In the recent decision in the “EEMS Solar”,1 the Admiralty Court had to consider whether the carrier was liable under a Bill of Lading for damage resulting from the movement of cargo during the voyage due to poor stowage.
Background
A cargo of 411 coils of pre-painted aluzinc steel sheets was shipped on board the “EEMS Solar” from Xingang, China to Novorossiysk, Russia, arriving in September 2010. Heavy weather during the passage resulted in a shifting in stowage, and the cargo sustained significant physical damage.
The claimant receiver of the cargo sought to recover damages of US$159,809.69 from the defendant carrier as compensation for breach of contract (i.e. breach of the carrier’s duties under Art III Rule 2 of the Hague Rules) or alternatively, negligence in the loading, handling, custody and care of the cargo.
Arguments
The receiver argued that the cargo damage resulted from unseaworthiness due to shipowner’s failure to equip the vessel with adequate lashing and securing materials or, alternatively, that the damage resulted from the master’s negligence in preparing an inadequate stowage plan and/or the crew’s failure to properly inspect and re-secure the cargo during the voyage.
In contrast, owners maintained that they were not liable under the Bill of Lading contract because:
(i) the terms of the voyage charter were incorporated and the terms of that charter allocated the risk and responsibility for cargo operations to charterers not owners;
(ii) the crew had taken all reasonable steps to care for the cargo; and
(iii) the master and crew had not intervened in the loading and stowage of the cargo, and were under no obligation to do so.
Cause of Loss
The Court determined that inspections conducted by the crew during the voyage were adequate and, under the circumstances, neither the crew nor shipowners could be faulted for not having done more to re-secure the cargo while the vessel was at sea.
The effective cause of damage was held to be improper stowage, and specifically the failure to use locking coils. There had also been a lack of systematic lashing necessary to ensure the cargo’s stability during the conditions the vessel was reasonably likely to meet on the voyage.
The vessel was found to be seaworthy, but any unseaworthiness which had arisen was solely the result of the failure to properly stow the cargo.
Responsibility for Poor Stowage
Terms of the Contract of Carriage
The cargo was shipped under a Congen 1994 bill of Lading containing a General Clause Paramount Clause applying the Hague Rules.
Clause 1 of the bill of lading provided:
“All terms and conditions, liberties and exceptions of the Charterparty, dated as overleaf, including the Law and Arbitration Clause are herewith incorporated.”
Clause 5 of the incorporated Gencon 1994 charterparty provided:
“The cargo shall be brought into the holds, loaded, stowed and/or trimmed, tallied, lashed and/or secured by the charterers, free of any risk, liability and expense whatsoever to the owners. The charterer shall provide and lay all dunnage material as required for the stowage and protection of the cargo on board, the owners allowing the use of all dunnage available on board.”
The bill of lading also contained a general paramount clause by which the Hague Rules 1924 were incorporated. So far as relevant Articles II, III Rule 8, and IV Rule 2i of which provide that:
Article II:
“Subject to the provisions of Article IV, the carrier shall properly and carefully load, handle stow, carry, keep, care for and discharge the goods carried.”
Article III Rule 8:
“Any clause covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to, or in connexion with goods arising from negligence, fault or failure in the duties and obligations provided in this Article or lessening such liability otherwise than is provided in this Convention, shall be null and void and of no effect.”
Article IV Rule 2i:
“Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from:
(i) Act or omission of the shipper … ”
Although the cargo claimants sought to argue that because clause 5 referred to charterers and not the cargo interests it could not be incorporated into the bill of lading, the court did not agree. That clause made it clear that the parties intended responsibility for stowage to be transferred to the shippers/cargo receivers, and more importantly, that owners would not be responsible.
The claimants also argued that Article III Rule 8 of the Hague Rules would render void an agreement to relieve the carrier of its obligations under the Rules – in particular in this case to properly load and stow the cargo. This was held not to apply. This was because clause 5 defined the scope of the tasks which owner was to perform, as distinct from seeking to limit or exclude liability for breach of the carrier’s duties and obligations under the Rules of those tasks that the carrier had agreed to perform – see the House of Lords' decision in the “Jordan II”:
As such, the carrier was not liable for damage arising from improper stowage since contractual responsibility for stowage had been passed from the shipowner to charterer, unless it could be established that the bad stowage leading to the damage arose from a significant intervention by or on behalf of owners.
Significant Intervention
For owners to be held liable for damage arising from poor stowage by reason of intervention in the stowage, the actions of owner or master would have to have been so significant as to effectively “tie the stevedores hands” 2. In other words, if cargo damage “was caused only by the captain’s orders or was the result of matters of which the captain was, but the charterers were not, aware” 3, then such intervention could give rise to liability on the part of the shipowner.
The master’s stowage plan did not provide for locking coils to be used, although doubts were raised over whether the plan did, or would have had, any influence on the actions of the load port stevedores. In this respect, while the Court accepted that the lack of locking coils was the effective cause of the cargo movement and therefore damage, there was no evidence that the stevedores had followed that plan. As such, responsibility for cargo stowage, and consequently liability for the damage, was not transferred back to owners: see Canadian Transport Co Ltd v Court Line Ltd [1940]and the “Imvros”
http://www.steamshipmutual.com/publications/Articles/Articles/DangStow0406.asp
http://www.steamshipmutual.com/publications/Articles/Articles/Seaworthiness.asp
Conclusion
This is an interesting case as it potentially expands the scope of the “The Jordan II” decision so as to protect carriers where a Bill of Lading incorporates charterparty terms which shift responsibility for cargo operations (or indeed other Hague/Hague-Visby Rules duties) away from the shipowner.
The effect of any such terms will of course depend on their precise wording and their construction in the context of the Bill of Lading contract as a whole.
1 EEMS Solar [2013] Lloyd's Rep. Plus75
2 EEMS Solar [2013] Lloyd's Rep. Plus75
3 Ibid
