Negligence of master causing additional cargo handling costs - who pays?

Clearlake Shipping Pte Ltd v Privocean Ltd (The “PRIVOCEAN”) [2018] EWHC 2460 concerned a claim against owners by time charterers under a NYPE charterparty in respect of unnecessary costs incurred by them in the carriage of a cargo of soyabeans.

The master had insisted on a stowage plan for charterers requiring strapping of a cargo of soya beans. This cost the charterers US$ 400,000 or so which they sought to recover from owners. The dispute went to arbitration and the tribunal in their award found that the master had been quite obviously negligent in his decision. The arbitrators also found that this was a breach of the charterparty. Nonetheless, they held that the charterers’ claim failed by reason of the defence afforded to the owners under Article IV, rule 2(a) of the Hague Rules (or the US COGSA equivalent) which was incorporated into the charterparty:

“Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from

(a) Act neglect, or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship”

The charterers ended up having to adopt a stowage plan unwillingly from the master. The master’s decision making had not been primarily related to caring for the cargo. His decision had revolved around his concerns for the stability of the ship in the exercise of his supervisory role. It was negligence relating to the management of the ship, not the cargo.

That was the key area for the appeal to the High Court. Was the master’s negligence really in the management of the ship or did it relate to the cargo, in which case, owners would not have a defence.

In reviewing the authorities, Mrs Justice Cockerill pointed out that the breaches complained of and established before the tribunal predated loading. The charterers ended up having to adopt a stowage plan unwillingly from the master. The master’s decision making had not been primarily related to caring for the cargo. His decision had revolved around his concerns for the stability of the ship in the exercise of his supervisory role. It was negligence relating to the management of the ship, not the cargo. The owners could, therefore, rely on the Hague Rules defence.

Charterers also sought to recover the costs by reference to clause 2 of the NYPE charter:

“Charterers are to provide necessary dunnage and shifting boards, also any extra fittings requisite for a special trade or unusual cargo…”

On that basis, so the charterers argued, they should not bear the costs of unnecessary extra fittings – in this case the strapping. That argument got short shrift. Clause 8 of the NYPE charterparty is the one which actually deals with the parties’ respective cargo handling obligations. As such, trying to read a transfer of responsibility into Clause 2 could not be justified and she was “entirely unpersuaded” on the point.

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