DMC Category Rating: Confirmed

The matters in issue were:

• What caused the vessel to suffer damage? 
• Was the damage caused by a steel coil on the dock bottom at Bird Port?

If the cause of the damage was proven on the facts:

• What was the standard of care owed by Bird Port?
• Had the servants and agents of Bird Port been negligent, by failing properly to discharge the duty of care owed to the shipowner?

Further:

• What was the correct charter rate upon which to base the quantification of the loss of freight/hire?
• Was it possible for the shipowner to recover the superintendent costs for dealing with the damage caused to the vessel?
• Was it possible to recover an additional 1 per cent "agency" fee, based upon the proven claim, as is the case for collisions in Admiralty practice, which would represent the disruption of business and the expenditure of management time following the vessel being damaged, or was it necessary instead to prove the actual loss?

Judgment
Causation
The judge held that, on the balance of probabilities, the claimant shipowner had established that the bottom damage to the Charlotte C was caused by a steel coil at the base of the dock at Bird Port, Newport, and that this steel coil had been subsequently discovered and removed by the defendant before the date on which the dock was inspected by the claimant shipowner’s surveyors.

Duty and Standard of Care
There was no dispute that the operator of a NAABSA ("Not Always Afloat But Safe Aground") berth should have a system for ensuring that vessels using the berth can do so without suffering damage. The only requirement of the berth at Bird Port was that it was kept free of obstructions, so that vessels could use it safely.

The duty upon the defendant required a regular system of dredging and inspection. It was not a proper discharge of that duty for the defendant to dredge only when operational requirements permitted. Such a practice meant that the busier the berth was, the less dredging would be done. This would plainly be an inadequate system in circumstances where the depth of mud or silt in the berth might be as much as 1.7m, so that dangerous objects could be hidden in the sediment.

The defendant’s expert’s report indicated that there was a need to dredge on a regular basis in order to ensure that there were no substantial obstructions on the bottom. Indeed this was so important that it should interrupt the commercial operation of the berth. The submission of the defendant, that it was unreasonable to expect the berth to be cleaned out more than once or perhaps twice a year, was rejected. The expert’s report indicated that the berth ought to be cleaned out every two or three weeks.

Safe operation of the berth required that the defendant and users of the berth could be confident that the sediment in the berth did not hide an obstruction capable of damaging a vessel using the berth. This could only be achieved by a daily system of careful inspection and regular dredging. This daily system of inspection had to be thorough. An inspection merely from the dockside could not be enough, as it could not ensure that objects in the mud were discovered. A system involving the use of a small boat to make a physical or sonar probe of the mud or of a cage attached to the crane, enabling two people to probe the mud, would have been thorough and effective.

Quantum
Loss of Freight
In calculating the shipowner’s loss of profit, the relevant voyage on which to base the charter rate was the voyage which the vessel was engaged upon when the incident happened and the loss of profit occurred. The rate had also to take into account the fuel costs and other expenses incurred in order to earn the freight. It was not appropriate to take into account the daily charter rate on the next voyage, which was greater than on the voyage in which the incident occurred –see the judgment of the Court of Appeal in The Soya [1956] 1 Lloyd’s Rep 557 - especially when there had been no opportunity to explore the reason for the higher rate.

Superintendent’s Costs
The shipowners relied upon the decision of Langton J in The Gudrun Maersk (1941) LlLRep 251 as authority for the proposition that a sum can be claimed as damages in respect of the wages paid to an employed superintendent. The port owners relied upon the decision of Stanley Burnton J in Admiral Management Services v Para-Protect Europe Limited [2002] 1 WLR 2722 in support of the proposition that a claim for the value of employee time or work is irrecoverable in the absence of expenditure or revenue loss.

In The Gudrun Maersk, an extra amount was allowed for the employed superintendent, as he performed a very large amount of work outside his normal duties, though Langton J expressly said that he could not lay down a general principle. The judge here was also unsure that any general principle could be extracted from The Gudrun Maersk.

