seminar on seaworthiness - cmhoulder.com · requirements to be observed, solas (international...

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海運學會

Institute of Seatransport

Seminar on Seaworthiness In the context of

Marine Insurance and General Average

Speakers: Capt. L C Chan – Risk Management & Loss Prevention Consultant of CM Houlder Insurance Brokers Ltd. Mr. Raymond T C Wong – Emeritus Chairman of Institute of Seatransport Date : 27th July 2016

AGENDA

• Seaworthiness

– Definition

– Maritime Law concept

– Governed by Ship Certificates

– Description

• What does it mean for a vessel to be “unseaworthy”?

– With some cases for reference

• ISM Code

• Marine Insurance Implications

– Warranties – Voyage & Time policies

– Cargo Policies - Seaworthiness Admitted

– Hull Policies – Wear & Tear, Latent Defect, Due Diligence and ISM Warranty

– Burden of Proof

• General Average – Cargo’s Refusal to Contribute

– GA and Contract of Carriage

– Consequences flow from Rule D of the York-Antwerp Rules

– Burden of Proof

– Exercising due diligence to provide a seaworthy ship

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Sea Experience 1. 10 years as Deck Officers in bulkers, tankers & container vessels 2. 15 years as Master in bulker and container vessels

In CM Houlder - Risk Management & Loss Prevention Consultant

Before CM Houlder • Management team in a container liner – accident investigation, cargo

operations, vessel claims matters, recruitment of senior officers, crew training & instructor in company simulator centre

• Corporate Safety, Security & Environmental Protection Officer to set policy, implement and supervise

• Corporate Emergency Response Team manager to handle ship and land accidents

• DPA, CSO, Representative in various public/private committees, such as PAC, POC, Shipping Consultative Committee, Civic Exchange.…

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Capt LC Chan – Profile

RAYMOND T C WONG 王德超

• Raymond has been adjusting averages since 1966 • Fully qualified by examinations in 1980 becoming the first Chinese Fellow of the

UK Association of Average Adjusters (founded 1869) – Sitting on the Advisory & Dispute Resolution Panel of the Association of

Average Adjusters • A founder and executive committee member of the HK Marine Insurance Club 香港海事保險學會 (established 1979)

• A founder and executive committee member of the HK Maritime Law Association 香港海商法協會 (established1987)

• Emeritus Chairman of the HK Institute of Seatransport 香港海運學會 (established 1984)

• Honourary Advisor of the HK Logistics Management Staff Association 香港物流管理人員協會 (established 1986)

• Principal of Asia Maritime Adjusting (HK) 亚理海损理算事务所, trading

division of TCWong Average Consulting Ltd., Hong Kong 德超海损理赔顾问有限公司 www. averageadj.com

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mailto:[email protected]

Seaworthiness

Captain LC Chan

2016-07-27

CM Houlder Insurance Brokers Ltd.

Constructed建造, outfitted裝備, manned人員配備 and in all respects fitted for a safe voyage at sea and in port.

A shipowner, carrier or charterer and the master shall exercise due diligence to ensure vessel is seaworthy at all times during the voyage.

In this respect the vessel must be properly manned and cargo to be properly loaded taking into account of ship’s stability.

And they shall also make a reasonable and careful inspection and perform maintenance of the vessel.

Seaworthiness (適航) - Definition

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Four contractual relationships:-

In a marine insurance voyage policy, the assured warrants that the vessel is seaworthy. (Policy)

A carrier of goods by sea owes a duty to a shipper of cargo that the vessel is seaworthy at the start of the voyage. (B/L)

A shipowner warrants to a charterer that the vessel under charter is seaworthy. (C/P)

A shipbuilder warrants that the vessel under construction will be seaworthy. (Contract)

Maritime Law concept on seaworthiness

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Constructed: Such as Certification Of Classification, Safety Construction Certificate, International Loadline Certificate etc.

Governed by Ship Certificates (1/4)

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Outfitted: Such as Safety Equipment Certificate, Safety Radio Certificate, Radio Station License etc.


