Edwinton Commercial Corp & Anor v Tsavliriss Russ (Worldwide Salvage & Towage) Ltd (Sea Angel)

On the 27^th July, 2003, the “TASMAN SPIRIT” (“the casualty”), laden with some 67,537 mt of light crude oil, grounded in or near the approaches to the port of Karachi. Subsequently, on or about the 13^th August, the casualty broke in two. I say nothing as to the precise place of grounding; that is the subject of a dispute as to the safety of the port and was not canvassed before me. On any view, the grounding comprised a major pollution incident; it gave rise to great local sensitivity on the part of the port authority, the Karachi Port Trust (“KPT”) and others.

The Islamic Republic of Pakistan (“Pakistan”) was not at the material time a signatory to the International Convention on Civil Liability for Oil Pollution Damage 1969 or the 1992 Protocol by which it was amended (collectively, “CLC”). It follows that the CLC regime of strict liability, compulsory liability insurance and limitation of liability was inapplicable. Accordingly, absent agreement, any prospect of satisfying claims for pollution damage rested on the security of those vessels or assets within the jurisdiction of Pakistan.

On the 30^th July, 2003, the Defendant (“Tsavliris”) entered into a Lloyd’s Standard Form of Salvage Agreement with the owners of the casualty, on the LOF 2000 form (“the LOF”), incorporating the SCOPIC clause – to which I shall return later. In the event, the SCOPIC clause was invoked by Tsavliris on the 13^th August. To fulfil its obligations under the LOF, Tsavliris engaged a number of sub-contracted craft (“the chartered in vessels”). It was necessary to lighten the casualty, off-loading part of its cargo with the use of shuttle tankers and transhipping that cargo to a larger tanker, the “ENDEAVOUR II”. One such shuttle tanker was the “SEA ANGEL” (“the vessel”), owned by the First Claimant, time chartered on the 25^th August, 2003 to the Second Claimant and sub-time chartered on the same day to Tsavliris (“the head charterparty” and “the charterparty”, respectively). The period/trading limits clause of the charterparty included this wording: “…up to 20..days…for transhipment(s) of up to full cargo of crude oil from forward and aft sections…” of the casualty. The vessel was delivered into service under the charterparty on the 26^th August.

On the 5^th/6^th September, the vessel completed loading her final parcel of cargo from the casualty and shifted to “ENDEAVOUR II”, in order to tranship that parcel of cargo. On the 6^th September, the Defendant gave 5 days notice of redelivery under the charterparty. On the 9^th September, the vessel completed the discharge of cargo into the “ENDEAVOUR II”. On the same day, Tsavliris gave 3 days notice of redelivery at Fujairah, assuming that the vessel departed from Karachi that day.

In the events which happened, the vessel did not leave Karachi until the 26^th December and was not redelivered until the 1^st January, 2004. In the intervening period, between the 10^th September and the 26^th December, the vessel had been unable to depart Karachi because the KPT had refused to issue a “No Demand Certificate” (“NDC”), a pre-requisite to port clearance and of which more in due course. On the 5^th December, in a reasoned judgment to which I would pay respectful tribute, Judge Alam, sitting in the High Court of Sindh at Karachi, held that the KPT’s refusal was unjustified and directed it to issue a NDC.

It is against this background that the present dispute has arisen. The Claimants claim that hire is due and owing under the charterparty in the amount of US$1,373,320, for the period from 18^th September, 2003 (from when Tsavliris ceased paying hire) up until redelivery on the 1^st January, 2004. For its part, Tsavliris denies that any hire is due and owing and contends instead that the charterparty was frustrated. This issue was first raised on the 21^st October, 2003, when Tsavliris alleged that the charterparty was frustrated, by latest the 13^th October. On the 23^rd October, the alleged frustration date was advanced to, in effect, the 10^th September. By the time of the trial, the 10^th September dated was (realistically) not pressed. Instead the Tsavliris case was that the charterparty was frustrated somewhere between the 19^th September (its primary case) and the 13^th October. The Claimants have throughout denied that the charterparty was frustrated, at all or, by way of a fallback position, not before the 18^th October. There were in addition certain ancillary claims and counterclaims with which it is unnecessary to deal at this stage.

In a nutshell, the rival cases were these. Mr. Hill, for Tsavliris, submitted, first, that there had been a frustrating event: namely, the unlawful refusal by the KPT to issue a NDC, when all sums properly due had been paid. KPT had “detained” the vessel as security for its pollution claims against third parties - the owners of the casualty and its Protection and Indemnity Club (“the Club”). This detention had continued until a deal had been done between KPT and the Club. From the 19^th September and certainly by the 13^th October, the parties acting as reasonable commercial men would reasonably have forecast that the period of delay would be inordinate, in the context of a 20 day charterparty for very limited services. This view was confirmed in retrospect; a 20 day charter had lasted for some 120 days. Secondly, Mr. Hill contended that the risk of such detention was not dealt with by the charterparty. This risk had not been assumed by Tsavliris and was neither foreseen by the parties nor reasonably foreseeable. As Mr. Hill put it in the Tsavliris written closing submissions:

“ …the risk of the vessel being detained by the port authorities for security of someone else’s obligations to pay for pollution damage was not reasonably foreseeable.”

This was not detention arising in the course of the vessel’s usual operation. The Claimants’ arguments that the charterparty excluded the doctrine of frustration whether through cl. 7 of the charterparty, or any safe port or safe places obligation, or any redelivery obligation, or by way of the rider clause, were ill-founded or misconceived.

For the Claimants, Mrs Blackburn QC denied that there had been any frustrating event. Delay was a normal incident of a maritime adventure. Detention of salvors’ craft and equipment, whether owned or sub-contracted, was a known risk of the salvage business; what happened here was not extraordinary. Alternatively, if the delay would otherwise have given rise to frustration, the risk of such delay was either assumed by Tsavliris, whether under the various provisions of the charterparty to which reference has already been made or otherwise, or it was self induced so that Tsavliris could not rely upon it. Above all and however analysed, Tsavliris had failed to launch timely court proceedings in Pakistan which could have secured the release of the vessel. The proceedings in the event instituted by the Claimants had done just that; it was the threat of contempt proceedings, following the order made by Judge Alam, which had brought about the vessel’s release. If Tsavliris chose to proceed by way of commercial negotiations rather than litigation, a case of frustration could not be made good; there was throughout the opportunity of securing the vessel’s release by recourse to the effective local court system. As to the alleged frustration dates advanced by Tsavliris, as at the 19^th September, the position was far too speculative to permit a conclusion that the delay would continue for such a period as to give rise to frustration. Throughout the period contended for by Tsavliris, namely the 19^th September – 13^th October, the litigation route had not yet been explored. As foreshadowed, if wrong on all this and as a fallback position, the earliest frustration date was the 18^th October.

Any notion of self induced frustration was disputed root and branch by Tsavliris. There was no relevant obligation; it was not in breach of any obligation (if obligation there was); any breach had not caused the delay or its continuation. The decision to pursue a commercial route to secure the release of the vessel had been justified; in any event, no court order, without the overall commercial deal already referred to, would have been effective to ensure the vessel’s release.

For completeness, I record that the Claimants had earlier pursued an application for summary judgment under CPR Part 24. This application was refused by Cooke J, on the 19^th February, 2004, for the reasons which appear from his judgment. Other than by way of a brief reference to the judgment of Cooke J, it is unnecessary to say more of that application and its fate.

(A) The LOF: Chronologically, I start with the LOF. Some words of introduction may be appropriate. Traditionally, as is well-known, services under LOF salvage agreements are rendered on the principle of “no cure no pay”. Again traditionally, salvage rewards and awards have been fixed with a view to encouraging salvage operations and taking into account the risk inherent in the “no cure no pay” principle. This approach is reflected in Art. 13 of the London Salvage Convention 1989 (“the 1989 Convention”), which has the force of law in the United Kingdom pursuant to s.224(1) of the Merchant Shipping Act 1995. Increasing concern as to the threat of damage to the environment posed by marine casualties led to the introduction of measures for “special compensation” for salvors, now contained in Art. 14 of the 1989 Convention. In circumstances giving rise to the threat of damage to the environment, Art. 14 was designed to interest salvors in undertaking salvage operations even when faced with a low value fund and a significant risk of failure. In the event, however, the limitations of Art. 14, perhaps in particular the fact that recovery thereunder was confined to the reimbursement of expenditure and excluded a profit element, gave rise to uncertainty and dissatisfaction and encouraged a search by the industry for an improved alternative: see, The Nagasaki Spirit [1997] AC 455; Brice on Maritime Law of Salvage (4^th ed.), at paras. 6-86 and following and 8-194 and following.

