Liability for Cargo Damage under GenCon 1994

by | Mar 30, 2023 | Carriage by Sea, Summaries of Cases |

Liability for Cargo Damage under GenCon 1994

Arnold Van Steenderen, Van Steenderen Mainport Lawyers, Rotterdam

The Netherlands – carriage by sea: Gencon 1994 charterparty, damage to cargo carried on board of the vessel, who is responsible and liable?   

The Amsterdam Court of Appeal rendered a judgment on 24 January 2023 (ECLI:NL:GHAMS:2023:137) in the BBC Spring/ MY “Low Profile” case, whereby BBC and appellant entered into a charter agreement pursuant to which BBC provided the ocean-going vessel BBC Spring for the deck transportation of a yacht from Genoa, Italy, to Colón, Panama. While unloading in Colón, the yacht fell onto the deck of the BBC Spring and was damaged.

BBC and appellant each claim that the other is liable to them for the consequences of that fall and is required to indemnify them and compensate them for their damages. In addition, BBC claims payment of demurrage.

The facts as established

  1. A Gencon 1994 charterparty was issued on 27 February 2015, with amended clauses and additional clauses 20 to 33, whereby BBC (defendant) provided a vessel for the carriage by sea of ‘One yacht in its own cradle’. Appellant is listed as ‘Charterers’ (Box 4) and BBC as ‘Owners’ (Box 3). The yacht referred to in the charter party is the motor yacht ‘Low Profile’ (‘the yacht’) owned by Iceberg Adventures Limited (‘Iceberg’).
  2. Eventually, BBC provided the m.v. BBC Spring (“the BBC Spring”) under the charter party for the transportation of the yacht. At the time of the transport, BBC was the time charterer of the BBC Spring.
  3. The first sentence of clause 5 sub (a) of the Gencon 1994 charter party (‘Costs/Risks’), “The cargo shall be brought into the holds, stowed and/or trimmed, tallied, lashed and/or secured and taken from the holds and discharged by the Charterers, free of risk, liability and expense whatsoever to the Owners” is crossed out. Also crossed out in this clause is under (b) (‘Cargo Handling Gear’ ) “Cranemen/winchmen shall be under the Charterers’ risk and responsibility.“
  4. To the extent relevant, the added clauses of the Charter Party read as follows:

“22. Shipment on Deck

On/under deck in Owners option. If on deck at merchant’s risk and expense. Bills of lading to be claused accordingly.

(…)

  1. Loading/stowage/discharging 

The loading, stowing, lashing, securing, dunnaging, unlashing, unsecuring and discharging of the yacht shall be performed by Shippers under the supervision of the Master who, at the completion of loading shall issue a certificate to Charterers confirming that the yacht has been loaded, lashed, secured and dunnaged at his satisfaction.

The crew to assist with lashing, securing, dunnaging and to operate cranes provided same is allowed by local regulations. (…)

(…)

Charterers to have free use of vessels gear and cranes to drive 24 hours a day if requested by Charterers. (…)

Charterers/Shippers to have the free use of any dunnage, lashing or securing material on board free of expense to them but otherwise dunnage and lashing/securing material, including cradles suitable for sea transport, are to be supplied and paid for by Charterers and will be removed prior to or upon completion of discharge at their risk and expense, with Crews assistance as outlined here above.

Whilst Stevedores at loading and discharging ports are appointed and paid by Shippers, Receivers or Charterers, they shall be deemed Charterers servants and shall work under the supervision of the Master. (…)

(…)

Any special required spreaders, lifting beams or other lifting equipment/gear not available on board the vessel to be supplied by the Charterers; suitable soft-belts/slings to be supplied by the Merchants/Shippers/Receivers. (…) cargo to be fitted with suitable lifting lugs or other adequate means of lifting and center of gravity to be clearly indicated.

(…)

Free use of ship’s cranes provided permitted by local regulations bends and crew to operate cranes.”

