Demurrage due to delays in discharge due to damaged condition of cargo.

Alianca Navegacao E Logistica LTDA v Ameropa SA (The Santa Isabella) [2019] EWHC 3152 (Comm)

A vessel carried a cargo of white corn/maize from Mexico to South African Ports under a Synacomex form charter incorporating the Hague Rules.  On arrival the cargo was found to have suffered extensive damage and that led to a delay in discharge resulting in demurrage becoming due. Voyage charterers claimed that they were not liable for demurrage due to delays resulting from fault of the disponent owners. They alleged that the damage to the Cargo, and the delays at Durban and Richards Bay, were caused by (a) the Vessel taking the Cape Horn route rather than the Panama Canal route from Topolobampo to Durban, (b) failure by the Vessel to ventilate the Cargo in accordance with a sound system, (c) failure by the Vessel to disinfest areas of the Vessel outside of the cargo holds following loading at Topolobampo and/or (d) the Vessel proceeding to Durban at less than her warranted speed.

Andrew Henshaw QC (sitting as a Judge of the High Court) found that the owners’ obligation was to proceed on the usual and reasonable route to the discharge port and that where there were more than one such routes they were entitled to choose one rather than the other and that choice did not require owners to calculate the effect of taking that route on the cargo being carried. Both the Cape Horn route and the Panama Canal routes were usual routes to Durban and the owners committed no deviation, nor breach of art. III(2) of the Hague Rules, in taking the former. In determining which route to take the judge stated[91]:

“cargo considerations may be relevant in the elementary sense that a much longer voyage is likely to be detrimental to a perishable cargo. However, the case law does not in my view require shipowners to undertake the far more refined analysis urged by Ameropa, which would involve (in the present case) considering in detail how predictable climactic conditions on the Cape Horn and Panama Canal routes would impact on the need to ventilate the cargo and the vessel’s ability to do so.

However, the owners were found to have been in breach of art III(2) of the Hague Rules in failing properly to ventilate the cargo on the voyage and this had resulted in the delays experienced at Durban and Richards Bay. It was common ground that as owners were not bailees the legal burden of proof in showing breach of art III(2) fell on charterers. Charterers argued that the arrival of the cargo in a damaged condition  gave rise to an inference of breach. The judge rejected this, stating [52]:

“As a matter of common sense, the arrival in a seriously damaged condition of a cargo loaded in apparent good order and condition calls for an explanation, and a want of care on the part of the shipowner is a possible inference. In the present case, Alianca’s explanation is that the length and/or route of the Voyage made damage inevitable. On that basis, I am inclined to the view that it is for Ameropa to show, on the balance of probabilities, that the damage suffered in fact arose from a breach of contract by Alianca.”

Ameropa succeeded in showing that the damage did arise from a breach of contract by disponent owners.

The owners were also in breach of their obligation to proceed at the warranted speed but it was not possible to identify any particular element of damage or loss caused by that breach.

Anti-suit injunction against owners’ third party proceedings against charterers and sub-charterers in Singapore.

 

The Chang Hang Guang Rong [2019] EWHC 2284 (Comm)  is an interesting, recent anti-suit injunction decision by Andrew Burrows QC, soon to become a Judge of the Supreme Court. Cargo claims arising out of the issue of switch bills were brought against the vessel’s owners in the Singapore High Court. Owners sought to pass these on to Clearlake, the charterer, and to Gunvor the sub charterers, through third party proceedings analogous to CPR Part 20 procedure in England. Both parties obtained anti-suit injunctions (ASI) from the High Court in London on the basis of an exclusive jurisdiction clause in the charter with Clearlake and in the bill of lading issued to Gunvor as shipper, although Gunvor denied being a party thereto.

