Shipping Law: about Deviation and Liberty Clauses - Case Study Example

Shipping Law case about deviation and liberty clauses Introduction: A Charter party was enforced involving Mr. Francis, the owner of the Motor VesselDrake and Mr. Philip on 1 October 2008 and chartered for the voyage from Plymouth to New York. The terms and conditions of Charter Party (CP) comprises the following also. Firstly, the vessel is entitled to visit any port in any sequence. Secondly, the owner of the ship is not bound to bear any loss, or damages, owing to any cause. What actually transpired: On 10th October 2008, Mr. Philip loaded the ship with cargo of medical Equipments and 50 boxes of AIDS Vaccines at Plymouth. The ship was scheduled to leave for New York on 18th October 2008. Instantly Mr. Francis (owner of the ship) received a message to consign 10 containers of engineering equipments to Southampton, before reaching New York. On 27th October 2008, the ship M/v Drake reached New York, but after a delay of 11days with the demurrage on delay estimated at £110.000. However, Philip pleaded that while loading the vaccine boxes on the vessel, he had no idea that health authorities had placed restrictions on procurement of live vaccines into the country. The ship docked in New York on 7th November 2008. When the ship was being anchored, it happened to hit against a dock wall, due to apparent negligence of the ship’s master. Consequently 40 crates of medical equipments, valued at around £40,000 were totally ruined. The subsequent inquiries revealed that navigating officer and master of the vessel, who were mainly responsible for the safety of ship and cargo, were in an inebriated state during the time of occurrence of accident. US Shipping Law: The shipping law is a combination of customs, precedents, legislations, and ratio decedent. The subject matter of the same is ownership and operation of ships travelling through the high seas which confers rights and imposes duties on the respective parties. The transportation of goods along the high seas is primarily based on contracts or agreements between the ship owner on the one hand, and the party consigning goods, on the other. Anyway, these agreements are grounded on archaic customs and antiquated precedents prevailing in the industry. Shipping Contracts: As already mentioned the transportation of goods through high seas is mainly based on contracts or agreements between the ship owner and the consigner. These types of contracts are otherwise termed as “Charter Parties”. The term Charter Party is derived from the Latin word “Carta Partitta” which means “divided charter”. As per the classification the charter party is divided into three types which are “Demise charter”, secondly, “Time charter” and finally “Voyage charter.” 1 Demise Charter: In this kind of chartering party the ship owner absolutely transfers the “possession“of the vessel to the charterer. 2 It is the charterer who appoints the master and the crew of the ship. The charterer himself affects the repairs etc. In summary the charterer acts as if he is the owner of the vessel during the period of the contract. Time Charter: In time charter the ship owner appoints the master and crew of the vessel. But the charterer getting a right (limited to the extent of the contract) to direct the route of the ship and to decide about the consignment. Voyage Charter: This is a contract of “carriage or affreightment.” That is a contract to rent a cargo space (either in whole or in part) of a ship. It can be for one voyage or a series of voyages. 3 Supervening Issues: In the above case study, the main issues that emanate are: 1. Diversion of route which results in subsequent delay to reach final port- New York. 2. Demurrage incurred due to delay in reaching final port - estimated at £110.000 due to delays caused by deviation of voyage via Southampton. Damages caused to medical equipments, valued at around £40,000. 3. Damages caused to medical equipments, valued at around £40,000. Diversion of route which results in subsequent delay to reach final port- New York: In the present case the main issues faced by Francis, the owner of M/V Drake are as follows: The scheduled direction of the ship is from Plymouth to New York. In the meanwhile, as a consequence of loading more cargo, the route is altered. The delay of 11 days caused demurrage for goods valued at £110.000, which needs to be recovered from the offending party. Thus it is seen that in this case of Demise Charter party shipments, the ship owner, through a general clause, having restricted his liability, it is incumbent on the ship charterer, Philip, to institute legal redressals for losses. Supreme Court case of Guzman v. Pichirilo 369 U.S. 698 (1962): In the Supreme Court case of Guzman v. Pichirilo 369 U.S. 698 (1962), relating to injury to dock worker, The Court of Appeals disallowed the findings of the District Court, holding “that the ship was under a demise charter to petitioners employer, that this relieved the owner of personal responsibility for unseaworthiness and that the ship was not liable in rem because no personal responsibility could be visited upon either the owner or the chatterer.” 