Australia: Transport & Logistics News - March 2017: part 3

This article is part of a series: Click Transport & Logistics News - March 2017: part 2 for the previous article.

Vinnlustodin HF and Anor v Sea Tank Shipping AS (The "Aqasia") [2016] EWHC 2514 (Comm.)

This case was concerned with a claim for US$367,836 for damage suffered to a cargo of 2,000 tonnes of fish oil shipped in bulk for a lump sum freight. The carrier admitted liability but sought to limit its liability to £54,730.90 calculated with reference to the limitation of liability under Article IV Rule 5 of the Hague Rules of 100 pounds per metric tonne of cargo damaged.

It was held by Sir Jeremy Cooke in the High Court in England that the word "unit" in Article IV Rule 5 referred to a physical unit for shipment and did not mean a unit of measurement or customary freight unit. Furthermore, he held that even if "unit" was capable of applying to bulk cargoes it could only apply to a "freight unit", and because the cargo was shipped for a lump sum there was no assistance to be gained by the carrier from such an interpretation.

In reaching his conclusion, Cooke J followed the decision reached by Allsop J (as he then was) in the Federal Court of Australia in the case of El Greco (Australia) Pty Ltd v Mediterranean Shipping Co SA (2004) 2 Lloyds Rep 537.

Kairos Shipping Limited and Anor v Enka AA and Co LLC & Ors (The "Atlantik Confidence") [2016] 2 Lloyds Rep 525

This case concerned a challenge to an owner's right to limit its liability under the Limitation for Liability for Maritime Claims Convention 1976, which was successful.

The vessel "Atlantik Confidence" sustained a fire in her engine room and sank a few days later after the crew had abandoned the ship. The owners sought a limitation decree but the subrogated insurers of the cargo contended that the owners were barred from claiming limitation by reason of their personal act or omission committed with intent to cause such loss under Article 4 of the Convention.

The High Court of England (Teare J) held that the cargo interests had met the high burden of proof required under the Convention, which was likened to that of a hull underwriter seeking to prove scuttling, a standard which was not far short of the rigorous criminal standard (beyond reasonable doubt).

Bahama Oil Refining Company International Limited v Owners of the Cape Bari Tankschiffahrts GMBH and Co KG (Bahamas) (The "Cape Bari") [2016] 2 Lloyds Rep 469

This was a decision of the Privy Council, arising on appeal from the Bahamas Court of Appeal which had held that the owners of the "Cape Bari" could not contract out of the right to limit liability under the 1976 Limitation Convention. The Privy Council reversed that decision in holding that it was permissible for vessel owners to contract out of or waive their statutory right of limitation under the 1989 Bahamas Act which gave effect to the Limitation Convention, but under the agreement between the parties the owners had not agreed to exclude their right to limit their liability.

The facts giving rise to the dispute were that during a berthing operation, the "Cape Bari" collided with Sea Berth No. 10 at Freeport in Grand Bahamas. The Sea Berth was the property of the Bahamas Oil Refining Company International Limited (BORCO). Its claim was for about US$22 million. The limitation sum that the owners claimed to be entitled to rely on was about US$16.9 million. The entitlement to do so was dependent on whether the owner had waived its right to limit under the "Conditions of Use" which had been signed by the master with BORCO. The suggestion that it had waived its rights, relied principally on a widely drawn provision in the "Conditions of Use" (clause 4), by which the owner agreed to hold harmless and indemnify BORCO against any loss or damage which it incurred. The absence of any reference to the Convention in the "Conditions of Use", let alone in clause 4, made it impossible for it to be said that the agreement made it clear that the owners had intended to abandon or contract out of its rights under the Limitation Convention. Accordingly, they were entitled to limit their liability.

