Unsafe ports - The "Kanchenjunga"

When the House of Lords gave its judgment in the EVIA (No.2) in 1982 ([1982] 2Ll LR, 307), it might have been thought that the law on the nature of a charterer's safe port warranty had been substantially resolved. This has unfortunately proved not to be the case and there are still a number of areas of considerable uncertainty. This article considers the circumstances in which the charterer is taken to warrant the safety of a port and, where he does so, the nature of the warranty given. We also consider the position where, notwithstanding the unsafety of the port, the vessel nevertheless proceeds to load or discharge there.

Any article which considers the nature of the safe ports warranty must start with a definition of "unsafety". For present purposes, it is sufficient to adopt the now widely accepted definition given by Sellers L.J. in the EASTERN CITY [1958] 2Ll LR, 127 where he stated that, for a port to be safe, the particular ship must be able to "reach it, use it and return from it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship". It is clear that, if the vessel is unable to do this, the port may be unsafe even if the nature of the danger arises from political factors (such as war) rather than the physical configuration of the port itself. The numerous cases on the meaning of unsafety are fully reviewed in the Third Edition of Wilford on Time Charters and are not considered further here.

(a) In what circumstances does the warranty arise?

Many time and voyage charters contain an express warranty on the part of the charterer that the vessel will only be traded between safe ports. In the case of a time charter, such a term may, in many cases, be implied, even in the absence of express wording.

The position in relation to a voyage charter which is silent on the point is, however, more difficult. Where the charter contemplates loading or discharging at any port within a geographical range, so that the charterer is still required to nominate a port which may not be specifically named, the position is likely to be similar to that of a time charter and the charterer may therefore be held to warrant the safety of the port which he nominates (although a contrary view was expressed by Staughton J in the EPAPHUS [1986] 2Ll LR 387). Where, however, the charter specifies a single named port, it is strongly arguable, in the absence of express words, that the owner is accepting an obligation to go to that port and must therefore satisfy himself that it is safe. It is hard to see the basis on which a warranty of safety on the part of the charterers could be implied in these circumstances. Similar arguments can be raised where the charter names more than one port, provided that this is done by reference to an express list of names, rather than a generic range. Even though the charterer would still have to nominate the actual port, he could only do so from the specified list to which the owner may be taken to have agreed. (The APJ PRITI [1987] 2Ll LR 37).

(b) The time at which the warranty is given

Assuming a warranty of safety can be established, it is necessary to ascertain the time at which it is given and the period to which it relates. The starting point for a review of the law on this question is the EVIA - which was the first such case to reach the House of Lords. The vessel was time-chartered on the Baltime Form and, while on charter in March 1980, was ordered by her charterers to carry a cargo from Cuba to Iraq. The vessel completed the voyage without difficulty and berthed at Basrah on 20th August. However, before the vessel had been able to leave, on 22nd September war broke out between Iran and Iraq and the vessel was trapped at Basrah. The case started as a claim by owners for hire accruing during the period of detention. At the arbitration hearing, the charterers relied on the doctrine of frustration to avoid liability for hire in respect of at least part of the period. The umpire found that the charter became frustrated on 4th October and that, while the charterers were obliged to pay hire for the period up to that date, their obligation ceased thereafter. Owners appealed to the High Court, arguing that the doctrine of frustration could not apply in circumstances where the problem had arisen from the vessel being ordered, in breach of contract, to an unsafe port. They contended that the charterers could not rely on their own breach as giving rise to a frustrating event. The High Court considered that the delay had been caused by the unsafety of the port and upheld owners' arguments. The charterers then appealed to the Court of Appeal who reversed this decision, holding that there had been no breach of the safe port warranty. They treated the warranty as being of a continuous nature but held that it had nevertheless not been breached on the facts since the outbreak of the war was an unforeseen, abnormal occurrence for which charterers could not be held responsible. The owners appealed to the House of Lords who, while upholding the Court of Appeal's decision, did so on fundamentally different grounds. They held that war was an event which was capable, in principle, of rendering a port unsafe; but that since at the time the nomination was given, war had not been declared, the charterers had been entitled to nominate it.

