SDTM-CI and others v Continental Lines amd another - the Sea Miror

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DMC/SandT/15/18

England

Société de Distribution de Toutes Marchandises en Côte D’Ivoire, trading as “SDTM-CI”, and others v. Continental Lines N.V. and another (the “Sea Miror”)

English High Court: Flaux J; 18 June 2015: [2015] EWHC 1747 (Comm)

Robert Thomas QC and Benjamin Coffer, instructed by Clyde & Co, for the Claimants, SDTM-CI

Timothy Young QC, instructed by Lax & Co, for the first Defendant, Continental Lines

SYNACOMEX 90 CHARTERPARTY: LOADING AND DISCHARGING TO BE AT THE EXPENSE AND RISK OF THE SHIPPERS/CHARTERERS AND RECEIVERS/CHARTERERS RESPECTIVELY: WHETHER OWNERS RESPONSIBLE FOR CARGO LOSS AND DAMAGE OCCURRING DURING LOADING AND DISCHARGE

Summary

In this case, the Commercial Court considered a preliminary issue of contractual interpretation regarding the responsibility for loading and discharge in the standard Synacomex 90 Form. The Court determined that the words “at the expense and risk of” the cargo interests were sufficiently clear to transfer responsibility for the proper performance of those operations from the carrier to the cargo interests.

This note is based on a report on the case prepared by Daniel Jones, partner, and Jonathan Reese, associate, in the Hamburg office of Ince & Co.

Background

This case concerned responsibility for the loading, stowage and discharging of nearly half a million bags of rice (“the Cargo”), which were carried in two consignments from Karachi, Pakistan, to Abidjan in the Ivory Coast. The Cargo was carried on board the “SEA MIROR” (“the Vessel”) pursuant to bills of lading which incorporated the Hague Rules and some of the terms of a Booking Note dated 15 March 2012 between the Carrier, Continental Lines, and Louis Dreyfus Commodities Limited. That Booking Note, in turn, incorporated, in so far as was relevant, the terms of a previous voyage charterparty on the Synacomex 90 Form.

The Receivers brought claims in respect of alleged loss and damage arising from:

1. wet and mouldy bags;

2. bags allegedly being torn during loading and/or carriage and/or discharge; and

3. alleged short delivery.

By the consent of the parties, the Court was asked to decide on the following preliminary issue:

“Whether on the proper construction of the contract of carriage contained in or evidenced by the bill of lading dated 7 April 2012 the First Defendant is liable for loss or damage to the cargo caused by improper loading, stowage or discharging of the cargo.”

At common law, the established position is that the carrier is responsible for loading, stowage and discharge but that parties can, through clear agreement, transfer this responsibility to cargo interests.

The key question in determining the preliminary issue was the construction of clause 5 of the standard Synacomex 90 Form and whether it demonstrated a clear agreement to transfer responsibility for loading, stowage and discharge. The clause provided:

"Cargo shall be loaded, spout trimmed and/or stowed at the expense and risk of Shippers/Charterers at the average rate of 1,500 metric tons per weather working day … Cargo shall be discharged at the expense and risk of Receivers/Charterers at the average rate of 1,500 metric tons per weather working day ……Stowage shall be under Master's direction and responsibility…".

Judgment

The Carrier accepted that the effect of the sentence “Stowage shall be under the Master’s direction and responsibility” was to make it responsible for any loss arising from the way in which the bags were stowed. The question to be decided was therefore whether the Carrier or one of the Cargo Interests was responsible for any shortcomings in the loading/discharge and, therefore, any losses arising therefrom.

Cargo Interests argued that the clause was not sufficiently clear to transfer responsibility to them. Specifically, they argued that “at the expense and risk of” could be interpreted in a number of ways and that the inconsistency between the two references to stowage in the clause (“at the expense and risk of Shippers/Charterers” and “under Master’s direction and responsibility”) meant that the clause was not clear.

The Carrier’s position was that “at the expense and risk of” were clear words transferring responsibility for cargo operations to the Cargo Interests and that the later reference to stowage in the same clause did not create any inconsistency. They argued that the effect of the first part of the clause was that the Cargo Interests were responsible for cargo operations but that the effect of the later words “Stowage shall be under Master’s direction and responsibility” meant that the responsibility for stowage (but not loading and discharging) was transferred back to the Carrier. The Carrier argued that they must be correct that the words “at the expense and risk of” changed the common law position by making the Cargo Interests responsible for cargo operations, otherwise the specific words making the Carrier responsible for stowage would be unnecessary.

The Court found that “at the expense and risk of” did indeed, as the Carrier argued, transfer responsibility for cargo operations to the Cargo Interests. It was held that the first part of clause 5 transferred responsibility for cargo operations to the Charterers, and the latter part of the clause made it clear that responsibility for stowage reverted to the Carrier. So the Court held that responsibility for damage caused by loading and discharging was the Charterers’ and answered the preliminary issue in favour of the Carrier.

Comment

The Court considered parallels between the construction of clause 5 in the Synacomex 90 form and clause 8 in the NYPE form. There is a clear line of authorities equating risk and responsibility and confirming that the addition of “and responsibility” in clause 8 NYPE transfers risk to the owners. Following these authorities, the Court had no hesitation in holding that risk in the context of clause 5 of the Synacomex 90 form meant also responsibility.

The judgment also provides a useful recap of the principles which guide the proper construction of clauses relating to responsibility for loading, stowage and discharge. It should be remembered that where charterers have a right to appoint and/or employ stevedores, such right will not, without more, transfer to the charterers responsibility for the stevedores’ acts or omissions. On the other hand, if charterers are to perform the cargo operations, then they will be responsible for them.