On 24 December 2010, armed pirates seized 5,921 mt of 33,460 mt of oil (transferred cargo) from Valle di Cordoba (the vessel) of Benin en route from Abidjan to Lagos. Navigazione Montanari SpA (defendant owner) chartered the vessel to Trafigura Beheer BV (claimant charterer) pursuant to a fixture note providing for the application of BPVOY3 form and Trafigura Chartering Clauses (as of 1 August 2005) as amended (Trafigura terms). The defendant charterer sought to recover the fob port of loading value of any proven difference between the net vessel volumes after loading at the loading port and before unloading at the discharge port, plus freight and insurance.

The BPVOY3 form, against the side note ‘Exceptions’, contained a clause (cl 46) stating that certain articles of the Hague-Visby Rules (including art 4) should apply to the charter and deemed the charter as a contract for the carriage of goods by sea to which the said articles applied.

Arts 4.2.c, 4.2.f and 4.2.q of the Hague-Visby Rules provide that neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from perils, dangers and accidents of the sea or other navigable waters (4.2.c); act of public enemies (4.2.f); any other cause arising without the actual fault or privity of the carrier (…) (4.2.q) respectively. If cl 46 applied, these rules would protect the owner claimant.

The Trafigura terms contained a clause (cl 4) headed ‘In-transit loss clause’ (ITL clause) which replaced the in-transit loss excess limitation from 0.3% to 0.5% and replaced the words ‘deduct from freight’ to ‘claim’ from the original. The amended clause reads:

In addition to any other rights which Charterers may have, Owners will be responsible for the full amount of any in-transit loss if in-transit loss exceeds 0.5% and Charterers shall have the right to claim an amount equal to the FOB port of loading value of such lost cargo plus freight and insurance due with respect thereto. In-transit loss is defined as the difference between net vessel volumes after loading at the loading port and before unloading at the discharge port.

There were two issues in this dispute. First, on a true construction of the ITL clause, does the transferred cargo constitute ‘in-transit loss’ or ‘lost cargo’? Second, if so, does the ITL clause impose strict liability upon the charterer defendant in respect of the transferred cargo or do the exceptions of cl 46 apply to exclude that liability? The claimant charterer submitted that if the ITL clause did not impose such strict liability, then art 4 of the Hague-Visby Rules would always protect the defendant owner and negate any benefit to a claim falling under the ITL clause and thereby the amended ITL clause would not have added value to the charterer defendant and would be emasculated.  Was there a clear and distinct inconsistency between the ITL clause and cl 46, and could the clauses be reconciled?

Held: The judge held that the transferred cargo did not fall within ‘in-transit loss’ or ‘cargo loss’ within the meaning of the clause and the liability on the defendant owner under the ITL clause was subject to the exceptions in cl 46.

On the first issue, The ITL clause referred to loss ‘incidental to the carriage of’ oil products rather than action by pirates.

On the second issue, the judge rejected the claimant charterer’s contention that the ITL clause imposed strict liability on the transferred cargo as it was subject to the exceptions in cl 46. Clause 46 provided that the owners were entitled to the protection of the relevant articles of the Hague-Visby Rules ‘in respect of any claim made’ under the charterparty and there was no good reason to limit the natural meaning of ‘any claim’ by excluding claims under the ITL clause. In addition, it was unusual in a charterparty to have an ITL clause that made the owners strictly liable for loss of cargo. Hence, it was unlikely that parties have desired such surprising result considered to be unreasonable and if they had intended it, they should have made the intention abundantly clear.

There was also no conflict between the ITL clause and cl 46. Clause 46 is not a clause paramount and the ITL clause stated that its provisions were: ‘In addition to any other rights which the Charterers may have’. Hence, the clauses could be reconciled.