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On Saturday March 24 2018, we published an article captioned: [TRUE STORY] IS YOUR MARINE INSURANCE A WASTE OF MONEY? The article which was culled from the SHIPPING GAZZETTETM sought to highlight the importance of insuring international trade transactions. It narrated the loss of a consignment of export timber from Napier port that got as far as the Bay of Plenty and ended upon the sea floor.
The timber exporter, Resources New Zealand Ltd (Resources NZ) sought to resist payment of cargo freight to Mediterranean Shipping Company (MSC) operators of Rena, the ill-fated vessel, until it was dragged to court by MSC. We noted the alternative dispute resolution opportunities which Resources NZ frittered away even in the face of commercial obligations thrown up by law in the circumstances. Today we publish the concluding part of that story in the hope that our readers will draw their own lessons from all that have been published. Enjoy
“There is no suggestion that the contract of carriage, represented by the bill of lading, was not entered into freely.” Furthermore Judge Abbott rejected the idea that the grounding was a case of ’non-performance”. Rather, it was “rather the occurrence of a recognized risk (loss of the ship and cargo) in the course of performance”. If that appears rough justice, Judge Abbott actually addressed the issue in more lay terms, which helps us understand his reasoning more clearly. “This takes me to the second aspect of Resources NZ’s argument, namely that there is something intrinsically unfair in allowing MSC to recover these freight charges . . .
“This argument has to be put in context. As already mentioned, these were commercial parties with experience in this kind of contract. The advance payment of freight is a common feature of contracts for carriage of goods, as is a ‘no set-off’ clause. “The risks of the transaction (such as loss of the ship or cargo) were known, as was the ability of the parties to ameliorate those risks with marine insurance “The circumstances of the grounding of MV Rena and loss of its cargo were unfortunate, but did not make this transaction, or the claim for freight and the ‘no set-off’ clause, extraordinary, so as to make it unfair to require Resources NZ to adhere to the terms of the contract . . . “ All of this led the judge to dismiss the application from Resources NZ set aside the statutory payment. Plus, he ordered the company to pay MSC’s legal costs.
What we can learn from it
While one can sympathize with shipper for its bad luck, this judgment is not controversial from a legal point of view, according to maritime lawyer Neil Beadle of DLA Phillips Fox. He says the contract clearly carried the obligation to pay the freight.
“Commonly such cargo is sold to an overseas purchaser at a cost those factors in the cost of freight and marine insurance. “While buyers might prefer to avoid the cost of insurance being passed on to them as part of the deal, given these common carriage terms, exporters need to appreciate that will leave them with “the cost of freight in the event of loss, unless they have insured for it.” So there we have it, a lesson for Importers & Exporters from a case of dreadful luck. Ship at your peril, unless you are prepared to pay for sufficient marine insurance.’’
