Inter Club Agreement Claims and the meaning of “similar amendment”

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Yes another dispute on the wording of the Inter Club Agreement which is of course designed to reduce disputes!   This time the issue involved the meaning of the words “similar amendment” in Clause 8(b) which of course makes charterers 100% liable for cargo claims arising from the handling of cargo unless the words “and responsibility” are added to clause 8 of the NYPE form or there has been a “similar amendment” making the Master responsible for cargo handling.  If such an amendment has been made then we revert to a prima facie 50/50 apportionment unless the Charterer can prove causative unseaworthiness so as to switch it back to 100% on owners.

However, what is a “similar amendment”?   That was the central issue in the case of Agile Holdings Corporation v Essar Shipping Ltd (“The Maria”) (1)

Very simply put the vessel Maria was chartered for a single trip from Tunisia via Trinidad to India carrying DRI (direct reduced iron).  DRI is pretty nasty stuff – it is reactive and combustible in the presence of water or heat.

On loading at Point Lisas, Trinidad a fire was noted on the loading belt.  The supercargo inspected the holds but he advised that loading should continue regardless of the fire.   On discharge in India, some of the cargo was still on fire! Subsequently, cargo receivers commenced legal proceedings against the ship owners to recover the damage they said that they had sustained due to the damaged condition of the cargo.   In turn, the shipowners commenced proceedings against the charterers and sought a declaration that charterers were obliged to indemnify them under Clause 8(b) of the ICA because the damage clearly arose from the handling of the cargo.

Clause 8(b) of the ICA provides:

(b) Claims in fact arising out of the loading, stowage, lashing, discharge, storage or other handling of cargo: 100% Charterers unless  the words “and responsibility” are added in clause 8 [of the NYPE form] or there is a similar amendment making the Master responsible for cargo handling in which case: 50% Charterers 50% Owner

In this case, clause 8 of the NYPE charter was not amended to include the words “and responsibility”.  Instead it contained the following standard provision, “… Charterers are to load, stow, and trim, tally and discharge the cargo at their expense under the supervision of the Captain…”.  However, Clause 49 of the NYPE charter, stated, “[t]he Stevedores although appointed and paid by Charterers/Shippers/Receivers and or their Agents, to remain under the direction of the Master who will be responsible for proper stowage and unseaworthiness and safety of the vessel…”

At the hearing, the Tribunal agreed that the cause of the cargo claim was the manner in which the cargo had been handled and thus liability fell to be apportioned under clause 8(b) of the ICA.   The Tribunal held that the words used in clause 49 were “a similar amendment”.  So the relevant apportionment was 50/50.

The owners were understandably unhappy and appealed.  On appeal they argued that in order to constitute a “similar amendment” the relevant provision requires a total transfer of responsibility for cargo handling to owners and that a partial transfer of responsibility was insufficient.  The charterers argued that a partial transfer of responsibility would be sufficient providing that the particular aspect of cargo handling that was causative was transferred.

Mr Justice Waksman QC disagreed with the charterers.  His view was that a detailed analysis of which particular cargo handling function was in issue went against the simple and mechanical approach that was intended by those who drafted the ICA.

Accordingly, the judge’s view was that a “similar amendment” is one which has the same effect as the addition of the words “and responsibility” such that it envisages transfer of all aspects of cargo handing back to the owner.

This case once again demonstrates the courts’ willingness to respect the intended function of the ICA, which is to provide a simple knock for knock approach to apportionment of liability between owners and charterers.   This is another important decision on the wording of the ICA. The last such decision was that of the High Court upheld by the Court of Appeal in the Yangtze Xing Hua which was reported on our blog previously.

  1. [2018] EWHC 1055 (Comm)
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