Agile Holdings v Essar Shipping - The Maria
Agile Holdings Corporation (Claimant) v Essar Shipping Ltd (Defendant)
English Commercial Court: Judge Waksman QC:  EWHC 1055 (Comm)
Simon Rainey QC and Peter Stevenson (instructed by Bentleys, Stokes and Lowless, Solicitors) for Agile
Charles Priday and Sushma Ananda (instructed by Fishers, Solicitors) for Essar
INTER-CLUB AGREEMENT: INTERPRETATION OF PROVISO TO CLAUSE 8(B): WHETHER A PROVISION TO “SIMILAR EFFECT” AS THE ADDITION OF THE WORDS “AND RESPONSIBILITY” TO CLAUSE 8 MUST TRANSFER RESPONSIBILITY FOR ALL CARGO HANDLING OPERATIONS TO OWNERS: WHETHER TRANSFER OF ONE ASPECT OF CARGO OPERATIONS – SUCH AS STOWAGE - SUFFICIENT
For charterers to obtain a 50/50 apportionment for cargo liability between themselves and the owners on grounds of the first proviso to clause 8(b) of the Inter- Club New York Produce Exchange Agreement 1996 (the “Inter-Club Agreement or ICA”), the charterparty must contain a provision which is clearly intended to pass complete responsibility for cargo handling to the shipowners. A partial transfer of responsibility, or responsibility for a particular aspect of cargo handling (such as stowage), will not be sufficient to engage the ICA 8(b) proviso.
Case Note contributed by James Kyne, LLB, MBA, Solicitor of England & Wales, podcaster at The Shipping Lawcast, and International Contributor to DMC’s CaseNotes
Agile Holdings Corporation (“Agile”) chartered the vessel "Maria" to Essar Shipping Ltd, as Charterers (“Charterers”), on a time charter (the “Charterparty”) for a single trip from Tunisia to India via Trinidad. The cargo was a consignment of direct reduced iron ("DRI") and the Charterparty was on the New York Produce Exchange 1946 form, with rider clauses attached.
DRI is highly reactive and combustible in the presence of heat or water.
Whilst the vessel was loading cargo by conveyor belt at Trinidad, the belt was observed to catch fire. Despite this, the appointed supercargo inspected the holds and advised that loading could continue.
In the event, the DRI continued to burn throughout the voyage. Upon discharge, the cargo receiver, Essar Steel Limited, asserted a claim against Agile – although this is yet to be fully particularised.
Agile commenced arbitration against the Charterers for an indemnity against liability to cargo interests.
In order to argue for a complete indemnity from the Charterers, Agile relied upon Clause 8 of the Charterparty, as well as Clause 89 which incorporated the terms of the ICA.
In defence, the Charterers asserted that either (a) the Vessel was unseaworthy to load and stow the cargo (and this was the proximate cause of damage) and/or (b) Clause 49 of the Charterparty was sufficient to place responsibility for cargo handling upon the Vessel. In the case of (a), the Charterers asserted that the ICA would therefore make Agile 100% liable for liabilities to cargo interests or, in the case of (b), 50% liable.
The Arbitration Award between the parties dismissed the unseaworthiness allegation, but agreed with the Charterers’ second argument – that Clause 49 made the Master at least partly responsible for loading operations. As such, the ICA proviso on liability should apply, so that liability for cargo claims should be shared 50/50 between the parties.
Agile sought leave to appeal on the grounds that the Tribunal had found wrongly in law – that Clause 49 was not a sufficient amendment for the purposes of Clause 8(b) of the ICA to apply to the circumstances of this voyage.
