Does a typhoon constitute force majeure and exempt the carrier from liability for cargo damage?

Recently, the Qingdao Maritime Court released the top ten cases of 2022 on its public platform. One of the cases dealt with the legal issue of whether a multimodal carrier can claim exemption from liability for cargo damage on the ground that a typhoon constitutes force majeure.

Facts

The plaintiff entrusted a logistics company (the defendant) to transport 12 containers of denim from Zouping, Shandong to Zengcheng, Guangdong. The scope of services was door-to-door which involved carriage by sea and in-land road transportation. The contract contained an exemption provision which stipulated that "the commissioned party is not responsible for losses due to natural disasters (heavy rain, typhoons, etc.)".

The goods were first transported by the first carrier to Jingtang Port and then by the second carrier to Nansha Port, where the goods were discharged and deposited at the port on 11 September 2018. On the same day, the meteorological department issued a typhoon warning, which was followed by successive typhoon warnings. On 16 September 2018, super typhoon "Shanzhu" made landfall along the coast of Guangdong. On 18 September 2018, the goods were shipped out of Nansha Port by the third carrier and delivered to the consignee on 25 September 2018.

At the process of unpacking and handover, it was found that eight containers with a total of 474 pieces of denim had suffered water damage. It was determined that the damage was caused by water ingress into the bottom of the container due to improper stacking and failure to take any precautionary measures during storage at the Nansha port.

Decision

The Court held that as the case concerned disputes over a multimodal transport contract which involved the carriage of goods by sea between Chinese ports, Contract Law was applicable⁽¹⁾ rather than Chapter IV of the Maritime Code which does not apply to the carriage of goods by sea between Chinese ports. As the cargo damage occurred during storage at the Nansha port and the defendant's position is as a multimodal transport operator, its period of responsibility lasted from the time it took delivery of the goods to the time it delivered the goods. Therefore, it was be held liable and obligated to compensate the plaintiff for the losses.

In this case, Typhoon Shanzhu did not meet the elements of force majeure which are "unforeseeable, unavoidable, and insurmountable" under Chinese law.⁽²⁾

First, the goods in question were transported to Nansha port on 11 September 2018, the day when the level IV emergency response to meteorological disasters (typhoons) was activated. Since then, the meteorological departments at all levels have continuously upgraded their emergency response to Typhoon Shanzhu and made rolling forecasts, all of which predicted that it would seriously affect Guangdong on 16 September.

Thus, that the typhoon would probably cause damage to the goods was foreseeable. In addition, the fact that defendant had informed the plaintiff about the eight containers stacked at the bottom might be wet damaged and in need of inspection before the container were delivered to the consignee also proved that the defendant actually did foresee the possibility of cargo damage.

Second, the multimodal transport contract between the plaintiff and the defendant contained neither transit to Nansha Port nor transshipment by the third carrier. The goods in question were transported to Nansha port on 11 September 2018 and were remained at the port until 18 September 2018. There was a five-day gap between the arrival of the good at Nansha port and the time when Typhoon Shanzhu had a serious impact on Guangdong. In fact, Nansha Port was less than 100 kilometers away from the final destination and place of receipt. The defendant had sufficient time to transport the goods to the final destination and place of receipt by in-land road transportation or other means and could have also notified the port to take necessary measures to re-stack the constrainers to avoid potential flooding. Therefore, the loss of goods was entirely avoidable and surmountable.

Third, although the contract between the plaintiff and the defendant contained an exemption provision which stipulated that "the commissioned party is not responsible for losses due to natural disasters (heavy rain, typhoons, etc.)" the Court viewed this provision not to be a statutory defence. The application of this exemption clause is subject to the premise that the damage to the goods was caused exclusively by natural disaster and that the carrier did not have any willful intent or gross negligence regarding the damage to the goods. If the carrier had had any willful intent or gross negligence with respect to the occurrence of the damage to the goods, it could not invoke this exemption clause.

