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CASES ENGLAND
(2013) 864 LMLN 1 Carriage of goods by sea Cargo damage Deterioration in cargo following delay caused by engine breakdown Whether vessel unseaworthy at commencement of voyage Whether shipowners failed to exercise due diligence Whether breach of obligation to proceed with all convenient speed Quantum of damages CHS Inc Iberica SL and Another v Far East Marine SA (The Devon) QBD (Comm Ct) (Cooke J) [2012] EWHC 3747 (Comm) 21 December 2012 The claimant cargo interests were the owners of a consignment of corn carried by the defendant shipowners on the vessel Devon from Varna, Bulgaria to Tarragona, Spain. The contract of carriage incorporated the Hague Rules. On 23 December 2010 the vessel suffered a main engine breakdown less than three hours after sailing from Varna and she was towed back the next day. The necessary repairs were not completed until 10 February 2011, and the vessel did not arrive at Tarragona until 20 February. As a result of the delay, some of the cargo arrived caked and mouldy. The breakdown report signed by the chief engineer stated: At about 1950 of 23 December notice luboil high temperature. The automation energized with indication high luboil temperature. Bridge informed immediately for this abnormality. After a very short time period the automation energized again with indication from oil mist detector from no 4 unit. As you understand this condition enabled me to act quickly to stop the main engine but during my way to control panel the main engine tripped through automation with indication of main bearing high temperature. On inspection at Varna, the crankshaft journals and main bearings 2, 3 and 4 were found severely damaged. It was agreed by the experts that the damage began in way of bearing 4. The claimants expert considered that the damage to the bearings and crankshaft was caused by the breakdown of the luboil viscosity caused by increased temperature in the luboil as a result of the failure of the saltwater (SW) cooling system adequately to cool the fresh water in the fresh water (FW) system which in turn was designed to cool the luboil used in the main engine. The failure in the SW system was the result either of the blockage on the salt water side of the Low Temperature Fresh Water cooler (the LT FW cooler) either by marine growth or by partial or full closure of a valve in the system or by blockage in a strainer preventing the cooling medium from cooling the volume of fresh water to the correct temperature (or a combination of those defects). The claimants said that the breakdown was attributable to unseaworthiness at the commencement of the voyage by reason of: (1) the poor condition of the engine lubrication and lubrication cooling systems; and (2) the lack of adequate systems to ensure that (a) the temperature of the engine lube oil was properly regulated, (b) the cooling system did not become blocked, and (c) the engine was adequately lubricated.
EDITED BY MICHAEL DAICHES, BARRISTER
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The claimants also said that the defendants failed to exercise due diligence within the meaning of the Hague Rules, and that there was a failure to proceed on the voyage with all convenient speed as required by the contract of carriage. The defendants expert could not provide a definitive cause of the incident and considered that latent defect was a possibility. As to quantum, the extent of the damage and its effect on the value of the cargo was disputed. The claimants arranged for a salvage sale of 3,020 mt of the total cargo of 14,353.50 mt. The defendants said that the damaged cargo should have been mixed with sound cargo and sold without any diminution in price. They also disputed various incidental expenses incurred by the claimants in investigating the effect of the delay on the cargo and in effecting the sale. Held, that as to unseaworthiness, the defendants could offer no reason for the failure of the lubrication system. No claim had been made in general average and no evidence had been adduced from anyone on board the vessel at the time of the incident, nor from any expert who attended at Varna to investigate the cause. The record in the chief engineers report and in the logs, (which contained less information than that report) were the only basis upon which the experts could express their views, together with the descriptions of the damage suffered and the repairs done at Varna. The absence of any oral evidence from the chief engineer, whose comments were relayed as hearsay was not a satisfactory basis upon which to proceed. Although it was said that he was no longer in the employment of the defendants that was not a satisfactory reason for the failure to call him or either of the other two engineers or the oiler who worked on the vessel at the time. No reason was advanced for the absence of any evidence from the surveyors who inspected the ship in Varna. Nor was the court satisfied that the defendants had disclosed all documents in their control relating to the cause of the damage. The inference was that the cause or possible causes discussed were causes which the defendants wished to hide because they were causes which would not have assisted them in their dispute with the claimants. They must have involved some unseaworthiness of the vessel at the commencement of the voyage from Varna. A latent defect leading to premature bearing failure was not the cause of the main engine breakdown because there was no mechanism to explain it. In the circumstances, the claimants experts explanation best fitted the evidence, when the temperature rise of the luboil was only explicable by reference to a failing in the LT FW cooling system, caused by a problem blockage of some kind in the SW side of that system. Accordingly, the vessel was unseaworthy at the commencement of the voyage by reason of the condition of the SW cooling system and its dirty and partially blocked state, which led to a failure in the LT FW cooling system which manifested itself within three hours of sailing from Varna in the form of high temperatures in the luboil for the main engine. Moreover, the defendants had no system in place for the proper monitoring of temperatures in the engine luboil or pressures in the SW system. Inspection in the three hours preceding the incident should have revealed the developing problem which manifested itself on the sounding of the luboil alarm. The vessel was unseaworthy by virtue of that lack of system also, which meant that the cooling system was prone to fail and the luboil to heat.