  1. Clause 7 of the charter party reads as follows:

“Demurrage at the loading and discharging is payable by the Charterers at the rate stated in Box 20 per day or pro rata for any part of a day.”

Box 16 (c) of the charter party states: “Total laytime for loading and discharging 36 ttl hours shinc” and Box 20 states “Demurrage rate and manner payable (loading and discharging) (Cl. 7) Usd 12,000 pdpr fd“.

  1. Appellant is a specialist yacht forwarder, engaged to load and unload the yacht. Appellant prepared a lift plan proposal for this purpose. Appellant instructed the master by email message dated 23 March 2015, including the charter party and the lift plan proposal. This email message stated in part:

“We request the assistance of your crew for the loading / discharging, securing and welding work. The yachts will be loaded / discharged with the ships cranes, mostly handled by the ship’s crew.

(…)

In the loading / discharge ports a [appellant] loadmaster / superintendent will come on board and attend and supervise the loading / discharge and securing operations.”

Appellant supplied the lifting straps used for unloading and engaged a Load Master for loading and unloading.

  1. On 4 April 2015, the BBC Spring departed from Genoa. The yacht was stowed on deck and set. On 20 May 2015, the BBC Spring arrived at the port of Cólon. A Tool Box Meeting took place that day, during which the unloading operation was discussed. This meeting was attended, among others, by the captain and first mate of the BBC Spring. During this meeting, the Load Master appointed by appellant presented himself on behalf of appellant.
  2. On 21 May 2015, the yacht fell and was damaged while unloading on the deck of BBC Spring (hereinafter: the incident).
  3. Following the incident, Iceberg had the BBC Spring arrested in the port of Colón. On 9 June 2015, a Panamanian court granted permission for the arrest to be lifted. The arrest was lifted after the BBC Spring’s liability insurer provided a guarantee of USD 12 million. On behalf of BBC and appellant, guarantees of USD 12 million were subsequently provided by their liability insurers to secure payment of recourse claims back and forth also.
  4. Following the incident, several proceedings were instituted in the Netherlands and in Panama.
  5. After the arrest was lifted, the yacht was transported back to Genoa on another vessel, the m.v. Clipper Helvetia (“the Clipper Helvetia”).
  6. On 19 June 2015, BBC invoiced demurrage (‘demurrage for all ports (GENOA, COLON)’) of USD 437,833.33 to appellant.
  7. The parties made a (procedural) choice of forum for the Amsterdam District Court and a (procedural) choice of law for Dutch law.

The findings of the Court of Appeal

  1. BBC’s claims are based on the contention that it follows from the charter party that appellant must indemnify it if it is sued for compensation for damage incurred during the unloading of the yacht. BBC argues that the master and crew of the BBC Spring acted in accordance with the terms of the charter party.
  2. Appellant submits that, contrary to contractual responsibilities and rights, the captain of the BBC Spring did not allow the Load Master hired by appellant, despite his request and insistence, to lead the unloading operation of the yacht in Colón. According to appellant, this deprived appellant of its responsibility for the unloading or at least took it from appellant and, as a result, shifted liability for the unloading to BBC.
  3. The cause of the incident is not established. The parties disagree on this point. The court takes as its starting point that the cause of the incident is unknown.
  4. It is not disputed that where the charter party refers to ‘Owners’, this refers to appellant and that BBC is alternately referred to as ‘Merchant’, ‘Shipper’ or ‘Receiver’. It is not in dispute that appellant and BBC agreed in clauses 5 and 25 of the charter party that appellant was in charge of the loading and unloading operations and thus the responsibility for proper loading and unloading was assigned to appellant. In view of the meaning that the parties could, in the given circumstances, reasonably ascribe to clauses 5 and 25 of the charter party and what they could reasonably expect from each other in that regard, it follows that the yacht would be loaded and unloaded by and at the expense of appellant, under the supervision of the master. With the provision on the master’s supervision, the agreements discounted the master’s overall supervision of the vessel. Appellant was free to use the equipment and ship’s cranes and other materials on board and had to take care of other necessary materials itself. BBC Spring’s crew had to assist in operating the ship’s cranes. The parties correctly take the view that these cost clauses are also risk clauses. As appellant argues, this implies that if damage occurs during loading or unloading, appellant is in principle liable for the consequences. Appellant rightly argues that, given the deletions in Standard Clause 5, the charter party leaves room for BBC to be liable for damage incurred during loading and unloading. Where BBC takes charge of the unloading operation itself in defiance of the arrangements in the charter party, it cannot indemnify itself or be relieved of liability for the unloading operation it takes over. Clause 22 of the charter party indemnifies BBC against the risk posed by carriage on deck, but does not affect any liability of BBC for the consequences of improper or careless unloading of cargo.
  5. It is established that appellant prepared a lifting plan for the loading and unloading of the yacht and gave ‘voyage instructions’ to the captain of BBC Spring, enclosing a copy of the charter party and the lifting plan. Appellant further provided a Load Master for loading and unloading and the lifting straps used for loading and unloading. All this is consistent with appellant’s responsibility for the loading and unloading of the yacht regulated in clauses 5 and 25 of the charter party. In substantiation of the actual course of events during unloading, appellant refers inter alia to the following passages in the written statements of the first mate:

