UK: Court Construes In-transit Loss Clause In Voyage Charterparty

Last Updated: 12 February 2014
Article by Paul Herring and Marco Crusafio

Trafigura Beheer BV v. Navigazione Montanari Spa (Valle di Cordoba) [2014] EWHC 129 (Comm)

The Commercial Court has recently considered the meaning of the expression "in-transit loss" in a voyage charterparty.

The Valle di Cordoba was attacked during the voyage by pirates, who forced the crew to transfer some of the motor oil cargo onto a lightering vessel and stole it. The Court held that the transferred cargo was not "in-transit loss" or "lost cargo" within the meaning of the in-transit loss ("ITL") clause in the charterparty. So the owners were not liable for the loss. The Court further held that, if it was wrong on this, the Owners could nonetheless rely on the protection of the charterparty exceptions clause, which incorporated the Hague-Visby Rules exceptions.

Ince & Co acted for the successful Owners. The decision is important because of the nature of the alleged in-transit loss that was claimed. In addition, if the Owners had been held liable, they would have lost their P&I cover because of the standard provisions in Club rules, providing that Club cover is lost if owners agree to a regime that is more onerous for them than the Hague-Visby Rules regime.

The background facts

The Valle di Cordoba was chartered for the carriage of a consignment of premium motor oil from Abidjan, Cote d'Ivoire to Lagos, Nigeria. Having tendered NOR on arrival offshore Lagos, the vessel sailed to a position about 55nm south-west of Lagos and awaited the Charterers' orders. The vessel was then attacked by pirates, who arranged for an STS transfer of some 5,300 mts of the cargo to an unknown lightering vessel that then departed with the cargo. The Valle di Cordoba was later released by the pirates and the remaining cargo was discharged. The Charterers claimed against the Owners for the value of the transferred cargo.

The charter was on a Beepeevoy 3 ("BP3") form plus Trafigura Chartering terms of 1 August 2005. The Charterers brought their claim under clause 4 of the Trafigura terms, the ITL clause, which provided as follows:

"In addition to any other rights which Charterers may have, Owners will be responsible for the full amount of any in-transit loss if in-transit loss exceeds 0.3% 0.5% and Charterers shall have the right to deduct from freightclaim an amount equal to the FOB port of loading value of such lost cargo plus freight and insurance due with respect thereto. In-transit loss is defined as the difference between net vessel volumes after loading at the loading port and before unloading at the discharge port."

The charter terms provided for payment of freight to be made less any sum derived from the operation of certain of the Trafigura clauses, including the ITL clause; a Clause Paramount; and an exceptions clause which, among other things, gave the Owners the benefit of the Hague-Visby Rules exceptions.

The Judge had to decide whether the transferred cargo was an "in-transit loss" or "lost cargo" for the purposes of the ITL clause and, if it was, whether the ITL clause imposed strict liability on the Owners in respect of the transferred cargo or whether the exceptions clause applied to exclude that liability (it being accepted by the Charterers that if the Hague-Visby Rules applied, the Owners would have no liability).

The Commercial Court decision

The Judge found in favour of the Owners. In his view, the ITL clause defined how the amount of in-transit loss is determined, rather than specifying the kinds of loss that qualify as in-transit loss. Ascertaining any short delivery in the bulk carriage of oil was difficult because there is no absolutely correct measurement. The practice in the oil trade is to make allowances of about 0.5% to account for discrepancies that invariably take place when measurements are made. In-transit loss clauses were designed to reflect this by stipulating a cut-off point above which differences in volumetric measures could not simply be explained as reflecting the normal incidents of carriage for which owners would not be liable.

Against this commercial background, the Judge ruled that the expression "in-transit loss" means loss that is incidental to the carriage of oil products and does not extend to losses such as those caused by the action of pirates. The Judge recognised that the limits of in-transit loss were not precisely defined. Uncertainties could arise in some cases about whether particular losses would fall within the expression as a matter of general trade usage. He did not, however, have to examine those uncertainties in this case as he considered that loss from the pirates' activities was clearly not covered.

Even if he was wrong on that, the Judge held that the Owners were nonetheless entitled to the protections afforded to them by the exceptions clause and the Hague-Visby Rules incorporated into the charterparty. He rejected the Charterers' argument that the ITL clause made the Owners strictly liable for loss of cargo. It was highly unusual for owners to accept absolute liability for cargo loss in a charterparty. Furthermore, given that the Owners would have the benefit of the Hague-Visby Rules exceptions if sued under the bills of lading, it did not make sense that they should be under an absolute liability if sued instead by the Charterers under the charterparty. The Charterers' interpretation of the ITL clause would have surprising results: the Owners would be strictly liable only in respect of differences between vessel measurements after loading and before discharge. This would mean, among other things, that the Owners would be strictly liable for loss of cargo, but not for damage to it. The Judge concluded that the parties could not have intended to agree to a term under which strict liability would give rise to "inconsistencies and absurdities".

The Owners' responsibility was, therefore, subject to the exceptions clause, which provided that the Owners were entitled to the protection of the relevant articles in the Hague-Visby Rules "in respect of any claim made" under the charterparty. There was no good reason to limit the natural meaning of "any claim" by excluding claims under the ITL clause.

Comment

Whilst this decision does not determine the kinds of loss that will qualify as in-transit loss, it is helpful in indicating that such loss is likely to be confined to loss that occurs as a direct result of the transit during the course of a routine or ordinary voyage.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.