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Tribunal rules on liability between Owners and Charterers where cargo was contaminated with fuel oil

Posted in Cargo Issues, Case Law

London Arbitration 8/13

Charterers faced cargo claims arising from the contamination of containerised cargo with fuel oil. Charterers settled these claims and claimed an indemnity from Owners under the time charter between them. Charterers also claimed for survey fees, off-hire and bunkers during the period of off-hire.

Facts

During the first voyage under the charter, cargo shifted due to Owners’ removal of container guide plates to allow the vessel to load wide containers. This caused a crack in the tanktop plating. A couple of months later, Owners noticed further damage, and it later became apparent that there were yet more defects in the tank top plating. It was not clear whether these had existed prior to delivery under the charter.

Owners elected not to repair this damage immediately, but to defer repairs until the vessel’s next drydock, which was due to take place in around a month’s time. Owners decided that, in the interim, the bunker tank in way of the crack in the tanktop plating would not be used, in order to avoid fuel leaking into the cargo hold.

However, Owners did use this bunker tank, which was half full prior to the incident in question. When fuel oil was transferred from various tanks during the voyage, the valve in one of the suction liens was left open which caused fuel to flow into the bunker tank. As a result of the crack in the tanktop plating, fuel leaked into one of the cargo holds.

Tribunal’s findings

The Tribunal held that Owners were in breach in several respects. They had failed to maintain the vessel “in a thoroughly efficient state”, on top of which the vessel was found to be unseaworthy. Owners failed to exercise due diligence before and at the beginning of the voyage to make her seaworthy. Owners also breached their obligation to carry, keep and care for the cargo.

Charterers’ claim succeeded in full.

Comment

This case reiterates Charterers’ right to an indemnity, as well as reimbursement of fees incurred, where Owners have breached these obligations. It also confirms that time lost as a result of these breaches can fall within the charter off-hire regime.

Owners must ensure they understand the nature of their obligations in respect of maintenance and seaworthiness. The former is generally a continuing obligation, which will apply equally during the course of the charter and on delivery. The courts have considered seaworthiness, and the associated obligation of due diligence, in detail. Although each case will turn on its own facts, the requirements for compliance are clear.