Court of Appeal Rules No Binding Contract Established in MV Ever Given Salvage Case

Citation: [2024] EWCA Civ 260
Judgment on

Introduction

The case of SMIT Salvage BV & Ors v Luster Maritime SA & Anor involves the salvage claim attached to the MV Ever Given, which famously blocked the Suez Canal in March 2021. Central to this appeal before the Court of Appeal was the determination of whether a legally binding contract was concluded regarding the remuneration for the salvage services between the appellants (ship owners) and the respondent salvors (SMIT Salvage BV).

Key Facts

On 23rd March 2021, the Ever Given grounded in the Suez Canal, attracting broad international attention because of the critical nature of the canal to global trade. The Suez Canal Authority maintained exclusive authority over operations to refloat grounded vessels. SMIT Salvage BV (SMIT), an experienced salvage company, was involved in contributing to the refloating efforts.

Crucially, the parties exchanged a series of communications concerning the terms of engagement for SMIT’s salvage services. This correspondence led to a disputed claim: SMIT regarded the services it provided as actionable under salvage law, thereby entitled to remuneration as per the success of its efforts (“no cure-no pay”). Conversely, the ship owners asserted that a binding contract, precluding a salvage claim and fixing the remuneration amount, had been agreed upon.

The legal principles hinged on establishing whether the email exchanges between the parties constituted a legally enforceable contract. The Court of Appeal reiterated established principles from cases such as RTS Flexible Systems Ltd v Molkerei Alois Mueller GmbH & Co KG [2010], Pagnan SpA v Feed Products Ltd [1987], and Global Asset Capital Inc v Aabar Block Sarl [2017]. The court considered:

  • The course of negotiations between the parties, understanding that a contract may be binding even if some terms are yet to be agreed upon.
  • The objective appraisal approach, where the judge assesses the parties’ intention to be legally bound based on communications and conduct.
  • The burden of proof rests with the asserting party to establish the existence of a binding contract.

Additionally, the salvage context’s nuances were underlined. Agreement to mobilise and provide assistance does not necessarily imply a concluded contract because salvors often commence mobilization on speculation, hoping to negotiate a contract or fall back on general salvage law if a contract is not reached.

Outcomes

The Court, upholding the first instance decision by Mr Justice Andrew Baker, concluded that no binding contract on remuneration was formed. The correspondence did not unequivocally demonstrate a mutual intention to create legal relations, especially given the skeletal nature of the agreement which omitted essential contract terms. Furthermore, the urgency expressed by SMIT to conclude a contract on the morning of 26th March lessened significantly when the refloating attempt on that day failed, suggesting SMIT was no longer in a rush to formalise an agreement possibly due to the increasing likelihood of a salvage award without a contract.

Conclusion

In SMIT Salvage BV & Ors v Luster Maritime SA & Anor, the Court of Appeal meticulously dissected the chronology of communications to discern the parties’ intention behind their correspondence. The legal principle of objective appraisal anchored the court’s analysis, leading to the conclusion that a binding contract had not been concluded. The decision reaffirms the importance of clear intentions and comprehensive agreements in contract formation, a principle that remains a cornerstone in English contract law, and a critical understanding for UK legal practitioners.