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Cargo liabilities under the New York produce exchange time charter and the Inter-Club Agreement





Appendix 7B


Inter-Club New York Produce Exchange Agreement (1996) (as amended September 2011)


This Agreement, the Inter-Club New York Produce Exchange Agreement 1996 (as amended September 2011) (the Agreement),is made on 1st September 19962011 between the P&I Clubs being members of The International Group of P&I Associations (hereafter referred to as ‘the Clubs’). this Agreement replaces amends the Inter-Club New York Produce Exchange Agreement 1984 1996 in respect of all charterparties specified in Clause (1) hereof and shall continue in force until varied or terminated. Any variation to be effective must be approved in writing by all the Clubs but it is open to any Club to withdraw from the Agreement on giving to all the other Clubs not less than three months’ written notice thereof, such withdrawal to take effect at the expiration of that period. After the expiry of such notice, the Agreement shall nevertheless continue as between all the Clubs, other than the Club giving such notice who shall remain bound by and be entitled to the benefit of this Agreement in respect of all cargo claims arising out of charterparties commenced prior to the expiration of such notice.


The Clubs will recommend to their Members without qualification that their Members adopt this Agreement for the purpose of apportioning liability for claims in respect of cargo which arise under, out of or in connection with all charterparties on the New York Produce Exchange Form 1946 or 1993 or Asbatime Form 1981 (or any subsequent amendment of such forms), whether or not this Agreement has been incorporated into such charterparties.


Scope of application



  1. (1) This Agreement applies to any charterparty which is entered into after the date hereof on the New York Produce Exchange Form 1946 or 1993 or Asbatime Form 1981 (or any subsequent amendment of such forms).
  2. (2) The terms of this Agreement shall apply notwithstanding anything to the contrary in any other provision of the charterparty; in particular the provisions of Clause (6) (time bar) shall apply notwithstanding any provision of the charterparty or rule of law to the contrary.
  3. (3) For the purposes of this Agreement, cargo claim(s) mean claims for loss, damage, shortage (including slackage, ullage or pilferage), overcarriage of or delay to cargo including customs dues or fines in respect of such loss, damage, shortage, overcarriage or delay and include:

    1. (a) any legal costs claimed by the original person making any such claim;
    2. (b) any interest claimed by the original person making any such claim;
    3. (c) all legal, Club correspondents’ and experts’ costs reasonably incurred in the defence of or in the settlement of the claim made by the original person, but shall not include any costs of whatsoever nature incurred in making a claim under this Agreement or in seeking an indemnity under the charterparty.

  4. (4) Apportionment under this Agreement shall only be applied to cargo claims where:

    1. (a) the claim was made under a contract of carriage, whatever its form,

      1. (i)   which was authorised under the charterparty; or
      2. (ii)  which would have been authorised under the charterparty but for the inclusion in that contract of carriage of Through Transport or Combined Transport provisions, provided that
      3. (iii)  in the case of contracts of carriage containing Through Transport or Combined Transport provisions (whether falling within (i) or (ii) above) the loss, damage, shortage, overcarriage or delay occurred after commencement of the loading of the cargo onto the chartered vessel and prior to completion of its discharge from that vessel (the burden of proof being on the Charterer to establish that the loss, damage, shortage, overcarriage or delay did or did not so occur); and
      4. (iv)  the contract of carriage (or that part of the transit that comprised carriage on the chartered vessel) incorporated terms no less favourable to the carrier than the Hague or Hague Visby Rules, or, when compulsorily applicable by operation of law to the contract of carriage, the Hamburg Rules or any national law giving effect thereto; and

    2. (b) the cargo responsibility clauses in the charterparty have not been materially amended. A material amendment is one which makes the liability, as between Owners and Charterers, for cargo claims clear. In particular, it is agreed solely for the purposes of this Agreement:

      1. (i)   that the addition of the words ‘and responsibility’ in Clause 8 of the New York Produce Exchange Form 1946 or 1993 or Clause 8 of the Asbatime Form 1981, or any similar amendment of the charterparty making the Master responsible for cargo handling, is not a material amendment; and
      2. (ii)  that if the words ‘cargo claims’ are added to the second sentence of Clause 26 of the New York Produce Exchange Form 1946 or 1993 or Clause 25 of the Asbatime Form 1981, apportionment under this Agreement shall not be applied under any circumstances even if the charterparty is made subject to the terms of this Agreement; and

    3. (c)  the claim has been properly settled or compromised and paid.

  5. (5)  This Agreement applies regardless of legal forum or place of arbitration specified in the charterparty and regardless of any incorporation of the Hague, Hague Visby Rules or Hamburg Rules therein.

Time bar



  1. (6) Recovery under this Agreement by an Owner or Charterer shall be deemed to be waived and absolutely barred unless written notification of the cargo claim has been given to the other party to the charterparty within 24 months of the date of delivery of the cargo or the date the cargo should have been delivered, save that, where the Hamburg Rules or any national legislation giving effect thereto are compulsorily applicable by operation of law to the contract of carriage or to that part of the transit that comprised carriage on the chartered vessel, the period shall be 36 months. Such notification shall if possible include details of the contract of carriage, the nature of the claim and the amount claimed.

The apportionment



  1. (7) The amount of any cargo claim to be apportioned under this Agreement shall be the amount in fact borne by the party to the charterparty seeking apportionment, regardless of whether that claim may be or has been apportioned by application of this Agreement to another charterparty.
  2. (8) Cargo claims shall be apportioned as follows:

    1. (a) Claims in fact arising out of unseaworthiness and/or error or fault in navigation or management of the vessel:

      100% Owners


      save where the Owner proves that the unseaworthiness was caused by the loading, stowage, lashing, discharge or other handling of the cargo, in which case the claim shall be apportioned under sub-Clause (b).


    2. (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 or there is a similar amendment making the Master responsible for cargo handling in which case:


      50% Charterers


      50% Owners


      save where the Charterer proves that the failure properly to load, stow, lash, discharge or handle the cargo was caused by the unseaworthiness of the vessel in which case:


      100% Owners



    3. (c) Subject to (a) and (b) above, claims for shortage or overcarriage:

      50% Charterers


      50% Owners


      unless there is clear and irrefutable evidence that the claim arose out of pilferage or act or neglect by one or the other (including their servants or sub-contractors) in which case that party shall then bear 100% of the claim.


    4. (d) All other cargo claims whatsoever (including claims for delay to cargo):

      50% Charterers


      50% Owners


      unless there is clear and irrefutable evidence that the claim arose out of the act or neglect of the one or the other (including their servants or sub-contractors) in which case that party shall then bear 100% of the claim.


Security



  1. (9)If a party to the charterparty provides security to a person making a Cargo Claim, that party shall be entitled upon demand to acceptable security for an equivalent amount in respect of that Cargo Claim from the other party to the charterparty, regardless of whether a right to apportionment between the parties to the charterparty has arisen under this Agreement provided that:

    1. (a)written notification of the Cargo Claim has been given by the party demanding security to the other party to the charterparty within the relevant period specified in clause (6); and
    2. (b)the party demanding such security reciprocates by providing acceptable security for an equivalent amount to the other party to the charterparty in respect of the Cargo Claim if requested to do so.

