Trafigura Beheer BV v Navigazione Montanari SpA [2015] EWCA Civ 91

The subject vessel was chartered to carry a cargo of oil from Abidjan, Ivory Coast to Lagos, Nigeria. Clause 46 of the charter (on an amended BPVOY3 form) incorporated the Hague-Visby Rules, which contain exemptions in respect of loss or damage arising or resulting from inter alia “act of public enemies”, “perils of the sea”, and “any other cause arising without the actual fault or privity of the carrier, or without the fault or neglect of the agents or servants of the carrier”. It was common ground that loss resulting from piracy would fall within one or more of these exemptions.

The charterparty also contained the following in-transit loss (ITL) clause:

“In addition to any other rights which Charterers may have, Owners will be responsible for the full amount of any in-transit loss if in-transit loss exceeds 0.5% and Charterers shall have the right to claim an amount equal to the FOB port of loading values of such lost cargo plus freight and insurance due with respect thereto. In-transit loss is defined as the difference between net vessel volumes after loading at the loading port and before unloading at the discharge port.”

During the course of the voyage, pirates took control of the vessel and removed part of the cargo. Charterers alleged that Owners were liable for the loss pursuant to the ITL clause.

At first instance, it was held that the cargo loss did not fall within the ITL clause and that even if it did, the incorporation of the Hague-Visby Rules excluded Owners’ liability. Charterers’ appeal against this judgment was dismissed by the Court of Appeal.

The words “in transit loss” were held to connote loss incidental to the carriage of the cargo, not loss caused by an event such as a piracy incident. There was a clear commercial rationale behind ITL clauses, in that it is very difficult to determine oil shortage claims, and it is sensible for the parties to agree that any unexplained difference will be recoverable where it exceeds a certain percentage. That ITL clauses only apply to short-delivery losses as encountered on a normal voyage was supported by the wording of the clause in this case which defined in-transit loss as the difference between volumes after loading and before unloading.

Clause 46 and the Hague Visby exceptions were held to apply whether or not the loss fell within the ITL clause. Charterers cited The Olympic Brilliance as authority that an owner could not rely on the Hague Visby Rules to claim back freight which had been correctly deducted in respect of unexplained losses which fell within an ITL clause, and that it followed that the Rules could similarly not be relied on to meet a claim which fell within such a clause. The Court disagreed. The Olympic Brilliance was authority for the point that an owner could not rely on the Hague Visby Rules to claim back freight correctly deducted in accordance with an ITL clause. However, it did not necessarily follow that the Rules could not be relied upon in respect of alleged liabilities for loss as distinct from an entitlement to freight.

This case exemplifies the importance to contractual interpretation of the commercial rationale behind a clause. Although cargo removed by pirates during a voyage could be said, on a purely factual interpretation, to be “in transit loss” because it occurred during transit of the cargo, that was not the intention of the ITL clause. It also exemplifies the court’s reluctance to disapply the Hague Visby Rules exemptions by analogy. The courts are likely to be reluctant to extend the situations in which charterers can recover from owners.