Such considerations in due course resulted in the development of “SCOPIC”, an acronym for “special compensation protection and indemnity clause”. The parties are free to choose whether or not to incorporate a SCOPIC clause into their LOF. The philosophy of the SCOPIC clause is “quite distinct” from that of Art. 14 of the 1989 Convention and that of the Nagasaki Spirit: Brice, at para. 8-199. The clause, which may only be invoked by the salvor, guarantees to him remuneration (not simplyreimbursement) if and insofar as the tariff rates under the clause yield more than an Art. 13 award. The salvor does not need to prove that there exists a threat of damage to the environment; but once the SCOPIC clause is invoked, if there is such a threat, then the SCOPIC clause rather than Art. 14 of the 1989 Convention governs. The SCOPIC clause is thus again a form of safety net. Where the salvor has erroneously invoked the SCOPIC clause, in the sense that the Art. 13 award exceeds the SCOPIC remuneration, then the Art. 13 award is to be discounted by 25% of the difference between the two. Liability for payment of SCOPIC remuneration rests on the shipowner (not on cargo interests) as does liability for the provision of security for such remuneration. In practice, the P&I Club’s role is critical, so reflecting the fact that it is the Club which benefits from the avoidance of pollution and other third party claims.

As already observed, the SCOPIC clause was incorporated in the LOF. For present purposes, reference should be made to cl.9 thereof, which gives the salvor the right to terminate his services (cl. 9(i)) and the shipowner the right to terminate his obligation to pay SCOPIC remuneration (cl. 9(ii)). Clauses 9(ii) and (iii) provide as follows:

“ (ii) The owners of the vessel may at any time terminate the obligation to pay SCOPIC remuneration after the SCOPIC clause has been invoked …provided that the Contractor shall be entitled to at least 5 clear days’ notice of such termination. In the event of such termination the assessment of SCOPIC remuneration shall take into account all monies due under the tariff rates set out in Appendix A hereof including time for demobilisation to the extent that such time did reasonably exceed the 5 days’ notice of termination.

(iii)

The termination provisions contained in sub-clause…. 9(ii) above shall only apply if the Contractor is not restrained from demobilising his equipment by Government, Local or Port Authorities or any other officially recognised body having jurisdiction over the area where the services are being rendered.”

It follows that where sub-clause 9(iii) applies, the services continue and SCOPIC remuneration continues to be earned. Brice goes on to say this (at para. 8-239):

“ Governmental intervention is commonplace where there is perceived to be a threat to the environment from a particular casualty. This can take the form of the arrest of the casualty , her crew, the salvors’ tug(s), crew(s) and salvage officers unless and until the littoral interests are provided with suitable guarantees in the event of pollution. If no such guarantees are forthcoming the relevant authorities are likely to seek to compel the contractors to continue with their services to the extent necessary to obviate the threat.”

Unsurprisingly, this passage gave rise to considerable debate at the trial.

It is against this background that under the LOF, the owners of the casualty are potentially liable to indemnify Tsavliris for all liabilities arising under the salvage operation, including liability towards the owners or operators of vessels, plant and equipment sub-contracted by Tsavliris for use in the operation. According to Mr. Moloney, a partner of Eversheds, under the final settlement of Tsavliris claims under the LOF, the liability insurers of the casualty agreed to take over, inter alia, the conduct of this dispute. Furthermore, pursuant to this agreement, responsibility for the matter was transferred from Clyde & Co., hitherto instructed by Tsavliris, to Eversheds, who were originally solicitors for the owners, managers, master, crew and liability insurers of the casualty. As these arrangements accordingly make clear, if the Claimants’ claim succeeds, then ultimately it appears that it would be passed on by Tsavliris and borne by the casualty’s owners or the Club, with Tsavliris earning remuneration in the process; conversely, if the Claimants’ claim fails, any loss will lie solely with them.

(B) The Claimants and the charterparty: So far as concerns the Claimants, the following matters may be noted:

I come to the charterparty, primarily contained in or evidenced by a fixture recap dated 25^th August, 2003. The charterparty provided, inter alia, as follows:

“ Redelivery: Dropping off last pilot Fujairah Roads after release by charterers or their authorised representative.

Period/Trading Limits: Up to 20…days in charterer’s option…for transhipment(s) of up to full cargo of crude oil from forward and aft sections of crude oil tanker ‘Tasman Spirit’ presently lying aground Keamari channel near Karachi, Pakistan for delivery/discharge to one safe berth(s) always afloat Pakistan/Arabian Gulf range in charterer’s option or mutually agreed safe port(s) or place(s). Transfers within OIMF guidelines.

Charterers to arrange, provide and pay for permits as required by the Pakistan or any other authorities in order that the ‘SEA ANGEL’ can perform under this charter.

Any taxes and/or dues on hire and/or cargo and/or vessel to be for charterers’ account and to be settled directly by them.

Contract: Terms ‘SHELLTIME 4’ time charter party, suitably amended to include the following additional clauses:-

It is agreed and understood that any responsibility, costs and any expenses which may arise following the removal of the crude oil cargo from the crude oil tanker ‘TASMAN SPIRIT’ will be for account of ‘TASMAN SPIRIT’s’/charterers’ interests. It is further agreed and understood that owners of crude oil tanker ‘TASMAN SPIRIT’/charterers will provide directly to third parties guarantees in relation to any potential cargo claim keeping free from any liabilities the M/T ‘SEA ANGEL’, her master and owners except as a result of wilful neglect on behalf of owners, master or crew.” *

* Throughout the trial, this clause has been referred to as “the rider clause”.

The SHELLTIME 4 form, incorporated into the charterparty as above, provided, inter alia, as follows:

“ 4. Period Trading Limits …Charterers shall use due diligence to ensure that the vessel is only employed between and at safe places (which expression when used in this charter shall include ports, berths, wharves, docks, anchorages, submarine lines, alongside vessels or lighters, and other locations uncluding locations at sea) where she can safely lie afloat. Notwithstanding anything contained in this or any other clause of this charter, Charterers do not warrant the safety of any place to which they order the vessel and shall be under no liability in respect thereof except for loss or damage caused by their failure to exercise due diligence as aforesaid.

7.

Charterers to Provide Charterers….shall pay agency fees, port charges, commissions, expenses of loading and unloading cargoes, canal dues and all charges other than those payable by Owners in accordance with Clause 6 hereof…..”

Introduction: The factual history and context were explored in great detail at the trial. It will be unnecessary for me to do likewise in this judgment but, unavoidably, I must deal with the facts in sufficient detail so as to do justice to the rival cases.

At the trial, oral evidence was given by a number of factual witnesses. The Claimants called Mr. Aga, their Pakistani lawyer. Tsavliris called a number of witnesses: (i) Mr. Hall, of Clyde & Co.; (ii) Mr. Constantinidis, its Managing Director; (iii) Mr. Taha, its Pakistani lawyer, of the firm Orr Dignam & Co. (“Orr Dignam”); (iv) Rear Admiral (Retd.) Khalid, the Executive Director of MM Marine Services (Pvt) Ltd (“MMM”), the Karachi general agents of Tsavliris throughout the events with which we are concerned; (v) Mr. Moloney of Eversheds, to whom reference has already been made. All these witnesses sought to assist the Court, though, understandably, their evidence was influenced by their individual perspectives. Various further witness statements were read; it is not necessary to list those here.

Questions of Pakistani law, practice and procedure were dealt with in the reports and Joint Memorandum dated 13^th January, 2006 (“the Joint Memorandum”) of Mr. Justice (Retd) Alavi, instructed by the Claimants and Mr. Naeem, a practising Pakistani lawyer, instructed by Tsavliris; Mr. Naeem in fact acted for the casualty and the Club in this matter. As appears from the Joint Memorandum, there was very little in issue between the experts. In consequence, the parties agreed that neither expert would be called to give oral evidence but that each party would be at liberty to make submissions as to the experts’ reports.

Before turning to the history and so as to place it in context, I must first summarise the standard procedures for the departure of vessels from Karachi, together with certain aspects of Pakistani law and practice.

Standard procedures for vessels departing Karachi: As appears from the undisputed evidence of Admiral Khalid, supplemented by the evidence from the experts on Pakistani law and practice:

Aspects of Pakistani law and practice: In Pakistan, vessels may be arrested or detained pursuant to two regimes. First, vessels may be arrested under the Admiralty Jurisdiction of the High Court Ordinance 1980, a law based on the Merchant Shipping Acts pre-dating Pakistan coming into existence in 1947. In the present case, the vessel was not arrested in this fashion. Secondly, vessels may be detained by certain public authorities (or bodies), by refusing port clearance if there are dues or charges owed to the authority by the vessel; in the case of the KPT, such powers are contained in ss. 52 and 53 of the KPT Act 1886; it is with these powers that the present case is concerned.

