Stowage of Dangerous Goods - Who is Responsible? - An Update

April 2006

 

In a website article of April 2005, the decision of London Tribunal dealing with the division of responsibility between owners and charterers for the stowage of dangerous goods on board a container vessel was discussed. Click here to view. The vessel was chartered on a NYPE C/P with an unamended clause 8 (that is without the addition of the words "and responsibility").

The Tribunal decided the charterers were responsible for the damage to both the vessel and cargo caused by the stowage of a container in contravention of the IMDG Code. The charterers sort and obtained leave to appeal to the High Court in London. The appeal was heard by Morison J in February, 2006, an was on the following grounds;

1) Stowage and Seaworthiness - What is the proper interpretation of Clause 8 of the C/P when read in conjunction with Clause 24 of the C/P which expressly incorporated as a clause paramount the Hague Visby Rules?

2) Bunker Tank Heating - If the heating of the bunker tanks was causative of the explosion (which had yet to be resolved by the Tribunal), could the owners have a defence to a claim for a breach of Article III Rule 2 of the Hague Visby Rules ("failing to case for … the goods carried") by virtue of Article IV Rule 2 (an "act neglect or default … in the management of the ship")?

Prior to Morison J's decision being handed down the owners and the charterers agreed a settlement of the claims. Notwithstanding this Morison J's decided that his judgment should still be handed down.

Stowage and Seaworthiness

In the appeal the charterers asked the court to consider three questions in relation to the seaworthiness point;

a) In the absence of any contrary provision in the C/P, does Article III Rule 1 (the duty to make the vessel seaworthy) require the Master to intervene and correct bad stowage at the commencement of the voyage?

b) If the answer to (a) is yes, as a matter of construction of the charterparty as a whole, including Article III Rule 1, have the Owners been relieved of liability for the stowage which rendered the vessel unseaworthy?

c) If the answer to (b) is again yes, is this contrary to the principals of Article III Rule 8, which provides that "any clause …or agreement in a contract of carriage relieving the carrier or ship from liability … arising from their negligence … shall be null and void"?

The charterers argued that the owner was under a non-delegable duty to make the vessel seaworthy at the commencement of the voyage and that although the owner may transfer the task of making the vessel seaworthy, the consequences of operating an unseaworthy vessel remained with owners. In support of this argument charterers pointed out that Clause 8 of the charterparty made no reference to unseaworthiness, therefore the Master's responsibilities under Article III (1) must remain absolute, and moreover Article III (8) prohibits the transfer of responsibility in this respect.

To substantiate their position the charterers argued that the majority of the House of Lords in "Court Line"¹ "arguably contemplated" that the transfer of responsibility for stowage to charterers could not take precedent over the owners' obligation to make the vessel seaworthy. In this respect owners were under a duty to intervene in the loading process. However, in response, owners' position was that while they may have responsibilities to vessels crew and bill of lading holders arising from unseaworthiness due to bad stowage, that was irrelevant to the contractual allocation of responsibility, and in this respect also relied on Lord Wright's² speech in the same case;

"It must follow that they not only relieve the ship of the duty of loading and stowing, but as between themselves and the shipowners relieve them of liability for bad stowage, except as qualified by the words "under the supervision of the captain"…"

Therefore, this was not an issue that would fall within the scope of Article III Rule 1 which only related to the non-delegable duties which the carrier had contracted to perform to cargo interests.

The owners also took issue with charterers' argument that Clause 8 was inconsistent with Article III Rule 8 to the extent that Clause 8 relieved owners of their seaworthiness obligations arising from the loading process. If this were the case this would mean that the Inter Club Agreement, which was incorporated in the Charterparty, was also inconsistent with Article III Rule 8. This point was discussed by Lord Justice Kerr in "The Strathnewton"³:

"What connection can the parties have intended between a settlement under the Inter-Club Agreement and the Hague Rules in relation to such settlement, the answer is "None" "

Morison J view was that the answer to the question of responsibility was dependent on a true construction of the Charterparty. He did though agree with the owners' interpretation of "Court Line" which dealt with each of the charterers' questions, and that the issue before him was whether the words "under supervision of the master" from Clause 8 imposed upon owners any duty to charterers to intervene in the stowage. This was robustly rejected by Lord Atkin in; "there is no foundation at all for this defence".

This decision has obvious impacts not only for the stowage of dangerous cargo on board a container vessel under an unammended NYPE C/P, but it also upholds the principles of the much discussed and debated decision of Langley J in the "Imvros"⁴ In this case Langley J made the point, with which Morison agreed:

"It would be a remarkable construction which produced the result that so long as the loading was carried out by the charterers badly enough to put the or other cargo but not the vessel at risk the charterers would be liable and the owners would not but the moment the loading was so badly carried out that it made the vessel unseaworthy the entire responsibility fell upon the owners and the charterers were relieved of it"

Morison J also did not share charterers' view that Clause 8 was inconsistent with the Inter Club Agreement. The dominant cause of the improper stowage was not negligence on the part of the vessel but that of the charterers who had agreed to load and stow the cargo. If the vessel was unseaworthy that was the fault of the charterers who, contractually, are responsible for loading and stowing and therefore liable for the damage flowing from their breach.

Bunker Tank Heating

Morison J agreed with the Arbitrators, that the latter was the correct answer when considering whether heating of the bunker tanks was deemed as part of the care of the cargo or the running of the vessel. The bunkers were heated to facilitate the transfer of oil to the vessels engines. This was not a process related to the care of the cargo. Although the Tribunal has not decided⁵ whether this was causative, the judge said that; "By asserting that an act directly causes damage to the cargo does not alter the nature of the act itself. If the act was done as part of the running of the ship, then the damage to the cargo is caused indirectly by that act…"

Therefore this reasserts the fact that should the damage to the cargo be caused indirectly though some act connected with the movement or operation of the ship, then the owners should be able to avail themselves of the "Error of Management" Defence in Article IV Rule 2(a).

1. Who also formed part of the majority 

2. Canadian Transport Company v Court Line 67 Ll L Rep 161 

3. "The Strathnewton" [1983] 1 Lloyd's Rep 217 

4. Transocean Liners Reederei Gmbh v Euxine Shipping Co Ltd (The 'Imvros') - QBD (Com Ct)(Langley J) - 9 March 1999

5. The claim has settled and the issue of causation will not now be decided by the tribunal.