(THE "SUPER SERVANT TWO")
COURT OF APPEAL
July 24, 25, 26 and 27, 1989
Before Lord Justice DILLON and Lord Justice BINGHAM
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Lord Justice BINGHAM: On May 27, 1988 Mr. Justice Hobhouse answered four questions raised as preliminary issues in an action between J. Lauritzen A.S. as plaintiffs and Wijsmuller B.V. as defendants. He answered one question in favour of Wijsmuller, and Lauritzen have not sought to challenge that ruling on appeal. He answered the other three questions in favour of Lauritzen, and Wijsmuller now appeal against those rulings (see [1989] 1 Lloyd's Rep.148).
Lauritzen were owners of a large and heavy drilling rig, now named Dan King, which was being built at a Japanese shipyard. Wijsmuller were specialized carriers by sea. By a written contract dated July 7, 1980 Wijsmuller agreed with Lauritzen to transport the rig from Japan I to the Rotterdam area of the North Sea: The contract provided that the transportation unit to be used for the carriage was to be -
. . . Super Servant One or Super Servant Two in Wijsmuller's option.
These were large, self-propelled, semi-submersible barges built for carrying large loads such as this rig. The date for delivery of the rig to Wijsmuller for carriage was to be between June 20, 1981 and Aug. 20, 1981, a period, to be progressively narrowed down according to a contractual schedule. The price was to be paid as to half at the beginning of the voyage and half at the end.
The contract of carriage was expressly governed by English law and not many of its terms are germane to these preliminary issues. Clause 15, on which argument was founded, was in these terms:
15. Duty of care
Subject to any provisions in this Contract Wijsmuller hereby agrees to do everything that a good carrier may reasonably be expected to do in Order to reach the port of discharge in time and safely.
Clause 16 is of some importance and read:
16. Liability
16.1. The Principal agrees that transportation to the actual location of loading, stowage, lashing, securing, carriage, unlashing and discharge of the Cargo and the transportation to the actual location of redelivery are entirely at the Principal's risk and that in no circumstances whatsoever Wijsmuller, its employees and/or agents and/or subcontractors and/or servants and/or agents of such subcontractors shall be liable for any loss (direct or consequential) or damage to the Cargo howsoever caused unless caused by the deliberate act or omission of Wijsmuller.
16.2 The Principal will be liable for all loss and damage whatsoever sustained by any third party caused by or contributed to by the Cargo, and the Principal undertakes to indemnify Wijsmuller, its employees and/or agent and/or subcontractors and/or servants and/or agents of such subcontractors against any claims (including interest and legal costs) made against Wijsmuller, its employees and/ 4 or agents or subcontractors and/or servants and/or agents of such subcontractors by any third party in respect of such loss or damage save in the event that such loss or damage to the third party is caused by or results from the deliberate act or omission of Wijsmuller.
Clause 17 was the subject of two issues argued before the Judge, one of which remains in contention on appeal. I should recite its full terms:
17. Cancellation
17.1. Wijsmuller has the right to cancel its performance under this Contract whether the loading has been completed or not, in the event of force majeur(sic), Acts of God, perils or danger and accidents of the sea, acts of war, warlike-operations, acts of public enemies, restraint of princes, rulers or people or seizure under legal process, quarantine restrictions, civil commotions, blockade, strikes, lockout, closure of the Suez or Panama Canal, congestion of harbours or any other circumstances whatsoever, causing extra-ordinary periods of delay and similar events and/or circumstances, abnormal increases, in prices and wages, scarcity of fuel and similar events, which reasonably may impede, prevent or delay the performance of this contract.
17.2. In the event that Wijsmuller has the right to terminate its performance under this Contract under this clause or clause 4, and the voyage has begun, Wijsmuller shall tender redelivery -of the Cargo at a convenient port or place to be determined after consultation with the Principal and when uncontactable to be determined after consultation with the authorised representative of the Principal on board the Transportation Unit, and such delivery shall constitute good delivery under the terms of this Contract.
If Wijsmuller exercises its right under this clause, all payments due to Wijsmuller under the terms of this Contract will be deemed earned by Wijsmuller and the last instalment of the Contract sum as more specifically described in the Conditions of Particular Application of this contract will be reduced or increased pro rata to the distance actually sailed or to be sailed to such convenient port or place and the distance in the normal course of the voyage i.e. between the port or place of delivery and the stated port or place of redelivery of the Cargo.
Clause 4 gave Wijsmuller a right to terminate the contract at a port of refuge which the state or condition of the cargo made it necessary to enter.
