Demurrage Forms one of the Most Important Parts of Carriage of Goods by Sea - Essay Example

Can Sinkers claim demurrage against the cricket clubs "A demurrage clause is merely a clause providing for liqui d damages for a certain type of breach. It is presumably the parties' estimate of the loss of prospective freight which the owner is likely to suffer if his ship is detained beyond the lay days," Devlin J., Chandris v. Isbrandisen-Moller [1951] 1 K.B. 240, at 2491. Demurrage forms one of the most important parts of carriage of goods by sea. Demurrage is the recovery of the consequential freight lost, due to the fault of other parties, and not that of the ship owners. Demurrage occurs when the vessel is detained beyond the agreed lay days, as it becomes a breach of contract. Vessel will be losing her time and the connected payment. In the present case, reaching the berth and unloading the goods took longer time than expected and the vessel has gone onto demurrage. The popular rule is 'once on demurrage, always on demurrage'. As an exception, demurrage would not occur if the delay was purely due to ship owner's fault and as the repercussion of actions taken by him suitable for his convenience and benefit. "The freighter of a ship is bound not to detain it, beyond the stipulated or usual time, to load or deliver the cargo, or to sail. The extra days beyond the lay days (being the days allowed to load and unload the cargo) are called the days of demurrage. The term is likewise applied to the payment for such delay, and it may become due, either by the ship's detention, for the purpose of loading or unloading the cargo, either before, during or after the voyage, or in waiting for convoy2." A shipowner will be entitled to unliquidated damages for being detained while loading or unloading, or delivering a consignment, within the stipulated time, if the delay happens for no fault of his or his representatives. In some transactions, to be safe, there could be an agreement to pay demurrage, which is usually for preventing the shipowner from demanding an enormous sum if an unfortunate delay occurs. As a result of this written understanding and agreement, if the demurrage is fixed at a certain rate per hour, the shipowner would be unable to demand more money as demurrage. According to John Wilson, "Liability for the payment of demurrage accrues immediately on the expiration of the lay days and runs continuously through Sundays, holidays and other periods normally excluded from laytime, e.g. bad weather working days3." Demurrage or the dead freight can occur at any point of affreightment. It is actually a fixed sum per hour or per day that charterer has to pay the vessel owner for the delays while loading and unloading of his consignments, and the time lost (beyond the stipulated time) and these days are called lay days. "If no demurrage is provided for by the charter-party, and the vessel is not loading or discharging beyond the lay days, the shipowner is entitled to claim damages in respect of the loss which he has suffered by the detention of his ship4" This is mainly to force the charterers to load and unload within the time fixed. If the time is not fixed, then it might be difficult for the shipowner to prove that the ship has run onto demurrage. There are difficult circumstances, honouring difficult judgements too. "Where time under a limitation clause runs from completion of discharge of the cargo, but there was no cargo to discharge, the judge held that the limitation clause does not apply. He refused to imply additional words into the clause that would have allowed time to run from when the cargo should have been discharged since, if the parties had wanted to provide for such a circumstance, they could easily have done so. The judge also held that, in addition to damages for repudiation, the shipowners could claim demurrage that had accrued before the charterparty was repudiated5". http://www.onlinedmc.co.uk/odfjell_seachem_v__continentale.htm As both the clubs are named as consignees in the receipts, even though they did not do the transactions personally through their office bearers, but asked Ian and Kevin to represent them respectively, the ship owners would definitely have an opportunity to collect demurrage from them. At the same time, fixing the responsibility on both the clubs could be difficult. It has to be done on circumstantial evidence. If the office bearers of the Clubs decline to take any responsibility, or deny knowledge of transactions, ship owners would be unable to make them pay the demurrage. Also, the adverse situations of Kevin's club not getting the consignment in spite of presenting the bill of lading and Ian's club getting the consignment, but in a damaged state, as accepted by the master of the ship might make an adverse impact on the ship owners' case. But on the face of it, ship owners definitely have a case in their hands. 