Beacon No. 1 2004 - Skuld

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The Master and crew should keep a close watch to ensure ROB surveys are conducted in accordance with MARPOL regulations practice and Masters/owners should be cautious to accept a letter of indemnity. When an indemnity is given in unlawful circumstances, such as when the Master knows the figures are incorrect and an innocent third party will rely on the statements, this is equivalent to fraud. Such an Indemnity would be unenforceable under English law and has no value, even where the charterers knew of the inaccuracy ref: "NOGAR MARIN" [1998] Lloyd’s rep. 412. Further, the owners will prejudice the P&I cover as a bill of lading known to contain an incorrect description is excluded from cover, ref. rule 5.2.5. Challenging bill of lading figures How can owners challenge the bill of lading figures? In the New Chinese Antimony Co. Ltd. v Ocean Steamship Co. Ltd. [1917] 2 KB 664, the Master had been unable to satisfy himself as to the weight or quantity of cargo loaded on board the vessel and in order to protect owner’s interests, he endorsed the bill of lading with the words, "weight or quantity unknown". The Court decided that the ...THE OWNERS WILL PREJUDICE THE P&I COVER AS A BILL OF LADING KNOWN TO CONTAIN AN INCORRECT DESCRIPTION IS EXCLUDED FROM COVER, REF. RULE 5.2.5. bill of lading was not prima facie evidence against the shipowner of the quantity shipped and the burden of proof was on the cargo owner to prove what, in fact, was shipped. However, owners should bear in mind that under English law this does not afford complete protection if the discrepancy between the vessel’s figure and the shore figure is so great that this would have been obvious to the Master, ref. Conoco Ltd. and Others v Limni Maritime Co. Ltd. (the Sirina) [1988] 2 Lloyd’s rep. 613. Clausing the bill of lading Other jurisdictions may not follow the approach adopted by the English Courts and qualifying clauses as ‘weight, quantity, etc. unknown’ are often ignored completely. However, the recommendation is to clause the bill of lading as necessary, either by inserting the ship figure and/or with qualifying words such as weight…unknown or similar. Should the owners want to challenge the figures inserted in the bill of lading before signing, some helpful guidance can be found in the English Court decisions, the Boukadora [1989] 1 Lloyd’s rep. 393. This was addressed in <strong>Beacon</strong> no. 2, December 2003, page 13. However, in short the Court said that, even if the charterparty requires the Master to sign bills as presented, this does not mean that the Master is bound to sign bills "in whatever terms the charterer chose to demand". "There is…a basic and implied requirement that the bills as presented should relate to the goods actually shipped and shall not contain misdescription of the goods…" The Court held that the owners were entitled to recover their loss from the charterers. ...THE RECOMMENDATION IS TO CLAUSE THE BILL OF LADING AS NECESSARY, EITHER BY INSERTING THE SHIP FIGURE AND/OR WITH QUALIFYING WORDS SUCH AS WEIGHT…UNKNOWN OR SIMILAR. Trade allowance It is common to counter any claim for shortage with the loss is within the ‘customary allowance’ of 0.5%, often referred to as the ‘trade allowance’. However, English law is clear on this issue and does not accept this custom unless the ‘trade allowance’ is referred to in the contract of carriage. The Court will consider the evidence placed before it, and with the expert evidence presented in a particular case, they will decide whether any allowance for transit loss should be made. In the Indian Oil Corporation Ltd. v Greenstone Shipping SA (the Ypatianna) [1987] 2 Lloyd’s Rep. 286 the court accepted a 0.55% tolerance comprised of 0.30% with respect to water and sediment in the crude oil cargo and 0.25% with respect to vapour loss. 28 BEACON
Photo: Scanpix U.S. Courts adopt a similar approach with respect to the 0.5% trade allowance, unless such a trade allowance is referred to in the contract of carriage. My view is that the phrase ‘customary allowance’ is misleading. The 0.5% figure originally stems from the cargo underwriter’s insurance deductible. The 0.5% would be better described as ‘measurement allowance’ since measurement of bulk liquid is not an exact science and many of the shortages have arisen out of inaccurate measurements. We would recommend that owners try to include a trading/measurement allowance into the contract. ROB Another type of shortage claim is the Remaining on Board (ROB) claim. There can be many reasons why the ship is facing an ROB claim. For instance, there can be problems with the vessel’s equipment that makes it difficult to pump out the remainder of the cargo. However, the Club is more concerned with the number of claims resulting from ...THE CLUB IS MORE CONCERNED WITH THE NUMBER OF CLAIMS RESULTING FROM THE CHARACTERISTICS OF THE CARGO RATHER THAN CLAIMS RELATED TO THE VESSEL AND ITS TECHNICAL EQUIPMENT. the characteristics of the cargo rather than claims related to the vessel and its technical equipment. It is important to determine the characteristics of the cargo to enable owners to defend an ROB claim under the Cargo Retention clause in the charterparty. Charterers and/or receivers may accept that some crude oil may become non-liquid during the voyage and that some cargo remains in the tanks as it is not reachable by vessel’s pumps. However, the dispute would be on the quantity of cargo left in the tanks, whether it is liquid or not and whether the cargo is pumpable and reachable by vessel’s pumps. Upon completion of discharge, a surveyor will perform an ROB survey and issue an ROB certificate. This can make it difficult to fight the claim if the certificate issued is inaccurate. The crew should closely monitor how the survey is performed and protest as necessary. For instance, in compliance with industry standards, the surveyor should take measures from at least four positions in the tanks. Should the surveyor only measure from one point, the crew should protest and insist on the surveyor taking four dips. MARPOL regulation, Annex 1, regulation 13(b) (2) requires the vessel to have four locations for measurements. If remaining cargo is found, investigations should be conducted to establish whether the cargo is liquid, pumpable and reachable by vessel’s pumps. Summary Fighting shortage claims may be an uphill struggle and each case will ultimately depend on its own facts. However, it goes without saying that accurate records of the loading and discharging operation need to be kept to enable owners to defend the claim made for shortage. One should also keep in mind that the Courts do not look favourably upon the ‘customary allowance’, but will only rely on what can be proven. The owner will defend the claim based upon the ship documentation such as, but not limited to, the OBQ report (On Board Quantity) prior to loading, ullage report after completing loading and prior discharge, Quantity report after completion of discharge and dry tank certificate on completion of discharge, preferably signed by consignees. Accurate records should be maintained of all in-tank transfers during the voyage. A log should also be kept during stripping operations listing the procedures followed and when suction was lost. Should any problems arise during loading or discharge, please contact the Club or its correspondent for assistance. ACCURATE RECORDS OF THE LOADING AND DISCHARGING OPERATION NEED TO BE KEPT TO ENABLE OWNERS TO DEFEND THE CLAIM MADE FOR SHORTAGE. BEACON 29
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