 “After the meeting the discharging preparations began. Rigging was made in accordance with Lifting Plan. Unlashing was made by Load Master, his deckhands and ship’s crew as assistance. Cutting of stopper and cradles was made by crew after Load Master order.”

It follows that the Load Master, in consultation with the master, directed the execution of the unloading operation in a manner consistent with the division of responsibilities laid down in clauses 5 and 25 of the charter party. It cannot be inferred from this, as appellant argues, that the Load Master was only performing an assisting and supporting role.

  1. It is not in dispute that BBC Spring’s first mate gave direct instructions to the crane operators of the ship’s cranes. Appellant submits that this was at the behest of the captain of the BBC Spring, who thereby deprived appellant of, or took over from appellant, the leadership and responsibility over the unloading operation. Appellant refers to the written statement of the Load Master for the actual course of events in the alleged taking away or taking over of responsibility for the unloading operation, which states:

“At the meeting [the Tool Box Meeting, court’s addition] we discussed the operational outline and operational sequence involved in the discharge of the LOW PROFILE. I requested and suggested to be the Load Master – that is to say, the person in charge of the actual lifting operations (controlling the cranes, etc). However, the Master of the BBC SPRING explicitly denied my request. Instead, the Master indicated to me that the Chief Mate would be the Load Master, and operations of the LOW PROFILE. The reason given was that the Chief Mate did the loading in Italy as well, and so the Master stated that it was more appropriate that the Chief Master should be in charge of conducting the discharge. This is not an uncommon practice on a heavy lift vessel like the BBC Spring. The decision of the Master seemed justifiable to me and it was clear that this could not be opposed by me. Finally, the Master further indicated that he would be at bridge assisting with the ballasting.“

  1. Appellant further refers to the Load Master’s comments on the statements made in the Panamanian proceedings by the master and first mate of the BBC Spring, in which the Load Master emphasises that the ship’s cranes were not controlled by him, but by the first mate. On the control of the ship’s cranes, these comments state:

“No commands were given from 7* loadmaster, as per captain on tool box meeting, took full control of the lift and we were told chief mate will do the lift with captain on bridge for ballasting control.