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Manned: Minimum Safe Manning Certificate


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In All Respects Fitted: Other certificates…. to ensure vessel is safe and secure for the voyage at sea and in port.

IMO List Of Certificates and Documents Required To Be Carried Onboard Ships

Such as Safety Management Certificate (SMC), International Ship Security Certificate (ISSC) etc.


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Constructed: IMO & Flag State requirements to be observed, SOLAS (International Convention for the Safety of Life at Sea) & MARPOL (International Convention for the Prevention of Pollution from Ships) to be complied etc.

Such as SOLAS Chapter II-1 - Construction - Subdivision and stability, machinery and electrical installations…

The subdivision of passenger ships into watertight compartments must be such that after assumed damage to the ship's hull the vessel will remain afloat and stable…

Seaworthiness – description (1/4)

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Outfitted: Fire Fighting Equipment and Life Saving Appliance to be installed and in place, radio equipment in good order etc.


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Such as SOLAS Chapter III - Life-saving appliances and arrangements - The Chapter includes requirements for life-saving appliances and arrangements, including requirements for life boats, rescue boats and life jackets according to type of ship.

SOLAS Chapter IV – Radiocommunications - The Chapter incorporates the Global Maritime Distress and Safety System (GMDSS). All passenger ships and all cargo ships of 300 gross tonnage and upwards on international voyages are required to carry equipment designed to improve the chances of rescue following an accident…….

Manned: STCW (International Convention on Standards of

Training, Certification and Watchkeeping for Seafarers), SOLAS & MARPOL to be complied. Competent seafarers to be deployed to meet the IMO and Flag State standard.


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Such as The STCW Convention & Code 2010 Manila Amendments - Revised requirements on hours of work and rest and new requirements for the prevention of drug and alcohol abuse, as well as updated standards relating to medical fitness standards for seafarers; new requirements relating to training in (ECDIS)……

Such as SOLAS Chapter IX - Management for the Safe Operation of Ships – safety management system to guide……

In All Respects Fitted: All navigational equipment and engines in good order, to take care of environmental protection, proper cargo stowage and securing etc. ….


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Not in a fit condition nor ready for a safe sea voyage.

Following are some unseaworthy cases for your reference.

What does it mean for a vessel to be

“unseaworthy”?

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Cargo is overloaded (1/2)

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Cargo is overloaded (2/2)

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Forward Draft Port=10.6 / Starboard=10.8 ~Fwd Mean (Fm) = 10.7

Aft Draft Port=11.2 / Starboard=11.0 ~Aft Mean (Am) 11.1

Mean of Fm+Am = (10.7 + 11.1) / 2 = 10.9

Midship Draft Port=11.0 / Starboard=11.2 ~Midship Mean (Mm)=11.1 (Sagging)

Mean of Mean = (10.9 + 11.1)/2 = 11.0 (Summer Draft 11.0)

Note: Draft correction and trim correction to be applied

Cargo not properly loaded or secured

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causing vessel in unsafe condition - improper ship’s stability / hull stress / visibility restriction

Insufficient Under Keel Clearance (UKC) or Air Draft Clearance

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Police consider charges for Hong Kong tugboat captain whose vessel hit bridge and caused traffic chaos to and from airport (2016 Feb)

Improper Manning Unqualified deck officers, engineers or ratings

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Expired officer/engineer certificate of competency, invalid watchkeeping certificates, invalid physical examination report of individual crew etc.

Master passed away at sea, 6 days to destination and 3 days to a safe port, what to do?

1) Chief officer is holding a valid master license and there is an extra licensed chief officer onboard.

2) No officer onboard has a valid master license.

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Equipment Failure

Such as Fire Fighting Equipment or Life Saving Appliance not in place or in bad condition, navigational equipment or engines out of order

Lifeboat is damaged by shore crane during cargo loading, can vessel sail?