4 Thus, it is seen that for all practical purposes, a demise charterer makes the ship charterer, in this case Philip, the virtual owner of the ship during its stipulated voyage, and all rights, privileges and enjoyments are bestowed on him, and similarly, all liabilities , responsibilities and losses due to accident or otherwise, are also to be compensated by him. Estimated demurrage of £110.000 incurred due to delay in reaching final port: Again, due to the laws governing demise charter party, the charterer is vested the temporary ownership of the vessel from beginning of voyage to the reaching of its final destination. Further, it is seen that the owner, Francis has categorically denied any liability or commitment for losses suffered, and this has been contracted in the contract of afreightment (in the absence of bill of lading). Thus, the demurrage having incurred during voyage, the liability is fixed with charterer and the owner is in no way connected with this loss. Hellenic Steel Co v Svolamar Shipping Co Ltd, The Komninos S [1991] 1 Lloyds Rep 370: In the case of Hellenic Steel Co v Svolamar Shipping Co Ltd, The Komninos S 1 Lloyds Rep 370, (1991) the cargo was damaged enroute, and the cargo owners placed their claim on owners of the ship. However, the documents binding the contract “exempted the ship-owners from liability.” 5 In this case, the Courts determined that the originating port being Greece, which is not a party to Hague Visby laws, as such, these laws did not apply in this case. Thus, the exemption clause of the owners were not disrespected and the Courts were allowed to enforce the exemption clause, exempted the owners from any liability under this claim. “Their appeal would be allowed.” 6 Damages caused to medical equipments, valued at around £40,000: 40 crates of medical equipments destroyed which cost 1000 pounds of sterling (GBP) per crates. The test revealed that the accident was due to the recklessness owing to consumption of drinks by the master and navigating officer of the ship. If the collision of the ship occurs cargo loss or damage may happen. Nevertheless the carrier is not bound to pay loss or damages if the goods are transported on a contract based on 1923 Brussels Convention on liability. But if the loss or damage occurred due to the lack of exercise of due diligence for proper staffing, equipping, operation the carrier will be liable. In the case herein the master and the navigating officer are under the influence of drinks and hence there is fall on the part of the owner for exercising due diligence by the employee of the ship. Therefore the owner of the ship is vicariously liable for the acts of his employee being they were under the influence of the drugs. Regarding the loss caused by the delay in the transportation can be justified by the verbatim provided in the charter party above dated. Because the charter party entitled the ship owner to alter or change the route or direction of the vessel and the owner is not liable to pay compensation on that ground. Moreover it is seen that the following aspects are also present. The ship owner has disclaimed responsibility for losses or damages as per the terms of the Demise Charter party. Since the ship charterer, Francis, was not, bona fide, aware of the fact that there were restrictions on shipment of live vaccines to New York, he could be excused from the liability of carrying live vaccines. Negligence at sea: Exxon Waldez case: The law relating to negligence at sea is well established in the celebrated case of Exxon Waldez in which a negligently driven oil tanker spilt 11 Million Gallons of crude into the sea near the southern coast of Alaska. It was felt that this was caused by sheer negligence of the navigators, and therefore, the Company was forced to pay heavy punitive damages for sea pollution. “The Supreme Court on Wednesday reduced what had once been a $5 billion punitive damages award against Exxon Mobil to about $500 million.