DMC Category Rating: Confirmed

Background
This case related to a number of preliminary issues arising out of a claim brought by Ferryways, a Belgian shipowner/operator against ABP, an English port owner/operator. The claim related to amounts paid by Ferryways (or, more accurately, by their P&I Club) in respect of the death of a Mr Prutskoy, who was Chief Officer on board the Ferryways’ vessel, the "Humber Way". Mr Prutskoy had been supervising cargo operations on board the vessel whilst it was docked at Immingham in October 2005, when he had been hit and killed by a tugmaster operated by an employee of an ABP subcontractor. For the purposes of determining the preliminary issues, it was assumed that the death of Mr Prutskoy had been caused by the negligence of the driver of the tugmaster. Ferryways had paid the amounts in question on the basis that it was the employer of Mr Prutskoy and was accordingly obliged to make the payments under Mr Prutskoy’s contract of employment.

ABP contested the claim on two main grounds: first, that Mr Prutskoy’s employer was not Ferrryways but its crewing manager, Ambra Shipmanagement Ltd of Cyprus; second, that ABP was protected from liability by the terms of its stevedoring contract with Ferryways.

As regards the first, Ferryways had engaged Ambra under a Crew Management Agreement on the standard form of the BIMCO crew management agreement known as ‘Crewman A Cost Plus Fee’. The contract was subject to English law. In it, Ferryways was described as ‘Owner’ and Ambra as ‘Crew Manager’. Part II of Clause 3 of the contract provided that:

"……..the Crew Managers shall carry out the Crew Management Services in respect of the Vessel as agents for and on behalf of the Owners."

Further clauses in the Crew Management contract provided that Ambra credit Ferryways with all discounts and commissions that Ambra obtained in the course of its management services and that Ambra would be fully indemnified by Ferryways against any liabilities it incurred in performing the contract.

Ambra engaged Mr Prutskoy on the terms of a ‘Voyage Contract’. In it, Ambra was described as the ‘Employer’ and Mr Prutskoy as the ‘Employee’. The contract was subject to the law of the vessel’s flag state. Prior to the date of his final engagement, Mr Prutskoy had served some fourteen months on board the "Humber Way".

The contract provided that ‘the Company’ was to liable for the payment of all wages and compensation in the event of the Employee’s death. There then followed elaborate provisions setting out a Grievance Procedure, involving ultimate escalation to ‘the Company’, a Code of Conduct and Company Policy, in particular, its Safety and Environmental Protection Policy.

Oral evidence from an employee of Ambra established that Ferryways got involved with the selection of junior officers and was responsible for the selection of the Master, Chief Officer, Chief and Second Engineer.

The stevedoring agreement between Ferryways and ABP incorporated the latter’s Standard Terminal Operator’s and Stevedore’s Conditions. These provided that ABP should perform its contracted services with ‘reasonable care and skill’. Clause 9 provided that ABP should have no liability for any loss suffered by Ferryways of an ‘indirect or consequential nature including without limitation:

"vi) the liabilities of the Customer to any other party"

Clause 10 provided that all claims of whatsoever nature must be advised to ABP within fourteen days of the event giving rise to the claim.

Judgment
1. Had Ferryways suffered a loss as a result of the payments it had made in respect of the death of Mr Prutskoy? The answer depended on whether or not Ferryways was a party to the Voyage Contract, under which Ambra had employed Mr Prutskoy. The judge noted in passing that both parties had relied on the commentary that BIMCO had provided on the two standard forms of crew management agreements it had drafted. This read in part as follows:

 It said that in Crewman A "the crew managers act as agents for and on behalf of the owners and in Crewman B the crew managers employ the     crew and act in their own name…. "The ‘agency’ nature of Crewman A implies that the owners are the employers of the crew."