Owners responded by amending their claims in the Singapore High Court, deleting all their contractual claims against Gunvor and relying on tort claims for misrepresentation, and deleting all their contractual claims against Clearlake, save for claims under a Letter of Indemnity, which contained a non-exclusive London High Court jurisdiction clause. Andrew Burrows QC held that there were two grounds for granting an ASI. First the foreign proceedings constituted a breach of the jurisdiction clause in the contract between the parties. An ASI would be granted unless there were strong reasons not to. Second, the foreign proceedings were otherwise vexatious and oppressive. The court would have to be satisfied that England was clearly the more appropriate forum for trial of the action. The ASI in respect of the proceedings against Clearlake fell within the first category and was maintained. Although the LOI provided for London arbitration for small claims this inconsistency was of no consequence as the claims here were not small.

The injunction was also maintained as regards Owners’ claims against Gunvor, now reframed solely as tort claims, which fell within the second category. The bringing of such claims was vexatious and oppressive, in that it circumvented the normal way of passing claims down a charter chain by leap-frogging Clearlake. Owners had manipulated their third party claims to avoid the exclusive jurisdiction clause in the charter. Clearlake, not Gunvor, dealt directly with the owners and the alleged misrepresentation was directly provided to them by Clearlake. There was a very good reason, so as to avoid forum-fragmentation on the same issues, to have all third party proceedings heard in the same jurisdiction (ie England). There was no obvious prejudice to owners in having all the third party proceedings heard in England rather than Singapore. It was not necessary to decide a further issue of whether Clearlake could restrain the tortious claims against Gunvor

Tort and implied contract in Singapore. The case of the ‘Bum Chin’.

 

In Wilmar Trading Pte Ltd v Heroic Warrior Inc (The “Bum Chin”) [2019] SGHC 143, Singapore High Court, an FOB buyer, Wilmar, nominated the ‘Bum Chin’ for shipping palm oil from Indonesia to Jeddah and Adabiyah.  An incident on the vessel caused physical damage to the vessel and loss of and damage to the cargo. Wilmar arranged for a substitute vessel to transport the palm oil purchased under the sale contracts and claimed damages from the registered owner on the grounds of contract and negligence. The registered owner counter claimed asserting that Wilmar was responsible for the damage sustained by the vessel because the loading terminal, as Wilmar’s agent, had improperly loaded the cargo.

Was there a contract between the parties? Wilmar relied on Pyrene v Scindia [1954] 1 Lloyd’s Rep 321, where there was found to be a  contract of carriage between the shipowner and the cargo interest. But Belinda Ang Saw Ean J found that here there was no such contract as the bills to be issued would have been charterers’ bills and the defendant was not the contractual carrier. Turning to tort, although Wilmar had no proprietary interest to found a cause of action in negligence since NTUC Foodfare Co-operative Ltd v SIA Engineering Co Ltd [2018] 2 SLR 588, pure economic loss was claimable under Singapore law and the question was whether the defendant owed a duty of care. The judge found that this was the case. The shipowner as performing carrier would have reasonably foreseen that its negligence would cause economic loss to a buyer of cargo who bore the risk of damage to or loss of the cargo. The requirement of legal proximity was also satisfied. The countervailing policy consideration of indeterminacy did not arise because the plaintiff as FOB buyer bore the risk of loss or damage to the cargo. In the absence of a contract of carriage, the defendant owed the plaintiff a duty to take reasonable care of the cargo loaded on board.

The counterclaim was dismissed on the basis that, absent a contract of carriage between the parties, Wilmar, who was not responsible for the actions in loading of the FOB seller in agency or otherwise, owed no duty of care to the defendant. On the evidence Wilmar’s loss was caused by the shipowner’s negligence as structural weaknesses were a cause of the failure of the tank which had caused leakage and contamination of the cargo.

Are CMR consignment notes electric?