Thus, as far as this case is concerned, Typhoon Shanzhu did not meet the constitutive elements of force majeure under Chinese laws and the defendant could not be exempted from liability.

The defendant later appealed against the judgment of the first instance on the ground that Typhoon Shanzhu constituted force majeure. The High Court of Shandong Province rejected the appeal and upheld the original judgment. The defendant's application to the Supreme Court for a retrial was also rejected.

Comment

In the carriage of goods by sea, it is not uncommon for carriers to claim exemption from liability for cargo damage on the grounds that typhoons constitute force majeure. However, where, as in this case, there are alternative means to transport the goods or protect the good from wet damage, the carrier cannot claim exemption from lability on the ground of force majeure if it had not taken the most efficient means.

This case reaffirms and clarifies that natural disasters such as typhoons are not ipso facto force majeure, but they should be determined in a comprehensive manner in terms of both the objective characteristics of the event and the subjective behavior of the carrier. For typhoon to be recognised as force majeure it must be unforeseeable, unavoidable and insurmountable. However, if the carrier omitted to take actions or was grossly negligent in performing its duties regarding proper cargo care, it cannot invoke force majeure to exempt itself from liability.

The similar rule also applies when the carrier invokes the statutory defence of exemption under article 51 of Charter IV of the Maritime Code. The law stipulates that "the carrier shall not be liable for the loss of or damage to the goods occurred during the period of carrier's responsibility arising or resulting from act of god and sea perils". In legal practice, typhoons are generally not recognised as an act of God or sea perils, as the wind, the duration and extent of a typhoon are usually predictable. However, if a typhoon brings abnormal and unforeseeable risks, and the carrier has fulfilled its duty of care, the carrier may be exempted from liability for damage to the goods.

 

Wind forces, mooring strategies, and common high-wind challenges.

As the American Club warns, the unpredictable force of the wind, often underestimated, significantly impacts large sail area (profile) vessels, especially when moored. 

Their large sail areas expose them to potential beam wind hazards, leading to risks like a vessel breakaway that can result in a grounding, allision, collision, or damage to third party property.

Factors affecting mooring 

If the vessel captain decides to stay moored after considering the expected wind speed, estimated wind load, and other general considerations, the vessel should deploy extra mooring lines taking into account the following factors:

§  Conditions and age of the mooring ropes;

§  Brake render settings of the mooring winches;

§  Availability and safe working load of shore/terminal mooring points;

§  Conditions of shore/terminal mooring points;

§  Maximum number of moorings allowed to each mooring point;

§  Mooring pattern/arrangement and lead of the mooring lines;

§  Terminal recommendations for mooring arrangements;

§  Availability of tug assistance and linesmen that may be required to assist on short notice;

§  Potential wake effects of passing vessels on moored vessels;

§  Any forthcoming high tides or currents at the location that can put additional strain on the mooring lines;

§  Availability of clear and constant communication between the ship’s crew, the terminal staff, and tug operators; and

§  Familiarity with port and terminal procedures, rules and guidelines that are relevant to mooring in high wind conditions, as may be applicable.

Complications

There are several mooring operations related complications that may arise during periods of high winds that should be considered:

§  overloading bollards due to the load from one or multiple mooring lines

§  using older and weaker mooring lines

§  incorrect settings on constant tension winches or winch render settings

§  lack of situational awareness and monitoring of weather conditions

§  inability to deploy additional mooring lines due to unavailability of line handlers

Lessons learned

§  Plan for the expected weather, especially if wind gust velocities are anticipated to be high.

§  Plan the mooring arrangement in advance of arrival as ashore mooring points can vary

§  Know the capacities of the available mooring points ashore.

§  Increasing the number of mooring lines before the weather deteriorates is much easier.

§  Anticipate that thunderstorms can often include high winds.

§  Training and drilling for high wind events can include line handling drills, emergency departure and engine start drills, and ensuring crew readiness in an actual situation.

