Marine Brief: latest decisions July 2020

We consider some recent decisions addressing issues including: limitation of liability for marina or dock operators; who is the ‘operator’ of a vessel; parties’ obligations under a chain of letters of indemnity and; interpretation of maritime contracts according to the US Supreme Court.

The Admiralty Court considers whether a marina or dock operator can limit their liability under s.191 Merchant Shipping Act

Holyhead Marina Ltd v Peter Farrer and others [07.07.20]

This claim arose out of damage caused by Storm Emma to craft moored in Holyhead Marina in March 2018. In anticipation of a large number of claims, the Marina commenced proceedings against the owners of the damaged craft seeking a limitation of its liability - said to total £5 million - to around £550,000 pursuant to s.191 of the Merchant Shipping Act which allows, in certain situations, for the owners of any dock or canal to limit liability for losses arising out of one distinct occasion assessed by reference to the tonnage of the largest UK ship which had been in the area within the five years preceding the loss.

The defendants argued that (1) the claimant was not the owner of a “dock”; (2) the claimant had lost their right to limit liability as the loss resulted from the claimant’s personal and reckless act or omission; and (3) that the alleged limit exceeded the anticipated amount of claims. The claimant sought to strike out these allegations and/or for summary judgment.

On (1), the court concluded that the pontoons which made up Holyhead Marina were within the statutory definition of “dock”. The claimants, as owners of the Marina, were therefore in principle entitled to rely on the limitation. On (2), the court concluded that the allegation could not be struck out because it has, just, a real prospect of success and there remained factual issues to be determined at trial. This also meant that the claimant was not entitled to summary judgment. On (3), the court concluded that the defendants had no real prospect of showing a craft of sufficient size had visited the Marina to establish a liability limit exceeding £5 million.

Contact: Craig Boyle-Smith and Ingrid Hu

Admiralty Court provides helpful clarification as to who is the ‘operator’ of a vessel

Splitt Chartering Aps & others v Saga Shipholding Norway AS & others (the “STEMA BARGE II”) [22.05.20]

Under the Limitation Convention 1976, shipowners (and salvors) are entitled to limit their liability for specified claims. The term ‘shipowners’ is defined as ‘the owner, charterer, manager or operator of a seagoing ship’, but what constitutes an ‘operator’ has been open to interpretation. In this case, the Admiralty Court provides helpful clarification as to who should be considered an ‘operator’ for the purposes of limitation.

Contacts: Andrew Purssell and Freddie Mehlig

Related item: Admiralty Court provides helpful clarification as to who is the ‘operator’ of a vessel

MIRACLE HOPE: guidance on parties’ obligations under a chain of letters of indemnity

Trafigura Maritime Logistics v Clearlake Shipping and Clearlake Chartering USA v Petroleo Brasileiro [06.05.20]

The Commercial Court has provided important guidance about the requirements imposed by the International Group of P&I Clubs’ standard letter of indemnity (LOI) wording and the position of intermediate parties in an LOI chain.

In principle, back-to-back charterers should be able to pass demands up and down the charterparty chain and recover their costs of doing so from the indemnifying party. However, this case highlights the difficulty they may find themselves in an LOI case with the court ultimately holding them to their independent contractual promise, meaning the indemnity down the LOI chain is only as good as the charterer who gives it.

Contacts: Andrew Purssell and Natalie Seal

Read more: MIRACLE HOPE: guidance on parties’ obligations under a chain of letters of indemnity

ATHOS I – The US Supreme Court weighs in on charter parties and other contracts

CITGO Asphalt Refining Co. v Frescati Shipping Co. Ltd [30.03.20)

The US Supreme Court recently decided a 16 year old case involving the M/T AHTOS I, a tanker which struck an anchor in the Delaware River causing a massive oil spill. At issue was whether the ASBATANKVOY charter party which included a safe berth clause was a warranty of safety, which imposed liability on the charterer if the berth was unsafe, even if the charterer had exercised due diligence in selecting the berth. Some lower courts had held that a safe berth clause required only that the charterer exercise due diligence in selecting the berth.

The Supreme Court viewed the charter party as a maritime contract, which should be viewed like every other contract, with reference to the terms and consistent with the parties’ intentions. The safe berth clause expressly stated that the charterer “shall” designate and procure a safe place or wharf from which the vessel can proceed and depart “always safely afloat.”. The Court viewed that language as absolute, constituting a warranty of safety for designated berths

The full extent of the impact of the decision remains to be seen. Undoubtedly, a safe berth clause will now be considered a warranty that the berth is in fact safe regardless of the charterer’s care (or lack of same) in choosing it. Contracting parties should carefully review their contracts and query whether their belief as to what the contract does or does not require is consistent with the plain meaning of the contract, and not dependent on their perception of industry standards, usages or commercial expectations.

Contact: Pamela Schultz

MV NIKA: court discharges freezing order

Fimbank Plc v Discover Investment Corp [05.02.20]

Baker J dismissed a Maltese bank’s application for the continuation of a freezing order (obtained ex parte) in support of its case that it was the lawful holder of bills of lading for the carriage of wheat from Ukraine to Egypt. The bills were consigned to order, and, pursuant to its agreement with its customer, AOS Dubai, the bank argued that it was the lawful holder. The cargo was discharged by the defendant owner of the vessel “Nika” without production of any bills of lading against a letter of indemnity issued by the vessel’s time charterers, to the notify party, AOS Egypt.

The bank claimed the cargo was delivered against production of forgeries of the bills of lading in circumstances where the originals were with a bank in Egypt. Nothing was ever paid for the cargo by any end buyers. The bank indicated that it would pursue a claim for damages for misdelivery and had obtained a freezing order in support of that claim.

The court dismissed the application and continuation of the freezing order, finding that the defendant had discharged the cargo to an entitled party, and therefore there was no good arguable case to justify its continuation.

Contact: Jonathan Biggins

Read others items in Marine Brief - July 2020