388 (2007) 13 JIML :THE SEA ANGEL : ANALYSIS AND COMMENT ANALYSIS AND COMMENT

TIMECHARTER PARTY ^ SALVAGE CONTEXT ^ LOF 2000 AND SCOPIC ^ UNLAWFUL DETENTION BY PORT AUTHORITY ^ FRUSTRATION OF TIMECHARTER ^ RELEVANT CRITERIA

Edwinton Commercial Corporation and Another v Tsavliris Russ (Worldwide Salvage & Towage) Ltd (The Sea Angel) [2007] EWCA Civ 547; [2007] 2 Lloyd's Rep 517. Previously noted at JIML13 (2007) 83; JIML13 (2007) 13 226. Facts On 27 July 2003 theTasman Spirit, a tanker laden with 67,537 tonnes of light crude oil, grounded at or near to the approaches to the port of Karachi and later broke into two causing a major pollution incident.On 30 July 2003 international salvors,Tsavliris, entered into a LOF 2000 Form and engaged a number of craft under sub-contract to assist it in the salvage operations.One such vessel was the Sea Angel, a small tanker, which was to act as a shuttle tanker carrying oil from theTasman Spirit to a storage tanker also sub-contracted byTsavliris.Two tugs had also been hired. The Sea Angel was chartered on 25 August 2003 from Global at US$13,000.00 per day.The vessel was chartered for `Up to 20 . . . days in charterer's option. . . for transhipment(s) of crude oil from the forward and aft sections of crude oil tanker Tasman Spirit presently lying aground Keamari channel near Karachi, Pakistan . . .'. She was delivered into service on 26 August 2003 and therefore the latest redelivery date was15 September 2003.The charter was encapsulated in a fixture recap telex and otherwise incorporated the terms of the Shelltime 4 form. On 9 September after her final transhipment voyage Tsavliris gave three days definite notice of redelivery at Fujairah, the delivery port, which was three days steaming away. It was anticipated that the Sea Angel would leave Karachi that day, which she did not. The Karachi Port Trust (KPT) refused to grant the Sea Angel a `No Demand Certificate' (NDC), a prerequisite to port clearance, and therefore the vessel was unable to leave.The primary purpose of a NDC was to ensure that all port dues were paid before a vessel was allowed to leave, but in the instant case the concerns of the KPTwere much wider.The KPTwas claiming about US$11million as payment or a guarantee of pollution and clear-up expenses or damages. Pakistan was not a party to the CLC1969 and1992 Protocol and therefore the KPT, taking the support of the strong national and local concern about the incident, sought to obtain security of those vessels and assets within the jurisdiction of Pakistan. This led to discussions between KPT, Tsavliris and the legal representatives and P&I Club (American Club) of the Tasman Spirit. The negotiations failed notwithstanding that Tsavliris paid a deposit of R3,375,000 and was prepared to pay a further deposit of R25.5 million, a sum well beyond its own obligation to pay port dues in respect of all of its vessels.ThereafterTsavliris and Global commenced litigation against KPTseeking to obtain the release of the vessel and, notwithstanding that judgments were obtained in their favour, KPT continued to resist the release of the vessel.The American Club also negotiated an agreement for the release of the Sea Angel but again she was not released. It was only after Global issued a motion to commit KPT's senior officers for contempt that theTsavliris vessels, including the Sea Angel, were released. The Sea Angel was released on 26 December 2003 and redelivered on1January 2004. She had been unlawfully detained from 9 September 2003 to 26 December 2004, a period of108 days and at a time

THE JOURNALOF INTERNATIONAL MARITIME LAW PUBLISHEDBY LAWTEXT PUBLISHINGLIMITED WWW.LAWTEXT.COM ANALYSIS AND COMMENT:THE SEA ANGEL : (2007) 13 JIML 389 when the unexpired period of the charter was 6 days. Tsavliris had stopped paying hire on 18 September 2003 when no sign of agreement was in sight.