Governing law



  1. (910) This Agreement shall be subject to English Law and the exclusive Jurisdiction of the English Courts, unless it is incorporated into the charterparty (or the settlement of claims in respect of cargo under the charterparty is made subject to this Agreement), in which case it shall be subject to the law and jurisdiction provisions governing the charterparty.


* Director, Fednav Ltd, Montreal.


1Sea & Land Securities v William Dickinson & Co (1942) 72 Ll L Rep 159, 162.


2This wording evidently goes back to the 1913 edition, and beyond. An alternative, less ambiguous, form of words is found in some late nineteenth-century charterparties: for example, the 1887 charter in Hogarth v Miller (1889) 16 R 599 reads: ‘That the Owners shall not be responsible for damage caused by improper stowage, the stevedore being appointed and paid by the Charterers.’ Compare this too: ‘That the Owners should not be responsible for damage to, or claims on, cargo caused by bad stowage, the stevedores being employed by the Charterers.’ (Burrell v Green [1913] 1 KB 293). A voyage charter from 1861 for the Crest of the Wave also has a clear division of responsibility: ‘The Master to employ at the Ship’s expense a regular Stivader with a sufficient number of men for the purpose of stowing the Cargo with dispatch, and the Charterers to appoint the said Stivader, but he being under the direction of the Master, the Charterers are not to be responsible for improper stowage.’ And so too the time charter in issue in Royal Mail v Macintyre (1911) 16 Com Cas 231: ‘The stevedore shall be employed and paid by the Charterers, but this shall not relieve the Owners from responsibility as to proper stowage.’


3Characterised by Lord Donaldson MR as ‘notoriously imprecise’ (The Kelaniya [1989] 1 Lloyd’s Rep 30, at 32). The 1981 revision, known as ASBATIME, was to the same effect: ‘… and Charterers are to perform all cargo handling at their expense under the supervision of the Captain …’. The 1993 revision of the NYPE form (NYPE 93) expanded this to read: ‘… and the Charterers shall perform all cargo handling, including but not limited to loading, stowing, trimming, lashing, securing, dunnaging, unlashing, discharging and tallying, at their risk and expense, under the supervision of the Master’. And this latter was carried over verbatim to the 2015 revision (NYPE 2015).


4As in The Argonaut [1985] 2 Lloyd’s Rep 216.


5As in CSAV v ER Hamburg Schiffahrt GmbH [2006] EWHC 483 (Comm); [2006] 2 Lloyd’s Rep 66.


6As in The Flintermar [2005] EWCA Civ 17; [2005] 1 Lloyd’s Rep 409.


7As in The Fantasy [1991] 1 Lloyd’s Rep 235 (CA); The Darya Tara [1997] 1 Lloyd’s Rep 42; The Imvros [1999] 1 Lloyd’s Rep 848; and The Socol 3 [2010] EWHC 777 (Comm); [2010] 2 Lloyd’s Rep 221.


8Court Line Ltd v Canadian Transport Co Ltd (1940) 67 Ll L Rep 161, referred to below as ‘Court Line.’


9‘There was no doubt that the damage was due to improper stowage, but beyond that there was no finding as to how the damage was caused. It was suggested before the arbitrator by Counsel for the shipowners that it was caused by stowing unseasoned timber on top of the grain, but Counsel for the Charterers said that he had no instructions upon that point and there was no finding by the arbitrator as to the nature of the improper stowage.’ (Viscount Maugham at (1940) 67 Ll L Rep 161, 166). Lord Atkin drily observed: ‘The special case is particularly niggardly of facts … None of these particulars is in fact essential for determination of the case; but it is unusual to have to decide a commercial case such as this without being able to satisfy one’s ingrained curiosity about them; and the learned arbitrator may be congratulated upon having achieved a degree of abstraction which is certainly rare and perhaps admirable.’ (Ibid, at 165)


10Both the judge and the Court of Appeal seem to have treated this as fairly obvious, paying more attention to the additional wording extending to the Charterer the benefit of the owner’s P&I cover ‘as far as club rules allow.’ ‘There is only one other minor matter upon which I desire to add one word, and that is this. It was contended that the clause which says that ‘Charterers are to load, stow and trim the cargo at their expense under the supervision of the captain’ was a clause which left the obligation of stowage, as between ship and Charterer, solely with the ship … but in my opinion it is an erroneous argument.’ (see Scott LJ at (1939) 64 Ll L Rep 57, 65).


11(1940) 67 Ll L Rep 161, 172. Cf Viscount Maugham at 166: ‘[T]he reservation of the right of the captain to supervise, a right which in my opinion would have existed even if not expressly reserved, has no effect whatever in relieving the Charterers of their primary duty to stow safely; any more than the stipulation that a builder in a building contract should build under the supervision of the architect relieves the builder from duly performing the terms of his contract.’


12The Imvros [1999] 1 Lloyd’s Rep 848, 851 (Langley J).


13‘[T]o the extent that the Master exercises supervision and limits the Charterers’ control of the stowage, the Charterers’ liability will be limited in a corresponding degree.’ ((1940) 67 Ll L Rep 161, per Lord Wright at 169). See too Lord Atkin at 166 (‘If it could be proved by the Charterers that the bad stowage was caused only by the captain’s orders, and that their own proposed stowage would have caused no damage no doubt that might enable them to escape liability’); and Lord Porter at 172 (‘It might also be that if it were proved that the Master had exercised his rights of supervision and intervened in the stowage, again the responsibility would be his and not the Charterers’).


14‘It may indeed be that in certain cases as, e.g., where the stability of the ship is concerned, the Master would be responsible for unseaworthiness of the ship and the stevedore would not. But in such cases I think that any liability which could be established would be due to the fact that the Master would be expected to know what method of stowage would affect his ship’s stability and what would not, whereas the stevedores would not possess any such knowledge.’ (Lord Porter at (1940) 67 Ll L Rep 161, 172).


15The Elpa [2001] 2 Lloyd’s Rep 596 at [17] (Morison J).


16The Strathnewton [1982] 2 Lloyd’s Rep 296, 298.


17See, e.g., the 1966 charter in The H.R. Macmillan [1973] 1 Lloyd’s Rep 27.


18Or, more precisely, perhaps, to make it clear that it was never to be transferred to the Charterer in the first place.


19The Ciechocinek [1976] 1 Lloyd’s Rep 489, 497 (Ormerod LJ). The clause in question read: ‘Dunnaging and stowage instructions given by the Charterers to be carefully followed, but to be executed under the supervision of the Master and he is to remain responsible for proper stowage and dunnaging.’


20The Alexandros P [1986] 1 Lloyd’s Rep 421, 424 (Steyn J).


21A.B. Marintrans v Comet Shipping [1985] 1 Lloyd’s Rep 568. Here, the additional provision referred to in the previous paragraph was cl 32.


22[1985] 1 Lloyd’s Rep 568, 577.


23[1985] 1 Lloyd’s Rep 568, 575. In effect, this is the mirror image of the first qualification in Court Line: see fn.13, above. The possible application of the Law Reform (Contributory Negligence) Act 1945 should not be an issue in relation to indemnity claims for liabilities to third party cargo (see T. Coghlin et al.: Time Charters (7th edn, 2014) (hereafter Time Charters), paras 20.37 ff ).


