The Pitfalls in the Shipping of ON DECK Cargo

by Peter F. M. Jones (Paterson MacDougall LLP)

Remember: in a dispute about deck carriage the forwarder is often in the middle, the target of the seller, the buyer and the carrier. The recent English case of Geofizika DD v MMB International Limited et al EWHC 1675 involved just such a scenario.

Geofizika agreed to buy three ambulances from the defendant, MMB International, to be delivered "CIP Tripoli". As a CIP seller subject to Incoterms 2000, MMB had to contract for the carriage of the goods "on usual terms" and "in a customary manner", and obtain cargo insurance that gave its buyer a right to claim directly from the insurer.

MMB obtained a quotation from a freight forwarder, GSC, for the carriage of the ambulances to destination. In turn GSC obtained a booking confirmation from a carrier, Brointermed Lines, that stated "ALL VEHICLES WILL BE SHIPPED WITH 'ON DECK OPTION', to be remarked on your original bills of lading".

Prior to sailing GSC received Brointermed's original bills of lading that included a printed clause on the reverse side giving the carrier liberty to carry cargo on deck, but did not include a statement that the vehicles were shipped on deck. The ambulances were stowed on deck, and two were washed overboard during a storm in the Bay of Biscay. After the sailing GSC sent shipping documents to MMB, including an insurance certificate that stated "Warranted shipped under Deck". Clearly there could be no recovery from insurers under the terms of that policy.

Geofizika settled its claim against Brointermed. It sued MMB who sought an indemnity from its forwarder, GSC, via a third party claim. Given the requirements of the insurance certificate, the parties to the action agreed that the contract of carriage ought to have provided for carriage below deck.

GSC submitted that the booking confirmation was an agreement to carry below deck. If the carrier wished to ship on deck, it had to issue bills of lading with a statement of that the goods were shipped on deck, as contemplated by the booking confirmation.

The court disagreed, finding that the booking confirmation was ambiguous, and could not override Brointermed’s rights under the standard terms of its bills of lading. So the contract of carriage did not meet the Incoterms 2000 requirements for carriage on usual terms, as least in the context of this shipment of ambulances. MMB was liable to Geofizika for the value of the two ambulances lost over side.

In support of its argument that the contract of carriage was on usual terms, GSC took the position that Brointermed ought to have carried the ambulances under deck, and breached its duty of care by carrying them on deck. The court considered that the "on deck option" was not invalidated by Article III (8) of the Hague Visby Rules that voids any clause that limits the liability of the carrier except as provided by the Rules.

Still, a carrier was subject to the general obligation to properly and carefully carry as required by Article III (2). A carrier could not exclude liability for on deck carriage if this was a breach of its duty of care. Depending on the facts, a carrier may be liable for deck carriage where the bill of lading gives the carrier an option to stow on deck - but it still could rely upon the package limitation or other defences under the Hague Visby Rules.

As the court held that the contract of carriage was not on usual terms, MMB was liable to Geofizika, but was entitled to an indemnity from GSC, its forwarder who had arranged the shipment and the insurance.

January 27, 2010