Against this background, the experts on Pakistani law and practice were asked a series of questions going to the manner in which an unlawful detention of a vessel by a port authority could be challenged; the timescale involved; whether the port authority could ignore orders of the Court and the remedies for non-compliance with any such order.

In summary, the experts said this:

The 27^th August – 19^th September, 2003: I turn to the factual history, starting with the chapter covering events up until the 19^th September. It will be recollected that the primary case of Tsavliris at trial was that the charterparty was frustrated on the 19^th September.

As early as the 27^th August, anticipating the need to meet port dues, MMM sent a pro forma to Tsavliris, asking for some US$14,459.00 in respect of the vessel’s visit to Karachi. Admiral Khalid said that this sum, once received from Tsavliris, was immediately paid into MMM’s LPD account; he was challenged in cross-examination and it was suggested that payment(s) into MMM’s LPD account were not made until the 23^rd September. Although the documentary evidence is not entirely clear, I am content to proceed on the assumption that Admiral Khalid’s recollection is correct; however, on the view which I take of the matter, nothing turns on this minor area of dispute.

On about the 28^th August, the vessel arrived at Karachi.

On the 5^th September, MMM for the first time requested up to date invoices from the KPT for all the Tsavliris sub-chartered vessels engaged in the salvage operation. Apart from the vessel, these vessels were the “ENDEAVOUR II” (the tanker into which the casualty’s cargo had been transhipped), the “FAIR JOLLY” (used as a shuttle tanker before the arrival of the vessel) and two tugs, the “UMKA” and the SB “408”. MMM indicated that, on receipt of the invoices, the requisite funds would be requested (from Tsavliris) and deposited in its LPD account. A number of chasers followed.

As already mentioned, on the 6^th and 9^th September, Tsavliris purported to give 5 and 3 day notices of redelivery under the charterparty.

On the 9^th September, MMM applied for a NDC for the first time.

Also on the 9^th September, the first indication emerged that there might be any hiccup with the departure of the vessel from Karachi. Mr. Paracha, a director of the Second Claimants, appears to have been told that the vessel was being held by the KPT because of non-payment of “some port dues from …[Tsavliris]…on their other vessels/tug boats”. The likely delay at the time was thought to be of the order of 2-3 days. It is plain on the available materials that the reasons for this had not been firmly established. In his evidence, Mr. Constantinidis said that he was aware of this problem but did not think it was a crisis; he had experience of these situations and believed it would be sorted out.

On the 10^th September, the Club purported to terminate the obligation to pay SCOPIC remuneration under cl. 9(ii) of the SCOPIC clause.

On the same day, the vessel was ordered by the KPT to shift from alongside “ENDEAVOUR II” to a berth.

At this stage, Mr. Hall was concerned about the position of the “ENDEAVOUR II” (rather than the vessel) and perhaps even more so as to the withdrawal of the passports of the salvage personnel. He consulted Orr Dignam, who advised, on the 11^th September, against initiating any action against the KPT, in effect until the situation had clarified. As to the “detention” of the personnel, Orr Dignam assumed that this related “….to the ongoing saga with the ‘TASMAN SPIRIT’ and KPT probably wish to detain all personnel involved in the event any information is required given the considerable public furore on the oil spill.”

Admiral Khalid had meetings with the KPT on the 11^th, 12^th and 13^th September. On the 13^th September, he specifically asked that any sums claimed by the KPT should be divided into two parts: first, port dues in respect of three vessels chartered in by Tsavliris (the vessel and the two tugs); secondly, claims made by the KPT in respect of the grounding of the casualty. Subsequently, he repeated these requests.

In his oral evidence, during cross-examination, Admiral Khalid said that on about the 6^th/7^th September, he had been told, apologetically, by the KPT that the Tsavliris vessels would not be released until there was an overall settlement of the entire “salvage operation”. In re-examination, Admiral Khalid said that he thought this discussion had taken place on about the 11^th – 13^th September. The suggestion of any such discussion on the 6^th/7^th September can safely be put to one side. It is convenient to defer for later evaluation, Admiral Khalid’s suggestion of a discussion of this nature between (about) the 11^th – 13^th September.

The 15^th September was the final day for timely redelivery of the vessel under the charterparty.

On the 17^th September, the KPT sent to MMM a detailed “statement of charges …due against MT Tasman Spirit…” and called upon MMM to deposit in its LPD account the sum of Rs.650,000,000 – at an exchange rate of Rs.58 = US$1, the equivalent of (very approximately) US$11 million.

These accounts prompted a robust response from MMM, on the same day, again calling for the port dues and other claims to be dealt with separately. Amongst other things, MMM said this:

“ We feel that one-sided claims are never settled. The parties concerned contest these. Who will pay the claim has to be established. All this may take months. Is the KPT’s intention to hold Port Clearance of all the vessels till this [is] decided? Such a decision may be counter productive. ”

On the 18^th September, Mr. Pappas, the Tsavliris Salvage Master and Mr. Gregory, the Shipowner’s Casualty Representative (“SCR” – see SCOPIC, cl. 11), acting on behalf of the Club, agreed that of the US$11m bill, only some Rs 20,517,604.84, at an exchange rate of Rs 58= US$1, the equivalent of US$353,751.80 was for the account of Tsavliris. Of that amount, only some Rs. 923,184.36, at the same exchange rate, US$15,916.97 was attributable to the vessel (as opposed to the other chartered in vessels).

Also on the 18^th September, the Pakistani Ministry of Foreign Affairs wrote to the Embassy of Greece, concerning the repatriation of the Master and Crew of the casualty, as follows:

“The Ministry….has the honour to state that the relevant authorities have conveyed that the preliminary inquiry into the grounding of MT Tasman Spirit has still not been completed.

It has also been informed that prior to repatriation of Master and Crew, the owner of the ship will have to provide the following undertakings, duly authenticated by the Greek and Phillippines Embassy in Islamabad:

i)

Undertaking and assurance through P&I Club to meet all losses including consequential losses.

ii)

Undertaking that owner will produce before Board of Inquiry/ Court of Law, in Pakistan the Master or any of the Crew as and when required.

The …Embassy is requested to get the above requirements expedited for an early repatriation of the crew members.”

On the face of it, the implications of this communication are startling; I shall return to it later.

On the 19^th September, MMM reported to Tsavliris in the following terms:

“ All remittances so far sent by you amounting to USD.192,459…has been accounted for by you ‘On account Port Dues’ and today you have remitted another USD 165,000…totalling to USD 353,751.80. All this amount has been taken by you as Port Dues. The Port Dues so far submitted by KPT are up to the 16^th September, 2003. the meter is still running and port dues continue to rise till finally settled. We have doubts that even after the above payments the vessels will be allowed to sail. We have sought clarification on this account….The general impression here is that unless the total amount of Rs. 650,000,000.00 is either paid by you or guaranteed by some one, no movement is likely to take place. We must therefore await KPT’s response to our letter before actually depositing the amount in our LPD account. You should not count on partial acceptance of the dues as final settlement. You must continue efforts to have the balance settled one way or other. Specially if it does not pertain to you.”

On any view, this communication could not have been reassuring. That said, the language expresses “doubts” and “impression”, rather than certainty. To my mind, the conversation with the KPT, recounted by Admiral Khalid (see above) is not to be understood as going beyond the terms of this report.

My inclination in this regard is strongly reinforced by the evidence of both Mr. Hall and Mr. Constantinidis. In his evidence, Mr. Hall said that as at the 13^th September, he was still trying to find out whether and, if so, why, the vessel was detained. A delay of a matter of days would not trigger alarm bells. As of the 17^th September, it was clear that there was a “major problem”. Challenged in cross-examination as to why recourse was not had by then to litigation, he said that, at this stage Tsavliris was seeking a political and commercial solution to the problem, rather than a litigation route. He was anxious for a “twintrack” approach involving politics and commercial negotiation. He did not wish to inflame the overall situation by bringing legal proceedings. Mr. Hall viewed the 19^th September MMM report as an “ongoing process”; the aim was to pay the port dues and obtain a NDC.

For his part, Mr. Constantinidis said of this period in time that there was a “lot of gossip” but “nothing official”. His hope was that a commercial solution would be found. He did not believe that resorting to litigation would have helped. He wanted to do his best for Tsavliris, having regard both to his concerns for the personnel “detained” in Pakistan and to obtaining the release of the vessel, together with the other chartered in vessels. He continued to hope that matters would not come to litigation. Put to him in cross-examination that this was a charterparty of short duration, so that his “first priority” should have been legal action, he disagreed. He thought a speedier solution would be forthcoming from a commercial cum political solution. He did not believe for a minute that the law would be quicker; from his “general knowledge” he did not wish to become “tangled” with court proceedings. Going to Court was the “last resort”; though he (or his company) had not litigated in the Pakistani Courts before, Pakistan was not well-known for the speed of its legal procedure. As to the 17^th September KPT statement of charges (see above), Mr. Constantinidis said that faced with “an unreasonable US$11 million demand – you don’t worry”; his aim remained a commercial solution, which had to be found; the involvement of the Club in the solution would help immensely. Asked later by me as to the timescale for such a commercial solution, he said that he had no fixed timescale in mind but contemplated something in the order of three months, “certainly before Christmas”.

