“No cure, no pay” or “best endeavours”: the shifting risk paradigm of commercial salvage

24 Июл

Публикация посвящена исключительно актуальным и сложным вопросам, связанным с изменением парадигмы распределения рисков при выполнении спасательных операций на море. Показано влияние английского права на формирование современных институтов, получивших значительное распространение в ХХІ в., причем исследуются различные механизмы определения суммы специальной компенсации, вытекающие из договора спасания по проформе LOF — Ллойдовской открытой форме договора спасания. Особое внимание уделяется стандарту «с приложением всех усилий», характерному для выполнения спасательной операции профессиональными спасателями. Подробно изучается понятие разумной и добросовестной морской практики. В заключение делается вывод о том, что полностью довольный ценой услуги клиент — большая редкость.

As long as there are ships, there will be marine casualties and, as a result, salvage companies. Salvors have traditionally worked under the “no cure, no pay” ethos, and the mature thread of common law that has developed over its long history. Since then the Lloyd’s Open Form (LOF), among others, has developed, ensuring “reasonable compensation” for efforts to protect the environment, and bringing a degree of contractual certainty to common law salvage.

However, as ships grow ever larger, and thus more difficult to salvage, the concept of “best endeavours” is becoming more popular. This article looks at the definition of “best endeavours” in law, and the possible consequences or benefit of the use of this clause. What are the pitfalls of a “best endeavours” contract to the modern salvage company, or indeed owner/underwriter, how strict is the duty, and how is it properly executed?

The concept of “best endeavours” in salvage may be growing in popularity, but the general concept is, by no means, new. As early as 1911, Sheffield District Railway Co v Great Central Railway Co(1911) 27 TLR 451 tested the meaning of the obligation in regard to developing “through and local traffic”. In that case the court defined the duty imposed as follows (at page 452):

“We think ‘best endeavours’ means what the words say; they do not mean second-best endeavours … They … do not mean that the limits of reason must be overstepped with regard to the cost of the service; but short of these qualifications the words mean that [the company] must, broadly speaking, leave no stone unturned to develop traffic …”

This seems to suggest two things: Firstly, that failure in the end goal will not necessarily constitute a failure to execute the duty, provided you “leave no stone unturned”, and; secondly, that you need not go broke trying, as that would surely overstep reason. Naturally, the latter need only apply to “lump-sum” contracts, as opposed to “time and materials” agreements (aka cost + x per cent). In the later case of Rhodia International Holdings Ltd v Huntsman International LLC [2007] 2 Lloyd’s Rep 325, Mustill J confirmed the earlier decision, stating that the obligation probably required a party to take all the reasonable courses available to him.

No cure, still pay – execution of best endeavours

In regard to the first conclusion above, what does “best endeavours” mean to the owner/underwriter, when a salvage operation is unsuccessful? It is likely to mean that, whether or not the casualty is “cured” is unlikely to be the decider in whether the salvage company is paid its reward. In the case of a grounded ship, where a salvage company promises to use “best endeavours” to tow the ship to safety, so long as they do all that it is reasonable to do, the duty is executed. Whether or not the ship is rescued, and unless dealt with elsewhere in the contract, success is irrelevant. In Hawkins v Pender Bros Pty Ltd [1990] 1 Qd R 135, an Australian case, the Court of Appeal stated that the promisor had:

“… obligation to do all that it reasonably could in the circumstances to achieve the contractual object, but no more. It was not required to go beyond the bounds of reason, and was not required to act in such a way as to bring ruin upon itself.” [At pages 151 and 152.]

If one were to apply this to salvage the duty is easily discharged. Where the salvors have done all that they reasonably could, and have failed, it stands to reason that they are still due any agreed reward. With the proliferation of larger ships, very few can provide the resources to deal with modern casualties. Accordingly, who is there to argue that “all reasonable endeavours” are not complete? Where the endeavour is on a “lump sum” basis, one presumes, the sum need not be exceeded, nor need the salvage company worry too much about exceeding original estimates when on “time and materials”. The case of Yewbelle Ltd v London Green Lane Developments Ltd [2007] EWCA Civ 475 lends further support to the financial aspect. This case involved the promise, by a London borough, to use “best endeavours” to secure planning consent. Subsequent to signing the agreement, it was discovered that part of the land in question belonged to a third party, necessitating either the purchase of said land or making the third party a party to the agreement. Both options would have meant expenditure in excess of that initially contemplated at the time of signing. The Court of Appeal made it clear that, whilst the discovery was unknown to both original parties, the execution of “best endeavours” did not require Yewbelle to spend money to resolve the dispute, but probably did oblige them to disclose it.