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There was no evidence of any system for inspection of temperature and pressure gauges or monitoring of them in watchkeeping duties. The system was to rely on alarms sounding before investigating a problem. Had there been any monitoring of the pressure gauge at the SW pump or monitoring of the efficacy of the ballast pump, it would have revealed a change in pressure if there was a blockage in the SW line. There was a failure to institute a system to monitor such matters which contributed to the casualty. The same feature that constituted unseaworthiness also constituted lack of due diligence in that respect. The blockage in the SW system should have been discovered at Varna. Accordingly, no defence was available to the defendants based on article IV rule 1 of the Hague Rules. As there was unseaworthiness at the commencement of the voyage, neither article IV rule 2 (p) (latent defect not discoverable by due diligence) nor (q) (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) could assist the defendants either. There was no separate breach of the obligation to proceed with all convenient speed. The cause of the delayed voyage was the breakdown of the vessel which resulted from her unseaworthiness. Any failure to proceed with all convenient speed could only arise at the point where the incident occurred. It was hard to see how there could be such a failure simply by virtue of the total length of the voyage when the reason for the delay was the incident itself which was caused by a breach of the Hague Rules seaworthiness obligation. There could not be a separate breach of the obligation to proceed with convenient speed, when the vessel could not proceed at all as a result of an earlier breach. As to quantum, the defendants submissions in relation to the partially damaged cargo were unreal and would be rejected. The experts had agreed that the cargo had deteriorated as a result of the delayed voyage. It was clear that 3,020 mt of cargo had been sold at a lower price than the sound arrived value of the cargo. On the evidence, that sale price properly reflected the value of the damaged cargo. The claimants were also entitled to damages in respect of: (1) additional stevedoring costs and warehouse costs, (2) loss adjusters charges for the salvage sale, (3) surveyors charges, and (4) Spanish Lawyers fees for arresting the vessel in order to obtain security for the claim. The defendants submission, in reliance on The Ocean Dynamic [1982] 2 Lloyds Rep 88, that those were irrecoverable in principle, as the costs of foreign proceedings, would be rejected. The proceedings in the present case were for security purposes and would fall to be decided alongside liability issues in the substantive proceedings, unlike the protective writ with which The Ocean Dynamic was concerned. Judgment for the claimants accordingly. David Walsh (Hill Dickinson) for the claimants; Adam Turner (Reed Smith) for the defendants.
GmbH, another German company, with the task of organising and providing the transport of the installation from Antwerp, Belgium, to Mexico. Samskip issued a bill of lading designating Krones as the shipper and the recipient as the consignee. The bill of lading contained a jurisdiction clause providing that any dispute was to be decided in Iceland according to Icelandic law. The consignment was damaged during the carriage and the recipient brought proceedings against Samskip before the Belgian courts. The Antwerp Court of Appeal declared itself to have no authority to hear and decide the case. It held that the recipient was not entitled to bring proceedings on the basis of the contract of carriage. The recipient was bound by the jurisdiction clause contained in the bill of lading. The judgment also stated that the Icelandic courts had exclusive jurisdiction, and for that reason the Belgian courts had no authority to hear the case. That judgment had become final. Krones (and the insurers to whom Krones had assigned its claims) subsequently brought proceedings for compensation against Samskip before the German courts. Samskip submitted that the actions were inadmissible inasmuch as the judgment of the Antwerp Court of Appeal produced legal effects not only as regards the Belgian courts lack of jurisdiction but also as regards the finding that jurisdiction lay with the Icelandic courts. Samskip said that the judgment had binding effect on the German court in accordance with articles 32 and 33 of Council Regulation (EC) No 44/2001. Krones and the insurers submitted that the binding effect of the Antwerp Court of Appeals judgment was confined to that part of the judgment which found that the Belgian courts had no jurisdiction. It did not extend so far as to mean that, as a result of the asserted jurisdiction of the Icelandic courts, courts of member states other than Belgium had no jurisdiction. The German court regarded the judgment of the Antwerp Court of Appeal as a procedural matter. Procedural judgments were not generally regarded by the German courts as being capable of recognition. It therefore referred questions to the ECJ for preliminary rulings: (1) as to whether article 32 of Regulation (EC) No 44/2001 covered a judgment by which a court of a member state declined jurisdiction on the basis of a jurisdiction clause, even though that judgment was classified as a procedural judgment by the law of another member state; and (2) as to whether articles 32 and 33 meant that the court, before which recognition was sought of a judgment by which a court of another member state had declined jurisdiction on the basis of a jurisdiction clause, was bound by the finding (made in a judgment, which had since become final, declaring the action inadmissible) regarding the validity of that clause. Held, that the principle of mutual trust would be undermined if a court of a member state could refuse to recognise a judgment by which a court of another member state declined jurisdiction on the basis of a jurisdiction clause. A restrictive interpretation of the concept of judgment would give rise to a category of judicial