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Inadequate publications per IMO or Flag State requirements

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Out of date charts (charts not corrected on time)

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Not enough fuel to reach destination or a safe port

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Inadequate food or fresh water or medicines

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Damages or cracks of ship’s hull – unsafe ship’s hull integrity

A slippery substance on the rungs of a ladder

Ice Class Artic Sea Smoke

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Not well prepared before entering into pirate high risk area

Ice Class Artic Sea Smoke

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Master has no instructions on how to avoid attack or reduce risk, such as

Crew not well trained in taking anti-pirate measures such as where is Safe Muster Point or Citadel, action when pirates attacking vessels, or pirates already onboard….

Vessel not equipped with anti-pirate protection measures

Invalid major trading certificates

Ship's crew not well trained or not familiar on proper operation of ship's equipment especially on FFA & LSA

Crew not familiar on dealing with emergency situations

Deck officers do not know how to properly use the navigation equipment / GMDSS equipment

Engineers not familiar on operating of M/E & Aux. engines

Major outstanding survey items showing in the Survey Status of the ship's Classification Society

More examples of unseaworthy (1/4)

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Poor maintenance of the ship / poor house keeping of the ship which could lead to major disasters at sea or severe pollution to the marine environment

Navigational equipment with major deficiencies - gyro compass not working properly, magnetic compass not fitted or not calibrated, echo-sounder not working properly, radars not working properly etc.


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Ship with major M/E & Aux. engines deficiencies

Lack of safe access between the vessel and shore (e.g. an unsafe gangway or the lack of a gangway)

Ship's cold chambers not functioning properly for keeping ship's provisions in good condition

Port State Control inspection with major deficiencies and/or findings not yet clear on time

Hatch covers of Cargo Holds are not properly closed and secured, not watertight or weather tight (if designed)


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Watertight doors, manhole covers & openings, ships’ side doors are not properly closed and secured for sea passage


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Ship’s tanks (Water Ballast tanks, Fuel tanks etc.) are not closed and secured safely when manhole covers are remaining opened during passage

Ship’s Anchors are not properly lashed

Ship’s Lifting Plants (Cranes & Derricks) are not safely secured

ISM Code – Purpose & SMS

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The purpose of ISM Code:- To ensure Safety at Sea To prevent human injury or loss of life To avoid damage to the environment and to the ship. In order to comply with the ISM Code, each ship must have a working Safety Management System(SMS). Each SMS consists of the following elements: Commitment from top management A Top Tier Policy Manual A Procedures Manual that documents what is done on board the ship, during

normal operations and in emergency situations Procedures for conducting both internal and external audits to ensure the ship is

doing what is documented in the Procedures Manual A Designated Person Ashore to serve as the link between the ships and shore

staff and to verify the SMS implementation A system for identifying where actual practices do not meet those that are

documented and for implementing associated corrective action Regular management reviews

ISM Code – External Audit and PSC Inspection

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External Audit – commercial reason - will not fail vessel

Port Station Control Inspector takes it very serious if below items are found:-

Invalid major trading certificates as required Ship's crew not well trained or not familiar on proper operation of

ship's equipment, engines etc. especially FFA & LSA Crew not familiar on dealing with emergency situations Deck officers do not know how to properly use the navigation

equipment / GMDSS equipment Engineers not familiar on operating of M/E & Aux. engines Oil pollution not due to accident – magic pipe cases Others…..concerning crew training, SOP not followed etc.

SMS failure – a major finding which may lead to ship detention in port (unseaworthy case)

Q & A

A Clean and Beautiful Day

Thank You

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MARINE INSURANCE

Warranties of Seaworthiness

Sec 39 of the Marine Insurance Act, 1906

(1) In a voyage policy there is an implied warranty that at the commencement of the voyage the ship shall be seaworthy for the purpose of the particular adventure insured.

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MARINE INSURANCE



(2) Where the policy attaches while the ship is in port, there is also an implied warranty that she shall, at the commencement of the risk, be reasonably fit to encounter the ordinary perils of the port.

(3) Where the policy relates to a voyage which is performed in different stages, during which the ship requires different kinds of or further preparation of equipment, there is an implied warranty that at the commencement of each stage the ship is seaworthy in respect of such preparation or equipment for the purposes of that stage.

