In this case the English High Court found that despite the negligence of the Master in requiring the unnecessary strapping of cargo, Charterers could not claim against Owners for losses flowing from that negligence.The case highlights the potentially wide reach of the exceptions available to shipowners in cases where the Hague/Hague-Visby Rules are incorporated into charterparties.

Background

The dispute arose out of the shipment of a cargo of soyabeans on the MV PRIVOCEAN from New Orleans to China via the Panama Canal in November 2014. Owners’ claim was for a balance of about US$400,000 of hire. The master had required that the cargo in hold number 2 be strapped in order to ensure the stability of the ship in accordance with SOLAS (The International Convention for the Safety of Life at Sea 1974). This entailed the Charterers incurring additional expenditure of some US$ 410,000 which they counterclaimed from Owners by way of damages on the grounds that the strapping was unnecessary and that the master’s insistence upon it was negligent.

Charterers contended that their counterclaim should succeed on two principal grounds:

(1) That the wording of clause 2 of the NYPE 1946 form meant that an inference could be made that Owners should be liable for the cost of unnecessary strapping.

(2) That the Master’s negligence in ordering the strapping of cargo in hold number 2 meant that the cost of such strapping should be for Owners’ account. Charterers argued that the stability of the vessel could have been ensured through other means, such as ballasting or distributing the cargo differently.

The Tribunal’s Decision

The Tribunal found that the Master had indeed been negligent and that adequate stability could have been achieved without the need for strapping. The negligence was found to have been a breach of clauses 8 and 83.

However, the Tribunal found that the negligence of the Master was in the management of the ship. Accordingly Owners were not liable by reason of section 4(2) of US COGSA (as incorporated in the relevant charterparty) which is in the same terms as Article IV Rule 2(a) of the Hague/ Hague-Visby Rules. Further, the Tribunal decided that clause 2 did not come to Charterers’ aid.

The High Court Claim

Permission was granted to Charterers to appeal the decision on two questions of law, namely:

(1) Is the effect of clause 2 of NYPE form 1946 edition that unnecessary and non-requisite fittings insisted upon by the Master are for the account of Owners?

(2) Where the primary purpose of a loading and stowage operation is to put the cargo on board so that it can be carried to the discharge port, and where the Master negligently causes the cargo to be loaded and stowed in such a way that money and time are wasted by fitting and removing unnecessary cargo fittings, is the negligence of the Master in the management of the ship (within the meaning of section 4(2) of COGSA and Article 4, rule 2 of the Hague/Hague-Visby Rules), or the management of the cargo?

Cockerill J upheld the Tribunal’s decision on both questions. The Judge concluded that in relation to the first question of law, clause 8, not clause 2 governed the parties’ obligations in respect of the loading and stowing of cargo. The effect of clause 8 is “well known”, it is a broad transfer of responsibility of such operations to Charterers. Without more any qualification for necessity as suggested by Charterers could not properly be read into clause 2.

As to the second question of law, the Judge again started from the position that as per clause 8 of the charterparty the responsibility for loading had been transferred to Charterers. The Master’s role in creating the stowage plan was, the Judge held, “supervisory and not primarily related to the care of the cargo”. The Master’s actions in this regard were considered by the Judge as “pertaining to the stability of the vessel” and the Judge noted that the Master took the same view. Thus the primary nature and object of the acts which caused the loss were related to ship management in the sense of the stability of the vessel and not the care of the cargo. This was so despite the relevant acts affecting the cargo. Thus the section 4(2) exception applied and excluded Owners from any liability.

Implications of the decision

This was an unusual case in that the counterclaim brought by Charterers in relation to which Owners sought to rely upon Article 4 rule 2 was not for damages for lost or damaged cargo, but rather for wasted costs. However, it was not suggested that the defence is limited to cases of physical loss or damage (see also in this regard The Aquacharm [1982] 1 Lloyd’s Rep. 7 at p. 10 per Lord Denning MR).

As with many such cases, the result will be very fact specific. A relevant factor in this case was held by the Judge to be the timing of the acts complained of – the negligent act of refusing to contemplate a particular stowage plan predated any act of loading. However, in a case such as this, it was not just the nature of the relevant act but the object of the act which determined the claim. At first blush the strapping of the cargo would appear to be an act concerning the care of the cargo, but once the precise acts complained of and which caused the loss were identified and the object of the acts examined, it followed that the negligent acts related to the management of the vessel. So the case shows that just because an act affects cargo, does not mean that it cannot be considered as being an act “in the management of the vessel”.

A copy of the draft judgment from the hearing is here.

David Goldstone QC and Saira Paruk acted for Owners, instructed by Stuart Parkin, Waterson Hicks. John Passmore QC acted for Charterers, instructed by David Handley, Clyde & Co LLP

David is a highly experienced barrister who has appeared in the High Court, Court of Appeal and Supreme Court and has acted for most of the UK`s leading commercial solicitors. He is now accepting appointments as arbitrator and mediator but also continues to advise clients across the full spectrum of commercial law, international trade and shipping.

David remains a leading barrister in the shipping sector and is ranked as a leading silk both by the Legal 500 and Chambers and Partners. Although he no longer acts as an advocate David brings a wealth of knowledge and experience to his advisory practice. He was "rightly rewarded with silk" (2007 Legal 500 - shipping) in 2006 and since then has gone from strength to strength. In recent years, he has been described as "a first-class brain who is exceptionally clever, analytical and incisive" (2007 Chambers UK - shipping and commodities), as "absolutely phenomenal", "runs rings around the opposition and can grasp complex issues exceptionally quickly" (2009 Chambers UK - Shipping and commodities) and as “outstanding” and “for some, the brightest man at the Bar” (2014 Legal 500). He is comfortable with technical cases including engineering, chemistry and related disciplines and is able to advise both in relation to wet and dry matters.

Saira regularly appears in the Commercial Court and in arbitrations in a wide range of commercial disputes including shipping, carriage of goods, shipbuilding, insurance and reinsurance, and private international law. She also has extensive experience of interlocutory matters of all kinds including jurisdictional challenges, freezing orders and injunctions.

Saira’s recent reported cases include Polaris Shipping Co Ltd v Sinoriches Enterprises Co Ltd (The "Ocean Virgo") [2015] EWHC 3405 (Comm) successfully appealling an arbitration award, Carlos Soto SAU v AP Moller-Maersk A/S (The SFL Hawk) [2015] EWHC 458 (Comm) as sole counsel in a Commercial Court trial, Crowther & Another v Rayment & Another [2015] EWHC 427 (Ch) as sole counsel successfully resisting the appointment of an arbitrator.