Edwinton Commercial Corporation & Anor v Tsavliris Russ (Worldwide Salvage & Towage) Ltd (The Sea Angel)

Frustration requires a multi-factorial assessment of whether a supervening event has made performance radically different from that undertaken. Relevant matters include the contract, its commercial context, the parties’ objective assumptions about risk, the event’s nature, the prospects of future performance and the demands of justice.

In delay cases, the probable delay relative to the remaining contractual period is important but not conclusive. Mere expense, onerousness or delay will not suffice. Foreseeability does not automatically prevent frustration, but a foreseeable risk which the contract or its context allocates to one party weighs strongly against it. The assessment is made objectively when the parties must decide where they stand, using later events only to test what could then reasonably have been forecast.

The appellants chartered the Sea Angel for up to 20 days to assist an oil-spill salvage operation at Karachi. After completing her principal work, the vessel was unlawfully detained by the port authority for 108 days. The authority sought security connected with pollution and wreck-removal liabilities arising from the casualty.

Gross J held that the charter had not been frustrated: [2006] EWHC 1713 (Comm). The charterers appealed, contending that by 13 or 17 October 2003 the delay already experienced, combined with the prospective delay, was inordinate when compared with the charter’s short remaining period.

The central issue was whether the detention and objectively anticipated further delay had, by either proposed date, made continued performance radically different from the contractual undertaking.

1. Appeal dismissed. Rix LJ held that the charter had not been frustrated by 13 or 17 October 2003. Wall LJ and Hooper LJ agreed.

2. Frustration requires a multi-factorial assessment. The court must consider the contractual terms and context; the parties’ objectively ascertainable knowledge, expectations and assumptions about risk; the nature of the supervening event; and their reasonable calculations about future performance. The radically different performance standard ensures that the doctrine is not lightly invoked. Expense, delay or increased onerousness alone is insufficient.

3. In a delay case, the probable total delay compared with the unexpired contractual period is important but is only a starting point. The present detention occurred after the vessel’s substantive salvage work had been completed, leaving principally redelivery and the financial incidence of continuing hire. Unlike wartime requisition or seizure, the detention remained susceptible to negotiation, diplomacy and legal action.

4. The assessment had to be made objectively as at 13 or 17 October. By then about five weeks had elapsed, and a focused application to the Pakistani court could reasonably have been expected to produce a first-instance decision within a further four to six weeks. Later events confirmed the reasonableness of that forecast. The move from negotiation to litigation was a stage in a continuing process, rather than a decisive breakdown demonstrating hopeless or indefinite delay.

5. The unreasonable detention of salvage equipment by local authorities was a foreseeable industry risk and fell within the contractual matrix, including the SCOPIC arrangements. Foreseeability did not exclude frustration as a rule, but materially reduced the force of the charterers’ case.

6. The time charter generally allocated the financial risk of delay to the charterers through continuous hire until redelivery, subject to specified off-hire provisions which did not apply. Frustration would have reversed that allocation. Given the foreseeable salvage risk, the available legal and commercial means of securing release, and the parties’ initial expectation that a solution could take about three months, justice did not require that reversal.

1. Court of Appeal (Civil Division): By [2007] EWCA Civ 547, unanimously dismissed the charterers’ appeal and affirmed the finding that the charterparty was not frustrated.
2. Queen’s Bench Division, Commercial Court: Gross J held that no frustrating event had occurred at any relevant time: [2006] EWHC 1713 (Comm).