DMC Category Rating: Confirmed

This case note is based on an Article in the February 2005 Edition of the ‘Bulletin’, published by the Marine and Insurance teams at the international firm of lawyers, DLA Piper Rudnick Gray Cary. DLA Piper is an International Contributor to this website.

Background
The owners, Flintermar, chartered the vessel Flintermar to the charterers, Sea Malta, under a time charter on the Baltime 1939 form dated 13 January 1995. The vessel, built in 1994, was designed for flexible, multi-purpose operations and could carry 102 containers under deck and 133 on deck. The hatch cover to the hold was made up of eleven interlocking pontoons, which had to be opened and closed in a fixed order. For this purpose the vessel had a hatch gantry crane on rails.

This gantry crane, however, could not be used when containers were stowed on decks in a certain configuration. In those circumstances, a shore crane had to be used, either to remove and reload the containers or to remove and replace the pontoons. In practice, owners and charterers had reached an arrangement to deal with these situations, whereby charterers' stevedores would use a shore crane to deal both with the containers and the pontoons. The owners made no extra payment for the fact that the vessel's pontoons were handled as well as containers.

On 16 September 1995, a shore crane was being used to reposition the first pontoon during the loading and discharging of a number of containers. The vessel's chief officer was standing on the pontoon to remove two slings when, before the slings were released, the stevedores' crane-driver lifted the spreader, causing the pontoon to tilt. The chief officer fell 9 metres into the hold, sustaining injuries. The owners settled his personal injury claim, but now sought to recover from the charterers.

The crucial question was whether, in replacing the vessel's pontoons, the stevedores were performing owners' or charterers' work. If it was owners' work, the owners' claim for an indemnity had to fail.

Charterparty terms
The charterparty agreement was on standard Baltime terms. Under clause 4, charterers were to provide and pay for (amongst other things) "loading, trimming, stowing…, unloading, weighing, tallying and delivery of cargoes, surveys on hatches …". Under clause 9, the Master was to prosecute all voyages with utmost despatch and to render "customary assistance" with the vessel's crew. Customary assistance was defined by clause 30(1) as including (amongst other things) the opening and closing of hatches.

Clause 13 provided:
"The Charterers to be responsible for loss or damage caused to the Vessel or to the Owners by goods being loaded contrary to the terms of the Charter or by improper or careless bunkering or loading, stowing or discharging of goods or any other improper or negligent act on their part or that of their servants."

Clause 48 gave charterers the right to place on board their own observer during loading/discharging operations. Charterers were not to be held responsible for the consequences of the observer's advice, recommendations or assistance; "it being clearly accepted and understood by the Charterers that the full and ultimate responsibility shall always remain with the Master of the vessel."

The Issues
The owners argued that, where container cargo was generally carried on and under deck and loading and discharging preceded and followed hatch operations, hatch handling should be regarded as part of the loading and discharging process for which charterers were responsible under clauses 4 and/or 13. This was supported by the arrangement they had made with charterers that hatch handling would be carried out by charterers' stevedores as part of cargo operations.

The charterers, however, said that opening and closing hatches was part of the owners' exclusive responsibility, both at common law and as emphasised by clause 30(1). The special arrangement did not affect the fact that, when dealing with hatch pontoons, the stevedores were performing owners' business, for which the owners remained responsible. Clause 48 made it clear that the owners remained ultimately responsible even for loading and discharging operations and this clause (which was typed rather than printed), took precedence over the other clauses.

In addition, the charterers raised issues of causation and contributory negligence, alleging that the Master had chosen an unsafe system of work and/or that the chief officer was himself negligent

The Decision at First Instance
The judge at first instance held that the overwhelming probability was that the accident was caused by the negligence of the stevedores' signalman or crane-driver. He agreed with the charterers that the system of work (whereby the chief officer stood on the pontoon to release the slings) was unsafe, but rejected the submission that this was the proximate cause of the accident, or that the chief officer had been in any way personally negligent.

Since the claim was in contract, there could be no pleading of contributory negligence, although if he had to apportion liability, the judge would have apportioned 80% to the stevedores and 20% to the owners for the unsafe system of work.

As for the question of contractual responsibility, the judge did not accept the charterers' interpretation of clause 48. There was a distinction between the Master's responsibility for his decisions as to how cargo operations should be concluded and charterers' responsibility for the actual conduct of those operations. Clause 30 did not assist either way, because it could not be said that the various tasks listed were the exclusive province of the owners.

Nevertheless, handling of cargo was one thing and handling of the hatch another. Clauses 4 and 13, which set out charterers' responsibilities, were only concerned with cargo operations. The judge concluded that the stevedores had been carrying out owners' work when they replaced the pontoon. The owners appealed.

