CONTRACT LAW ESSAY
The object of this essay question is whether there is a conflict between the statements of Roche J. in Portsmouth Steamship v Liverpool & Glasgow Salvage[1]_ and The Hill Harmony[2]. To start with, both statements were made in the same field of application − that is to say, the duties of the Master to comply with the employment instructions of the charterer. However, there was a long period of time between these two cases and, therefore, we have to start by looking at the wording of each.
First of all, the scope of the rights of the charterer is contained in the charter party. This means that the right to give orders to the Master is frequently in the contract. The BALTIME 1939 and BALTIME 2001 clauses indicate:
‘The Master to be under the orders of the charterers as regards employment, agency or other arrangements.’
We can appreciate that this clause limits the field in terms of when the charterer can lawfully give orders to the Master. This field is the employment of the ship. The clause does not refer to the field of navigation. The Master has the duty to provide a safe ship and to provide a ship that is seaworthy for navigation. This creates a conflict of interest for the parties. The problem arises when an order has to be considered as being a commercial or a nautical decision. Before getting to the crux of the matter, it would be appropriate to explain the terms. Lord Hobhouse in The Hill Harmony defined the concepts of employment and navigation:
The meaning of any language is affected by its context. …‘Employment’ embraces the economic aspect – the exploitation of the earning potential of the vessel. ‘Navigation’ embraces matters of seamanship.[3]
In the first judgement, in the author’s understanding, Mr Justice Roche’s statement only explains the duty of the Master, which is in the clause of the charter party, as it was understood in that time. Mr. Justice Roche gives the Master no chance to defend himself against the charterer; just the limits of ‘obvious grave danger’. There is no reference here to the right to refuse an order. However, in the second judgement, the Master is entitled to refuse the order of the charterer. This is the basic meaning of these statements.
Mr. Justice Roche stated ‘without undue question’. This affirmation does not contradict Lord Hobhouse’s statement, because both statements are in the same field of application and both statements refer to the right of the charterer. However, the author considers that they indicate a conflict. It has been recognised in many cases that the Master has the right to refuse or to question the orders of the charterers. We are going to look at some of them.
In The Houda[4], the ‘existence of a right and perhaps sometimes a duty to delay’ [5] was recognised. In that case, Legatt LJ stated:
It is obvious that lawful orders have to be obeyed, unless to do so would imperil the safety of ship, crew or cargo.[…]When a Master receives an order relating to the cargo his duty….is to act reasonably.
Here we can see the similarities with what Lord Hobhouse said in The Hill Harmony; where the Master has the right to refuse the order, it means to act reasonably as a prudent Master. Also, Legatt LJ said:
The circumstances in which an order is received or the nature of it may make it unreasonable for the Master to comply without further consideration or enquiry. [6]
This gives the Master the right to pause, think and ask for information in order to be a prudent Master and act reasonably. Moreover, we can say that the Master not only has the right to take a reasonable time to check the order, but also the duty to perform it.
In Pole v Cetcovich[7], it was held that the Master was entitled to pause so as not to be captured during the war. Another example is found in The Teutonia[8], where it was held that
if a Master receives credible information that if he continues in the direct course of his voyage, his ship will be exposed to some imminent peril…he must be justified in pausing and deviating from the direct course[9].
In The San Roman[10], the duty to act reasonably was recognised. In order to not obey an order of the charterer, Sir Montague Smith stated:
‘It appears to their Lordships most clearly that a man of reasonable prudence would have waited.’[11]
Further, in Midwest Shipping Co v DI Henry (Jute) Ltd[12], it was said
that the Master has a ‘duty to act reasonably upon receipt of orders’ This means that the Master is not required to obey such orders immediately[13].
These are examples of cases that show that the Master is not obliged to comply with the order of the charterer. It will depend on each individual case, but it is not up to the Master to unduly question an order, if that order is about the employment of the vessel. The scope of the duties of the Master is wider, including the right not to sign a fraudulent bill of ladings or to navigate to safe ports, among others. From these cases, it is safe to say that if the order is illegal or is intended to commit fraud, he has a duty to refuse it. In all other cases, the Master has some choices when receiving an order: he can accept and obey the order; he can, with the correspondent indemnity, refuse it; or he can temporally refuse it and seek further information from the ship owner to ensure that he is acting with skill and seamanship and in the best interest of the ship owner.
In each case, the circumstances will probably determine whether the refusal or the delay was justified. Therefore, even though Mr. Justice Roche stated that the Master has to follow the orders of the charterer ‘without undue question’, in the opinion of the author, this contradicts the right provided in The Hill Harmony.
Notwithstanding the fact that the Master has a duty to act reasonably, the first point to be judged is what Neill LJ stated in The Houda:
How would a man of reasonable prudence have acted in the circumstances?[14]
In the end, it depends on each individual case. The Master has to take the particular factors into account when making a decision. These factors can be either from a legal point of view or from a commercial point of view. Whatever conclusion he reaches, he has to ensure that he can justify his decision to avoid future liability.
