Collateral lies: The lie is dishonest but the claim is not

The Supreme Court rules that a collateral lie embellishing a valid claim does not amount to a fraudulent claim.

Versloot Dredging BV and another (Appellants) v HDI Gerling Industrie Versicherung AG and others [2016] UKSC 45

Facts

The vessel DC Merwestone was incapacitated by an ingress of water which flooded the engine room. A claim was made in respect of damage to the engines under a policy of marine hull insurance in the sum of approximately €3.2 million.

The relevant individual employed by the vessel’s managers was frustrated by the delay in the insurers recognising the claim and making a payment on account. At a time when the cause of the flooding was unclear, the individual said that the bilge alarm had sounded but that the crew had been unable to investigate the leak because of rolling of the ship in heavy weather. The employee said that members of the crew had told him this when, in fact, it was merely his own theory.

The individual thought that, by making the statement, he could speed up payment of the claim when the insurers might otherwise focus on, for example, the potentially defective condition of the ship. In fact, the loss was covered by the policy and the issue of whether the bilge alarm had sounded was irrelevant.

You can read our full client alert here.

The importance of the arbitration notice: make sure it is sent to the right person

Sino Channel Asia Ltd v. Dana Shipping and Trading Pte Singapore and Another [2016] EWHC 1118 (Comm)

A recent English High Court decision serves as a reminder of the importance of taking great care in relation to service of notice to commence arbitration. The case concerned whether the notice was sent to the correct party.

The judge set aside a US$1.68 million arbitral award for being neither valid nor binding as the notice to commence arbitration was not correctly served.

  • A notice of arbitration must be served on the intended respondent as set out in the arbitration agreement.
  • It is insufficient to serve notice on the person/entity with whom you commercially communicated during the business if they are not a party to the contract.
  • An agent for commercial purposes is not necessarily an agent to accept service of the notice of arbitration.

Impact

It is common in commercial contracts to communicate with an agent, associated company or head office. If the contract ends up in dispute, a party should take care to ensure that the arbitration claim comes to the notice of the contract counterparty, rather than simply the ‘usual’ party communicating during the business relationship.

To view our client alert on this case please click here.

 

Definitely indefinite? Container Demurrage in the Court of Appeal

In the recent case of MSC Mediterranean Shipping Company S.A. v. Cottonex Anstalt [2016] EWCA Civ 789 the Court of Appeal ruled that the commercial purpose of the contract had been frustrated and that demurrage on detained containers which could not be redelivered to the carrier did not accrue indefinitely.

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Contracting out of waiver? Court of Appeal provides guidance on ‘no variation’ and ‘anti-oral’ variation clauses

The Reed Smith Shipping Group recently published a client alert that looks at the effectiveness of what are commonly termed “no variation” or “anti-oral variation” clauses (i.e. clauses which purport to prevent the contract in question from being amended absent compliance with specified requirements). They are commonly found in commercial contracts in numerous guises. Normally they specify that to be effective, any amendment to the contract must be in writing and signed by the contracting parties. In the alert, we specifically look at the recent MWB Business Exchange Centres Ltd. v. Rock Advertising Ltd. [2016] EWCA Civ 553 decision under English law.

Click here to read and access the full version of the alert.

“A Weight on Your Shoulders” – New Weighing Obligations Upon Shippers and Carriers From 1 July 2016

On 1 July 2016 the International Maritime Organisation’s amendments to the Safety of Life at Sea (“SOLAS”) Convention Chapter VI enter into force. From this date, all packed containers must be accompanied by Verified Gross Weight documentation prepared by shippers (normally in the form of a certificate). There will be regulatory consequences for the shipper if the incorrect weight is ascribed to the container, as well as for the vessel if it accepts a mis-declared container.

Current Situation

At present, shippers themselves weigh and declare the weight of their containers and contents. It is thought that this results in the weight of around 20% of all containers being mis-declared, either maliciously or accidentally. Such misdeclaration is thought to have contributed to accidents, such as the sinking of the MSC Napoli. The IMO has decided that this system needs to change, and 1 July 2016 marks a significant shift in roles and responsibilities for anyone involved in the container trade.

Regime Change

From 1 July 2016, the following changes will come into force:

  1. The “Verified Gross Weight” of a container must be evidenced in the form of documentation (paper or electronic) signed by the shipper, stating the weight of the container after it has been packed and measured on a weighbridge (“method 1”) or the weight of the individual components and the weight of the container (“method 2”). Weighing must be carried out at an approved weighing station which complies with national rules. Estimated weights are not permitted for the purposes of the certification.
  2. The shipper (being the party listed as shipper in the bill of lading or sea waybill ) will be ultimately responsible for the weighing and verification of the container, and must communicate the weight to the Master a reasonable time in advance of it being loaded.
  3. The carrier is responsible for relaying the verified gross weight information to the terminal.
  4. If the certification evidencing the weight of the container is not received in advance, then the vessel must not sail with that container onboard, unless the master or the terminal can establish the verified weight of the container through other means. Enforcement of the regulations will vary from country to country and as best practice it should be assumed that the certification will be inspected at both the load and discharge port. In England compliance will be monitored both by the receiving terminal and the national regulator (the Maritime and Coastguard Agency), with penalties ranging from criminal liability to a ban on using method 2 (the weight of the individual components and the weight of the container) to calculate the Verified Gross Weight of the container.

