Rights and Potential Liabilities of Parties - Coursework Example

?Rights and potential liabilities of parties Grade 16th December Introduction In the case, there are damages of coffee cases, which were transported, from Bristol to Qingdao by ship. The largest part of the cargo is affected by damp and hence fermentation of many coffee cases. The actual number of the coffee cases is supposed to be 100 whereas 99 cases are available. One of the cases is stolen at the dock. In addition, there is also a big mistake done at the dock. Another coffee case is sprayed with water by a driver while washing a lorry. When the goods were loaded from Bristol, Oriental Shipping Limited had to sign the bills of landing. They agreed in the bill that, the goods were in good order but one case was missing. Instead of recording the date as it was, that is 15th August; they recorded the date to be 10th of August. Supreme Coffee Limited obtained an insurance policy for the voyage with Commodity Insurance which incorporated the Institute Cargo Clauses (B). Again, incorrect statement was recorded. They recorded the cost of the cargo as 50,000 pounds instead of 30,000 pounds. This means that the insurance policy was taken out of 50,000 pounds instead of 30,000 pounds. This is over writing of the insurable goods. In this case, it is quit clear that Supreme Coffee Limited obtained an insurance policy with Commodity Insurance. The insurance policy was to cover against any risk of the shipment. Article 1.2.2 of Institute Cargo Clauses (B) provides cover against damage or loss of goods transported caused by washing overboard or jettison1. Article 1.2.3 provides insurance cover against damage or loss of the subject matter insured caused by entry of river, sea or sea water, into the vessel craft, place of storage or hold conveyance. In addition, Article 1.3 provides insurance cover against total loss of any package whether lost overboard, when unloading from or loading to, craft or vessel2. However, Article 4 provides some exclusion to the insured. According to Article 4.1, insurance policy will not cover against expense or damage brought by willful misconduct of the insured3. Analysis of the case The coffee cases which were taken to the dock were in good condition. When they were taken from the factory by Supreme Coffee Limited, none of them was wet or damaged. It is true to say so because Oriental Shipping Limited confirmed it. Although Oriental Shipping limited was not keen on safety of the coffee cases, it cannot be noted that the cause of damp was caused by spraying of water at the dock. There is no evidence to support this because the fault was not detected when the cases were loaded on to the ship. However, if only part of the cargo was damaged and not all, it will be difficult for the insurance company to be held accountable4. This case is similar to Nelson Marketing International versus Royal Sun Alliance Company of Canada case which took place in year 2006. In the case, the cargo was LTF (Laminated Truck Flooring) and it was moving from Malaysia to California. The cargo was damaged but the main cause was not known. It was no clear whether it was damaged due to moisture inherent or improper care in the laminated truck flooring. The ruling was finally made after 94 days of trial in the Lower Court where a decision of 92 pages was given5. According to the insurer, the exclusion of willful mischief of the insured was applicable. On the other hand, the owner of the cargo complained of the carrier’s negligence in handling and care of the cargo. According to the court, the damages were not caused by the carrier’s negligence. It was caused by heat in the feeder vessels at voyage time and therefore, the insurer was held responsible. However, in the Court Of Appeals, the decision of the judge was reverse. The court argued that, with the nature of LTF, the damage was bound or certain to happen. The temperatures in the feeder vessels were normal and were expected6. In this case, it is evident and logical to say that, the damage of the cargo was not caused by negligence of Oriental Shipping Limited. It should be noted that, portion of the coffee case damaged was due dampness. The damage could be caused by entry of river, sea or sea water, into the vessel craft, place of storage or hold conveyance. In addition, coffee is a perishable good and it should be transported to the required destination within the shortest time possible7. The coffee cases had been in the sea for more than three weeks meaning that, it was exposed to high humidity. It is also evident that, there were heavy storms during the transportation time. The dampness might have been caused by bad weather or ingress of water in the storage area. There is no evidence brought forward to show that one of the coffee cases was wet. It makes no sense to say that, the damage was caused by wetness of some coffee cases. More so, there is no evidence to show that, the damage was caused by willful misconduct of the insured. There are no doubts to say that, the exclusion of Article 4 of Institute Cargo Clauses (B) is not applicable. In regard to the case, Article 1.3 provides cover against total loss of any package whether lost overboard, when unloading from or loading to, craft or vessel. One of the coffee cases was lost when the good were loaded on to the ship. Supreme Coffee Limited signed a document to show that they had given the required number of