Shipping Force v ABS

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DMC/SandT/04/29
Shipping Force Co. Ltd & Marine Managers Ltd, as Owners and Managers of the m/v Sea Trident v. American Bureau of Shipping
Society of Maritime Arbitrators, New York: Louis G Juliano, Chairman, Peter D Clark and Francis M O’Regan, Arbitrators
Thomas L Tisdale and Kevin J Lennon of Tisdale & Lennon LLC, for the Owners and Managers
Michael D Wilson and Gerard W White, of Hill Rivkins & Hayden LLP, for ABS
CLASSIFICATION SOCIETY: PRELIMINARY AND REVISED SURVEY REPORTS: NEGLIGENT MISREPRESENTATION: RELIANCE: NEGLIGENT PERFORMANCE OF CONTRACTUAL DUTIES
Summary
In this case, owners were unsuccessful in pursuing the ship’s classification society for damages allegedly arising from the society amending its preliminary report on the vessel’s annual dry-docking.

Facts
The Sea Trident was a bulk carrier, built in Japan in 1983, and at the relevant time was operating under time charter to Atlantic Bulk Carriers. She was classed by ABS and, on discharge of her inward cargo of coal at Lazaro Cardenas in Mexico, was surveyed there for her annual hull survey by a senior ABS surveyor on 27 April 2000.

The condition of the ship, as found by the surveyor, required her to execute "prompt and thorough repairs", pursuant to ABS Rule I/C.1.3.3. This read:

On April 30, prior to the vessel’s departure from Lazaro Cardenas, the surveyor issued - at the request of the Master - a preliminary report, in which he recommended that certain enumerated frames in holds nos.1 and 5 be repaired to the satisfaction of the attending surveyor and prior to loading of the vessel. These repairs were to be carried out at her next port of call, as there were no repair facilities in Lazaro Cardenas. The surveyor also recommended that, with respect to all frames in holds nos.1, 2 and 5, re-examination, thickness gauging and repairs were to be made prior to crediting the next scheduled dry-docking in June 2000. The surveyor advised the Master that the survey report was subject to possible revision and that the repairs were, in any event, of the "prompt and thorough" type.

A day later, the survey report was revised by the ABS Country Manager for Mexico. The revision required that the further re-examination, thickness gauging and repairs be done at the next port of call, effectively eliminating the delay in compliance contained in the preliminary report. The revised report was faxed to the Owners in Greece on May 3 and a copy of it handed to Owners’ representative on his arrival in Long Beach, California on May 4 to meet the ship.

Despite the recommendations listed in both reports to effect repairs prior to loading the vessel, the Owners loaded her under sub-charter with about 3,900 tons of shredded scrap iron before the completion of repairs. Owners then made various proposals to ABS, to allow the vessel to proceed to China and have permanent repairs done there, or to effect temporary repairs on the West Coast and thereafter to sail to China in ballast for permanent repair there.

These proposals were rejected by ABS, whose surveys at Long Beach had disclosed further deficiencies with the framing falling under the "prompt and thorough repairs" rule. ABS did, however, permit temporary repairs to be done, to enable the vessel to proceed to Portland, Oregon, for permanent repairs. Prior to this, owners were obliged to discharge the cargo. Once at Portland, additional repair costs were incurred, as the yard selected by owners did not have available framing on hand, either in shape or section.

Consequent on these events, owners claimed damages from ABS in the amount of some US$1.742,370, alleging negligent misrepresentation and breach of the warranty of workmanlike performance. The essence of owners’ case was that the ABS surveyor in Lazaro Cardenas had issued an erroneously worded preliminary report, misrepresenting the work required to be done, upon which owners had relied to their detriment. ABS denied the claims, maintaining that its actions were strictly in accordance with its Rules and procedures and asserting its right to insist that there be compliance with its Rules. As the vessel’s classification society, ABS argued that concerns relating to vessel safety should prevail over owners’ countervailing concerns of a commercial nature.

The Award
The tribunal found there was no negligent misrepresentation by ABS in the performance of its surveying procedures and that its actions were in accordance with its Rules and procedures, having due regard for the safety of the vessel.

The panel did not regard the preliminary report as a negligent misrepresentation, holding that the surveyor had told the Master firstly, that the repairs required fell into the "prompt and thorough" category (although this fact was not mentioned in the report.) and secondly, that the report was preliminary and subject to revision by his superior.

The panel held further that owners had failed to prove that it was in reliance on that report that they had directed the vessel to Long Beach and there taken on another cargo. The panel did not accept the evidence of owners’ managing director that, had owners known sooner about the changes made in the preliminary report, they would have abandoned the voyage under the sub-charter and sent the vessel direct to a repair facility in China. The panel further found that owners had not in fact relied on the preliminary report; the Master had been alerted to the need for "prompt and thorough" repairs, the preliminary report had been qualified as subject to revision and the revised report – with its requirement for "prompt and thorough repairs" was in owners’ hands prior to the vessel commencing to load at Long Beach.

Nor did the panel accept that ABS had failed to exercise reasonable care in the discharge of its duties in carrying out the surveys and reporting its findings. In particular, the panel noted that the preliminary report, which was not usually prepared, had been provided at the insistence of the master and that the final report had been made available to owners in timely fashion. A major concern to the panel was the condition of the vessel. In its view, ABS’ refusal to allow owners to opt out of the need for "prompt and thorough" repairs was made "in steadfast and justifiable adherence to its Rules."

The panel concluded that the owners "were the authors of their own misfortune, attempting in every way possible to continue trading a vessel which surveys confirmed was below classification standards and in a condition unfit for her intended service". The panel accordingly ruled that owners’ claim failed.

Each side was ordered to bear its own costs.

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