In Sea Master Shipping Inc v Arab Bank (Switzerland) Ltd & Yousef Freiha & Sons SA [2020] EWHC 2030, Owners, in a situation where Charterers were in insolvent liquidation and unable to meet their obligations under a voyage charter, sought to hold receivers liable for delay at the discharge port under the bill of lading.

The decision by the arbitration tribunal that neither the financing bank nor the receivers were liable for discharge port demurrage was unappealable.

That left the Commercial Court considering the Owners’ attempt to introduce an implied term into the contract of carriage (contained in or evidenced by the bill of lading), that the bank and / or the receivers would: (i) take all necessary steps to enable the cargo to be discharged and delivered within a reasonable time; and / or (ii) discharge the cargo within a reasonable time.

In the usual way, the bill of lading included a clause incorporating the terms of the voyage charter and it was common ground that this meant that they were incorporated “insofar as they [were] appropriate and relevant for such incorporation”.

Looking at each of the implied terms in turn:

Obligation to discharge the cargo within a reasonable time

The Court accepted that at common law, the responsibility for discharge rests with the owners of the vessel in the absence of a contractual provision to the contrary, in reliance on the Jordan II [2005] 1 Lloyd’s Rep 57. Clear language is needed to oust that general rule.  In this case, Owners sought to rely on a provision in the Charter that “cargo is to be discharged free of expense to the vessel”, and another which provided that “stevedores at discharging ports are to be appointed and paid for by the Charterers / Receivers”.

The Court found no difficulty in determining that the natural inference of those provisions was that only responsibility for costs was transferred, ie that the responsibility for discharge stayed where it lay, i.e. with Owners.  This finding was obviously based on the usual construction exercise, which involves looking at the contractual language and the factual matrix in each case.

It was telling that one of the points made by the Court was that once the general principles have been identified, authorities are unlikely to assist unless they concern the same language used in a similar context to the words to be construed in the instant case.  This seems to restrict the prospect of stretching similar language to fit your case.

The Court found that the receivers were under an obligation only to pay for the discharge operation and, in connection with that obligation, to meet the cost of appointing stevedores.  There was no reason, therefore, to imply the term proposed.

Obligation to take all necessary steps to enable the cargo to be discharged and delivered within a reasonable time

As to the discharge obligation, the implied term was rejected on the basis that it was an attempt to avoid the difficulty arising from the fact that the obligation to discharge rested exclusively on Owners, and that it was unnecessary to imply such a wide and general express term into the contract of carriage.

In terms of the delivery obligation, it was found that there was simply no need to imply such a wide term to give the contract “commercial coherence”. The indication was that the Court could be more inclined to imply a narrowly expressed term focussed on exactly what would be needed to bring commercial coherence to the Contract, rather than a wide term of the type sought by Owners in this case.

The Judgment is a useful review of the implied terms principles, but also emphasises that, in such circumstances, Owners bear the risk of Charterers becoming insolvent, and that the Courts will be unwilling to amend the agreement reached between the parties in order to improve the bargain made.