Referring again to The Hill Harmony, the Master is always responsible for the safety of the vessel, her crew and cargo. This also differs from the statement ‘to follow instructions without undue question’, because the Master has to guarantee the safety of the vessel, her crew and her cargo at all times and so, if the charterer gives him an order which may endanger or compromise any of these, he will be entitled to refuse that order. Therefore, he must comply first with the regulations and rules, proving good seamanship and lawful behaviour. Contrario sensu, he cannot comply with an order which is against a Local Authority, even though it is an order regarding the employment of the vessel. Moreover, he cannot accept an order that charterer is not entitled to give under the charter party:
I cannot think that the clause in a time charter party which puts the Master under the orders of the charterers as regards employment is to be construed as compelling him to obey orders which the charterers have no power to give.[15]
In addition, as we said at the beginning of the essay, the Master must determine whether it is an order regarding employment or navigation, because if it is related to navigational matters, he will be entitled to refuse it as under the contract the charterer has no right to give such an order.
The author finds Mr Justice Roche’s statement to be quite general and more restrictive than that of Lord Hobhouse. There is no doubt that in the first, the scope of the rights of the Master is more restricted than in the second. In other words, Mr. Justice Roche states an obligation while Lord Hobhouse admits an exception to that obligation in a specific situation.
Also, there is a significant time-gap between the two statements, and therefore they incorporate a different concept of danger. Lord Hobhouse takes a modern approach in that the scope of the rights of the Master is wider. A defence is established against the charterer when not complying with the order. He gives the Master discretionary power to refuse the order. The danger here is foreseeable, or at least more foreseeable than in Mr. Justice Roche’s statement: if something endangers the safety of the vessel, her crew or cargo, the Master has a defence and he is entitled to refuse to obey it, according to Hobhouse. In contrast, Mr. Justice Roche is totally absolute in his statement.
From a commercial point of view, what is stated in The Hill Harmony is possibly an answer to the modern times with the Master having a more developed role than in the past. As the Master is given more personal duties, he is also compensated with better defence against third parties. However, we have to look at the circumstances of the case: in the opinion of the arbitrators, the Master in The Hill Harmony was given too much discretion and so the interests of the parties had to be balanced. Baughen S’s opinion is very illustrative. In his article he states:
The practical significance of the decision is that the economic interests of time charterers will no longer be put in jeopardy as a result of an unjustifiable excess of caution on the part of the master. Unless the master can establish reasonable grounds for showing that compliance with charterers’ routing instructions will endanger the safety of the ship or the crew, he will have to follow those orders or else expose his owners to a liability in damages in respect of the consequent delay. [16]
Hence, the Master must establish reasonable grounds in order to have a defence against the charterer. If the Master is successful in proving that he acted reasonably and with good seamanship, the ship owner will be able to claim indemnity. The charterers, as a matter of business, expect the Master to encounter some dangers because this trade has inherent risks. The key, as in most circumstances, is what each party can prove.
Conclusion
It has been proved by contrasting cases, examples and evidence that the right of the charterer to give employment orders is not absolute, as Mr. Justice Roche stated in Porstmouth Steamship v Liverpool & Glasgow Salvage Association[17]. This conflicts with the modern approach of Lord Hobhouse in The Hill Harmony. In these cases, we have the chance to look at the difference between employment and navigation, and how this determines the consequences of the given orders.
Moreover, we have explored the scope of the duties of the Master. It is possible to say that the Master has to be cautious when executing an order. He has to comply first with his duties, related in most circumstances to the safety of the vessel, crew and cargo. Nonetheless, he also has to comply with the orders of the charterer.
BIBLIOGRAPHY
Baughen, S. Navigation or employment? [2001] LMCLQ 177
Hodges, S. Cases and Materials on Carriage of Goods by Sea (3rd Ed, 2004), Cavendish
Wilford, M. Time Charters (5th Ed, 2003), LLP.
Wilson, J. Carriage of Goods by Sea (7th Ed, 2010), Pearson
[1] [1929] 34 Ll.L. Rep. 459
[2] The Hill Harmony (2001) 1 Lloyd’s Rep. 149
[3] Ibidem
[4] The Houda [1994] 2 Lloyd’s Rep. 541 CA
[5] Hodges, Cases and Materials on Carriage of Goods by Sea (3rd ed) p. 422.
[6] Ibidem
[7] Pole v Cetcovich (1860) 9 CBNS 430
[8] The Teutonia (1872) LR4 PC 171
[9] Ibid. p 179.
[10] The San Roman(1873) LR5 PC 301
[11] Ibid. p 307
[12] [1971] 1 Lloyd’s Rep. 375
[13] Wilford, M: Time Charters (5th Ed), (2003), LLP, Chapter 33 para 33.89.
[14] The Houda [1994] 2 Lloyd’s Rep. 541 CA
[15] The Sussex Oak [1950] 83 Ll. L. Rep., p. 307.
[16] Baughen, Simon, Navigation or employment?, [2001] LMCLQ 177
[17] Porstmouth Steamship v Liverpool & Glasgow Salvage Association [1929] 34 Ll.L. Rep. 459