Lord Justice Clarke:
Introduction
- This is an appeal from a decision of David Steel J dated 4 November 2002 made on the trial of certain preliminary issues. It is brought with the permission of the Judge.
The Facts
- On 22 July 1998 the Respondents' tug BORVIGILANT collided with the Appellants' tanker ROMINA G off Kharg Island in the Persian Gulf. As a result of the collision the skipper and some of the crew of the tug lost their lives and the owners of both vessels suffered loss and damage. The tugowners are Borkan General Trading ("Borkan") and the owners of the ROMINA G are Monsoon Shipping Limited ("Monsoon"). Each claims damages against the other, Borkan in contract and tort and Monsoon in tort. It is agreed that the issues between the parties, both in contract and tort, should be determined in England in accordance with English Law.
- The preliminary issues concern the alleged contract between the parties. The underlying facts are not in dispute. On 22 July 1998 the ROMINA G was inbound and due to berth at the Kharg Island terminal in order to load a cargo of crude oil. The terminal is operated by the National Iranian Oil Company ("NIOC"). The ROMINA G required both a pilot and tugs before berthing at the terminal. Soon after boarding the pilot handed the master of the vessel two documents for his signature on behalf of Monsoon. They were entitled "Conditions of Use of Terminal of Kharg" and "Tug Requisition" respectively. In this appeal we are concerned only with the latter.
- NIOC only made tugs available to assist the vessel after the Master had signed the tug requisition form. Four tugs were provided in all including the BORVIGILANT and one other tug owned by Borkan. It is not known whether the other two tugs were owned or chartered by NIOC. Borkan relies upon the terms of the tug requisition form both in order to protect itself against Monsoon's claims and in order to entitle it to an indemnity in respect of its own loss and damage.
The Preliminary Issues
- The preliminary issues determined by the judge were in these terms:
"1. In respect of the rights and liabilities of Borkan and Monsoon arising out of and in connection with a collision between the ships BORVIGILANT and ROMINA G on 22 July 1998, is Borkan entitled to rely upon and take the benefit of the conditions contained in the "Tug Requisition Form" and/or the "Conditions of Use of the Terminal of Kharg" both of which were signed by the Master of ROMINA G on 22 July 1998?
2. If so, and if the collision was caused or contributed to in whole or in part by the negligence of Borkan or its crew:
(A) is Borkan exempt from liability for the heads of loss claimed by Monsoon arising out of the collision, comprising:
(1) detention of the ROMINA G at Kharg/Fujairah and
(2) permanent repairs and related costs and
(3) delays during repairs and
(4) indemnity in respect of liability for claims brought by dependants of deceased crew members and associated legal costs and expenses?
(B) is Monsoon liable for the heads of loss claimed by Borkan arising out of the collision, comprising:
(1) loss of the BORVIGILANT and bunkers on board and
(2) loss of the use of the BORVIGILANT and
(3) indemnity against settled crew and related claims and
(4) indemnity against miscellaneous costs and expense claims?"
- The judge answered the first question "yes" and the second question "yes unless caused by want of reasonable care to make the tug seaworthy". I should note that, like the judge, we are not concerned with the causes of the collision. It is sufficient to note, as the judge did, that each party contends that the collision was caused by the fault of the other and, in addition, Monsoon contends that it was caused by the unseaworthiness of the tug.
- I should perhaps note in passing, as the judge did, that Borkan were not able to pray in aid section 1 of the Contracts (Rights of Third Parties) Act 1999 because it only came into force on 11 May 2000.
The Tug Requisition
- The document signed by the master begins as follows:
"I/we hereby request and authorise the Company on behalf of the MV ROMINA G to supply such tug or tugs as may be considered necessary by the Company for the moving or otherwise assisting of the vessel whilst entering or leaving the port of KHARG, such hiring to be on the terms of the Company's usual conditions printed below."
- The date of 22 July 1998 and the signature of the master then appear on the tug requisition followed by "CONDITIONS OF HIRE OF TUGS" which include the following:
"2. When a tug is engaged in towing operations
(a) The Master and crew thereof become the servants of and identified with the Hirer and are under the control of the Hirer and his servants or agents and anyone on board the Hirer's vessel who may be employed and/or paid by the Company shall be considered the servants of the Hirer.
(b) The Company shall not bear or be liable for damage of any description done by or to the tug or done by or to the Hirer's vessel or for loss of the tugs or the Hirer's vessel or for loss of or damage to anything on board the Hirer's vessel or for any personal injury or loss of life arising from any cause whatsoever, including negligence at any time of the servants or agents of the Company, unseaworthiness, unfitness or breakdown of the tug, its machinery, boilers, towing gear, equipment or hawsers, lack of fuel, stores or speed or otherwise and the Hirer shall pay for and indemnify the Company against all such loss, damage, personal injury and loss of life as .. aforesaid and the consequences thereof.
3. When a tug is rendering any service other than towing operations at the request, expressed or implied, of the Hirer or his servants or agents the Company shall not be held responsible for any loss of or damage to the Hirer's vessel or for any loss of life or personal injury to anyone on board the vessel or to any third party other than a member of the crew of the tug and the Hirer shall pay for and indemnify the Company against all such loss, damage, personal injury and loss of life as aforesaid.
4. Nothing in the preceding paragraphs shall
(a) Make the Hirer liable to pay for or indemnify the Company against any loss, damage, personal injury or loss of life caused by want of reasonable care on the part of the Company to make the tug seaworthy for the navigation of the tug during towing operations or other services, the burden of proof of any failure to exercise such reasonable care is being upon the Hirer.
(b) Prejudice any claim the Company shall have under the Iranian law against the Hirer.
7. The Company shall have the right to perform their obligations under this contract by using a tug or tugs not owned by themselves but made available to the Company under charter parties or other arrangement. In such circumstances, without prejudice to the Company's rights, the Hirer agrees to the Owners or Charterers of such tug or tugs have the benefits of and being bound by these conditions to the same extent as the Company.
8. The Expression 'The company' in these conditions means National Iranian Oil Company which is the owner of the hired Tug/Tugs.
9. These Conditions shall be governed by Iranian law, and the parties hereto shall submit to the jurisdiction of the Iranian Courts, unless otherwise mutually agreed."
As to clause 9, as I indicated earlier, the parties have agreed otherwise.
The Judgment
- The judge held that the agreement contained in the tug requisition form was made by the master not only with "the Company", which is defined by clause 8 as NIOC, but also with Borkan as the owners of the BORVIGILANT. He so held on two alternative bases, first that NIOC had the implied actual authority to make the agreement on behalf of Borkan and that it did so and secondly, in the alternative, that Borkan ratified the making of the contract on its behalf. Mr Russell challenges all three of those conclusions. I will consider them in turn.
Agency
- The judge quoted extensively from the classic cases in this area of the law. Before considering them, it is I think appropriate to make these observations in the context of the instant case. First (at any rate on the construction of clauses 2(b) and 4(a) favoured by the judge) there is nothing unusual about the terms imposed. Indeed, they are modelled on the pre-1986 version of the United Kingdom Standard Conditions for Towage. Secondly, it is plain from clause 7 that NIOC was entitled under the agreement to use tugs owned by others and that Monsoon, as hirer, agreed that the owners of such tugs, which thus included Borkan as owner of the BORVIGILANT, were to have the benefit of and be bound by the terms to the same extent as NIOC. It is plain that the draftsman of the contractual terms intended that the owners of each of the tugs should have the same rights and obligations, whether they were NIOC or not.