§  Establish and prepare an emergency action plan to mitigate the consequences of a mooring failure or vessel breakaway. For large sail (profile) vessels, such considerations should be part of the safety management system’s emergency preparedness procedures.

§  Perform a risk assessment before the vessel is berthed to help identify any possible issues and to enable planning for mitigation actions.

§  Identify and liaise with local port authorities and meteorological departments.

§  Cooperation with these authorities can be beneficial for gaining an understanding of local weather patterns and berth characteristics.

See full alert here

https://safety4sea.com/wp-content/uploads/2023/07/AmericanClub-Mooring-Precautions-for-Vessels-with-Large-Sail-Areas-When-Expecting-High-Winds-2023_05.pdf

Shipowner may disregard charterers' voyage instructions without interrupting demurrage

 Introduction

The High Court has clarified when a shipowner may disregard charterers' voyage instructions without interrupting demurrage, in a decision that underlines the obligation of voyage charterers to choose safe ports and berths for vessels.

The recent High Court decision in CM P-Max III Ltd v Petroleos Del Norte SA (the "Stena Primorsk") is a helpful reminder as to when owners may disregard charterers' voyage orders without preventing demurrage from running.

Facts

The owners (also the claimants) chartered out the vessel "Stena Primorsk" on a voyage charter based on the Shellvoy 6 form. Pursuant to the terms of the charterparty (CP), the charterers had a total allowance of 72 hours of laytime for both loading and discharge.

The cargo was loaded onto the vessel in the port of Bilbao. It was undisputed that this loading process took 68 hours and 54 minutes of laytime. The vessel subsequently proceeded towards Paulsboro, the nominated discharge port situated on the Delaware river.

Since the vessel's freshwater draft only exceeded the depth of the discharge berth by four centimetres and the tide was expected to vary by 1.6 metres, the master applied for a waiver under the vessel's keel clearance insurance policy prior to berthing. The waiver was granted on a one-off basis and on the assumption the vessel's draft would be equal to or less than the river's declared safe draft at high tide and that discharge would commence promptly after arrival.

Once the vessel arrived at the discharge berth on 31 March 2019, the master was informed that discharge could only take place at a reduced rate initially (for seven to eight hours). Taking into account the fluctuations in the tide and the rate of discharge, the master concluded that the vessel would not be able to maintain a sufficient keel clearance and there was a risk that the vessel could touch bottom. The vessel then departed the berth, returning to anchorage 12 minutes after arrival.

On 1 April 2019, another discharge berth which could facilitate a higher rate of discharge became available. The charterers therefore gave the owners orders to proceed to this berth to complete the discharge of the cargo.

Before proceeding to the newly available berth, the owners applied for another waiver under the insurance policy. The request had no allowances for delays, berthing, connections or technical failures. The request was declined on the basis that the risk that the vessel could touch bottom was too great. Proceeding to the berth would have constituted a breach of the insurance policy. As a result, the master did not comply with the charterers' orders.

Eventually, part of the cargo was lightered on 4 April 2019, and the balance was discharged at the discharge berth on 6 April 2019. The whole discharge process took an additional 154.63 hours, with the aggregate laytime used for loading and discharge amounting to 226.63 hours. The owners claimed for demurrage amounting to $143,153.64 at the applicable demurrage rate under the CP.

It is also worth highlighting that the CP contained the following clauses which were relevant to the dispute.

Clause 3(1):

Subject to the provisions of this Charter the vessel shall perform her service with utmost despatch and shall [having loaded the vessel] proceed as ordered on signing bills of lading to such berths as Charterers may specify, in any port or ports within Part I clause (E) nominated by Charterers, or so near thereunto as she may safely get and there, always safely afloat, discharge the cargo.