2. Ian's club is anxious to sue Sinkers for loss and damage to his goods but is anxious, as his club did not negotiate a contract of carriage with Sinkers. What is your advice on this issue " This is a difficult situation. The club did not negotiate a contract of carriage with Sinkers. But they are named as consignees in the bill. Yet, they are not part of the transactions. At the same time, it is difficult to prove their claim beyond doubt. In such cases, judges have shown lenience to the carriage owners; as such incidents are termed as accidents6. If the Club had negotiated the transaction through its office bearers, they definitely had a perfect case in their hands. There should not be any problem in Ian suing Sinkers for loss and damage of his goods. Ian had taken the right consignment after presenting the bill of lading, but the consignment was damaged. He made enquiries and found out that there was a slight accident in the ship. He obtained the statement from the Master that there was a small fire in the ship, which damaged the consignment. This fire had created much more damage, beyond their expectations, mainly because the Master and Crew had not been very alert to the danger. This could be an important point in support of the claim of Ian and his Club. Loss or damage from any neglect of the carrier and/or his employees could be a serious matter. Usually a 'negligence clause' is included in the contract, for the protection of the ship owner, even though negligence on his part and on his employees' part has been proved. "Whether liability for loss by negligence has been effectively excluded is a matter of construction in each case" says Hardy Evami, p.188. In paying the damage, the following clause is an important one and sometimes, gives an entirely different turn to events: "Rule XII. Damage to Cargo in discharging etc. - Damage to or loss of cargo, fuel or stores caused in the act of handling, discharging, storing, reloading and stowing shall be made good as general average, when and only when the cost of these measures respectively is admitted as general average7". According to United Nations Convention on the Carriage of Goods by Sea (The Hamburg Rules) Hamburg, 1978: "4. (a) The carrier is liable (i) For loss or damage to the goods or delay in delivery caused by fire, if the claimant proves that the fire arose from fault or neglect on the part of the carrier, his servants or agents8". UN Convention also states rules about the Notice of loss, damage or delay: "Article 19: 1: Unless notice of loss or damage, specifying the general nature of such loss or damage, is given in writing by the consignee to the carrier not later than the working day after the day when the goods were handed over to the consignee, such handling over is prima facie evidence of the delivery by the carrier of the goods as described in the document of transport or, if no such document has been issued in good condition9." There is a necessity of notice that should be given to any of the carrier's officials within the stipulated time10. We are not aware if Ian has given any such notice to any official of Sinkers. In Ian's case, if his Club could prove that Ian was their authorized representative, who is entitled to deal on behalf of the Club with carriers and Sinkers officials to negotiate the transactions, this would definitely help their case. The Club had not been a party to the transactions. But Ian must have been representing the Club in an official way, as the Bill of Lading was addressed to the Club and Club is mentioned as the Consignee and this part is unclear in the case study. Bill of Lading, called 'a document of dignity' is perhaps the most important document in the transactions by Sea since the fourteenth century, which also functions as evidence to the entire transaction. Strictly speaking, it is not a negotiable instrument. But it is negotiable to the extent that it is transferable. In terms of South African common law, the principle of clavium traditio is broad enough to accommodate the delivery of a bill of lading as a symbol of the goods therein described.23 As held in The Mariannina: 'The holder of the bill, ie, the person in whose favour it was originally made out or the indorsee thereof, is entitled, to the exclusion of others, to receive the goods from the ship at the place of destination. He is thus in the same commercial position as if he were in physical possession of the goods. The bill of lading is, accordingly, recognized as a symbol of the goods and the transfer of the bill is regarded as a form of symbolical delivery11'. Prior to 1855 Act, there were difficulties when a third party cargo receiver suffered loss or damage as it happened in The Sophia Moffat45, Maule, J in casu denied an indorsee the right to sue the carrier. Section 1 of the 1855 Act provides the following: 'Every consignee named in a bill of lading, and every indorsee of a bill of lading to whom the property in the