In practice, the courts have upheld the financial position:

“A party … is … obliged to take those steps which a prudent person in the position of that party would take acting in its own interests …:

‘A party is not required to abandon or subordinate its interests to those of the other party … in the case of … an agreement to use one’s best endeavours to perform something the party has to accept that the court or other tribunal may determine what is in its own best interests and to that extent some of the objective criteria would be applied to what will otherwise be regarded as selfish or subjective.’” [Abballe v Alstom UK Ltd [2000] EWHC 122 (TCC).]

This offers some succour to the beleaguered owner or underwriter, as well as the salvor. It suggests that the salvor is able to maintain self-interest, but where he has overstepped the bounds may be found in breach by way of “selfish” actions. Whether the premise applies in both directions is more elusive. The above makes sense where the promisor does not use all reasonable efforts in order to maximise profit by under-expenditure. However, does the same apply to over-expenditure where the duty applies to a “time and materials” contract? This would mean that the promisor, in executing the duty, overspends to increase profit, which is dependent upon a percentage of the total spend. Where this is done intentionally, there are already sanctions that may apply, but it is rare to find a customer who is completely satisfied with price. It is submitted that the wording above suggests it would apply, given the right set of circumstances. Naturally, the more complex the objective, the more difficulty there is in weighing the cost against the required actions. Abballe also suggests that the standard is that of the “prudent person” acting in his or her own interests. This raises the question: when it comes to salvors, will some sort of Bolam test apply, as it does in the medical profession? (Bolam v Friern Hospital Management Committee [1957] 1 WLR 582.) How will the courts decide between different methodologies, all of which could ultimately achieve the same goal? Salvage is often uncertain and risky by nature, so “best endeavours” may not be the ideal contractual vehicle. The case of Paltara (Paltara Pty Ltd v Dempster (1991) 6 WAR 85) reaffirms the conditional approach of the courts:

“Whether a party has ‘used his best endeavours’ to achieve a stated objective, must be determined objectively in light of what in fact is required to be done, in the circumstances as they exist, to achieve the stated objective. In such a case … he is required to do all that he reasonably can in the circumstances to achieve the contractual objective, but no more.”

It logically follows that; where the promisor hires a 3,000 ton HLV, when any “prudent person” would have known that a less expensive 800 ton vessel would have been more than capable, the objective standard may be met. Assessing the events, with the benefit of hindsight, could easily be managed, by a tribunal or court, and history suggests that judges have done so, with success, in the past:

“When a man by the fault of another is presented with a choice between two perilous courses, the comparative perils must not be too nicely weighed, nor must the choice be held a wrong one if the course chosen does not attain its object. What is demanded of the man who had to choose is that he should exercise judgement and discretion as becomes a reasonable and prudent seaman.” (Hill J, The Crown (Adolph Woermann) v Hessa (1921) 9 Ll L Rep 271 at page 273 col 2.)

The difficulty may prove to be a need to set the boundaries. Much of what salvors do is perilous, and indeed uncertain, which is why the rewards are high. With a more contractual approach, as opposed to common law salvage, there is a more certain, if perhaps lower, remuneration level. It is, by no means, averred that salvage companies will attempt to pad “time and materials” contracts with overly expensive measures but, as stated above, a client who is completely satisfied with price is rare.

The editor wishes to thank Dr Dingjing Huang for a helpful discussion on the subject of this article.

Автор: Graham Caldwell

Источник: http://www.shippingandtradelaw.com/shipping/pollution-and-salvage/no-cure-no-pay-or-best-endeavours-the-shifting-risk-paradigm-of-commercial-salvage—1.htm