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London Arbitration- whether vessel off hire and liability for cargo shortage fine

Disputes arose concerning off-hire at Chittagong due to the ship’s trim and stability issues, a cargo shortage claim, and a customs fine. The disputes were referred to a sole arbitrator under the LMAA SCP. The charterers failed to serve their Defence submissions after an order, followed by a peremptory order, and the arbitrator informed the parties that he would proceed to an award.

The claims

The off hire

The owners’ position was that the SOF stated during the disputed period that the mother vessel had stability or trimming problem. Delays due to trim and stability problems did not constitute an off-hire event because, even if the problems had arisen because of the action of the Master, there had been no inefficiency of the vessel or her equipment. Further, a mistake by the Master was not an off-hire event because it was not a default within the meaning of the off-hire clause, clause 15 (The Saldanha [2011] 1 Lloyd’s Rep.187).

Further, the owners asserted that the jetty had been obstructed by a shore crane that prevented discharge from holds 1 & 5, and stevedores worked on other holds that affected the vessel’s trim. To defend the owners’ position, the master inserted remarks in the SOF and took photographs of the shore cranes preventing the discharge.

Cargo shortage of 527 bags

The owners settled a shortage claim and produced the R&R forms. In addition, the shortage resulted in a custom fine paid in cash. Consequently, the owners sought to recover both claims from the charterers according to the Hague Rules, the USCOGSA or the implied indemnity under clause 8. The owners said that the holds were sealed upon completion of loading, and seals were found intact at the discharge port. They submitted that the explanation for the shortage was that the cargo had not been shipped, and the charterers were liable.

In particular, the owners submitted that they could recover under Article III, Rule 5 if charterers presented bills of lading for cargo that had not been shipped. Alternatively, it was an implied term under clause 8 of the NYPE that the bill of lading should relate to goods actually shipped and should not describe goods which were known to be incorrect (The Boukadoura [1989] 1 Lloyd’s Rep. 393).

The tribunal’s decision

Off- hire

Held, that even if the Master had been negligent, that would not bring the charterers within clause 15 because such negligence would not constitute “default” within the meaning of the clause. However, the evidence shows that the presence of shore cranes prevented the discharge of cargo from holds nos. 1 and 2. This was clear from the SOF, the master’s working reports and the photographs produced. The charterers and their agents had been responsible for arranging the berth and for ensuring that the vessel could discharge. They failed to do so and so the costs and expenses must be for their account.

Shortage-customs fine

Held, that the reports from the discharge port showed a shortage of 527 bags under the heading “Balance on Board”. If, indeed, there was a balance still on board, responsibility lay with the charterers who had the obligation to discharge all the cargo. It is, in fact, more likely, that the bags were never shipped. The holds were sealed at the load port and were found to be intact at the discharge port. The charterers are to indemnify the owners for the loss under Article III rule 5 of the Hague Rules/USCOGSA. In addition, the charter incorporated the NYPE ICA which states that claims arising out of the loading of the cargo are to be for the Respondents’/charterers’ account. If the shortage arose from pilferage, the Respondents as charterers would bear 100% of the claim. Accordingly, however the claim is analysed, the charterers are liable.

Accordingly, the charterers were to reimburse the owners for the customs fine, which would not have been incurred but for the breach of charter by the charterers. The charterers were also ordered to pay the costs along with interest.

Final Award, 13 August 2018

Note: This website removes the names of the parties involved in this or other awards. The reader can find more details on Jus Mundi These awards mostly come into the public domain through enforcement under the NYC 1958.

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