The relevant provisions of the Charterparty are:
"…Charterers are to load, stow, and trim, tally and discharge the cargo at their expense under the supervision of the Captain…"
"Cargo claims as between the Owners and Charterers shall be settled in accordance with the Inter- Club New York Produce Exchange Agreement of February 1970 as amended September 1996 as attached, or any subsequent amendments"
"…The Stevedores although appointed and paid by Charterers/Shippers/Receivers and or their Agents, to remain under the direction of the Master who will be responsible for proper stowage and seaworthiness and safety of the vessel…"
The relevant provisions of the ICA are:
"Cargo claims shall be apportioned as follows:…
(a) Claims in fact arising out of unseaworthiness and/or error or fault in navigation or management of the vessel: 100% Owners…
(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 [of the NYPE form] 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 [the numbers in square brackets have been added for clarification]
(c) Subject to (a) and (b) above, claims for shortage or overcarriage: 50% Charterers 50% Owners…
(d) All other cargo claims whatsoever (including claims for delay to cargo): 50% Charterers/50% Owners…"
Prior to its amendment in 1996, the ICA only specified a 50/50 liability apportionment where the words "and responsibility" were added to Clause 8 of the charterparty. Where the effect of adding those words (absent the ICA) would have been to place all the responsibility on the master/owner, the charterers still had to bear 50% of liability under the ICA. The 1996 ICA revision extended the application of the 50/50 proviso beyond the NYPE Clause 8 amendment, to cases where there is a "similar amendment" to ‘and responsibility’ somewhere else within the charterparty.
The BIMCO circular dated 1 September 1996 which accompanied publication of the 1996 ICA revision did not suggest that there were any significant changes intended by this. Indeed the "similar amendment" addition receives no specific attention at all.
So, "similar" connotes a provision in the charterparty which is of the same kind or is to the same effect as the addition of the words "and responsibility", which is what the amendment must be "similar to".
To be similar, the amendment must be to the effect of transferring all cargo handling responsibilities back to the owners – and not just some of them - because this is the effect of adding the words "and responsibility" to Clause 8.
The charterparty amendment should make the Master responsible for cargo handling. On a natural reading, this means cargo handling generally as opposed to some particular aspect of cargo handling. The general reference to "cargo handling" reflects the descriptive heading to Clause (8)(b) of the ICA which refers to claims arising out of the loading, stowage… or other handling of cargo.
This interpretation is not merely true to the language of the ICA but also has the merit of simplicity and certainty which underpins the ICA regime. Owners and charterers can agree different ways to allocate responsibility between them by using clear enough words – Clause (8)(b) of the ICA does not prevent that, it merely dictates a particular result where particular wording is used.
The wording of Clause 49 in this particular Charterparty effected only a partial transfer of cargo handling responsibilities back to Agile. It was concerned specifically with one aspect of cargo handling, namely stowage.
The fact that stowage is not the same as all aspects of cargo handling was emphasised by Flaux J. (as he then was) in The Sea Miror  2 Lloyd's Rep 395. A transfer back to owners of stowage only does not connote any transfer back of other cargo handling responsibilities.
In this case the handling responsibility transferred back was that of stowage alone. Accordingly, Clause 49 was ineffective to engage the first proviso to Clause (8)(b) of the ICA, to make liability 50/50 and not 100% on the Charterers. The Tribunal’s decision was held to be wrong on this point of law. in the prevailing circumstances.
Agile’s appeal was accordingly successful and Agile were awarded a 100% indemnity against the Charterers.
The case turned on two issues:
1. The extent and clarity of charterparty wording which is required to engage the ICA proviso at 8(b); and
2. whether, in this instance, Clause 49 of the Charterparty was sufficient to do so.
The Court has given clear guidance on the first issue: either the words “…and responsibility…” are written into the NYPE Clause 8 wording so as to place cargo loading under the Master’s clear responsibility; or another similar amendment is placed within the charterparty which has an identical effect – a complete transfer of all cargo handling responsibility back to the Owners.
On the second issue, the Court found plainly that the wording at Clause 49 of the Charterparty was limited to stowage; there was thus only a partial transfer of responsibility back to Agile. This was not a complete transfer of all cargo handling responsibility back to them, and so was not sufficient to engage, in the prevailing circumstances, the ICA 8(b) 50/50 apportionment.
Therefore, given that anything less than a complete transfer of responsibility for cargo handling will not suffice, this judgment concludes that the ICA regime does not require a complicated factual enquiry as to whether a particular aspect of cargo handling has been transferred and whether that particular aspect caused the loss in question. A simple approach should be taken to apportionment under the ICA, in accordance with its original objectives.