Charlie,
I was interested in this article:
"Lloyd's List
June 18, 2008 Wednesday
Focus; Pg. 7
1207 words
Outcome of hold-cleaning case a warning to charterers;
Tribunal's decision means evidence of cargo residues needed
A LONDON arbitration addressed hold-cleaning issues after a vessel had been twice rejected for residues of pre-charter cargoes despite a successful first voyage carrying grain, writes Richard Mabane.
The vessel had been delivered into an NYPE charter, under which the owners were to perform intermediate hold cleaning without responsibility for failed inspections. Having arrived at New Orleans after five days' cleaning, it passed detailed hold inspections and carried grain to China without incident.
Before loading bulk alumina in Kwinana, Australia, its holds were failed for alleged residues of cement and copper concentrate (both pre-charter cargoes) as well as rust scale, leading to more than four days of shore cleaning.
On the next voyage, carrying grain from Oregon to Japan, its holds were again failed, this time for alleged cement dust, causing two days of extra cleaning.
The charterers withheld hire for the cleaning time, alleging off-hire or breach of charter party warranties that the holds would be clean and free of residues on delivery (lines 41-42), and on delivery/arrival at first loadport (clause 90).
The tribunal held that the charterers were not entitled to withhold hire and had not lost time.
With cleaning costs still an issue, the tribunal had to deal with the underlying allegations, and held that:
Given the five days of cleaning necessary after delivery, the owners had not complied with the delivery warranty in lines 41-42;
In light of clause 90, it had been sufficient to comply on arrival at the first loadport, as evidenced by successful inspections;
The charterers had also accepted delivery and paid hire without objection, despite knowing (from an on-hire survey) that lines 41-42 had not been complied with on delivery;
Regarding the condition of the holds at Kwinana, the tribunal held that there had been no cement residues requiring removal, merely harmless staining of the upper reaches of bulkheads and shell plating, no loose rust scale and only "irrelevant" hardened residues of copper concentrate on the tank tops.
In reaching this conclusion, the tribunal noted that:
The charterers' surveyor had produced a very detailed report after an inspection lasting only around two hours;
Nothing of the kind complained of had been observed following discharge in China;
Reference, in another Kwinana survey, to cement had been to stains on the bulkheads, which was not the same as residues;
For reasons best known to themselves, the local surveyors had required removal of hard (that is, not loose) rust scale, which was surprising given that smelting alumina required only the same cleanliness as grain.
The tribunal remarked that the latter requirement might have been a means of making the owners pay for lost time because no cargo was ready.
While making no specific finding in that regard, it was however noted by the tribunal that no ship had been taken ahead of the vessel, which would have been likely had cargo been available.
In relation to the rejection at Portland, the tribunal, noting all the cleaning since delivery and the lack of complaint when the alumina cargo out-turned, held that:
In terms of cement, there had been nothing more than "inoffensive staining";
Any "paint scale" must have resulted from interaction of the alumina cargo and the vessel, and was therefore within the intermediate hold cleaning regime so that the owners were not responsible for the failed inspection;
Any cement residues would have resulted from defective intermediate hold cleaning at Kwinana, for which the owners were also not responsible.
Disputes frequently arise where holds are rejected for residues of pre-charter cargoes. This can be a particular problem where an initial "dirty" cargo is followed by a cargo (for example, grain or fertiliser) requiring far greater cleanliness.
The size and structures of ships' holds are such that some residues can remain, despite considerable efforts, particularly in inaccessible upper areas not easily reached without special equipment such as brows or cherry pickers, and in places where they may become lodged (for example, behind frames, pipes or brackets). It is also common practice for a vessel's holds to be cleaned on delivery/presentation for loading, only to the standard required by the first cargo.
Charter parties, however, often contain stringent requirements for hold cleanliness on delivery/at the first loadport; and, while these are sometimes balanced by intermediate hold-cleaning clauses protecting the owners if the holds are rejected later, this poses a question on who is responsible where pre-charter cargo residues cause delays later in the charter.
The issue is an important one, because standards vary considerably between cargoes, and lack of time (for example, where there is no ballast-positioning voyage) can make strict compliance with delivery provisions impossible, and often the parties will know this.
The approach of tribunals in recent London decisions has been commercial and flexible, taking account of the practical realities involved, but perhaps applying the law with excessive flexibility.