24Mediterranean Shipping Co SA v Alianca Bay Shipping Co [1985] 2 Lloyd’s Rep 216.


25[1985] 2 Lloyd’s Rep 216, 224.


26Alexandros Shipping Co of Piraeus v Mediterranean Shipping Co SA [1986] 1 Lloyd’s Rep 421.


27[1986] 1 Lloyd’s Rep 421, 424. However, in The Clipper São Luis, where cl 8 also included ‘and responsibility,’ David Steel J was prepared to imply a term to the effect that the stevedores appointed by the Charterer should be competent. ‘It is one thing to supervise,’ he said, ‘quite another to train’ (Macieo Shipping Ltd v Clipper Shipping Lines Ltd [2000] 1 Lloyd’s Rep 645 at [24]). Cf too Mikkelson v Arcos (1925) 42 TLR 2.


28CHZ ‘Rolimpex’ v Eftavrysses Compañía Naviera [1986] 2 Lloyd’s Rep 586.


29Ibid, at 591.


30Transocean Liners Reederei GmbH v Euxine Shipping Co Ltd [1999] 1 Lloyd’s Rep 848.


31As codified in the IMO Code of Safe Practice for Ships Carrying Timber Deck Cargoes.


32See fn.36, below.


33[1999] 1 Lloyd’s Rep 848, 851.


34See text at fn.29, above.


35[1999] 1 Lloyd’s Rep 848, 852. It is perhaps worth noting the precise language used in this context (emphasis added). ‘It might also be that if it were proved that the Master had exercised his rights of supervision and intervened in the stowage, again the responsibility would be his and not the Charterers’ (Lord Porter at 172); ‘If it could be proved by the Charterers that the bad stowage was caused only by the captain’s orders, and that their own proposed stowage would have caused no damage no doubt that might enable them to escape liability’ (Lord Atkin at 166); ‘It is also important to bear in mind that in the present case there is no finding of unseaworthiness which might have given rise to a duty on the part of the Master to intervene’ (Steyn J in The Panaghia Tinnou at 591).


36Clause 24 having been deleted, so that the only express reference to seaworthiness was the initial warranty set out at line 21: ‘Vessel on her delivery to be … tight, staunch, strong and in every way fitted for the service.’


37[2006] EWHC 483 (Comm); [2006] 2 Lloyd’s Rep 66, referred to below as ‘ER Hamburg’.


38The owner’s claim was for US$63 million, the Charterer’s counterclaim for US$12 million. A subsidiary issue was whether, assuming that the ship had heated the bunker tank beyond the temperature strictly required for pumping the contents, this was an ‘act neglect or default in the management of the vessel’. The tribunal found that it was, and the judge held that this was strictly a matter of fact, the Charterer’s appeal on this point being quite hopeless. In the subsequent action between the Time Charterer and the shipper, Christopher Clarke J agreed: ‘The heating of the cargo was, however an “act, neglect or default in the management of the ship” … The arbitrators so held; and, in my opinion, rightly so … Heating of bunker oil for transfer to the engine room was, in their view, with which I agree, “patently” something done as part of the running of the ship’ (see CSAV v Sinochem [2009] EWHC 1880 (Comm); [2010] 1 Lloyd’s Rep 1, at [372]).


39The vessel had apparently been built for CSAV, which had sold it to the Owners and time-chartered it back. The Charterer was thus well informed as to its design and lay-out.


40Or, alternatively, there was nothing in the charter which achieved a clear and effective transfer to the Charterer of the owner’s common law responsibility for stowage.


41[2006] EWHC 483 (Comm); [2006] 2 Lloyd’s Rep 66 at [41]. Morison J added this: ‘[T]here is no suggestion at all that the question of the relationship between stowage and seaworthiness in a contract such as this was not in the minds of the members of the House, as can be seen from Lord Wright’s speech and the passage relating to safety in Lord Atkin’s speech. A clear distinction was drawn between an entitlement to supervise on the one hand and a duty to do so (owed to the Charterers) on the other. An owner might be liable under a bill of lading to a cargo owner if the stowage was such as to render the vessel unseaworthy and the Owners were guilty of a lack of due diligence in “looking after” the vessel and the goods, but, as Lord Wright explained, the effect of clause 8 was to transfer that responsibility to the Charterers from whom the Owners would be entitled to an indemnity’ ([2006] EWHC 483 (Comm); [2006] 2 Lloyd’s Rep 66, at [42]). For an informed discussion of this decision, see J. Russell, Bad stowage, unseaworthiness and clause 8 of the NYPE charter (LSLC lecture 21 November 2007: at time of writing, accessible by Googling: jeremy russell london shipping law centre bad stowage)


42Curiously, perhaps, Morison J did not mention Neill LJ’s remark in The Shinjitsu Maru, referring to the Master’s responsibility under cl 8 and his overall responsibility to ensure that the ship was seaworthy: see text at fn.22, above.


43[2006] EWHC 483 (Comm); [2006] 2 Lloyd’s Rep 66 at [53].


44See, e.g., S. Baughen, ‘Problems with Deck Cargo’ [2000] LMCLQ 295; S. Baughen, ‘Bad Stowage or Unseaworthiness?’ [2007] LMCLQ 1.


45In this context, the suggestion has been made – fanciful or offensive, depending on the reader’s standpoint – that, where the lives of the crew are at stake, it is unacceptable for the owner to adopt a laissez-faire attitude, relying on its indemnity in allowing the vessel to sail with a stow which imperils its safety. One must suppose that the prime motivation of the officers who will sail with the vessel is unlikely to be the potential right of the owner to the Charterer’s indemnity following its loss: this sort of consideration was, after all, the justification for the nineteenth-century exclusion of their act, neglect or default in the navigation or management of the ship, subsequently carried over to the Hague Rules.


46Elder Dempster & Co Ltd v Paterson Zochonis & Co [1924] AC 522, 561–562; (1924) 18 Ll L Rep 319, 332 (Lord Sumner).


47As the owner pointed out in ER Hamburg: ‘It is not necessarily an easy question to decide whether the quality of the stowage or lashings is such as to render the vessel unseaworthy or not. When is the line between the two crossed? If the Charterers’ arguments are right, effectively Owners would have to take on responsibility for the loading of their vessel, which would have the effect that their contractually agreed allocation of responsibility [sc. clause 8 being unamended] would be meaningless.’ ([2006] EWHC 483 (Comm); [2006] 2 Lloyd’s Rep 66, at [34]). Morison J agreed: ‘Any construction of the contract which had that effect should be resisted because in reality no owner could safely and properly leave the stowage to the Charterers’ (Ibid, at [49]).


48As Baughen at [2007] LMCLQ 1 fairly acknowledges (see fn.44, above), Article III.8 having no mandatory effect under the charter.


49After all, it would surely be surprising if the House of Lords, in considering what circumstances might reverse the effect of the unamended clause 8, did not have wit enough to envisage the situation where the stowage was so bad that it rendered the vessel itself unseaworthy.


50Time Charters, (7th edn), para 20.14.


