The Inter-Club Agreement – Clause 8(b): When is “similar” similar?

//The Inter-Club Agreement – Clause 8(b): When is “similar” similar?

Agile Holdings Corporation v Essar Shipping Ltd. (The Maria) [2018] EWHC (Comm)

In a recent judgment on appeal from an arbitration award under S.69 of the Arbitration Act 1996, the English High Court had to consider whether an amendment to a NYPE charterparty was sufficient to make the Master responsible for cargo handling pursuant to the terms of Clause 8(b) of the Inter-Club Agreement (“ICA”) in which event claims arising from cargo handling would be split 50/50 between owners and charterers.

The court held that only a complete transfer of responsibility to owners is sufficient to trigger the 50/50 apportionment under Clause 8(b), and rejected the argument that in each case there should be a factual investigation in relation to what aspect of cargo handling had caused the loss and then whether responsibility for that partial aspect had been transferred to owners under the applicable charterparty. That analysis was inconsistent with the purpose of the ICA.

Facts

Agile Holdings were the owners of the “Maria” and chartered the vessel to Essar Shipping on the customary NYPE 1946 charterparty form for a time trip from Tunisia to India via Trinidad. A cargo of Direct Reduced Iron (DRI) was to be loaded at Port Lisas in Trinidad and during loading operations fire broke out in the cargo. Nevertheless, the owners’ supercargo allowed loading to continue and upon discharge the cargo interests brought a cargo claim against the owners. The owners in turn brought a claim against the charterers arguing that charterers were 100% responsible for the loss pursuant to Clause 8(b) of the ICA.

Clause 8(b) of the ICA states:

Claims in fact arising out of the loading, stowage, lashing, discharge, storage or other handling of cargo: 100% Charterers unless the words “and responsibility” are added in Clause 8 or there is a similar amendment making the Master responsible for cargo handling in which case: 50% Charterers 50% Owners (emphasis added).

In the subject charterparty, the words “and responsibility” had not been added to Clause 8. Instead, Clause 49 stated:

The stevedores although appointed and paid by Charterers/Shippers/Receivers and/or their agents, to remain under the direction of the Master who will be responsible for proper stowage and unseaworthiness and safety of the vessel” (emphasis added).

The Tribunal decided that this clause rendered the Master responsible for part of the loading operations and that this was therefore sufficient to trigger the “similar amendment” provided for in Clause 8(b) of the ICA resulting in liability for the claim being apportioned on a 50/50 basis. The owners appealed.

Judgment

Owners argued that the Tribunal had erred in law and that for an amendment to be “similar” to adding the words “and responsibility”, the amendment had to involve a total transfer of responsibility for cargo handling. They argued that clause 49 at best only transferred partial responsibility for cargo handling, but even if that was right, it only transferred responsibility for stowage resulting in unseaworthiness and not resulting only in cargo damage.

Charterers argued that a “similar amendment” for the purposes of Clause 8(b) only needed to transfer responsibility for the aspect of cargo handling that resulted in the cargo claim (and that therefore the claim ought to be apportioned 50/50). Self-evidently, this would require a detailed examination of the facts and cause of the loss.

The Judge found in favour of the Owners. He agreed with the owners that the original purpose of the ICA was to provide a simple, mechanistic agreement for the apportionment of cargo claims between owners and charterers. Clause 8(b) of the ICA provided that charterers were responsible for claims arising out of cargo handling unless the responsibility for those operations had been shifted to the owners. The words “and responsibility” in clause 8 of the NYPE charterparty would achieve this or a “similar amendment”. “Similar” in this context did not mean ‘alike but not identical’. “Similar” meant of the same kind or of the same effect and therefore required a total transfer of responsibility for cargo handling.

On Charterers argument there would need to be a factual determination that the loss was caused by cargo handling and then what particular aspect of that cargo handling caused the loss so that it could then be decided whether responsibility for that aspect had been transferred to owners or not under the charterparty. That level of detail was inconsistent with the simple apportionment of liability the ICA was designed to achieve.

Commentary

This judgment will come as welcome news to owners, charterers and their P&I insurers who can rely on a simple analysis of the charterparty terms and the facts to determine whether cargo claims arising out of cargo handling under the ICA ought to be apportioned 100% to charterers or 50/50 between owners and charterers. Only the addition of the words “and responsibility” to clause 8 will achieve this, or another “similar amendment” which results in a total transfer of responsibility to owners for cargo handling. This case is another recent example of the English courts’ willingness to give effect to the simple, broad-brush mechanism to the apportionment of cargo claims the ICA was designed to achieve. Clearly, however, the simplest way to invoke the proviso to clause 8(b) of the ICA with absolute certainty is to include the words “and responsibility” at clause 8 of the NYPE form.

 

Smooth Waters

 

This commentary was provided by Smooth Waters, the claims adjusting division of SafeWaters & Trident

 

 

 

By |2018-06-25T14:18:44-05:00June 25th, 2018|Insights|Comments Off on The Inter-Club Agreement – Clause 8(b): When is “similar” similar?
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