Serena Navigation v. Dera
DMC Category Rating: Confirmed
This case note is based on an article, written by Alexandra Saxty, Solicitor, that was originally published in Hill Dickinson’s Marine, Trade and Energy Newsletter July 2008
The facts assumed for the purposes of the case were that, following bad weather on the voyage, a small quantity of cargo (about 7 or 12 m/t) was wet damaged by leakages through the vessel’s hatch covers. The amount claimed in respect of this tonnage was USD 1,742.40. An attempt was made to segregate and dispose of the damaged corn. However, there was an issue, assumed in favour of the cargo owner, that some of it was not properly segregated and was discharged together with the sound cargo. Further, up to 250 tonnes had to be discharged by bulldozers and suffered as a result an increased number of broken kernels. Thus, the quantity of cargo said to have been physically damaged prior to or at the time of discharge from the vessel was from 7-12 up to 250 tonnes. This quantity (which was known as the "Conceded Tonnage") was accepted as being damaged cargo and falling within the definition of "goods lost or damaged" under Article IV Rule 5 (a) of the Hague-Visby rules.
However, the cargo owner claimed additional losses amounting to about US$1.5 million which arose as a consequence of the wet damage (the "Consequential Losses") for the following reasons.
As a condition of allowing discharge of cargo from the holds in which wet damage had occurred, the Jordan Silos and Supply General Co required that the cargo be fumigated, chemically treated and then transferred to pre-fumigated and disinfected silos. This operation resulted in an increase in the number of broken kernels and a depreciation in the value of the cargo amounting to US$362,142.
The whole cargo acquired a reputation as a distressed cargo and its sound arrived market price was depressed by US$13 per m/t resulting in a loss of US$571,842.26 and yet further expenses were incurred by the cargo owners as a result of the requirements of Jordan Silos.
Cargo owner’s claim
The carrier disagreed with this interpretation and claimed that, whilst economic loss was recoverable under the Hague-Visby Rules, the words "gross weight of the goods lost or damaged" meant that the amount recoverable in respect of economic loss was, for the purposes of limitation, to be based only on the weight of the goods that were physically lost or physically damaged (emphasis added). As a result, the carrier claimed to be entitled to limit liability by reference to the conceded tonnage only.
The cargo owner submitted that the carrier’s interpretation was wrong, as (1) this would be inconsistent with the acceptance in other parts of the Hague-Visby Rules that economic damage is recoverable and (2) it "flouts business common sense", in circumstances where there is a small amount of physical damage and a large economic loss claim, to limit liability by reference to the weight of the physical damage.
As a result, the carrier was found to be entitled to limit liability in respect of the cargo owner’s claim by reference to the Conceded Tonnage. It was yet to be determined precisely what the quantity of this tonnage was to be.
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