Trafigura PTE Ltd v TKK Shipping PTE Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Nigel Teare |
| Judgment Date | 13 January 2023 |
| Neutral Citation | [2023] EWHC 26 (Comm) |
| Docket Number | Case No: CL-2022-000044 |
| Court | Queen's Bench Division (Commercial Court) |
[2023] EWHC 26 (Comm)
Sir Nigel Teare
Sitting as a Judge of the High Court
Case No: CL-2022-000044
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
John Russell KC and Benjamin Coffer (instructed by Stephenson Harwood LLP) for the Claimant
Nevil Phillips and Peter Stevenson (instructed by MFB Solicitors) for the Defendant
Hearing dates: 15 December 2022
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Friday 13 January 2023 at 12:00 noon.
This is an application pursuant to section 45 of the Arbitration Act 1996 for the determination of a point of law arising in the course of an arbitration. The interesting point of law relates to the true construction and application of Article IV(5)(a) of the Hague-Visby Rules which limits the carrier's liability to a sum based upon the weight of the “goods lost or damaged”.
The application is made with the agreement of the Defendant. It is to be determined on the basis of agreed or assumed facts.
The Claimant was at all material times the owner of a bulk cargo of zinc calcine with a gross weight of 10,287.07 WMT which was loaded on board the vessel THORCO LINEAGE for carriage from Baltimore, USA to Hobart, Australia pursuant to a bill of lading dated 31 May 2018 issued in Geneva, Switzerland.
The contract of carriage incorporated the terms of a charterparty dated 15 May 2018, including the law and arbitration clause. That clause provided for English law and arbitration in London.
On 31 May 2018 the vessel loaded the cargo into holds 1 and 2.
On 21 June 2018, whilst en route to the discharge port, the vessel lost power following an engine failure. On 23 June 2018 the vessel grounded on Raroia Atoll in French Polynesia. As a result she suffered extensive damage. Several ballast tanks were punctured, her rudder was lost and her propeller was damaged beyond repair. It is to be assumed for the purposes of this application that the casualty was caused by a breach of the contract of carriage by the carrier.
On 25 June 2018 a Lloyd's Standard Form of Salvage Agreement (No Cure No Pay) (“the LOF”) was signed by the master on behalf of the property to be salved with Smit Singapore Pte and The Nippon Salvage Company Limited (“the Salvors”). The LOF contained the SCOPIC clause which was invoked by the Salvors on 25 June 2018.
On 27 June 2018 the vessel was refloated and taken to Papeete, French Polynesia for inspection and temporary repairs. She was subsequently towed under the LOF to South Korea for repairs, departing Papeete on 19 July 2018.
On 5 September 2018 the Claimant provided an Average Bond.
The vessel arrived at Gwangyang, South Korea, under tow on 11 September 2018 where some cargo was discharged and stored ashore.
The vessel then proceeded to Yeosu shipyard for further repairs, arriving on 16 September 2018 when she then discharged further cargo.
On 21 September 2018 the LOF was terminated.
Pursuant to clause 4.7 of the Lloyd's Salvage and Arbitration Clauses 2011 (“the LSSA Clauses”) the Salvors had a maritime lien on the property salved for their salvage remuneration until security was provided. If security was not provided the Salvors could and would have exercised their maritime lien. Pursuant to clause 4.8 of the LSSA Clauses the property salved could not be removed without the consent of the Salvors.
The Claimant was required to put up General Average Security in order to obtain possession of the cargo. If it were not provided the shipowner could and would have exercised their lien in respect of General Average over the cargo.
On 5 November 2018 Axa XL provided a General Average Guarantee in respect of the cargo.
On 6 November 2018 the Claimant provided salvage security in the sum of US$8 million.
On 26 December 2018 some of the cargo was shipped on board MV MERWEDEGRACHT for carriage to the intended port of discharge where it was delivered.
In the result 9,523 WMT of cargo were not lost or physically damaged and 764.07 WMT were lost or physically damaged. It is assumed for the purposes of this application that the carrier's breach of contract caused the Claimant the following loss and damage:
i) Liability to pay the Salvors US$7,355,000.
ii) Physical loss and/or damage to the cargo US$278,658.31.
iii) On-shipment costs in respect of the cargo (some of which was physically damaged and some of which was not) US$723,831.85.
iv) Costs incurred in arranging for the salvage sale and/or disposal of some of the physically damaged cargo US$58,934.74.
