TCSV v. SMT (m.v "Somerset")

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Transportes Coal-Sea de Venezuela C.A., as owners of the Hopper Barge TCSV-2, v. Ship Management & Transport of Limassol, as agents for the owners of the m.v. "Somerset" ("SMT")
United States of America: Society of Maritime Arbitrators of New York Inc.: Raymond J. Burke, Jr. (Chair), Manfred W. Arnold and Louis P. Sheinbaum; 3892, July 28, 2005
Mark C. Flavin and Paul E. O’Brien of Flavin & O’Brien for Transportes Coal-Sea de Venezuela C.A.
John P. Vayda and Lawrence J. Bowles of Nourse & Bowles for Ship Management & Transport of Limassol
In this case, a majority of the arbitration panel held that a barge owner could not recover damages from the operators of the carrying ship for the loss of one of its barges that sank in unexplained circumstances whilst alongside. Since there was no contract defining each party’s duties, the Panel applied the maritime law of bailment. Under this law, the barge owner had the burden of proving that, at the time of sinking, the barge was seaworthy and was in the exclusive custody and control of the crew of the carrying ship. The Panel majority found that the barge owner had failed to carry this burden and, furthermore, that the loss occurred without any contributing negligence of the officers or crew of the carrying vessel, nor by reason of her unseaworthiness

DMC Category Rating: Confirmed

This case note has been contributed by Patrick V. Martin, a retired New York attorney and active arbitrator, who specializes in charter party and commodity disputes.

TCSV owned tugs and old, unmanned, barges in Maracaibo, Venezuela. Its business was to transport coal from the coal terminal to an anchored ship and the ship’s gear would then discharge, or offload, the coal from the barges and load it into the holds.

In this instance, on February 21, 2001, the m/v "Somerset", operated by Ship Management & Transport of Limassol ("SMT"), arrived and went to TCSV’s customary anchorage. Carbonas de la Guajira S.A ("CDG") was the shipper of the coal cargo and had arranged with TCSV to move the coal from the terminal to the ship’s side using TCSV’s tugs and barges. One of these barges was the TCSV-2. It was 35 years old and showed its age. The majority of the tribunal commented that its value was little more than scrap.

Movement of the coal from the terminal to the ship’s holds was done as follows. The coal was loaded to the barges at the dock. There were no load lines or draft makings on the barges and the amount of coal loaded to each barge was estimated by the number of trucks used to load any particular barge. The loaded barge was then moved by TCSV’s pusher tug, the "Bahia Honda", to the "Somerset’s" side and tied up by the ship’s crew. Once this was done, the tug would depart on other duties. This included moving barges from the ship to the terminal, the terminal to the ship, repositioning barges at the ship’s side and related tasks. When not working, the tug would "stand by" awaiting orders. The barges had no crew on board. The "Somerset’s" cranes and buckets were then used to unload the barge. A representative of CDG was on board to observe the cargo operations and relay orders from the ship to the tug and barges. Because the cranes could not reach all the way to the outboard side of the barge, each barge had to be turned. This was done using the "Bahia Honda", together with the ship’s crew as necessary. While alongside, the barge’s lines were tended by the ship’s crew. The crew had no responsibility to inspect the barges and no crew member went on board any barge as part of their duties.

On February 25, 2001, the TCSV-2 was loaded for her fourth trip to the "Somerset". She arrived at the vessel at 1640 and made fast to her starboard side. At the time, there were two other barges at the vessel, the TCSV-3 and TCSV-4, also engaged in cargo operations. The tug spent the time shifting the barges about the vessel as ordered by the shipper’s onboard representative. At about 2130, the second mate of the "Somerset" noticed that the TCSV-2 was down by the stern and taking in water. The tug was notified and attempted to tow the barge from the vessel’s side. While attempting to do this, the barge sank.

At the time of the sinking, the ship was in the process of discharging the barge and had discharged about 204 metric tons of the cargo of about 1200 tons on board. According to the evidence, there was a sea of about 1 meter and the weather was generally rough with water coming on deck. The discharging was under the control of the "Somerset" and there was nobody from TSCV present on board the barge.

