Cargo damage – interpretation of NYPE ICA
Agile Holdings Corporation let the vessel to Essar Shipping Ltd on a time charter for a single trip from Tunisia to India via Trinidad.
The cargo was a consignment of direct reduced iron and the charter was on the NYPE 46 form.
DRI is highly reactive and combustible in the presence of heat or water.
In the course of loading the cargo onto the vessel by means of a conveyor belt at Port Lisas, Trinidad, the belt was seen to have caught fire.
Supercargo inspected the holds and advised that loading could continue.
The DRI was still on fire through the voyage and upon discharge, the cargo interests, Essar Steel Limited – an associated company of Essar brought a claim against Agile.
Agile commenced an arbitration seeking from Essar a declaration that it was obliged as charterer to indemnify it against any liability it might be found to have to the cargo interests.
By clause 8 of the charter party:
“… Charterers are to load, stow, and trim, tally and discharge the cargo at their expense under the supervision of the Captain…”
By clause 89 of the charter party:
“Cargo claims as between the Owners and Charterers shall be settled in accordance with the Inter- Club New York Produce Exchange Agreement of February 1970 as amended September 1996 as attached, or any subsequent amendments.”
Clause (8) of the ICA provided as follows:
“Cargo claims shall be apportioned as follows:…(a) Claims in fact arising out of unseaworthiness and/or error or fault in navigation or management of the vessel: 100% Owners…
(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 [of the NYPE form] 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
(c) Subject to (a) and (b) above, claims for shortage or overcarriage: 50% Charterers 50% Owners…
(d) All of the cargo claims whatsoever (including claims for delay to cargo): 50% Charterers/50% Owners…”
Finally, by Clause 49 of the charter party (“Clause 49”),
The Stevedores although appointed and paid by Charterers/Shippers/Receivers and or their Agents, to remain under the direction of the Master who will be responsible for proper stowage and seaworthiness and safety of the vessel…”
Agile’s case was that Clause (8) (b) applied without qualification so that Essar was 100% liable.
In the alternative it contended that Clause (8) (b) applied but in circumstances where there was clear and irrefutable evidence that the claim arose out of the act or neglect of Essar so that again, Essar was 100% liable.
Essar’s case was that Clause (8) (a) applied without qualification so that Agile was 100% liable.
In the alternative it relied upon Clause (8) (b) contending that Clause 49 was a “similar amendment making the Master responsible for cargo handling” in which case liability was 50/50.
The arbitrators, Mr Alan Oakley, Mr Michael Baker-Harber and Mr Robert Thomas QC found that clause 49 operated in Essar’s favour thereby effecting a 50/50 split.
It was common ground that as a result of the decision in Court Line v Canadian Transport  AC 934, clause 8 was effective to transfer responsibility for all cargo handling from owner to charterer.
On appeal, Agile contended that the tribunal was wrong because in order for there to be a “similar amendment”, the relevant provision had to transfer all cargo responsibilities (i.e. loading, stowing, discharge, trimming etc) to the Master/Owner, and a partial transfer was insufficient.
Clause 49 effected a partial transfer only.
His Honour Waksman QC upheld this argument:
The regime created by the ICA was designed to achieve, and has achieved, a clear and certain system for allocating responsibilities as between owner and charterer in the cases to which it applies. Since the only options within Clause (8) (b) are 100% charterer, 100% owner or 50/50, it is obviously a very mechanistic and no doubt sometimes arbitrary regime. Which is why it is sometimes criticised. But it has the merit of simplicity, as with motor insurers’ “knock for knock” agreements to which it has been compared. See the observations of Goff J. in The Strathnewton  2 Lloyd’s Rep. 296 at p298 and of Kerr LJ in the same case on appeal,  1 Lloyd’s Rep. 2019, at p223 and those of Hobhouse J in The Benlawers  2 Lloyd’s Rep. 51 at p60.
The parties are at odds as to what “similar” means in this context. I do not see any undue difficulty here. Surely (as Agile submits) it is intended to connote a provision in the charter party which is of the same kind or is to the same effect as the addition of the words “and responsibility”, which is what the amendment must be “similar to”. That distinguishes it from a provision which is the same as “and responsibility” which would just be a repetition. On that basis, the amendment must be to the effect of transferring all cargo handling responsibilities back to the owner not just some of them, because this is the effect of adding the words “and responsibility” to Clause 8.
The reasoning in this case is similar to that in the Sea Miror.
Popplewell J granted leave to appeal on the basis of likely error by the arbitrators.
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