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AND 43 Tsamadou Street, Piraeus 185 32, Greece. Telephone (30) 210 429 4300
We are delighted to announce that the firm has been
joined by Julian Morgan, a very experienced solicitor
who has run his own firm for many years and brings
with him his commodities, energy and shipping practice.
In the “STAR POLARIS” the claimant Buyer contracted
with the defendant Builder for a new Capesize bulk carrier.
After delivery the vessel suffered a serious engine failure
and was towed to a repair yard. The Claimant sought
(i) damages for the cost of repairs to the vessel
(ii) towage costs and other costs associated with the
engine failure and (iii) the diminution in value of the vessel.
Article IX.4 of the contract limited the Defendant’s liability
to the obligations set out expressly in that article, which
included a guarantee that the vessel was free from
defects for 12 months. The article also purported to
exclude the Builder’s liability for any ‘consequential or
special losses, damages or expenses’.
The Court rejected the Buyer’s argument that
‘consequential loss’ should be interpreted in the context
of the second limb of Hadley v Baxendale (which covers
losses within the reasonable contemplation of the parties
at the time the contract was entered into). The Court
agreed with the Arbitration Tribunal that the proper
interpretation of Article IX.4 was wider than this. Taken
as a whole, the article was understood to exclude liability
for all damages other than those directly resulting from
defective materials or workmanship. This meant that
financial losses caused by defects other than the cost
of repair of physical damage were excluded.
In Transgrain Shipping v Yangtze Navigation, there was a
dispute under a charterparty incorporating the Inter-Club
Agreement 1996 (the ICA). Clause 8 of the ICA provided:
“(8) Cargo claims shall be apportioned as follows:
(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”
The Charterers had ordered the ship to wait off the
discharge port for over four months whilst awaiting
payment for cargo. When the cargo was eventually
discharged, damage was found and a claim against
the vessel was settled for 2,654,238. The Owners claimed
that amount together with hire from the Charterers.
The Tribunal found that the cause of damage was
inherent vice of the cargo and the prolonged period of
being anchored off the discharge port. The Tribunal
held that the damage was due to the act of the
Charterers, despite the fact that they were not in
breach or at fault for loading the cargo. Therefore, the
Charterers should bear the full cost of the claim.
The Court rejected the Charterers’ appeal. Clause 8
should be given its ordinary, natural meaning and did
not raise issues of fault. The reference in clause 8 to
‘neglect’ was used to cover claims arising out of a party’s
failure to act and did not import a requirement of fault.
In Volcafe Ltd v CSAV, the Court of Appeal considered
a claim by cargo interests in respect of condensation
damage suffered by consignments of coffee beans carried
in dry, unventilated containers from Columbia to Northern
Germany. The Claimants’ case was that the carrier failed to
deliver them in the same good order and condition as upon
shipment. Alternatively they argued that loss and damage
had been caused by the carrier’s failure to carry and care
for the cargoes. In particular, because the kraft paper
used to line the internal metal surfaces of the containers
was inadequate. The expert evidence was that a degree
of damage by condensation was usual for such cargoes.
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The Court of Appeal found that where goods were
loaded in apparent good order and condition, the cargo
claimant bears the burden of establishing they were lost
or delivered in a damaged condition. If this burden is
met an inference is drawn that the carrier was in breach
of its obligation to properly and carefully carry and care
for the goods. If the carrier wishes to raise an exception
to liability, it has the burden of establishing such but the
carrier is not required to prove the damage occurred
without its negligence. Rather, the burden is on the
cargo claimant to negate the operation of the relevant
exception by establishing negligence or want of care.
Overruling the first instance judge, the Court of Appeal
found that adequate lining paper had been employed,
that the carrier had applied a sound system of carriage
and that because of the high inherent level of condensation
in the cargo as shipped damage was inevitable. The
Owners were not liable for the damage.
On 30
November 2016 the limits of liability for maritime
claims under the Convention on Limitation of Liability
for Maritime Claims 1976 and its 1996 Protocol were
increased under English Law. The limits for both physical
damage and physical injury have been increased by 51%
for all categories of vessel tonnage with the exception of
vessels less than 300GT where there will be no increase.
The new limits will only apply to incidents on or after
November 2016.
In the “ATLANTIK CONFIDENCE”, following the sinking
of a bulk carrier on a laden voyage from Ukraine to
Oman, the Owners issued proceedings seeking a
limitation decree pursuant to the Limitation Convention
1976. This was opposed by the insurers of one of the
cargoes who contended that the vessel was deliberately
scuttled. They argued that, pursuant to article 4 of the
Convention, the Owners were barred from claiming
limitation because the loss resulted from their personal
act or omission and they intended to cause that loss.
It was held that the insurers had to prove their case on
the balance of probabilities. This is the same standard of
proof applied to whether a hull underwriter has shown on
the balance of probabilities that a vessel has been scuttled.
