International Shipping Law - Far Horizon Pty Ltd - Assignment Example

FAR HORIZON PTY LTD MEMORANDUM OF ADVICE Date: 10 January, 2011 To: The Company Secretary and Board of Directors From: Jeffery Earl Hartley, of Counsel Subject: THE MYSTIC SPIRIT AND THE “LAVANAX” INCIDENT Ref: MOA1-100111 1. PRELIMINARY 1.1 This memorandum of advice has been prepared for the Company Secretary and Board of Directors of Far Horizon Pty Ltd., who seek advice on the liability of Global Minerals Pty Ltd (‘Global’) with regard to circumstances under which the vessel ‘Mystic Spirit’ discharged a chemical described as Lavanax in it’s pure chemical form, subsequent to sustaining damage to a tank containing the chemical substance, which was being transported under a contract of affreightment with Global. Further, the Company seeks advice on whether it can recover the monies paid in penalties for environmental pollution in the amount of $950,000.00 as a result of the discharge. 2. Executive summary 2.1 The term carriage of goods is complicated as a result of three differing rules which may be adopted in the contract of affreightment either by cargo or national legislation. Hague-Visby Rules was the first rule created to protect rights, duties and obligation of the contracting parties and establish a bill of lading between a cargo and carrier interest. The need of harmonizing carriage is well recognized in almost all parts of the world if not all (AGLC)1 3. STATEMENT OF FACT 3.1 Far Horizon entered into a contract with Global Minerals Pty Ltd to transport a substance with the trade name “Lavanax”. All documents relating to Lavanax provided to both the master of the Mystic Spirit and Far Horizon described the cargo as Lavanax in its pure chemical form. The substance was later on loaded to Mystic Spirit (Charter voyage). The voyage began the journey well without incident until they were about to enter the port were Lavanax was to be delivered. Mystic Spirit encountered heavy sea conditions. It was later on unable to make any viable progress. The ports authority instructor ordered the master to drop anchor and halt. 3.2 Far Horizon and the master were not aware that the substance it its pure form usually carried as a cargo as a suspension mixed with mineral oil. On leaving territorial waters the Mystic Spirit left a slick of thick, sticky, foul smelling substance on the beaches near the port where Lavanax was to be delivered. Far Horizon and the master were charged under the criminal offense act for environmental pollution which carries strict liability. The defendants (owner of the vessel and the master) pledged guilty. They were fined and were required to pay a total of $ 950,000.00. 3.3 A "Time charterer” (Global Minerals Pty Ltd) enters into a binding contract of affreightment with the ship owner (Far Horizon) to transport cargo during a specified period and time. Relevant documents relating to the carriage of Lavanax provided by Global to Far Horizon, including documents provided to the Master of the Mystic Spirit, describes the cargo as Lavanax in its pure chemical form. Although an Appendix 3 substance in its pure chemical form, is normally carried as cargo as a suspension mixed with mineral oil. However, the time charterer failed to disclose in the document all the relevant information with regards to Lavanax. Failure of this information induced Far Horizon to enter into a binding contract with Global Mineral Pty Ltd. 3.4 Far Horizon should sue under the law of tort. Tort is defined as a breach of civil duty owed to someone else. The following are the elements of tort; (1) Global Mineral Pty Ltd must have committed some dangerous act or omission (in this situation, the company failed to disclose all the information in its document thus defrauding Far Horizon economically), (2) Far Horizon must (plaintiff) have suffered legal damages, and last but not least, (3) the wrongful act of the defendant must be the one that give rise to legal damages (Cooke 234-346). However, although many acts amount to both torts and crime, Far Horizon should bring a lawsuit for torts. Far Horizon is entitled to recover all his monies paid in penalties "damages", usually monetary compensation, from Global Mineral Pty Ltd for legal injuries caused. Legal injuries are not however limited to physical injuries but it may also include reputational, property, emotional or economic injuries. Tort cases comprises of topics such as imprisonment, false imprisonment, environmental pollution just to mention but a few (AGLC)2. According to the law of torts, Far Horizon must prove that Global Pty Ltd had: Duty to match to a standard conduct for protection Global breached that duty Factual causation Damages 3.5 The standard action in tort is negligence. Negligence is the omission to do something which a reasonable man in his capacity will either do or not do. The tort of negligence tends to provide cause of action which is leading to damages designed to protect statutory rights, including those goods to be transported by the ship. Negligence section tends to limit or exclude Far Horizon (Ship owner) liability for any loss as well as damages from an act, neglect or rather default of Global Mineral Pty Ltd in the navigation of manoeuvring of Mystic Spirit, not resulting, however, from want of due care, diligence and skills by Far Horizon . 3.5.1Global Mineral Pty Limited is liable for negligent misstatement when it failed to disclose relevant information, thus making Far Horizon to incur financial loses when acting because of the statement. This is clearly evident with the amount of monies Far Horizon paid in penalties. In Hadley Byrne vs. Heller, states that if the defendant of the bankers gave a misleading statement either orally or written about the affairs of the customer to the plaintiff who relied on the misstatement to his losses. It was held that the defendant was liable even if the misstatement was made honestly. In the case of Far Horizon, Global Mineral Pty Ltd failed to disclose all the information, thereby making Far horizon to rely on the availed information thus suffered losses. Therefore, it is right for Far Horizon to recover all the monies paid in penalty (AGLC) 3 3.5.2 The following element must be proven by Far Horizon under the tort of negligent misstatement: (1) Far Horizon relied upon the statement provided by Global Mineral Pty Ltd, (2) Far Horizon suffered economic injury as a direct consequences of the relied statement, (3) and Far Horizon suffered legal damages in terms of monetary. 