 

They will be soon. The UK has indicated its intention to accede to the e-CMR protocol allowing an electronic consignment note as an alternative to a paper consignment note. In 2008 the CMR protocol became part of the Convention and came into force in 2011 for accepting countries, of which there have been few to date. The UK intends to deposit its instrument of accession to the UN in September 2019, after which it will take 90 days for the Protocol to come into force in the UK. Next stop, extending COGSA 1992 to electronic bills of lading?

Hague-Visby Time Bar. Timeous claims by non-parties.

 

How does the Hague-Visby time limit operate when suit is commenced within the one year period, but by the wrong party? Can they amend the statement of claim to add or substitute the correct party? A resounding ‘no’ is the answer recently given in Feyha Maritime Ltd v Miloubar Central Feedmill Ltd and Another – Civil Leave to Appeal 7195/18, Supreme Court of Israel (Hendel J) – 12 May 2019.

MCF alleged that it imported a cargo of corn to Israel from the Ukraine on the defendant’s ship. The Phoenix Insurance Co Ltd (Phoenix) insured the cargo. A fire broke out on the ship on 13 May 2015 and the cargo never reached its destination. On 4 February 2016 MCF filed a claim against Phoenix in the Magistrates’ Court  and on 5 April 2016 MCF amended its statement of claim to add the shipowners as an additional defendant. That same day Phoenix filed a claim against the shipowners in the District Court of Haifa which claim was subsequently settled. MCF continued to pursue its claim against the shipowners on the basis that it had not received a full indemnity from Phoenix in respect of the damage to the cargo. The shipowners filed a motion to dismiss MCF’s claim on the basis that the bill of lading identified the consignee as “Miloubar Cooperative Agricultural Society Ltd” (MCAS) and not MCF.

The Magistrates’ Court agreed that MCF had no cause of action against the shipowners. MCF argued that it was possible to amend the statement of claim to add or substitute MCAS as plaintiff. The Magistrates’ Court agreed and rejected the shipowners’ motion to dismiss MCF’s claim in limine. Adding MCAS as a plaintiff constituted an amendment that was merely technical and formal. The shipowners filed a motion for leave to appeal to the District Court who rejected the motion for different reasons. The shipowners appealed, arguing the Hague-Visby Rules time bar was a substantive limitation that rescinded the right of claim itself.

The Supreme Court agreed. To allow amendment of the statement of claim without affecting the limitation period of the claim, the original statement of claim had to demonstrate a cause of action against the defendant, but here MCF’s original statement of claim revealed no cause of action against the defendant. The term “suit” in article III rule 6 related to the existence of a proper claim between appropriate parties. The claim filed by Phoenix against the shipowner could not stop accrual of the limitation period with respect to a claim of the owner of the insured cargo against the carrier.

Parallel claims filed in different forums were capable of stopping accrual of the limitation period (see The Nordglimt), but those cases mostly focused on the question whether a claim filed by a party entitled to do so in a foreign forum with jurisdiction to hear the claim could stop accrual of the limitation period for another claim between the same parties (or between parties with relevant nexus) filed in a different forum. It was not appropriate to conclude from judicial precedents permitting claims filed in another forum to stop accrual of limitations, that a claim filed by another plaintiff could also be permitted to do so. The identity of the parties was an integral part of the term “cause” of the story being heard, for purpose of statutes of limitation, and a rule allowing the identity of the plaintiffs to be changed without such having any implications on the limitation period undermined certainty in the rules of limitation and the principle of claim preclusion.

Leave to appeal was granted, and the appeal accepted, meaning that the claim would be dismissed in limine for having reached its limitation period.

 

 

Of damages and counterfactuals — again

It’s not often that we can say “You read it first on the IISTL blog.” But it seems we may be able to, following the decision of the Court of Appeal (Males, Rose and Haddon-Cave L.JJ.) in Classic Maritime Inc v Limbungan Makmur Sdn Bhd [2019] EWCA Civ 1102.

