Case Updates - Charterers’ Liability under a Charterparty Tony Wong / Julia Zhu Gard Shanghai Seminar 24 th May 2018
Case Updates - Charterers’ Liability
under a Charterparty Tony Wong / Julia Zhu Gard Shanghai Seminar 24th May 2018
Introduction
• Owners’ Liability and Defence Cover
• Case Updates:
Yangtze Xing Hua 2017
Arundel Castle 2017
• Charterers’ Liability and Defence Cover
• Case Study: Damage to Hull
2
Owners’ Liability &
Defence Cover
Owners’ Liabilities and Risks
• Damage to/Loss of Cargo
• Personal Injury
• Collision with Other Ships
• Damage to Fixed or Floating
Objects
• Stowaways
• Fines4
Owners’ Liabilities and Risks
• Pollution
• Wreck Removal
• General Average
• Salvage/Towage
• Legal Costs
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Owners’ P&I and Defence Cover
Case Updates
Transgrain Shipping (Singapore) Pte Ltd v. Yangtze
Navigation (Hong Kong) Co Ltd (“Yangtze Xing
Hua”) [2017] EWCA Civ 2107
Background
• Time Charter Trip
o NYPE form dated 3rd Aug 2012
o Soya bean meal cargo
o South America to Iran
• Vessel arrived Iran port in Dec 2012
• Cargo interests failed to pay
Charterers
• Charterers’ instructions:
o Wait off the discharge port for over
4 months7
Claim
• Soya bean meal overheat
• Cargo discharged in May 2013
• Cargo damage for Euro 5 million
Settlement
• Owners paid Euro 2.6 million
Indemnity Claim under ICA
• Owners claim against Charterers for
o Cargo damage Euro 2.6 million
o Outstanding hire USD1 million 8
The “Yangtze Xing Hua”
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The Inter Club Agreement(8) Cargo Claims shall be apportioned as follows:
(a) Claims in fact arising out of unseaworthiness and/of error or fault in navigation or
management of the vessel:
100% Owners
save where the Owner proves that the unseaworthiness was caused by the loading,
stowage, lashing, discharge or other handling of the cargo, in which case the
claim shall be apportioned under sub-clause (b).
(b) Claims in fact arising out of the loading, stowage, lashing, discharge, storage or
other handling of cargo:
100% Charterers
unless the words "and responsibility" are added in clause 8 or there is a similar
amendment making the Master responsible for cargo handling in which case:
50% Charterers 50% Owners
save where the Charterer proves that the failure properly to load, stow, lash,
discharge or handle the cargo was caused by the unseaworthiness of the vessel in
which case:
100% Owners
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The Inter Club Agreement
(c) Subject to (a) and (b) above, claims for shortage or overcarriage:
50% Charterers 50% Owners
unless there is clear and irrefutable evidence that the claim arose out of pilferage or
act or neglect by one or the other (including their servants or sub-contractors) in
which case that party shall then bear 100% of the claim.
(d) All other cargo claims whatsoever (including claims for delay to cargo):
50% Charterers 50% Owners
unless there is clear and irrefutable evidence that the claim arose out of the act or
neglect of the one or the other (including their servants or sub-contractors) in which
case that party shall then bear 100% of the claim.
Arbitration Decision
• Whether Owners were to blame for not monitoring
cargo temperature?
No, not the Owners’ fault
• Whether Charterers were in breach or at fault in
loading the cargo?
No, not the Charterers’ fault in loading
• Cause of the damage
o Inherent nature of the cargo
o Prolonged period at anchor at the discharge
port11
The “Yangtze Xing
Hua”
Charterers
Court of First Instance
• Charterers’ argument:
o Act under 8 (d) means culpable act andact or neglect means fault
• Court rejected the Charterers’ argument
o The word “act” in clause 8(d) wouldreasonably be understood to bear itsordinary and natural meaning of any actwithout regard to questions of fault
• Charterers appealed
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The “Yangtze Xing Hua”
Court of Appeal
• Held
o Previous versions of the ICA are irrelevant
o Court agreed that sub-clauses (a) and (b) used phrases thatencompassed fault but it was not a requirement
o Questions of causation would not be difficult to apply in practiceMaritime law (as in other areas of law) has worked out howcausation is to be dealt with
o Clause 8(d) was a sweeping up provision which only appliedwhere there was no apportionment under sub-clauses (a) to (c)
• Court dismissed the Charterers’ appeal
13
The “Yangtze Xing Hua”
Background
• Voyage Charter - Gencon 94 form
• Vessel arrived at the loading port of
Krishnapatnam India
• Vessel could not berth
• Port Authority directed the vessel to
anchor at a location where vessels
usually anchored
• NOR was tendered from anchorage
• Owners claimed demurrage
• Charterers rejected claim
o NOR was invalid as it was tendered
outside port limits14
Navalmar UK Ltd v Kale Maden Hammaddeller Sanayi
Ve Ticaret AS (the “Arundel Castle”) [2017] EWHC
Port Congestion
• Clauses under Fixture Recap and Gencon 94
o Clause 15
“NOR to be tendered at both ends by cable/telex/fax on vessels
arrival at load/discharge ports within port limits”
o Clause 6(c) Gencon Charter
“If the loading/discharging berth is not available on the vessel’s
arrival at or off the port of loading/discharge, the vessel shall be
entitled to give notice of readiness within ordinary office hours on
arrival there……”
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The “Arundel Castle”
OWNERS
Arbitration Decision
• Tribunal identified the port limits by
reference to the admiralty chart of the
relevant area
• The vessel was anchored outside the
geographical limits of the port.