This decision is a case in point. The arbitrators accepted that the delivery requirements had been breached, but read that clause together with a later one in a way which (they held) avoided the potential consequences for the owners. It is far from clear that this was the correct approach, it being perfectly possible to give both provisions full effect, without the later clause diluting the effect of the earlier one.
It is also difficult to see how, by not rejecting delivery and paying hire, despite knowing the vessel's holds contained residues on delivery, the charterers could have lost their right to claim damages later when the remainder of those pre-charter residues caused delay. Pending the later loss of time, there may have been no grounds to put the vessel off-hire. In any event, without any clear waiver, neither a failure to put the vessel off-hire, nor acceptance of delivery despite hold conditions entitling rejection, would exclude the right to claim damages later (the Democritos [1975] 1 Lloyd's Rep. 386).
It is also unclear how residues of pre-charter cargoes could come within an intermediate hold-cleaning regime, simply because their removal ought (in preparing for an intermediate cargo) also to have occurred between later voyages: the vessel was supposed to have been delivered free of residues, and surely (as that obligation suggests) the intermediate hold-cleaning regime was to cover only cargoes loaded during the charter?
One suspects that more detailed evidence of the residues might have led to a different outcome, and that the tribunal may have been influenced by a suspicion that the Kwinana delays had been engineered to make the owners pay for time while no cargo was available. Hire levels are now so high that the cost of shore labour pales into insignificance in comparison with the cost of time.
In any event, the message for charterers is perfectly clear: obtain clear evidence of any cargo residues and reserve your position when accepting an unclean vessel and then paying hire, to prevent any later finding of waiver.
Richard Mabane is a partner at Holman Fenwick Willan.
June 17, 2008"
http://www.world-grain.com/news/newsfinder.asp?Action=UserDisplayFullDocument&orgI d=586&docId=l:808661069&topicId=14429&start=9&topi cs=single
How careful are grain growers about mouse and bird droppings?
Is your truck 'spotless' after spring seeding... will 'staining' become an issue on seed dressings?
The world is a very diffeernt place... when folks pay $10/bu or more for the grain they buy!
I was interested in this article:
"Lloyd's List
June 18, 2008 Wednesday
Focus; Pg. 7
1207 words
Outcome of hold-cleaning case a warning to charterers;
Tribunal's decision means evidence of cargo residues needed
A LONDON arbitration addressed hold-cleaning issues after a vessel had been twice rejected for residues of pre-charter cargoes despite a successful first voyage carrying grain, writes Richard Mabane.
The vessel had been delivered into an NYPE charter, under which the owners were to perform intermediate hold cleaning without responsibility for failed inspections. Having arrived at New Orleans after five days' cleaning, it passed detailed hold inspections and carried grain to China without incident.
Before loading bulk alumina in Kwinana, Australia, its holds were failed for alleged residues of cement and copper concentrate (both pre-charter cargoes) as well as rust scale, leading to more than four days of shore cleaning.
On the next voyage, carrying grain from Oregon to Japan, its holds were again failed, this time for alleged cement dust, causing two days of extra cleaning.
The charterers withheld hire for the cleaning time, alleging off-hire or breach of charter party warranties that the holds would be clean and free of residues on delivery (lines 41-42), and on delivery/arrival at first loadport (clause 90).
The tribunal held that the charterers were not entitled to withhold hire and had not lost time.
With cleaning costs still an issue, the tribunal had to deal with the underlying allegations, and held that:
Given the five days of cleaning necessary after delivery, the owners had not complied with the delivery warranty in lines 41-42;
In light of clause 90, it had been sufficient to comply on arrival at the first loadport, as evidenced by successful inspections;
The charterers had also accepted delivery and paid hire without objection, despite knowing (from an on-hire survey) that lines 41-42 had not been complied with on delivery;
Regarding the condition of the holds at Kwinana, the tribunal held that there had been no cement residues requiring removal, merely harmless staining of the upper reaches of bulkheads and shell plating, no loose rust scale and only "irrelevant" hardened residues of copper concentrate on the tank tops.