- The judge considered whether the four criteria identified by Lord Reid in the classic passage from his speech in Midland Silicones Ltd v Scruttons Ltd [1962] AC 446 at 474 were established. The House of Lords was there considering circumstances in which stevedores, who had dropped and damaged a drum, might be able to take advantage of provisions in a bill of lading contract to which they were not a party but which were intended to benefit them. The particular provision upon which they wished to rely was a package limitation of US$500 and clause 4, upon which they relied as entitling them to rely upon the package limitation, included the following:
"If it shall be adjudged that the United States Lines Co or any person other than the owner or demise charterer is the carrier or bailee of the goods, all rights, exemptions, immunities and limitations of liability provided by law and all terms of this bill of lading shall be available to it or such other person."
- Lord Reid said this at p 474:
"I can see a possibility of success of the agency argument if (first) the bill of lading makes it clear that the stevedore is intended to be protected by the provisions in it which limit liability, (secondly) the bill of lading makes it clear that the carrier, in addition to contracting for these provisions on his own behalf, is also contracting as agent for the stevedore that these provisions should apply to the stevedore, (thirdly) the carrier has authority from the stevedore to do that, or perhaps later ratification by the stevedore would suffice, and (fourthly) that any difficulties about consideration moving from the stevedore were overcome."
- Monsoon accepted before the judge and accepts before us that clause 7 satisfies the first of the requirements in that passage. It further accepted and accepts that the fourth requirement, that of consideration, was satisfied by the tug performing towage services which were referable to those being supplied by NIOC under the tug requisition form, following the approach of the Judicial Committee of the Privy Council in New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd (The Eurymedon) [1975] AC 154, Port Jackson Stevedoring Pty Ltd v Salmond and Spraggon (Australia) Pty Ltd (The New York Star) [1981] 1 WLR 138 and The Mahkutai [1996] AC 650 per Lord Goff at 664 F-G. Both those concessions are in my opinion correctly made.
- The issue before the judge and indeed before us is, however, whether Lord Reid's second and third requirements were met. Mr Russell submits that they were not. As to the second requirement, it was submitted to the judge that clause 7 does not make it clear that NIOC was not only contracting on its own behalf but also on behalf of Borkan. As to the third requirement, it was submitted that it was not shown that NIOC had authority to contract on behalf of Borkan or that Borkan ratified the contract. The judge rejected those submissions, which Mr Russell now repeats. The question is whether the judge was correct. I take the points in turn.
- As applied to this case, Lord Reid's second requirement is that the tug requisition form should make it clear that NIOC, in addition to contracting on the terms of the form on its own behalf, was also contracting as agent for Borkan that the terms should apply to Borkan as the owner of one of the tugs supplied. The judge resolved this issue very shortly as follows:
"24. If and to the extent, as contended by the Defendants, it was necessary that Clause 7 should state that NIOC was contracting also as agent, such was clearly implicit in the provision that the owners of non-NIOC tugs were to have the 'benefit' of and to be 'bound' by the conditions. Such could only arise if NIOC was indeed acting as agent with at least the appropriate degree of authority."
- I agree with the judge. Lord Reid did not say that the clause must expressly state that the carrier is contracting as agent for the stevedores. He simply said that the contract must make that clear. As I see it, whether it does so or not is a question of the construction of the relevant term in the contract construed in the context of the contract as a whole, which in turn must be considered against its surrounding circumstances or factual matrix.
- Clause 7 provides that NIOC shall have the right to perform its obligations under the contract by using a tug or tugs owned by others. It then expressly provides that "in such circumstances … the Hirer [i.e. Monsoon] agrees to the Owners … of such tug … [i.e. Borkan] have the benefits of and being bound by these conditions to the same extent as the Company [i.e. NIOC]". Absent a trust, the only way in which Borkan could have the benefit of and be bound by the terms of the contract under English law is if NIOC was making such a contract on behalf of Borkan. In these circumstances, in the absence of any evidence of an intention to create a trust, to my mind the parties must have intended that NIOC was making the contract both on its own behalf and on behalf of the owners of any tug used to perform the contract, here Borkan.
- It is true that, as Mr Russell observes, Lord Reid expresses the second requirement as different from the first, which is that the contract makes it clear that the alleged principal is intended to be protected by the relevant terms. However, the question remains whether, construed as a whole, the contract provides that NIOC was entering into the contract, at least in part as the agent of the owner of any tug supplied by NIOC but not owned by NIOC. In my view, commercial good sense requires only one answer to that question, namely yes.
- Mr Russell submits that so to conclude elides the first and second requirements identified by Lord Reid. However, for my part, I would not accept that that is so. I would accept Mr Popplewell's submission that Lord Reid's first requirement is not, on analysis, strictly relevant to the existence or otherwise of the alleged agency. In principle, as a matter of the law of agency, in order to establish that A contracted on behalf of P it is necessary to satisfy only three conditions: first, that (except in the case of an undisclosed principal) on the true construction of the contract A purported to contract on behalf of P, secondly that he had authority to contract on behalf of P (or that P held him out as having that authority or subsequently ratified the contract) and thirdly that there was consideration moving from P. (I note in passing that it is common ground that this is not a case of an undisclosed principal as opposed to a disclosed but unnamed principal.)
- In order to establish agency it is not necessary to establish that the contract was made for the benefit of, as opposed to or in addition to, on behalf of P. Why then did Lord Reid include his first requirement? I would accept Mr Popplewell's submission that the answer lies in the facts of the case he was considering and can be seen from the passage in Lord Reid's speech which almost immediately follows that quoted above, where he refers back to the reference to "carrier" in the part of clause 4 of the bill of lading quoted above. He said this:
"I agree with your Lordships that "carrier" in the bill of lading does not include stevedore, and if that is so I can find nothing in the bill of lading which states or even implies that the parties to it intended the limitation of liability to extend to stevedores. Even if it could be said that reasonable men in the shoes of these parties would have agreed that the stevedores should have this benefit, that would not be enough to make this an implied term of the contract. And even if one could spell out of the bill of lading an intention to benefit the stevedore, there is certainly nothing to indicate that the carrier was contracting as agent for the stevedore in addition to contracting on his own behalf. So it appears to me that the agency argument must fail."
- In these circumstances I would accept Mr Popplewell's submission that the first requirement was not included by Lord Reid in order to satisfy the requirements of the law of agency but in order to satisfy the further requirement under clause 4 of the bill of lading on the facts that the "person other than the owner or demise charterer", namely the stevedore, was "the carrier or bailee of the goods".
- However, assuming that all four requirements must be satisfied in every case, it appears to me that the first two requirements are closely related. Thus if, as here, the contract expressly provides that it is made for the benefit of another person, that seems to me to be a strong pointer to the conclusion that the contract was made on behalf of that person, especially if, as is the case under English law (absent a trust), such a person would not be entitled to the benefit of the contract unless the contract was made on his behalf. While I accept Mr Russell's submission that it is not for the courts to make the parties' bargains for them, the role of the court is, by a process of construction of the contract, to give effect to the intentions of the parties as derived objectively from the terms of the contract set in its factual matrix.