goods mentioned shall pass upon or by reason of such consignment or indorsement, shall have transferred to and vested in him all rights of suit, and be subject to the same liabilities in respect of such goods as if the contract contained in the bill of lading had been made with him.' http://web.uct.ac.za/depts/shiplaw/theses/surjan.pdf "Section 2(5) of UK COGSA '92 provides that 'Where rights are transferred by virtue of the operation of subsection (1) above in relation to any document, the transfer for which that subsection provides shall extinguish any entitlement to those rights which derives - a) Where that document is a bill of lading, from a person's having been an original party to the contract of carriage, or b) in the case of any document to which this Act applies, from the previous operation of that subsection in relation to that document," http://web.uct.ac.za/depts/shiplaw/theses/surjan.pdf Hence Ian can independently sue the ship owners on his own right as the holder of the document and also as the party who negotiated the transactions. At the same time, the Club too can sue Sinkers as the consignee who did not receive the consignment in proper condition. Perhaps Ian would be in a better position to do so, considering the circumstances. 3. Sinkers have said that their straight bill excludes all loss and damage however it may occur; and that these terms will govern any action brought by Ian's club. Ian has sought your advice on this matter. According to Hague-Visby Rules, "Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from - a) Act, neglect, or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship; b) Fire, unless caused by the actual fault or privity of the carrier," Wilson, p.195. But in this transaction even though the charter incorporated the Hague-Visby Rules12, they are not mentioned in the bills. This means that Sinkers would not be excluded from all loss and damages. But as the Hague-Visby Rules are already incorporated in the Charter, whether they cover all the transactions or not, is a matter for judicial interpretation. Sinkers can also claim that the Club had not taken part in the negotiations of the transaction and Ian was the party who negotiation with them and they do not know the Club. Having named them as Consignee, this could be a little tricky. United Nations Conference on Trade and Development and the United Nations Commission on International Trade Law have produced a new cargo convention in 1978 called the Hamburg Rules. According to these rules: .2) The shipowner will be liable for fire caused by the negligence of his crew or agents. The onus of proof will be on the cargo owner13," Kwang (pp. 16-17). "Article 5. Basis of liability 1. The carrier is liable for loss resulting from loss of or damage to the goods, as well as from delay in delivery, if the occurrence which caused the loss, damage or delay took place while the goods were in his charge as defined in Art. 4, unless the carrier proves that he, his servants or agents took all measures that could reasonably be required to avoid the occurrence and its consequences." Maritime Law UNITED NATIONS CONVENTION ON THE CARRIAGE OF GOODS BY SEA, 197814. It is not very easy for Sinkers to be exonerated completely from the responsibility of damaging Ian's consignment and that too, when master has already accepted that an act of negligence by himself and his crew members, who misunderstood the situation, caused the damage to the consignment. It is now established that the fire was caused by some miscalculation and negligence of the ship crew and hence, damages will perhaps be granted without much ado. United Kingdom has "fire statutes" incorporated in statutes of ship owners' limitation. There are fire exceptions in carriage of goods by sea acts. These sets of diversifying rules and acts sometimes slightly in conflict with one another, cause confusion to judiciary while granting a decision. "The U.K. Fire Statute provides: [11] "Exclusion of liability - (1) Subject to subsection (3) below, the owner of a United Kingdom ship shall not be liable for any loss or damage in the following cases, namely - a) where any property on board the ship is lost or damaged by reason of fire15 on board the ship;" http://www.mcgill.ca/maritimelaw/maritime-admiralty/fire/ Sinkers may try to limit or avoid liability for claim either by invoking the package or package-and-kilo limitations and using Hague/Visby and national carriage of goods by sea acts, or by limitation and exemption called "limitation of shipowners' liability16". According to Hamburg, United Nations Convention, 1978, "Article 19: 1. Unless notice of loss or damage, specifying the general nature of such loss or damage, is given in writing by the consignee not later than the working day after the day when the goods are handed over to the consignee, such handing over the prima facie evidence of the delivery in good condition," and hence the