51See Nichimen v MV Farland, 462 F.2d 319 (1972); Fernandez v Chios Shipping, 458 F Supp 821 (1976); Duferco v Ocean Wide Shipping Corp, 210 F Supp 2d 256 (2001). In Nichimen, Friendly CJ had dealt with the issue in rather clear terms (at [49]f): ‘[The Charterer] appears to make two arguments: (1) that in exercise of the Captain’s supervisory responsibilities, he and his mates participated in the stowage of the coils to such an extent as to render the owner primarily liable; and (2) that in performance of the owner’s responsibility for the seaworthiness of the vessel, the Captain was obligated to correct any improper stowage where, as is alleged to have been the case here, such improper stowage threatened the seaworthiness and safety of the vessel … At first impression, [the Charterer’s second] argument is not without attraction. Under the time charter, the owner bears continuing responsibility for the seaworthiness of the vessel … It might seem reasonable then that the Captain’s failure to correct improper stowage of cargo which poses a threat to the safety of the vessel, should it become unstowed, is the owner’s responsibility. It must be remembered, however, that the only issue here is primary liability for cargo damage. In this respect, the position urged by [the Charterer] would drain too much meaning from clause 8’s delegation of responsibility for the cargo to the Charterer. Many heavy items of cargo can threaten the safety or stability of a ship if they become loose; serious threats to seaworthiness also may be posed by cargo that may cause fire or explosion unless properly stowed. To hold the shipowner primarily responsible in all such cases would effectively undermine the Charterer’s obligation under clause 8. The Charterer’s prime responsibility for loading and stowage is not destroyed by the qualification that this shall be “under the supervision of the Captain,” a phrase doubtless intended to make plain the Master’s right to veto a plan that might imperil the seaworthiness of the vessel … not to impose on him a duty, as the owner’s agent, to supervise the Charterer’s stow.’


52[2006] EWHC 483 (Comm); [2006] 2 Lloyd’s Rep 66, at [53]. The authors of Time Charters comment (para 20.10): ‘Morison J’s reasoning has been criticised by Baughen in [2007] LMCLQ 1, but it seems consistent with the underlying time charter bargain.’ While it is clear that the owner’s Article III.1 obligation as to seaworthiness under the contract of carriage cannot be delegated or transferred to another, that does not mean that the owner may not claim indemnity under the terms, express or implied, of the time charter – just as the owner of the Muncaster Castle would not necessarily be barred from claiming against the ship-repairer for the negligence of its employee in failing to tighten up the inspection cover (Riverstone Meat Co Ltd v Lancashire Shipping Co Ltd [1961] AC 807; [1961] 1 Lloyd’s Rep 57).


53The Charterer’s case seems to have evolved during the proceedings: the arbitrators characterised its attempt to distinguish The Imvros as ‘an attempt to introduce an unpleaded case on unseaworthiness by the back door’.


54Cf Lord Hobhouse in The Hill Harmony [2001] 1 Lloyd’s Rep 147, 160 (emphasis added) (‘The Master remains responsible for the safety of the vessel, her crew and cargo. If an order is given, compliance with which exposes the vessel to a risk which the Owners have not agreed to bear, the Master is entitled to refuse to obey it: indeed, as the safe port cases show, in extreme situations the Master is under an obligation not to obey the order’). Compare too Devlin J in The Stork [1954] 2 Lloyd’s Rep 397, 414 (‘[This] does not mean that a Master can enter ports that are obviously unsafe and then charge the Charterers with damage done. The damages for any breach of warranty are always limited to the natural and probable consequences. The point then becomes one of remoteness of damage … There is also the rule that an aggrieved party must act reasonably and try to minimise his damage. A Master who entered a berth which he knew to be unsafe (and which perhaps the Charterer had nominated in ignorance of its condition), rather than ask for another nomination and seek compensation for any time lost by damages for detention, might find himself in trouble’).


55See Court Line (1940) 67 Ll L Rep 161, at 172.


56In The Panaghia Tinnou, Steyn J certainly did not rule that out: see text at fn. 29, above. In ER Hamburg, the arbitrators had found that chief officer did not know, because he had an imperfect understanding of the relevant computer programme; but they had held that this was negligence – i.e., not incompetence.


57As reflected in Article III of the Hague Rules, and also in the ordering of the apportionment under cl (8) of 1996 and 2011 versions of the Inter-Club Agreement: see Appendix B.


58Lord Wright in Smith, Hogg v Black Sea & General Insurance (1940) 67 Ll L Rep 253, 260. ‘If unseaworthiness arising from a failure to exercise due diligence is an effective cause of loss and damage, in the sense that the loss or damage would not have happened without it, the carrier is liable for that loss and damage even if there were other contributing causes and even if some or all of those contributing causes fall within the exceptions in Article IV rule 2 … This is so even when the contributing cause is a breach by the cargo owner.’ (J Cooke et al., Voyage Charters (4th edn, 2014), para 85.258) Cf Northern Shipping v Deutsche Seereederei GmbH (The Kapitan Sakharov) [2000] 2 Lloyd’s Rep 255.


59Monarch Steamship v Karlshamns Oljefabriker (1948/49) 82 Ll L Rep 137, 155–6.


60The Isla Fernandina [2000] 2 Lloyd’s Rep 15, 32.


61Onego Shipping & Chartering v JSC Arcadia Shipping [2010] EWHC 777 (Comm); [2010] 2 Lloyd’s Rep 221.


62[2010] EWHC 777 (Comm); [2010] 2 Lloyd’s Rep 221, at [47].


63‘The test in a case of this kind, of course, is not absolute: you do not test it by absolute perfection or by absolute guarantee of successful carriage. It has to be looked at realistically, and the most common test is: Would a prudent shipowner, if he had known of the defect, have sent the ship to sea in that condition?’ (McNair J in MDC v NV Zeevaart Maatschappij [1962] 1 Lloyd’s Rep 180, 186). So too Cresswell J in The Eurasian Dream [2002] EWHC 118 (Comm); [2002] 1 Lloyd’s Rep 719, at [126] (‘Seaworthiness is not an absolute concept; it is relative to the nature of the ship, to the particular voyage and even to the particular stage of the voyage on which the ship is engaged … Seaworthiness must be judged by the standards and practices of the industry at the relevant time, at least so long as those standards and practices are reasonable’). As one writer put it: ‘The Catalan Code, the Consolato del Mare, which probably dates from the fourteenth century, proclaimed that the “senyor” of a ship was responsible for damage by rats if it could not be proved that he had provided an adequately skilful cat’ (D. Burwash: English Merchant Shipping 1460–1540 (U of T Press, 1947), p. 40). (Compare Shakespeare’s The Tempest (1611) Act 1, sc.2, ‘A rotten carcass of a boat, not rigg’d, / Nor tackle, sail, nor mast; the very rats / Instinctively had quit it …’).


64In which context, recent experience suggests that the incidence of extreme weather is increasing, which may itself influence what it means to be seaworthy. It is also as well to bear in mind the obiter comment of Mustill J in The Hermosa: ‘The difficulties created by the inclusion of the Hague Rules into a time charter have not yet been worked out by the Courts … The analogy with a consecutive voyage charter is not exact. For example, the Charterer pays directly for the whole of the time while the ship is on hire, including ballast voyages; and there are in most time charters express terms as regards initial seaworthiness and subsequent maintenance which are not easily reconciled with the scheme of the Hague Rules, which create an obligation as to due diligence attaching voyage by voyage.’ ([1980] 1 Lloyd’s Rep 638, at 647).