- An application of that approach here leads to the conclusion that NIOC was contracting on behalf of Borkan. It is the only conclusion which makes commercial sense, given that the terms of the contract show that it was intended that Borkan should have the benefit of the contract and, for example, the only way in which the parties could have agreed that the master and crew of the BORVIGILANT should become the servants of Monsoon, as expressly provided by clause 2, was by NIOC making the contract on Borkan's behalf.
- There is a further strong indication in clause 7 which leads to the same result. The provision that Monsoon agrees to the owners of tugs not owned by NIOC not only having the benefit of the terms of the contract but "being bound" by them seems to me to be consistent only with NIOC contracting in part on behalf of Borkan. It could otherwise not purport to bind Borkan as the owners of the BORVIGILANT.
- For these reasons, I would hold that the judge was correct to conclude that NIOC purported to contract on behalf of Borkan. Moreover the contract was signed on behalf of Monsoon just as it had been many times before: see further below.
- The approach which has led to the conclusion just stated seems to me to receive some support from the approach of the courts to Himalaya clause cases in recent years. This can best be seen from the judgment of Lord Goff in the Privy Council in The Mahkutai [1996] AC 650, where the Privy Council was considering a case in which the question was whether shipowners could rely upon a Himalaya clause in a charterers' bill of lading in order to take advantage of an exclusive jurisdiction clause in the bill of lading. It was held that for various reasons they could not, but Lord Goff made a number of general observations relevant to the courts' approach to Himalaya clauses.
- At page 658 he identified the way in which what he called the pendulum of judicial opinion had swung back and forth from "a readiness on the part of the judges to recognise" claims of third parties in Elder, Dempster & Co Ltd v Paterson, Zochonis & Co Ltd [1924] AC 522, "back in the direction of orthodoxy" in the Midland Silicones case and then back again in more recent years to "recognition of their commercial desirability" in The Eurymedon and The New York Star.
- Lord Goff then considered the cases in some detail. After considering Midland Silicones he said at p 661:
"In more recent years the pendulum has swung back again, as recognition has been given to the undesirability, especially in a commercial context, of allowing plaintiffs to circumvent contractual exception clauses by suing in particular the servant or agent of the contracting party who caused the relevant damage, thereby undermining the purpose of the exception, and so redistributing the contractual allocation of risk which is reflected in the freight rate and in the parties' respective insurance arrangements."
- Lord Goff also drew particular attention (at p 663) to passages in Lord Wilberforce's judgment in The New York Star, including this passage at p 144:
"Although, in each case, there will be room for evidence as to the precise relationship of carrier and stevedore and as to the practice at the relevant port, the decision [ie in The Eurymedon] does not support, and their Lordships would not encourage, a search for fine distinctions which would diminish the general applicability, in the light of established commercial practice, of the principle "
Lord Goff made it clear that the Judicial Committee continued to support that approach. Thus he said at p 664 that what he called the bold step taken in The Eurymedon and the New York Star has been widely welcomed.
- It seems to me that the approach of the judge in the present case is entirely consistent with the approach approved by the Privy Council. Mr Russell submits that, unless or until the House of Lords departs from the decision in Midland Silicones, the courts must continue to apply the ordinary principles of the law of agency to the facts of the particular case and that the position here is that, while it is plain from clause 7 that the parties intended to confer the benefit of the terms of the requisition form on all tugs supplied by NIOC to perform the contract, they failed to achieve their end because they did not make it clear that NIOC was acting as agent of Borkan in making the contract.
- In reaching my conclusion I have tried to apply the principles stated in the cases including Midland Silicones. However, I would not accept Mr Russell's submission that they lead to the conclusion that there was no agency here. For the reasons I have given, it is in my opinion legitimate, in construing the terms and deciding whether NIOC purported to be acting on behalf of Borkan, to have regard to the intention to benefit (and to bind) Borkan, to the fact that in the absence of such agency that intention would be thwarted and to the commercial good sense in so holding as recognised by the Privy Council in the cases since Midland Silicones.
- For all these reasons I would hold that on the true construction of the terms of the contract NIOC purported to make the contract both on its own behalf and on behalf of Borkan. It follows that I would dismiss the appeal unless Monsoon succeeds in persuading us that the judge was wrong to hold both that NIOC had actual authority to make the contract on behalf of Borkan and that Borkan did not validly ratify the contract.
Actual Authority
- Borkan's case, which was accepted by the judge, is that on the facts (both as agreed and found) it was implicit that NIOC had the authority of Borkan to enter into a contract on the terms of the tug requisition form on its behalf. The judge relied upon the course of dealing between the parties and upon his conclusion that it is inconceivable that the general manager of Borkan at Kharg Island, Mr John Alban, was not aware of the terms of the form. Mr Russell challenges both those conclusions.
- As to the course of dealing, the judge emphasised four factors. The first was that there was no opportunity for direct negotiation between Borkan and the individual tanker owners given that Kharg Island was under the operational control of NIOC. The second was that the arrangements were that the Borkan tugs were chartered to NITC which in turn supplied the tugs to NIOC as required. NIOC then obtained the master's signature as described above. The third was that the form contained terms as to liability and indemnity which were standard in the industry, namely the UK Standard Towage Conditions, albeit a pre-1986 version. The fourth was that this process had been followed on numerous previous occasions over a period of four years.
- The evidence is clear that the practice followed on 22 July 1998 was the same as was always followed, namely that the tug requisition form was handed to the master of the tanker by the pilot and the master was required to sign it without there being any communication between the tanker and the tugs or their owners. The precise number of times that Borkan tugs had followed the practice was not in evidence but it must have been a large number because the evidence shows that the ROMINA G had herself used the BORVIGILANT and BORVERVE over 20 times since December 1994.
- The judge added a fifth consideration, namely that Captain Askarpour, who was the Head of Marine Services for NIOC at Kharg Island, made two statements which included the following:
"In procuring the execution of [the tug requisition form] (both on our own behalf and on behalf of all tugs involved in tug operations) NIOC considers that the terms of the document apply both to NIOC and to all tugs involved in tug operations in equal manner."
That view is entirely consistent with clause 7 of the terms which, as is conceded by Monsoon, provided that the owners of chartered tugs were to have the same rights and obligations as NIOC in its capacity as owner of its own tugs.
- Mr Russell submits that those factors are neutral and do not establish that NIOC had the authority of Borkan to enter into a contract on its behalf. Moreover he submits that the judge disregarded or paid insufficient regard to the fact that each of the Borkan tugs was under time charter to NITC and to the terms of those charters. We have only seen the agreement relating to the BORVIGILANT but it is a reasonable inference that all the charters were in the same terms.
- At the time of the casualty the BORVIGILANT was chartered to NITC under the terms of a Supplytime charterparty dated May 1996, which is in essence a time charter and was initially for a period from 6 April 1996 to 30 June 1997 but was subsequently extended first to 30 June 1998 and then for a further year to 30 June 1999. The rate of hire from 1 July 1998 was US$4085 per day net of Iranian tax. The charterparty included the following:
"28. OWNER'S RESPONSIBILITES AND OBLIGATIONS
The owners shall:
28.8 Be liable for or in respect of any damage or compensation payable at law in respect or in consequence of death or injury to any one of its employees and in respect of any loss or damage to the property.
