Yuzhny Zavod Metall Profil v Emms Beheerder - the M/V Eems Solar

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DMC/SandT/14/09

England

Yuzhny Zavod Metall Profil LLC v Eems Beheerder B.V. (“the M/V EEMS SOLAR”)

English High Court, Queen’s Bench Division, Admiralty Court: Jervis K, Q.C, the Admiralty Registrar: 5 June 2013

BILLS OF LADING: INCORPORATION OF CHARTERPARTY TERMS PROVIDING THAT CHARTERERS WERE RESPONSIBLE FOR STOWAGE: WHETHER OWNERS COULD RELY ON THAT CLAUSE AS DEFENCE TO CLAIM BY RECEIVERS FOR CARGO DAMAGE CAUSED BY BAD STOWAGE

Turlough Stone, instructed by Gateley LLP, for the Claimant Cargo Receivers

Neil Henderson, instructed by Hill Dickinson LLP, for the Defendant Owners

Summary

This case decided that the carrier could rely on a charterparty term, providing for stowage to be the responsibility of the Charterers, that had been incorporated into the bill of lading, as a defence to a claim brought by a third party bill of lading holder for cargo damaged by bad stowage. The incorporation of that term was effective to transfer responsibility for stowage away from the carrier under the bill of lading

This case note is based on a note prepared by Neil Henderson, a barrister at Stone Chambers, Gray’s Inn, London who appeared for the successful Defendant Owners in this case.

Background

The Claimant Receivers brought a claim against the Defendant Owners of the vessel the M/V EEMS SOLAR, for damage to a cargo of 411 coils of pre-painted aluzinc steel sheets. The damage had occurred when the stow had shifted in heavy weather encountered during the voyage from Xingang, China to Novorossiysk, Russia. The Receivers alleged that the damage was caused by the unseaworthiness of the vessel, in that she had not been properly equipped with additional lashing material upon departing the load port, and also that the crew of the vessel had failed to tend and care for the cargo during the voyage. The claim was put on the alternative ground that, if the cargo damage was due to poor stowage, the Owners were contractually responsible for this.

The cargo was shipped under a Congenbill 1994 bill of lading. The bill of lading contractually incorporated both the Hague Rules 1924 and a Gencon 1994 charterparty that the Defendant Owners had entered into with a third party charterer. Article III Rule 2 of the Hague Rules provides that “Subject to the provisions of Article 4, the carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried”.

Clause 5 of the incorporated charterparty provided that the “The cargo shall be brought into the holds, loaded, stowed and/or trimmed, tallied, lashed and/or secured by the Charterers[emphasis added], free of any risk, liability and expense whatsoever to the Owners”. The cargo had in fact been loaded and stowed in some haste by stevedores appointed by the Charterers.

The Admiralty Registrar held that the damage was due to poor stowage in that locking coils were not used. This meant that the cargo had been able to shift whilst the vessel was on passage across the Indian Ocean in monsoon conditions. He further held that the vessel was not unseaworthy because of a lack of lashing equipment, nor had the crew failed properly to care for the cargo during the voyage.

As to whether the Owners were responsible for the poor stowage, the parties’ cases on the incorporation of clause 5 of the charterparty into the contract of carriage were as follows:

The Receivers argued (paragraphs 52(b) and 73 of the judgment) that clause 5 was not incorporated because:

(i) the clause – in referring to the Charterers - did not make sense in the context of a bill of lading which regulated the rights of the parties to that contract of carriage, namely, the Receivers and the Owners; Although a degree of verbal manipulation was permissible to enable charterparty clauses to be incorporated into bills of lading, that was so only where the parties had intended them to apply or where it made commercial sense (The Miramar [1984] AC 676; The Spiros C [2000] 2 Lloyd’s Rep. 319;

(ii) the incorporation in this case could not have been intended and did not make commercial sense in that there was no reason why a receiver should take on responsibility for a loading operation over which it had no control; and that

(iii) a contractual carrier remains responsible to a consignee/bill of lading holder for damage arising from inadequacy of the stow, even if responsibility for undertaking that stowage had passed to the charterers.

The Owners argued (paragraphs 61 and 68 of the judgment) that clause 5 was validly incorporated into the contract of carriage and that its effect was to transfer responsibility for loading and stowing the cargo away from the Owners and to the Charterers.

Referring to the decisions of the House of Lords in GH Renton v Palmyra Trading Corporation [1957] AC 149 and The Jordan II [2003] 2 Lloyd’s Rep. 87, the Registrar held that transfer of responsibility to a third party was sufficient and that there was no need to manipulate the language so as to read the word “charterers” in clause 5 as “shippers” and/or “receivers”.

As to whether the Owners retained a residual responsibility for the acts of that third party (the issue considered by the Court of Appeal in The Coral [1993] 1 Lloyd’s Rep. 1), clause 5 expressly provided by the words “free of any risk, liability and expense whatsoever to the Owners” that the Owners were not to be liable for the third party’s acts.

The Admiralty Registrar held (paragraphs 84-87 and 92-98 of the judgment) that clause 5 was validly incorporated into the contract of carriage and that this was effective to transfer responsibility for stowing the cargo away from the Owners. This transfer of responsibility was effective notwithstanding the incorporation of Article III Rule 8 (fn 1) of the Hague Rules into the contract of carriage.

This meant that the Owners had a complete defence to the claim, subject only to the question whether the Owners or their agents had intervened in the stowage, such that the damage was attributable to their intervention. The Admiralty Registrar held that there was no evidence that the stowage plan, which had been prepared by the vessel and provided to the stevedores at Xingang, had contributed to the improper stowage.

Comment

The case is of obvious importance to the industry, given it involved the widely-used Congenbill 1994 and the Gencon 1994 charterparty. The clause 5 in question was amended, but only insofar as the words “and taken from the holds and discharged” had been deleted and, accordingly, the decision is limited to the effective transfer of responsibility for loading and stowing operations. However, there is no reason why the principle recognised in The “Eems Solar” should not apply to discharging operations as well, if the incorporated clause 5 is in its unamended form.

The Eems Solar decision extends the protection afforded to contractual carriers by the incorporation of charterparty clauses which transfer responsibility away from the contractual carrier, beyond that recognised by the House of Lords in The Jordan II, so as to include situations where the transfer of responsibility clause in the incorporated charterparty does not include the words “shipper” and/or “receiver”.

Fn 1. This Article renders invalid any term of a bill of lading which purports to reduce the carrier's obligations below the standard provided by the Rules themselves