Case Updates - Charterers’ Liability

under a Charterparty Tony Wong / Julia Zhu Gard Shanghai Seminar 24th May 2018

Introduction

• Owners’ Liability and Defence Cover

• Case Updates:

Yangtze Xing Hua 2017

Arundel Castle 2017

• Charterers’ Liability and Defence Cover

• Case Study: Damage to Hull

2

Owners’ Liability &

Defence Cover

Owners’ Liabilities and Risks

• Damage to/Loss of Cargo

• Personal Injury

• Collision with Other Ships

• Damage to Fixed or Floating

Objects

• Stowaways

• Fines4

Owners’ Liabilities and Risks

• Pollution

• Wreck Removal

• General Average

• Salvage/Towage

• Legal Costs

5

Owners’ P&I and Defence Cover

Case Updates

Transgrain Shipping (Singapore) Pte Ltd v. Yangtze

Navigation (Hong Kong) Co Ltd (“Yangtze Xing

Hua”) [2017] EWCA Civ 2107

Background

• Time Charter Trip

o NYPE form dated 3rd Aug 2012

o Soya bean meal cargo

o South America to Iran

• Vessel arrived Iran port in Dec 2012

• Cargo interests failed to pay

Charterers

• Charterers’ instructions:

o Wait off the discharge port for over

4 months7

Claim

• Soya bean meal overheat

• Cargo discharged in May 2013

• Cargo damage for Euro 5 million

Settlement

• Owners paid Euro 2.6 million

Indemnity Claim under ICA

• Owners claim against Charterers for

o Cargo damage Euro 2.6 million

o Outstanding hire USD1 million 8

The “Yangtze Xing Hua”

9

The Inter Club Agreement(8) Cargo Claims shall be apportioned as follows:

(a) Claims in fact arising out of unseaworthiness and/of error or fault in navigation or

management of the vessel:

100% Owners

save where the Owner proves that the unseaworthiness was caused by the loading,

stowage, lashing, discharge or other handling of the cargo, in which case the

claim shall be apportioned under sub-clause (b).

(b) Claims in fact arising out of the loading, stowage, lashing, discharge, storage or

other handling of cargo:

100% Charterers

unless the words "and responsibility" are added in clause 8 or there is a similar

amendment making the Master responsible for cargo handling in which case:

50% Charterers 50% Owners

save where the Charterer proves that the failure properly to load, stow, lash,

discharge or handle the cargo was caused by the unseaworthiness of the vessel in

which case:

100% Owners

10

The Inter Club Agreement

(c) Subject to (a) and (b) above, claims for shortage or overcarriage:

50% Charterers 50% Owners

unless there is clear and irrefutable evidence that the claim arose out of pilferage or

act or neglect by one or the other (including their servants or sub-contractors) in

which case that party shall then bear 100% of the claim.

(d) All other cargo claims whatsoever (including claims for delay to cargo):

50% Charterers 50% Owners

unless there is clear and irrefutable evidence that the claim arose out of the act or

neglect of the one or the other (including their servants or sub-contractors) in which

case that party shall then bear 100% of the claim.

Arbitration Decision

• Whether Owners were to blame for not monitoring

cargo temperature?

No, not the Owners’ fault

• Whether Charterers were in breach or at fault in

loading the cargo?

No, not the Charterers’ fault in loading

• Cause of the damage

o Inherent nature of the cargo

o Prolonged period at anchor at the discharge

port11

The “Yangtze Xing

Hua”

Charterers

Court of First Instance

• Charterers’ argument:

o Act under 8 (d) means culpable act andact or neglect means fault

• Court rejected the Charterers’ argument

o The word “act” in clause 8(d) wouldreasonably be understood to bear itsordinary and natural meaning of any actwithout regard to questions of fault

• Charterers appealed

12

The “Yangtze Xing Hua”

Court of Appeal

• Held

o Previous versions of the ICA are irrelevant

o Court agreed that sub-clauses (a) and (b) used phrases thatencompassed fault but it was not a requirement

o Questions of causation would not be difficult to apply in practiceMaritime law (as in other areas of law) has worked out howcausation is to be dealt with

o Clause 8(d) was a sweeping up provision which only appliedwhere there was no apportionment under sub-clauses (a) to (c)

• Court dismissed the Charterers’ appeal

13

The “Yangtze Xing Hua”

Background

• Voyage Charter - Gencon 94 form

• Vessel arrived at the loading port of

Krishnapatnam India

• Vessel could not berth

• Port Authority directed the vessel to

anchor at a location where vessels

usually anchored

• NOR was tendered from anchorage

• Owners claimed demurrage

• Charterers rejected claim

o NOR was invalid as it was tendered

outside port limits14

Navalmar UK Ltd v Kale Maden Hammaddeller Sanayi

Ve Ticaret AS (the “Arundel Castle”) [2017] EWHC

Port Congestion

• Clauses under Fixture Recap and Gencon 94

o Clause 15

“NOR to be tendered at both ends by cable/telex/fax on vessels

arrival at load/discharge ports within port limits”

o Clause 6(c) Gencon Charter

“If the loading/discharging berth is not available on the vessel’s

arrival at or off the port of loading/discharge, the vessel shall be

entitled to give notice of readiness within ordinary office hours on

arrival there……”

15

The “Arundel Castle”

OWNERS

Arbitration Decision

• Tribunal identified the port limits by

reference to the admiralty chart of the

relevant area

• The vessel was anchored outside the

geographical limits of the port.