31 LIABILITIES AND INSURANCE
31.1 The Owners are responsible for damages to the vessel and take care of the liabilities towards the Charterers and third parties concerning the nautical management of the vessel.
31.2 The Owner shall insure the vessel, its personnel and third party against all liabilities, damages and losses occurring from the execution of this charter."
- Mr Russell submits that the terms of the charterparty are significant in deciding whether NIOC had authority to enter into contractual relations with tanker owners on behalf of Borkan. He submits that NIOC was using the tug pursuant to some arrangement with NITC, which was both the chartering arm of NIOC and its subsidiary, and that Borkan was not concerned with the contractual arrangements made by NIOC with tanker owners pursuant to which it supplied tug assistance. He stresses that Borkan was paid its daily rate under the charterparty in any event, whether the tug was engaged on berthing services or not. Moreover he relies in particular upon clause 31.1, which makes it clear that Borkan is responsible under the charterparty for liabilities both to NITC and to third parties such as shipowners, and upon clause 31.2, which imposes an obligation upon Borkan to insure in respect of damage to the tug and in respect of all such liabilities.
- Mr Russell further relies upon the fact that after the casualty the parties renegotiated the charterparty so as to include clause 31.3 in these terms:
"The Charterers shall procure for the benefit of the Owners that when the vessel is employed in berthing or unberthing operations at Kharg Island, the National Iranian Oil Corporation will obtain the signature of the Master or Agents for and on behalf of ships and their owners to which the vessel is providing services, of a tug requisition form substantially in the wording annexed hereto with the intent that the Owners and/or the Charterers of the vessel shall have the benefits of and be bound by the conditions of hire of tugs to the same extent as the National Iranian Oil Corporation ("the Company" as referred to in the tug requisition form)."
Ironically that clause is contained in a charterparty of the BORVIGILANT expressed to be for one year from 30 June 1998 and thus covering the date of the casualty, but the clause was agreed after the casualty and it is not said that it gave NIOC authority to contract on Borkan's behalf as at the date on which the tug requisition form was signed.
- Mr Russell relies upon clause 31.3 as showing what could have been done had Borkan wished before the casualty. He submits, as is certainly the case, that it was only agreed and incorporated into the charterparty in the light of the casualty and because of it. He says that the fact that it was agreed later suggests that Borkan had given no authority to NIOC to contract on its behalf earlier.
- Those submissions undoubtedly have some force. However, they do not seem to me to be decisive or, indeed, to carry the matter very far. The judge did, to my mind, consider submissions which had been made to him along the same lines because in paragraph 23 he said that clauses 28 and 31 of the existing charterparty were not inconsistent with NIOC having authority to enter into a towage contract with shipowners on behalf of Borkan under which the shipowners bore the risk of damage to the tug and of loss of life.
- Mr Popplewell makes similar submissions to this court. He submits that the charterparty governs the position as between NITC and Borkan and not as between NIOC or Monsoon and Borkan and that there is nothing in the charterparty which is inconsistent with or militates against NIOC having the authority found by the judge.
- I agree. As the judge pointed out, the subsequent inclusion of clause 31.3 (without the deletion of clauses 28.8, 31.1 or 31.2) shows that there is no inconsistency between the two. So far as I can see, clause 7 of the tug requisition form is entirely for the benefit of Borkan and was drafted so as to ensure that tugs owned by tugowners other than NIOC, including Borkan, were treated in the same way as NIOC's own tugs. The terms of the form were in no way disadvantageous to NITC or NIOC and they were beneficial to Borkan because they both protected Borkan from direct liability to tanker owners in circumstances in which it would otherwise be liable and conferred a right of indemnity against them in circumstances in which Borkan would otherwise be entitled to no such indemnity. These seem to me to be valuable or potentially valuable advantages for Borkan and are in no way inconsistent with the terms of the charterparties, which only regulate the position between Borkan and NITC.
- It is relevant in this context to observe that, as Mr Sharief says in his affidavit, the tugs operated within port limits and were wholly under the operational control of NIOC. They were thus under the control of the pilot on board the tanker. They were not therefore simply under the directions of NITC.
- Taken in the round, these circumstances in my opinion support the conclusion that NIOC had the authority which it thought it had to contract for the benefit of Borkan. They prompt the question: why would NIOC contract for the benefit of Borkan unless it reasonably thought that it had authority to do so? If Borkan had been asked whether NIOC had its authority to enter into such a contract on its behalf I can see no reason why it would not have said "yes, of course", just as it agreed to the inclusion of clause 31.3 after the casualty. NIOC expressly approved the clause. If an officious bystander had been asked whether in all the circumstances it was implicit that NIOC had such authority he too would in my opinion almost certainly have given the same answer.
- In all the circumstances, although it may be that each of the factors relied upon by the judge, if taken individually, would not lead to the conclusion that NIOC had the necessary implied authority to contract for the benefit of and on behalf of Borkan, taken together they support the conclusion reached by the judge that it did.
- Mr Popplewell submits that the judge was (or would have been) justified in concluding that NIOC had the necessary authority even if Borkan had not been aware of the terms of the tug requisition form and of its mode of use. There is, in my opinion, much to be said for that view. However, the judge held that it was inconceivable that Mr Alban did not have the relevant knowledge. Mr Russell submits that he was wrong so to hold whereas Mr Popplewell submits that he was correct. I therefore turn to that question.
- The judge expressed his conclusions shortly in paragraph 21 of his judgment as follows:
"The Defendants sought to challenge this approach [ie the judge's approach to implied authority] on the grounds that Borkan were not shown to be aware of the terms of the form. This is wholly improbable given the long history of the arrangement. Indeed a copy of the form was to be found on the sister vessel Borverve. Although there was some evidence that the managing director of Borkan, Mr Sharief Zamam, based in Sharjah, might possibly have been unaware of the terms of the form, it is inconceivable, in my judgment, that the general manager, Mr John Alban who was based in Kharg Island and in sole charge of the tugs (having been inherited from the previous owners Semco) was not fully aware of its terms and its mode of use."
- It was not necessary for the judge to conclude that it was inconceivable that Mr Alban did not have the necessary knowledge. The question for us to decide is whether the judge was justified in holding that it is more probable than not he did. I have reached the conclusion that he was so justified. He drew a distinction between the knowledge of Mr Sharief, who was in Sharjah, and Mr Alban, who was at Kharg Island. That was in my opinion a sensible distinction to draw.
- Mr Russell criticises the judge's statement that there was some evidence that Mr Sharief might possibly have been unaware of the terms of the form. He submits, in my opinion correctly, that it is clear from Mr Sharief's statement that he was not aware of it. He does not say that he was; yet he would surely have said so if he had been aware of it. Moreover, Borkan's skeleton argument stated that Mr Sharief "candidly volunteers that he himself was not aware of the form until after the incident".
- Mr Russell further correctly submits that the burden of proof on this issue was on Borkan. He draws attention to the fact that Borkan did not call any oral evidence as to its knowledge and submits that the evidence is insufficient to justify the inference drawn by the judge.