The barge was eventually raised and inspected. There were no hull or deck openings that would explain the sinking. There was some wastage around the coamings. There was no clear reason for her sinking. Each side blamed the other.

Since there was no contract between the ship and barge, the parties agreed to have the dispute settled in New York arbitration. TCSV claimed US$2,800,000 in damages including loss of the barge, wreck removal, coal removal, and related expenses plus attorneys’ and arbitrators’ fees. Twelve evidentiary hearings were held.

There were several issues. TCSV argued that there had been a bailment of the barge pursuant to which TCSV, as bailor, had handed over exclusive control of the barge to the crew of the "Somerset", as bailee, for the purpose of discharging the coal from the barge to the ship. Since the barge had sunk during this period, TCSV was entitled to a presumption, under the doctrine of res ipsa loquitur (namely, that the facts speak for themselves), that the barge would not have sunk but for some act of negligence of the crew or defect in the ship itself. Following from these premises, TCSV argued that the burden of proof was upon the SMT to show that it was not at fault, and that it had failed to carry this burden. TSCV further argued that the logical cause of the sinking was the improper manner in which the cargo was being off loaded from the barge.

SMT argued that the barge was unseaworthy and that there was no bailment because the "Somerset’s" crew did not have exclusive control over the barge and the discharging operation. Therefore, TCSV had the affirmative burden to establish that (i) the TCSV-2 was seaworthy and (ii) the crew of the "Somerset" had committed some act of negligence or the "Somerset" was unseaworthy in some respect.

Since these issues presented mixed questions of law and fact, the outcome depended on how the Panel viewed the evidence. Despite the number of hearings, no one from the crew testified. Instead, SMT relied on crew statements some of which were not signed. Each side presented surveyors and other expert testimony as to how the barge might have sunk. None of the evidence was conclusive.

The Panel majority stated that for there to be a bailment, the bailee must have exclusive control over the bailed property (the barge in this instance) and further that TCSV was not entitled to any presumption of fault on the part of SMT unless it could prove that there was a bailment and that it (TCSV) was without fault.

The majority found that there was no bailment because the evidence established that both TCSV and the shipper had representatives present, who observed and had some control over the barges, how they should be placed alongside the vessel and the order of their offloading. Therefore, there was no handing over of exclusive control of the barge to the "Somerset" for the off loading operation. Of equal importance was the panel’s finding that the various wasted areas and minor holes in the deck coamings of the TCSV-2 made her unfit for the service. These conditions allowed sea water, which was coming on deck, to enter into the cargo hopper and from there some of the water flowed into the below deck compartments through wasted areas. These conditions eventually led to the TCSV-2’s overloading (combination of the amount of coal and water on board) and resultant sinking. Therefore the fault was with TCSV and not SMT. The panel therefore denied TCSV’s claim and awarded SMT US$617,258 in attorney’s fees and disbursements, plus interest and arbitrator’s fees.

There was a dissent by Mr. Arnold. He did not take issue with the legal points. He took a practical rather than a legal approach to the evidence. Based on his view of the same evidence introduced in the hearings, he came to a different factual conclusion. Since the barge had made three prior trips without incident, it was obviously fit for the service. He discounted the crew statements and relied on the testimony of TCSV’s marine superintendent. If the condition of the barge was as bad as set forth in the unsigned statements, then SMT personnel had a duty to make a formal protest or reject the barge. He determined that as a practical matter the entire offloading operation was in the effective control of the "Somerset". Since SMT did not produce any of the crew to testify about the events, which it could have done, it was proper to draw adverse inferences against SMT. He concluded that TCSV had made out a prima facie case which SMT had failed to rebut. Therefore, TCSV was entitled to an award in its favor.

TCSV has recently filed a petition with the court to have the award vacated (set aside) on the grounds that one of the arbitrators was prejudiced and failed to disclose material information about his relationship with one of the parties.

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