"Discharged at the expenses and risk of Receivers/Charterers" – who is liable for stevedore damage to cargo on outturn?

Societe de Distribution de Toutes Merchandises en Cote D'Ivoire trading as "SDTM-CI" v Continental Lines N.V. and another (the SEA MIROR) [2015] EWHC 1747

This decision considered the interpretation of clause 5 of the SYNACOMEX 90 form in proceedings commenced by the claimant cargo interests (the "Cargo Interests") of a consignment of bagged rice discharged at Abidjan in the Ivory Coast against the defendant carrier (the "Carrier") under the bill of lading contract.

The Carrier, a member of Steamship Mutual, faced numerous cargo claims in English High Court proceedings in relation to a series of shipments of bagged rice to ports in West Africa where liability for stevedore damage to bags on outturn was in issue.

In the SEA MIROR action Mr Justice Flaux was required to rule upon a preliminary issue agreed upon by the parties at a Case Management Conference (the parties having also agreed to stay all the other High Court actions pending determination of this preliminary issue). The preliminary issue concerned the construction of the contract of carriage and whether the Carrier was liable for loss caused by bags being torn/cut by stevedores during loading and discharge.

It was common ground between the parties that the bill of lading incorporated the Hague Rules by a General Clause Paramount as well as the terms of a voyage charter entered into on the SYNACOMEX 90 form, clause 5 of which provided as follows:

"5 Cargo shall be loaded, trimmed and/or stowed at the expenses and risk of Shippers/Charterers at the average rate of 1,500 metric tons per weather working day…

Cargo shall be discharged at the expenses and risk of Receivers/Charterers at the average rate of 1,500 metric tons per weather working day…

Stowage shall be under Master's direction and responsibility"

It was further common ground that both at common law and under Article III rule 2 of the Hague Rules that the parties could agree that the carrier would not be responsible for cargo operations.

The Carrier's position was that clause 5 transferred responsibility for loading and discharging the cargo from the Carrier to the Cargo Interests and that the Carrier had no liability for bags that were torn/cut during loading and discharging. The Carrier accepted however that the effect of the words "stowage shall be under Master's direction and responsibility" was to transfer responsibility for stowage back to themselves. The Cargo Interests in contrast contended that clause 5 was not sufficiently clear to divest the Carrier of his responsibility under Article III Rule 2 of the Hague Rules to properly and carefully load and discharge the cargo.

At the hearing before Mr Justice Flaux, both parties made reference to the Court of Appeal decision in The Jordan II [2003] 2 LR 87 in which Tuckey LJ stated:

"I have already referred to the position at common law and the need for clear words if the contract is to transfer the obligation to load, stow and discharge from owners to charterers. There are three facets of the cargo operation which have to be considered. Who is to pay for it; who is to carry it out; and who is liable for it not being done properly and carefully? The judge decided and I agree that there is no presumption that each of these responsibilities should fall on the same party. In other words, if the charterer has agreed to pay for the cargo operation, there is no presumption that he has also agreed to carry it out or be liable if it is done badly".

The Cargo Interests contended that in order to impose liability upon the charterers/Cargo Interests for the loading/discharging operation the provision needed to state that they were to perform the operations in question. "Risk" the Cargo Interests contended was not to be equated with responsibility for the performance of cargo operations. The meaning of "at the risk of" was they contended simply that the Cargo Interests were to bear loss caused by damage occurring fortuitously (i.e. without fault) during the cargo operation, alternatively it meant that the risk of delay in the cargo operations was with Cargo Interests.

The Carrier's position in contrast was that "at the expense and risk of" were clear words allocating responsibility for the performance of loading/discharging onto charterers/Cargo Interests. The Carrier further submitted that if the Cargo Interests' construction was right then the provision that "stowage shall be under Master's direction and responsibility" was otiose. "Risk" the Carrier submitted had been associated by the courts in a number of cases with "responsibility" for the performance of the relevant function and the Cargo Interests' construction of "risk" did not accord with the ordinary meaning of the word nor did it make any commercial sense in the context of the charter.

In a detailed judgment Mr Justice Flaux having considered the various authorities found in favour of the Carrier. Mr Justice Flaux accepted the Carrier's submission that just because the Cargo Interests were able to put forward alternative constructions of clause 5 this did not mean that the Carrier's construction was incapable of achieving the necessary degree of clarity to transfer responsibility for the cargo operations to the Cargo Interests. As regards the Cargo Interests' proposed constructions of "at charterers' risk", Mr Justice Flaux considered that neither stood up to scrutiny. Mr Justice Flaux held that in relation to Cargo Interests' primary construction of risk as referring only to accidental loss, this submission had previously been considered and dismissed by Evans J in the Alexandros P [1986] 1 LR 421 and was not persuasive. As regards Cargo Interests' secondary construction, that risk concerned the responsibility for delay, Mr Justice Flaux found that this was even less promising as delay was dealt with by the laytime and demurrage provisions of the charter. Mr Justice Flaux accordingly concluded that:

"…I am firmly of the view that the effect of the first sentence of clause 5 of the charterparty incorporated in the bills of lading is to impose responsibility on the charterers/cargo interests for bad loading and discharge of the cargo. It follows that, to the extent that it is established that damage to the bags of rice was caused by bad loading and/or discharge (as opposed to bad stowage) that damage is the responsibility of the cargo interests who cannot recover in respect of such damage from the carrier".

This common-sense judgment is to be welcomed for providing clarification to a poorly drafted but much used charterparty clause. Damage to cargoes of bagged foodstuff due to stevedore mishandling at discharge ports is unfortunately a commonly encountered risk which carriers and their P&I insurers face. Care should always be taken to ensure that clauses are clearly drafted to ensure that responsibility for such losses are transferred from the carrier to charterers/cargo interests.

Issued by

Stuart Dench
Lax & Co LLP
Dir: +44 (0) 20 7397 0542

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December 21st, 2015

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