United States: Clause 8 Of The Nype Form Revisited - The Master’s Duty

In a significant decision concerning Clause 8 of the NYPE form charter, a New York consolidated arbitral panel in "Ocean Wide Shipping Corp., owner of the PUNICA v. Canadian Forest Navigation, Trans Sea Transport N.V. and Duferco S.A. Lugano, as charterers," (SMA 3513), awarded owner recovery of deviation and restowage expenses necessitated by a shift of a steel slab cargo while the vessel was off the Tunisian coast in January 1995. The panel majority also awarded owner $150,000 towards its attorneys’ fees and costs.

Charterer entered into a purchase contract with ILVA Laminati Piani S.p.A.("Ilva"), a large steel manufacturer and exporter, as shipper. Charterer and Trans Sea entered into a Gencon form charter for a vessel to be named to carry steel slabs from Taranto, Italy, to Sparrows Point, Maryland. That charter was "free in/out stowed, lashed, secured and dunnaged." Trans Sea, in turn, time-chartered the PUNICA from its disponent owner Canadian Forest Navigation ("CFN"). CFN had previously time chartered the vessel from her owners, Ocean Wide. The trip time charter was, in relevant respects, identical to the head time charter on the NYPE form. Clause 8 remained unamended except to add the word "discharge" to charterers’ obligations.

Ilva acted as charterer’s stevedore under the Gencon charter, loading about 15,500 mt of slabs. The slabs ranged in weight from about 14 mt. to about 23 mt. They were stowed by what Ilva called the "California Block Stow" ("CBS") method developed by California Steel Industries in which steel slabs are loaded fore and aft in free standing, dunnaged stacks, secured by Signode strapping using the "Olympic" lashing method. Under the CBS method, stacks are not braced to the vessel structure except that the bottom-most slab is intended to contact the junction of tank top and wing tank slope plating. Otherwise, Signode strapping is applied to the top two tiers of slabs in athwartship stacks to bind them into a "cap." The strapping also binds the "cap" to the next several lower tiers in the outboard stacks only.

The PUNICA’s master had never carried a steel slab cargo before this voyage and was initially skeptical of the CBS method, suggesting that the slabs be winged-out to the sloping sides of the hopper tanks. Ilva advised this was not possible because of difficulties in discharging slabs stowed outboard of the hatch square. Ilva persuaded the master that the CBS method was widely used and that Ilva was expert in its application. Thereafter, loading, stowage and lashing were conducted by Ilva. The chief officer confirmed that the vessel had adequate stability. On completion of loading, Ilva presented the master with a form letter stating that the "...cargo has been loaded, stowed, secured and lashed under [the master’s] supervision and up to [his] complete satisfaction. The vessel is in all respects seaworthy and is ready to carry on her voyage." The master signed the letter.

The PUNICA sailed on 10 January. Three days out, while rolling moderately in Beaufort Force 6-7 seas with swell, the PUNICA took a sudden port list of about 12 degrees. On inspection, it was found that the steel slab stow had collapsed and shifted to port in all five cargo holds. The master was able to reduce the list to about five degrees by ballasting. After consulting with owners, the vessel deviated to Cagliari, Sardinia as a port of refuge, where Owners declared general average.

At Cagliari, surveyors representing all parties attended. While each prepared a separate report, the surveyors jointly agreed that the PUNICA could not proceed on her voyage without restowing the cargo. Because of the Cagliari stevedores’ inexperience with steel slabs, restowage was not completed until 8 February. Thereafter, the voyage was completed without incident. Arbitration of claims for hire and fuel during the period of deviation and restowage costs followed.

The Panel majority found "... no basis for criticizing the Master’s shiphandling." (Award at 19.) The Panel majority concluded that "... because of deficiencies in the stowage and securing of the cargo, moderate rolling conditions were sufficient to cause the stow to collapse." Charterer’s contention was that the overarching duty to provide a seaworthy vessel rested with Owner, notwithstanding Charterer’s obligation to load, stow, trim and discharge the cargo under the Charter. Charterer pointed to Ilva’s form certificate signed by the master at Taranto reciting that the stowage and securing had been performed to the master’s satisfaction. Charterer also argued, in view of the master’s admitted inexperience with steel slab cargoes, that he had an obligation to familiarize himself with the cargo and to supervise the loading. Charterer claimed that the master made no such inquiries, took no interest in the cargo operations at Taranto and, therefore, failed to satisfy his affirmative obligation to make appropriate inquiry about cargo stowage and securing.

The Panel majority analyzed these issues as follows: Clause 8 of the NYPE form confers a twofold duty on the master—he is responsible for carrying out the owners’ obligation to furnish a vessel fit for sea and for charterers’ cargo, in which role he and the crew act as servants of the owner. The master is also responsible for supervising the loading, stowing, trimming and discharging of the cargo. In that role he and the crew act as the borrowed servants of the charterer in fulfilling their charter obligations under Clause 8. The Panel majority cited with approval Nichimen v. The Farland, 462 F.2d 319 (2d Cir. 1972), which concluded under Clause 8 that primary liability for improper cargo stowage rested with charterers.

Responding to Charterer’s argument that the master accepted responsibility by virtue of the signed form certificate approving the loading and stowage, the Panel majority concluded that "...the Master was, by his own open admission, unfamiliar with the carriage of steel slabs, and relied entirely on the assurances and representations given him by ILVA." (Award at 22) The Panel majority emphasized that Ilva’s representations were not casual. Ilva held itself out as an expert in the CBS method and generally in stowing and securing steel slabs, thereby usurping supervision of the cargo operations. (Award at 23)

Acknowledging that the Master "...had a duty to protest and intervene if he became aware of an unsafe condition affecting the vessel’s seaworthiness ... ILVA’s assurances gave him no reason to suspect there was any fault with the stow or the securing which would require his intervention." (Award at 23-24) The majority concluded that:

Charterer challenged the majority’s Award in the United States District Court for the Southern District of New York, claiming that it was rendered "in manifest disregard of the law." Owners, with CFN, moved to confirm the award. Judge Berman issued a lengthy order on April 7, 2000 confirming the award.

Clause 8 issues and the interaction of Clause 8 with the owners’ due diligence obligation as considered in the Award and now in Judge Berman’s Order warrant a continuation of the present discussion, especially in relation to other recent awards and decisions. Mr. France is writing such a article with a view to completing it during the summer.