• NOR was invalidly tendered as it was not
given within port limits as required under
clause 15 of the fixture recap which
prevailed
• Owners appealed16
The “Arundel Castle”
Court Decision
• The Common Law Test in The Johanna Oldendorf
o “the essential factor is that before a ship can be treated as an
arrived ship she must be within the port and at the immediate
and effective disposition of the charterer and that her
geographical position is of secondary importance”
o “for practical purposes it is so much easier to establish that, if
the ship is at a usual waiting place within the port it can generally
be presumed that she is at the charterer’s disposal”
• N.B. the usual waiting place may not always be within the port limit
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The “Arundel Castle”
Court Decision
• Held
o The definition of “port” in the “Laytime Definitions for Charterparties
2013” was not held to define “port limits”
o Where there is a national or local law that defines the limits of the
port in question, those limits shall apply
o Where there is no such law, a good indication of what the port
limits are is given by the area of exercise by the port authority of its
powers to regulate the movements of ships
• Court dismissed the Owners’ appeal
• N.B.: Parties can freely define “port limits” in the charterparty
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The “Arundel Castle”
Charterers’ Liability &
Defence Cover
Case Study:M/V LUCKY
• Bulk Cargo
• Discharge in Shanghai
• Ship’s grab is damaged due to
stevedore fault
2017 201711/10 18/10 25/10
Vessel arriving at port + discharge started
13/10/2017
Discharge completed
20/10/2017
Vessel sailing 27/10/2017
DAMAGE
18/10/2017
Vessel not sailing
13/10/2015 - 27/10/2015
Cranes repaired by Stevedores
21/10/2015 - 26/10/2015
M/V LUCKY
M/V LUCKYCover?
• Cost for repairing the damaged grab?
• Hire? Freight?
• Bunker costs?
TCT (17.09.2017)
Period: about 40 days
A Shipping Co. Ltd.
Golden Ocean
Head
owners
Charterer
Sub-
charterer
B Co Ltd
C Shipping Co. Ltd
D Shipping Co.Ltd Sub-
charterer
Time c/p (21.09.2017)
Period: 24-26 months
Voyage c/p: from
US to China
Parties
Cover What can Members recover?
Physical damage?
1. No No linked cover, no hire
2. Yes Question of fact: Is charterers responsible and liable under
the CP?
Yes No
Charterparty?
Cannot put the vessel offhire:
B) Continues to pay hire: Members
claim (1) and (3). We indemnify (1)
and (2)
C) Wrongfully puts vessel offhire:
Members claim (1),(2),(3)
Offhire? A)Owners claim:
1)Damage to hull (physical repairs)2)Lost hire3)Other expenses (ex. Bunker costs)
Charterers puts vessel offhire:
Owners repairs cannot be recovered nor hire
-Reasonable conduct by
Members?
-Quantum of damages?
-CP defences?
Comprehensive Charterers’ Liability CoverSummary of Standard SCC
• Applies P&I named risks in the capacity of a charterer of a ship
• Adds risks excluded for Owners (examples):
o DTH + hire
o GA contribution & Salvage contribution
o Cost to remove and replace bunkers that could damage the ship
• Fixed premium – (not poolable)
• Gard offers limits up to USD 1 billion per event
• Gard retention – USD 100 Million – amounts above retention are
re-insured and cover limits at renewal are subject to availability
of re-insurance.
P&I risks: Liabilities in respect of:
• Loss of or damage to third party cargo
• Personal injury
• Damage to fixed and floating objects
• Other property damage
• Pollution
• Fines (customs, immigration, accidental pollution)
• Wreck removal (including removal of bunkers and cargo)
• Mitigation and legal costs in respect of the above liabilities
Comprehensive Charterers’ Liability Cover
Other charterers’ risks: Liability in respect of
Cargo owners’ and traders’ liabilities: Liability in respect of cargo carried on both chartered and non-chartered vessels
Additions to P&I risks and cargo owners legal liability extension
• Physical damage to or loss of the
chartered ship or ship’s equipment
• Salvage of the chartered ship
• Removal and replacement of bunkers
in order to avoid or minimise damage
to the chartered ship
• Freight’s and bunkers’ contribution in
general average
• War and terrorist risks, including liability
for damage to or loss of the ship
• Damage to ships including salvage
and detention, caused by cargo
traded by the assured, whether
contractual or in tort (but not cargo
contribution)
• P&I liabilities caused by cargo - for
example:
o Pollution by cargo including fines
o Damage to berth, terminal
o Personal injury caused by cargo
Comprehensive Charterers’ Liability Cover
Legal cost cover
Limits:
USD 10 million
Deductibles:
All legal and other costs incurred under the
Defence Cover will be subject to a
deductible of 25 per cent, subject to a
minimum contribution by the Member of USD
5,000
Risk covered:
Cover for risks as detailed in Rule 65 which
include; legal costs, as well as a general
advisory and claims handling service for non-
P&I matters, claims brought and defended in
connection with contract of carriage, delay
of the ship, loading, stowage, discharge etc.
Defence Cover
* I
What we do not cover
• No reasonable prospect of succeeding/enforcing a claim
• Legal costs unreasonably outweigh the amount in dispute
• Costs/expenses are covered under other insurance
• There has been wilful misconduct by the Member
• Costs including legal fees which are incurred prior to notification of Gard (although we often approve following notification
where Gard would have taken similar action)
Defence Cover
The team
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Thank you!