels which were proceeding to destinations far to the south of Japan such as Singapore or the Philippines. There was no evidence of any particular difficulties encountered by the vessels which had taken the northern route during the relevant period.

    The (majority) arbitrators found that the owners were in breach of their obligation under the charterparty to ensure that the master prosecuted the voyages with the utmost dispatch and followed the charterers' orders regarding the employment of the vessel. They then considered the defence 'error' in navigation (sic). Following what they understood was the effect of the decision in S.S. Lord (Owners) v Newsum Sons & Co. Ltd. [1920] 1 KB 846, they concluded that the planning of the voyage was not a matter of navigation; it was not a case where the master had decided to alter course at sea.

    Clarke J adopted a diametrically opposite approach. He held that the dispute related to matters of navigation not to matters of employment. It followed that the orders were not ones which the charterers were entitled to give and the decision what route to follow was one for the master alone. If any liability had arisen it would have been covered by the exception. At pp.81-2, he said:

    "In my judgment an order as to where the vessel was to go, as for example to port A or B to load or discharge or to port A or port B via port C to bunker, would be an order as to employment which the master would be bound to follow, subject of course (as all parties agreed) to his overriding responsibility for the safety of his ship. An order as to how to get from where the ship was to port A, B or C would not, however, be an order as to employment but an order as to navigation. So, for example, to take an illustration discussed in argument, a direction to a master proceeding to a port of discharge to pass, say, on one side or another of a light vessel or an island or to proceed by way of one channel rather than another would be a direction as to navigation not employment. There can I think be no real doubt that a decision by a master as to which channel to take, what course to set or which side of an island or light vessel to go, would be a decision as to navigation and not as to employment. The same must be true of an order or direction to the master in any of those respects.

    In my judgment those 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 an about the navigation of the vessel and not in and about her employment. It is true, as the arbitrators say and as has been urged in argument, that one decision or the other would be likely to have important financial consequences for the charterers (and perhaps also the owners), but that is true of many decisions which masters take."

He therefore was able to discard as irrelevant the arbitrators' view that the decisions of the master were unreasonable and unjustified.

    "That might have been a good decision or a bad decision. It might have been justified or (as the arbitrators held) unjustified but it was not, in my judgment, a decision as to the employment but as to the navigation of the vessel."

As regards whether the master had failed to prosecute the voyages with the utmost dispatch, Clarke J apparently concluded that the arbitrators had not found that he had failed to do so. He said that they had not considered it. (p.88)

    In the Court of Appeal, the leading judgment, agreed to by the other members of the Court, was given by Potter LJ. He held that the ocean route to be followed by the vessel was a matter of navigation for the master and not a matter of employment upon which the charterers could give the master orders. Provided that the master acted bona fide, it did not matter whether he acted reasonably because the owners were protected by the exception in Article IV rule 2(a). He summarised his decision at pp.261-2:

    "It seems to me, as Mr Hamblen [for the owners] submitted, that the master's decision was a decision on navigation because it was a decision upon what course or combination of courses to follow in prosecuting the overall voyage, and because the reason for the decision, made bona fide, was the master's concern for the safety of the vessel. ..... So far as the application of Article IV rule 2(a) is concerned, I consider that the judge was right in construing the term 'navigation' as therein appearing as extending to a decision taken, in the course of voyage planning to steer a particular course or courses having regard to the weather to be anticipated."

    These judgments of two such experienced judges are entitled to great respect but so is the decision of the commercial shipping arbitrators to whom the parties agreed that the resolution of their dispute should be entrusted. It should also be appreciated that the decision of Clarke J has been forcefully criticised by the late Mr Davenport QC in 1998 LMCLQ 502 and that the Court of Appeal decision has been similarly criticised from a commercial point of view at 1999 LMCLQ 461 by Mr Donald Davies, a highly experienced and legally qualified London maritime arbitrator who has also had experience as a master mariner. Similarly, Mr Young who appeared for the charterers was able to refer your Lordships to an award of maritime arbitrators in New York holding, on facts probably less favourable to charterers, that the master was not entitled to choose, contrary to the wishes of the charterers, to proceed across the Pacific by a longer and more southerly route.