On Jan. 29, 1981, several months before Dan King was due to be tendered for carriage, Super Servant Two foundered and became a total loss in the course of off-loading another drilling rig in the Zaire River. For purposes of these preliminary issues it is to be assumed, as Wijsmuller have alleged, that they had intended to use this vessel for the Dan King carriage contract. The other vessel, Super Servant One, had been scheduled to carry, and did carry, cargo under two other contracts spanning the expected period of performance under the Dan King contract.
Lauritzen have alleged that the loss of Super Servant Two was caused by the negligence of Wijsmuller; their servants or agents. Wijsmuller deny this. The facts have not yet been investigated. The issues have accordingly been framed on the alternative hypotheses that the loss of the vessel was and was not caused by the negligence of Wijsmuller.
On or about Feb. 16, 1981, some two weeks or so after the casualty, Wijsmuller informed Lauritzen that they would not carry out the transportation of the rig with either Super Servant One or Super Servant Two. The parties then entered into without prejudice negotiations which led to a further agreement in April, 1981 under which the rig was transported by Wijsmuller between July and October by barge and tug. This different method got carriage caused both of the parties loss or increased expense which have led to the present litigation, in which each party claims for the loss it has suffered.
Wijsmuller allege, and for purposes of the issues it is to be accepted, that Super Servant One had been scheduled to perform six cargocarrying voyages between November, 1980 and August, 1981 and Super Servant Two to perform seven. Super Servant Two was lost during the third of her voyages. The Dan King carriage would have been the seventh. After Super Servant Two was lost, Super Servant One did carry one of the cargoes previously scheduled for Super Servant Two, but otherwise only carried the cargoes originally scheduled. The contracts performed by Super Servant One during the period when Dan King was due to be carried could, Wijsmuller contend, only be safely performed by a Super Servant vessel.
In the Action, Lauritzen claimed damages for breach of the Dan King carriage contract. Wijsmuller pleaded that the contract had been frustrated. Alternatively they relied on clause 17.1 of the contract. They also counterclaimed.
5The issues ordered to be tried were:
Whether (on the assumption that the matters pleaded in paragraphs 5 and 6 of the Defence are accurate)
(1) the Defendants were entitled to cancel the contract under clause 17 and/or
(2) the contract was frustrated (a) if the loss of the Super Servant Two occurred without the negligence of the Defendants their servants or agents (b) if the loss of the Super Servant Two was caused by the negligence of the Defendants their servants or agents.
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My conclusions are these:
1. Like the Judge, I cannot accept that cl. 15 has an application to events occurring before performance of the carriage contract begins. The reference to "everything that a good carrier may reasonably be expected to do" focuses attention on Wijsmuller's role as carrier alone. The expression "in order to reach the port of discharge in time and safely" focuses attention on the voyage. If the parties' intention had been that for which Mr. Legh-Jones contended I cannot think they would so significantly have failed to express it.
2. Again like the Judge, I cannot accept that a term is to be implied into this contract to the effect contended for by Lauritzen. The drafting of this contract, as of most commercial contracts, is not faultless, but it is detailed and elaborate and suggests, in some respects at least, that the parties have applied their minds to the requirements of this particular adventure. The term contended for, however reasonable, is not in my view necessary to make the contract operable nor is it a term which one could confidently say the parties would have adopted had the point been raised during their negotiations.
3. I accept that the expression "perils or dangers and accidents of the sea" describes a proximate cause of loss which may, as a matter of definition, arise with or without negligence. There is nothing in these words, read alone, which excludes a cause which would not have been operative had reasonable care been taken. But the words are not to be read alone but as part of a contract to be construed as a whole.
4. Wijsmuller's construction of cl. 17, giving them a right to cancel the contract at any stage with financial impunity on occurrence of an event within the clause, even though the event is brought about by negligence on their part, would make this a very one-sided clause. Had Lauritzen cancelled when Wijsmuller claimed to do so they would have had to pay 40 per cent. of the contract sum. Some contracts are of course very one-sided and expressly so, but in construing a doubtful clause it is not irrelevant that one construction may lead to a draconian result and the other not.
