Marine Brief: latest decisions March 2020

In this briefing, we consider some recent decisions addressing issues including: the scope of seaworthiness to include passage planning, charterers’ liability for statements made in bills of lading, when marine cargo cover attaches, the admissibility of MAIB reports in arbitration proceedings, and judgment in default award for salvage services.

The scope of seaworthiness to include journey planning and Owners’ non-delegable duty to exercise due diligence

Alize 1954 v Allianz Elementar Versicherungs AG (The “CMA CGM LIBRA”) [04.03.20]

The Court of Appeal rejected owners’ appeal and held that clear errors in navigation or management occurring prior to the commencement of the voyage can render a vessel unseaworthy. It re-iterated that owners’ duty to ensure seaworthiness is non-delegable.

The vessel had been navigated outside the buoyed fairway whilst leaving the port of Xiamen, China, and ran aground on a shoal in an area where the charted depths were over 30 metres. The shoal was not marked on the paper admiralty charts available at the time, but recent Notices to Mariners had warned that depths less than those charted existed in the approaches to the port. The vessel’s passage plan had not provided for it to leave the buoyed fairway but nor did it contain a clearly marked warning of the danger created by the presence of depths less than those charted. General average was declared and 92% of cargo interests paid their contribution. However, 8% refused, submitting that the unsafe and negligently prepared passage plan rendered the Vessel unseaworthy and was causative of the casualty.

Owners submitted that the Master’s navigational decisions were reasonable in the circumstances and that passage planning was part of navigation and not in itself an aspect of seaworthiness. The 8% argued that the vessel was unseaworthy before and at the beginning of the voyage due to its defective passage plan and therefore owners, through the Master and the Second Officer, had failed in their duty of due diligence to exercise reasonable care and skill when preparing the plan.

The court agreed with the 8% and concluded that seaworthiness extended to having the appropriate documentation on board, including a passage plan which is required at the beginning of the voyage. Owners’ duty to exercise due diligence to ensure the vessel’s seaworthiness was non-delegable, and it was irrelevant that they had relied on the Master and Second Officer to prepare the passage plan.

Contacts: Andy Purssell, Craig Boyle-Smith and Ingrid Hu

Charterers’ responsibility for statements made by agents regarding the condition of goods shipped

Priminds Shipping (HK) Co Ltd v Noble Chartering Inc (The “Tai Prize”) [31.01.20]

The Tai Prize was chartered for the carriage of a cargo of soyabeans from to China. The Master executed the bill of lading without any reservations, stating that the cargo had been “Shipped… in apparent good order and condition…”. The contract of carriage was with the shipowner, not the charterers.

When the cargo was discharged it was found to have suffered heat and mould damage. Receivers claimed against the shipowners and recovered a sum of US$1,086,564.70. In turn, the shipowner commenced arbitration proceedings against the disponent owners/head charterers for a 50% contribution of the sum paid to receivers. The disponent owners brought arbitration proceedings against the charterers claiming the amount paid to the shipowner (and their costs).

The tribunal rejected the disponent owners’ claim for an indemnity, but held the charterers liable because: (a) the shipper, as charterers’ agent, had impliedly warranted the accuracy of any statement contained in the bill of lading; (b) charterers, via the shipper (as their agents), had warranted that the cargo was shipped in apparent good order and condition; and (c) the cargo defects would have been visible on reasonable examination by the shipper.

On appeal, the Commercial Court held that when the shipper tendered the bill of lading for the Master’s signature this was not a warranty as to the accuracy of the represented facts, or a representation as to the actual condition of the goods shipped. Presenting the draft bill of lading for signature was only inviting the master to make a representation of fact following his own assessment of the apparent condition of the cargo. Charterers’ appeal was therefore allowed.

Contacts: Andy Purssell and Jonathan Biggins

The importance of timing in the attachment of marine cargo cover

Swashplate Pty Ltd v Liberty Mutual Insurance Company trading as Liberty International Underwriters [16.01.20]

In an Australian case which turned on when cover attached, it was held that the various contractual documents, including the placement slip, the policy wording and the Institute Cargo Clauses needed to be read together. While the Master Slip was not considered a contractual document, the court held it was admissible to assist in the interpretation of the insurance contract.

This resulted in insurers being held not liable for damages to a helicopter due to it being inadequately chocked.

This case highlights the importance for insureds, brokers and insurers to check commencement dates on cargo policies, ensuring that they take into account different dates and time zones between where the risk is located and where the insurance is taken out.

Contacts: Chris Finn, Peter Craney and James Barnett

Related item: Yesterday, all my troubles seemed so far away… the importance of timing in the attachment of marine cargo cover

Admissibility of Marine Accident Investigation Branch (MAIB) reports in arbitration

Ocean Prefect Shipping Ltd v Dampskibsselskabet Norden AS (The “Ocean Prefect”) [06.12.19]

The UK-flagged Ocean Prefect (the vessel) ran aground whilst entering Umm Al Quwain Port in the UAE. Owners commenced arbitration, alleging that the grounding was caused by charterers’ breach of the safe port warranty.

Where there is a serious marine incident, both the coastal and flag state can investigate. The UK MAIB duly investigated the incident and issued its report shortly before the arbitration hearing was due to take place. Owners wished to refer to the MAIB report in arbitration; charterers and the MAIB argued that the court had to give permission for it to be admitted.

The court found that arbitration was within the definition of “judicial proceedings” and therefore permission was required for the report to be admitted.

The court then considered whether to admit the MAIB report into these arbitration proceedings.

The purpose of MAIB reports is to improve maritime safety and not to attribute blame. Investigations are conducted on the understanding that witnesses cannot refuse to answer questions on the grounds of self-incrimination, but that generally no answer would be admissible in evidence against that person.

The court considered any prejudice or likely prejudice to future accident safety investigations outweighed the interests of justice in admitting the report on this occasion. Permission was refused.

This approach prioritises the purpose of MAIB reports in promoting safety of life at sea.

Contacts: Andy Purssell, Craig Boyle-Smith and Ingrid Hu

Claimant salvors’ entitled to judgment in default award of £450,000 for common law salvage services following Falmouth grounding

Keynvor Morlift Ltd And Others v The Vessel “Kuzma Minin”, Her Bunkers Stores And Freight At Risk (If any) [19.12.19]

The Admiralty Court awarded claimants £450,000 for performance of common law salvage services in accordance with the Salvage Convention 1989, executed timely, successfully, and at considerable risk to personnel and equipment.

On 18 December 2018, the bulk carrier, Kuzma Minin grounded after dragging its anchor in strong winds in Falmouth Bay. The vessel was not adequately insured for P&I risks, and her owner’s hesitance to engage professional salvors resulted in the Falmouth harbourmaster having to coordinate local resources to move the vessel at the next high tide.

The salvors brought an in rem action against the vessel, her bunkers, stores and freight at risk in the sum of £550,000 for salvage services. In default of acknowledgement of service, the salvors sought judgement in default, the vessel having been sold by the Admiralty Marshal for US$1,0003,000. However, the total claims exceeded the sale amount paid into court, and the mortgaging bank contested the salvage claim.

In one of his final judgments before retiring, the Admiralty Registrar Jervis Kay QC, found that the “salvors deserve an encouraging award which, given the dangers and the nature of the services rendered, may represent a substantial proportion of the salved fund without being unjust to the salved interests” in the sum of £450,000.

Contacts: Andy Purssell and Craig Boyle-Smith

Read others items in Marine Brief - March 2020