Nanjing Maritime Court of PRC[1] recently issued Mediation Statement on 10 Sept. 2021, for cargo claims case arising from B/L contract of carriage of wood pulp cargo from loadport Indonesia to disport Zhenjiang of China. The plaintiff cargo underwriter (CPIC) claimed for cargo loss/damage arising from fire-damage of Hold 2# and water-damage of Hold 1#, total claims over RMB2.67million plus interest and costs.  The vessel P&I Club’s LOU was provided at RMB3 million to cargo side for the avoidance of ship arrest.

HiHonor lawyers acting on behalf of the Defendant vessel Owner, as carrier of the Bs/L, rendered good arguable defense points, prepared bundles of Evidence, retained experts report/opinions for the owners, finally the cargo suit was settled at approximately 22% of the claims amount, among which, Fire-Affected cargo damage of cargo Hold No. 2# over RMB2.01million was fully rejected, leaving only Water-affected cargo damage of Hold No.1# (CIF value around RMB300,000), while the claimant alleged that by adopting the Depreciation Rate method of calculation, water-affected cargo damage to be RMB560,000 to RMB590,000.  The Owner/Carrier firmly relying on the FIRE Defence for hold No.2# cargo damage, the case was finally compromised based on Hold No.1# water-affected cargo damage, at lump sum RMB600,000 (22% of total claims) inclusive interest and costs, saving as to costs of appeal.

Court hearings were held on 17^th Dec.2020 and 14^th July 2021 for evidence-exchange and public hearings, both sides’ lawyers performed duty diligently, actively produced bundles of evidence, involved respective site attending surveyors and appointed marine experts to debate during court hearing on technical issues relating to vessel seaworthiness prior to and at commencement of the voyage, and whether carrier rendered duty of care to the cargo, fully expressed their respective opinions.

The Defendant vessel owners raised various defense points including below listed

1) The plaintiff have NO title to sue (details omitted).

2) Carrier is entitled to Fire Defense / The incident of hold No.2 cargo damage was caused BY FIRE of crew repair work on board, for which the owner defendant /carrier shall not be liable. The  Master’s note of sea protest, marine accident report and cargo survey report all showing that: cargo damage of Hold No.2 was caused by hot repair work conducted by crew subject to the vessel Master’s approval, plaintiff cannot prove that it was the carrier’s fault/negligence which caused fire, hence, the Carrier shall NOT be liable for cargo damage of hold No.2 caused by FIRE, in accordance with Art.51(1).2 of China Maritime Code (CMC).

3)    Cargo damage of hold No.1 was attributable to water leakage from the portside sounding pipe of No.1 WBT, due to the aging/rusting at end of sounding pipe ”, belonging to Latent Defect of ship NOT discoverable by due diligence, carrier shall NOT be liable as per Art. 51 (11) of CMC.

4)    The Plaintiff’s calculation of cargo losses was lack of factual and legal basis (details omitted).

To conclude, the defendant carrier applying NMC court to fully reject the alleged claims.

After various mediation taken lead by the court, the parties concluded the case via Court Mediation at around 22% of the total Lawsuit claims amount.

Summary

In PRC maritime trial practice since 1984, not many of carrier’s FIRE DEFENSE were successful. In accordance with Art. 51.(2) of The China Maritime Code, carrier shall not be liable for cargo loss or damage arising from FIRE, unless caused by the actual fault of the carrier.

In order to rely on FIRE Defense, carrier have to prove vessel seaworthiness prior to and at commencement of the voyage.  The carrier can only raise the exception of fire /FIRE DEFENCE if the fire was not a result of its actual fault or privity. And the burden of proof (onus of proving) is on the claimant side.

The above case summary and comments are for reference only.  If you are interested in this case, or have any query, please welcome to contact the below lawyers of HiHonor Shipping Team:

Ms. Xinwei Zhao xinwei.zhao@hihonorlaw.com info@hihonorlaw.com

Mr. Huanying Liu huanying.liu@hihonorlaw.com