The evidence in the case was sufficient to conclude a
fire was deliberately started onboard the vessel and that
the vessel was deliberately sunk by the Master and Chief
Engineer. The Court found it difficult to accept that three
improbable events had occurred in quick succession,
namely an accidental fire, an accidental flooding of the
engine room and an accidental flooding of two double
bottom tanks. There was also other evidence such as an
earlier change of the vessel’s course into deeper water and
an unscheduled abandon ship drill conducted in an odd
manner. The Master initially sought to conceal the change
of course and then attempted to explain it by reference to
a risk of piracy when there was no such risk. Looked at
cumulatively, this evidence justified the Court’s finding.
The subsequent question was whether the vessel was
sunk on the request of Mr A, the sole shareholder and
director of the Owners. There was no evidence suggesting
the Master and Chief Engineer had a motive to sink the
vessel personally. Also, some evidence suggested the
involvement of senior employees of the Owners. For
example, the Owners failed to inform salvors that they
had dispatched another of their vessels to the casualty,
with the intention of their superintendents boarding the
vessel before it was boarded by salvors. Further, Mr A
had lied about the destination of hull insurance proceeds,
suggesting an attempt to mask a benefit received from
the vessel sinking.
The Court concluded the vessel was deliberately sunk by
the Master and Chief Engineer at the request of Mr A. In
those circumstances, the loss of the cargo was a natural
consequence of his act and must have been anticipated.
The Owners’ claim for a limitation decree was dismissed.
Sino Channel Asia Ltd v Dana Shipping and Trading
highlights the care that must be taken when serving
a Notice of Arbitration, in particular where an opponent
is unresponsive.
Dana Shipping and Trading Pte Ltd, Singapore (Owners),
entered into a Contract of Affreightment (COA) with
Sino Channel Asia Ltd, Hong Kong (Charterers). The
fixture negotiations were carried out via separate
independent brokers acting on behalf of each of the
parties. Subsequently, during the performance of the
COA, Dana communicated with Sino Channel via Mr C,
who was an employee of Beijing XCty Trading Limited,
a company registered in the Peoples Republic of China.
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On certain occasions Mr C represented himself to Dana
as acting for Sino Channel and on other occasions as
acting for Beijing XCty. Dana was not aware of the precise
relationship between Sino Channel and Beijing XCty.
Following a dispute regarding the COA, Dana appointed
an arbitrator and e-mailed a Notice of Arbitration to Mr C
directly. Mr C responded on three occasions, including a
request for a time extension. Nevertheless, Sino Channel
did not appoint an arbitrator and so Dana appointed their
arbitrator as sole arbitrator. Eventually an award was issued
by the sole arbitrator in favour of Dana which was served
on Sino Channel in Hong Kong. Sino Channel alleged this
was the first time they had become aware of the arbitration
proceedings. They argued that Mr C had no authority to
accept service of process on their behalf and that therefore
the arbitration was ineffective. Sino Channel commenced
proceedings in the English High Court for a Declaration
that the Tribunal had not been properly constituted.
It emerged in the subsequent Court proceedings that
Sino Channel and Beijing XCty were in business together,
but were independent companies. Beijing XCty found
and arranged various back-to-back sale and purchase
contracts in which Sino Channel would appear as the
named party. In line with this arrangement, the relevant
COA was signed by Sino Channel’s director and bore
Sino Channel’s stamp, however it was Beijing XCty that
concerned itself with the performance of the contract.
The Court held that while Beijing XCty may have had a wide
general authority to communicate and act on behalf of Sino
Channel for the fixing and performance of the COA, such
authority did not (without more) include the authority to
accept service of the Notice of Arbitration. The Court did
not find evidence that specific authority had been given by
Sino Channel and so rejected Dana’s argument that Beijing
XCty had actual implied authority to accept the service.
The Court also rejected Dana’s argument that Beijing XCty
had ostensible authority to accept service. There was no
express representation made by Sino Channel to this effect
and representations made by the intermediaries did not
suffice. Whilst the Court accepted in some cases it may
be possible to infer the existence of a representation by
looking at the conduct of the principal, on the present facts
there was insufficient evidence to merit such a conclusion.
Finally, the Court held there was no ratification by Sino
Channel. Failing to participate in an arbitration which was
improperly constituted did not amount to ratification or
acceptance of the process. Nor did a 4 month period of
inactivity after being served with the award. Accordingly,
the Court granted the Declaration sought by Sino Channel.
This case may come as a surprise to the shipping
community which is accustomed to sending arbitration
notices via broking channels and insurers. When faced
with an uncooperative or silent opponent it is advisable
to spend time ensuring notice is served correctly and
in a manner that cannot be subsequently challenged.
In the “PATRICIA SCHULTE”, Cargo interests loaded
containers of rape seed cake on the Owners’ vessel.
Similar cargoes loaded on another of the Owners’ vessels
self-ignited on passage. As a result of this, the Owners
discharged the present Claimants’ containers at an
intermediate port on the grounds that they contained an
undeclared dangerous cargo.
