A voyage charter usually provides for a remedy of demurrage to the owner of the vessel against the charterer in circumstances where there is delay in unloading or discharge of the cargo. However, where demurrage cannot be recovered owing to the charterer's insolvency, the Court will be slow to imply terms into a contract of carriage so as to make other parties liable to the delay in the discharge of the cargo. In the recent English case of Sea Master Shipping Inc v Arab Bank (Switzerland) Limited Yousef Freiha & Sons Sal  EWHC 2030 (Comm), the Commercial Court (the "Court") considered whether terms relating to the discharge of cargo should be implied into a contract of carriage against the cargo receivers or a bank involved in financing the cargo.
The claimants (the "Owner") were the assignees of the registered owners of a vessel (the "Vessel") who chartered the Vessel to a charterer (the "Charterer") by a voyage charter (the "Voyage Charter"). The cargo (the "Cargo"), which was carried by the Vessel under a contract of carriage (the "Contract of Carriage") evidenced by a bill of lading (the "Bill of Lading"), was discharged late. The Owner could not recover demurrage from the Charterer under the Voyage Charter as the Charterer was insolvent. As such, the Owner sought remedies against the Cargo receivers who took delivery of the Cargo (the "Receivers") and/or the bank which was involved in financing the Cargo (the "Bank") for demurrage or, alternatively, damages for breach of two implied terms of the Contract of Carriage.
Both of the Owner's claims were dismissed by the arbitral tribunal (the "Tribunal"). In the present case before the Court, the Owner only appealed against the Tribunal's finding that there would be no implied terms.
The Owner's arguments
The Contract of Carriage evidenced by the Bill of Lading contained a clause incorporating all the terms of the Voyage Charter. As such, by relying on clauses 10 and 11 of the Voyage Charter that "...Cargo is to be discharged free of expense to the Vessel..." and that "...Stevedores at discharging ports are to be appointed and paid for by the Charterers/Receivers", the Owner argued that there should be an implied term in the Contract of Carriage where the Bank and/or the Receivers should discharge the Cargo within a reasonable time (the "First Issue"). Further or alternatively, the Owner argued that there should be an implied term in the Contract of Carriage where the Bank and/or the Receivers should take all necessary steps to enable the Cargo to be discharged and delivered within a reasonable time (the "Second Issue").
The Court first summarised the well-known principles in relation to implied terms of a contract:
(1) Terms are to be implied only if it is necessary to give the contract business efficacy or to give effect to what was so obvious that it goes without saying and only if and to the extent that without the terms contended for the contract would lack commercial or practical coherence;
(2) The term to be implied must appear fair and is one that the parties would have agreed if it had been suggested to them;
(3) The terms to be implied must be capable of clear expression and not contradict the express terms of the contract;
(4) It is usually after completion of the process of construing the express words of a contract that the issue of an implied term is to be considered.
For determining these issues of law, the Court has assumed that the Receivers and the Bank were either the original contracting party to the Bill of Lading or became subject to the same liabilities under the Contract of Carriage as if they had been a party to the contract pursuant to section 3(1) of the Carriage of Goods by Sea Act 1992.
The First Issue
For the First Issue, the Court held that the duty to discharge cargo normally rested on ship owners under common law. In order for this general rule to be ousted by agreement, clear language is required. As a matter of construction, the Court held that clauses 10 and 11 of the Voyage Charter were only concerned with the allocation of cost of discharge but not with allocation of contractual responsibility for discharge. Besides, the second part of clause 11 of the Voyage Charter also provides that the "stevedores shall be deemed to be the servants of the Owner and shall work under the supervision of the Master". This shows that even though the stevedores were to be appointed and paid for by the Charterers/Receivers, discharge remained the responsibility of the Owner represented by the master.
In any event, the Court held that the Contract of Carriage does not lack commercial or practical coherence without the implied term and worked perfectly well without the term being implied. The Court also noted that as the Owner chose to accept the risk of Charterer insolvency, it would not re-write the Contract of Carriage so as to make it more favourable in the interest of the Owner by reference to the Charterer's insolvency, which was an event that occurred after the Contract of Carriage has been entered into.
The Second Issue
In relation to the Second Issue, the Court also rejected the Owner's argument that there should be an implied term where the Bank and/or the Receivers should take all necessary steps to enable the Cargo to be discharged and delivered within a reasonable time. Firstly, this was held to be an attempt to avoid the difficulty that discharge was an obligation that rested exclusively on the Owner. Secondly, it was unnecessary to imply such a wide and unqualified term into the Contract of Carriage for there was already an express term of the contract stating the duty of the Receivers to enable the Cargo to be discharged, which is to appoint the stevedores.
The judgment sheds light on the application of the principles for the implication of implied terms in the context of shipping. It also serves as a reminder to owners of vessels of the difficulties they will face when trying to recover demurrage or damages from other parties where the charterer becomes insolvent.
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