Marine Brief: latest decisions March 2018

In this briefing we consider some recent decisions that have been handed down in the UK and overseas courts, that include: the meaning of “unit” under the Hague Rules; the right of owners to abandon a vessel arguably late and claim a CTL; and ‘whaling’ in Singapore, which is a cyber attack case, where payments are made by a bank on the instructions of an impostor.

Limit of liability under the Hague Rules does not apply to bulk cargo

Sea Tank Shipping AS (formerly known as Tank Invest AS) v (1) Vinnlustodin HR and another [22.02.2018]

The carrier, Sea Tank Shipping AS, appealed against the decision that it was not entitled to limit its liability to the cargo owner, Vinnlustodin HR, for damage to cargo carried on its vessel under the Hague Rules 1924 art.4 para.5. The carrier shipped a cargo of fish oil pursuant to a charterparty on the “London Form”, which provided for the incorporation of the Hague Rules by contract. On arrival at the discharge port, almost all of the subject cargo had been damaged, and the cargo owner claimed damages of US$367,836.

The carrier accepted liability in principle, but argued that it was limited to £54,730.90 (£100 per metric tonne of cargo damaged) pursuant to art.4 para.5 of the Hague Rules, by which a carrier’s liability for loss or damage to or in connection with goods would not exceed £100 “per package or unit”. The carrier argued that a metric tonne was the suitable unit because the bill of lading described the cargo in kilograms. The cargo owners contended that the word “unit” could only refer to a physical item of cargo so art.4 para.5 could not apply to a liquid or other bulk cargo.

The court found that, as a matter of ordinary language, the word “unit” could refer to either an individual physical item or a unit of measurement. However, it was held that the word “unit” in art.4 para.5 could only mean a physical unit for shipment and not a unit of measurement or customary freight unit. The word “unit” therefore did not apply to bulk cargoes, and the carrier’s liability was not limited under art.4 para.5. In addition, even if the carrier was correct, there was no description in the charterparty of the cargo in terms of its measured weight, and its attempt to limit its liability failed on the facts.

Contacts: Christopher Chatfield and Hamish Reid-Kay

SCOPIC expenses prior to NOA can count towards assessing whether the vessel is a CTL

The Swedish Club and others v Connect Shipping Inc and another (The RENOS) [19.02.2018]

The Court of Appeal upheld the Commercial Court’s decision that owners had not lost the right to abandon the vessel and to make the claim pursuant to Section 62(3) of the Marine Insurance Act 1906 (MIA) notwithstanding that it was arguably late. The court also found that the vessel was indeed a CTL and that the costs incurred before the notice of abandonment and other SCOPIC costs could be counted as costs of repairs.

Related item: Hull insurance: Court of Appeal confirms SCOPIC and expenses prior to NOA can count towards assessing whether vessel is a constructive total loss

Contacts: David McKie and Craig Boyle Smith

‘Whaling’ in Singapore

Major Shipping & Trading Inc. v Standard Chartered Bank (Singapore) Limited [04.01.2018]

This is the first reported decision by the Singapore High Court relating to a social engineering scam known as ‘whaling’ or ‘spoofing’.

The claimant Singapore shipping company brought a claim against its bank in circumstances where the bank had made several large payments to unknown entities following instructions received from an imposter who accessed the claimant’s Managing Director’s email account without his knowledge. The total remittances amounted to US$1.8 million. The claimant sought to recover the funds from the bank on the basis that the remittances had not been authorised by them and that the bank could not in good faith have believed that the instructions were correct where, in their view at least, the circumstances were highly suspicious.

The court held in favour of the bank and dismissed the claim finding that the bank was not negligent and had made the transactions in good faith.

The claimant argued that certain ‘red flags’ put the bank on notice that the payments were not genuine. These were considered by the court but were deemed insufficient to make the bank liable; the court took the view that given the number of transactions that banks are required to consider and deal with on a daily basis that bank staff could not reasonably be required to scrutinise every remittance instruction in detail. A significant decision to anyone who authorises its bank to make payments against email instructions. Be careful!

Related item: ‘Whaling’ in Singapore

Contact: Karnan Thirupathy

Read other items in the Marine Brief - March 2018