- There is undoubtedly some force in that submission, which may be summarised as follows:
i) Mr Sharief said that following the loss of the BORVIGILANT he appointed an agent at Kharg Island who advised him of the existence of the form and was able to furnish him with a copy obtained from NIOC.
ii) No-one else can have known of the form. Why else was it necessary to appoint an agent and why was it only through that agent, and not through any other employee of Borkan at Kharg Island or elsewhere, that Mr Sharief learned of the existence of the form?
iii) Mr Sharief's evidence reflected the fact that it was only after learning of the existence of the form after the casualty that clause 31.3 was added to the charterparty.
iv) Despite requests, no copy of the form was produced from any of Borkan's offices, including its office at Kharg Island. Borkan must have had such an office in order to run its tug operations from there, which it had done since 1994. Although a copy of it was found on the BORVERVE, that was probably (as Mr Russell put it) mere happenstance. No copy of the form was found on the other surviving tug.
v) Although Mr Alban had died before the trial, his death was in 2000. If he had known of the form, Mr Sharief would have learned of it through him and not as a result of a newly appointed agent obtaining a copy from NIOC. Moreover, if Mr Alban had known of the form, there would have been a copy of it in Borkan's office at Kharg Island.
vi) It is not surprising that Mr Alban was not aware of the form because, although he was in sole operational charge of the tugs, he was not concerned with their commercial operations given that they were under time charter to NITC, who could give directions as to their employment. He was no doubt concerned with their crewing, maintenance and repair but there was no reason why he should interest himself in arrangements made between NIOC and tanker owners when a Borkan tug was used to berth a tanker.
- Mr Popplewell correctly accepts that the evidence is less full than it might have been but submits that the judge's conclusion was justified. His submissions may be summarised as follows:
i) The Borkan tugs were previously owned by the well known Singapore salvage and towage company Semco, when they were called for example SALVIGILANT and SALVERVE. Semco had operated them at Kharg Island for some years before they were purchased by Borkan in 1994. Mr Alban had then been employed by Semco at Kharg Island. He came over to Borkan, as it were, with the tugs and worked for Borkan at Kharg Island for some four years before the casualty.
ii) The whole purpose of the terminal at Kharg Island was to load tankers with Iranian crude oil. Many, if not all, of the tankers were large vessels which needed tug assistance when berthing and unberthing. Mr Alban must have witnessed those operations many many times. In these circumstances it is inconceivable that he would not have known the procedure adopted when tug assistance was taken, including the fact that NIOC used both their own and other tugowners' tugs and that the master would be required to sign both berthing conditions and a tug requisition form, which included terms which benefited the tugowners. That is especially so since such terms were usual in the trade.
iii) Mr Sharief says in his affidavit that the tug requisition form is known, not only by the tugs but by the tanker owners for whom it was designed. There is no sensible basis upon which to reject that evidence, which is supported by the fact that a blank form was found on the BORVERVE. The evidence was that it had been on board the BORVERVE prior to the casualty. In these circumstances the suggestion of mere happenstance is not convincing.
iv) It is not significant that no copy was produced from whatever office there was at Kharg Island. Nor is it significant that an agent was appointed and that he obtained a copy of the form from NIOC. Mr Alban was English whereas it is likely that the agent was Iranian and was appointed to investigate the casualty. It is perhaps natural that he would ask NIOC for a copy of the documents signed by the master after the casualty and the fact that he did so tells us nothing about whether Mr Alban was aware of the form.
v) It is far from clear that anyone focused on the knowledge of Mr Alban before he died. There is no evidence that he was asked. It is probable that he was not because, if he had been asked, it is likely that, given his experience of tug operations at Kharg Island and Mr Sharief's evidence that the tugs knew of the form, he would have said that he was aware of the form and its terms.
- In all the circumstances I prefer Mr Popplewell's submissions and have come to the conclusion that the judge was justified in concluding that it is (at least) more probable than not that Mr Alban was aware of the form and its terms. I have also reached the conclusion that he was justified in holding that NIOC had implied actual authority to enter into the contract with Monsoon on behalf of Borkan in order to give Borkan the same protection in respect of its tugs as NIOC had in respect of its own tugs.
- I would add, by way of postscript, that in reaching that conclusion I have not thought it right to compare the authority asserted by Borkan in this case with the authority asserted (and held to exist) in somewhat different circumstances in The Eurymedon and the New York Star. I simply note that the conclusion reached by the judge in this case does seem to me to be consistent with the general approach (referred to above) which has been adopted by the courts to problems of this kind.
- It follows that I would dismiss the appeal and would answer the question posed by the first preliminary issue yes, as the judge did. It also follows that it is strictly unnecessary to express a view on the issues of ratification. I will however briefly consider them because they were considered in some detail and I have reached a clear conclusion with regard to them.
Ratification
- The judge held that, even if NIOC did not have Borkan's authority to contract on its behalf, Borkan subsequently ratified the contract and was accordingly entitled to rely upon the terms of the tug requisition form.
- Mr Popplewell relied before the judge and relies before us on four different acts as amounting to ratification. They are:
i) Performance of the towage services on 22 July 1998.
ii) Mr Sharief's conversations with NIOC and NITC following the incident in which he asked for and was given confirmation that the terms of the tug requisition form applied.
iii) The inclusion, with the approval of NIOC, of clause 31.3 in the charter, which although drawn up subsequently, was in respect of the period during which the casualty occurred.
iv) Borkan's reliance on the terms of the tug requisition form in the letter before action of 5 January 2000 and subsequently in these proceedings.
The judge referred only to steps ii) and iii) and observed that it was not seriously in issue that such acts constituted acts of purported ratification.
- Before us Mr Russell submits that the evidence on steps ii) and iii) is not sufficiently clear to justify the judge's conclusion. Although I would not, for my part, accept that submission, Mr Russell in any event correctly accepts that step iv), namely Borkan's reliance on the tug requisition form in the letter before action dated 5 January 2000, would amount to an act of ratification, save that he submits that it was not done within a reasonable time.
- It is fair to say that Mr Russell recognises that there are difficulties with that submission and his principal point is that the letter was written too late because by the time it was written Monsoon had an accrued property right in the form of its cause of action for negligence against Borkan. If it is good, that point defeats each of the acts of ratification in steps ii), iii) and iv) because the cause of action accrued on 22 July 1998 when the loss and damage were sustained.
- Mr Russell was in my opinion correct to recognise the difficulties with the submission that the letter of ratification was not written within a reasonable time. I would reject the submission on the basis that no good reason has been suggested as to why we should so hold. For my part, I can see no good reason for holding that a reasonable time had already passed.
- Before turning to the principal point advanced by Mr Russell I should say a word about step i). It is, as I understand it, common ground that the performance of the services would only amount to ratification if Borkan, as the putative principal, knew that the contract included terms apparently made on its behalf. No-one suggested that for present purposes the knowledge of Mr Alban would not be the knowledge of Borkan. I have already expressed the view that Mr Alban probably had knowledge of the terms such that, together with the other factors to which I have referred, NIOC had actual authority to contract on behalf of Borkan on the terms of the form. If that is correct, no question of ratification arises. If it is wrong, the argument that Borkan ratified the contract cannot succeed on the basis that performance of the towage services amounts to ratification because, on that hypothesis, Borkan would not have the relevant knowledge.
