Onego Shipping & Chartering BV v JSC Arcadia Shipping

When the Hague-Visby Rules are incorporated into a time charter, the expression “contract of carriage” in Article 1(c) refers to the bill of lading where that provision concerns an on-deck statement. The Rules therefore apply to deck cargo unless the relevant bill of lading states that the cargo is carried on deck.

An indemnity for loss, damage or liability arising from deck cargo does not ordinarily cover the owners’ own negligence or breach of the seaworthiness obligation unless the wording makes that intention sufficiently clear. Causation requires the carriage of deck cargo to be an effective cause, not merely a “but for” cause.

The charterers appealed under section 69 of the Arbitration Act 1996 from an arbitration award concerning loss of deck cargo and a diversion to Halmstad. The tribunal found that inadequate stowage, defective lashing and the vessel’s instability caused the casualty. It held that the Hague-Visby Rules did not apply to the deck cargo and that clause 13(b) of the NYPE 1993 Form indemnified the owners against all resulting loss, damage and liability.

The appeal concerned the proper construction of Article 1(c) of the Hague-Visby Rules and the scope of clause 13(b), including whether it covered loss caused by the owners’ negligence or breach of the seaworthiness obligation.

1. Question 1. The appeal was allowed to the extent necessary to answer the questions of law. Where the Hague-Visby Rules are incorporated into a time charter, contractual references to “bill of lading” or “contract of carriage” must be adapted intelligently and only so far as necessary to avoid an insensible result. Article 1(c) is concerned with the bill of lading because that is the document likely to contain the on-deck statement. The Rules therefore apply to deck cargo unless the relevant bill or bills of lading state that it is carried on deck.

2. The relevant voyage for the Article III Rule 1 duty is the voyage of the cargo in question. Where cargo is loaded at more than one port, the due-diligence obligation arises at each relevant loading port.

3. The charterers retained the primary duty to load, stow and lash the cargo. Responsibility may shift to the owners where the master actively intervenes and that intervention causes the loss, or where the loss concerns matters uniquely within the vessel’s knowledge, such as stability. On the tribunal’s findings, the owners were contractually responsible for instability and consequent unseaworthiness.

4. Question 2. Clause 13(b) was both an exclusion and an indemnity clause. Its words were wide enough to cover negligence or unseaworthiness, but those liabilities were not expressly mentioned. Applying the guidance in Canada Steamship Lines Ltd v The King [1952] AC 192 and subsequent authorities, the clause would ordinarily not cover the owners’ negligence or breach of the seaworthiness obligation unless that intention was made clear.

5. The phrase “as a result of the carriage of deck cargo” required effective causation. The additional wording concerning loss which would not have arisen had deck cargo not been loaded imposed a necessary but insufficient “but for” condition. The indemnity covered loss, damage or liability effectively caused by the carriage of deck cargo, including inherent deck-cargo risks, but not loss effectively caused by the owners’ negligence or unseaworthiness.

6. The tribunal had treated deck cargo as a “but for” cause and had found that the effective causes were defective stowage, inadequate care of lashings, instability and unseaworthiness. Its construction of clause 13(b) therefore could not stand. Consequential orders were reserved for further submissions.

This was an appeal under section 69 of the Arbitration Act 1996 from a First Final Award published on 28 April 2009. Permission to appeal was granted by Andrew Smith J on 30 July 2009. The tribunal’s conclusions on the construction and application of clause 13(b) were held to be erroneous.