Ince’s Michael Volikas presents the position at common law

Volikas: ‘boils down to a debate about allocation of risk’.

Under common law, the responsibility to load, stow, trim and discharge the cargo is that of the vessel (Filikos [1983] 1 Lloyd’s Rep 9). However, many standard form charterparties have express clauses apportioning this responsibility.

One of the most common forms in use in the bulk trade is the NYPE form, which provides at clause 8 that “…Charterers are to load, stow, trim and discharge the cargo at their expense under the supervision of the Captain.”

The House of Lords decided in Court Line Ltd v. Canadian Transport Company Ltd ([1940] 67 Lloyd’s Rep 161) that this has the effect of transferring the responsibility for these cargo operations onto the charterers. The House of Lords held that the reservation of the right of the captain to supervise loading in no way detracted from the charterers of the primary duty to stow safely. In the course of their judgment, their Lordships said:

Viscount Maugham:

“…The supervision of the stowage by the captain is in any case a matter of course; he has in any event to protect his ship from being made unseaworthy…”

Lord Wright:

“[The words “under the supervision of the Captain”] expressly give the master a right, which I think he must in any case have, to supervise the operations of the charterers in loading and stowing. The master is responsible for the seaworthiness of the ship …”

Lord Porter:

“It may indeed be that in certain cases as, eg, 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 …”

So, it appears that the House of Lords may have contemplated that, in certain circumstances, the captain had a duty to intervene, even though the primary duty to load and stow was on the charterers.

In Court Line, the issue was simply damage to cargo, and there was no question of the bad stowage affecting the seaworthiness of the ship. In the later case of Panaghia Tinnou [1986] 2 Lloyd’s Rep 586, which also involved only damage to cargo, Steyn J said, after referring to Court Line: “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.”

So, who is responsible for bad stowage affecting the seaworthiness of the ship? That was the question which Langley J had to answer in the Imvros [1999] 1 Lloyd’s Rep 848. In the Imvros, the charterparty was on the NYPE form, with clause 8 as cited above. Importantly, the reference to the clause paramount incorporating the US Carriage of Goods by Sea Act 1936 (and thus the Hague Rules obligations on the owners to exercise due diligence to make the vessel seaworthy) was deleted. In addition, the charterparty also provided that charterers were to leave the vessel in “safe and seaworthy trim…”.

During the laden voyage part of the deck cargo was lost overboard and the vessel damaged. The cargo was found to be badly lashed and the vessel was unseaworthy as a result. Langley J found that there were limited express “seaworthiness” obligations on the owners (ie delivery obligations), and that these were not broken. He noted that the due diligence obligations under the Hague Rules were expressly deleted, and the charterparty expressly provided that charterers were to leave the vessel in a seaworthy trim. He then held that the charterers were liable for bad stowage which affected the seaworthiness of the ship.

He said: “It would be a remarkable construction which produced the effect that so long as the loading was carried out by the charterers badly enough to put the or other cargo but not the vessel at risk the charterers would be liable and the owners would not, but the moment the loading was so badly carried out that it made the vessel itself unseaworthy the entire responsibility fell upon the owners and the charterers were relieved of it. That would mean that the worse the loading the better for charterers and it is often not an easy question to determine the moment when the line between bad stowage and unseaworthiness is crossed.”

So, who is responsible for bad stowage affecting seaworthiness when owners have an express duty to exercise due diligence to make the vessel seaworthy?

In the Imvros, the owners did not have an express contractual duty to exercise due diligence to make the vessel seaworthy as provided for by Article III (1) of the Rules, but the Hague-Visby Rules were specifically incorporated into the charterparty considered in CSAV v. MS ER Hamburg [2006] 2 Lloyd’s Rep 66.

Article III(1) of the Hague-Visby Rules expressly provides that the carrier shall be bound to exercise due diligence to make the ship seaworthy. This duty is non-delegable and rests with the carrier (Muncaster Castle [1961] 1 Lloyd’s Rep 57). In CSAV, a container of calcium hypochlorite was stowed by charterers next to a heated bunker tank, which caused the container to explode, damaging the vessel. It was found by the arbitrators that the charterers’ stowage did not comply with the International Maritime Dangerous Goods code for stowing such cargoes. However, the charterers argued that as the charterparty incorporated the Hague-Visby Rules, and as the stowage affected the seaworthiness of the vessel, the owners were in breach of their non-delegable duty to intervene and make the vessel seaworthy (it should be noted that it appears that the charterers did not in fact plead that the vessel was in fact unseaworthy).

Morison J held that, as a matter of construction of clause 8 and as regards the duties and obligations owed by the owners and charterers to each other, the decision in the Imvros should be followed, ie, that charterers were liable to the owners for stowage even if it affected the seaworthiness of the vessel. In so holding, Morison J relied on the observation of Langley J cited above.

Falling cargo: responsibility for stowage is not always clear cut.

However, and probably due to the fact that the charterers did not plead unseaworthiness (which would have placed the burden of proof on the owners to show that they exercised due diligence in this respect), Morison J’s judgment did not contain a detailed analysis of the interplay between clause 8 and Article III(1) of the Hague-Visby rules, and whether or not, in the context of an unseaworthy stow affecting the vessel, the owners’ obligation under Article III(1) was paramount. This was not an issue which Langley J had to contend with in the Imvros. However, one view is that Morison J agreed with the owners’ submissions in this case that the owners’ non-delegable duty under Article III(1) only applied to those functions of loading and stowing which owners had contracted to perform. As in this case, the charterers had assumed responsibility for loading and stowing, the owners did not owe any duty to them to exercise due diligence to make the vessel seaworthy if the unseaworthiness was caused by their loading and/or stowing.

It should be noted that Morison J’s judgment does not seem to affect owners’ obligations where loss and damage is attributable to stowage which is not in itself wrong, but which, because of the special characteristics of the vessel known only to owners but not charterers, caused the charterers’ stowage to be unseaworthy, or a bill of lading is issued and transferred to a third party claiming under its terms.

There is some debate as to whether or not the decision in CSAV, and for that matter in the Imvros, is correct. On the one hand, it would make sense for all aspects of seaworthiness to remain the responsibility of the owners and vessel. On the other hand, it seems strange, as Mr. Justice Langley highlighted, that charterers should be responsible for stowage (responsibility for which they have accepted) that they perform badly but not for stowage that they perform very badly, particularly in the case of complex stowage undertaken by charterers in, for example, the container trade.

The reality is that this debate boils down to a debate about allocation of risk. The line between bad stowage which affects, and that which does not affect, seaworthiness is a fine one and will provide scope for further debate before the courts, in particular when there is next a case where breach of an express duty on owners to make the vessel seaworthy is alleged. An option for the parties to a charterparty is to attempt to provide expressly in their contract where risk should lie.

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