65The concept of the metacentre was identified and defined in the 1730s (L.D. Ferreiro, Ships and Science (MIT Press, 2007)). In 1870, HMS Captain capsized and sank off Finisterre on its third voyage because the concept’s practical application was still not fully understood by shipbuilders.


66By Kerr J in The Strathnewton [1983] 1 Lloyd’s Rep 219, 223. It may be relevant that deductibles and franchises were at that time rather low by modern standards.


67In The Benlawers, Hobhouse J was in no doubt that ‘unseaworthiness’ must here be construed to include a lack of fitness to carry the cargo – i.e., in the same sense as under the Hague Rules (see [1989] 2 Lloyd’s Rep 51, 59). Cf Lord Denning MR in The Aquacharm [1982] 1 Lloyd’s Rep 7, 9: ‘I think the word “seaworthy” in The Hague Rules is used in its ordinary meaning, and not in any extended or unnatural meaning. It means that the vessel – with her Master and crew – is herself fit to encounter the perils of the voyage and also that she is fit to carry the cargo safely on that voyage.’


68D/S A/S Idaho v P&O [1982] 2 Lloyd’s Rep 296 (HC); [1983] 1 Lloyd’s Rep 219 (CA).


69Despite the obvious drafting deficiencies of ICA 1970, the Clubs evidently wished to keep the changes to a minimum. It should be noted that under ICA 1984 mere notification is sufficient to stop the time bar clock, subject only to the statutory time limit for initiating proceedings.


70I.e., The Shinjitsu Maru, The Argonaut, and The Alexandros P.


71A fourth case from the 1980s, The Benlawers, arose from a cargo claim under a NYPE charter which added ‘and responsibility’ to clause 8, and also provided that cargo claims were to be settled in accordance with ICA 1970. But the tribunal had found the damage to be caused by actionable unseaworthiness: ‘In the final analysis we are of the view that insufficient ventilation was the effective cause of mould and/or sprouting damage suffered by the cargo of onions on its out-turn. The simple fact of the matter is that the vessel was not, regrettably, fitted with a ventilation system which could supply adequate ventilation for safe carriage of the cargo during the voyage in question.’ And so the outcome would presumably have been the same even without one or both of these amendments to the printed form (Ben Line Steamers v Pacific Steam Navigation [1989] 2 Lloyd’s Rep 51).


72S.J. Hazelwood, P. & I. Clubs – Law and Practice (3rd edn, 2000), 204. ‘The only way in which you can acquire any knowledge or learning on the effect of this agreement [sc. as incorporated in the NYPE form] is on a case-by-case basis’ (The Kelaniya [1989] 1 Lloyd’s Rep 30, 32 (Lord Donaldson MR)).


73Generously described as ‘a comprehensive overhaul dealing with many of the shortcomings of the earlier versions’ (see S.J Hazelwood & D. Semark, P. & I. Clubs – Law and Practice (4th edn, 2010) (hereafter ‘P. & I. Clubs – Law and Practice’), para 15.43).


74Including the admission of the Hamburg Rules, where compulsorily applicable, to qualifying contracts of carriage, with a corresponding extension of time for notification of claim to three years; the inclusion of a governing law and jurisdiction provision; and the rewriting of the quirky drafting of ICA 1970/1984 as to the addition of ‘and responsibility’ – charitably described by Mocatta J in The Ion as ‘somewhat curious’ (NYK v Pacifica Navegación [1980] 2 Lloyd’s Rep 245, 248).


75Between the late 1960s and 1996, shipping had undergone all sorts of major changes. When ICA 1970 was being drafted, grain was still carried by shelter-deckers fitted with shifting boards; older vessels continued to use the Ralston indicator in planning their stowage; Blue Funnel’s Priam class was generally regarded as the epitome of fast and efficient liner shipping; OCL’s first newbuilding (1,900 TEU), had entered service only in March 1969; and TOVALOP was quite new.


76As a result, no doubt, of the general adoption of ICA 1970/1984.


77In London Arbitration 17/03 ((2003) LMLN 626), the cargo claim giving rise to the claim under ICA 1996 was raised by the sub-Charterer under a voyage charter, and the tribunal decided that ‘a distinction between a contract of carriage on the one hand and a contract for carriage on the other was unnecessarily technical and unreal’. This surely goes too far: each expression has a well-established meaning, and the distinction is legally and commercially significant.


78E.g., fire. By Article IV.2(b) of the Hague Rules as incorporated by cl 24 of the NYPE forms, the carrier is liable for fire only if caused with its actual fault or privity.


79The Clubs do not appear to have drawn attention to this anomaly. Its effect is to penalise the Charterer – except where the Charterer has officiously intervened in the stowage, when it is the Owner that suffers.


80In passing, it should be noted that amount of the security to be provided by Party B is to be ‘for an equivalent amount’. Thus, any issues of apportionment are ignored; but Party B is only required to match the amount put up by Party A to the cargo claimant: it does not provide security for costs in Party A’s indemnity claim against Party B.


81If the cargo interest should also raise a separate or overlapping claim against Party B under the contract of carriage, Party B would then presumably have a separate primary right to demand its own equivalent security from Party A.


82The 2011 revision may have been issued in some haste, as the Clubs began to realise the implications of the sharp reduction in world-wide demand for shipping.


In their introductory circulars, the International Group Clubs cited ‘concern about the time and costs associated with dealing with issues of and demands for security as between Owners and Charterers.’ The Norwegian Hull Club (Circular 10.2011) dismissed this as disingenuous: in its experience, time and costs associated with handling such demands had been negligible. Describing ICA 2011 as unfavourable to Charterers, the Hull Club argued that Owners would now be too ready to accept an inflated primary demand for security simply in order to avoid delay to the ship, and that there was really no justification for requiring the Charterer to put up equivalent security where the claim clearly fell under clause (8)(a) of the Agreement; but perhaps the reciprocal counter-security under clause (9)(b) was intended as a crude mechanism to police such behaviour.


83NYPE 93 states: ‘Cargo claims as between the Owners and the Charterers shall be settled in accordance with the Inter-Club New York Produce Exchange Agreement of February 1970, as amended May, 1984, or any subsequent modification or replacement thereof.’ NYPE 2015 has the same wording, except that it refers to ‘the Inter-Club NYPE Agreement 1996 (as amended 1 September 2011)’. The Clubs’ 1996 circular states: ‘The NYPE Inter-Club Agreement seems to have become an industry standard in the sense that NYPE charterparties now routinely regulate the settlement of cargo claims between Owners and Charterers in accordance with the Agreement’s formulae.’ Given the requirement of ICA 1970/1984 that ‘The Agreement is not binding on members but in all case the parties will recommend without qualification its acceptance to Members,’ this may seem less than candid.


