Marine & Transit - July 2010

“There goes the deck cargo”: who carries the can?

Owners liable under charter for deck cargo losses

Onego Shipping & Chartering BV v JSC Arcadia Shipping (The “Socol 3”) [2010] EWCA 777 (Comm)

This recent decision in the Commercial Court shows that owners may not have the protection they imagined under specific exclusion clauses contained in a time charterparty.

The “Socol 3” was on a voyage from Finland to Egypt with a cargo of timber packs, some of which were carried on deck.  The vessel encountered heavy weather and some deck cargo was lost overboard.  The remaining cargo had to be discharged at a nearby port of refuge.  The vessel had been chartered on an amended NYPE 1993 Form, and various claims arose between the owners and charterers concerning the loss of the cargo, loss of time, bunker consumption and port of refuge expenses.

The matter went first to arbitration in London.  The Tribunal found that the cause of the casualty arose from an inadequate method of stowage of the deck cargo and use of unsatisfactory lashing equipment for which the charterers were responsible under the charter. However there had also been inadequate care of the lashings by the crew during the voyage.  Further, the vessel was in fact unstable and accordingly unseaworthy following the loading of the cargo and for this aspect the owners were responsible. 

Nevertheless the charter contained a standard NYPE clause 13(b).  This provided that the owners were to be fully indemnified by the charterers for any consequences in the event any deck cargo was carried.  The Tribunal held this provision applied and found in favour of the owners.  The charterers then appealed to the court.

The charter also had a Clause Paramount incorporating the Hague-Visby Rules.  The charterers argued the Rules applied and the owners had not complied with the obligation to provide a seaworthy ship.  However Mr Justice Hamblen found that the Rules did not apply to the deck cargo.  The relevant bills of lading all had “on-deck” statements.  The court considered that under Article 1(c) of the Rules, the bills were to be considered as the “contacts of carriage” for the deck cargo.  On this basis the Rules did not govern deck cargo carried under the charter.

The Judge then considered the exclusion clauses relied on by the owners.  The charter also had a standard NYPE clause 8 providing that the charterers were to perform among other things all cargo handling, loading, stowing, lashing and securing of the cargo at their risk and expense under the supervision of the master. 

Although in this instance the clause did not have the additional words “and responsibility” after “supervision”, the court still found the owners responsible for the deck cargo shift.  In this case the improper stowage of the cargo had affected the vessel’s fundamental stability.  This was an aspect that only the chief officer and master would have known about, not the charterers.  There had been a failure on the part of the master to supervise the cargo stowage properly with the ship’s stability and ultimate seaworthiness in mind.

Finally the owners sought reliance on NYPE clause 13(b), providing for charterers to indemnify owners where deck cargo was carried.   However the court was not prepared to allow the owners to escape liability under this provision. 

Applying the guidelines in the House of Lords’ authority of Canada Steamship [1952], the court considered this was a type of exclusion clause that had to be read restrictively.

In this case the owners had in effect been negligent causing the vessel to be unseaworthy by reason of the unstable stowage.  Such a provision as clause 13 (b) would only exempt the owners for negligence if clear words to this effect were used.   Such clear words were not to be found in clause 13(b) and accordingly the owners could not seek an indemnity from the charterers and remained liable for the deck cargo claims and losses.

The case emphasises the rule that if a party wishes to exclude liability for his negligence in an exclusion clause, then very clear words to this effect must be employed in the contract. 

Something for owners and charterers to bear in mind when fixing such charters.

Terry Donaghy, Partner
Weightmans LLP