In order to reach this conclusion, the Court had of course to consider whether or not the safe port warranty was a continuing warranty applying from the time when the port was nominated to the time when the vessel had completed her visit. Lord Roskill held that there was no justification for such an argument. The warranty was given by the charterer at the time when he nominated the port and related to the prospective safety of the port at the time the vessel was expected to be there. Thus, it did not matter if the port was unsafe at the time it was nominated, provided that it would be safe at the time when the vessel needed to use it; conversely, it did not matter, in this context, if the port subsequently became unsafe. In the EVIA, at the time when the nomination was made, there was nothing to suggest that the port of Basrah was not or would not be a safe port for the vessel and, indeed, all aspects of its set up were safe apart from the fact that hostilities broke out before the vessel was able to leave.

(c) Changed circumstances after nomination

(d) Owners rejection of charterers nomination

(e) Owners decision to proceed to an unsafe port

In the STORK [1954] 2Ll LR 397, Devlin J suggested that, if the port was obviously unsafe and damage was bound to result, then the owner's action in continuing with the voyage might break the chain of causation so that the owner would thereby forfeit his right to damages.

Furthermore, since an innocent party has a duty to mitigate any damage which he might suffer, an owner on learning of obvious unsafety might be bound to refuse to proceed, or order the vessel out of port if she has already arrived, in order to reduce his losses. Devlin J also stated, however, that in an appropriate case it was important for an owner to be able to continue with the voyage in the expectation of being indemnified if damage resulted, even in cases where the charterer's breach was clear. He gave as an example a case where there was a risk that the vessel might scrape her paintwork owing to the restricted size of the berth, and suggested that it was obviously desirable that the voyage should nevertheless proceed, rather than being abandoned in the face of a [relatively] minor risk. It would appear from this that the owner is required not only to assess the extent of the unsafety of the port, but also the extent of the likely damage to his vessel.

The Court of Appeal has recently had a further opportunity to consider these principles in the KANCHENJUNGA [1989] 1Ll LR, 354. ëThis case concerned a consecutive voyage charter with an option to nominate one safe port in the Arabian Gulf. The vessel was ordered to Kharg Island. The owners accepted these orders and proceeded to the port where, on her arrival, she tendered a Notice of Readiness. Whilst waiting to berth, Kharg Island was bombed by hostile forces and the Master put to sea for the safety of the ship. The charterers called upon the vessel to return to port, which owners refused to do, resulting in the charterparty coming to an end with both sides claiming that the other had repudiated it. The owners asserted that charterers had done so by nominating an unsafe port. Charterers claimed that the owners had done so by refusing to load. The arbitrators held that the charterers were in repudiatory breach for ordering the vessel to an unsafe port and the charterers appealed. In the High Court it was held that, while the port was unsafe, the owners had waived any right to reject the order to go there, in particular by tendering Notice of Readiness to berth. Accordingly, they had forfeited any right to claim damages for repudiation of the charter. On the other hand, the Master was entitled to refuse to re-enter the port in reliance upon a particular war risk clause, which operated entirely independently of the unsafe port doctrine, so that charterers' claim for damages also failed. Both parties appealed to the Court of Appeal which upheld the High Court judgment. It is important to bear in mind that the KANCHENJUNGA was only concerned with the question of whether the owners could refuse to go to the nominated port. The vessel suffered no damage and the case is therefore of limited guidance in considering what might have occurred if she had. Nevertheless, in the leading judgment, Lloyd L.J. indicated that such waiver as had occurred probably constituted only a waiver of the right to treat the order as invalid. It did not amount to a waiver of owners' rights to claim damages if any had been suffered. If that point had been in issue, the question of the owners reasonableness in proceeding to the port would almost certainly have been more directly in issue.