Issues and decision Global claimed US$1,373,320 as hire due under the charterparty from 18 September 2003, when Tsavliris ceased paying hire, and the vessel's redelivery on1January 2004. Tsavliris denied that any hire was owing, alleging that the charterparty had been frustrated. The defence was essentially run by the American Club because even if the charterparty was not frustrated the hire was recoverable under the SCOPIC agreement in the LOF 2000 contract. But if the charterparty could be shown to have been frustrated the obligations of the Club under the SCOPIC clause also disappeared. Global submitted that the charterparty had not been frustrated. The detention of the salvor's equipment was a known risk and what had happened was a foreseeable, if not foreseen, risk. The risk had been assumed byTsavliris under the terms of the charter or it was otherwise a risk that fell within their sphere of responsibility. The judge at firstinstance held that the charterparty had notbeen frustrated and the appeal from this decision was dismissed by the Court of Appeal.

Commentary Introduction The crucial issue was whether the delay of 108 days towards the end of a short 20 day time charterparty caused by the unlawful detention of the vessel by port authorities, in a salvage context, had frustrated the contract. If the contract had been frustrated then the precise date of frustration was probably 17 October, the date by which the parties must have realised that there was no prospect of agreement and no progress was likely to be made without litigation. There would be frustration on this date if the delay already experienced and the future delay reasonably to be expected could be interpreted as having frustrated and therefore terminated the charter.

Concept of frustration The precise kind of frustration in issue was that brought about by changed circumstances so that performance of the contract becomes something radically different from that originally contemplated by the parties. One of the classical formulations of this aspect of the law is that of Lord Radcliffe in Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696, 729, who said: . . . frustration occurs whenever the law recognises that without fault of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract. Non haecin foedera veni. It was not this that I promised to do. There are many judicial dicta to similar effect which also emphasise that the object and basis of the principle is to give effect to the demands of justice. In the changed circumstances it is just that a contractor should be released from the literal performance of his contractual obligations. In Hirji Mulji v CheongYue Steamship Co Ltd [1926] AC 497, 510, Lord Sumner explained the rationale of the concept in the following terms: `It is really a device by which the rules as to absolute contracts are reconciled with a special exception which justice demands . . .'. It has also been emphasised that the courts in their quest to administer justice are not constrained by any rigid legal framework. In the words of Lord Wright in Cricklewood Property and Investment Trust Ltd v Leighton's Investment Trust Ltd [1945] AC 221, 241,`the doctrine of frustration is modern and flexible and is not subject to being constricted by an arbitrary formula'.

Delay as a source of frustration It is established that delay in the performance of a contractual obligation may amount to frustration provided the prerequisites of the conceptcan be established.Itmust be shown that the past delay and

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the prospective delay that may be reasonably anticipated will render any future performance of the contractual obligation radically different from that which was undertaken under the contract (The Nema [1981] 2 Lloyd's Rep 239 (HL); [1982] AC 724).This is a very difficult test to apply to the facts of any case and when reviewing a disputed assertion of frustration the court places itself in the shoes of the assertor and endeavours to arrive at an informed judgment on the basis of an objective assessment of the impact of the delay that has already occurred and which may reasonably be prospectively anticipated (Bank Line Ltd v Arthur Capel & Co [1919] AC 435). The question is essentially one of fact and degree to be answered by the tribunal of fact. An appeal will only succeed if it can be shown that the tribunal of fact made an error of law. It has been said in the context of delay in the performance of a charterparty that regard must be had to the probable length of the total deprivation of use of the vessel as compared with the unexpired duration of the charterparty (Anglo-NorthernTrading Co Ltd v Emlyn Jones & Williams [1917] 2 KB 78, 84, per Bailhache J).This may be a significant factual consideration but it is not of itself a conclusive determinant of frustration; it may not even be the main consideration and it is certainly not the only factual consideration (Bank Line p 454, per Lord Sumner).

Foreseen and foreseeable contingencies and frustration This association is again not crystal clear; it may be a question of degree. If a charterparty expressly anticipates a contingency and what is to occur upon its occurrence, the doctrine is excluded (The Safeer [1994] 1 Lloyd's Rep 637). But a contingency may be provided for in a charterparty in terms that suggest that the doctrine of frustration is not excluded. In other words the terms of the charterparty are not intended to be exclusive (Bank Line p 456). Itis also recognised that a contingency connected with a charterparty maybe in the contemplation of or foreseeable by the parties, notwithstanding that no provision is made for it in the charterparty, and that this state of mind is relevant to a determination whether the charterparty is frustrated.The fact that the supervening event was contemplated or foreseeable in this wider sense will not necessarily preclude the charterparty from being frustrated (Tatem v Gamboa (1938) 61 Ll LR 149;[1939] 1 KB 132; The Nema). But even if a contingency is foreseeable this does not mean that it was actually foreseen by the parties, and, even if foreseen, they may not have foreseen the actual consequences. These again may be relevant facts to take into account in coming to an informed judgment whether the charterparty is frustrated.

