Court holds that owners consented to deductions from hire of allowance for time lost and cost of bunkers

The Sanko Steamship Co Ltd v Fearnley and Eger A/S (The “Manhattan Prince ")

Time charterparty — trade union dispute - boycotting of vessel - proper construction of telex messages - whether owners agreed unconditionally to bear costs of bunkers and off-hire

The claimants in this action were the disponent owners of the vessel Manhattan Prince, which vessel became seriously caught up in the activities of the International Transport Workers Federation (ITF) an international federation of trade unions which, amongst other things, exercises its muscle upon shipowners to ensure, so far as it can, that European wage levels are not undercut by Third World crews accepting Third World rates of remuneration lower than those enjoyed by European crews. So it was that in May, 1979, the Swedish Seaman’s Union, acting on behalf of the ITF, threatened to black the Manhattan Prince at Gothenburg unless the owners entered into ITF agreements.

After some discussion between the directing manager of the Sanko Steamship Company and the ITF representatives on May 31,1979, an agreement was entered into on behalf of the owners of the vessel with the ITF whereby the owners undertook to employ each seafarer in accordance with the terms of the current ITF collective agreement for worldwide trading. By one of the recitals to that agreement the word “seafarer” was in effect defined as denoting, “all seafarers serving from time to time aboard the ship”. Subsequently a replacement crew was signed on at Venice once again consisting of Filippinos, but they were not paid at ITF rates.

At the beginning of 1980, before the voyage with which this present case is concerned, that crew was in turn replaced by a third crew, which also consisted of Filippinos not paid at ITF rates. Thereafter orders were given to the vessel in February, 1980, to load two part cargoes in West Africa, one part being crude oil subsequently discharged at Corunna, the other part being fuel oil which at Corunna the vessel was ordered to discharge at Oxelosund in Sweden. Whilst the vessel was on her way to Oxelosund the agents telexed to say that the vessel was to be blockaded there by the ITF until a total sum was paid by the owners to the Federation of Sweden, a sum then equivalent to about US $471,000. When the charterers, Fearnley and Eger A/S, learned of this they sought to show that the problem was one for the owners to overcome.

It seems that, notwithstanding the threatened industrial action, the vessel anchored off Oxelosund and tendered notice of readiness on the day that she was expected to arrive, namely February 24, but, not surprisingly, no tug would assist the Manhattan Prince. At that stage the directing manager of the Sanko Steamship company went personally to negotiate with the ITF representatives in Sweden. Five days later, on February 29, the negotiations were still in progress. The charterers were suggesting that the part-cargo concerned might be discharged at a Mediterranean port but before that could occur it was obviously desirable to make arrangements for the payment of the hire incurred on what had proved to be an abortive trip and for bunkers consumed in the course of it.

An agreement was reached between charterers and owner which was recorded in an exchange of telex messages, and one о the primary issues in this case concerned the proper construction of those telex messages. The charterers contended that by means of them the owners had agreed unconditionally to bear the off-hire cost and the cost of bunkers; but the owners said that all they agreed to do was to permit deduction in the first instance of the hire and the bunkers, but that they did so without prejudice to the resolution of the dispute between the parties as to who would be liable under the terms of the charter. On the evening of February 29, the vessel managed to proceed on her way to Flushing whilst the negotiations between the owners’ directing manager and the ITF continued.

It seems that on March 3, the ITF were successful in tracing the vessel to Flushing were they had her arrested. On the following day an agreement was reached whereby the owners undertook to pay to the ITF the total sum of $387,775, and the vessel was released from arrest and sailed to ultimate destination at Izmir, Turkey.

A number of telex messages had passed between the owners and charterers ending with a telex message from the owners, upon which the determination of this part of the case depended. This read, “We for and on behalf of the owners agree, without prejudice, to your three-points questions so as to release vessel from Oxelosund proceeding to Flushing for bunkering and/or Mediterranean as per your sub-charterers’ instructions”. This telex was actually from another company in the Sanko group.

The court said that the expression “without prejudice” was not mere surplus jargon; it was without prejudice to resolution of the rights of the parties under the charter and in that manner the three points raised by the charterers in their telex message to which the owners gave their “without prejudice” acceptance were left in abeyance; and the owners in effect consented to deductions from hire of allowance for time lost and cost of bunkers. The court went on to say, amongst many other things, that the true interpretation of the phrase “efficient working of the vessel”, in its context, demanded that it should apply, and apply only, to the physical condition of the vessel, and that the phrase “efficient working” must enjoy the connotation of efficient physical working. Therefore the vessel worked, even though she was prevented from working in the way the charterers would have wished because of the action of the ITF, and was fully operational and as such was not within the scope of the off-hire clause.

Clause 13 of the charterparty then came into the picture. This read in part, "owners hereby indemnify charterers, their servants and agents against all losses, claims, responsibilities and liabilities arising in any way whatsoever from the employment of pilots, tug boats or stevedores. ” The court said that the only orders which the charterers were entitled to require to be obeyed were those it was physically possible for the master to obey, and it did not seem to the court to make sense to suggest that the owners could be under an obligation to indemnify the charterers against losses arising in any way whatsoever from the employment of pilots, tug boats or stevedores when in fact no pilots, tugboats or stevedores were or could have been employed at the material time.

It was held that there was no breach in this case because the task ordered was impossible.

Case № 5