decisions which were not among the exhaustively-listed exceptions set out in articles 34 and 35 of Regulation (EC) No 44/2001, which could not be categorised as judgments for the purposes of article 32 and which the courts of other member states would accordingly not be obliged to recognise. Such a category of decisions, including in particular those by which a court in another member state declined jurisdiction on the basis of a jurisdiction clause, would be incompatible with the system established by articles 33 to 35, which favoured the unimpeded recognition of judgments and ruled out the possibility of review of the jurisdiction of the court of the member state of origin by the courts of the member state in which recognition was sought. Accordingly, article 32 also covered a judgment by which the court of a member state declined jurisdiction on the basis of a jurisdiction clause, irrespective of how that judgment was categorised under the law of another member state. A judgment by which a court of a member state had declined jurisdiction on the basis of a jurisdiction clause, on the ground that that clause was valid, bound the courts of the other
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CASES SINGAPORE
(2013) 864 LMLN 3 Company law Winding up Charterers asserting right to wind up shipowning company for failure to pay charterparty freight Whether shipowners entitled to declaration and injunction restraining charterers from presenting winding-up application
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SE Shipping Lines Pte Ltd v Austral Asia Line Pte Ltd (The AAL Shanghai) High Court (Choo Han Tek J) [2012] SGHC 220 30 October 2012 The plaintiff chartered the vessel AAL Shanghai from the defendant. The charterparty was entered into to allow the plaintiff to transport cargoes from South Korea and China to Brazil, under a contract between the plaintiff and Suzlon Energy Limited (SEL). SEL was the owner of the cargo, and the consignee was Suzlon Energy Eolica do Brasil Ltda (SEEBL). The plaintiff failed to pay freight under the charterparty, and the defendant exercised its lien over the cargo onboard AAL Shanghai. It also commenced proceedings against SEL and SEEBL in Brazil, and issued a notice of arbitration against the plaintiff. By letter of 12 June 2012 the defendants solicitors demanded that the plaintiff pay all the outstanding freight in a sum in excess of US$2 million, and threatened to wind up the plaintiff if payment was not made within 21 days. The freight remained unpaid, and the defendant claimed the right to commence winding-up proceedings against the plaintiff pursuant to section 254(1)(e) and 254(2)(a) of the Companies Act. The plaintiff now applied by originating summons for a declaration that any application by the defendant to wind up the plaintiff would amount to an abuse of the process of the court, and for an injunction preventing the defendant filing any application to wind up the plaintiff. Held, that an injunction would be granted if the debtor was able to show that it was likely that a winding-up order would not be made if a winding-up petition was presented (Metalform Asia Pte Ltd v Holland Leedon Pte Ltd [2007] 2 SLR(R) 268). This was hardly such a case. The plaintiff had raised a host of objections to winding-up proceedings by the defendant, including the fact that defendant had obtained security for its claim because SEEBL had paid a sum of US$ 2,547,440 into the Brazilian court, and that having sued in Brazil and commenced arbitration, the defendant would be abusing the process of court if it were allowed to present a winding-up petition in Singapore. However, the contract under which the present debt had arisen was the charterparty between plaintiff and the defendant. That was entirely separate from the carriage contract between the plaintiff and SEL. Further, the Brazilian proceedings concerned SEL and SEEBL, not the plaintiff, and the arbitration proceedings related to separate claims. The plaintiff could not piggyback on the security SEEBL paid into the Brazilian court as it related to a separate claim against a different party in proceedings which the plaintiff was not part of. The plaintiff had also claimed that it had cross-claims against the defendant arising from the latters alleged unlawful exercise of its lien over the cargo on board AAL Shanghai. In cross-claim
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Lloyds Maritime Law Newsletter is published by Informa Law, 12 Bolt Court, Fleet Street, London EC4A 3DQ Tel: 020 7017 5532 Fax: 020 7017 4781 Informa UK Ltd 2013 ISSN 0268 0696 Subscriptions orders: Please contact Sally Rodwell on tel: +44 (0)20 7017 3633 or email sally.rodwell@informa.com Copyright: We want you to make the best use of Lloyds Maritime Law Newsletter, we also need to protect our copyright. We would remind you that copying is illegal. However, please contact us directly should you have any special requirements. Informa Law is an Informa business, one of the worlds leading providers of specialist information and services for the academic scientific, professional and commercial business communities. Registered Office: Mortimer House, 3741 Mortimer Street, London W1T 3JH. Registered in England and Wales No 1072954. Printed by: Halstan Printing Group Informa Law would like to thank the Society of Maritime Arbitrators Inc (SMA) for allowing us to report on these decisions. The full texts of all decisions rendered by its members are available through the SMA Award Service. For information contact the SMA Tel: (212) 587 0033 Fax: (212) 587 6179 While all reasonable care has been taken in the preparation of this publication, no liability is accepted by the publishers nor by any of the authors of the contents of the publication, for any loss or damage caused to any person relying on any statement or omission in the publication. All rights reserved; no part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electrical,mechanical, photocopying, recording, or otherwise without the prior written permission of the publisher.
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