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MARINE INSURANCE



(4) A ship is deemed to be seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured.

(5) In a time policy there is no implied warranty that the ship shall be seaworthy at any stage of the adventure, but where, with the privity of the Assured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness.

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WARRANTIES

M.I.A Sections 33-41

• Exact compliance

• Any breach voids the policy

• Insurer not liable from date of breach

• Cover not restored when breach rectified

• A breach of warranty may be waived by insurers

[NOTE THE INSURANCE ACT 2015] 41

IMPLIED WARRANTIES

Unseaworthiness defeats a claim only if:

- the loss was caused by unseaworthiness and

- the assured was privy to that unseaworthiness

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Voyage policy – absolute seaworthiness

Time policy – privity of assured

“PRIVY” MEANS:

• the Assured must know or should have known of the defect

• “turning of a blind eye”

• Assured is required to

– ask questions,

– keep a good record of maintenance and inspection

• a blameless but stupid or lazy or innocently ignorant ship-owner may still be found to be privy to defects, i.e. she should have known

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THOMAS V. LONDON & PROVINCIAL (1914)

• 3 groundings - underwater damage

• Drydock strike - all 19 crew dismissed

• Engaged 8 crew (the Master being the only one with certificate) for removal to repair port.

• Sprang a leak and sank (the crew not being efficient or sufficient to close the watertight door).

Held:

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Loss attributable to unseaworthiness with Owners privity of; MIA relieved Underwriters form liability.

THOMAS V. TYNE & WEAR (1917)

• Time Policy - vessel sent to sea unseaworthiy

– (1) insufficientcy of crew

– (2) unfitness of hull (latent defect)

• Assured was privy to (1)

• Loss by (2)

Held: Assured was entitled to recover.

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CARGO POLICIES

Sec 40 of MIA 1906

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(1) In a policy on goods or other movables, there is no implied warranty that the goods or movables are seaworthy.

(2) In a policy on goods or other movables, there is an implied warranty that at the commencement of the voyage the ship is not only seaworthy as a ship, but also that she is reasonably fit to carry the goods or other movables to the destination contemplated by the policy.

INSTITUTE CARGO CLAUSE 1/1/09

Clause 5.1 In no case shall this insurance cover loss damage or expense arising from

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5.1.1 unseaworthiness of vessel or craft or unfitness of vessel or craft for the safe carriage of the subject-matter insured where the assured are privy to such unseaworthiness or unfitness at the time the subject-matter insured is loaded therein 5.1.2 unfitness of container or conveyance for the safe carriage of the subject-matter insured where loading therein or thereon is carried out prior to the attachment of this insurance or by the assured or their employees and they are privy unfitness at the time of loading.


Clause 5.2

Exclusion 5.1.1 above shall not apply where the contract of insurance has been assigned to the party claiming hereunder who has bought or agreed to buy the subject-matter insured in good faith under a binding contract.

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Clause 5.3

(“Seaworthiness-admitted Clause”)

• The insurers waive any breach of the implied warranties of seaworthiness of the ship and fitness of the ship to carry the subject-matter insured to destination.

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HULL & MACHINERY POLICIES

Included Losses

Sec 55 of MIA 1906

(1) Subject to the provisions of this Act, and unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against, but, subject as aforesaid, he is not liable for any loss which is not proximately caused by a peril insured against.

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EXCLUDED LOSSES

Losses not usually covered - S. 55

(c) Unless the policy otherwise provides, the insurer is not liable

for ordinary wear and tear, ordinary leakage and breakage,

inherent vice or nature of the subject-matter insured, or for any

loss proximately caused by rats or vermin, or for any injury to

machinery not proximately caused by maritime perils.

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WEAR & TEAR

Definition (by Arnold)

“merely the result of ordinary service conditions operating upon the hull or machinery, as for example when the relevant part wears out, having reached the end of its expected working life, or when initially sound materials have undergone some process of deterioration, such as corrosion, which was introduced in the ordinary course of trading and remained uncorrected.”

