On 22 July 1998, the tug BORVIGILANT hit the tanker ROMINA G near Kharg Island in the Persian Gulf; the tug’s skipper and some crew died, and both vessels suffered loss and damage. Before berthing, a pilot had handed the master of ROMINA G a “Tug Requisition” form from the National Iranian Oil Company (NIOC). NIOC would only send tugs after the master signed it, and four tugs, including BORVIGILANT, then worked the ship. The tug owner, Borkan, later relied on that signed form to defend itself and to claim an indemnity for its own losses. The form contained tough risk-allocation terms. In clause 2(b), it said the tug company would not be liable for almost any kind of loss—even if caused by negligence or unseaworthiness—and that the hirer must indemnify the tug company for such loss; clause 3 did the same for non-towing services; clause 4(a) added a safety valve: nothing made the hirer pay or indemnify for loss “caused by want of reasonable care…to make the tug seaworthy”; and clause 7 promised that when NIOC used tugs it didn’t own, their owners (like Borkan) would have the same benefits and be bound by the same conditions.
Lawsuits followed in England. Two “preliminary issues” were set for trial. First: could Borkan, the tug owner, rely on the tug requisition terms even though NIOC presented the form? Second: if Borkan or its crew were negligent, did the exclusions and indemnities still protect Borkan (and make Monsoon, the shipowner, pay), or did the “want of reasonable care to make the tug seaworthy” proviso stop that? The trial judge answered the first question “yes,” and the second “yes—unless the loss was caused by want of reasonable care to make the tug seaworthy.”
Monsoon (owner of ROMINA G) appealed the first answer. The Court of Appeal agreed with the judge: reading clause 7 with the rest of the form, NIOC was contracting not just for itself but also as agent for Borkan, so Borkan could take the benefit of the terms. The court held that, on the true construction, NIOC purported to contract both on its own behalf and on behalf of any non-NIOC tug owner used to perform the job—here, Borkan—and therefore dismissed Monsoon’s appeal on that point. Monsoon also argued that, even if there was agency, Borkan hadn’t authorized it. The court found actual authority from the long practice at Kharg Island and from the business sense of the arrangement; and, even if not, Borkan later ratified the contract—at the latest by a letter before action of 5 January 2000—within a reasonable time. The court explicitly agreed that Borkan validly ratified the contract after the casualty.
Borkan cross-appealed the second answer. It said clause 4(a)’s seaworthiness proviso should only cut back the indemnity part of clause 2(b), not the main exclusion of liability. The court rejected that. It read the two halves of clause 2(b) together: if loss was caused by a want of reasonable care to make the tug seaworthy, neither the exclusion nor the indemnity could be used by Borkan. That, the court said, gives the contract a sensible meaning and, if there were any doubt, the wording would be construed against the tug owner seeking to rely on it.
Here is the court’s final word, put simply. First, Monsoon’s appeal on issue one failed: Borkan can rely on the tug requisition terms because NIOC contracted as Borkan’s agent, and in any case Borkan ratified the contract. Second, Borkan’s cross-appeal on issue two also failed: the court kept the judge’s approach but made the wording precise. The protection in clause 2(b) stands, except where the loss was “caused by want of reasonable care on the part of Borkan to make the tug seaworthy.” The Court of Appeal therefore dismissed Monsoon’s appeal and dismissed Borkan’s cross-appeal, varying the answer to match the clause’s exact words.
