Briefing

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

In Clearlake Shipping Pte Ltd v Privocean Shipping Ltd, the English High Court found that charterers had no recourse against owners for the master's negligent decision to require additional cargo strapping in one of the ship's cargo holds – a decision that cost the charterers in excess of US$ 400,000.

It acts as an important reminder of the exceptions available to shipowners when the Hague / Hague Visby Rules are incorporated into charterparties.

What happened?

A dispute arose between shipowners and time charterers in relation to the stowage of cargo of soybeans shipped from New Orleans to China.

The charter was on the NYPE 1946 form. The master rejected a stowage plan which leftcargo holds partly loaded, on the basis that strapping was required to ensure the stability of the vessel. The master rejected a different solution involving ballasting.

The charterers argued that cargo strapping was unnecessary. They presented expert evidence to demonstrate that the vessel's stability could have been ensured either by ballasting or distributing the cargo differently.

Shipowners claimed the sum of approximately US $400,000 in balance hire. The charterers claimed the costs of circa US$ 410,000, which they said had been spent unnecessarily on strapping the cargo.

The charterparty's perspective

The NYPE form:

• Clause 2 provided that "Charterers are to provide necessary dunnage and shifting boards, also any extra fittings requisite for a special trade or unusual cargo…".
• Clause 8 imposed responsibility for loading and stowage on the charterers.

The United States Carriage of Goods by Sea Act ("US COGSA") was incorporated in the charterparty.

Section 4(2) of US COGSA, which is the same as Article IV, rule 2(a) of the Hague / Hague Visby Rules, excludes shipowners' liability for any "act, neglect or default of the master . . . in the management of the ship".

The decisions made

The arbitrators found that adequate stability could have been achieved without cargo strapping, and that the master was negligent in requiring strapping.

However, the Charterers were unable to recover their unnecessary expenses from the shipowners for the following reasons:

• 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 attempted to appeal the decision to the English High Court.

Cockerill J examined the existing authorities on the scope of a shipowner's exemption of liability for the master's negligence "in the management of the ship".

While it is well established that an act 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 cargo strapping was directed at the ship's stability (rather than care for the cargo), notwithstanding that the same result could have been achieved by ballasting.

The implications for charterers

The charterers will, understandably, be disappointed with this result. They incurred significant unnecessary costs resulting from negligence of the master.

Clause 8 of the NYPE form allocates responsibility to charterers for loading and stowage and, where the Hague/Hague Visby Rules or US COGSA apply, clear wording will be required to shift responsibility to the shipowners, even when unnecessary expenditure has been caused by the negligence of servants of the shipowners, or a breach of the charterparty.

This case is an important reminder for charterers of the exceptions available to shipowners when the Hague/Hague Visby Rules or US COGSA are incorporated into charterparties – often by way of a Clause Paramount.

It also establishes that the exception pertaining to negligent acts of the shipowners' servants in the "management of the ship" can indirectly extend to acts involving cargo, where the wrongful act concerns the safety of the vessel.