84Curiously, while Time Charters devotes seven paragraphs to the legal effect of adding ‘and responsibility’ to clause 8 of the charter, it does not draw attention to the 50:50 allocation of ICA 1996/2011. It simply remarks that that regime is ‘mostly straightforward and does not call for substantial elaboration.’ (para 20.77). It often happens that the possible inclusion of ‘and responsibility’ is the last issue to be resolved in negotiating the charter. One face-saving compromise which is sometimes encountered reads ‘ … under the supervision and responsibility (to be construed as per the Inter-Club Agreement) of the Master’. One might as well toss a coin to decide whether the qualification in parentheses is intended to relate to all liability issues, or only to third-party cargo claims.


85Para 20.47.


86At least in the reported cases, this is the usual form of words, although some charters, as in The Ion ([1980] 2 Lloyd’s Rep 245), Newcastle P&I v Gard (The Labrador) ([1998] 2 Lloyd’s Rep 387), and The Hawk ([1999] 1 Lloyd’s Rep 176), have expressly incorporated the Agreement itself into the charter – a device characterised as clumsy by Mocatta J in The Ion. However, given the robust decision of the Court of Appeal in The Strathnewton, nothing appears to turn on this distinction, certainly in respect of ICA 1970/1984. And in The Genius Star 1 [2011] EWHC 3083 (Comm); [2012] 1 Lloyd’s Rep 222, where the charter provided that claims were to be settled as per ICA 1996, Teare J at [13] referred to ‘the incorporated ICA’. The clause recommended by the Clubs in May 2016 also effectively merges the two concepts: ‘Cargo claims as between Owners and Charterers shall be settled in accordance with the Inter-Club New York Produce Exchange Agreement 1996 (as amended 2011), or any subsequent modification or replacement thereof. This clause shall take precedence over any other clause or clauses in this charterparty purporting to incorporate any other version of the Inter-Club New York Produce Exchange Agreement into this charterparty.’


87He said: ‘That clause [‘Cargo claims under this Charterparty to be settled between Owners and Charterers under the Inter-Club New York Produce Exchange Agreement’] presupposes that (where the Charterers are seeking redress) there is a claim by the Charterers under the charter of the relevant kind, which must be a claim for damages for breach of charter on the basis that the Owners have, by breach of their obligations under the charter, caused damage to the goods for which the Charterers claim to be liable to the bill of lading holder; and then provides that, in the event of such a claim, it is to be settled between Owners and Charterers under the Inter-Club Agreement’ (see [1982] 2 Lloyd’s Rep 296, 301).


88The Strathnewton [1983] 1 Lloyd’s Rep 219, 227.


89Kerr LJ in The Strathnewton [1983] 1 Lloyd’s Rep 219, 225.


90In light of the unanimous decision of the Court of Appeal in The Strathnewton, it seems unlikely that the wording of NYPE 2015 as to settlement of claims in accordance with ICA 1996/2011 (see fn.83, above) will be construed as achieving anything less than full incorporation of the Agreement, including its cl 2, and also its cl 5: ‘This Agreement applies regardless … of any incorporation of the Hague, Hague Visby Rules or Hamburg Rules [in the charterparty].’. But it may be relevant to note the different form of words used by cl 33 of NYPE 2015 in relation to the Hague Rules: ‘The following protective clauses shall be deemed to form part of this Charterparty. …’


91So, for example, cl 33 of NYPE 2015 makes the General Clause Paramount a part of the charter, thus making the contract subject to the Hague/Hague-Visby Rules, and also provides that it will be included in any bills of lading. But cl (8)(a) of ICA 2011 lays on the owner 100% of any cargo claim arising out of error or fault in navigation or management of the vessel, so effectively cancelling, to that extent, the effect of Article IV.2(a). And the Owner may well find that it has lost its right of recourse against the Charterer where a cargo claim arises under a non-compliant bill of lading issued in breach of the Clause Paramount as incorporated by cl 33. Here, P. & I. Clubs – Law and Practice (para 15.69) states: ‘[S]ub-clause (a) made the apportionment applicable to claims arising out of error or fault in the navigation or management of the vessel; for example, collisions. This is designed to deal with claims under the Hamburg Rules. Under the Hague and Hague-Visby Rules there is already an ‘error of navigation’ exemption in respect of loss or damage caused by collision and so the carrier will not be liable for such claims where the contract of carriage is subject to those rules.’ But this rather misses the point: if the claim is subject to apportionment, it must already have been settled, not successfully defended. (In its contemporary justification (Insight 143, 1 Sept. 1996), Gard is even wider of the mark: ‘The rationale behind this is that many charterparties incorporate the Hague or Hague-Visby Rules thus giving Owners a complete defence to claims of this kind.’)


92A/S Ivarans Rederei v KG MS Holstencruiser Seeschiffahrt GmbH [1992] 2 Lloyd’s Rep 378.


93‘As I have already said, the language of this clause has varied from time to time; and, in my judgment … it is wrong to construe this clause historically … I think that, in approaching a question of construction of this kind, one should have regard only to the language of the clause as it now stands; and I approach the question of construction on that basis and none other’ (Roskill J in The Jevington Court [1966] 1 Lloyd’s Rep 683, 691). The objection is one of practicality as well as principle: ‘[Counsel] wished us to look at the previous version of the standard NSF terms and to look at the BIMCO drafting committee’s commentary as aids to construction. Whilst there may be occasions when this has to be done in order to assist in solving a problem of an ambiguous wording, I would generally discourage such exercises in ‘the archaeology of the forms’. In most cases it makes the task of interpretation of contractual wording unnecessarily over-elaborate and it can add to the expense and time taken in litigating what should be short points of construction’ (Aikens J in The Rewa [2012] EWCA Civ 153; [2012] 1 Lloyd’s Rep 510, at [30]).


94Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 76 ALJR 436 at [69]. There is also a common, but misleading, tendency to compare the wording of ICA 1996 with that of ICA 1984 as an aid to construction: see, e.g., London Arbitration 17/03: ‘However, the tribunal’s views had begun to alter during the course of the hearing … [The Charterers] had drawn attention to distinctions between the wording of the 1996 Agreement and that of its 1984 predecessor…’ ((2003) 626 LMLN).


95There has been no suggestion that the wording of the Agreement so incorporated requires some form of verbal manipulation, as when a bill of lading clause paramount is incorporated into a charterparty.