The Court of Appeal Judgment
Respective responsibilities
At common law, the test for distinguishing the respective responsibilities of owners and charterers developed on geographical lines. Subject to contrary agreement, what happened on board ship was the owners' responsibility, whereas, as long as cargo was still ashore, it was the charterers' or cargo owners' responsibility. But since cargo might be handled on both sides of this divide by the same stevedores, agreements were developed as to who would be responsible for those stevedores. Even when charterers took full responsibility for cargo handling, however, there were still difficult areas, such as stowage, because the Master retained ultimate responsibility for the safety and seaworthiness of the vessel.

Clauses, therefore, often referred to charterers' cargo handling operations remaining "under the supervision" of the Master. These words alone did not affect charterers' primary liability for cargo handling (Court Line Limited v Canadian Transport Company Limited [1940] AC 161, which was considering clause 8 of the NYPE time charter). But if the phrase used was "under the supervision and responsibility" of the Master, this was held to reverse the position again, so that primary liability for cargo handling reverted to the owner (The Shinjitsu Maru No. 5 [1985] 1 Lloyd's Rep. 568). Charterers also became keen to have their own representative on board to assist and observe cargo operations, and this led to the development of clauses such as clause 48 in this charterparty.

There is, however, comparatively little discussion in the authorities about the parties' responsibilities for hatch handling. In The Azuero ([1967] 1 Lloyd's Rep. 464), the issue was not liability for an accident, but who paid the cost of hatch operations. During discharge, hatches were sometimes closed and opened and these operations were performed by the shore stevedores and charged for by the port authority. It was agreed that the first opening and last closing of the hatch was for the owner's account. But what about the ones in between?

The judge in that case agreed with the owners that the cost of the intermediate operations was all part of the discharge of cargo and should fall on the charterers. The test to be applied was whether, in all the circumstances, the operation was "either part of discharging the cargo, or so closely associated with the operation of discharging the cargo that it could properly… be treated for all practical purposes as part of that discharge so that the costs falls upon the charterers."

Construction issue
The Court of Appeal in Flintermaar looked first at the terms of the contract. Which party under the charterparty had primary responsibility for hatch handling operations? Ignoring clause 48, which party had primary responsibility for cargo operations? Did Clause 48 and the reference to the Master's "full and absolute responsibility" override this?

In answer to the first question, the owners bore primary responsibility for hatch handling. This followed from the fact that the hatch was part of the vessel's equipment and has its own gantry crane for handling the hatch pontoons. One would, therefore, expect that the owners would be responsible for its operation.

Under clauses 4 and 13, charterers had responsibility for loading and discharging operations. The reference to hatches in clause 4 did not affect this conclusion, as it was limited to surveys.

Since hatch operations were primarily a matter for the owners, responsibility should not easily be found to have shifted to the charterers. While it was not impossible for hatch handling to fall within the charterers' sphere of responsibility, it would require clear wording. Clause 30 did not assist because, read in the context of the charter as a whole, it was not concerned with allocating responsibility.

What then was the effect of clause 48? Did this transfer "full and ultimate responsibility" for loading and discharging to the owners? No. The clause was dealing with the role of the charterers' observer, not with a fundamental reversal of responsibility for cargo operations. The Court of Appeal agreed with the High Court on the distinction between decision and conduct. It was for the Master to decide how to load and discharge but for the charterers and their stevedores to carry out those operations without negligence. On this reading, there was no inconsistency between clause 48 and clauses 4 and 13.

This meant, however, that, if the replacement of the pontoon (even if treated as part of cargo operations), was a direct consequence of the Master's decision as to the method of operation, the owner's claim would fail. If, however, it fell to be considered as part of the cargo operations and the accident was due to the stevedores' negligent execution rather than the Master's decision, clause 48 would not help the charterers.

In The Azuero, it was established that the practical question to ask was whether the hatch closing was either part of, or so closely associated with, loading and discharging as properly to be treated as part of the cargo operation.

In this case, the evidence was that the handling of the pontoon occurred during a cargo operation and was conducted by the charterer's stevedores using the shore crane as part of the cargo operation for no extra payment, pursuant to an arrangement between owners and charterers.

The answer to the question was, therefore, relatively plain. The pontoon was being replaced as an integral part of the cargo operation. The effective cause of the accident was the charterers' stevedores' negligence, not the decision of the Master about the system of work. Consequently, the charterers were liable under the contract for the injury. The Court of Appeal awarded the owners damages for breach of contract equivalent to their liability to the chief officer and the costs of defending and settling that claim.

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