Original bills of lading

Original bills of lading
London arbitration

THIS London arbitration dealt with the thorny issue of whether a shipowner had acted unreasonably in refusing to discharge cargo in the absence of original bills of lading.

The vessel was chartered under the NYPE form to carry a cargo of prime concast slabs for discharge in the US. Prior to arrival at discharge port, the owner rejected the charterer's signed letter of indemnity - sent without prior indication - covering discharge without bills of lading.

The charterer argued that it was customary practice to discharge cargo without production of original bills into the custody of US customs, to be released upon presentation of the bills. The owner did not accept this, and discharge was delayed until the bills were available, resulting in a claim by the charterer for lost time of two days, one hour and twenty minutes.

At London arbitration it was held that the owner's argument would be rejected. The charterer had maintained that the owner could have agreed with the terminal (which was, primarily and initially, the charterer's agent) to hold the cargo to the owner's account, and thus get whatever security it might reasonably require. The arbitrators said that this in no way prevented the possibility of an arrangement being made whereby the terminal would be the owner's agent for the purposes of receiving and holding the cargo. And such a dual role should have presented no difficulty, at least in a country such as the US.

From the documents it was clear that the terminal had been prepared to hold the cargo to the owner's account, and there was no reason why the owner should not have asked the terminal for its direct and binding undertaking to the owner that cargo would not be released without production of the bills of lading. Had the owner taken such a course, discharging would have started much earlier.

It was held that the charterer was entitled to a credit for hire in respect of one day, sixteen hours and twenty minutes, amounting to $13,948, and $753 for bunkers for the same period.
(Lloyd's Maritime Law Newsletter 499)

Cargo damage
Bacchus Associates v Reefer Express lines Pty Ltd

THIS arbitration dealt with a claim for damages to cases and pallets of oranges shipped from Morocco to the US.

Shipment was made pursuant to a Gencon charter party between Bacchus Associates, as charterer, and Reefer Express Lines Pty, as disponent owner of the Ocean Rex.

The oranges were packed in cases, then palletised, with 63 cases to the pallet, on board the Ocean Rex. The pallets consisted of nine cases to a tier and were stacked seven tiers high, secured by reinforced angles and nylon straps. The charter provided for "free in/liner out till first point of rest in warehouse".

The cargo was delivered to the vessel in apparent good order and condition and clean bills of lading were issued. Although the master filed a note of protest with respect to delays in loading and the effect of such delays on the product's pulp temperature, he did not register a complaint with respect to the packaging, longshoremen handling or onboard stowage.

On discharge at New Bedford in the US, significant physical damage was observed to a number of pallets, although the owner and charterer disagreed as to the extent and cause of same.

After discharge, the cargo was moved from the pier by forklift and flatbed truck to an adjacent cold storage warehouse, where it was stored in accordance with government regulations for fourteen days. Thereafter, some of the damaged cargo was sent to a repacking facility, from where it was sold. Other pallets were shipped directly to cargo buyers.

Bacchus claimed for $260,617, representing the depreciated value of the product, together with survey fees and interest.

Bacchus argued that Reefer Express and its surveyor were unaware of the customary packaging of Moroccan oranges. It claimed that Reefer Express, having not raised a complaint about packaging, loading or stowage, was precluded from asserting that the cargo was damaged during loading in Morocco, or by heavy weather during the sea passage.

Reefer Express, meanwhile, maintained that there were a number of possible causes of damage, for example pre-shipment condition and/or insufficient packing, heavy weather and negligent handling during discharge to the wharf and subsequent delivery to the warehouse.

The arbitration panel noted that the cargo was delivered to the vessel in good order and condition, as borne out by the issuing of clean on board bills of lading. It was noted that Reefer Express had failed to introduce any evidence which showed damage during loading, the defective nature of the pallets and cases, or that the packaging was anything other than standard for Moroccan oranges. It was also noted that there was no evidence to suggest that heavy weather had played any part in the damaged pallets, and that Bacchuss's surveyor was barred from making any pre-discharge survey on the vessel as a result of Reefer Express's firm policy of not allowing cargo surveyors on board its vessels to inspect and survey cargo damage.

