Article: English court confirms position on deck cargo exclusion clauses in The Elin

Background
The English court has recently confirmed the position on the carriage of deck cargo and the operation of exclusion clauses in a judgment that is a useful reminder for members both as to the use and effectiveness of such clauses. The dispute in this case involved the carriage of offshore project cargo that was lost overboard during heavy weather and the operation of a clause in a bill of lading excluding the carrier’s liability for deck cargo.

Deck cargo risks

The carriage of deck cargo has for a long time been considered as being more perilous than cargo carried below deck. In his judgment, Stephen Hofmeyr QC, sitting as a Judge of the High Court, provides a helpful summary of the nature of deck cargo noting that

'…carriage of goods on the deck of a ship is inherently risky because the cargo is exposed to the elements and is subject to sea, spray and wind, as well as the additional risk of being washed or falling overboard. For this reason, as stated above, deck cargo has always been treated as being in a category of its own.'[2] 

Hague/Hague-Visby Rules

Given the enhanced risk nature of deck cargo, carriers will typically look to protect themselves wherever and however possible in the terms of carriage. The starting point is to consider the operation of the Hague/Hague-Visby Rules. Under the Rules, the carrier is under an obligation to 'properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.'[3] The definition of 'goods' is broad and the Rules apply to all cargo, including that carried on deck, unless:  

1. the contract of carriage clearly and expressly states that the cargo is to be carried on deck
2. the cargo is in fact carried on deck.

Therefore, should deck cargo fall outside the definition of 'goods' under the Rules then, in the event the deck cargo is lost/damaged, the carrier will be deprived of their defences in the Rules. As a result, the carrier will seek to exclude all liability for carriage of cargo on deck by inserting a deck cargo exclusion clause in their bill of lading terms and usually insisting on referencing the cargo as loaded on deck on the face of the bill of lading.    

Following the loss of the deck cargo in this case, the cargo interests sought to dispute the operation and effectiveness of the following clause:

'loaded on deck at shipper’s and/or consignee’s and/or receiver’s risk; the carrier and/or Owners and/or Vessel being not responsible for loss or damage howsoever arising.'

The cargo interests sought to argue that the exclusion clause should be read narrowly. In other words, that the implied obligation of seaworthiness is a fundamental and overriding obligation in a contract of carriage by sea and should not exclude the carrier’s liability for loss or damage caused by the carrier’s negligence or the unseaworthiness of the ship. The cargo interests relied on judgments in Canada and Singapore to support their position.

Meanwhile, the carrier argued that the correct approach to construing exclusion clauses is the same as any other contractual provision in that clear words will be necessary to limit or exclude the liability of a party and that there is no need to construe words of limitation or exclusion narrowly or artificially.

The judge agreed with the carrier’s view and confirmed the words of exclusion used in this case were clear and that the carrier had no responsibility for cargo carried on deck whatever the cause was. Reference was made to several recent cases on construction of clauses in commercial contracts including Rainy Sky [2011][4], Arnold v Britton and others [2015][5] and Wood v Capita Insurance Services Ltd [2017][6].

The judge noted that

'Words of exemption which are wider in effect than howsoever caused are difficult to imagine and, over the last 100 years, they have become the classic phrase whereby to exclude liability for negligence and unseaworthiness.'

Club cover

Claims in respect of loss of/damage to cargo carried on deck can only be covered at the discretion of the club’s board unless one of the following conditions are satisfied:

1. The contract of carriage permits the cargo to be carried on deck and states that it is being carried on deck and either:
   a) the contract exonerates the member from all liability in respect of such cargo
   b) it applies the Hague or Hague-Visby Rules to such cargo; 
2. It is customary to carry such cargo on deck (eg containers)
3. Such carriage has been approved by the managers.

See the club's rule 3.13 and exclusion (10) to rule 3.13.

Comments

Members involved in the carriage of deck cargoes should pay particular attention to their bill of lading terms. Careful consideration should be given to the nature of the trade and the possibility to apply terms that exclude liability for the carrier usually making the shipper solely responsible for the risks of such carriage. This is particularly important in the context of expensive heavy lift cargoes that are frequently carried on deck.

This article intends to provide general guidance on the issues arising as a matter of English law. It is not intended to provide legal advice in relation to any specific query. The law is not static and if, in doubt, The Standard Club is always on hand to assist.

Members requiring further information on this topic should direct their enquiries to either their usual contact at the club or to the authors of this article.

References
[1] Aprile SPA v Elin Maritime Ltd 'The Elin' [2019] EWHC [1001] (Comm)
[2] Para 23
[3] Article III, Rule 2
[4] Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900 at paragraphs 14-23 (per Lord Clarke of Stone-cum-Ebony)
[5] Arnold v Britton and others [2015] AC 1619 at paragraphs 14-21 (per Lord Neuberger of Abbotsbury PSC)
[6] Wood v Capita Insurance Services Ltd [2017] AC 1173 at paragraphs 8-15 (per Lord Hodge)

Categories: Defence, Bills of Lading