In conclusion, the owners' task when receiving an order to go to a port which he believes to be unsafe is to act reasonably. It would appear that he has to weigh up the nature and extent of the unsafety, and the potential damage which might occur if he proceeds. If he weighs up these factors wrongly he may forfeit his right to indemnity; but if he gets it right, he will not lose that right merely because he might have declined the nomination in the first place.

Clearly, if the charterer is called upon to make a fresh nomination and does so, the problem will be resolved. What, however, is the position where the owner, notwithstanding his objection to the nomination, nevertheless proceeds to the nominated port? Until the 1989 Court of Appeal decision in the KANCHENJUNGA, the leading case on this topic was the HOUSTON CITY [1956] 1Ll LR 1, a decision of the Privy Council on appeal from the High Court of Australia. The case concerned a voyage charterparty which contained an option to nominate a safe port. The port of Geraldton in Western Australia was nominated and the vessel proceeded there. The only berth available for the loading of the cargo in question was at the time defective in that an hauling-off buoy had been removed for repair. The Master was advised of this on arrival at the port, but, nevertheless, decided to go into berth and remain there, believing that the weather was sufficiently good to allow for a safe loading. However, during his stay, the weather suddenly worsened and the vessel suffered damage by striking against the dock. It was held that the charterer was liable for sending the vessel to an unsafe port. An argument that the Master's action in deciding to remain at the berth broke the chain of causation failed, since it was found to be a reasonable decision for the Master given the expected nature of the weather to be experienced.

This decision is often cited as authority for the proposition that the shipowner on learning of the unsafety of the port can decide to proceed and simply claim an indemnity if things go wrong. However, as can be seen from the case itself, the situation is not so straightforward. Had the Master acted unreasonably in remaining at the berth, it is likely that no damages could have been recovered.

If, at the time the nomination is given, the port is in fact prospectively unsafe, but neither party is aware of this, the charterer will still be liable for breach of warranty if the vessel suffers damage as a result. In this sense, the charterers obligation is strict. Where, however, the owner considers in advance that the port nominated by the charterer is unsafe, the position can become more complex. It seems clear that, if the port is indeed unsafe, the owner may (unless, perhaps, the port is expressly named in the charter) reject the order to proceed there; although he of course takes the risk that his view of the port's unsafety may ultimately be held to be wrong. In the case of a time charter, the charterer would in these circumstances be obliged to give fresh orders. As in the previous paragraph however such a refusal could give rise to greater difficulties in the case of a voyage charter, or where the time charterer has himself sub¬chartered the vessel for a specific voyage. In any event, it is likely that the nominated port will have been chosen because that is where the cargo to be lifted is situated and the nomination of an alternative port would, in those circumstances, be commercially pointless. None of these issues have been satisfactorily addressed in the cases and the position therefore remains extremely unclear.

One of the difficulties with Lord Roskill's approach is that the factual situation can of course change between the time of giving the nomination (and therefore the warranty) and the time when the vessel arrives at the port. Under the above rule, any subsequent change of circumstances which rendered the port unsafe would not place the charterer in breach and, in some cases, could require the vessel to proceed towards a port which both parties might, by then, regard as plainly unsafe. To avoid this conclusion, Lord Roskill indicated that, if a prospectively safe port subsequently became unsafe due to changed circumstances, the charterers had a secondary obligation to issue fresh orders so that the vessel could proceed to a safe port. Since this suggestion was not essential to the decision in question, the ramifications of it were not fully explored in the Judgment. In particular, the entire issue of how the doctrine could be applied to voyage charters was expressly left open. Where, however, the charterer has no right to nominate an alternative port, any such implied secondary obligation would be inconsistent with the express terms of the contract so that, if the named port became unsafe, it might still be argued that the contract had become frustrated. A further problem, both under voyage and time charters, will arise if the charterer becomes obliged to nominate an alternative port, but the bills of lading do not contain provisions entitling the vessel to deviate in the changed circumstances which have arisen.

Staff Author