The 19^th September – 18^th October, 2003: I turn to the next chapter in the history, taking in the Tsavliris alternative case(s) as to frustration date(s) and the Claimants’ fallback position (in the event that contrary to their primary case, the charterparty was frustrated).

On the 23^rd September, MMM paid into its LPD account a further sum (about US$17,000) in respect of the vessel. MMM continued to press the KPT for a NDC in respect of the vessel and the two tugs. For completeness, at this time, MMM did not press for port clearance either for the MT “FAIR JOLLY” (as that vessel was in dock) or for the MT “ENDEAVOUR II” (as she was under arrest at the suit of cargo interests).

On the 24^th September, Mr. Hall gave instructions to Orr Dignam. Tsavliris was anxious to secure the release of the vessel and the two tugs. Orr Dignam was to prepare – but not issue – an urgent application to the Court seeking an order that Mr. Pappas (the salvage master) be allowed to depart along with the vessels in question. In addition, consideration was to be given to bringing a claim for damages against the KPT in respect of the detention of Mr. Pappas and the vessels. As Mr. Hall explained in his oral evidence, the matter was “very delicately poised”, both in respect of personnel who had been or, in the case of Mr. Pappas, continued to be detained and with regard to the release of the vessels; hence his instructions to prepare for legal proceedings but not to issue them. His preference remained for a commercial solution but he was now exploring legal options in case of need; he did not think that the legal route would be quick and he still had no definite explanation as to why the ships had not been released.

On the same day, Orr Dignam responded. They were still examining how best to proceed – i.e., whether to file a constitutional petition or a separate action by way of a civil suit for damages. In their opinion, the better route was to issue a formal legal notice which would be a precursor to the commencement of any proceedings. Depending on the KPT’s reply, as to which they were uncertain, they would be in a better position to determine their future course of action.

On the 26^th September, Thomas Miller (acting in respect of the tug “SB 408”) advised Mr. Hall that their information was to the following effect:

“ …KPT will not release the SB 408 until they receive security or compensation from either the owners or Tsavliris….

…the situation in Karachi is very sensitive and difficult and is not going to be resolved without intervention and agreement being reached between the 3 parties; owners, Tsavliris and KPT….”

Mr. Hall’s reaction to this advice was that the prospects for release looked very bleak without legal action but much of the information swirling around amounted to rumour and gossip.

At this time, Mr. Moloney was in Karachi, representing the interests of the casualty and the Club. He held a series of meetings with the KPT and others on the 26^th and 27^th September. He said that the position was “still fluid” and in his report to clients said that the meetings had done some good. He appreciated that wreck removal was a P&I obligation; he had thought of seeking to do that under SCOPIC but had decided that that would not be viable; the contract had therefore been put out to tender and Smit had by then been identified as the preferred contractor. He was, however, very unhappy at the prospect of bringing another ISU contractor (Smit) into the Pakistani jurisdiction while Tsavliris assets were still detained. He and the Pakistani parties with whom he met were well aware that Pakistan was not a party to CLC (as already noted); accordingly, the Pakistani parties were very much alive to their security needs. Mr. Moloney was concerned that settling with the KPT might not dispose of the matter, not least given that the Defence Housing Association was an “Army run” large potential claimant. He was also anxious as to the liberty of the master and crew of the casualty and the dangers posed in this regard by “minor officialdom”. He had some leverage arising from the issue of wreck removal and the high level political repercussions of the detention of seafarers, highlighted by the letter of the Ministry of Foreign Affairs of the 18^th September (see above).

In his Witness Statement (dated 30^th November, 2005), Mr. Moloney said that he:

“…was convinced from the moment that the ‘Sea Angel’ was detained that any legal proceedings would be utterly ineffectual in obtaining the release of the detained assets.”

Plainly, as he himself came to accept in his oral evidence, Mr. Moloney could not have known this “from the moment” the vessel was detained. He now said that he became sure of this after meeting the KPT’s lawyers on the 27^th September. Cross-examined as to why this opinion had not found its way into his contemporaneous report (of 27^th September) to his clients, Mr. Moloney answered that he had wanted to keep the report short and he was “exercising editorial control”. I defer until later a more critical examination of Mr. Moloney’s views as to the efficacy of legal proceedings.

On the 29^th September, Admiral Khalid reiterated to Tsavliris that port dues for the three vessels for which port clearance was then being sought had been deposited on the 23^rd September. He now said that “he had always maintained that even after the payment of Port Dues, the KPT would not allow them to sail”.

On the 30^th September, a meeting took place at the office of the KPT’s General Manager Operations (“GMO”), Admiral Bashir, attended by Mr. Pappas and a Mr. Rapley from the Club. They reviewed the KPT invoices issued to date and (apparently) agreed that the total to be allocated to Tsavliris amounted to no more than Rs. 28,012,668.46, equivalent to US$482,977.04. This apparent agreement gave a glimmer of hope, followed as it was by a message, albeit of a somewhat curious nature, from Admiral Bashir of the 1^st October. At all events, MMM asked Tsavliris to transfer to them the requisite sums and this was in due course done. However, for Mr. Hall at least, a “pivotal moment” came when Admiral Bashir declined to sign the memorandum reflecting the suggested agreement. As Mr. Hall put it, Tsavliris was now on the horns of a dilemma; if more money was paid the ships might still not be released and the moneys would be lost; per contra, if the moneys were not paid, the non-payment might be used as an excuse or reason for clearance not being given.

On the 2^nd October:

In a meeting on the 9^th October, attended inter alia by Messrs. Moloney and Hall, the view was expressed that no one “believes KPT will allow any Tsavliris vessels to leave even when they pay the agreed port dues tomorrow or Saturday….If this happens, Tsavliris will bring an action against KPT in Karachi next week.”

On the 10^th October, Admiral Khalid was informed by the local representative of the casualty’s P&I Club that he had been informed by the KPT that port dues in respect of all the Tsavliris chartered in vessels had to be paid before any of them would be allowed to leave.

On the 11^th October, Usmani & Iqbal, the KPT’s Karachi lawyers, wrote to Eversheds in the following terms:

“ We believe there appears to be some misunderstanding…We are not aware of any agreement having been reached between KPT and Tsavlriis with respect to payment of dues….At no stage was it proposed or agreed to by KPT that mere payment of the dues proposed to be allocated to Tsavliris would enable the vessels in question to sail away….At the time it was repeatedly emphasised by KPT that the only reason why the sailing of the vessels was being delayed was because of the non-payment of the total outstanding dues in respect fo the vessels in question by …[MMM]…..KPT have no objection to part payment of dues by Tsavliris themselves and the balance by P&I Club, provided that the whole amount payable in respect of the vessels in question is settled or in the alternative a Bank Guarantee is furnished for the amounts that are disputed…..

May we emphasize that the payment of these dues must not be linked with the removal of the wreck because the dues are payable by the local agents of the vessels in question and the removal of the wreck is admittedly the responsibility of the Owners…. ”

On the same day, the Second Claimants commenced proceedings against Tsavliris and the KPT in the High Court of Sindh at Karachi (“the Karachi proceedings”). The progress of these proceedings looms large and is best considered in the context of the next factual chapter (covering events up until the 26^th December) and is deferred until then.

On the 13^th October, Eversheds passed on to Clyde & Co. a copy of this fax letter from Usmani & Iqbal, adding that the letter confirmed that the KPT intended to detain the Tsavliris vessels and equipment against both payment of port dues on those vessels and payment or security in respect of KPT’s claims against the owners of the casualty.

Nonetheless, perhaps mindful of the conversation relayed to Admiral Khalid on the 10^th October (see above) or with a view to a yet further attempt to sway the KPT or because the funds from Tsavliris had now arrived, on the 13^th October, MMM deposited in its LPD account a sum of Rs.25,500,000. This amount more than covered the port dues up until the 23^rd September in respect of all the Tsavliris vessels (i.e., including the MT “FAIR JOLLY” and the MT “ENDEAVOUR II”, as allegedly agreed at the meeting on the 30^th September. Immediate port clearance was requested for the vessel and the two tugs and permission was sought for Mr. Pappas to depart Pakistan immediately.