The panel majority (Mr Nelson dissenting) found that Reefer Express was liable for the damage to the cargo. Awarding Bacchus $218,246 in damages, the panel majority found that Bacchus had acted reasonably in its efforts at reconditioning and selling the damaged cargo.
In his dissenting opinion, Mr Nelson said the cargo as delivered to the vessel by Bacchus was defectively packaged for safe carriage by what was a relatively small vessel undertaking a winter North Atlantic voyage. The packaging, he said, was insufficient to permit safe loading and/or discharging by forklifts.

Mr Nelson also disagreed with the majority opinion that "free in/liner out till first point of rest in warehouse" meant landing the cargo on the wharf and the subsequent forklifting of the cargo to a cold treatment facility. He said that in-transit cold treatment would have allowed all the damaged cargo to have been removed from the wharf directly to the repackaging unit and would have saved costs and unnecessary handling damages.

Off-hire dispute
London arbitration

THIS arbitration addressed the issue of whether a vessel could be deemed to be off-hire during a period of hold cleaning, and whether the owner was entitled to recover cleaning expenses from the charterer.

The vessel was chartered on the NYPE form. Upon delivery, it loaded a cargo of phosphate rock in Morocco for discharge at New Orleans. During the course of discharging that cargo in New Orleans, the master was told by the charterer to prepare the ship for a cargo of grain to be loaded at the same port.

When discharging was completed, the vessel anchored and started to clean holds.
The following day a National Cargo Bureau inspector rejected all the vessel's holds, on account of a large amount of loose rust scale and loose paint scale, residue of previous cargo, wasted-through hatchcovers, a hole in the bulkhead between holds 2 and 3, and poor and (in places) missing hatchcover gaskets.

It was a further ten days before the holds were passed, and the charterer submitted that the vessel was off-hire for the period between inspection and final clearance by the NCB surveyors. It accordingly withheld hire and made a reduction in respect of bunkers.

The owner claimed the withheld hire, together with expenses incurred in connection with the cleaning of the ship.

It contended that the charterer had accepted the vessel on delivery and had then loaded a cargo of phosphate rock, so that hold cleaning fell to be dealt with under Clause 73 of the charter, which provided, "If charterers so request...crew to perform hold cleaning between cargoes...but owners not to be responsible for passing subsequent inspections and, if further cleaning and/or shore labour ...required then same to be for charterer's account and vessel always to remain on hire..."

The owner maintained that, since shore cleaning crews had been required, these had to be for account of the charterer. There was no question of the ship being off-hire.

The charterer, meanwhile, claimed that the defects found at New Orleans, with the exception of the cargo residues, must have been present on delivery of the ship.

At arbitration in London it was held that the amount of rust and paint scale removed at New Orleans could not have developed during the voyage from Morocco to New Orleans, and neither could it have been caused by the phosphate rock cargo.

The vessel, then, was not ready on delivery in accordance with the provisions of the charter.

It was further held that Clause 73 did not apply on the facts of the case, because what was required in this case was not the hold cleaning between cargoes envisaged by Clause 73 but necessary repairs and cleaning as a result of the defective condition of the vessel on delivery.

The arbitrators said that the owner, being in breach of its delivery obligations, could not recover the cost of remedying the vessel's defects, and its claim for expenses failed.
The charterer's justification for deducting from hire was complicated by the fact that it had sublet the vessel.

Because of the delay at New Orleans, it had effected delivery under the subcharter at a later date than expected, and maintained that it was therefore entitled to recover from the owner at the higher subcharter rate.

The arbitrators said the claim for loss suffered under the subcharter was too remote and had to fail.

It could not be said that a reasonable owner could reasonably foresee that a charterer might subcharter on terms which meant that, if the owner was in breach as to the ship's condition on delivery, the charterer some weeks later would not be able to deliver the vessel into that subcharter and would thus suffer loss accordingly.

In any event, the arbitrators said that the charterer had failed to prove that it had suffered any loss of time, there being no indication that loading under the subcharter would have taken place sooner than it did if circumstances had been different.

The inference had to be that loading would not have started earlier even if the ship had been ready sooner. The burden to show loss was on the charterer, whose claim for loss of time failed, whether it was put as damages or off-hire. (Lloyd's Maritime Law Newsletter 499)