96For examples, see the following. ‘[T]he commercial context in which the agreement is intended to take effect …’ (The Holstencruiser [1992] 2 Lloyd’s Rep 378, 390). ‘Adopting the common-sense commercial approach which we believe from our own experience of the ICA is required …’ (The Kamilla award, as quoted by Morison J at [2006] 2 Lloyd’s Rep 238, 242). ‘[I]t is important that this test be applied broadly and flexibly so as to give effect to the commercial purpose of the Inter-Club Agreement …’ (The Hawk [1999] 1 Lloyd’s Rep 176, 185). ‘If the application of the ICA were dependent upon the resolution of issues arising out of the charterparty, then to that extent, the effectiveness of the ICA, and its underlying purpose, would be undermined’ (The Elpa [2001] 2 Lloyd’s Rep 596 at [17]). ‘ [I]t should be construed in such a way so as to give effect to the commercial purpose of the ICA …’ [because] ‘a different interpretation would defeat the commercial purpose of the ICA.’ (T. Nikaki, ‘The allocation of cargo claims between Owners and Charterers in NYPE charterparties’ in D.R. Thomas (ed), Legal Issues Relating to Time Charterparties (Informa, 2008) paras 13.52, 13.58). [The distinction between a contract of, and a contract for, carriage] ‘also gave rise to wholly uncommercial distinctions between those cargo claims that were covered and those that were not.’ (London Arbitration 17/03). ‘[A]nd it had to be borne in mind that the ICA was very much a commercial agreement designed to cut across endless fine legal arguments’ (London Arbitration 3/13). Tellingly, this commercial purpose is generally treated as being self-evident, requiring no specific definition or elucidation. With the exception of The Genius Star 1 [2011] EWHC 3083 (Comm); [2012] 1 Lloyd’s Rep 222, which dealt with time bar issues, and The Clipper São Luis [2000] 1 Lloyd’s Rep 645, where there was no discussion of apportionment, there has to date been no reported case involving the interpretation of ICA 1996. [Editor’s note: In December 2016, judgment was handed down in Transgrain Shipping (Singapore) v Yangtze Navigation (Hong Kong) [2016] EWHC 3132 (Comm), Teare J deciding that the word ‘act,’ as it appears in the phrase ‘act or neglect’ in cl (8)(d) of ICA 1996, covers any act, whether culpable or not. The case has been set down for appeal in late 2017.]


97‘The purpose of referential incorporation is not, or at least is not generally, to incorporate the intention of the parties to the contract whose clauses are incorporated but to incorporate the clauses themselves in order to avoid the necessity of writing them out verbatim’ (Oliver LJ in The Varenna [1983] 2 Lloyd’s Rep 592, 596).


98Although, as pointed out by Time Charters at para 20.54, there is no reason why this clause should not be over-ridden by a specific provision of the contract. More generally, the clause has to be read in the context of the charter as a whole: in London Arbitration 13/08, where clean bills of lading had been issued by the Time Charterer against claused mate’s receipts, the Owner had sought a declaration that it was entitled to be indemnified by the Charterer for liabilities to receivers of the cargo. The charter ‘provided for [ICA 1996] to apply’; and the Charterer argued that, because there had been no settlement of the cargo claims, the Owner’s claim was premature. The tribunal granted the Owner’s application: ‘The Inter-Club Agreement did not apply in the circumstances of the case. The relevant contracts of carriage were plainly not authorised by the charter: indeed, they were issued in clear breach of it’ (see (2008) 753 LMLN 4).


99One does not usually hear it suggested that the clause paramount of the NYPE form should be construed in light of the travaux préparatoires of the Brussels Convention.


100Note Lord Neuberger’s salutary warning in Arnold v Britton [2015] UKSC 36; [2015] AC 1610 at [17]: ‘[T]he reliance placed in some cases on commercial common sense and surrounding circumstances … should not be invoked to undervalue the importance of the language of the provision which is to be construed. The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision.’ The Inter-Club Agreement is not an international convention, and should not be treated as if it were.


101Challis (A L) Ltd v British Gas Trading Ltd [2016] EWHC 513 (Comm) at [14] (Popplewell J). The judge cited Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896; Attorney General of Belize v Belize Telecom [2009] UKPC 10; [2009] 1 WLR 1988; Chartbrook v Persimmon Homes [2009] UKHL 38; [2009] 1 AC 1101; Re Sigma Finance Corp Ltd [2009] UKSC 2; [2010] 1 All ER 571; Rainy Sky SA v Kookmin Bank [2011] UKSC 50; [2011] 1 WLR 2900; Arnold v Britton [2015] UKSC 36; [2015] AC 1619 and Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72; [2016] AC 742.


102Wood v Sureterm Direct Ltd [2015] EWCA Civ 839 at [30] (Christopher Clarke LJ).


103Obvious examples are Glynn v Margetson [1893] AC 351 and Rainy Sky SA v Kookmin Bank [2011] UKSC 50; [2011] 1 WLR 2900. But it is sometimes forgotten that, in Rainy Sky at [23] Lord Clarke started out by stating: ‘Where the parties have used unambiguous language, the court must apply it.’


104‘No one is in favour of abstract metaphysical theory. Nor is anyone against common sense. I do think, however, that judges should be encouraged to give the real reasons for their decisions. References to common sense often mean that they have not really thought them through.’ (L.H. Hoffmann, Common Sense and Causing Loss (Chancery Bar Association Lecture, June 1999))


105Time Charters, para 20.58. This strict approach may receive some support from the explanatory circular issued by the Clubs in connection with the 2011 amendment: ‘The Group has taken the view, which Counsel has confirmed, that [Clause 4(c) of ICA 1996] makes payment of a Cargo Claim … a condition precedent to a right to indemnity. Accordingly, in the absence of payment, no accrued cause of action crystallises and there is therefore no right, prior to payment, for the party sued in respect of a Cargo Claim to require that the other party to the charterparty provide security …’.


106As, e.g., with payment.


107Paragraph 20.70.


108It also lies uncomfortably with the statement of Morison J in The Elpa [2001] 2 Lloyd’s Rep 596, at [16]: ‘The ICA [1984] operates as it stands: there must be a cargo claim under the bill and the bill must contain the Hague-Visby Rules or their equivalent.’ (ICA 1970/1984 had stated: ‘It shall be a condition precedent to settlement under the Agreement that the cargo claim … shall have been properly settled or compromised and the cargo carried under a bill or bills of lading incorporating the Hague or Hague/Visby Rules or containing terms no less favourable.’) P. & I. Clubs – Law and Practice states: ‘The Elpa is … authority for the view that the Inter-Club Agreement will apply in practically all circumstances provided only that the bill of lading … is subject to the Hague/Hague-Visby Rules or an equivalent regime – even if it does not conform to the terms of the charterparty.’ But that opinion would seem to go too far in respect of ICA 1996/2011.


109[1999] 1 Lloyd’s Rep 176.


110[1999] 1 Lloyd’s Rep 176, 185. This is not obviously consistent with the proposition that an implied term should be capable of precise expression. ‘Before a term can be implied in a commercial contract, it must not only be necessary that a term should be implied in order to give the contract business efficacy, but the term to be implied must also be capable of being defined with reasonable precision.’ (Lloyd LJ in The Badagry [1985] 1 Lloyd’s Rep 395, 401).


111[1992] 2 Lloyd’s Rep 378.


112[1999] 1 Lloyd’s Rep 176.


113[2001] 2 Lloyd’s Rep 596.


114In The Holstencruiser, Hobhouse J held that the bill of lading had to be one which was issued in accordance with the requirements of the charter, and the Charterer was bound to prove that the goods had in fact been shipped. In The Hawk, HHJ Diamond QC held that an admissible claim must be brought under a bill of lading authorised by the charter, but added the qualification that this test must be applied ‘broadly and flexibly’, having regard to the commercial purpose of the Agreement. And in The Elpa, Morison J saw no need for such an implied term: the Agreement had to apply to any cargo claim provided it was raised under a bill of lading which contained the appropriate protective terms.


