Unnecessary strapping of cargo: Charterers pay for Master’s negligence

Monday, 1st October 2018

Clearlake Shipping Pte Limited v. Privocean Shipping Limited (M/V Privocean) [2018] EWHC 2460 (Comm)

In this case, the Master was negligent in insisting that the only safe stowage plan for the ship was one where cargo was part loaded in two holds and strapped, thereby incurring additional time and expense. In fact, the Master had been presented with an alternative stowage plan, which did not require strapping and this would have been perfectly safe, but the Master refused to use it.

Although clause 2 of the NYPE form requires the charterers to pay for necessary and requisite cargo fittings, this does not in itself mean that the owners must pay for unnecessary and non-requisite cargo fittings. The Court found that the Master’s actions constituted a neglect in the management of the ship, thereby falling within section 4(2)(a) of US COGSA, because the Master’s review of the stowage plans was with reference to the stability and safety of the ship and so not an act in the management of the cargo.

The background facts

The vessel, a Kamsarmax bulk carrier with seven holds and hatches, was time- chartered on an amended NYPE form, containing the following clauses:

Clause 2: “…Charterers are to provide necessary dunnage and shifting boards and also any extra fittings requisite for a special trade or unusual cargo…”

Clause 8: “…Charterers are to load, stow trim and discharge the cargo at their expense and under the supervision of the Captain…”

Clause 83: “…Charterers shall instruct the terminal operators to load/discharge/shift the vessel in accordance with the loading/discharging plan which shall be approved by the Master with due regard to the vessel’s draft, trim, stability, stress or any other factor which may affect the safety of the vessel.”

The charterparty also incorporated the terms of US COGSA, section 4(2) of which is identical to Article 4, Rule 2 of the Hague/Hague Visby Rules:

“…neither the Carrier nor the Ship shall be responsible for loss or damage arising or resulting from:

(a) Act, neglect or default of the Master, … in the navigation or in the management of the Ship.”

The Charterers ordered the vessel to load a cargo of soya beans at New Orleans for discharge in China. At the loadport, the Master was asked to approve the cargo stowage plans. Four stowage plans were shown to him. One of the plans involved hold 4 being empty, but the Master considered that this was unsafe. The Master would only accept a plan where holds 2 and 6 were partly loaded and the cargo in hold 2 was strapped. This incurred extra time and increased costs which were the subject of the dispute.

In the arbitration proceedings, the Tribunal found that the Master had been negligent as he should have accepted the plan involving hold 4 being empty and that this was perfectly safe for the vessel. Accordingly, the strapping had been unnecessary. The Master’s negligence was a breach of clauses 8 and 83 but, due to section 4(2) of US COGSA, the Owners were not liable as this was an act, neglect or default of the Master in the management of the ship.

The Commercial Court decision

On appeal by the Charterers, the Court was asked to consider two questions.

1. Under Clause 2 of the NYPE form, can it be said that unnecessary and non-requisite cargo fittings are for the owners’ account?

The findings of the Tribunal meant that the strapping of hold 2 constituted unnecessary and non-requisite cargo fittings. The Charterers argued that clause 2 stated that they were to provide and pay for necessary and requisite cargo fittings. This meant that the Owners had to pay for unnecessary and non-requisite cargo fittings.

The Court disagreed. As the fittings were unnecessary and non-requisite, clause 2 was irrelevant. The applicable provision was clause 8, which made cargo operations the Charterers’ responsibility and at their expense, including unnecessary and non-requisite cargo fittings.

2. Was the Master’s act negligence in the management of the ship or negligence in the management of the cargo?

The Charterers pointed out that the subject matter of the case was cargo stowage plans and that the expense under dispute was the expense of strapping the cargo. The Charterers argued that the Master’s negligence was in the management of the cargo, not the ship, and so the Owners could not claim the protection of US COGSA section 4(2)(a).

The Court found in favour of the Owners, who argued that it was necessary to look at what the specific act, neglect or default was that caused the loss. In this case, the Master was negligent in carrying out his clause 8 and 83 obligations. Both clauses required the Master to act in a supervisory role over cargo operations in order to maintain the safety of the vessel. Accordingly, the Master’s negligence was in the management of the ship, not the management of the cargo.

The Charterers’ appeal was dismissed.

Comment

The Court’s decision regarding clause 2 is a welcome reiteration of a basic principle of contract interpretation, namely that a positive obligation on one party does not necessarily mean a negative corollary obligation on the other party.

The distinction between when an act, neglect or default is in the management of the ship or in the management of the cargo is a common point of dispute when an owner invokes the article 4, rule 2(a) defence of the Hague/Hague-Visby Rules or equivalent provisions. The Court reviewed the relevant authorities and highlighted that, as each case is very fact-specific, the principles put forward in the authorities are not entirely consistent. However, the decision clarifies that it is necessary to look at the specific act, neglect or default which caused the loss and consider whether this relates to management of the ship or cargo.

Source : Ince & Co