• NOR was invalidly tendered as it was not

given within port limits as required under

clause 15 of the fixture recap which

prevailed

• Owners appealed16

The “Arundel Castle”

Court Decision

• The Common Law Test in The Johanna Oldendorf

o “the essential factor is that before a ship can be treated as an

arrived ship she must be within the port and at the immediate

and effective disposition of the charterer and that her

geographical position is of secondary importance”

o “for practical purposes it is so much easier to establish that, if

the ship is at a usual waiting place within the port it can generally

be presumed that she is at the charterer’s disposal”

• N.B. the usual waiting place may not always be within the port limit

17

The “Arundel Castle”

Court Decision

• Held

o The definition of “port” in the “Laytime Definitions for Charterparties

2013” was not held to define “port limits”

o Where there is a national or local law that defines the limits of the

port in question, those limits shall apply

o Where there is no such law, a good indication of what the port

limits are is given by the area of exercise by the port authority of its

powers to regulate the movements of ships

• Court dismissed the Owners’ appeal

• N.B.: Parties can freely define “port limits” in the charterparty

18

The “Arundel Castle”

Charterers’ Liability &

Defence Cover

Case Study：M/V LUCKY

• Bulk Cargo

• Discharge in Shanghai

• Ship’s grab is damaged due to

stevedore fault

2017 201711/10 18/10 25/10

Vessel arriving at port + discharge started

13/10/2017

Discharge completed

20/10/2017

Vessel sailing 27/10/2017

DAMAGE

18/10/2017

Vessel not sailing

13/10/2015 - 27/10/2015

Cranes repaired by Stevedores

21/10/2015 - 26/10/2015

M/V LUCKY

M/V LUCKYCover?

• Cost for repairing the damaged grab?

• Hire? Freight?

• Bunker costs?

TCT (17.09.2017)

Period: about 40 days

A Shipping Co. Ltd.

Golden Ocean

Head

owners

Charterer

Sub-

charterer

B Co Ltd

C Shipping Co. Ltd

D Shipping Co.Ltd Sub-

charterer

Time c/p (21.09.2017)

Period: 24-26 months

Voyage c/p: from

US to China

Parties

Cover What can Members recover?

Physical damage?

1. No No linked cover, no hire

2. Yes Question of fact: Is charterers responsible and liable under

the CP?

Yes No

Charterparty?

Cannot put the vessel offhire:

B) Continues to pay hire: Members

claim (1) and (3). We indemnify (1)

and (2)

C) Wrongfully puts vessel offhire:

Members claim (1),(2),(3)

Offhire? A)Owners claim:

1)Damage to hull (physical repairs)2)Lost hire3)Other expenses (ex. Bunker costs)

Charterers puts vessel offhire:

Owners repairs cannot be recovered nor hire

-Reasonable conduct by

Members?

-Quantum of damages?

-CP defences?

Comprehensive Charterers’ Liability CoverSummary of Standard SCC

• Applies P&I named risks in the capacity of a charterer of a ship

• Adds risks excluded for Owners (examples):

o DTH + hire

o GA contribution & Salvage contribution

o Cost to remove and replace bunkers that could damage the ship

• Fixed premium – (not poolable)

• Gard offers limits up to USD 1 billion per event

• Gard retention – USD 100 Million – amounts above retention are

re-insured and cover limits at renewal are subject to availability

of re-insurance.

P&I risks: Liabilities in respect of:

• Loss of or damage to third party cargo

• Personal injury

• Damage to fixed and floating objects

• Other property damage

• Pollution

• Fines (customs, immigration, accidental pollution)

• Wreck removal (including removal of bunkers and cargo)

• Mitigation and legal costs in respect of the above liabilities

Comprehensive Charterers’ Liability Cover

Other charterers’ risks: Liability in respect of

Cargo owners’ and traders’ liabilities: Liability in respect of cargo carried on both chartered and non-chartered vessels

Additions to P&I risks and cargo owners legal liability extension

• Physical damage to or loss of the

chartered ship or ship’s equipment

• Salvage of the chartered ship

• Removal and replacement of bunkers

in order to avoid or minimise damage

to the chartered ship

• Freight’s and bunkers’ contribution in

general average

• War and terrorist risks, including liability

for damage to or loss of the ship

• Damage to ships including salvage

and detention, caused by cargo

traded by the assured, whether

contractual or in tort (but not cargo

contribution)

• P&I liabilities caused by cargo - for

example:

o Pollution by cargo including fines

o Damage to berth, terminal

o Personal injury caused by cargo

Comprehensive Charterers’ Liability Cover

Legal cost cover

Limits:

USD 10 million

Deductibles:

All legal and other costs incurred under the

Defence Cover will be subject to a

deductible of 25 per cent, subject to a

minimum contribution by the Member of USD

5,000

Risk covered:

Cover for risks as detailed in Rule 65 which

include; legal costs, as well as a general

advisory and claims handling service for non-

P&I matters, claims brought and defended in

connection with contract of carriage, delay

of the ship, loading, stowage, discharge etc.

Defence Cover

* I

What we do not cover

• No reasonable prospect of succeeding/enforcing a claim

• Legal costs unreasonably outweigh the amount in dispute

• Costs/expenses are covered under other insurance

• There has been wilful misconduct by the Member

• Costs including legal fees which are incurred prior to notification of Gard (although we often approve following notification

where Gard would have taken similar action)

Defence Cover

The team

30

Thank you!