In Admiral v Para-Protect the question of recovering damages for work done by an employee was considered in some detail. Stanley Burnton J held that it could be recovered where it was an expenditure which would not otherwise have been incurred, for example, where additional staff were employed or overtime was paid. He further held that it could be recovered where revenue had been lost as a result of the employee being unavailable to carry out revenue producing work. As it might be difficult to quantify any loss of revenue, the cost of the employee time might be taken as an approximation for the loss of revenue. But Stanley Burnton J held that claims for work done irrespective of any expenditure loss or loss of revenue were not recoverable in respect of salaries paid to the claimants’ employees during the period when they carried out work made necessary by the defendants’ tort, if those salaries would have been paid in any event.

On this basis, the judge held that the sums for meals and subsistence and for travel expenses were recoverable as expenditure loss. However, the sum claimed for the superintendent’s time could not be claimed as expenditure loss, because his wages as an employee would have been paid in any event.

On the facts, the superintendent involved in the incident was not usually involved with the Charlotte C. This incident took the superintendent away from his usual work. The work of the superintendent was likely to be of benefit to the claimant, so that the claimant lost that benefit while the superintendent was engaged elsewhere. However, it would probably be very difficult to identify the revenue which a superintendent would earn for his employer by his work as superintendent. This case seemed, therefore, to be one of those foreshadowed by Admiral v Para-Protect; accordingly, the judge allowed the claimed sum in respect of the superintendent’s services.

"Agency" Fee
The shipowner relied upon the decision of Clarke J in The Kumanovo [1998] 2 Lloyd’s Rep 301 to claim 1% of the proven claim as a standard allowance in collision cases for disruption to business and expenditure of management time. The port owners accepted this practice, but argued that this was "crude and speculative" where lost time and additional expenses could easily be recorded and should be limited to collision cases.

The judge considered that it was not possible to distinguish a case of contact with a submerged object with that of a collision, where the Admiralty practice referred to by Clarke J had been applied. As a matter of principle the cost of management time spent on dealing with the consequences of a collision could be recovered under the head of expenditure loss or revenue loss. The judge also did not consider that management time would be properly recoverable as such unless it was expenditure or revenue loss, despite Forbes J stating that it was a recoverable head of loss in Tate and Lyle Distribution v. GLC [1982] 1 WLR 149.

In this case it was obvious that the shipowner’s managers had expended time in dealing with the consequences of the Bird Port incident. It was more likely than not that, had the accident not occurred, the managers would have focused upon revenue generating activities. In general principle, the claimant must prove its loss, by adducing evidence of the loss. In this case no such evidence was adduced. It was, therefore, arguable as a matter of principle that the claimant’s claim should fail due to its failure to prove the quantum of the loss.

Instead of proving the loss, the shipowner sought to rely upon the Admiralty practice in collisions. As Clarke J had pointed out in The Kumanovo, the exercise of proving the actual loss would be likely to involve further cost and disruption. In the present case, where the sum was £1,565, there was undoubted force in that observation. The practice was also consistent with the principle of proportionality, which is now a feature of modern day court practice. It was more likely than not that the diversion caused to the shipowner’s managers by the incident was time that would otherwise have been used in profit generating activities. Even though it might be possible to record management time which was lost, it was probably difficult to prove how much profit was lost by that diversion. So long as there was no risk of the practice producing an unjust result, it seemed appropriate to adopt it as an approximation of the revenue loss caused by the disruption to the shipowner’s business arising from the accident.

Comment
The judge has provided valuable practical insight into the frequency and thoroughness required for the inspection and dredging of NAABSA berths, to enable berth operators adequately to discharge the duty of care they owe to berth users. Although compliance with this standard does not necessarily guarantee the discharge of the duty in all cases, as this is dependent upon the factual matrix surrounding the operation of a particular berth and its characteristics, it is a good aid to identifying the management and control systems that ought to be implemented.

As can be noted, the recovery of the superintendent’s costs and the applicability of an "agency" fee are somewhat entwined. The judgment indicates the potential difficulties of first identifying and then separating revenue loss and expenditure loss into watertight categories, due to the surrounding factual matrix. In allowing the claim for agency fee at 1% of proven quantum, by applying the Admiralty practice for collisions, and the recovery of the superintendent’s wages to approximate lost revenue-generating activities – in recognition of the difficulties of quantification and the impracticality of recording the use of all management time and costs – the judge has created a most welcome and practical cost-saving ‘shorthand’ for quantifying damages where relatively small sums are involved.

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