- I therefore consider the arguments on ratification which have been addressed to us on the basis that the relevant act of ratification is one or more of steps ii), iii) or iv). Having held that step iv) is in principle sufficient to ratify the contract, it is not necessary for me to consider the arguments relating to steps ii) and iii) separately because (as already stated) the same point arises in relation to each. The point is in short whether any such act was done too late to have the effect of ratifying the contract. As I understand it, the only basis upon which each such act is said to be too late is that by the time it was done Monsoon had an accrued property right in the form of an accrued cause of action against Borkan for damages for negligence which caused loss and damage.
- What then are the relevant principles? Mr Popplewell submits that they are correctly stated in paragraph 2-087 of the 17th edition of Bowstead and Reynolds on Agency ("Bowstead") in Article 19, under the heading "Limits on Ratification" as follows:
"Ratification is not effective where to permit it would unfairly prejudice a third party, and in particular –
(1) where it is essential to the validity of an act that it should be done within a certain time, the act cannot be ratified after the expiration of that time, to the prejudice of any third party;
(2) the ratification of a contract can only be relied on by the principal if effected within a time after the act ratified was done which is reasonable in all the circumstances."
- Mr Russell submits, on the other hand, that that principle is too widely stated and that, on a fair reading, both Bowstead and the authorities support the conclusion that ratification is not effective in law if its effect would be to divest an accrued property right. He relies in particular upon Bird v Brown (1850) 4 Exch 786 and also upon Bolton Partners v Lambert (1889) 41 Ch D 295, per Cotton LJ at pp 306-7, Presentaciones Musicales SA v Secunda [1994] Ch 271 per Roch LJ at pp 285-6 and Hughes v Superannuation Pty Ltd (1993) 29 NSWLR 653. Mr Popplewell submits in response that those cases do not support Mr Russell's proposition but that, if the principle is as stated by him, an accrued cause of action, although properly to be characterised as a chose in action and thus in one sense a property right, is not a property right of the kind envisaged by the cases.
- The issue between the parties must be put in its context. It is common ground that the general principle of ratification is correctly stated in paragraph 2-047 of the 17th edition of Bowstead and Reynolds in Article 13 as follows:
"Where an act is done purportedly in the name or on behalf of another by a person who has no authority to do that act, the person in whose name or on whose behalf the act is done may, by ratifying the act, make it as valid and effectual, subject to the provisions of Articles 14 to 20, as if it had been originally done by his authority, whether the person doing the act was an agent exceeding his authority, or was a person having no authority to act for him at all."
We are not concerned in this case with any of the problems discussed in Articles 14 to 20, except Article 19 which I have quoted above.
- The general principle of ratification is that it is "equivalent to an antecedent authority": Koenigsblatt v Sweet [1923] 2 Ch 314 per Lord Sterndale MR at 325. It thus has retrospective effect: see eg Smith v Henniker-Major [2002] EWCA Civ 762, [2003] Ch 182 per Robert Walker LJ at paragraph 56.
- In my opinion the authorities support the proposition that the law is correctly stated in Article 19 of Bowstead. I do not think that there is any absolute rule that a contract (or indeed any other act) cannot be ratified if the effect of ratification would be to divest an accrued property right. The better view is, in my opinion, that the principle identified in paragraph (1) of Article 19 of Bowstead is an example of the general proposition stated at the beginning of the article, namely that ratification is not effective where to permit it would unfairly prejudice a third party.
- That view is supported by the conclusions expressed by Robert Walker LJ in Smith v Henniker-Major. The conclusions were obiter because the appeal was decided on a different point on which Robert Walker LJ was in the minority, but on the ratification point Schiemann and Carnwath LJJ agreed with him. In paragraph 63 he quoted Article 19 of Bowstead as set out above. He then said that the most important English authority cited in support of that principle was the decision of this court in In re Portuguese Consolidated Copper Mines Limited (1890) 45 Ch D 16.
- In that case an allotment of shares was purportedly, but invalidly, made at a board meeting. One of the allottees was sued for what was due on the allotted shares. Thereafter the allotments were confirmed at one or more board meetings. It was held that the allotments had been ratified thereby within a reasonable time. In so concluding each member of the court stressed that at the time it was not "inequitable" as against the allottee (per Cotton LJ at p 27) or "unfair" (per Lindley LJ at p 32) or "such an alteration in the prospects of the company as rendered it unfair" (per Bowen LJ at p 36).
- Robert Walker LJ also analysed the decision of this court in the Presentaciones case, where the defendants relied upon Bird v Brown for the proposition "that the act of ratification must take place at a time, and under circumstances, when the ratifying party might himself have lawfully done the act which he ratifies". However, I do not read Robert Walker LJ as accepting the proposition as so formulated. He observed in paragraph 68 that in the Presentaciones case Dillon LJ discussed the leading cases, including Bird v Brown, and at p 279 extracted from them the principle that "if a time is fixed for doing an act, whether by statute or by agreement, the doctrine of ratification cannot be allowed to apply if it would have the effect of extending that time".
- Dillon LJ, with whom Nolan LJ agreed, held that, where a writ is issued by solicitors asserting a single cause of action on behalf of the plaintiff but without his authority, the plaintiff "must be entitled to adopt the action notwithstanding the expiration of the limitation period applicable to the cause of action". The majority did not treat the case as an example of the application of the principle derived from the cases by Dillon LJ and identified above.
- At paragraph 70 Robert Walker LJ considered part of the passage from the judgment of Roch LJ in the Presentaciones case at pp 285-6 which is relied on by Mr Russell (part of which was quoted by the judge). At page 284 Roch LJ had quoted the passage from the judgment of Cotton LJ in Bolton Partners v Lambert which is relied upon by Mr Russell. He said at p 307:
"The rule as to ratification is of course subject to some exceptions. An estate once vested cannot be divested, nor can an act lawful at the time of its performance be rendered unlawful, by the application of the doctrine of ratification."
As Robert Walker LJ observed, Roch LJ then noted (correctly) that Cotton LJ was there giving examples of exceptions rather than setting out an exhaustive list.
- The whole passage on pp 285-6 of Roch LJ's judgment is in these terms:
"The other exception which has to be considered in the present case is that indicated by Cotton LJ in the passage cited by the words "an estate once vested cannot be divested". I would suggest that that exception should be stated in these terms: that the putative principal will not be allowed to ratify the acts of his assumed agent, if such ratification will affect adversely rights of property in either real or personal property including intellectual property, which have arisen in favour of the third party or others claiming through him since the unauthorised act of the assumed agent. The expiry of the limitation period in the present case does not create any such right in the defendants; if applicable it would merely bar the plaintiff company's remedies. I would not extend this exception to cases such as the present where a defendant would receive a windfall defence in a case where the vice against which the Limitation Acts are designed to protect defendants, namely the bringing of claims at a time so far after the occurrence of the cause of action that a defendant is put at a disadvantage in defending the claim, does not exist. In this case the first defendant cannot claim to be in that position. The principle in Bird v Brown … on which Mr McDonnell relies is, in my opinion, too widely stated and that case should be considered as it was by Cotton LJ in Bolton Partners v Lambert as an example of the "vested property right" exception."