    The question raised by this dispute is not a new one. It reflects the conflict of interest between owners and charterers under a time charter. Under a voyage charter the owner or disponent owner is using the vessel to trade for his own account. He decides and controls how he will exploit the earning capacity of the vessel, what trades he will compete in, what cargoes he will carry. He bears the full commercial risk and expense and enjoys the full benefit of the earnings of the vessel. A time charter is different. The owner still has to bear the expense of maintaining the ship and the crew. He still carries the risk of marine accidents and has to insure his interest in the vessel appropriately. But, in return for the payment of hire, he transfers the right to exploit the earning capacity of the vessel to the time charterer. The time charterer also agrees to provide and pay for the fuel consumed and to bear the disbursements which arise from the trading of the vessel. The owner of a time chartered vessel does not normally have any interest in saving time. An exception is where towards the end of a time charter, the expiry of the charter depends upon whether voyages can or cannot be performed within the allotted period. In such a situation the owners' interest will vary depending upon whether the charter rate is above or below the current market rate.

    There have been a succession of statements by experienced commercial judges which refer to these features of charterparties. To quote Lord Mustill in The Gregos [1995] 1 Lloyd's Rep. 1 at p.4,

    "My Lords, in merchant shipping time is money. A cargo ship is expensive to finance and expensive to run. The shipowner must keep it earning with the minimum of gaps between employments. Time is also important for the charterer, because arrangements must be made for the shipment and receipt of the cargo, or for the performance of obligations under sub-contracts. These demands encourage the planning and performance of voyages to the tightest of margins. Yet even today ships do not run precisely to time. The most prudent schedule may be disrupted by regular hazards such as adverse weather or delays in port happening in an unexpected manner or degree, or by the intervention of wholly adventitious events.

    Where the charter-party is for a period of time rather than a voyage, and the remuneration is calculated according to the time used rather than the service performed, the risk of delay is primarily on the charterer. For the shipowner, so long as he commits no breach and nothing puts the ship off-hire, his right to remuneration is unaffected by a disturbance of the charterer's plans. It is for the latter to choose between cautious planning, which may leave gaps between employments, and bolder scheduling with the risk of setting aims which cannot be realized in practice.

    "....... This conflict of interest becomes particularly acute when there is time left for only one more voyage before the expiry of the charter, and disputes may arise if the charterer orders the ship to perform a service which the shipowner believes will extend beyond the date fixed for redelivery."

    What might be described as the scheduling of the vessel is of critical importance to the charterer so that obligations to others can be fulfilled, employment opportunities not missed and flexibility maintained. The 'utmost dispatch' clause is, as Lord Sumner said in Suzuki & Co. Ltd. v J. Benyon & Co. Ltd. (1926) 42 TLR 269 at p.274, a merchants' clause with the object of giving effect to the mercantile policy of saving time. As a matter of this mercantile policy and, indeed, as a matter of the use of English a voyage will not have been prosecuted with the utmost dispatch if the owners or the master unnecessarily chooses a longer route which will cause the vessel's arrival at her destination to be delayed. If the charterer has sub-voyage-chartered the vessel to another or has caused bills of lading to be issued, the charterer will be under a legal obligation to ensure that the voyage be prosecuted without undue delay and without unjustifiable deviation. The charterer is entitled to look to the owner of the carrying vessel to perform this obligation and that is one of the reasons why the 'utmost dispatch' clause is included in the usual forms of time charter.

    Suppose that the charterer does no more than order the vessel to load at Vancouver and proceed to a port on the east coast of Japan, that order would give rise to an obligation under the clause to proceed from one port to the other with the utmost dispatch and is inconsistent with a liberty to delay the vessel by going by a longer than necessary route. To proceed by an unnecessarily long route delays the vessel just as surely as if the vessel had sailed at something less than full speed. There may of course be countervailing factors such as adverse currents or headwinds which may make an apparently longer route in fact the more expeditious route but, on the arbitrators' findings, none of those factors justified taking the longer route in the present case.