consignee has to inform the ship owners within the stipulated time, about the damage caused to his goods. Historically, ocean carriers had definite liability of the goods they carry and as the commercial aspect of 'goods by sea' increased, ships slowly tried to escape this liability under various bizarre headings like 'act of God' or 'restraints by rulers or princes' to proclaim that happenings were beyond their control rendering them mere spectators and such rules, many times, exempted the ship owners even from pure acts of negligence on their part. Some of those rules completely excluded them of every liability to the extent that reveling in the newfound security, ship owners had become incorrigibly negligent in managing the goods they shipped and to stop these abuses The Hague Rules were formed in 1924. The Carrier's Liability is described in many ways: "III. Carrier's Liability: (1) The Carrier shall be liable for loss of or damage to the goods occurring between t6he time when he receives the goods into his charge and the time of delivery. (2) The Carrier shall be responsible for the acts and omissions of any persons of whose services he makes use for the performance of the contract of carriage evidenced by this Bill of Lading Sea Waybill17." Sinkers must be having stipulated conditions in their bills of lading that might give them certain protection. But it is doubtful if they could be completely exonerated from any liability against Ian and the Club, if an action is brought against them. 4. Will Sinkers be liable to Kevin's club in respect of their cargo If so, will Sinkers be able to claim the indemnity promised by Freddie for instructing the master to release the goods without production of the bill of lading Bill of lading is the only evidence of contract. According to The Bills of Lading Act 1855, Bill of lading in hands of consignee etc. is a conclusive evidence of shipment as against master18. It is also the evidence that a transaction has taken place between the buyer and the carrier. Without bill of lading, there is no documentary cover for the material being transported. No one other than the actual holder of the bill has any right as against the carrier to demand the release of the consignment. "delivery of the goods by the carrier without presentation of the bill of lading attracts severe sanctions against the carrier," Charles Debattista, p. 31. In the present case, Freddie has convinced the Master to give delivery of the consignment to a person, who persuasively presented himself as the owner of the consignment, even though the person did not have the Bill of Lading with him. Freddie has taken responsibility of the entire transaction. Master was very unhappy to do so, but allowed himself to be persuaded by Freddie. Here Plaintiff could be granted summary judgment against the Defendant charterers for having persuaded the Master to deliver the goods to an unknown party without the usual bill of lading. No doubt they have done so to escape the demurrage mounting and perhaps with good intention. But as the person who took the goods turned out to be an imposter, the main charge will be that the cargo was delivered without surrendering the original bill of lading. Summary judgment will be granted as soon as this fact is established. "Should the carrier, or his agent, deliberately disregard the basic obligation to make delivery of the cargo only against presentation of the bill, he will be guilty of a fundamental breach of the contract of carriage and could lose the protection of all exceptions and limitation of liability clauses," (See The Stettin (1889) 14 PD 142)19. Under circumstances where there is no alternative, an indemnity bond is given by the buyer to the carrier holding him not responsible for any future consequences. In the present case, as it was an imposter who took the consignment, naturally such straight dealings did not take place. If the carrier had received instructions from the shipper that in the absence of the consignee and the bill, another person, whose identities are established, could be given the consignment, and again, it is not the case here20. "Alternatively, if the carrier is reasonably sure of the identity of the receiver, he may risk delivering the goods without presentation of the bill of lading. In such a casehe acts at his peril since such action amounts to willful misconduct and a deliberate breach of his contractual obligations," Wilson, p.158. But there could be another side of the story, where the Defendant Charterers are not the owners of the ship and therefore, they are not prima facie liable for delivery of the cargo. Defendants have induced a breach of contract knowing that there was a contract. If the knowledge of a contract between Sinkers and the Plaintiff could be proved, and also if it could be proved that Defendants willfully and intentionally induced a breach of contract, they could be liable for breach of