Charterers Order Ship to Unsafe Port

Charterers Order Ship to Unsafe Port

An order is given by charterers that the vessel is to proceed to a port that is unsafe:

Can the Ship Master refuse to call at Unsafe Port?

If the Ship Master and the Shipowners do agree to call at Unsafe Port, what are their remedies if the ship is damaged or delayed?

Usually, an order to proceed to a port will be considered legitimate and the Ship Master and Shipowners are entitled to act on it without making their own enquiries about the port’s safety. The Ship Master must act reasonably and must not place the ship in a position of peril if the danger is known and can be avoided.

In some cases, the danger will not be known until after the ship arrives and berths. For instance, if there is a violent storm and the port’s security warning system does not work, with the result that the ship is damaged, the Charterers will be liable for the Shipowners’ losses.

However, if it is clear that the port or place to which the ship has been ordered is unsafe, then the Ship Master may properly refuse to proceed and request alternative orders.

One theory for why the Shipowners and the Ship Master have this right is that the Charterers have given an Uncontractual Order or, in effect, No Order.

Also the Charterers’ Order takes the ship outside of the limits of her legitimate employment. The leading case on the issue of the Shipowners’ and the Ship Masters’ rights to refuse or accept orders to go to an unsafe port is “The Kanchenjunga’ [1990]” House of Lords brief facts of the case were as follows: “The vessel was chartered on a voyage charter but a range of ports was given to which the charterers could order the vessel with an obligation that the ports were safe. The parties were therefore in the same position as if it had been a Time Charter. There was an additional clause which gave the Ship Master and the Shipowners the right to refuse to load or discharge in places where there was a war or warlike activities.

Charterers’ Order was given for the ship to load at Kharg Island, off Iran, despite the fact that war had broken out between Iraq and Iran shortly before. The Shipowners knew that the port was unsafe but despite that they agreed to go there and gave Notice of Readiness (NOR) to load.

After a few days waiting, a berth became available but there was then a substantial air raid on Kharg Island which caused the Ship Master to leave the port. The following day the Shipowners asked the charterers for orders to a new and safe port. The Charterers insisted that the ship return to Kharg Island.

An arbitration in London followed in which the Shipowners argued that the port was unsafe. The arbitrators found that the port was prospectively unsafe when the order was given to go there by the Charterers.

The Charterers appealed and the case went before Mr Justice Hobhouse. Mr Justice Hobhouse found that, whilst the port was unsafe, the Shipowners had waived their right to object by calling at the port with the knowledge that it was unsafe and also giving a Notice of Readiness (NOR) to load.

Shipowners could not therefore reject the port as unsafe. Despite the apparent victory of the Charterers on this point, the Shipowners were protected from any damages claim by the War Clause.

The judgment of Hobhouse J was upheld both by the Court of Appeal and the House of Lords. The judgments of all three courts are reported and make interesting but quite dense reading. It may be helpful to set out one or two observations made by the various judges.

Hobhouse J said: “Generally speaking a person is entitled to act in the faith that the other party to a contract is carrying out his part properly. Even if the breach of contract is clear it is vital to the proper conduct of business that the relevant party should be able, if he considers the breach a minor one, to proceed without sacrificing his right to be indemnified. But this does not mean that he can enter ports that are obviously unsafe and then charge the charterers with the damage done.

In the House of Lords, Lord Goff said: “if, with the knowledge of the facts giving rise to his rights to reject he nevertheless unequivocally elects not to do so, his election will be final and binding upon him and he will have waived his right to reject the tender as uncontractual.

In considering the consequences of going to the port Lord Brandon said: “the only right which the owners waived was the right to reject the nomination as uncontractual. “They did not lose the protection of the right to damages or the shield against the charterers’ claim.” There is another aspect to the issue of refusing to obey or accepting the charterers’ orders which relates to the employment of the vessel. Prima facie, the charterers have the right to employ the vessel in all legitimate trade but if, in the course of that employment, the vessel suffers damage, then the owners may have the right to be indemnified for their losses by the charterers. This principle could apply to cases where there was no safe port obligation or the owners had waived their right to her protection. A case where the owners went so far as treating the charterers’ orders to go to an unsafe port as acceptable and complied with them, resulting in their loss of the right even to claim damages for losses suffered, was “The Chemical Venture’ [1993]” the facts of which are set out earlier. One of the main points in that case was that the owners accepted and paid bonuses for the crew to go to the unsafe port.