3.6 The charter party and contract of affreightment The Charterer may be advocating the ship to carry its own cargo or those of the third parties. The time charter must distinguish from the bareboat, the cargo which the charterer (Far Horizon) will be considered the owner of the property while at sea, who shall be duly responsible for navigation, crewing, and operation of the voyage. A common carrier (Far Horizon) in common law refers to a company or a person who is in charge for a safe delivery of goods, unless it has been prevented by the following (exception to Far Horizon liability): fault by the shipper, if it is an act of God, inevitable scene, an inherent deficiency in the goods or an act of an enemy. I will concentrate on this exception: an act of God (AGLC)4 3.6.1 An act of God This is an incident caused by natural forces such as earthquakes, lightening, floods etc. There the vessel encountered very heavy seas and sever storm conditions. Even with due care, skills and diligence, Far horizon could not be able to stop the scene. This is clearly evident in the case of Nicholas vs. Marsland Nicholas vs. Marsland M (Marsland) owed certain artificial lakes on his land. An unexpected rain which has never been witnessed in living memory caused the banks of the lake to burst, and the escaping water carried away the bridges belonging to N (Nicholas). N sued M for damages and it was held that M was not liable for the extra ordinary act of the nature which could not reasonably been anticipated. The same facts applies to Far Horizon, very heavy seas and sever storm conditions could not have been anticipated. Therefore, Far Horizon must recover the monies paid in penalties. 3.6.2 In this case, there was a navigation error caused by the master of Mystic Spirit, and as a result of this error, Far Horizon suffered legal damages. Far Horizon can, according to Hague-Visby Rules, exclude his/her liabilities on the above mentioned grounds, for instance Far Horizon is not liable for any damages to the good if the damages are as a result of fire of the ship or as a result of the navigation error caused by the master of Mystic Spirit (AGLC) 5 3.7 Failures to disclose A Bill of Lading is a document signed by both the carrier or by the master of the ship or by the agent on behalf of the Carrier (Far Horizon) starting that certain commodities have been shipped on a particular ship, setting out the existing terms and conditions under which the specified goods will be carried by the ship, Mystic Sprit. A Bill of lading provides three functions, first it provides evidence that the contract of carriage of goods by the ship exist. Second, it serves as a receipt for all the goods carried and finally, it acts as a document of title. Under the general liability, a company or an individual shall not be held liable for loss or damages arising from; an omission of Global Minerals Pty Ltd to disclose information in the document about the nature of the goods. 3.7.1 The document issued to Far Horizon did not display the nature and the content of the good to be shipped via Mystic Spirit. Unknown to Far Horizon that Lavanax, although an Appendix 3 substance in its pure chemical form, is normally carried as cargo as a suspension mixed with mineral oil is enough prove to recover the entire monies paid in penalties. Under the international shipping law, if a document is issued without stipulating the nature of good to be transported, the owner (Far Horizon), Far Horizon will not be liable (AGLC)6 3.7.2 For example, Global Minerals Pty Ltd failed to disclose all of the relevant information regarding the nature and the content of the substance in its documents, thus inducing Far Horizon to enter into a contract. According to Gordon v Selico it is possible to make misrepresentation by words or conduct. 3.7 The misclassification There are no adequate ways of avoiding misclassification. Far Horizon has limited its exposure through utilizing the masters leasing devices; through outsourcing part of the business. On the other hand, where Far Horizon has misclassified the substances’ MARPOL (International convention for the prevention of pollution from ships harbor’s and landing places) he/she can sue under the tort of negligence for damages suffered. This damage does not necessarily have to be in physical terms but also in economic terms. For instance, if maters of the ship are reclassified as masters, Far Horizon will face anticipated liabilities. 3.7.1 In the absence of a requirement for survey and documents under Appendix 3 of MARPOL, there are two major elements which should be taken into consideration for verification of the IMDG coding. This includes first, a detailed inspection of the required certificate or documentation. Second, is to ensure that the paperwork matches the markings and stowage on board. According to Appendix 3 of MARPOL, the IMDG code, states that all ships carrying dangerous goods shall have a special list, in accordance with regulation 4.5 of MARPOL VII of SOLAS of 1974 (AGLC)7 3.8 Conclusion The vessel encountered very heavy seas and severe storm conditions which could not have been controlled with care or diligence by the owner and the master of the ship. I am of the opinion that Far Horizon can recover the monies paid in penalties. Global Minerals Pty Ltd failed to disclose the nature of the goods to be transported in its documents. As a result of its action, Far Horizon and the master of the ship were induced to enter into a contract without knowing the composition of Lavanax. 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