MSC Mediterranean Shipping Co SA v Cottonex Anstalt [2016] 2 Lloyds Rep 494

The principal facts in this case were set out in the Transport & Logistics News (30 September 2015) in which the decision of the first instance Judge was reported. Leggatt J had not permitted the owners to keep the contracts of carriage in force solely in order to claim demurrage, in circumstances in which various parcels of cotton were shipped from Bandar Abbas and Jebel Ali to Chittagong between April and June 2011. There had been a collapse in the value of the cargo and disputes between the shipper and the consignee resulting in the cargo not being collected at the port of discharge.

The Court of Appeal found that the shipper was bound under the bill of lading to pay demurrage for the containers after the expiry of the allowable free time. The Court overturned the first instance decision which had held that the commercial purpose of the venture had been frustrated as early as 27 September 2011, but held that it had been so frustrated by 2 February 2012. Thus, the carrier could recover demurrage up to that date and the value of the containers on that date.

Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd (The "Spar Capella", "Spar Vega" and "Spar Draco") [2016] 2 Lloyds Rep 447

In Transport & Logistics News (30 September 2015), we reported on the first instance decision of Popplewell J in this case in the High Court in England, who did not follow the decision of Flaux J, his colleague, in the case of Kuwait Rocks Co v AMN Bulkcarriers (The "Astra") (2013) 2 Lloyds Rep 69. Flaux J had held that payment of hire in a time charter is a condition of the contract, breach of which entitles the innocent party to terminate the contract.

Although finding that punctual payment of hire was not a condition of the three charter parties for the three vessels, Popplewell J had held that the charterers' conduct concerning the payment of hire was a renunciatory breach which the owner had accepted by exercising its contractual right to withdraw the vessel. The charterer appealed this ruling and on appeal the Court of Appeal confirmed Popplewell J's decision and overruled the "Astra" decision of Flaux J. The Court of Appeal found that the obligation to make punctual payment of hire was not a condition of the three charter parties involved but given the history of late payments, the amounts and delays involved—together with the absence of any concrete or reliable assurance from the charterer or their guarantor as to the future—it was reasonable to conclude that the charterer had renounced the charters.

Regulus Ship Services Pte Ltd v Lundin Services BV and Anor (2016) 2 Lloyds Rep 612

This decision of Phillips J in the English High Court arose from the towage contract on the Towcon form which provided that the Floating Production Storage and Offloading Vessel, which was to be towed, would be provided in "light ballast condition". It was held that the vessel was not in such a condition but that did not cause any delay to the voyage. The term "in light ballast condition" was held to mean: "the least amount of ballast with which the vessel could safely proceed on her voyage", as found by Andrew Smith J in the case of Ease Faith Ltd v Leonis Marine Management Ltd (2006) 1 Lloyds Rep 673.

Connect Shipping Inc & Anor v Sveriges Anfgartygs Assurans Forening (The Swedish Club) and Ors (The "MV Renos") (2016) 2 Lloyds Rep 364

This case, essentially, centred on whether or not the vessel was a constructive total loss in order to ascertain the indemnity to which the owners were entitled when the vessel MV "Renos" caught fire in August 2012. It was not until 1 February 2013 that the owners served a notice of abandonment on the insurers, of which the Swedish Club was the lead insurer under the hull and machinery policy, which incorporated the Institute Time Clauses - Hulls (1/10/83).

There was no dispute that the casualty was an insured peril and the owners were entitled to be indemnified. The issue was the measure of the indemnity. The insurers contended that the claim was only for a partial loss but the owners contended that they were entitled to be indemnified on a constructive total loss basis.

Knowles J held that the owners were entitled to be indemnified on the basis of a constructive total loss. It was found in particular that the notice of abandonment had not been given too late, despite section 62(3) of the Marine Insurance Act 1906 (UK) that it requires a notice of abandonment to be given "with reasonable diligence after the receipt of reliable information of the loss ...", the insured was entitled to a reasonable time to make inquiry and the nature of the casualty was such that achieving reliable information of the loss was a complex task and took time.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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This article is part of a series: Click Transport & Logistics News - March 2017: part 2 for the previous article.
This article is part of a series: Click Transport & Logistics News - March 2017: part 4 for the next article.
Andrew Probert
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