Issues of liability and the cause of the arrest and detention of the vessel

The vessel was chartered on the Sugar Charter Party 1999 for the carriage of “a full and complete” cargo of sugar. At the discharge port, it was found that there were a large number of bags of short-delivered or damaged cargo. Of these bags, some were damaged, some torn and empty, some wet, and some short-delivered. As a consequence, the vessel was arrested by the receivers, who claimed US$150,000 in cash or a bank guarantee for US$540,000 in respect of the shortage and damage. The invoice value of the goods was around US$73,000, and the vessel was eventually released on payment by Owners to the receivers of US$100,000.

Owners claimed US$81,455.12, alternatively US$65,000, in respect of the cargo damage. They conceded that the wet damage, amounting to 35% of the damage, was for their own account. They argued that Charterers were liable for 65% of the invoice value of the cargo, plus the excess paid to achieve settlement, together with a customs fine. This totaled US$81,483.12. The alternative claim of US$65,000 was for an indemnity, being the proportion of the settlement figure not attributable to wet damage. Owners also claimed for damages for detention while the vessel was under arrest. They argued that the detention was caused by the receivers’ insistence on receiving a bank guarantee rather than a P&I Club letter of undertaking, in breach of clause 62 of the charterparty.

Charterers did not admit liability for the cargo claim or the customs fine and challenged the quantum. They argued that Owners were responsible for the torn or torn empty bags; as such damage was caused by the stevedores who were Owners’ agents pursuant to clause 14 of the charterparty. Charterers also denied liability for the detention claim and challenged quantum. They denied that clause 62 had been breached and argued that Owners had failed to establish either that a Club letter was ever offered to the receivers, or that the receivers had refused to accept it.

It was held that the cargo damage, other than the wet damage, was caused by the stevedores for whom Charterers were responsible. Each party should contribute proportionately to the settlement based on their respective liabilities, i.e. Charterers to pay US$65,000 and Owners to pay US$35,000.

Regarding the detention claim, there was no evidence that Owners’ P&I Club had offered the receivers a letter of undertaking at any stage or that receivers had refused to accept such a letter. The burden of proof of establishing a breach of clause 62 was on Owners: they had to show a positive case that their Club had offered a letter to the receivers, which the receivers had refused.

Owners had not established this. The cause of the arrest and detention, and the primary reason for the detention, was the damage to the cargo, the major part of which Charterers were responsible for. But for the stevedore damage, the whole situation may have been very different. The parties should therefore contribute to the detention claim in the same proportion as their respective liabilities for the cargo damage (35% Owners, 65% Charterers).