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Davies Johnson’s Simon Church discusses the recent decision of the Commercial Court in CLEARLAKE SHIPPING PTE LTD v PRIVOCEAN SHIPPING LTD on the scope of the exception to Owners’ liability for neglect or default of the Master in “management of the ship”.

The Facts

Under a Time Charterparty on the NYPE 1946 Form, and incorporating the United States Carriage of Goods by Sea Act (US COGSA),  a cargo of soya beans was shipped from New Orleans to China via the Panama Canal.  Upon loading the cargo in question stowage plans were submitted which contemplated leaving one hold empty and two partly loaded.  For the purposes of ensuring the vessel’s stability, the Master refused to agree to this proposal unless cargo in one of the holds was strapped.  He also rejected an alternative proposal involving ballasting.

The Issues

In London arbitration proceedings, brought by Owners for recovery of approximately US$400,000 unpaid hire, Charterers counter claimed for US$410,000 costs which they said were unnecessarily incurred in strapping the cargo. Charterers’ case was argued on two principal grounds:

(a)          That Clause 2 of the NYPE 1946 wording stipulated that “Charterers are to provide necessary dunnage and shifting boards, also any extra fittings requisite for a special trade or unusual cargo…” From this they said, it should be inferred that Owners should be liable for the cost of the strapping employed because this was not necessary or required.

(b)          Because the Master had negligently insisted on the use of strapping  before sailing in circumstances where stability could have been ensured by distributing the cargo differently  and/or ballasting, giving rise to unnecessary costs for which Owners should be liable.

The Decisions

The Tribunal held, as Charterers had contended, that the vessel could have safely sailed without the additional strapping required by the Master.  Notwithstanding this finding, however, the Tribunal found in favour of Owners and its decision was upheld on Appeal to the High Court on the following grounds:

  • Clause 8, not Clause 2 of the NYPE wording was the reference point for determining the parties’ obligations in respect of loading and stowage. The reverse inference which Charterers drew from the Clause 2 wording could not be supported.
  • Section 4(2) US COGSA excluded a carrier’s liability for neglect or default of the Master in “the management of the ship”. Although the default of the Master in this case related to the stowage/ securing of cargo, his negligence/ default arose through his seeking to ensure the ship’s safety and stability and as such was concerned with the management of the ship such that Owners were exempt from liability.

 

Conclusions – Clarity or Muddied Waters?

In the context of the equivalent terms of Article IV Rule 2(a) Hague Visby Rules, which likewise excludes Owners’ liability for the Master’s negligence or default in management of the ship, there has been considerable judicial debate in the past as to where one should draw the line between management of the vessel and of cargo, and to what extent it is necessary to draw a line at all.

Cooke on Voyage Charters states that:

““Management” means management of the ship and not the general carrying on of the business of transporting goods by sea; it does not include management of the cargo, nor, probably management of those parts of the vessel whose function is concerned with the safety of the ship and with the safety of the cargo, such as an inert gas system.”   Hence the decision in Caltex Refining Co Pty Ltd v BHP Transport Ltd (The Iron Gippsland) [1994] 1 Lloyd’s Rep. 335 in which failure to maintain the vessel’ s inert gas system, leading to contamination of cargo was held to be a failure in management of the cargo notwithstanding that this system was provided for the safety of the vessel.

The present case provides an interesting corollary to The Iron Gippsland as one where a failure in relation to the securing of cargo has been held to be a failure in management of the vessel.   As the Court held, these matters very much turn on the facts, but it seems that  the key question will always be that of which interest the Master is primarily concerned with protecting, or which interest is primarily at risk in the event of the Master’s default – ship or cargo?  And it may be that in managing cargo the Master will be found to have been negligent in the management of the vessel.

Simon Church – Solicitor

+44 (0)7919 576293

simon.church@tmlawltd.com