DMC Category Rating: Confirmed

This case note is based on an Article in the April 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
On 11 January 2002, Borgship chartered the product tanker "Casco" from Product Transport Corporation for a period of 60 to 90 days +/- 20 days on the Shelltime 4 form. The vessel was then sub-chartered on the Asbatankvoy form to carry gasoline from the Netherlands to West Africa.

The vessel completed discharge of a cargo of palm oil on 10 April 2002 and proceeded to Amsterdam, where tank cleaning commenced. Notice of readiness was tendered on 19 April but on 20 April, the sub-charterers' surveyors reported that the vessel was not ready to load the intended cargo of gasoline. Further tank cleaning ensued, but by 26 April, the surveyors were still not happy, claiming that the tanks were in poor condition due to the state of the epoxy coating. On 28 April, the parties agreed that the vessel should be redelivered to owners, without prejudice to any existing claims.

The charterer claimed against the owner for breach of the charterparty in relation to the condition of the tanks, claiming damages of US$795,000. 97% of the claim was for net freight under the sub-charterparty. The rest was for wasted bunkers and for a balance of account on the final hire statement.

The owner, however, argued that the first two claims were time-barred under Clause 27(c)(ii) of the Shelltime form, which provided that any claim (whether brought by charterers or any other person) "arising out of any loss of or damage to or in connection with cargo" would be subject to the Hague-Visby Rules. Article III Rule 6 of those Rules provides:

"…the carrier and the ship shall in any event be discharged from all liability whatsoever in respect of the goods unless suit is brought within one year of their delivery or of the date when they should have been delivered".

If this provision applied, the goods should have been delivered some time in late April/early May 2003. The arbitration proceedings were not begun until July 2004.

The crucial question was whether the claims were claims "arising out of any loss of or damage to or in connection with cargo" within clause 27(c)(ii) of the Shelltime 4 form or claims "in respect of the goods" under Article III Rule 6 of the Hague-Visby rules.

The owner argued that the claims all stemmed from uncargoworthiness. The vessel's tanks were not clean enough to receive a particular cargo and, as a result, that cargo was lost. Consequently the time bar applied. The charterer, however, said the claims were for breaches of charter obligations that were independent of the Hague-Visby Rules. According to the decision in The Stena Pacifica [1990] 2 Lloyd's Rep 234, clause 27(c)(ii) of Shelltime 4 did not apply to such claims.

Judgment
The judge agreed with the charterer. As a matter of construction, clause 27(c)(ii) was concerned with what would be regarded in the marine market as "cargo claims", namely claims (whether original or derivative) of the sort normally brought by cargo interests claiming loss or damage arising in relation to and measured by reference to the cargo. Included in this category would be claims for physical loss of and damage to cargo. Also included would be claims for financial loss such as, for instance, a fall in the value of a particular cargo. This was the conclusion reached in The Stena Pacifica, which had stood for over 15 years as the only authority specifically on the effect of clause 27(c)(ii) of the Shelltime 4 form.

In the present case, no claim was made for loss of or damage to cargo or loss in connection with cargo. The charterer was claiming damages for loss of use of the vessel. The claim was, therefore, not a cargo claim in the sense understood in the marine market so clause 27(c)(ii) and the time bar did not apply.

Back to Top