Perils of the Sea

Nov 16, 2004
Author: Dusty Donnelly of Routledge Modisse Moss Morris

On Saturday 16 October 2004 the 5,548 ton mini bulker BBC China ran aground off the Wild Coast of South Africa. She was leaking fuel oil, and the salvors worked hard to minimise environmental damage and to re-float the vessel.

picture courtesy Smit Salvage


South Africans have become used to hearing of such casualties along our coast: the Sealand Express and Jolly Rubino have become household names through media interest sparked by the dramatic salvage operations which took place following both disasters. To anyone with cargo on board those vessels, however, the incident may have left a far more negative mark – on their bank accounts.

Routledge Modise Moss Morris has recently opened a Durban office and has been joined by directors Mike Posemann, Andrew Clark, and associate Dusty Donnelly, and their support staff. The Durban office specialises in Maritime and International Trade Law and has the expertise to advise on all areas of shipping, trade, customs and marine insurance related matters.

pictured from left Dusty Donnelly, Andrew Clark and Mike Posemann


It is vital for any trader to ensure, before goods embark on their international journey that he knows exactly where the risk of loss of or damage to those goods lies. This is a question of properly accessing the sale contract, which is frequently either poorly documented, or worse, contain contradictions and inappropriate use of terminology. The second step is to put in place proper insurance for those risks.

Cargo owners must appreciate that ‘all risks’ insurance does not cover all risks. For example loss proximately caused by delay or insufficiency of packing are not covered. Another pitfall facing South African importers who purchase CIF is that a claim which might have been paid by a local insurer, perhaps with the persuasive influence of a knowledgeable broker, is repudiated by a foreign insurer. The marine insurance certificate transferred under the CIF insurance contract means nothing unless one has the means to enforce payment against the foreign insurer. Frequently this proves to be economically unviable.

When cargo is discharged, the problems are compounded by the current disarray surrounding road transport in South Africa. Andrew Clark and Dusty Donnelly currently sit on the Maritime Law Association sub-committee, which is looking at road and rail transport and is attempting to formulate legislation and policy which will address some of these difficulties. As a cargo owner you should be wary of using fly-by-night transporters who contract out of all liability, and should be doubly wary of any ‘goods in transit’ policy offered by a transporter, unless you have seen a copy of the policy and have satisfied yourself of the terms and conditions of cover.

The reason for taking such precautions was abundantly obvious following the ‘Sealand Express’ and ‘Jolly Rubino’ situations. Few cargo owners are aware that in addition to the package limitations placed on a shipowner's liability by virtue of the terms of the bill of lading, shipowners are entitled to invoke a tonnage limitation which is based on the tonnage of the ship concerned. Cargo owners on the ‘Jolly Rubino’ ended up with a recovery of 15% of the CIF value of their cargo following the declaration of a tonnage limitation by Messina Lines.

Furthermore, where the ship is not lost, but is in fact salved, cargo owners may face the rude shock of receiving a declaration of general average from loss adjusters appointed by the shipowners. This was the case with the ‘Sealand Express’ where cargo owners were required to put up a guarantee of 50% of the CIF value of their cargo as security for general average and salvage, before they were entitled to obtain the release of their cargo for onward carriage to its destination. Those cargo owners who were adequately insured were able to call upon their insurers to put up the necessary guarantees and were also able to claim under the marine policy for additional expenses incurred in forwarding the cargo.

But one could easily be caught short. For example, an exporter of perishable produce would have been forced by the lengthy delay to airfreight his cargo to destination. As a general rule loss or damage proximately caused by delay is not covered by a marine policy. Where a cargo owner has obtained a proper extension which adequately covers delay they would be in a position to claim any damages caused through the incident.

The provision of a general average contribution may seem inherently unfair to cargo owners, but general average is in fact an ancient concept which arose from the earliest days of admiralty law. The principle is that a shipowner is entitled to a contribution from every other party with an interest in the sea voyage whenever:

The ship owner has made any extraordinary sacrifice or incurred any extraordinary expenditure; and

This was intentionally and reasonably made;

For the common safety

In the face of real and imminent danger;

With a successful outcome (i.e. some property preserved).

The type of expenses which the shipowner might be able to recover in general average would include salvage payments, port of refuge expenses, and damage to the ship or cargo resulting from efforts to remove her from the dangerous situation. For example if a ship runs aground, the damage caused to the ship during the grounding could not be claimed in general average. The shipowner would bear this loss himself. However any damage resulting to the ship during the process of freeing her could fall under general average.

another recent shipwreck on the South African coast, the Sagittarius off East London – picture by Greg Hutson


The question is then whether the cargo owner would ultimately be in a position to defeat any claim by the shipowner for general average, and recover the security which he put up. This would depend in simple terms upon whether or not the ship owner was at fault.

It may come as a surprise to some cargo owners to learn that under the provisions of the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading signed at Brussels on 25 August 1924 (with the Hague Rules) and amended in 1968 (the Hague-Visby Rules) the shipowner may rely, inter alia on the following defences:

Act, neglect or default of the Master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship;

Fire unless caused by the actual fault or privity of the carrier;

Perils, dangers and accidents of the sea or other navigable waters and

Acts of God

With a coast as treacherous as our own, it is clear that cargo owners need to be armed in advance with sufficient expertise to enable them to navigate not only the stormy seas but also the legal issues which could mean the difference between a financial disaster and a good recovery.