In reaching this conclusion, the tribunal noted that:
The charterers' surveyor had produced a very detailed report after an inspection lasting only around two hours;
Nothing of the kind complained of had been observed following discharge in China;
Reference, in another Kwinana survey, to cement had been to stains on the bulkheads, which was not the same as residues;
For reasons best known to themselves, the local surveyors had required removal of hard (that is, not loose) rust scale, which was surprising given that smelting alumina required only the same cleanliness as grain.
The tribunal remarked that the latter requirement might have been a means of making the owners pay for lost time because no cargo was ready.
While making no specific finding in that regard, it was however noted by the tribunal that no ship had been taken ahead of the vessel, which would have been likely had cargo been available.
In relation to the rejection at Portland, the tribunal, noting all the cleaning since delivery and the lack of complaint when the alumina cargo out-turned, held that:
In terms of cement, there had been nothing more than "inoffensive staining";
Any "paint scale" must have resulted from interaction of the alumina cargo and the vessel, and was therefore within the intermediate hold cleaning regime so that the owners were not responsible for the failed inspection;
Any cement residues would have resulted from defective intermediate hold cleaning at Kwinana, for which the owners were also not responsible.
Disputes frequently arise where holds are rejected for residues of pre-charter cargoes. This can be a particular problem where an initial "dirty" cargo is followed by a cargo (for example, grain or fertiliser) requiring far greater cleanliness.
The size and structures of ships' holds are such that some residues can remain, despite considerable efforts, particularly in inaccessible upper areas not easily reached without special equipment such as brows or cherry pickers, and in places where they may become lodged (for example, behind frames, pipes or brackets). It is also common practice for a vessel's holds to be cleaned on delivery/presentation for loading, only to the standard required by the first cargo.
Charter parties, however, often contain stringent requirements for hold cleanliness on delivery/at the first loadport; and, while these are sometimes balanced by intermediate hold-cleaning clauses protecting the owners if the holds are rejected later, this poses a question on who is responsible where pre-charter cargo residues cause delays later in the charter.
The issue is an important one, because standards vary considerably between cargoes, and lack of time (for example, where there is no ballast-positioning voyage) can make strict compliance with delivery provisions impossible, and often the parties will know this.
The approach of tribunals in recent London decisions has been commercial and flexible, taking account of the practical realities involved, but perhaps applying the law with excessive flexibility.
This decision is a case in point. The arbitrators accepted that the delivery requirements had been breached, but read that clause together with a later one in a way which (they held) avoided the potential consequences for the owners. It is far from clear that this was the correct approach, it being perfectly possible to give both provisions full effect, without the later clause diluting the effect of the earlier one.
It is also difficult to see how, by not rejecting delivery and paying hire, despite knowing the vessel's holds contained residues on delivery, the charterers could have lost their right to claim damages later when the remainder of those pre-charter residues caused delay. Pending the later loss of time, there may have been no grounds to put the vessel off-hire. In any event, without any clear waiver, neither a failure to put the vessel off-hire, nor acceptance of delivery despite hold conditions entitling rejection, would exclude the right to claim damages later (the Democritos [1975] 1 Lloyd's Rep. 386).
It is also unclear how residues of pre-charter cargoes could come within an intermediate hold-cleaning regime, simply because their removal ought (in preparing for an intermediate cargo) also to have occurred between later voyages: the vessel was supposed to have been delivered free of residues, and surely (as that obligation suggests) the intermediate hold-cleaning regime was to cover only cargoes loaded during the charter?
One suspects that more detailed evidence of the residues might have led to a different outcome, and that the tribunal may have been influenced by a suspicion that the Kwinana delays had been engineered to make the owners pay for time while no cargo was available. Hire levels are now so high that the cost of shore labour pales into insignificance in comparison with the cost of time.
In any event, the message for charterers is perfectly clear: obtain clear evidence of any cargo residues and reserve your position when accepting an unclean vessel and then paying hire, to prevent any later finding of waiver.
Richard Mabane is a partner at Holman Fenwick Willan.
June 17, 2008"
http://www.world-grain.com/news/newsfinder.asp?Action=UserDisplayFullDocument&orgI d=586&docId=l:808661069&topicId=14429&start=9&topi cs=single
How careful are grain growers about mouse and bird droppings?
Is your truck 'spotless' after spring seeding... will 'staining' become an issue on seed dressings?
The world is a very diffeernt place... when folks pay $10/bu or more for the grain they buy!
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