- After setting out part of that passage Robert Walker LJ said this in paragraph 71 of his judgment in what seems to me to be an important passage:
"I am inclined to think that this debate (as to whether the exception is limited to ratification affecting property rights) may not be particularly profitable. Even though the operation of the Limitation Act 1980 is normally to bar the remedy rather than extinguish the right, an accrued defence under the Act has often been spoken of in terms approximating to a property right of which a party ought not to be deprived. In my view the right approach would be to regard the deprivation of an accrued right as an important example of the general rationale identified in Bowstead & Reynolds's article 19, that is, unfair prejudice."
I have put that last sentence in italics because it is, to my mind, the key point of principle to emerge from this part of the judgments in Smith v Henniker-Major. Robert Walker LJ underlined what is essentially the same point in paragraph 73, where he said that he would not accept the submission that prejudice is not necessary.
- The opinion of the court in Smith v Henneker-Major seems to me to provide strong support for Mr Popplewell's submission that the principle stated in article 19 of Bowstead is correct and that there is no absolute rule that ratification will not be permitted if it will defeat an accrued property right. I would further accept Mr Popplewell's submission that none of the cases to which we were referred is authority to the contrary.
- Dillon LJ had identified the principles to be derived from the cases, including Bird v Brown, and thus treated it as an example of the principle in the first paragraph of Article 19 in Bowstead. Mr Popplewell correctly submits that if Roch LJ took a different view it was a minority view. In these circumstances it is perhaps superfluous for me to express my own view of the ratio of Bird v Brown. However, I will do so shortly.
- I cannot resist drawing attention, as Dillon LJ did in passing, to a curiosity of Bird v Brown. It has at least this historical interest identified by Lord Macnaghten in Keighley, Maxted & Co v Durant [1901] AC 240 at p 248:
"The case is instructive, I think, and useful because it tends to shake one's confidence in the infallibility of reports, which always seem to carry the more weight the less opportunity there is of testing their accuracy. Why should an obscure report be taken for gospel just because it is old? Bird v Brown 4 Ex 786, 19 LJ (NS) Ex 154, 14 Jur 132 was heard by four judges. Only one judgment was given. The Exchequer Reports attribute the judgment to Rolfe B. The Law Journal ascribes it to Parke B. The Jurist puts it in the mouth of Pollock CB. No one gives it to the fourth judge; but then there were only three sets of reports current at the time. The Weekly Reporter did not begin till later."
- The facts were that an agent in New York, one Illins, bought goods in New York on behalf of principals in Liverpool. Pursuant to instructions from their principals Illins had drawn some bills in favour of the defendants. The principals subsequently became bankrupt and their rights were assigned to the plaintiffs, who on 11 May 1846 demanded delivery of the goods from the master of one of the ships on which the goods were being carried and tendered the freight. The master refused to deliver them to the plaintiffs but subsequently delivered them to the defendants on the ground that the defendant had validly exercised a right of stoppage in transitu. The plaintiffs were entitled to delivery of the goods and to damages for conversion unless the defendants had effectively exercised a right of stoppage in transitu.
- The relevant issue for present purposes was whether purported stoppage by the defendants before 11 May 1846 defeated the plaintiffs' claim in circumstances where Illins only ratified the stoppage or stoppages after that date. It was held that it did not. The judgment included the following at pp 798-9:
"This, therefore, brings us to the real question, which is, whether the ratification by Illins, after a conversion by the defendants, can have the effect of altering retrospectively the ownership of the goods, so as to prevent the plaintiffs from saying that the goods were theirs at the time of the conversion, which, if no subsequent ratification had occurred, certainly were theirs at that time, and would have so continued. We are of opinion that the ratification by Illins had no such effect. The doctrine, "Omnis ratihabitio retrotrahitur et mandato aequiparatur" is one intelligible in principle, and easy in its application, when applied to cases of contract. If AB unauthorised by me makes a contract on my behalf with JS, which I afterwards recognise and adopt, there is no difficulty in dealing with it as having been originally made by my authority. JS entered into the contract on the understanding that he was dealing with me and when I afterwards agreed to admit that such was the case, JS is precisely in the condition in which he meant to be; or if he did not believe AB to be acting for me, his condition is not altered by my adoption of the agency, for he may sue AB as principal, at his option, and has the same equities against me, if I sue, which he would have had against AB."
- The judgment concluded as follows:
"During that period [ie of the transitus] the defendants, without authority from Illins, made the stoppage. After the transitus was ended, but not before, Illins ratified what the defendants had done. From that time the stoppage was the act of Illins, but it was then too late for him to stop. The goods had already become the property of the plaintiffs, free from all right of stoppage."
Mr Popplewell submits that that passage represents the ratio decidendi of the decision and that it is an example of the proposition identified by Dillon LJ on the basis that, as it were, the time fixed for exercising a right of stoppage in transitu was during the transitus and that a ratification of a purported exercise of such a right after the transitus was over was too late. It would unfairly prejudice the plaintiffs to permit a retrospective ratification in those circumstances. I would accept those submissions.
- The decision in Bolton Partners v Lambert is not authority for the proposition advanced by Mr Russell. The facts were that A accepted an offer to buy property on behalf of the plaintiffs without authority to do so. The defendant subsequently withdrew the offer and some time after that the plaintiffs ratified the contract. The court held that the ratification related back to the acceptance by A and that the withdrawal was therefore inoperative. The observations of Cotton LJ relied upon were therefore obiter and, in so far as Cotton LJ said (or may have said) at p 307 that Bird v Brown was authority for the unqualified proposition that "an estate once vested cannot be divested" by ratification, his view is inconsistent with that of Dillon LJ, which (for the reasons already given) I prefer.
- It is plain from the above and the Presentaciones case that it is not authority for such an unqualified proposition. Although reliance was placed upon a decision of the Supreme Court of New South Wales in Hughes v NM Superannuation, I do not read the judgments in that case as supporting such an unqualified proposition. If I am wrong about that, I prefer the qualified proposition in Article 19 of Bowstead, supported as it is in Smith v Henniker-Major.
- It is true that in their discussion in paragraph 2-089 of paragraph (1) of the principle in Article 19, the editors of Bowstead say that "it cannot in fact be doubted that the doctrine cannot change property rights". However, it seems to me that that must be read subject to the terms of Article 19 and cannot therefore have been intended to be wholly unqualified.
- In reaching these conclusions I do not wish to suggest that ratification will ordinarily have the effect of divesting property rights. On the contrary, in the vast majority of cases it would be unjust to the third party to give effect to a ratification if to do so would divest a vested property right. Indeed in the case, for example, of vested real property rights it is difficult to think of an example of a case. The same is no doubt true of other property rights.
- However, the facts of the present case seem to me to underline the importance of avoiding an inflexible principle. Here Monsoon contracted on the basis that the owners of all the tugs which assisted the vessel would have the rights accorded by the terms of the tug requisition form. The purpose of those terms was to regulate responsibility in the event of a casualty of the kind which took place. In these circumstances it does not seem to me to be in any way unjust to hold Monsoon to those conditions, whether Borkan had given authority to NIOC before or after the contract was made or, in the case of ratification, whether the ratification was before or after the casualty. In my opinion there is nothing unfair, unjust or inequitable in holding Monsoon to the terms of the form to which they agreed, whether Borkan gave NIOC authority to make the contract before it was made or ratified it after it was made and after the casualty. Monsoon is simply bound by the terms of the agreement which, on the true construction of the terms, it made.