115‘[W]hile commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed’ (Lord Neuberger in Arnold v Britton [2015] UKSC 36; [2015] AC 1610 [20]). See too Lord Lloyd, dissenting, in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, 904 (‘Purposive interpretation of a contract is a useful tool where the purpose can be identified with reasonable certainty. But creative interpretation is another thing altogether. The one must not be allowed to shade into the other’).


116The ‘archaeological’ school of construction – see fn. 93, above – might draw attention to the express reference of ICA 1970/1984 to conditions precedent. The Clubs’ circulars offer no explanation for the 1996 change in wording.


117At first sight, a reported award might appear to have addressed this question. Cargo receivers at Hodeidah had detained the vessel, alleging short-delivery and insisting on payment in full. ‘Had the Owners allowed the matter to go to court there would have been some days’ detention to the ship, during which she would have been off-hire. Within a very short period the off-hire suffered would have exceeded the amount of the claim.’ But the owner’s Club correspondents had confirmed, albeit well after the event, that if the matter had gone to court, the owner would have been found liable; and this evidence being uncontroverted, the tribunal accepted that the settlement was proper. ‘The tribunal would not venture to try to define exactly what was meant by the words V properly settled or compromised,” but they did not exclude the possibility of showing that a settlement reached in circumstances which were less than ideal might yet have been “proper,” and therefore capable of being passed on under the ICA’ (London Arbitration 29/04 (2004) 652 LMLN 2(2)).


118If the Owner successfully defends the cargo claim, but is unable to recover its costs in the action (as, for example, before a court in the USA), it has no right of recovery of those costs from the Charterer under ICA 1996/2011: this can obviously lead to uncommercial behaviour.


119And its insertion in cl 8 was, by 1996, unquestionably an amendment which ‘makes the liability, as between Owners and Charterers, for cargo claims clear’.


120In effect, ‘an application of the well-known elephant test … difficult to describe, but you know it when you see it’ (Stuart-Smith LJ in Cadogan Estates v Morris [1998] EWCA Civ 1671 at [17]). In Newcastle P&I v Gard [1998] 2 Lloyd’s Rep 387, where cl 8 was amended to read ‘under the supervision and direction of the captain …,’ Colman J considered that ‘the words “and direction” … do not have the effect of transferring responsibility for the proper stowage of the cargo,’ with the result that the Charterer retained primary responsibility for the stowage. But absent authority, this might well be construed as a material amendment: depending on its context, the verb ‘to direct’ will often imply active control (see the clause from the Crest of the Wave charter, at fn.2, above).


121Where, one may wonder, do agents fit into this scheme?


122Cf Field J at first instance in The Global Santosh [2013] EWHC 30 (Comm); [2013] 1 Lloyd’s Rep 455 at [24]: ‘In my judgement, the words “occasioned by” import a notion of causation which is broader than the concept of “the effective cause” … but it is not so broad as to include “but for” causation. Instead, the causal relationship … has to be such that it can be said as a matter of commercial common sense that the latter was caused by or brought about by the former.’


123If the Aconcagua’s charter had incorporated ICA 1996, the tribunal in ER Hamburg would have had to choose between ‘claims in fact arising out of unseaworthiness caused by the stowage of the cargo’ and ‘claims in fact arising out of error or fault in the management of the vessel’. Left to choose between the bad stowage and the Chief Officer’s misapplication of the ship’s computer software, it is easy to see how a tribunal might conclude that such a claim should properly lie 100% with the Owner.


124In The Kamilla [2006] EWHC 509 (Comm); [2006] 2 Lloyd’s Rep 238, where the charter provided that all claims in respect of cargo were to be settled under ICA 1984, less than 2% of the cargo was damaged by ingress of seawater. At the urging of the receiver, the Algerian authorities rejected the entire cargo; and the owner claimed to be indemnified by the Charterer under the ICA. The arbitrators held that questions of remoteness and foreseeability were irrelevant in determining whether the owner’s loss was ‘due to unseaworthiness,’ and accepted the Charterer’s argument that it was enough for the unseaworthiness to be in practical terms a cause of the loss. In upholding the award, Morison J said: ‘[T]he correct test of causation was applied by the arbitrators when they found that, provided the unseaworthiness of the vessel could be said in a practical sense to be a [and I stress the use of the indefinite article] cause of the loss, it was not appropriate to embark upon a further inquiry as to whether it was the [and I stress the definite article] effective cause of the loss.’ (Ibid, [15]). But this does not offer much insight where unseaworthiness is not in issue.


125Thus, if there is a string of two sub-charters, and the cargo claim is raised against the ship, the Owner will end up carrying 50%, the head Charterer 25%, and the first and second sub-Charterers 12½% each, so that the second sub-Charterer – the one actually employing the vessel – is absolved as to 37½%. (The logic is presumably that each party is exposed only to the potential insolvency of its immediate counter-party.)


126It is said that the Clubs of the International Group insure more than 90% of the world fleet. They also insure, separately, the liabilities of a large population of Time Charterers.


127P. & I. Clubs – Law and Practice’ (paras 15.5, 15.45) suggests that members could prejudice their cover should they resolve cargo disputes by means other than that provided for under the ICA when it should have been applicable; but no evidence is provided for this opinion. (And, after all, the Agreement itself envisages and provides for material amendment of the charter.)


128Especially where the cargo claim arises out of the alleged negligence of those on board in navigation or management of the vessel: by settling the claim, as will often happen, the owner may have forfeited any right of recovery from the Charterer.


129‘In ordinary cases, where the charterparty does not amount to a demise of the ship, and where possession of the ship is not given up to the Charterer, the rule is that the contract contained in the bill of lading is made, not with the Charterer, but with the owner …’ (Channell J in Wehner v Dene Steamship Co [1905] 2 KB 92, 98). See too Leggatt LJ in The Rewia [1991] 2 Lloyd’s Rep325, 333: ‘It appears to me that the law was correctly stated by Mr. Justice Channell … [A] bill of lading signed for the Master cannot be a Charterers’ bill unless the contract was made with the Charterers alone, and the person signing has authority to sign, and does sign, on behalf of the Charterers and not the Owners.’


130No explanation seems to have been offered for this addition. The Club circulars refer to ‘related customs fines, interest and certain costs’, but contain no mention of claims for delay – which is possibly the most fertile ground for dispute between owner and Charterer, simply by the nature of the contract. Suppose that, having completed loading under the charter at a port in the USA, the vessel has been detained by the US Coast Guard on account of an alleged breach of MARPOL: absent proof that such infringement did actually occur, the Charterer may or may not be able to place the ship off hire; but ICA 1996/2011 will certainly require it to reimburse one half of a claim for loss of market through delay as settled by the Owner with the buyer of the cargo, even though it is obvious that the Charterer has had no causative involvement at any stage.


131As in The Nour [1999] 1 Lloyd’s Rep 1, 5.


132Thereby giving rise to a variety of anomalies in respect of non-cargo liabilities. As often as not, the cargo claim will also involve delay to the vessel and incidental costs incurred by the Charterer. Falling outside the ambit of ICA 2011, these will have to be dealt with under the other provisions of the charter, complicating the factual enquiries, and resulting in an inconsistent result overall.


133The Genius Star 1 [2011] EWHC 3083 (Comm); [2012] 1 Lloyd’s Rep 222 at [5] (Teare J).

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