“ 7 It is often seen that maritime laws often opens the floodgates for ship-owners and ship owing companies to punitive and culpable action purely because of actions of their “managerial employees”, especially at sea. 8 It could be said that in this case the application of Hague Visby rules could be applied since both the initiating country, United Kingdom and the final port, the USA are signatories of the agreement. Moreover under Demise Charter Party as in this case, once the voyage has begun, liability shifts to the charterer, since he is responsible for the transport and safe conduct of the crewmembers, ship and cargo until its destination. Again, there are a number of contingents in terms of length of voyage, weather conditions out at sea, etc. In this case, there has also been an instance of deviation,, which although provided under the contract, has material bearing on the number of days, since the delay has precipitated demurrage and 11days lost. Onus shifts to the charterer, Philip: There are also other factors in terms of the fact that sea travel, unlike other modes of transportation are long drawn, fraught with natural and man made dangers and also the consequences of poor planning and logistic management. Once the owner, Francis has handed over Charter party to Philip, the onus shifts to the charterer, Philip. In order to substantiate his claim, the real causes for the damages have to be ascertained. This needs to be provided by Philip, since he has been associated with the cargo during the currency of the charter party contract. However, his stand that he was not aware of the fact that part of the stated cargo, relating to 50 boxes of live AIDS vaccines is tenable, but he needs to prove that this is so. In such case, this liability would not vest with the charterer. . Degree of care: The crux of the issue, which would find favour with Courts, would be the degree of care taken by the various parties. Here acts of both commission and omission are culpable and a party cannot claim exculpation based on his reading of the situation. The degree of care and prudence need to be what ordinary persons, faced with similar circumstance would have taken recourse to do. In the case of Dominion Tankers Ltd. v. Shell Petroleum Co. Ltd., [1939] Ex. C.R. 192 at p. 203, 1939 AMC 541 at p. 551 the Court observed that "the onus on a person relying on an exception relieving him from liability did not go so far as to make him prove all the circumstances which could explain an obscure situation." 9 Conclusion: Thus, it could be said that in this case, the following aspects would emerge: Diversion of route which results in subsequent delay to reach final port- New York.- this is permissible under the contract, although liability arising out of longer voyage time has not been anticipated, or dealt with in charter party. Demurrage incurred due to delay in reaching final port - estimated at £110.000 since the contract is categorical about ship owner’s negation of liability, it would fall upon the charterer to bear the risks of this voyage. Deviation of voyage via Southampton. Damages caused to medical equipments, valued at around £40,000. Negligence cause by navigator – ship captain, or by vicarious liability , the shipping company is liable It need however to be cautioned that matters relating to maritime disputes and claims are issues of which court jurisdicates and how. In this case, it is seen that the charter party document has been issued from the British port of Plymouth and therefore, British rules need to be applied. However, the courts would need to take a holistic view and decide matters on what best solution, amenable to all parties, including the ship owner, Francis, the charterer Philip, the captain of the vessel MV. Drake, etc need to be considered. Denying of responsibility does not absolve the owner, if it is caused through the negligence of his servant, or agent. However, the Courts would need to consider the merits of the case and he involvements of various players and their roles and responsibilities vis-a –vis the contract to arrive at a final solution. Bibliography Hellenic Steel Co v Svolamar Shipping Co Ltd, The Komninos S: [1991] 1 Lloyds Rep 370. [online]. Law teacher. Last accessed 10 December 2008 at: http://www.lawteacher.net/international/ LIPTAK, Adam. (2008). Washington: Damages Cut against Exxon in Valdez Case. [online]. The New York Times. Last accessed 10 December 2008 at: http://www.nytimes.com/2008/06/26/washington/26punitive.html Shipping laws: Shipping Contracts. (2008). [online]. Answers.com. Last accessed 10 December 2008 at: http://www.answers.com/topic/shipping_law Supreme Court of the United States: Guzman v. Pichirilo. (1962). [online]. Last accessed 10 December 2008 at: http://www.admiraltylawguide.com/supct/Guzman.htm TETLEY, William. (2008). The Cause of the Loss or Damage: Degree of Certainty of Cause. [online]. McGill. Last accessed 10 December 2008 at: http://www.mcgill.ca/maritimelaw/maritime-admiralty/cause/ United States Courts of Appeals for the Ninth Circuit. In re: The Exxon Valdez. (2006). [online]. Last accessed 10 December 2008 at: http://caselaw.lp.findlaw.com/data2/circs/9th/0435182pv2.pdf Read More