On the 14^th October, Clyde & Co (not at all unreasonably) sought clarification from MMM as to the payments and figures involved; Mr. Hall was anxious to ensure that any other sums claimed by the KPT had nothing to do with Tsavliris. Such clarification was forthcoming on the 15^th October.

On the 15^th October, MMM wrote again to the KPT, acknowledging that the sum deposited might not now be sufficient to cover the port dues for all five Tsavliris vessels, as the deposit was based on the dues calculated up until the 23^rd September. However, as the letter pointed out, a substantial amount of the sum deposited related to the MT “ENDEAVOUR II”; as port clearance was not then being requested for that vessel, such moneys could be applied to the other vessels for which immediate port clearance was sought.

On the 17^th October, MMM sent what might be regarded as the final chaser of this sequence to the KPT, yet again requesting a NDC. The vessels were not released.

By now, Clyde & Co, Orr Dignam and MMM were busying themselves with a draft legal notice to be served on the KPT. On the 18^th October, the final draft was available; in the event, it was served on the KPT on the 22^nd October.

If and insofar as it should matter, I shall return to a more precise analysis of the period 13^th – 18^th October. However, it can at once be said – and is consistent with all the evidence – that, as expressed by Mr. Hall in his Witness Statement dated 29^th November, 2005:

“ Whilst during the first two weeks of October Tsavliris and I had been hoping that matters would be resolved without the need for legal action, particularly following the meeting on 30^th September and the Memorandum obtained as a result, by 13^th October there was now clearly no alternative to proceed in a more aggressive manner….”

With the qualification that (as already remarked) the 13^th October might or might not be the precise date within the period 13^th – 18^th October at which this conclusion could properly be reached, in my judgment Mr. Hall’s summary is otherwise amply justified. Whether that factual conclusion leads to the further conclusion that the charterparty was then or thereabouts frustrated, is, of course, another matter entirely – and for later consideration.

The 18^th October – 26^th December: This chapter includes the raising of the issue of frustration, the Karachi proceedings and a commercial settlement involving the Club and the KPT.

I start with the Clyde & Co. letter to the Second Claimants, dated 21^st October, 2003, alleging frustration of the charterparty on or before the 13^th October. After re-tracing the history, Clyde & Co. said this:

“ It is clear…..that the KPT are not releasing the ‘SEA ANGEL’ and the other vessels and will not release ….[them]…until such time as the KPT have received compensation from the owners of the ‘TASMAN SPIRIT’ or their P&I Club for the initial grounding incident and subsequent pollution, even before our clients came on the scene.

…the current detention of the ‘SEA ANGEL’ and the other vessels is illegal and our clients have written to the KPT to this effect demanding release. If no response is forthcoming….our clients will have no alternative but to take appropriate action against the KPT for damages and for an order that the vessels be released.

Indeed, you have already taken such action….

It is clear that for some time now the commercial purpose of the charter of the ‘SEA ANGEL’ has come to an end. All that was required under the charter between our clients and yourselves for the ‘SEA ANGEL’ was for the ‘SEA ANGEL’ to be redelivered to Dubai. That would have only taken a few days. This should have happened long ago but for the illegal detention of the KPT.

The latest that the ‘SEA ANGEL’ should have been released in our clients’ view was once the port dues for the ‘SEA ANGEL’ and the other vessels had been paid. As such, our clients regard the charter of the ‘SEA ANGEL’ as frustrated from that moment ….”

As has been seen, “that moment” was on the 13^th October.

On the 23^rd October, Clyde & Co. sought to advance the frustration date. Tsavliris was not liable for any hire from the time the KPT “illegally detained” the vessel.

“…it is our clients’ position that the ‘SEA ANGEL’ should have departed as soon as our clients gave notice of redelivery or at the very latest within one or two days thereafter. The fact that the ‘SEA ANGEL’ did not depart when the notice of redelivery was given by our clients is…evidence (supported by subsequent actions of the KPT and statements made by the KPT or on their behalf), that there was never any intention of the ‘SEA ANGEL’ being allowed to depart.”

Although there was some debate at trial, much of the early chronology relating to the Karachi proceedings can be shortly summarised, as follows:

On the 3^rd December, a substantive hearing took place before Alam J. With admirable expedition, the learned Judge delivered a carefully reasoned judgment on the 5^th December (“the judgment”). For present purposes, the salient features of the judgment may be summarised as follows:

Notwithstanding the judgment, the vessel was not then released. On the 9^th December, the KPT sought and, on certain conditions, was granted a stay of the order for release of the vessel for 7 days, to permit an application to the appellate court. In the event, no application was made by the KPT within the 7 day period, so that the stay expired on the 16^th December.

In the meantime, the Club, through Mr. Moloney, had been actively pursuing a negotiated settlement with the KPT. The essential features of the proposed bargain centred on the release of the Tsavliris chartered in vessels, the payment of a sum of money towards the KPT’s claims for pollution costs and damage and the agreement to bring into Pakistan another ISU contractor to undertake the wreck removal of the casualty. On the 8^th December, the Club made a written proposal in this regard. On the 16^th December, the same day that the stay expired (see above), the KPT accepted that proposal.

For present purposes, the salient terms of the agreement between the KPT and the Club (“the settlement”), were as follows:

“ KPT hereby accepts the proposal of the ….Association [i.e., the Club]…offered through your letter….dated 8 December 2003, as follows:

The Association wishes to facilitate complete removal fo the wreck of TASMAN SPIRIT to the satisfaction of KPT. To this end, the Club proposes that the KPT will permit and facilitate the four Tsavliris-controlled vessels ‘Umka’, ‘SB 408’, ‘Sea Angel’ and ‘Fair Jolly’ to leave Karachi before their preferred contractors, Smit Salvage BV, come on site, subject only to a standby tug always remaining attached to the wreck until relieved by a SMIT tug, and provide the Association with a receipt…

In consideration of this, the Association has agreed and undertaken to:-

1.

Pay the balance of port dues according to tariff owed by the four vessels named above, before their departure, for the period from October 16, 2003 until the date of their departure.

2.

Pay KPT or to its order, the sum of USD1.6 million…., as part payment towards its charges and expenses in providing services to prevent, minimize and cleanup oil pollution damage arising from the incident. The sum will be placed in Pakistan, in the manner agreed for payment to KPT ….immediately on departure from Karachi of the four vessels named above.

3.

Contract with….[a named contractor]…to carry out the port infrastructure cleanup….

4.

At your risk and expense, remove the entire wreck of Tasman Spirit to the extent compulsory by law.

5.

To this end, the Association will contract with Smit Salvage BV”

Even now the vessel was not released. There followed yet further haggling as to the payment of port dues by the Club and the KPT’s demand for undertakings from the Club or the owners of the Tsavliris chartered in vessels releasing the KPT from liability in respect of their detention. Though the position is not entirely clear, it would seem that in due course undertakings to such effect were provided by the owners of the other Tsavliris chartered in vessels but not by the owners of the vessel. On the 17^th December, MMM, acting on behalf of Tsavliris – but without prejudice to the question of frustration - lodged the Rs.1,000,000 guarantee required by the judgment. Furthermore, by the 23^rd December (perhaps before), the US$1.6 million had been received in Pakistan and was available to the KPT upon departure of the vessels and still further sums in respect of port dues had been paid into MMM’s LPD account. Notwithstanding all this activity, as of the 24^th December, the vessel (and the other Tsavliris chartered in vessels) had not yet been released.

On the 24^th December, Mr. Aga, for the Claimants, issued an application for contempt of court, naming as Defendants the Chairman and Chief Account Officer of the KPT. The motion was to be heard on the 26^th December. In the event, the vessel and the other three Tsavliris chartered-in vessels dealt with in the settlement were released on the 26^th, so that the application was never adjudicated upon.

From the papers filed in support of the application for contempt, the following appears. First, it was the Claimants’ case that the two alleged contemnors were deliberately disobeying the order(s) of the Court. Secondly, it was being said, apparently by the KPT, that regardless of the order(s) of the Court, the vessel (and the other vessels) would not be released until (variously) Tsavliris paid “its alleged liability” and/or the Club paid a substantial amount or entered into an agreement with the KPT. Mr. Aga, in cross-examination, denied that he had been told this by the KPT and gave Admiral Khalid as his source of information. So far as it matters, Admiral Khalid was not, I think, cross-examined on this. Tsavliris has placed much emphasis on this feature, seeking to build upon it the argument that court proceedings were of no effect in securing the release of the vessel. For instance, Mr. Moloney, in his Witness Statement of the 30^th November, 2005, said this:

“ I am in no doubt whatsoever that the release of the detained vessels was only achieved by the American Club’s willingness to perform the wreck removal operation and by their payment on account to Karachi Port Trust. This is evidenced by the terms of the agreement that I negotiated with the KPT. The effect of any legal proceedings in Pakistan had no bearing whatsoever on that process.”

