Web alert: The Sea Miror – an owner/carrier can shift responsibility for the loading / discharge of cargo with the use of clear language

News & Insights 16 September 2015


In the recent case of the Sea Miror,[1] the English High Court has reviewed the law on responsibility for cargo operations and considered which party is liable for loss or damage arising from improper loading, stowage and/or discharge of cargo.

Introduction
In the recent case of the Sea Miror,[1] the English High Court has reviewed the law on responsibility for cargo operations and considered which party is liable for loss or damage arising from improper loading, stowage and/or discharge of cargo. 
 
Facts
The dispute arose following the carriage of around 450,000 bags of rice from Pakistan to the Ivory Coast on board the Sea Miror. Following discharge, various claims arose relating to alleged moisture damage, torn bags (arising during loading/carriage/discharge) and alleged short delivery.
 
The bills of lading relating to the above cargo incorporated a voyage charter on the Synacomex 90 form. Clause 5 of the charter contained the following provision:

‘Cargo shall be loaded, spout trimmed and/or stowed at the expenses [sic] and risk of Shippers/Charterers…Cargo shall be discharged at the expenses [sic] and risk of Receivers/Charterers…Stowage shall be under Master's direction and responsibility…’

The parties were unable to agree on the meaning of the above term and asked the High Court to decide which party was responsible as a preliminary issue to the main dispute. 
 
Discussion
Cargo interests argued that clause 5 of the charterparty did not transfer responsibility from the owner to the charterer (and therefore cargo interests) for the following reasons:

  • The words ‘at the expense and risk of Shippers/Charterers’ were not sufficiently clear to transfer responsibility. 
  • Risk’ does not equate to responsibility. The clause contains both the words ‘risk’ and ‘responsibility’ indicating that they are separate concepts.
  • The words ‘at the expense and risk of Shippers/Charterers’ related only to the risk of delay in cargo operations.

In contrast, the owner’s view was that the words ‘at the expense and risk of Shippers/Charterers’ were sufficiently clear to transfer responsibility for loading and discharging operations to the charterer (and therefore cargo interests). The owner argued as follows:

  • As a whole, the fact that the operations for loading, stowage and discharge were performed by the charterers suggested that they should be responsible for them, subject to the addition of the words ‘and responsibility’ which shifted liability for stowage back to the carrier. 
  • The situation is similar to the addition of the words ‘and responsibility’ at clause 8 of the NYPE form. The effect of the addition of these words is to transfer risk from the charterer to the owners and risk is akin to responsibility, as supported by other cases. 
  • The cargo interests’ argument that ‘at the risk of’ meant that the party would be liable for loss arising from delay only was not persuasive, such issues were dealt with by other provisions of the charter, as well as cargo conventions.
  • Overall, cargo interests’ arguments did not result in any sensible commercial meaning for clause 5. 

The Court’s decision
The High Court agreed with the owner on all points, holding that clause 5 successfully shifted the burden for loading and discharging upon cargo interests, albeit that the risk for stowage was with the owner by virtue of the words ‘and responsibility’.
 
While the judge agreed that there is some internal tension with clause 5 – because on the one hand it makes cargo interests liable for loading, discharging and stowage and then transfers liability back to the owner for stowage – it was held that cargo interests’ construction was the most difficult to reconcile when the charter was read as a whole. 
 
Comment
At common law, a carrier is responsible for loading, stowage and discharge of cargo. There is no doubt that a carrier can shift responsibility for these operations to the charterer/cargo interests by express agreement and to do so is not in breach/contravention of the Hague/Hague-Visby Rules. Such charterparty terms are also germane and will be incorporated into the relevant, corresponding, bill of lading where general words of incorporation (such as those in the Congenbill) exist.
 
The Sea Miror provides a useful summary of the case law in relation to the transfer of responsibility for loading, stowage and discharge of cargo. The decision acts as a reminder that when seeking to shift responsibility for cargo operations, it is very important to use clear language set out in a logical way.
 
This article intends to provide general guidance on the issues arising. It is not intended to provide legal advice in relation to any specific query. The law is also not static. If in doubt, The Standard Club is always on hand to assist.
 
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[1] Societe De Distribution De Toutes Merchandises En Cote D’Ivoire (trading as ‘SDTM-CI’) and others v Continental Lines NV and another (The ‘Sea Miror’) [2015] EWHC 1747 (Comm)

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