Clearlake Shipping v Privocean Shipping: Master’s negligence – no recourse for charterers

In Clearlake Shipping Pte Ltd vPrivocean Shipping Ltd, the English High Court found that charterers had norecourse against owners for the master’s negligent decision to requireadditional cargo strapping in one of the ship’s cargo holds – a decision thatcost the charterers in excess of US$ 400,000.

It acts as an important reminder ofthe exceptions available to shipowners when the Hague / Hague Visby Rules areincorporated into charterparties.

What happened?

Adispute arose between shipowners and time charterers in relation to the stowageof cargo of soybeans shipped from New Orleans to China.

Thecharter was on the NYPE 1946 form. The master rejected a stowage plan whichleftcargo holds partly loaded, on thebasis that strapping was required to ensure the stability of the vessel. Themaster rejected a different solution involving ballasting.

Thecharterers argued that cargo strapping was unnecessary. They presented expertevidence to demonstrate that the vessel’s stability could have been ensuredeither by ballasting or distributing the cargo differently.

Shipownersclaimed the sum of approximately US $400,000 in balance hire. The charterersclaimed the costs of circa US$ 410,000, which they said had been spentunnecessarily on strapping the cargo.

Thecharterparty’s perspective

The NYPE form:

• Clause 2 provided that “Charterers are to provide necessarydunnage and shifting boards, also any extra fittings requisite for a specialtrade or unusual cargo…”.
• Clause 8 imposed responsibility forloading and stowage on the charterers.

The United States Carriage of Goodsby Sea Act (“US COGSA”) was incorporated in the charterparty.

Section 4(2) of US COGSA, which isthe same as Article IV, rule 2(a) of the Hague / Hague Visby Rules, excludesshipowners’ liability for any “act,neglect or default of the master . . . in the management of the ship“.

The decisionsmade

The arbitrators found that adequatestability could have been achievedwithout cargo strapping, and that the master was negligent in requiringstrapping.

However, the Charterers were unableto recover their unnecessary expenses from the shipowners for the followingreasons:

• Clause 8 imposed the responsibility on loading and stowage on the Charterers.
• Clause 2 concerned what the charterers had to provide by way of dunnage & fittings, etc, but was silent on the position where the charterers had paid for a fitting that was unnecessary.
• While the master was negligent, the shipowners were entitled to rely on the exemption in s. 4(2) of US COGSA pertaining to negligence of the master “in the management of the ship“.

Charterers unsuccessfully attemptedto appeal the decision to the English High Court.

Cockerill J examined the existingauthorities on the scope of a shipowner’s exemption of liability for themaster’s negligence “in themanagement of the ship“.

While it is well established that anact done primarily in connection with the cargo does not constitute “the management of the ship”,in this case the exemption of liability was available.

This was on the basis that cargostrapping was directed at the ship’s stability (rather than care for thecargo), notwithstanding that the same result could have been achieved byballasting.

Theimplications for charterers

Thecharterers will, understandably, be disappointed with this result. Theyincurred significant unnecessary costs resulting from negligence of the master.

Clause8 of the NYPE form allocates responsibility to charterers for loading andstowage and, where the Hague/Hague Visby Rules or US COGSA apply, clear wordingwill be required to shift responsibility to the shipowners, even whenunnecessary expenditure has been caused by the negligence of servants of theshipowners, or a breach of the charterparty.

Thiscase is an important reminder for charterers of the exceptions available toshipowners when the Hague/Hague Visby Rules or US COGSA are incorporated intocharterparties – often by way of a Clause Paramount.

It also establishes that the exception pertainingto negligent acts of the shipowners’ servants in the “management of the ship” can indirectly extend to acts involving cargo, where the wrongful act concernsthe safety of the vessel.