Mediterranean Salvage & Towage Ltd v Seamar Trading & Commerce Inc

A contractual term is implied only where the instrument, read as a whole against its relevant background, would reasonably be understood to contain it. Reasonableness alone is insufficient. Necessity remains central to that inquiry.

A voyage charterer’s right to nominate a berth does not, without more, carry an implied warranty of its safety. The implication depends on the particular charterparty, including the extent of the charterer’s choice and the parties’ express allocation of risk. Where the port is named, its safety is not warranted and the owner undertakes responsibility for its berths and approaches, an implied safe-berth warranty is unlikely and may be inconsistent with the express terms. In the absence of such a warranty, the vessel remains at the owner’s risk and loss lies where it falls.

The owners voyage-chartered the vessel Reborn to carry cement from Chekka to Algiers under an amended Gencon form. Chekka was the named loading port. The charterers were to nominate the loading berth, but the charterparty contained no express warranty that the port or berth was safe. Clause 20 warranted that the vessel complied with the restrictions of the ports, berths and approaches, and stated that the owners had satisfied themselves about their specifications and restrictions.

The vessel allegedly suffered damage when a hidden underwater projection penetrated her hull during loading. Three LMAA arbitrators held that the charterparty contained no implied absolute duty to nominate a safe berth. Aikens J dismissed the owners’ appeal from that award and granted permission for a further appeal.

The central issue was whether the charterparty impliedly required the charterers to nominate a safe berth at the named loading port.

1. Appeal dismissed. The charterparty did not contain an implied warranty that the charterers would nominate a berth at Chekka which was safe from hidden dangers. Sir Anthony Clarke MR gave the leading judgment. Rix and Carnwath LJJ agreed.

2. The implication of a contractual term forms part of construing the instrument as a whole against its relevant background. The governing question is whether the proposed term expresses what the instrument would reasonably be understood to mean. The traditional formulations concerning business efficacy, obviousness and the officious bystander are ways of addressing that question, rather than independent tests. Nevertheless, necessity remains essential; it is insufficient that the proposed term would be reasonable: Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 11 applied.

3. The charterers did not need to establish a competing implied term. Unless the owners established the proposed warranty, the vessel remained at their risk and the loss lay where it fell. A right to nominate a berth does not by itself impose a warranty of safety. Whether such a warranty is implied depends on the particular charterparty, including the extent of the charterer’s liberty and the information and risk accepted by the owner.

4. The named port was not warranted safe. The deletion of the word “safely” from clause 1 indicated that the parties did not intend an express safety obligation. More importantly, box 10 and clause 20 showed that the owners undertook to investigate Chekka and its berths or to accept the relevant risks of reaching, using and leaving the nominated berth. Although “specifications and restrictions” referred to advertised or known matters rather than a hidden underwater projection, the residual warranty proposed by the owners was inconsistent with the express allocation of risk.

5. The charterers’ only limitation was that the nominated berth had to accommodate a vessel with the stipulated 27-foot salt-water draft. A berth unable to do so would be an impossible berth and its nomination would be ineffective. That limited obligation did not amount to a warranty against every danger peculiar to the berth.

6. Rix LJ added that the owner bears the basic risk to the vessel’s integrity unless the parties shift it through an express safety warranty. There was no authority extending an implied safe-berth warranty to a voyage charterer’s choice of berth within a named port which was not itself warranted safe. Carnwath LJ agreed that the proposed term was neither necessary nor compatible with the express contract.

• Court of Appeal (Civil Division): Dismissed the owners’ appeal and upheld the conclusion that no safe-berth warranty was implied: [2009] EWCA Civ 531 .
• High Court, Commercial Court: Aikens J dismissed the owners’ appeal from the arbitral award on 1 August 2008 and granted permission to appeal.
• LMAA arbitration: Three arbitrators made a final declaratory award on preliminary issues on 6 November 2007. They held that the charterparty contained no implied absolute duty upon the charterers to nominate a safe berth.