In due course, I shall evaluate this proposition, which, as already noted, formed a recurrent theme in Mr. Moloney’s evidence.

It is convenient at this stage, to pull together some miscellaneous threads, helpfully summarised by Mr. Moloney in his evidence:

I was referred to a good many authorities and a number of textbooks on the topic of frustration. Much has been written on this topic and it is not the purpose of a judgment at first instance to add to the legal literature. Instead, for present purposes, the summary which follows will suffice.

First, the doctrine exists to do justice by mitigating the rigours of the common law; the effect of frustration, however, is such that it is not to be lightly invoked. As explained in The “Super Servant Two” [1990] 1 Lloyd’s Rep. 1, at p.8, by Bingham LJ (as he then was):

“ 1. The doctrine of frustration was evolved to mitigate the rigour of the common law’s insistence on literal performance of absolute promises….The object of the doctrine was to give effect to the demands of justice…as an expedient to escape from injustice where such would result from enforcement of a contract in its literal terms after a significant change in circumstances….

2.

Since the effect of frustration is to kill the contract and discharge the parties from further liability under it, the doctrine is not to be lightly invoked, must be kept within very narrow limits and ought not to be extended…..

3.

Frustration brings the contract to an end forthwith, without more and automatically….”

Secondly, the mere fact that, due to an unexpected turn of events, a contract has become more onerous to perform, will not by itself give rise to frustration of the contract in question. Instead, what is required is such a change of circumstances, so that the nature of the contract has fundamentally altered or has become radically different; performance of the literal words of the contractual promise, if enforced in the changed circumstances, would involve a fundamental or radical change from the obligation originally undertaken: Chitty on Contracts (29^th ed.), Vol. I, at para. 23-012. The distinction is, with respect, illuminated in the speeches of Viscount Simonds and Lord Radcliffe, in Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 and in that of Lord Simon of Glaisdale in National Carriers v Panalpina Ltd. [1981] AC 675.

Thirdly, while delay is undoubtedly capable of giving rise to the frustration of a contract, it may be no easy matter to determine whether in any given case it has done so. Often, it will be a question of degree. In considering the question of delay in the present case, I keep the following matters in the mind:

Fourthly, frustration is concerned with the incidence of risk for unforeseen, supervening events: Chitty, at paras. 23-056 and following. Accordingly and by way of brief elaboration:

Fifthly, a party cannot rely upon that which would otherwise be a frustrating event, if the frustration was “self-induced”: Chitty, at para. 23-059. In The “Super Servant Two” (supra), Bingham LJ said this (at p.8):

“4.

The essence of frustration is that it should not be due to the act or election of the party seeking to rely on it…..A frustrating event must be some outside event or extraneous change of situation…..

5.

A frustrating event must take place without blame or fault on the side of the party seeking to rely on it…”

Later in the same judgment, Bingham LJ (at p.10) elaborated on the real question:

“ ….which is whether the frustrating event relied upon is truly an outside event or extraneous change of situation or whether it is an event which the party seeking to rely on it had the means and opportunity to prevent but nevertheless caused or permitted to come about. A fine test of legal duty is inappropriate; what is needed is a pragmatic judgment whether a party seeking to rely on an event as discharging him from a contractual promise was himself responsible for the occurrence of that event.”

Where a party makes good a prima facie case of frustration, the burden rests on the other party to prove that any such (otherwise) frustrating event was self-induced: Chitty, at para. 23-063.

Introduction: As will be recollected, it is the Tsavliris case that there was a frustrating event on the facts; that frustration was not precluded by the charterparty or otherwise and that it was not shown to be self induced. That division of the argument is useful, provided it is accepted that the issue cannot be approached in watertight compartments; questions going to the contract and the ability of the party alleging frustration to do something about the alleged frustrating event are, to my mind, relevant to the inquiry as to whether there was a frustrating event in the first place. In particular, when asking whether there was a frustrating event on the facts, “the facts” cannot be approached in a vacuum. In my judgment, it is here that the Tsavliris submissions, capably advanced though there were, encounter difficulty and it is here – at the first hurdle – that the Tsavliris case fails: there was no frustrating event. My reasons follow.

A more onerous contract: There can be no doubt that the detention of the vessel made the charterparty more onerous for Tsavliris. The obligation to pay hire continued for considerably longer than anticipated. However, as already discussed, this consideration, by itself, would not suffice to establish that the charterparty was frustrated.

The unexpired portion of the charterparty: I accept that a focus on the probable length of the delay compared to the unexpired portion of the charterparty, certainly by the 13^th-18^th October, 2003 (see below), represents the high water mark of the Tsavliris case on frustration. By the 10^th September, the vessel had been ready to commence her redelivery voyage, having completed her services in Karachi. The charterparty was for a short period (up to 20 days in charterer’s option) and the probable delay, viewed in mid-October and confirmed by the events which happened, was for a period considerably in excess of that. All the while, if the charterparty continued in existence, a comparatively high rate of hire was payable, reflecting the intended use of the vessel for the purposes of assisting in a salvage operation. This is, as Lord Sumner observed in Bank Line v Capel (at p.454) an important feature – though it may not be the main and certainly is not the only feature to be considered. For completeness, in the requisitioning cases the charterers were deprived of the use of the vessel for all purposes, for the duration of the requisitioning: see, Anglo-Northern v Jones & Williams (supra); here, strictly, the same could not be said – even though effectively detained, the vessel remained in the service of Tsavliris. If, however, a frustrating event was otherwise made good, this consideration would not, in my judgment, have precluded the frustration of the charterparty.

I must next turn to the features of the case other than the probable length of the delay compared to the unexpired portion of the charterparty. These may conveniently be considered under the following headings:

Delay in the salvage context: I take as my starting point the context in which the charterparty was to be found. It is incontrovertible that delay is an ordinary incident of salvage operations as it is of any maritime adventure. Such delay may of course be (to use Lord Sumner’s words in Bank Line v Capel, supra) “even of considerable length and of wholly uncertain duration”. Notably, on the evidence, for some time the delay here did not trigger alarm bells, all the more so given a situation replete with rumour and gossip rather than hard fact. Again, as was clear on the evidence, salvage operators are accustomed to resolving such difficulties and salvage remuneration is designed to reward or at least reimburse them for their skill in doing so.

What then of the nature and extent of the delay in the present case? I focus first, here, on its nature. It must be acknowledged that, in his evidence, Mr. Hall, with some 30 years of experience at Clyde & Co., said that he had not come across another case where (salvage) contractors’ tugs had been detained by port authorities. I confess to some surprise at that answer though, it may of course reflect Mr. Hall’s own experience. Inevitably, however, Mr. Hall accepted that such a risk was covered by SCOPIC clause 9(iii) – as already observed, the SCOPIC clause was an industry response to the needs of salvors in, amongst others, cases such as this case.

In his evidence, Mr. Constantinidis said that he had experience of a tug and a sub-contracted tug detained in Syria in 1986-7 by cargo interests (who may have been a public or state body). That was his only experience of the detention of a Tsavliris chartered in vessel in respect of third party claims against casualties. In Jeddah in 1995, a tug had been required to remain so as to continue salvage operations, when otherwise Tsavliris would have wished to terminate its services. He acknowledged too that there had been an arrest of a Tsavliris tug in connection with an allegation going to the manner in which services had been performed.

Perhaps, however, more tellingly than the individual examples put to and acknowledged or explained by Mr. Constantinidis, was the Tsavliris 2003 “Salvage Status Statement” (“the Tsavliris 2003 status statement”). As is well-known, such a statement is typically adduced in evidence by contractors in LOF arbitrations; it provides an evidential basis for “encouraging awards” and speaks to the expertise of the salvors in question, the expenses they incur and the risks to which they are exposed. Here, the Tsavliris 2003 status statement included the following passage:

“ On occasions Tsavliris salvage tugs were assisting casualties only to find themselves arrested or detained for lengthy periods through no fault on our part.”

I asked Mr. Constatinidis about this passage. He accepted that the risk was significant enough to mention, albeit while suggesting that such occasions were more rare now. He said that this was something which happened occasionally. I asked whether that was one of the risks of the industry. Mr. Constantinidis answered: “Oh, definitely.”