- If, contrary to the views I have expressed, it were held that there is an unqualified principle that vested property rights cannot be divested by ratification, I would hold that an accrued cause of action, while being a chose in action and a type of property right, is not the kind of property right which, for example Cotton LJ, who spoke of an estate, had in mind. It is more akin to an accrued right to rely upon the Limitation Acts which, as Robert Walker observed, is often spoken of in terms approximating to a property right. In my opinion, similar principles should apply to each.
- For these reasons, I agree with the judge that Borkan validly ratified the contract after the casualty.
Other Issues
- Mr Popplewell submitted that, if Borkan failed to establish agency on the basis of either actual authority or ratification, it could succeed on the basis that NIOC was the trustee of Monsoon's promises in clause 2 of the tug requisition form both to indemnify Borkan and not to hold Borkan liable for its losses. He submitted in the further alternative that Borkan owed no duty of care to Monsoon to avoid negligently causing damage because under the terms of the contract between Monsoon and NIOC, Monsoon undertook to take the risk of sustaining such damage and because it would not in those circumstances be fair and reasonable to impose a duty of care upon Borkan to avoid such damage.
- Some of the questions raised by those arguments are not entirely free from difficulty and I do not think that I should further lengthen this judgment by embarking upon them when it is not necessary to do so.
Unseaworthiness of the Tug
- The remaining issue between the parties is that raised by Borkan's cross-appeal against the judge's determination of the second preliminary issue. Although the true issue between the parties is not readily identifiable from the terms in which the issue was formulated, as I understand it, the question is whether the proviso in clause 4(a) applies only to the indemnity in the second part of clause 2(b), as was submitted on behalf of Borkan, or whether it extends to the liability excluded by the first part of clause 2(b), as was submitted on behalf of Monsoon.
- The judge resolved this issue in favour of Monsoon. Borkan submits, by way of cross-appeal, that he was wrong to do so. The judge dealt with the point very shortly indeed. In paragraph 35 he set out Borkan's submission and said this:
"I disagree. The first part of clause 2(b) excludes responsibility for loss and damage and the second part gives an indemnity in respect of "such" loss or damage. Accordingly in the event of causative unseaworthiness attributable to the want of due diligence, neither the defence nor the indemnity are available."
- The issue between the parties relates to the effect of clause 4(a) where relevant loss is caused by "want of reasonable care on the part of the Company to make the tug seaworthy for the navigation of the tug during towage operations or other services". It is common ground that in such a case the words in clause 2(b) which provide that "the Hirer shall pay for and indemnify the Company against all such loss" etc have no effect.
- As an aid to a consideration of this point, it is convenient to divide clause 2(b) into two parts. The first part is in these terms:
"The Company shall not bear or be liable for damage of any description done by or to the tug or done by or to the Hirer's vessel or for loss of the tugs or the Hirer's vessel or for loss of or damage to anything on board the Hirer's vessel or for any personal injury or loss of life arising from any cause whatsoever, including negligence at any time of the servants or agents of the Company, unseaworthiness, unfitness or breakdown of the tug, its machinery, boilers, towing gear, equipment or hawsers, lack of fuel, stores or speed or otherwise."
The second part, which immediately follows the first, is in these terms:
"and the Hirer shall pay for and indemnify the Company against all such loss, damage, personal injury and loss of life as .. aforesaid and the consequences thereof."
- Mr Popplewell submits that clause 4(a) reflects the difference in treatment in clause 2(b) between loss which "the Company shall bear and be liable for" in the first part of the clause and loss which "the Hirer shall pay for and indemnify the Company against" in the second part of the clause. Thus he says that it is only losses in the latter category which are taken out of clause 2(b) by clause 4(a) and that clause 4(a) does not qualify the first part of the clause.
- It is true that the words "liable to pay for or indemnify the Company against any loss" in clause 4(a) reflect the words "shall pay for and indemnify the Company against all such loss" in the second part of clause 2(b). If those words in clause 2(b) were limited to an obligation upon the hirer to indemnify the tugowner against, or even to pay for and indemnify the tugowner against, loss and damage sustained by the tug or its personnel, I would accept Mr Popplewell's submission. However, they are not.
- The reference to "such loss" in the second part of clause 2(b) is to all the loss referred to in the first part. Thus, as I see it, the second part of the clause can be written as follows:
"the Hirer shall pay for …. damage of any description … done … to the Hirer's vessel or for loss of … the Hirer's vessel or for loss of or damage to anything on board the Hirer's vessel or for any personal injury or loss of life arising from any cause whatsoever, including negligence at any time of the servants or agents of the Company, unseaworthiness, …"
That aspect of the second part of clause 2(b) is not an indemnity provision but a statement that the hirer shall pay for loss and damage to its own ship caused by negligence. It is in effect a restatement or underlining of the first part of the clause.
- As already stated, it is common ground that the effect of clause 4(a) is to exclude the indemnity in clause 2(b) against loss and damage to the tug and personal injury and loss of life of the tug's crew caused by "want of reasonable care on the part of the company to make the seaworthy". It seems to me that the effect of clause 4(a) must equally be to exclude the hirer's obligation in clause 2(b) to "pay for" loss and damage to the hirer's ship or loss of life of or personal injury to those on board the ship. Yet, if Mr Popplewell's argument were accepted, the hirer would have to pay for just such loss and damage.
- This is, I think, essentially the point which the judge was making in the paragraph from his judgment which I have quoted. In short, the two parts of clause 2(b) must be read together and, because of the reference to "pay for … such damage" in the second part, there is no real dichotomy between them. The same would be true of clause 3. For these reasons I would construe clause 4(a) in the same way as the judge.
- This seems to me to give a sensible meaning to the contract as a whole. Thus, if loss or damage to ship or tug or the personnel of either, is caused simply by the events set out in clause 2(b), the tugowners are protected unless caused by "want of reasonable care on the part of the [tugowners] to make the tug seaworthy".
- Moreover, if there is any ambiguity in the clause, it must be construed against the tugowners. There is I think no doubt that NIOC was the proferens and that the owners of a tug not owned by NIOC should also be so treated. In any event it is Borkan which seeks to rely upon the clause and, again, any ambiguity in the clause should be construed against it, especially since the effect of the contract, on Borkan's case, is that it will not be liable for loss or damage to the ship and any loss of life to those on board the ship wholly caused by "want of reasonable care on the part of [Borkan] to make the tug seaworthy".
- In all these circumstances I would dismiss the appeal on the second preliminary issue. I would only add in passing that the court has not been asked to consider the meaning of the expression "want of reasonable care on the part of the Company to make the tug seaworthy" in the clause. I understand that Borkan may wish to contend that that expression means actual fault or privity of the tugowner and does not extend to want of reasonable care on the part of its servants or agents. I express no view on that question (either as to its arguability or otherwise), but would vary the answer to preliminary issue two so that it precisely reflects the words of the clause. I would therefore answer the question "yes, unless caused by want of reasonable care on the part of Borkan to make the tug seaworthy".
Conclusion
- I would dismiss Monsoon's appeal against the judge's determination of issue one. I would also dismiss Borkan's cross-appeal against his determination of issue two, subject to a slight alteration to the answer to the question as just stated.
Dyson L.J.
- I agree.
Peter Gibson L.J.
- I also agree.