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WEAR & TEAR

• The relevant part of MIA, sec. 55 reads “unless the policy

otherwise provides, the insurer is not liable for ordinary wear

and tear”.

• What about ….. caused by both “wear and tear” and a “peril

insured against” (e.g. heavy weather)?

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W&T AND PERILS OF THE SEAS

Whittle v. Mountain (1921)

• Old vessel with leaky topside seams

• If remained moored, survived for some years to come

• during towage to yard on a calm day, breastwave caused

by tug caused water to penetrate leaky seams

• sank

Held: Breastwave constitute a fortuity.

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MISS JAY JAY (1985)

Chain of causation:

Held:

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Combination of unseaworthiness and heavy weather; one without the other

would not have caused the loss.

initial unseaworthiness -

design defect

Adverse weather Loss of watertight

integrity of the vessel

Damage to the vessel

LATENT DEFECT

“Latent”

not discoverable by proper inspections, it is not patent.

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LATENT DEFECT

Institute Additional Perils Clauses extends to cover “the cost of repairing or replacing any defective part which is a latent defect … any defective part which has caused loss or damage to the vessel covered by Clause 6.2.2 of ITC - Hulls 1/10/83”.

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ITC - Hulls 1/10/83

6.2.2 covers loss or damage caused by “….. any latent defect in machinery or hull”

PRUDENT TANKERS V. DOMINION INS(1980)

• 19-year old “Caribbean Sea” sank in fine weather due to entry of seawater

into engineroom

• Leakage in way of main sea suction valve - through a fracture in the short

pipe leading from the ship’s side to the suction valve

• Owners alleged latent defect and Underwriters maintained wear & tear or

defect in design why it has come about that the H&M is in that state

Held: Loss due to latent defect.

• in considering whether there is a defect in H&M, one is concerned

with the actual state of the H&M and not with the historical reason

why it has come about that state

• ordinary wear & tear is NOT a latent defect.

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WANT FOR DUE DILIGENCE

Meaning: Lack of care

Onus of Proof: Underwriters

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Who are the Assured, Owners or Managers?

“….. personal failure of the Assured, Owners or

Managers, or of their alter ego in the case of

corporate bodies, rather than a failure by

subordinate employees.” (Arnold)

BURDEN OF PROVING UNSEAWORTHINESS

• First, it is up to the Assured to prove a loss proximately caused by a peril insured against.

• The burden of proving unseaworthiness rests with the Insurer.

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EXPRESS WARRANTIES

ISM Code Warranty Clause

• It is warranted that all vessels attaching to this policy requiring compliance with the ISM Code by the IMO have a valid Safety Management Certificate (SMC) and that the assured, the owner or the managers to whom the designated person ashore (DPA) links those on board the vessels have a valid Document of Compliance (DOC), in accordance with the requirements of the International Safety Management Code (ISM Code). The SMCs and the DOCs are to be maintained in accordance with the requirements of the ISM Code.

• Any suspension or withdrawal of DOCs or SMCs should be notified to underwriters immediately and, unless the underwriters agree to the contrary in writing, they will be discharged from liability under this insurance as from the date of suspension or withdrawal.

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ISM Code Warranty Clause – Claims Guideline

Adjusters’ Note:

Copies of the relevant documents are shown at Appendix ? In order to demonstrate compliance with this warranty, namely:

• Safety Management Certificate (SMC) issued by ….

• Document of Compliance (DOC) issued by …..

• Statement from the Designated Person ashore confirming that all aspects of the ISM Code for which he has specific responsibility have been carried out in accordance with the provisions stated therein.

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GENERAL AVERAGE

• A system of making good maritime losses based on equity, equity being the key word.

• Extraordinary sacrifice or expenditure voluntarily and reasonably made or incurred in time of peril to preserve property imperiled in the common adventure.

• Object of GA Act must be the preservation of the whole adventure.

• Adventure or some part thereof must be saved

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RHODIAN LAW

Rhodian Law of some 2,500+ years ago: “Let that which has been jettisoned on behalf of all be restored by the contributions of all . A collection of the contributions for jettison shall be made when the ship is saved.”