The facts briefly recap thus. A charterer signed a CoA promising to come up with vast cargoes of Brazilian iron ore that would have netted the shipowner profits of something like $20 million. It didn’t, and in hindsight it was abundantly clear that it it never could have. The contract was subject to a force majeure clause including floods preventing performance. Floods duly materialised; but (as was held both at first instance and on appeal) the charterer couldn’t invoke the clause, since if it had never had any cargoes in the first place the floods hadn’t prevented it doing anything. Nevertheless Teare J held at first instance that even though there was breach the damages were not $20 million, but zilch (or rather nominal). His argument was that, hindsight having shown that the shipowner wouldn’t have had a right to performance even if the cargoes had been there, the value of the lost rights was zero.

We raised an eyebrow here at the idea that a defendant who hadn’t, and never could have, performed should be able to cut damages from $20 million to zero by pointing to a force majeure clause that might have protected him but in fact didn’t. The Court of Appeal has now made it clear that it thinks the same way, and substituted an award of $20 million. If (it was said) a claimant showed that a defendant had failed to perform and the defendant could not invoke any exculpatory provision, there was no reason why damages should not be substantial. The reasons behind the non-performance were irrelevant, as was the fact that had the defendant been able to perform in the first place he would have had an excuse.

In our view, despite the beguiling advocacy of the Institute’s own Simon Rainey QC, this is sensible and logical. Males LJ hit the nail on the head at [89] when he pithily pointed out that the breach was not inability or unwillingness to supply cargoes, but the simple fact that the cargoes, for whatever reason, were not there. Put that way, everything neatly falls into place. If you don’t perform your contract and can’t point to any excuse, you are liable for substantial damages. End of story.

Carriage contracts mean what they say, OK?

Open any contract textbook at the chapter on exception clauses, and you will come across a long list of cases on the restrictive interpretation of such clauses, saying that (for example) they will not lightly exonerate a party from the consequences of his own fault in the absence of clear words; that if a clause could cover both negligence and strict liability it will presumptively only cover the latter; that ambiguities will be construed contra proferentem; and so on.

As usual, however, things are not as they seem. No doubt such matters have formed the stuff of contract lectures and provided law professors with enjoyment for as long as most of us can remember. Outside academia, however, commercial lawyers today can pretty safely treat them as a mere empty ritual incantation and then go on quietly to ignore them.

The latest demonstration of this point comes in a case decided six weeks ago but only just reported, Aprile SpA v Elin Maritime Ltd [2019] EWHC 1001 (Comm). On the facts as assumed, steel fabrications were carried on deck from Thailand to Algeria under a straight bill stating that they were so carried and continuing: “ The Carrier shall in no case be responsible for loss of or damage to the cargo, howsoever arising prior to loading into or after discharge from the Vessel or while the cargo is in the charge of another Carrier, nor in respect of deck cargo or live animals.” The cargo did not arrive in one piece, and cargo — or its insurers — wanted to bring a claim. Faced with the unpromising terms of the bill of lading (which was unaffected by the Hague Rules because of the statement of deck carriage), they argued, with a touching hope, that for all its wideness the exemption did not cover any damage caused by negligence or unseaworthiness.

The deputy judge, Stephen Hofmeyr QC, was having none of it. In line with a series of recent authorities such as Persimmon Homes Ltd v Ove Arup & Partners [2017] EWCA Civ 373, he held that the exception clause had to be read, like any other contract term, with a view to seeing what it would mean to a reasonable businessperson, taking into account the circumstances surrounding the contract. He saw no reason to interpret the words “howsoever arising” as meaning anything other than what they said, or to regard claims alleging negligence or unseaworthiness as raising any special issue in this connection. He expressed the view that Langley J had been right to suggest as much in The Imvros [1999] 1 Lloyd’s Rep 848, and saw no justification in criticisms later made of that case. Equally he joined in the general tendency to sideline Canada SS v R [1952] AC 192 and its suggestions for cutting down the presumptive meaning of clauses that did not mention negligence in so many words. The argument that there might be strict liability as a common carrier and that the exception clause might have been intended to be limited to that he treated with the disbelief it richly deserved.

