July 31, 2019

The “ELIN” – Deck Cargo and Exclusion Clauses

The recent case of Aprile SPA v Elin Maritime Ltd (“The Elin”)1 relates to a shipowners' ability under English law to exclude their liability for loss of and/or damage to a cargo carried on deck, pursuant to an express exclusion clause contained on the face of a bill of lading. 

Facts

The cargo was a consignment of steel equipment being transported from the port of Laem Chabang, Thailand, to the port of Djen Djen, Algeria. During the voyage, between 2 and 6 July 2016, the "ELIN” encountered heavy seas, and some of the cargo was lost and/or damaged. A part of the cargo that suffered loss and/or damage was indisputably carried on the vessel's deck and it is that cargo which was the subject of the decision.

The cargo interests alleged that the loss of the deck cargo was caused by the owners’ failure to deliver the deck cargo in the same good order and condition in which it had been on shipment; to properly and carefully load, stow, carry, keep and care for the cargo in breach of Article III, Rule 2 of The Hague Rules, or alternatively The Hague-Visby Rules; to properly lash and/or stow the deck cargo sufficiently for the voyage; and/or to exercise due diligence to make the ship seaworthy at the commencement of the voyage and, in particular, to make the ship and her holds fit for the reception, carriage and preservation of the deck cargo stowed in it in breach of Article III, Rule 1 of the Hague or Hague-Visby Rules.

The owners denied liability on the grounds, amongst others, that liability for the carriage of deck cargo was excluded by an express term in the bill of lading, which stated as follows:

"of which 70 pckgs as per attached list loaded on deck at shipper’s and/or consignee’s and/or receiver’s risk; the carrier and/or Owners and/or Vessel being not responsible for loss or damage howsoever arising"

As it would be determinative of liability, a preliminary issue was ordered for the purpose of determining “whether, on a true construction of [the bill of lading], the defendant is not liable for any loss or damage to any cargo carried on deck howsoever arising, including loss or damage caused by unseaworthiness and/or the defendant’s negligence.”

The Court's Decision

The Judge held that, as a matter of plain language and good commercial sense, the owners' construction of the exclusion was to be preferred. The Court held, on the issue of construction, that the words “howsoever arising” were effective to exclude liability for both negligence and unseaworthiness. The words were clear and the owners were found to have no responsibility for cargo carried on deck whatever the cause, even if owners were at fault.  The exclusion covered any and every cause, and there was no justification for excluding either negligence or unseaworthiness. The Judge's decision focused on the effect of industry standard wording, as “words of exemption which are wider in effect than “howsoever caused” are difficult to imagine and, over the last 100 years, they have become “the classic phrase” whereby to exclude liability for negligence and unseaworthiness.”

Comment

Liability for loss of, or damage to cargo carried on deck has long been a subject of debate between shipowners and cargo interests. Goods stated as being carried "on deck" are not "goods" within the meaning of the Carriage of Goods by Sea Act 1971, the Hague Rules or the Hague-Visby Rules. Therefore, the cargo interests are not able to benefit from Article III, Rule 8, which would have rendered a clause of the above nature null and void.

Whilst the obligations in respect of under-deck carriage benefit from a significant degree of uniformity because of the application of the Hague or Hague-Visby Rules, the position in respect of liability for deck cargo losses varies considerably between jurisdictions.

Carriers have been found liable for deck cargo losses in some jurisdictions (such as in Canada, with the "BELTIMBER" decision, or Singapore with the "PEPNAUTIC2"). There has been a debate under English law over the extent to which these exclusions operate to –

a) protect the carrier from the consequences of their negligence and/or

b) overcome the obligation at common law to provide a seaworthy ship  

The "IMVROS3" was a decision where owners were able to exclude liability even though the vessel was unseaworthy. That decision was justified on the facts of that case because the unseaworthiness arose from stowage failures which were the responsibility of the claimant. It was previously open to debate whether the position would be the same under English law if the unseaworthiness was due to a failing on the part of the owners/carriers. The decision in the "ELIN" has now resolved that debate in favour of the owners, and it is clear, as a matter of English law, that the owners will not be liable for loss or damage of deck cargo whether caused by their negligence or by unseaworthiness.

It is well-known that carrying cargo on deck presents a greater risk of damage. However, this decision does not sit easily where the damage is caused by the negligence of the carrier and was not solely due to the fact the cargo was carried on deck. This is especially so where the cargo would still have suffered some damage even if it was carried in the hold. With this in mind, a buyer or receiver of cargo carried on terms where risk passes on shipment should be careful to ensure that the shipper does not consent to the cargo being carried on deck without permission of the buyer/receiver, as this may adversely affect recovery rights.

However, it is worth remembering that, save where a usage of trade has sanctioned the practice or where, as in the present case, the master had the shipper's consent to stow the goods on deck, stowage of a cargo on deck without consent is a breach of the contract of carriage by the shipowner and prospects of recovery remain good in that scenario.

[2019] EWHC [1001] (comm).

2  Belships v Canadian Forest Products Ltd – "BELTIMBER" (1999) A.M.C. 2606 – Canadian Court of Appeal - Sunlight v Ever Lucky Shipping Company Ltd – "PEPNAUTIC" [2004] 2 Lloyd’s Rep. 174 - Singapore Court of Appeal   -   Jai Sharma of Clyde & Co acted in both these cases

3 [1999] 1 Lloyd's Rep 848