cases to Oriental Shipping Limited. The shipping company had no doubt in this and this made continue with transportation activities without a complaint. The bill of lading has enough evidence8 to show that Supreme Coffee Limited delivered the right amount of coffee cases. Therefore, Supreme Coffee Limited is not liable for the loss. It is right to say that, Article 1.3 of Institute Cargo Clauses (B) is applicable in the case without exclusion. This portion of the case brings to a similar case of Pacific Link Services Corporation versus Timber Forest Corporation (2009, FCA 119 affirming 2008, FC 801). In the case, there was a subrogation claim of lost logs worth about C$ 1million. The logs were lost from a barge deck while they were transported from Vancouver to California9. The question was, whether the defendants had the right to rely on exclusion or the other party had to benefit from the insurance clause in the contract. The contract of carriage was in the letter of understanding as well as the set standard conditions and terms incorporating a bill of lading. Unfortunately, the bill of lading was never issued but on the face of the bill there a statement that. ‘All cargo was carried on deck”. This made the case not to comply with the laws. The case was, therefore, not applicable. The other major issue was about the insurance policy which specified subrogation 10against the contracting carrier. In the case, the contracting carriers had been engaged into time charters for the barge and tug with two allied parties (companies) who carried undertook the contract through their employees11. The question was, whether the companies and the employees could benefit from the waiver of subrogation clause. According to the decision of the court, it was intended to waive the subrogation against the carrier terms which were used indiscriminately. This made the other parties to benefit from the waiver of subrogation clause. However, there is a serious problem in the bill of lading. The date of loading is not the actual one. Although the goods were loaded from Bristol on 15th august, the bill started the date as 10th of august. The bill of lading has terms and conditions, the carrier is not supposed to issue false bills of landing. In year 2010, there was a similar case between Kuehne & Nagel Limited and Agrimax Limited (2010 FC 1303). In the case, the forwarder was authorized to issue the bills of lading having a pen of the NVOCC. It was an action of freight payment by a freight forwarder12. According to the defender, it was not liable for the freight since the forwarder did not issue the bill of lading showing different date of loading from the actual date. The defender wanted a different date to abide by the requirements of the documentary of a letter of credit. According to the decision by the judge, the proper date for conversion of currency was needed. The court held that, the proper date should be stated in the bill of lading13. Supreme Coffee Limited and Oriental Shipping Limited should be given time to bring the bill of lading showing the actual date of loading. There is no enough evidence to show that, the damage was caused by willful misconduct of the insured. This means that, Article 1.2.3 which provides insurance cover against ‘damage or loss of the subject matter14 insured caused by entry of river, sea or sea water, into the vessel craft, place of storage or hold conveyance is applicable’. This means that, Commodity Insurance will be held responsible for the compensation of the damaged cargo. However, the case is complicated because the, policy undertaken by Supreme Coffee Limited did not state the actual cost of the cargo. They stated the amount as 50,000 pounds instead of 30,000 pounds. This is called overwriting in insurance terms. The issue in this case is, whether Commodity Insurance should pay the compensation using the actual figure or the overstated figure15. In addition to issue, the insurance company is not aware of any over stated amount. The question is, how will they know the actual cost of the cost of the cargo? Valuing the subject matter should be done by qualified personnel with the assistance of the staffs who were involved in the transportation16. The officials and the supervisors in coffee factory’s warehouse should also be involved so that the correct value of the coffee cases can be identified. More so, surveyors and adjusters should assess the damage so that the insurance company can know how to compensate for the goods. They should use prior experience, skills and maximize their intelligence to arrive at the right decision. The decision should be based on evaluation of all the factors involved when assessing the level of damage17. In addition, they should appoint the evidence concerning the cause of the dampness to the coffee cases. They should point the facts but not the party of fault as this is done by the court. The facts and the evidence are to be applied in the case in relation to the policy conditions of coverage. The key point to be noted by the surveyors and the adjusters is that, a complete, thorough, and much detailed investigation is necessary to come up with the cause of the damage. In order to be given credibility by the court, the surveyor should act in fair, impartial, and judicial manner and without prejudice or discrimination. According indemnity (an insurance principle)18 the claimant should be compensated in case of an