One day before expiry of the one year limitation period, the
cargo interests issued a Claim Form in the Admiralty Court
against the Owners. As the Owners declined to appoint
solicitors for service in England, service needed to be
effected under EU Service Regulation EC No. 1393/2007.
The cargo interests’ English solicitor flew to Copenhagen
and purported to serve the claim form by handing it to
an in-house lawyer at the Owners’ offices in Denmark.
The effectiveness of such service was challenged.
The Court held that service of an English Claim Form
by an English solicitor directly on the Owners in Denmark
was not permitted by the Service Regulation as applicable
under Danish law. Article 15 of the Regulation allows
service of judicial documents directly through “judicial
officers, officials or other competent persons of the
Members State addressed”. However, an English solicitor
is not a judicial officer, official or other competent person
of Denmark. Accordingly there was no valid service of the
Claim Form by such method. The Court also held that the
attempted service was not merely a minor procedural error
which could be remedied (for example, an incomplete or
missing translation in circumstances where the recipient
was fluent in the language of the original documents). The
defect could not be remedied because there was no valid
service whatsoever under article 15. Accordingly the Court
had no jurisdiction to try the cargo interests’ claim.
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In Regulus Ship Services v Lundin Services, under an
ocean towage contract on BIMCO terms, Regulus agreed
to tow a Floating Production Storage and Offloading
vessel (IKDAM) using its tug (HARMONY 1) between
Sousse, Tunisia and Labuan, Malaysia. Following a
number of disputes, Regulus diverted the voyage to
Singapore in order to exercise a lien over the tow. Lundin
completed the voyage by entering a new towage contract.
Regulus subsequently commenced proceedings.
Firstly, Regulus claimed that the Defendants had breached
an express term that IKDAM would be provided in ‘light
ballast conditions’. The Claimants argued that due to
receiving the vessel in heavy ballast conditions, they
had incurred excess fuel costs, demurrage charges and
other expenses.
It was held that ‘light ballast conditions’ should be
interpreted as carrying the minimum ballast that would
enable the vessel to proceed safely and in a seaworthy
condition on her voyage. The Court rejected Lundin’s
argument that the condition of the tow had to be legally
fit for the voyage and satisfy the requirements of a marine
warranty surveyor. The test was one of minimum ballast
for physical safety and seaworthiness and was not
transformed into one based on the wishes of a third
party. Despite this, Regulus did not show that the breach
caused any delay to the voyage. Accordingly they
were entitled only to nominal damages.
Secondly, Regulus claimed it was entitled to delay
payments on the grounds that IKDAM was incapable
of being towed at the speed originally contemplated.
Clause 17 of the contract stipulated that if the tug
slow steamed because the tugowner or tugmaster
reasonably considered the tow was incapable of being
towed at the original speed contemplated, the tugowner
was entitled to receive additional compensation at a
delay payment rate. The Court rejected the Claimants’
argument: the tugowner did not show that they had
made a decision to steam slowly or intended to do so
and there was no evidence that IKDAM was incapable
of being towed at the intended speed, just that the tug
could not average that speed using only two engines.
The Court also rejected Lundin’s counterclaim that
there was a collateral agreement the convoy would
average a speed of 4.5 knots. The evidence relied upon
by Lundin was part of contractual negotiations and was
based on anticipated fuel consumption, rather than a
guarantee of speed.
The Court held that Regulus repudiated the contract by
sending an email giving notice of cancellation. Lundin
had accepted the repudiation and was entitled to recover
as damages the cost of an alternative tug to complete
the voyage. Lundin was required to give credit for the
US$ 100,000 which would have been due had
HARMONY 1 completed the voyage.
Excalibur Ventures LLC v Texas Keystone Inc concerned
an appeal by litigation funders in a claim regarding an
interest in oilfields in Iraq. Lord Justice Tomlinson approved
the trial judge’s description of the underlying claim as
“speculative and opportunistic” with “no sound foundation
in fact or law”. The claim failed on every point and the
manner in which it was conducted was heavily criticised. It
was ordered that the Claimant should pay the Defendant’s
costs on an indemnity basis. A complex and varied funding
arrangement underpinned the claim. A number of parties
provided a total of £31.75 million, £14.25 million of which
was the Claimant’s legal costs to bring the claim and £17.5
million in security for costs.
The Court of Appeal upheld the order of the trial judge
that the litigation funders were liable for the Defendants’
costs on an indemnity basis. The Court was not moved
by the absence of discreditable conduct by the funders
themselves. The conduct of a party was but one factor to
be considered in the broad discretion to make costs orders.
It was not necessary for the funder to know the egregious
feature of the litigation which gave rise to indemnity costs.
A feature of the appeal concerned whether the money
advanced as security of costs should count towards the
“Arkin” cap (this cap limits the funders’ liability to the
amount that it invested in the litigation). It was submitted
that contributions towards security of costs should not be
added to the amount invested in solicitors’ costs when
setting this cap. The Court of Appeal rejected this and held
that funds paid for security of costs should not be treated
any differently from other litigation costs.
Issue 1 2017
The above are only intended to be short summaries.
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