Sea Master Shipping Inc v Arab Bank (Switzerland) Ltd & Anor

Contractual responsibility for discharging cargo remains with the shipowner unless the contract uses clear language transferring responsibility to charterers or receivers. A term allocating the cost of discharge does not ordinarily transfer responsibility for carrying out or supervising the operation.

Terms are implied only where necessary for business efficacy or obviousness, and only to the extent required for commercial coherence. Fairness, hindsight and the insolvency of a contracting party cannot justify implication. An implied term must be clearly expressible and consistent with the express contractual regime.

The claimant appealed under section 69 of the Arbitration Act 1996 from preliminary legal conclusions in a partial final award. The dispute concerned demurrage or damages in lieu of demurrage under a bill of lading incorporating the terms of a voyage charter.

The arbitral tribunal held that neither the financing bank nor the receivers were contractually liable for discharge-port demurrage. It also rejected proposed implied terms requiring them to discharge the cargo, or to take all necessary steps to enable discharge and delivery within a reasonable time. The appeal concerned only the latter conclusions and was determined on assumed facts.

1. Appeal dismissed. The tribunal’s conclusion that the proposed implied terms did not arise was upheld.
2. At common law, the duty to load, stow and discharge cargo prima facie rests with the shipowner. It may be transferred by agreement, but clear contractual language is required. The allocation of the cost of discharge does not ordinarily transfer responsibility for performing the operation or liability for its performance. The words appointing and paying stevedores, read with the deeming provision that they were servants of the owners working under the Master’s supervision, left responsibility for discharge with the owners.
3. The proposed term requiring the bank and receivers to discharge the cargo within a reasonable time was unnecessary. They were not contractually responsible for performing the discharge. In any event, the contract remained commercially coherent without the term, and implication would contradict the express regime under which demurrage was payable by the charterer.
4. The wider proposed term requiring the defendants to take all necessary steps to enable discharge and delivery within a reasonable time was also unnecessary and impermissibly general. Discharge and delivery were distinct. Any obligation concerning provision of a berth could, if necessary, be narrowly formulated. The obligation to appoint stevedores was express, while the contractual demurrage machinery addressed delay for which receivers were responsible.
5. Delivery did not require legally relevant collaboration between carrier and receiver. The general law already supplied a narrower and established solution where a bill of lading holder failed to claim delivery within a reasonable time, including the master’s power, and in some circumstances duty, to land and warehouse the cargo.
6. The court applied the principles on implied terms stated in Marks and Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72, including the requirements of necessity, clear expression and consistency with express terms. Construction of the express contract had to precede implication.

• Arbitral tribunal: determined preliminary questions in a partial final award dated 16 May 2019. It held that the bank and receivers were not liable for discharge-port demurrage and rejected the proposed implied terms.
• High Court (Commercial Court): permission to appeal under section 69 of the Arbitration Act 1996 was granted by Picken J. The appeal was dismissed.