standard. This decision has been widely accepted in Australian case law.
47 In Bhasin
v. Hrynew,
48 a 2014 decision of the Supreme Court of Canada, it was acknowledged
that there is a general principle of good faith underpinning contract law, and the
specific duty of honesty in the performance of contract is a manifestation of this
principle.
4.3.1 Express Duty of Good Faith
It is evident that in the current milieu of contracts in English law, the requirement of
good faith is being increasingly provided for in express terms. A clause imposing an
express duty of good faith was considered in Berkeley Community Villages Ltd v.
Pullen in 2007.
49 The clause in question provided that, “[I]n all matters relating to
this agreement the parties will act with the utmost good faith towards one another
. . .” In relation to this clause, Morgan J. upheld the imposition on the defendants “a
contractual obligation to observe reasonable commercial standards of fair dealing in
accordance with their action which related to the Agreement and also requiring
faithfulness to the agreed common purpose and consistency with the justified
expectations of the first claimant.”
50 In deciding what the obligation to act in good
faith meant, Morgan J. relied on an Australian case, which cited some American
sources.
Incidental to this, at a lecture given to the Commercial Bar Association in 2016,
Sir George Leggatt, opined that “[E]nglish law recognises and will enforce contractual duties of good faith, where they are embodied in express terms of contract. . .”.
51
But this observation is hardly relevant to charterparties where rarely, if ever, such
express terms appear, and decidedly never in respect of a lien clause.
4.3.2 Implied Duty of Good Faith
Flowing from the above discussion, the question then is whether good faith can be
implied in respect of a shipowner exercising his rights under a lien clause. If the
answer is in the affirmative, then it follows that a shipowner invoking and exercising
his lien, should be held liable for acts that are not considered to be in good faith, such
as excessive or unnecessary use of the security. In the case of Yam Seng Pte Ltd v.
International Trade Corp Ltd. mentioned earlier, the claimant Yam Seng Pte Ltd.
obtained certain exclusive distribution rights pursuant to a distributorship agreement.
Yam Seng terminated the agreement and alleged that the defendant International
47 Leggatt (2016) para. 15.
48 2014, SCC 71.
49 [2007] EWHC 1330 (Ch).
50 [2007] EWHC 1330 (Ch) para. 97.
51 Leggatt (2016) para. 22.
Shipowner’s Implied Obligations in a Charterparty Relating to. . .
323
47 In Bhasin
v. Hrynew,
48 a 2014 decision of the Supreme Court of Canada, it was acknowledged
that there is a general principle of good faith underpinning contract law, and the
specific duty of honesty in the performance of contract is a manifestation of this
principle.
4.3.1 Express Duty of Good Faith
It is evident that in the current milieu of contracts in English law, the requirement of
good faith is being increasingly provided for in express terms. A clause imposing an
express duty of good faith was considered in Berkeley Community Villages Ltd v.
Pullen in 2007.
49 The clause in question provided that, “[I]n all matters relating to
this agreement the parties will act with the utmost good faith towards one another
. . .” In relation to this clause, Morgan J. upheld the imposition on the defendants “a
contractual obligation to observe reasonable commercial standards of fair dealing in
accordance with their action which related to the Agreement and also requiring
faithfulness to the agreed common purpose and consistency with the justified
expectations of the first claimant.”
50 In deciding what the obligation to act in good
faith meant, Morgan J. relied on an Australian case, which cited some American
sources.
Incidental to this, at a lecture given to the Commercial Bar Association in 2016,
Sir George Leggatt, opined that “[E]nglish law recognises and will enforce contractual duties of good faith, where they are embodied in express terms of contract. . .”.
51
But this observation is hardly relevant to charterparties where rarely, if ever, such
express terms appear, and decidedly never in respect of a lien clause.
4.3.2 Implied Duty of Good Faith
Flowing from the above discussion, the question then is whether good faith can be
implied in respect of a shipowner exercising his rights under a lien clause. If the
answer is in the affirmative, then it follows that a shipowner invoking and exercising
his lien, should be held liable for acts that are not considered to be in good faith, such
as excessive or unnecessary use of the security. In the case of Yam Seng Pte Ltd v.
International Trade Corp Ltd. mentioned earlier, the claimant Yam Seng Pte Ltd.
obtained certain exclusive distribution rights pursuant to a distributorship agreement.
Yam Seng terminated the agreement and alleged that the defendant International
47 Leggatt (2016) para. 15.
48 2014, SCC 71.
49 [2007] EWHC 1330 (Ch).
50 [2007] EWHC 1330 (Ch) para. 97.
51 Leggatt (2016) para. 22.
Shipowner’s Implied Obligations in a Charterparty Relating to. . .
323