Impact of the New Regime

The impact of the new regime is widespread. Below are a few key points of which carriers and shippers must now be aware, and have policies and procedures in place to implement before the new regime takes effect.

Carriers

  • Should make it clear to shippers that a container cannot be loaded until verified gross weight certificate documentation has been received
  • Are responsible for transmitting this information to the port/terminal
  • Should consider incorporating clauses into contracts/charterparties preventing claims from shippers if documents have not been received/transmitted in time for loading and departure, and entitling them to claim/be indemnified for any claims if they suffer loss or delay as a result of shippers’ conduct

Shippers

  • Are responsible for obtaining and providing carriers with compliant verified gross weight certificate documentation in advance
  • Risk missing slots if this information is not provided in advance
  • Need to consider how the costs of storage and spoilt cargo will be dealt with if the documentation is missing/inadequate or not accepted by the carrier or terminal

Questions Which Will Arise

Given the significant changes which will come into force on 1 July 2016, various questions will inevitably arise about the application of the new regime. Many of these will be dealt with “on the ground”, but we set out below some considerations which all parties should review and, as necessary, implement policies and procedures to deal with so as to minimise the interruption to service:

  • What happens if a container arrives in a port without the necessary documentation, or with documentation which is incorrect? Does the receiving port bear any responsibility, or is the shipper wholly responsible?
  • To what extent is the master required to investigate / refuse to load a container which has the necessary documentation but which he suspects to be incorrect?
  • What is a “reasonable time in advance” for the documentation to be provided to the carrier by the shipper?
  • What if the documentation is signed by someone “on behalf” of the shipper? Does the carrier need to check he has the necessary authority to do so? What if the carrier suspects he may not?

The Global Santosh: The Supreme Court provides guidance on a charterer’s responsibility for its agents

NYK Bulkship (Atlantic) NV (Respondent) v Cargill International SA (Appellant) (“The Global Santosh”) [2016] UKSC 20 (overturning the Court of Appeal [2014] EWCA Civ 403)

The Supreme Court last week handed down an important decision concerning the issue of when a charterer will be held responsible for its agents under a charterparty.

Contractual position

NYK was the disponent owner of the m.v. Global Santosh (“the Vessel”). NYK time chartered the Vessel to Cargill on an Asbatime form, which is a variation of the NYPE 1946 form. Cargill sub-chartered the Vessel to Sigma Shipping Limited under a voyage charter. The Vessel carried a cargo of cement in bulk from Sweden to Nigeria under a sale contract between Transclear SA (“Transclear”) and IBG Investments Ltd (“IBG”). It is likely that Transclear was a further sub-charterer of the Vessel.

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Res Cogitans – A Class of Its Own

Bunker Supply Contracts, Retention of Title Clauses, The Sale Of Goods Act 1979 and One Highly Publicised Insolvency Combine to Give Vessel Owners a Global Headache.

The Supreme Court’s ruling in this already notorious case may have a significant impact on the bunker supply industry and be somewhat unsettling for vessel owners and charterers (as purchasers of bunkers).

Its decision that bunker sale contracts on standard terms are not contracts for the sale of goods under the Sale of Goods Act 1979 (“SOGA”) means that an assumption that no-one had questioned prior to the Tribunal’s decision of April 2015 is now turned on its head. Its impact both on the many disputes which have been awaiting this decision and on the future of this industry may take some time to unfurl. We take a look at the decision and give some pointers as to what the future may hold.

The above is an executive summary from the Shipping Group’s client alert ‘Res Cogitans – A Class of Its Own’, dated 12th May 2016. Read the full Alert here.

Contractual amendments – “only in writing and signed by the parties”

We often see contracts containing wording along the lines of: “This Agreement may not be amended, except by the mutual written agreement of the Parties.”

The recent decision of the Court of Appeal in Globe Motors Inc., et al. v TRW Lucas Varity Electric Steering Ltd., et al. [2016] EWCA Civ 396, considered the impact of similar clauses, in that case one which provided “Entire agreement; amendment: This Agreement, which includes the Appendices hereto, is the only agreement between the Parties relating to the subject matter hereof. It can only be amended by a written document which (i) specifically refers to the provision of this Agreement to be amended and (ii) is signed by both parties.”

This is of particular interest because there were previously two inconsistent Court of Appeal decisions on this point, which the Court had to consider.

Purpose of such clauses

The starting point for the party seeking to rely on the clause was that it meant that any amendment had to be in writing and be signed by both parties, and that it was not open to the parties to amend the Agreement orally. It was said that the purpose of the clause was to promote certainty and avoid false or frivolous claims of an oral agreement. Such clauses can also prevent a person in a large organisation from producing a document which unwittingly and unintentionally is inconsistent with a contract to which the organisation is a party, and they therefore set an evidential threshold.

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Shelltime 4 – who bears risk of arrest?

In ST Shipping & Transport Pte Ltd -v- Space Shipping Ltd (“CV STEALTH”), the Commercial Court (“the Court”) heard an application arising out of an Arbitrator’s Award in respect of a dispute under a charterparty on an amended SHELLTIME 4 form.

The Charterers had sub-chartered the vessel on an amended BPVOY form to a company which had intended to export a cargo of crude oil unlawfully from Venezuela. Unaware of this, the Charterers gave orders for the vessel to proceed to Venezuela to load the sub-Charterers’ cargo. Suspicions were aroused when the documents were presented at the loadport and the vessel was detained in September 2014 in Venezuela, where she remained at the time of judgment.

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