The Mookda Naree: the meaning of common words

Beware your presumption as to the meaning of common words.

Without any context what do the words ‘cargo claims’ mean?

If charterers agree to accept some liability for “cargo claims”, in return for trading to W Africa, one might reasonably think that this only related to the cargo being carried by the vessel.

But could it actually mean “any proceedings (or threat of proceedings) in relation to the carriage of (any) goods” whether carried on board the vessel or not. In the context of a time charter where owners and charterers are seeking to apportion risk, can such a wide definition really be what the parties contemplated?

In an appeal case relating to the arrest of the m.v. Mookda Naree (the Vessel), the interpretation of these words was called into question.

Facts

The dispute arose due to delays when the Vessel was arrested at Conakry on 15 December 2018, to secure a cargo shortage claim against Cerealis, a French wheat trading company, for goods had been carried on m.v. Supertramp, a ship unrelated to the Vessel.

Cerealis were sub-sub charterers of both the Supertramp and the Vessel. The time charter provided in clause 86 that “when trading to West African ports Charterers to accept responsibility for cargo claims from third parties in these countries (except those arising from unseaworthiness of vessel) including putting up security, if necessary, to prevent arrest/detention of the vessel or to release the vessel from arrest or detention and vessel to remain on hire.”. Such clauses are relatively common. The charter also incorporated the ICA and several other references to ‘cargo claims’.

The Tribunal

Charterers contended that “cargo claims” must mean claims in relation to the carriage of cargo under the charter. The Tribunal disagreed and said that the phrase ‘cargo claims’ should be given a wide and literal interpretation such that the arrest of the vessel in West Africa for any claim that related to cargo (not caused by unseaworthiness) was the responsibility of charterers no matter how, when or where the claim arose.

Appeal

On appeal, Baker J overturned the Tribunal’s decision and agreed with charterers that “cargo claims” had to be limited to cargo claims relating to cargo carried by the vessel under the charter. That was consistent with the other uses of the words “cargo claims” in the context of the charter (in particular in relation to the ICA). In particular he noted that if the Tribunal were correct, then, if the Vessel was arrested in W Africa, in relation to a claim alleged against owners under a different charter, at any time, anywhere else in the world, that claim became the responsibility of charterers. The Judge considered that “..made for an incoherent, arbitrary allocation of responsibility to [charterers]”.

Therefore, because the arrest in this case was for a cargo carried on a different vessel, this was not a “cargo claim” under clause 86, and therefore there was no breach by charterers.

Conclusion

This judgment brings some welcome commercial sense to the intentions of the parties in relation to their exposure for cargo claims under a charter. Apart from anything else, it would likely have been extremely difficult for charterers to obtain insurance cover if the acceptance of liability was as wide as the Tribunal thought.

Further it is to be noted that Baker J was assisted in his reasoning by the meaning given to “cargo claims” elsewhere in the charter party. As such all parties should be careful to ensure that terms used in charter parties are used consistently.

However, the case also demonstrates that even an experienced Tribunal might reach a different conclusion from what might have been intended.

Accordingly we recommend that great care is taken in drafting rider clauses, particularly if accepting unusual or potentially onerous liabilities. If in doubt, be as explicit as possible.

For further insight please read our second article The Mookda Naree: on or off hire during an arrest?