contract, but this has to be judged on the merits of the case21. There could be another liability in Tort. The ship owner could be sued for loss or damage of his goods, mainly due to the negligence of the carrier or his representatives, through negligence and irresponsibility. "5.3.1: Liability in Tort: Where a claim for loss or damage is based on the negligence of the carrier or his servants, an alternative to the contractual remedy might be to sue the party responsible for the loss in tort. There would be little advantage to a bill of lading holder in pursuing such an action against the contractual carrier," p.143, Wilson22. Liability in Tort is limited through many circumstances and again, it is limited on the merits of the case. It could be argued that while negotiating a contract, the negotiators would be definitely aware of the risk connected. "A shipper of goods, when negotiating a contract of carriage, will be aware that the obligations arising from that contract will rarely be performed personally by the contractual carrier but will be delegated to employees of the carrier or to independent contractors engaged to carry out a particular function, such as stevedores engaged to load or discharge the cargo," Wilson, p.145. This does not let off the ship owner completely from all the responsibilities. He could be definitely liable to the buyer if his representative is persuaded by the charterer to release the consignment to any person, without possession of bill of lading, as the person who allows the actual delivery is his own representative and hence, his actions reflect those of the ship owners. Then again he is saved by the clauses in most of the charters that would indemnify him. "The shipowner may be liable to a receiver of the goods as a result of the charterer's negligent act in presenting the bill of lading for signature. Fortunately, there is a usual employment and indemnity clause found in most charters to protect the shipowner as a result of such a negligent act," Kwang (1986, p.8). According to English law, a shipowner is not entitled to deliver goods to the consignee without producing the bill of lading23. It is perfectly clear that if he does so, it is at his peril. 'The contract is to delivery, on production of the bill of lading, to the person entitled under the bill of lading.' And here, the consignment was delivered not only without bill of lading, but also to the wrong person, who was not entitled to receive the consignment. Hence it becomes a clear case of breach of contract, unless there is some term in the bill of lading protecting the shipowners. They are, therefore, liable in conversion unless likewise so protected. Hence, Sinkers might be exonerated from Kelvin's charges. But then again, there is a fair chance of their being implicated. They would be, most probably, able to seek protection under Freddie's assurance cover. Freddie can claim that the said act was done unintentionally, to save the demurrage charges that Sinkers might demand and hence, it was not a liable act. He was saving them from further demurrage that might be charged by Sinkers. They were not guilty, because it was an act of trust and ignorance. Here establishing the innocence and good intention is important. As we can see from many of the cases that this would go on the merits of the case and the way it was presented in the Court. To escape the consequences of the misdelivery, the appellants will take refuge under the clause 2 of the bill of lading24. But there are limitations to this clause. "There is, therefore, an implied limitation on the clause, which cuts down the extreme width of it; and, as a matter of construction, their Lordships decline to attribute to it the unreasonable effect contended for25". On the face of it, Kevin's club might win the case and collect damages from the Sinkers. Again it depends on the clauses of the negotiation transactions and one of these clauses might lend protection to Sinkers. BIBLIOGRAPHY: 1. John F. Wilson, Carriage of Goods by Sea, 5th edn., (London: Pearson Longman), 2004. 2. Martin Dockray, Cases and Materials on the Carriage of Goods by Sea, (Abingdon: Professional Books), 1987. 3. Peter Koh Soon Kwang, ed., Carriage of Goods by Sea, (Singapore: Butterworths), 1986. 4. Anthony Diamond, The Hague-Visby Rules, (Lloyd@s of London Press Ltd.), 1978. 5. Charles Debattista, Sale of Goods Carried by Sea, (London: Butterworths), 1990. 6. E.R. Hardy Ivamy, Payne and Ivamy's Carriage of Goods by Sea, (London: Butterworths), 1989. ONLINE SOURCES: 1. http://www.admiraltylaw.com/carriage.htm 2. http://www.admiraltylaw.com/carriage.htm 3. http://www.onlinedmc.co.uk/odfjell_seachem_v__continentale.htm 4. http://www.jus.uio.no/lm/un.sea.carriage.hamburg.rules.1978/doc.html#40 5. http://www.mcgill.ca/maritimelaw/maritime-admiralty/fire/ 6. http://web.uct.ac.za/depts/shiplaw/theses/surjan.pdf 7. http://www.samskip.com/Transportinfo/seawaybill/ Read More