He also referred to a passage from the judgment of Lord Lloyd of Berwick in the case of Siu v. Eastern Insurance Co. Ltd. [1994] 2 AC 199, at p206/207, where he said:

Nowhere in the contract of employment, however, was it stated that Ferryways was to be the Employer, nor that Ferryways was the principal of Ambra. If Ferryways was to take the benefit of the employment contract it must therefore be as an undisclosed principal, that is, a principal whose existence is not disclosed in the contract of employment. The judge then went on to hold that Ferryways was indeed, an undisclosed principal to the employment contract and therefore exposed to the compensation obligations contained in the contract. Factors on which he relied were the following:

a) there was no express provision in the contract that Ambra was the only person to have the rights and obligations of an employer under the contract;

b) the applicable law of the contract was the law of the vessel’s flag; this was more suggestive of the shipowner/operator being entitled to the rights and obligations of the employer, rather than Ambra.

c) the Grievance Procedure, the Code of Conduct and Company Policy clauses in the contract all suggested that it was envisaged that an entity other than Ambra would have the rights and obligations of the employer under the contract; "the obvious contender is the owner or operator of the ship on which the employee agrees to serve";

d) by the time of the accident, Mr Prutskoy knew that the vessel on which he was serving was owned or operated by Ferryways and he was willing to serve on ships in their fleet.

On this basis, Ferryways, in meeting the claim of Mr Prutskoy’s next of kin, had simply discharged a liability falling directly upon them under the employment contract. Had it been Ambra that was liable to the next of kin, then, the judge held, Ambra would have had a right to indemnity from Ferryways under the Crew Management Agreement.


2. Could ABP rely on the terms of the stevedoring contract to avoid liability? The first argument advanced by ABP under this heading was that the exclusion of "indirect and consequential loss, including without limitation…

"vi) the liabilities of the Customer to any other party"

applied to this case, since Ferryways were in effect claiming from ABP the amounts paid in settlement of the claim brought against them by Mr Prutskoy. But these words, the judge held, were not effective to exclude the claim, since it was the ‘direct and natural result’ of ABP’s (subcontractor’s) breach of contract. He said, at para.84:

"In my judgment those words ["including without limitation"] do not provide the sort of clear indication which is necessary for the Defendant’s argument. The parties are merely identifying the type of losses (without limitation) which can fall within the exemption clause so long as the losses meet the prior requirement that they "of an indirect or consequential nature." Had the parties intended that liability for losses which were the direct and natural result of the breach could be excluded they would have hardly have described such losses as "indirect or consequential".

The judge rejected an alternative argument advanced by Ferryways to the effect that they could rely on a further provision in the Stevedoring contract which provided:

"(e) Nothing in this Clause [9] or in Clause 10 shall exclude or limit the liability of the Company for death or personal injury resulting from the Company’s negligence."

Here the judge preferred the position adopted by ABP, namely that these words applied only to its liability to pay damages to the estate of a deceased person who has died as a result of ABP’s negligence. They did not apply to a claim for indemnity from a Customer in respect of the compensation that the Customer had paid to a third party who had, as in this case, been killed by the negligence of (attributed to) ABP.

As for the notice provisions, the judge held that the notice given on the day following the accident was sufficient compliance with Clause 10. He also held that these provisions, being part of ABP’s standard terms and conditions, were subject to the Unfair Contract Terms Act 1977 but were valid in that they were ‘reasonable’. He said, at para.93

"However, I am persuaded that the standard terms and conditions were reasonable. The Defendant wished to attract the Claimant to its terminal and thus the stevedoring agreement was freely negotiated between the parties. The Claimant had a full opportunity to consider the standard terms and suggest amendments to them (though in the event chose not to do so). The fact that, in addition to the stevedoring agreement, a side letter was signed shows that there was a real negotiation between the parties. The Claimant had every opportunity to insure against losses in respect of which the Defendant did not accept liability and availed itself of that opportunity, atleast to the extent that the Club provided cover."

The key preliminary issues were, therefore, determined in Ferryways’ favour.

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