(…)

(…) in tool meeting he [the captain, court addition] made it very clear that the CO [the first mate, court add] will be in charge of lifting and [appellant 2] loadmaster wont give ant[y] commands.“

  1. The factual course of events shown above implies that the Load Master, without any comment or protest, agreed at the Tool Box Meeting that the first mate of BBC Spring would be in charge of the ship’s cranes. Given this consent by the Load Master without any reservation (regarding liability), the master and thus BBC could reasonably trust that responsibility for unloading the yacht remained with appellant even during this, undeniably risky, part of the unloading operation.
  2. To the extent that the Load Master felt pressurised during the Tool Box Meeting to agree to the first mate directing the ship’s cranes – which, incidentally, is questionable given his statement that he found the captain’s decision justifiable and that this division of labour is not unusual in this type of unloading operation – he had plenty of time in the period between the Tool Box Meeting on 20 May 2022 and the lifting of the yacht with the ship’s cranes the following day to contact appellant, so that appellant could make representations and/or express reservations to BBC regarding appellant’s responsibility arising from the charter party for (this part of) the unloading operation. It is impossible to see, without further explanation, which is lacking, how the hierarchical relations on the ship and the Load Master’s apparently existing feeling that he could not go against the master prevented this.
  3. The considerations above mean that the factual course of events alleged by appellant did not lead to a division of responsibility that deviated from the charter party. Thereby, appellant has not disputed with sufficient reasoning that (this part of) the unloading operation was carried out in accordance with clauses 5 and 25 of the charter party and has not stated sufficiently concretely that the responsibility for the unloading was taken away from appellant or taken over by BBC.
  4. It follows from the foregoing that, in principle, BBC is not liable for the damage resulting from the unloading of the yacht and that appellant must indemnify it for any third-party claims and compensate it for its damage resulting from the incident.
  5. The last claim – the demurrage claim – rests on the contention that the ‘laytime’ in Colón began on 20 May 2015, at 13:00, and continued until 25 June 2015 at 20:40, when BBC Spring was able to depart. This claim was awarded in the contested final judgment of the Amsterdam District Court in the amount of € 403,500. The court upheld appellant’s plea of own fault and charged the demurrage after 22 June 2015 to BBC. Appellant’s contention was that, after permission was given on 18 June 2015 to load the yacht to the Clipper Helvetia, BBC chose not to load its cargo to the BBC Asia until the night of 22-23 June 2015.
  6. The position of appellant that it is not liable for demurrage because it was deprived of responsibility, or at least the direction, of the unloading operation, or at least it was taken over by BBC, is contrary to what has been considered above in relation to the other claims of BBC.
  7. Appellant furthermore challenges the court’s finding that it had allegedly done nothing to lift the arrest. According to appellant, that was not up to appellant, so that the court incorrectly determined the amount of demurrage owed by it. This argument fails already because of the lack of a (numerical) specification thereof. This is all the more important since – apart from the lifting of the arrest – after the incident it was necessary to wait for the Clipper Helvetia to transport the yacht back to Genoa.
  8. BBC challenges the upholding of the plea of own fault. The upheld plea of fault implies that BBC could have transshipped the yacht onto the Clipper Helvetia earlier, but chose not to do so and allowed the demurrage to accrue. BBC has not disputed this with sufficient reasoning by arguing, without further specificity or substantiation, that it could not have transshipped the yacht at an earlier time. This is all the more compelling as it follows from the Clipper Helvetia’s statement of facts that she was in/near Colón in the early morning of 22 June 2015. This grievance therefore fails.

The decision of the Court of Appeal

The Court of Appeal:

  • rules that appellant is liable to BBC for all consequences of the incident dated 21 May 2015 at Colon and is obliged to indemnify BBC in all respects;
  • orders appellant to pay to BBC such sums as BBC may be ordered to pay (or pay pursuant to a reasonable settlement) to third parties who have made or will make claims against BBC in connection with the incident;
  • orders appellant to pay to BBC compensation for the damage it has suffered as a result of the incident, to be ascertained by statute and settled in accordance with the law;
  • orders appellant to pay BBC USD 403,500, plus statutory interest on that amount from 10 July 2015 until the date of payment in full, on account of the demurrage claim;
  • orders appellant to pay the costs of the proceedings at first instance and on the appeal.