5. I have no doubt that Lord Justice Donaldson (as he then was) was right in The Raphael, [1982] 2 Lloyd's Rep. 42 at p. 45 to caution against uncritical application of the rules in Canada Steamship without regard to the peculiar features of the contract in issue. Different 7 clauses are to be approached in different ways:
George Mitchell (Chesterhall) Ltd. v. Finney Lock Seeds Ltd., [1988] 2 Lloyds Rep. 272; [1983] 2 A.C. 803. The present clause is not, as the Judge accepted, an exceptions clause. It is not therefore directly covered by Canada Steamship. The clause is, however, one which confers on one party only a right exercisable in a very wide range of circumstances to nullify the contractual bargain made between the parties at no cost to itself and regardless of the loss which the other party may sustain. To such a clause the broad approach-indicated by Canada Steamship is in my judgment appropriate.
6. Clause 17.1 does not expressly provide that Wijsmuller may cancel even though the event in question is one which they could by the exercise of reasonable care have averted. There is an obvious contrast with the language of cl. 16.1 where Wijsmuller unambiguously exempt themselves from liability for loss or damage to the rig even though caused by their negligence.
7. The language of cl. 17.1 is, I think, wide enough to embrace events caused by Wijsmuller's negligence. But the general tenor of the clause, opening with a reference to force majeure and acts of God and including such events as acts of war, civil commotion, canal closure and harbour congestion, strongly points towards events beyond the direct or indirect control of Wijsmuller.
8. Clause 17.1 is not deprived of a sensible application if read as excluding events brought about by the negligence of Wijsmuller their servants or agents. - Almost all the events listed could only occur wholly independently of Wijsmuller and there is none which could only occur as the result of Wijsmuller's negligence.
9. It could not be supposed (and Mr. Clarke did .not argue) that Wijsmuller could cancel under cl. 17.1 where they had deliberately brought about the event relied on. But, in contrast with cl. 16, there is no express exclusion of deliberate acts or omissions. So some restriction of the wide language of cl. 17.1 is to be understood. In considering the breadth of the clause it is significant that the words "howsoever caused" which appear in cl. 16.1 do not appear here.
10. It seems plain that cl. 16 is an exemption clause of the purest water, attracting the full rigour of the Canada Steamship approach. On that basis Wijsmuller are protected against any liability for loss or damage to the rig unless caused by their deliberate conduct. Is it anomalous that this far-reaching exemption should be coupled with a right of cancellation under cl. 17.1 not exercisable where the event in question has been brought about by the negligence or deliberate conduct of Wijsmuller their servants or agents? I think not. The practical effect of cl. 16, by allocating the risk of loss or damage to the Cargo almost entirely to Lauritzen, is to impose on Lauritzen the commercial necessity and the expense of obtaining insurance: If the clause were in less stringent terms Wijsmuller would no doubt insure themselves against Cargo claims with a consequent increase in the contract price. Lauritzen might reasonably prefer to insure the rig themselves and keep the price down. There is no reason to suppose that insurance cover would not be readily available in the market. By contrast, the risk to Lauritzen of cancellation by Wijsmuller under cl. 17.1 would, I think, be much less readily insurable. It would not in my view make commercial sense for the risk under cl. 17.1 to be allocated in the mariner which Wijsmuller's construction would involve. A more restrictive Interpretation of the clause is thus to be preferred.
11. Mr. Clarke argued that if Wijsmuller negligently brought about a cl. 17 event they were entitled to cancel even after the carriage had begun and although cl. 15, by that stage admittedly applied. Lauritzen's remedy, he suggested, lay in an action for breach of cl. 15. I cannot accept this. For reasons already outlined I infer that Wijsmuller could not rely on a cl. 17.1 event which the exercise of reasonable care would have prevented, whether it occurred before or after carriage had begun. This interpretation does, I must accept, give little save cosmetic effect to cl. 15. That does not trouble me. Clause 9 (which exempts Wijsmuller from liability for delay) and cl. 15 already combine to deprive cl. 15 of its apparent potency. I cannot think the parties included cl. 15 to give Lauritzen a right to damage if Wijsmuller cancelled the contract during the voyage in reliance on an event they had negligently or deliberately brought about.
12. Mr. Clarke also argued that if, contrary to his submission, negligence precluded reliance on cl. 17.1 before the carriage began, then it had to be negligence on the part of Wijsmuller as opposed to its servants or agents. I do not accept this. There are undoubtedly instances in which actual fault or privity on the part of the shipowner must be shown if he is to be liable, and liability for the acts of servants or agents can of course be excluded by contract. In the ordinary way, however, English law treats a party, his servants and agents as one, and I 8 would construe cl. 17.1 as precluding reliance by Wijsmuller on any event which would not have occurred if they, their servants or agents had exercised reasonable care.
I accordingly agree with the conclusion which the Judge has, with much greater succinctness, expressed.
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