Clause 3(2):

Owners shall be responsible for and indemnify Charterers for any time, costs, delays or loss including but not limited to use of laytime, demurrage, . . . due to any failure whatsoever to comply fully with Charterers' voyage instructions . . . Owners shall adhere to Charterers' voyage instructions as long as such orders are considered safe by the Master of the ship.

Clause 4 – "Charterers shall exercise due diligence to order the vessel only to ports and berths which are safe for the vessel and where the vessel will always be afloat".

Clause 7:

If requested by Charterer, Vessel shall load and/or discharge more than one grade simultaneously if Vessel is technically capable of doing so. Any delay resulting from the failure by Owners to provide such personnel, equipment and facilities shall not count as laytime or, if the vessel is on demurrage, as demurrage.

Clause 13(1)(a) provided that time at the port of discharge would commence to run six hours after the notice of readiness had been tendered by the master or owners' agents to charterers or their agents and/or the vessel was securely moored at the specified loading or discharging berth, whichever occured first. If the owners:

fail to obtain free pratique unless this is not customary prior to berthing . . . either within the 6 hours after notice of readiness originally tendered or when time would otherwise normally commence under this Charter, then the original notice of readiness shall not be valid.

Clause 14: "Time shall not count when: . . . (c) lost as a result of: (i) breach of this Charter by Owners".

Clause 15(2):

Any delays for which laytime/demurrage consequences are not specifically allocated in this or any other clause of this Charter and which are beyond the reasonable control of Owner or Charterer shall count as laytime or, if Vessel is on demurrage, as time on demurrage. If demurrage is incurred, on account of such delays, it shall be paid at half the Demurrage Rate.

The CP also contained a warranty confirming that the information set out in the Q88 questionnaire appended to the CP was "an integral part" of the CP. The questionnaire contained a detailed list of information on the vessel that the charterers would require to utilise the vessel safely (including the vessel's draft, its insurers and the owners' guidelines for keel clearance).

Dispute
The dispute centred around whether laytime continued to run after:

• the initial departure from the discharge berth on 31 March 2019; and
• the owners' refusal to comply with the charterers' orders the following day to proceed to the alternate discharge berth.

Given the factual matrix, the owners' claim was for demurrage and lighterage costs, rather than for damages for breach of the safe port warranty. The charterers in turn counterclaimed for lighterage costs.

Decision

Experts from both sides agreed that the original departure from the berth on 31 March 2019 was a reasonable decision made on safety grounds.

It followed that this action was reasonable and did not put the owners in breach of the CP. Therefore, time continued to run after the departure from the first berth.

With respect to the masters' decision not to proceed to the second discharge berth on 1 April 2019, during the discussion of the legal position, Judge Bird highlighted the following with respect to the terms of the CP:

• The obligation to proceed with "utmost dispatch" was qualified by the requirement for the vessel to remain safely afloat.
• The obligation of the owners to comply with the charterers' voyage instructions was also not an absolute one.
• The master had a right not to comply with voyage orders that he did not consider to be safe.
• The charterers were obliged to exercise "due diligence" in choosing ports and berths to ensure that they would be "safe for the vessel" to proceed to.
• It was "apt" to refer to the Q88 questionnaire as an integral part of the CP which could not be ignored.

The discussion also referred to Fontevivo decision, which established that for demurrage to stop, a charterer must establish that the owner be at "fault". In that case, demurrage stopped running where the owner's decision to move off the berth was not reasonably necessary.

Consequently, the owners were entitled to rely on the keel clearance policy as justification for refusing to comply with the charterers' orders to proceed to the second discharge berth. The owners' actions were deemed to comply with clause 3(1) of the CP.

As a result, laytime continued to run for the purposes of demurrage. It also followed that the charterers' counterclaim for lighterage costs failed.

Comment

This judgment is helpful authority that:

• the master can refuse to comply with voyage instructions where they give rise to reasonable safety concerns; and
• laytime will continue to run unless the charterers can establish that there has been a "fault" in non-compliance with their instructions.