    Another difficulty for the owners' argument is the fact that the owners have already agreed in the charterparty what are to be the limits within which the charterers can order the vessel to sail, for present purposes the Institute Warranty Limits, and have undertaken that, barring unforeseen matters, the vessel will be fit to sail in those waters. It is not open to the owners to say that the vessel is not fit to sail from Vancouver to Japan by the shortest route within IWL. Yet it was exactly this type of argument which the courts below entertained. In fact, upon the findings of the arbitrators, the vessel was fit to sail by the shorter northern route and the master did not have any good reason for preferring the longer southern route. It was not a good reason that he preferred to sail through calm waters or that he wanted to avoid heavy weather. Vessels are designed and built to be able to sail safely in heavy weather. The classification society rules require, as does clause 1 of the NYPE Form, the maintenance of these safety standards. It is no excuse for the owners to say that the shortest route would (even if it be the case) take the vessel through the heavy weather which she is designed to be able to encounter.

    The courts below discussed the question of deviation under bill of lading contracts or voyage charterparties. This was not directly material to a time charter where the contract is not a contract of carriage but a contract for the provision of the services of a crewed vessel. However there is a relationship between prosecuting a voyage with the utmost dispatch and doing so without unjustifiable deviation. Thus, in relation to a voyage charter, Lord Porter said, Reardon Smith Line Ltd. v Black Sea and Baltic General Insurance Co Ltd. [1939] AC 562 at p.584:

    "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 charterparty or bill of lading. ..... In some cases there may be more than one usual route. It would be difficult to say that a ship sailing from New Zealand to this country had deviated from her course whether she sailed by the Suez Canal, the Panama Canal, round the Cape of Good Hope or through the Straits of Magellan. Each might, I think, be a usual route."

The question in that case was whether a visit to a bunkering port was a breach of the charterparty contract. There was evidence that it was usual for vessels loading at the loading port to proceed via the other port for bunkers. Therefore there was no breach of the contract of carriage.

    A number of points relevant to the present case arise from this. Under the time charter the obligation is not simply to proceed by a usual route but to proceed with the utmost dispatch. Further, where the vessel should take on bunkers is, subject to emergencies, undoubtedly a matter for the charterers. The provision of bunkers is the charterers' responsibility and the charterers can give orders as to the bunkering ports to be visited; no question of what is usual arises. Again, Lord Porter points out that there may be more than one usual route for proceeding on a long voyage from one continent to another. The argument of the owners, from which they did not resile, was that in this situation the choice between the usual routes was entirely a matter for the master and the charterers could not give orders as to which was to be chosen, say, via the Cape of Good Hope or via the Suez Canal, even though the charterers would have to pay the canal and port dues and pay for the fuel consumed. (See also Mr Davenport QC, loc cit.) The significance of such choices are commercial and relate to the exploitation of the earning capacity of the vessel. They are within the ambit of the employment of the vessel and are matters about which time charterers can give orders. A time charterer can give an order because he wants the vessel to be well positioned for a commercial opportunity or other commercial reason. A time charterer can order the chartered vessel to proceed at an economical speed; the time charterer may be waiting for a cargo to become available or the laydays at a loading port may not begin until after a certain date.

    But even if the courts below should have got involved, which they have not, in a discussion of what was the usual route across the Pacific from Vancouver to the east coast of Japan, the arbitrators' Reasons were clear. The northerly route was the shortest route. There was no evidence that any other route was a usual route. There was evidence that the northerly route was the usual route to follow as it had been by 360 vessels over a three month period. It was also incorrect to treat the case as if it left open the possibility that there had been a rational justification for refusing to proceed by the northerly route. The arbitrators found that the master did not have any rational justification for what he did. My Lords, it follows from what I have already said that, on the findings of the arbitrators, the charterers were, by ordering the vessel to proceed by the shortest and most direct route, requiring nothing more than was in any event the contractual obligation of the owners. Therefore the question whether the order was an order as regards the employment of the vessel is academic. But it was in truth such an order. The choice of ocean route was, in the absence of some over-riding factor, a matter of the employment of the vessel, her scheduling, her trading so as to exploit her earning capacity. The courts below, by contrast, accepted the owners' argument that it was necessarily a matter of the navigation of the vessel.