Development

Separate development of laws of GA in the various maritime countries, leading to the adoption of a common code, the York-Antwerp Rules

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v

INTERNATIONAL GA CONGRESS AT YORK, SEPTEMBER 1864

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YORK ANTWERP RULES

• York Rules 1864

• York/Antwerp Rules 1877

• YAR 1890

• YAR 1924 CMI – Comite Maritime International 國際海事委員會

• YAR 1950

• YAR 1974

• YAR 1974 as amended 1990

• YAR 1994

• YAR 2004

• YAR 2016

• YAR not a Convention

• Incorporation by reference in Contract of Carriage 69

CONTRACT OF AFFREIGHTMENT

At common law

Without express provisions to the contrary, the ship-owner has an unqualified duty to provide a seaworthy ship.

Under Hague and Hague-Visby Rules

Absolute duty qualified by requirement to merely exercise due diligence to provide a seaworthy ship.

(Note Hamburg Rules and Rotterdam Rules)

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SEAWORTHINESS AND GENERAL AVERAGE

Contract of Carriage Incorporates:

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Hague or Hague-Visby Rules Set out to define responsibilities, liabilities, rights and immunities of carrier. GA per York-Antwerp Rules Designed to promote uniformity in adjustment of GA “to the exclusion of any law and practice inconsistent therewith”.

HAGUE-VISBY RULES

Article III

1. The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to:

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a) Make the ship seaworthy; b) Properly man, equip and supply the ship; c) Make the holds, refrigerating and cool chambers, and all

other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation.

HAGUE-VISBY RULES

Article IV

1. Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence on the part of the carrier to make the ship seaworthy, and to secure that the ship is properly manned, equipped and supplied, and to make the holds, refrigerating and cool chambers and all other parts of the ship in which goods are carried fit and safe for their reception, carriage and preservation in accordance with the provisions of paragraph 1 of Article III. Whenever loss or damage has resulted from unseaworthiness the burden of proving the exercise of due diligence shall be on the carrier or other person claiming exemption under this article.

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HAGUE-VISBY RULES

Article IV 2. Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from -

a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship.

b) Fire, unless caused by the actual fault or privity of the carrier.

c) Perils, dangers and accidents of the sea or other navigable waters.

d) Act of God….

p) Latent defects not discoverable by due diligence.

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…

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YAR 2016

• Rule of Interpretation （解释规则）

– YAR over-ride law of destination （解读：如合同已约定“约安规则”，则“约安规则”优先于目的港法律）

– Provision of number rules, whether positive or negative, over-ride lettered rules （“数字规则”优先于“字母规则”）

• The Makis 1929

• The Alpha 1991

• Rule Paramount (since 1994) [首要规则 – 1994年约安规则首次添加]

– Reasonableness (合理性)

• 7 Lettered rules (general principles) [7个字母规则对共同海损做了原则性规定]

• 23 Numbered rules (specific cases) [23个数字规则对列明的不同情况做了详细阐述]

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YORK-ANTWERP RULES

Rule A. There is a general average act, when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.

Rule D. Rights to contribution in general average shall not be affected, though the event which gave rise to the sacrifice or expenditure may have been due to the fault of one of the parties to the adventure, but this shall not prejudice any remedies or defences which may be open against or to that party in respect of such fault.

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CONSEQUENCES FLOW FROM RULE D

• The fact that an incident was caused by the fault of one of the parties does not deprive the resulting act of expenditure or sacrifice of its GA character

• The rights and liabilities of the parties to GA adjustment will be assessed without regard to questions of fault, or to the liability of the parties under any applicable contract of carriage or in tort.

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CONSEQUENCES FLOW FROM RULE D

The adjustment of the parties right in GA

And

the contractual rights and liabilities of the parties

are 2 entirely separate matters

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INNOCENT PARTY’S CLAIM UNDER THE CONTRACT OF CARRIAGE

• A declaration that, as a result of the defaulter’s breach, the claimant is not

liable to contribute to that party in GA.

• A claim for the return of any GA contribution already paid, or any security

given.