What is the true scope of this evidence? As it seems to me:

It follows, in my judgment, that nothing in the nature of the detention in the present case leads me to treat it as other than an incident of the salvage operations in which Tsavliris was engaged. Viewed in this light, the risk of unreasonable detention of the vessel at the hands of the KPT must be regarded as, objectively, forming part of the matrix of the charterparty. That the risk may only manifest itself on occasions or rare occasions is neither here nor there. If right so far, it would not be straightforward for either party to found a case of frustration on such detention. In any event and whatever might have been the position had it been the Claimants who were asserting frustration, given the evidence summarised above, it is difficult for Tsavliris to do so - it having entered into the charterparty against the background and with the knowledge of the risk I have adumbrated. When considering whether the detention in the present case gave rise to a fundamental or radical change in the obligation originally undertaken, this conclusion as to the contractual setting by itself provides a powerful argument for saying that it did not; the risk was always present. There is indeed a cogent case for concluding that the detention (at least so far as its nature is concerned) came within the ambit of the commercial risks undertaken by the parties. I shall return in due course to the prospective extent of the delay.

The Tsavliris approach: As already noted when summarising the evidence of Mr. Hall and Mr. Constantinidis, Tsavliris favoured a solution involving political and commercial negotiation. They were not at all anxious to resort to litigation and it was only (very broadly) in mid-October that Mr. Hall, at any event, came to the view that there was no alternative to a more aggressive approach.

Throughout the trial, the Claimants were critical of this approach. They repeatedly suggested, inter alia, that litigation should have been a “first priority”. In my judgment, such criticism was misplaced. I do not accept that Tsavliris fall to be criticised for not favouring earlier litigation. The highest I think it can be put is that some parties might have preferred to litigate sooner; but I cannot begin to conclude that it was unreasonable to approach litigation as a remedy of last resort.

Accordingly, in my judgment, Tsavliris was entitled, so to speak, to play a long game. But its choice in doing so must be relevant to the question of frustration. The point should not be over-stated; I do not think it can be said that the mere pursuit of a commercial solution is fatal to Tsavliris treating the charterparty as frustrated. Conversely, however, if a reasonable commercial party in the position of Tsavliris could properly have approached the detention of the vessel by seeking a commercial solution, it must be difficult to conclude that within a reasonable time frame for such negotiations the charterparty can be regarded as frustrated. As already noted, the timescale Mr. Constantinidis had in mind in mid-September for a commercial solution was something in the order of three months – “certainly before Christmas”. As it struck me that was an answer in evidence, both realistic and revealing in equal measure. It would certainly be difficult to reconcile the Tsavliris approach with the contention that, prior to Christmas 2003, justice required the charterparty to be treated as frustrated. Realistically, that approach instead suggested that this was no more than a commercial problem with which salvors are from time to time required to deal.

Cl. 7 of the charterparty: Viewed from another angle, it is not surprising that Tsavliris should have been actively engaged in the attempts to secure the release of the vessel. Quite apart from considerations going to its commercial reputation, cl. 7 of the charterparty (set out above) requires consideration. It is fair to say that cl. 7 loomed larger in the Claimants’ case on the application for summary judgment before Cooke J, than it did at trial. However, Mrs. Blackburn QC confirmed to me that an argument based on cl. 7 was maintained. Mr. Hill’s response was that cl. 7 was of no relevance. First, cl. 7 went only to payment; not to the assumption of risk. Secondly, there had been no failure to pay port dues; alternatively, any failure to port dues was not causative of the detention.

I am not, for my part, persuaded that cl.7 can be disposed of as readily as Mr. Hill contends. In my view, cl.7 does extend to assumption of risk. It seems inescapable, notwithstanding Mr. Hill’s submission to the contrary, that had there been a simple dispute, however unreasonably pursued, as to the amount of port dues actually paid, the risk of any resulting delay would have rested with Tsavliris. So, here, the fact that the KPT, however unreasonably, adopted the stance that it did as to the amount of port dues payable, does not impinge on the allocation of risk in respect of port dues as between the Claimants and Tsavliris. Whereas I am content to proceed on the footing that cl. 7 by itself may well not preclude frustration – see the reference above as to the construction of contractual clauses said to do so – I do think it is a relevant factor in the present equation. In considering whether the detention gave rise to a fundamental or radical change in obligation, it is pertinent to keep in mind the Tsavliris sphere of responsibility under the charterparty, of which cl. 7 is a part. In commercial and contractual terms, Tsavliris assumed the responsibility of making the arrangements necessary for this sub-contracted vessel to enter into Pakistan, operate there and depart Pakistan; see, apart from cl. 7, the various clauses as to permits, taxes and dues found in the fixture recap, set out above.

Proposed frustration dates: It is convenient here to pause so as to consider the frustration dates contended for by Tsavliris. As earlier recorded, Tsavliris’s primary case was that the charterparty was frustrated on the 19^th September. In my judgment, that contention has no merit. It is belied, or at any rate unsupported, by Tsavliris’s own evidence. On that evidence, which I have already summarised when dealing with this factual chapter and need not repeat, any conclusion ventured on the 19^th September as to the prospective length of delay would have been, at best, speculative. Accordingly, the argument for frustration as of this date is doomed – even without regard to the other features of the case telling against frustration more generally.

The more cogent argument – in terms of the probable length of delay – was centred on the 13^th October. By then (or thereabouts), it had become clear, as Mr. Hall explained, that the need for legal action could not be avoided. It must therefore be considered whether, prospectively, continued detention as of this date, at a stage when no resort had yet been made to the Pakistani Court to obtain the release of the vessel, gave rise to the frustration of the charterparty.

The availability of the Pakistani Court: It is necessary, in my judgment, to spell out what this Tsavliris argument entails. To conclude as of mid-October that the charterparty was frustrated must involve the assumption that either the Pakistani Court could not grant effective relief or that it could not grant effective relief other than after a period of inordinate delay. It is, with respect, a strong thing to make such an assumption with regard to the Court of a friendly foreign state. In my judgment the evidence does not warrant any such conclusion. Plainly, if effective and timely relief could be anticipated, the charterparty could not yet be regarded as frustrated.

I have not, in all this, overlooked Tatem v Gamboa (supra). As Mr. Hill rightly said, that case involved a charterparty for a short period, at a high rate, held to be frustrated following its seizure by a Nationalist ship in the Spanish civil war. As Goddard J concluded, the foundation of the contract was destroyed as soon as the “insurgent war vessel had seized the ship” (at p. 140). I respectfully entertain no doubts as to the correctness of the conclusion in that case. It does not of course follow that the conclusion of Goddard J would by itself require or suggest the same answer in the present case. In any event, it is sufficient to underline a key distinction between that case and this. In Tatem v Gamboa, there was no prospect of recourse to any court to obtain the release of the vessel. As discussed, here, the Pakistani Court was available. For that reason alone, Tatem v Gamboa cannot make good the Tsavliris case here.

Conclusion: I have reached the clear conclusion that Tsavliris, upon whom the burden rests, has not made good its case that there was a frustrating event at any relevant time. There was not so radical or fundamental a change in the obligation assumed by Tsavliris as to establish frustration. In summary:

I confess that I am not unhappy to arrive at this conclusion. In a salvage operation of this nature, it seems to me (subject always to any specific contractual provision) more satisfactory that salvors should assume the risk of unreasonable detention of their chartered in vessels. Such risks can be incorporated in the price for the services and passed on whether by way of an Art. 13 award or under the SCOPIC clause. Subject always to any specific contractual provision, they should not be borne by the owners of the chartered in vessel alone.

By way of postscript, I return to the letter dated 18^th September, 2003, written by the Pakistani Ministry of Foreign Affairs to the Embassy of Greece. That letter appears to suggest, inter alia, that individual seafarers would be detained pending the provision by the P&I Club of adequate security in respect of claims arising out of the grounding and break-up of the casualty. If that be the right interpretation of the letter, then, with the greatest respect, it gives rise to real unease. I say no more, as the fate of the casualty’s crew was not an issue falling for decision at this trial. But on any view, the letter serves as a reminder of the attraction of addressing legitimate concerns as to pollution and the provision of security by way of international conventions, rather than by way of a unilateral approach.

Introduction: The conclusion to which I have come – that there was no frustrating event – is sufficient to decide the outcome of this trial. Nonetheless, the question of whether, had there otherwise been a frustrating event, frustration was precluded by the charterparty, was fully argued. It is right that I should say something in this regard but, in the circumstances, I shall do so very briefly indeed. Not least, the exercise is inherently artificial, in that the relevant assumption must be that there has been at some time (contrary to my conclusion) a frustrating event on the facts (“the relevant assumption”). Doing the best I can, I am not persuaded that the charterparty provisions relied upon by the Claimants would, in isolation, have served to exclude the doctrine of frustration, assuming that there had otherwise been a frustrating event (i.e., the relevant assumption). As to questions of foreseeability of the risk, I do not think that any useful purpose would be served by a hypothetical decision on a difficult area of law in a necessarily fact sensitive area. I reiterate, however, that both cl.7 of the charterparty and the risk of unreasonable detention forming part of the contractual matrix, were significant contributory factors in my decision that the nature of the charterparty had not altered fundamentally or radically so that there had been no frustrating event. My reasons follow.

