Shipping Case Digest - June 2021

• Published date: 28 July 2021
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Transport, Marine/ Shipping, Insurance Laws and Products, Trials & Appeals & Compensation
• Law Firm: Hill Dickinson
• Author: Hill Dickinson

Welcome to this month's edition of our shipping case digest, providing you with concise and useful summaries of recent legal decisions in the shipping market.

SEPTO TRADING INC -V- TINTRADE LTD [2021] EWCA Civ 718

The Court of Appeal considered the effect of incorporated general terms which were alleged to conflict or to be inconsistent with a term expressly agreed between the parties in a recap.

Factual background

This was a dispute between Septo Trading Inc (buyer) and Tintrade Limited (seller) arising from the sale of a cargo of fuel oil loaded on board the vessel "NOUNOU" at the port of Ventspils in Latvia in July 2018.

The contract was evidenced by a recap dated 20 June 2018, which said that a quality certificate issued by an independent inspector at the load port would be binding on the parties in the absence of fraud or manifest error, but it also provided for the BP 2007 General Terms and Conditions for FOB Sales ('the BP Terms') to apply 'where not in conflict with the above'. Those terms say that the quality certificate will be conclusive and binding 'for invoicing purposes', but without prejudice to the buyer's right to bring a quality claim.

On 25 June 2018, the seller nominated Ventspils as the loading port. On 26 June 2018, the buyer provided an independent inspector with instructions to perform quantity and quality determinations of the fuel oil to be shipped at Ventspils on board the vessel.

The quality certificate issued by the independent inspector certified that the fuel oil was in accordance with the contractual specification at the load port, but the judge at first instance found as a fact that it was not (see the first instance judgment). He held that the BP terms qualified the recap term which, if it had stood alone, would have excluded the buyer's quality claim, but that there was no conflict between these terms which could be read together so as to give effect to both of them. Accordingly the buyer's claim against the seller for the off-spec cargo succeeded and the judge assessed damages in the sum of US $3,058,801.

The seller appealed contending that the BP terms were in conflict with the recap term providing for the determination of quality by the independent inspector to be binding on the parties.

Legal analysis

Lord Justice Males delivering the leading judgment noted that the law was well settled where there was said to be an inconsistency between specially agreed terms and the printed standard terms of the contract where the contract contained an inconsistent clause.

Applying the leading cases of Pagnan SpA -v- Tradax Ocean Transportation SA [1987] 3 All ER 565 and Alexander -v- West Bromwich Mortgage Co Ltd [2017] 1 All ER 942 he stated that there was a distinction between a printed term which qualified or supplemented a specially agreed term and one which transformed or negated it. In order to decide on which side of this line any particular term fell, the question was whether the two clauses could be read together fairly and sensibly so as to give effect to both. Ultimately, the object was to ascertain the intention of the parties as it appeared from the language in its commercial setting.

The judge's starting point was the meaning of the recap term. A provisional view of what that term meant had to be formed, which could be tested against other clauses of the contract in the usual way. At that stage, account should not be taken of the printed term which was alleged to be inconsistent. However, if the provisional view formed required significant modification when account was taken of Section 1 of the BP terms that was likely to be relevant to the issue of inconsistency.

The judge held that the first instance judge was right to conclude that the effect of the recap term, considered on its own, was that the quality certificate was intended to be binding on both parties for all purposes. That was the clear meaning of the term.

Lord Justice Males saw no reason to revise this provisional view...