Approach of the Court of Appeal The court (expressed in the judgment of Rix LJ) favoured what it described as a multi-factorial approach to frustration. Although it recognised that the law must possess a firm framework it did not favour the approach of building up the law by reference to factors that exclude, or preclude the doctrine or made the doctrine inapplicable.The factors identified by the court as relevant included the (i) terms and matrix of the contract, (ii) parties' knowledge, expectations, assumptions and contemplations as to risk at the time of the contract in so far as could be ascribed mutually and objectively, (iii) nature of the supervening event and (iv) parties' reasonable and objectively ascertainable calculations as to the possibilities of future performance in the new circumstances. It is to be emphasised that with regard to factor (ii) the distribution of risk does not depend wholly on the express and implied terms of the charterparty but may also depend on the wider contemplation of the parties. Theradicallydifferent testinforms that (i) the doctrineis not to belightlyinvoked, (ii) mereincidence of expense, delay or onerousness is not sufficient, and (iii) there has to be a break in identity between the contract as provided for and contemplated and its performance in the new circumstance. Although the language of the law does not always make the point clear, the doctrine is founded on considerations of justice.One consequence of this is that the legal test cannot be applied without the consequences of the decision being measured against the demands of justice. For example, to hold that a charterparty has been frustrated may result in the allocation of risk between the parties

THE JOURNALOF INTERNATIONAL MARITIME LAW PUBLISHEDBY LAWTEXT PUBLISHINGLIMITED WWW.LAWTEXT.COM ANALYSIS AND COMMENT:THE SEA ANGEL : (2007) 13 JIML 391 being reversed, and it must be asked if this consequence serves the ends of justice.The obligation to take into account the interests of justice does not override the other factual elements, but it does mean that the application of the factual elements recognised as relevant by the law does not lead to a determined answer without further consideration of the demands of justice.

Determination of the court The critical question in the case was whether as of 13 or 17 October 2003 (more probably 17 October), the delay which had already occurred and prospective further delay would have led the parties at that time to have reasonably concluded that the charterparty was frustrated. A delay of some five weeks had already occurred and the prospective delay would involve a further four^six weeks. A comparison of the probable length of the delay with the unexpired duration of the charterparty was not the principal test; it was only a starting point. Many other factors fell to be considered, namely (i) the consequences of the detention by the port authorities remained an open question, (ii) the supervening event came very near the end of the charter period with redelivery the only remaining obligation; (iii) the essential object of the charterparty, lightening the casualty, had been performed; (iv) in general terms of risk of delay caused by detention of the vessel by government authorities was firmly on the charterers (follows from the terms of the charterparty); (v) the risk of detention by littoral authorities arising out of a salvage operation where there was concern about pollution damage was in general terms foreseeable (even if the particular form of the risk on the facts of the case was unforeseeable); (vi) the general risk was foreseeable by the salvage industry as a whole and was provided for in the SCOPIC agreement, which was applicable to the situation which had arisen and formed part of the matrix to the charterparty; (vii) it was common ground that no frustration had occurred until the strategy of commercial negotiation had failed. The case was an example of a `wait and see' situation, with the determination depending on all the circumstances of the case, objectively assessed from the position of the parties, with the court endeavouring to arrive at an informed judgment of reasonable and well informed men, consistent with the demands of justice, on the question whether the actual and prospective delay had rendered performance of the charterparty radically different. The relevant facts included the possibility of effective relief being obtained from the Pakistani courts within a period of four^six weeks.The salvors regarded three months as a likely time for a solution. It was highly relevant that the unreasonable detention of vessels participating in salvage, whether owned or contracted for by the salvors, was foreseen by the industry and was actually provided for in the SCOPIC agreement. The general risk of delay under the charterparty fell within the charterers' sphere of responsibility. And finally there was no reason based on considerations of justice why the charterparty should not be maintained. Taking into account all these factorial elements the court held that the charterparty had not been frustrated. The outcome was of direct consequence to the American Club who were obliged to indemnifyTsavliris for the hire payments under the SCOPIC agreement. Had the charterparty been frustrated the SCOPIC agreement would also have fallen by the wayside. DRT

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