The obligation to redeliver: Plainly, under the charterparty, Tsavliris was obliged to redeliver the vessel at Fujairah, at the end of the charterparty period. The orders given by Tsavliris to the vessel were consistent with this obligation. With great respect to the argument advanced by the Claimants, I fail to see how the redelivery obligation assists on the issue of frustration. The short answer to the Claimants’ contention is that, on the relevant assumption, rather than the redelivery obligation amounting to a contractual provision precluding reliance on the frustrating event, the ability of Tsavliris to redeliver the vessel would have been prevented by the frustrating event.

The due diligence obligation to ensure that the vessel was only employed between and at safe places: For similar reasons, the obligation contained in cl. 4 of the SHELLTIME 4 form, takes the matter no further. On the relevant assumption, even the most generous view of the “secondary obligation” (see, The Evia No.2 [1983] 1 AC 736) does not assist the Claimants; no further order from Tsavliris would have enabled the vessel to leave Karachi. Tsavliris advanced a variety of other and anterior objections to the Claimants’ reliance on the “safe ports” provision in the charterparty; given the view which I take of the matter, it is unnecessary to express a view on these submissions. I do no more than record that they were advanced.

The rider clause: Here, the Claimants mounted a rather more formidable argument. They submitted that the first sentence of the rider clause (the full terms are set out above) should be given its natural meaning; there was no basis for restricting the width of its wording. When the clause said “any responsibility, costs and any expenses which may arise following the removal of the crude oil cargo” from the casualty will be for the account of the casualty’s or Tsavliris’s interests, it meant it. If that construction was well-founded, then the parties had made their own provision for the allocation of risk in the circumstances which had arisen. Accordingly, the application of the doctrine of frustration was precluded.

Tsavliris contended that the rider clause must be read as a whole and its true scope was indicated and confined by the second sentence – namely, it was a clause addressing problems arising in relation to cargo transhipped from the casualty. While the drafting was not ideal, there were obvious commercial reasons for such a confined clause. In any event, on the relevant assumption, the wording was not sufficiently clear to preclude frustration.

I have anxiously considered these rival arguments. Very much on balance, I prefer those of Tsavliris. First, the clause must be read as a whole; if that be right, then it would be very curious to find a clause of the untrammelled width contended for by the Claimants bolted together with the second sentence, itself plainly confined to cargo matters. Secondly, I accept the argument that the language of the clause would not bear the weight sought to be put on it if, as must be assumed, it alone stood to preclude the frustration of the charterparty. As a matter of construction, I am unable to conclude that the parties intended the rider clause to cover the event which, on the relevant assumption, must be taken to have occurred; I do not think that the wording of the clause was sufficiently clear to achieve any such purpose.

Cl. 7 of the charterparty: For the reasons as to construction already set out, I do not think that, on the relevant assumption, cl. 7 of the charterparty, taken by itself, would preclude the application of the doctrine of frustration. That said, as discussed above, I do think that cl. 7 has no little significance in highlighting Tsavliris’s sphere of responsibility under the charterparty – the starting point for any determination as to whether there has been so radical or fundamental a change in obligation assumed by Tsavliris, as to give rise to frustration.

A foreseen or foreseeable event? The position here requires a little elaboration. First, I am not persuaded that it follows from the fact that unreasonable detention by a port authority of a salvor’s craft and equipment (owned or sub-contracted) is a risk of the industry, that this detention of the vessel by the KPT was actually foreseen by Tsavliris, at the time it entered into the charterparty. Indeed, as Mr. Hill contended, the evidential basis for such a conclusion was not laid. Secondly, however, in the light of my earlier conclusions as to the Tsavliris 2003 salvage statement and the evidence of Mr. Constantinidis, I am satisfied that such a risk was foreseeable. Thirdly, for reasons already discussed in connection with the contractual setting, I do think that this feature is an important contributing factor in deciding that the nature of the charterparty had not been fundamentally or radically altered by the detention. As already foreshadowed, beyond this, I do not think it would be right for me to go; in particular, I decline to express a hypothetical view as to whether, had there otherwise been some frustrating event, the fact that the risk of unreasonable port authority detention of the vessel was foreseeable would by itself have served to exclude the doctrine of frustration.

If, contrary to my earlier conclusion, there was otherwise a frustrating event, would Tsavliris have been unable to rely on it, on the ground that it was self-induced? Once again, therefore, the relevant assumption is applicable, the discussion is academic and the exercise is artificial. Here too, there is very little useful that I can say. The only suggested basis on which frustration (if frustration there otherwise was) was self induced, lay in the Tsavliris decision to prefer a negotiated solution to earlier recourse to litigation. It is, however, impossible to determine this argument without first deciding on a frustration date and the reasons why the charterparty was then frustrated. If, for example, the charterparty had been frustrated on or about the 19^th September, 2003, then any argument as to self induced frustration would not get off the ground. If, however, the charterparty had been frustrated somewhere between the 13^th – 18^th October, 2003, on the ground of the extent of the prospective delay at that point in time, then there may well have been rather more to be said for this submission – even taking into account the burden of proof resting on the Claimants. Beyond that, I do not think I can usefully go.

My reasons for going this far are these. First, I have earlier concluded that the availability of effective and timely relief could be anticipated from the Pakistani Court and that the Karachi proceedings played a material role in securing the release of the vessel. If that be right, then there was scope for argument that proceedings commenced sooner could have been expected to bring forward the likely date of the vessel’s release.

Secondly, I take as my guide the observations of Bingham LJ, set out above in The “Super Servant Two”, supra, at p.10; what is needed is a pragmatic judgment; the essential question is whether the frustrating event relied upon:

“…is truly an outside event or extraneous change of situation or whether it is an event which the party seeking to rely on it had the means and opportunity to prevent but nevertheless caused or permitted to come about.”

Thirdly, I accept that Tsavliris did not have the means and opportunity of preventing the KPT from detaining the vessel in the first place. But, thereafter, Tsavliris’s choice as to whether and, if so, when to have recourse to the Pakistani Court to seek the release of the vessel could not be ignored in considering the vessel’s continued detention and the extent of the prospective delay. Here too, I would not have been minded to view the matter as one of criticism or breach of duty; it is, instead, a question of choices and consequences. The doctrine of frustration exists to do justice. If and insofar as Tsavliris relied on delay resulting from the vessel’s continued detention as constituting the frustrating event, there would be force in the argument that it had the means and opportunity of doing something about that detention but it had not or not yet done so.

It will be recollected that the Claimants’ fallback position was that if the charterparty was frustrated at any time (which they denied), then it was not frustrated before the 18^th October, 2003. For its part, Tsavliris contended for a frustration date between the 19^th September and the 13^th October. In the light of my conclusion that the charterparty was not frustrated, this point too is academic. Once again, however, it was fully argued and I will indicate my view.

I have already set out the key factual events over the relevant period and I will not repeat them here.

As it seems to me, if the charterparty was to be seen as frustrated, regardless of the various considerations upon which my conclusion was based, including but not confined to the fact that no attempt had yet been made to invoke the assistance of the Pakistani Court to obtain the release of the vessel, then I would likely have concluded that the frustration date was the 17^th October, 2003.

As already discussed, the matter must be considered as it had to be considered by the parties, rather than after the event. By the 17^th October, it was clear that something more was needed to obtain the vessel’s release, than Tsavliris ensuring that MMM had sufficient funds in its LPD account to cover the port dues of all the Tsavliris chartered in vessels then seeking clearance. If such a conclusion was sufficient to give rise to frustration of the charterparty (as must be assumed for the purposes of this hypothesis), then it was established, on the probabilities on the 17^th October. I do not think that the final, forlorn, chaser in the relevant series, sent that day, impacts on the matter. Conversely, until the 17^th October, I do not think that the matter had been sufficiently worked out to justify this conclusion; I am in particular struck by the communication from MMM to the KPT, on the 15^th October, explaining how the funds were to be allocated between the respective vessels so as to ensure that the funds in the LPD account kept pace with the constantly accruing dues. At least a day or so needed to be allowed thereafter to see if this letter attracted a favourable response. Come the 17^th October, it was, in my judgment, clear that it would not.

By the conclusion of the trial, there was, as I understood it, agreement on a variety of matters of quantum:

I shall be grateful for the assistance of counsel in drawing up the order and in connection with all questions of costs. So far as concerns the agreed items of quantum, it would be convenient if the agreed figures could be incorporated in the draft order; in the unlikely event that there is any difficulty in this regard, I shall of course consider any submissions advanced by counsel.