Golden Fleece Maritime Inc & Anor v ST Shipping and Transport Inc

An obligation in a time charter that a vessel be fit for service or specified cargo is not confined, as a matter of law, to physical condition. Its scope depends on the charter wording and may include legal fitness and documents required by applicable law.

A clause requiring documents needed from time to time can impose a continuing requirement despite an opening reference to delivery. A separate future warranty of compliance with applicable conventions, including MARPOL, may require a vessel to hold an available exemption needed to carry the contracted cargo. If the exemption cannot be obtained, the owner is in breach. Peculiar background facts and broad assumptions about commercial risk cannot displace clear standard-form wording.

The appellants, owners of the ELLI and FRIXOS, appealed against Cooke J’s decision in the Commercial Court, reported at [2008] 1 Lloyds Rep 262.

The vessels were not double-hulled. After 5 April 2005 they could not carry fuel oil without an exemption under MARPOL Regulation 13H(5), which the owners could not obtain. The charterers withheld part of the hire and counterclaimed for lost profits. The central issue was whether the charterparty warranties required continuing legal fitness and compliance with MARPOL, or were confined to the vessels’ physical condition at delivery.

The appeal was dismissed and Cooke J’s order was upheld. Lord Justice Longmore delivered the leading judgment; Lord Justice Lawrence Collins and the Master of the Rolls agreed.

1. Construction of the standard form. The scope of fitness and seaworthiness obligations depends on the words of the particular charterparty. Background facts and general assertions about commercial risk or capital improvements cannot displace clear wording in a pervasive standard form.
2. Legal fitness and documents. The authorities, including Levy v Casterton (1816) 4 Camp. 389, The Madeleine [1967] 2 Lloyds Rep 224 and The Derby [1985] 2 Lloyds Rep 325, did not establish that fitness obligations can never include legal fitness or documents required by law. Documents required by the law of the flag or a port may be relevant to seaworthiness and fitness for service.
3. Clause 1(g). The words requiring documents needed from time to time by applicable law prevailed over the introductory reference to delivery. An exemption required by Liberian flag-state law from April 2005 could therefore fall within the clause. The court left open the more difficult question whether clauses 1(b) and 1(c), and the maintenance obligation in clause 3, would alone require restoration of legal fitness.
4. Clause 52. The first paragraph was not confined to delivery, and the second expressly imposed a future warranty of compliance with applicable conventions, including MARPOL. Without the unavailable Regulation 13H(5) exemption, the vessels did not comply with MARPOL while designated to carry fuel oil. This was a breach of clause 52, even if the other clauses were not breached.
5. The argument that compliance would require an impermissible rebuilding of the vessels was rejected. Frustration remained a theoretical long-stop for radically different supervening events, but it had no application here.

• Court of Appeal (Civil Division) dismissed the owners’ appeal and upheld the order below: [2008] EWCA Civ 584.
• High Court, Queen’s Bench Division, Commercial Court Cooke J upheld the charterers’ contentions, found breaches of the charterparties and awarded damages: [2008] 1 Lloyds Rep 262.