In short, in carriage as elsewhere commercial contracts mean what they say; complex rules of interpretation, and outdated presumptions about exoneration for fault, have little part to play. And rightly so. Carriers and cargo interests alike are keen on English law and jurisdiction precisely because they know their contracts will be read in a common sense and businesslike way. The deputy judge here needs, if one may say so, to be commended for approaching this case with a realistic and hard-headed attitude, and not disappointing them.

When is a bill of lading ‘spent’?

 

In The Yue You 9023 [2019] SGHC 106 the High Court of Singapore has considered the issue of title to sue when spent bills of lading are involved under section 2(2)(a) of the Bills of Lading Act (equivalent to UK COGSA 1992). The bank held bills of lading as security for a loan to the buyer and sued the shipowner for misdelivery in delivering the cargo to a party nominated by the seller before the loan was made without production of a bill of lading. The court held that delivery of cargo to a party that was not entitled to delivery did not cause a bill of lading to be spent (a point noted obiter by the Court of Appeal in The Erin Schulte).

If, however, the bill had been spent the bank would have obtained title to sue under s.2(2)(a) as the loan facility agreement made several years earlier between the bank and the buyer was the contractual arrangement in pursuance of which the transaction had been effected for the purpose of section 2(2)(a). Further the bank had become the holder of the bills in good faith as required by s.5(2) of the Bills of Lading Act and its decision to grant the loan to the buyer against security over the bills, even on the assumption that it knew that the cargo had been discharged, could not be said to have been dishonest; nor could the bank be said to have consented to delivery of the cargo without production of the bills of lading.

‘Howsoever caused’ in exception clause in bill of lading covers loss due to negligence and unseaworthiness.  

 

The Elin (Aprile S.PA. v Elin Maritime Ltd) [2019] EWHC [1001] (Comm) involved a claim under a bill of lading for damage to a cargo carried on deck which was stated to be so carried, and was therefore not subject to the Hague Rules. Owners sought to rely on two clauses.

1- the provision on page 1 of the Bill of Lading that “The Carrier shall in no case be responsible for loss of or damage to the cargo, howsoever arising … in respect of deck cargo”

2- the provision on page 2 of the Bill of Lading that the 70 packages identified on the attached list were “loaded on deck at shipper’s and/or consignee’s and/or receiver’s risk; the carrier and/or Owners and/or Vessel being not responsible for loss or damage howsoever arising”.

Owners argued that these two provisions must be interpreted as excluding all liability for carriage of deck cargo, including liability for negligence and unseaworthiness.. The phrase “howsoever arising”, which appeared in each of the clauses referred to all causes of loss or damage. The Owner relied on the decisions of Saville J,  Langley J and Hamblen J in The Danah [1993] 1 Lloyd’s Rep 351, The Imvros [1999] 1 Lloyd’s Rep 848 and The Socol 3 [2010] 2 Lloyd’s Rep 221, respectively.

Stephen Hofmeyr QC, sitting as a Judge of the High Court agreed. Nothing in the authorities to justify departing from that point of construction. The same or similar words of exclusion have been held to be effective to exclude both liability for negligence causing the loss of cargo (Travers v Cooper [1915] 1 K. B. 73 and  [1993] 1 Lloyd’s Rep. 351) and liability for unseaworthiness causing the loss of cargo (The Imvros). It would be difficult to imagine words of exemption which are wider in effect than “howsoever caused”. Over the last 100 years, they had become “the classic phrase” whereby to exclude liability for negligence and unseaworthiness. Accordingly on a true construction of the Bill of Lading, the Owner was not liable for any loss of or damage to any cargo carried on deck, including loss of or damage to any cargo carried on deck caused by the unseaworthiness of the Vessel and/or the Owner’s negligence.