    In support of this argument, the charterers primarily relied upon Larrinaga SS Co v The King [1945] AC 246. The vessel in question had suffered a marine casualty: in the early hours of 14 October 1939, in a storm, she had stranded on a bank outside St Nazaire. She was at the time under requisition by the British Government on the terms of the T99A charterparty which effectively incorporated war risks insurance. This insurance includes cover for accidents occurring during or the consequence of "warlike operations". The vessel had at the time received an oral order from a Sea Transport Officer to vacate the berth and sail to join a convoy proceeding to the Bristol Channel. As a result of the stranding the vessel was seriously damaged. Her owners sought to recover the cost of repairs from the Government. They put their claim on two bases, neither of which succeeded. First, they claimed that the casualty was a consequence of a warlike operation: it was not, nor was she engaged on such an operation at the time. Secondly, they claimed under the charterparty indemnity clause on the basis that the casualty was caused by obeying an order regarding the employment of the vessel. This too failed for a number of reasons. The only order as regards the employment of the vessel was that requiring her to proceed from the French port to the English port; that order did not cause the casualty; in any event the order to leave St. Nazaire had been a naval order not an order of the charterer. The relevant parts of the speeches are those relating to whether there was an order of the charterer regarding the employment of the vessel and whether the casualty was caused by that order or by the master's navigation of the vessel. The question of causation is a real one. Lord Porter stressed this at pp.260-1. He referred to the fact that employment related to the employment of the vessel and that the order had been to sail after discharge was complete. He said:

    "But this order did not in a legal sense, and I doubt if such an order ever could, cause such a loss. ..... This wording left it to the master's discretion to sail at a reasonable time thereafter, and in determining what is a reasonable time all such matters as the state of the weather and the exhaustion of the crew would properly be taken into consideration. In these circumstances it cannot be said that either of these orders caused the damage which the ship suffered. A loss is not, under English law, caused by orders to make or by making a voyage because it occurs in the course of it. Such a loss is merely the fortuitous result of the ship being at a particular place at a particular time, and in no legal sense caused by the charterers' choice of port to which the ship is directed or their instructions to her master to proceed to it. But it was said that the ship sailed not by reason of the written order to proceed, but by the subsequent oral order, and that such an order did cause the loss, since it was the probable and contemplated result of sailing in unfavourable weather that the ship might suffer damage which, had the master been free to choose his own time, would probably have been avoided."

    This argument Lord Porter rejected, giving three reasons for doing so. First, he drew a distinction between an order to sail from port 'A' to port 'B' and an order to sail at a particular time, the former being a direction as how the ship shall be employed and the latter relating to how she shall act in the course of that employment. His second reason was that, whilst a mere order to sail may be an order which the charterer is entitled to give, this still "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." (p. 262) An order from a naval authority could be different but that was not something for which the Government was liable as charterer. His third reason was one of lack of legal causation. (Later authorities confirm this need for a direct causal link: eg The White Rose [1969] 1 W.L.R. 1098.) The other members of the House agreed with Lord Porter, Lord Wright adding, at p. 255, that 'employment' meant "the services which the ship is ordered to perform" and contrasting it with 'navigation'.

    Lord Porter used the word 'seamanship'. This word was also used by Lord Sumner in Suzuki v Benyon (sup) when describing what was encompassed by the exception for errors of navigation. That case concerned the master of a time chartered vessel which failed, without any good reason, to steam at full speed. He said, 42 T.L.R.269, 274:

    "I see no ground for bringing the captain's action or inaction under the head of navigation. ....... there is a real field in which the captain's shortcomings would not fall within the exception clause 14 ['negligence, default or error in judgment of the .... master ..... in the management or navigation of the steamer'] and yet would constitute a breach of his obligation to use dispatch under clause 9 ['the captain shall prosecute all his voyages with the utmost dispatch']. 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."

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