Ease Faith Ltd v Leonis Marine Management Ltd

A towage obligation to proceed at utmost dispatch requires the maximum speed consistent with normal navigation and ordinary use of the tug’s engines. A comparable obligation to proceed with all reasonable dispatch may be implied into a towage contract where necessary for business efficacy.

A description of a tow as being in “light ballast condition” ordinarily means that it carries no more ballast than is necessary to proceed safely and seaworthily. It does not describe the vessel’s total displacement. Contractual exclusions of “loss of profit” must be construed in context and, where applicable, do not necessarily exclude a diminution in the sale price of the tow.

Ease Faith Ltd claimed damages from Leonis Marine Management Ltd for delay in towing the vessel Kent Reliant from Panama to China. Leonis sought to pass any liability to Cloudfree Ship Management Ltd under a head towcon.

The claims concerned delay in February 2004, delay outside Shanghai, the use of one engine, the meaning of “light ballast condition”, alleged misrepresentation, liens for unpaid sums, estoppel by convention and the effect of an exclusion clause. The principal issues were whether the towcons required dispatch, whether the delays caused loss, and whether the losses were excluded.

1. Light ballast condition. The entries in box 12 of both towcons were contractual undertakings, not mere representations. “Light ballast condition” meant that the vessel carried the minimum ballast necessary to proceed safely and seaworthily on the intended voyage. The expression did not refer to total displacement, and the fact that the vessel was damaged did not alter that meaning. Cloudfree and Leonis failed to prove any breach or actionable misrepresentation. ([2006] EWHC 232 (Comm), paras 107–123)
2. Dispatch under the sub-towcon. “At utmost dispatch” required the maximum speed consistent with normal navigation and normal use of engine power. Routine use of both engines was required, subject to insignificant periods of routine maintenance. The February slow steaming, the April delay outside Shanghai after the final instalment had been paid, and the extended use of one engine breached the sub-towcon. The lien clause did not justify delay for claims that were not sums due under the agreement. ([2006] EWHC 232 (Comm), paras 124–135)
3. Dispatch under the head towcon. A term that the tug would proceed with all reasonable dispatch was implied because it was necessary to give the contract business efficacy. In the circumstances, reasonable dispatch required routine use of both engines. Cloudfree therefore breached the head towcon by slow steaming, using one engine for extended periods and delaying after the final hire instalment had been paid. ([2006] EWHC 232 (Comm), paras 152–162)
4. Estoppel by convention. Leonis’ communications did not create an estoppel preventing it from challenging the February delay. Although one communication amounted to acquiescence in Cloudfree’s asserted entitlement, Cloudfree had already decided to delay and had not been influenced by Leonis’ position. It would therefore not be unjust or unconscionable to permit Leonis to dispute the alleged entitlement. ([2006] EWHC 232 (Comm), paras 163–173)
5. Loss and exclusion clause. Ease Faith proved that the delay caused pilot and escort charges and a reduction in the price paid for the vessel. The reduction was more akin to a diminution in price than loss of profit. On the proper construction of clause 18(3), the claim was not excluded. The claim against Leonis succeeded, and Leonis were entitled to recover against Cloudfree in respect of their liability, subject to credit for interest on late hire payments. Cloudfree’s claims failed. ([2006] EWHC 232 (Comm), paras 136–151 and 174–176)