• A claim for additional damages in respect of loss suffered as a result of the

incident.

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“ACTIONABLE” FAULT (TO DEFEND A CLAIM FOR GA CONTRIBUTION)

A person should not be allowed to recover in respect

of the consequence of his own wrong.

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WHERE GA DECLARED

• Collect GA security – “properly due” / “legal due”.

• GA adjustment (correctly) prepared providing evidence as to : – details

– computation and

– allocation of GA

• Collect / Enforce contributions 81

SETLEMENT UNDER THE ADJUSTMENT

• Copies of Adjustment, or extract therefrom,

are sent to all cargo interests

• Debtors are asked to settle contribution; for

cash depositors refund will be made upon

production of original deposit receipt

• Any Creditors are advised that payment will

be made in due course (when other

contributions collected)

• Any defence to payment - refer to P&I

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CARGO’S RESPONSE TO ADJUSTMENT

• What is the contractual provision concerning GA?

• Is the adjuster fully qualified?

• Is basis of GA correct and fully explained?

• Are allowances reasonably made per YAR?

• Are contributory values correct?

• Have cargo’s own losses been included/taken into account?

• Does the adjustment cover cause of loss?

Is there a defence to contribution to be followed up?

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GA ARISING FROM OWN FAULT

• Fault means actionable fault.

• Ship-owners can rely upon exceptions clause, but not • Where GA arises from ship’s unseaworthiness, and

• Breach of warranty to exercise due diligence to make ship seaworthy.

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ONUS OF PROOF

Cargo to make a prima facie case of

a) Unseaworthiness

b) The unseaworthiness casualty connected with GA

Then Carrier to

a) Either show that the vessel was not unseaworthy

b) Or demonstrate that even though the vessel was unseaworthy,

1) Either such unseaworthiness did not cause the GA loss

2) Or the unseaworthiness was not the result of want of due diligence on the Shipowners part before and at the beginning of the voyage. 85

DUE DILIGENCE & UNSEAWORTHINESS

• The Muncaster Castle [1961] 1 Lloyd’s Rep. 57 upheld by • The Fjord Wind [2000] 2 Lloyd’s Rep. 191

• That a very heavy burden of proof rests on Carrier to show

“due diligence”

• Exercise covers not only Ship-owner their employees and servants but also their sub-contractors/agents whether independent or not.

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MUNCASTER CASTLE

Cargo in the vessel’s no.5 hold was damaged during the voyage by seawater which entered through a valve inspection chamber. This chamber had been opened in the previous annual overhaul and the cover had not been re-secured properly. Of course it was not the Shipowners themselves who carried out this work. They employed well-known and reputable repairers and it was as a result of the gross carelessness of one of the repairers’ fitters that the cover was incorrectly refitted and, as a result water entered the hold. In the Queen’s Bench division and in the Court of Appeal it was held that the Ship-owners had not failed in the duty to use due diligence to provide a seaworthy vessel because they had done so by employing reputable repairers to put the vessel through survey. However, the House of Lords reversed these decisions and found that the Ship-owners had failed to exercise due diligence because they were personally responsible to the Owners of the cargo, which they had contracted to carry, for the negligence of their contractors’ servant.

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HAMBURG RULES

• Nautical fault no longer valid excuse

• Nor is due diligence to make vessel seaworthy

• Carrier liable unless he can show all measures were taken that could reasonably have been required to avoid the occurrence and its consequences.

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ROTTERDAM RULES

Significant shift of liability in favour Cargo

• Due diligence to keep vessel seaworthy throughout voyage – art.14

• Abolition of the “nautical fault” – art.17(3)

However, apportionment/division of loss “all or part of liability”, “all or part of the loss”, then see art.17(6)

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Thank You

For further questions: Email:

[email protected] Mobile: +852 9265 9199

Asia Maritime Adjusting (Hong Kong) Trading division of TCWong Average Consulting Ltd. Office B, 9/F., Sai Wan Ho Plaza 68 Shau Kei Wan Road Hong Kong www.averageadj.com

Questions

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Answers

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