By a letter dated 3 May 2019 the Defendant warranted that it was the carrier under the bill of lading.
On 15 June 2020 the Claimant commenced arbitration proceedings. The Tribunal consists of Luke Parsons KC, Mr. David Martin-Clark and Mr. Jon Elvey.
In the arbitration the Claimant claims an indemnity, alternatively, damages for loss, damage and expense in respect of the cargo including the costs of salvage, on-shipment costs, disposal costs and a sum in respect of the lost or damaged cargo.
The Hague-Visby Rules have the force of law in relation to the bill of lading and contract of carriage. Article IV r.5(a) thereof provides as follows:
“Unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading, neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the goods in an amount exceeding the equivalent of 667.67 units of account per package or 2 units of account per kilogram of gross weight of the goods lost or damaged, whichever is the higher.”
The question of law for the court, which arises in respect of the claim in respect of the Claimant's liability for salvage and the on-shipment costs, is:
Whether on the agreed and assumed facts, the Defendant is entitled to limit its liability, and if so, in what amount in respect of each head of loss?
The Claimant's case
It is submitted by John Russell KC on behalf of the Claimant that:
i) The Defendant's liability in respect of the Claimant's liability to pay salvage and the on-shipment costs is limited by reference to the weight of the salved cargo because the words “goods lost or damaged” at the end of Article IV r.5(a) refer to goods lost or damaged, physically or economically. The whole cargo suffered economic damage by reason of the Claimant's liability to pay salvage and on-shipment costs. The limit calculated on that basis exceeds the value of the claim.
ii) Further or alternatively, the Defendant's liability in respect of the Claimant's liability to pay salvage and the on-shipment costs is limited by reference to the weight of the salved cargo because the maritime lien on the cargo for salvage damaged the Claimant's proprietary or possessory title in the cargo so that the cargo was damaged. Again, the limit calculated on that basis exceeds the value of the claim.
iii) Further or alternatively, if submissions (i) and (ii) are not accepted then, pursuant to the decision of Burton J. in Serena Navigation v DERA Commercial Establishment, “The Limnos” [2008] 2 Lloyd's Reports 166 the Defendant's liability in respect of the Claimant's liability to pay salvage and the on-shipment costs is not subject to any limit pursuant to Article IV(5)(a).
The Defendant's case
It is submitted by Nevil Phillips on behalf of the Defendant that:
i) The Defendant's liability in respect of the Claimant's liability to pay salvage and the on-shipment costs is limited by reference to the weight of the goods which were damaged physically because the words “goods lost or damaged” at the end of Article IV(5)(a) refer to goods which have been lost or goods the physical state of which has been changed.
ii) The cargo was not damaged by reason of being subject to a maritime lien and the Defendant's liability is not unlimited.
Since only a small amount of the cargo was physically damaged the limit of the Defendant's liability to the Claimant was, I was told, about $800,000. Thus the question of law is of some importance to the parties.
Limitation of liability in the Hague and Hague-Visby Rules
Article IV r.5 of The Hague Rules provided as follows:
Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with goods in an amount exceeding £100 per package or unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading…………
Article IV r.5 of the Hague-Visby Rules provides as follows:
(a) Unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading, neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the goods in an amount exceeding 667.67 units of account per package or 2 units of account per kilogram of gross weight of the goods lost or damaged, whichever is the higher.
(b) The total amount recoverable shall be calculated by reference to the value of such goods at the place and time at which the goods are discharged from the ship in accordance with the contract or should have been so discharged. The value of the goods shall be fixed according to the commodity exchange price, or if there...
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The Thorco Lineage: Limitation Under The Hague-Visby Rules Where There Is Physical Damage And Economic Loss (Video)
...In an important judgment handed down on Friday 13th January 2023 (Trafigura PTE Ltd v TKK Shipping Ltd ("The Thorco Lineage") [2023] EWHC 26 (Comm)), Sir Nigel Teare declined to follow The Limnos and rejected the argument that Article IV(5)(a) of the HVR limits claims for economic loss by r......