accident. However, the insurer promises to help the insured to restore the position before the damage or loss. The insured should not earn a profit from the insurer and cannot exceed the extent to which the insurable interest has covered the asset. In addition, the insured should receive compensation in terms of money and not exact property. In this case, Supreme Coffee Limited should receive the actual amount of money from Commodity Insurance. The actual cost of the coffee cases is 30,000 pounds and not 50,000 pounds. However, Supreme Coffee Limited will not receive exactly 30,000 pounds from Commodity Insurance. This is because all the coffee cases were not damaged. The insurance company should evaluate the damaged cases for compensation to be made19. According to the principle of subrogation, the insured should receive full compensation of the goods if the damage is serious. The remains of the goods should be taken by the insurer to him or her for the lost goods. It is correct to say that, this code is not pertinent to the case because not all the coffee cases were destroyed. Only the fermented coffee cases will be compensated and the rest which are in a good state will be taken by the owner. Commodity Insurance should do a complete, thorough, and much detailed investigation on the cases damaged before compensation is done. There is also a challenging issue as to how the case between Supreme Coffee Limited and Qingdao Coffee Importers will be handled. Qingdao Coffee Limited is refusing to pay for the goods because they are damaged. The company never received the coffee cases as started in the letter of Credit against documents as agreed. They were supposed to receive 100 good coffee cases but the actual number delivered was 99 and a portion of damaged cases. However, Qingdao Coffee Importers Limited should pay for the cases that are in good condition20 and then claim for the damaged cases. Qingdao Coffee Importers does not have a case with the insurance company. All they agreed was to receive the goods from Supreme Coffee Limited. It is therefore the duty of Supreme Coffee Limited to make sure that the goods arrive to the required destination, that is, Qingdao. Supreme Coffee Limited gave Oriental Shipping Limited the contract to transport the goods to Qingdao. More so, Supreme Coffee Limited obtained an insurance policy from Commodity Insurance to cover against loss or damage of the coffee cases. This is evident that, Oriental Shipping Limited did not get involved with the insurance company in any way. However, it is there responsibility of Commodity Insurance to follow the right procedures with immediate effect before excessive damages21. It will be held responsible for any excessive damage because Supreme Coffee Limited obtained a policy from them. They should use their assessors to do the investigation and valuation of the damages22. In addition to the payment of the damaged goods, Qingdao Coffee Importers Limited should be paid for the delay of goods. All the parties involved should be fully aware that, the coffee cases were not to be used by Qingdao Coffee Importers Limited; they were to be delivered somewhere else. This forms another series of inconveniences caused to other clients. This part of the case is similar to a case between Garnat Trading & Shipping and Baominh Insurance Corporation (2011, EWCA Civ. 773) which took place at Royal Courts of Justice Strand, London. In the case Garnat Trading & Shipping (Singapore) PTE Limited were transporting goods from Vladivostok to Vung Tau in Vietnam. It was permissible for the towage to sail when the condition of the sea was ‘sea force 5’ and a maximum permissible wave height of 3.5 m. The ship departed from Vladivostok on 23rd June 2006 but unfortunately, on 9th July 2006, the ship had a close encounter with a typhoon. The typhoon ‘Ewiniar’ had a condition of ‘sea force 6’ with a wave of 3.5 m high. On 12th July 2006, a strong tropical storm changed its direction from WNW to NW while the ship was captured by waves of up to 10 m high. This made large quantities of water to enter into the ship. The starboard buoyancy chambers and the port were holed making the seawater to enter the ballast compartment. The ship was abandoned on 14thJuly at 0300 hours due to the tragedy23. The crew and the captain were rescued by a Chinese vessel. According to the judge, the respondent was not supposed to sail under bad climatic condition because the ship could not withstand it. This resulted to delay of goods for a long time. The respondent was not compensated for the delay24 due for this reason. Relating to this case, Qingdao Coffee Limited should be paid for the delay of goods because there were no set conditions on the risks and uncertainties which could be caused by bad weather. There was no written document for such agreement between Qingdao Coffee Limited and Supreme Coffee Limited. Conclusion Supreme Coffee Limited should be compensated for the damaged as well as the lost coffee cases. This is in relation to Article 1.2.2, Article 1.2.3, and Article 1.3 of Institute Cargo Clauses (B). It should claim for the damaged goods from the insurance company. The company should be confident that, Article 1.3 of Institute Cargo Clauses (B) is applicable. Compensating Supreme Coffee Limited will not mark the end of problems to the parties. They should also take the initiative of paying Qingdao Coffee Importers Limited which was to receive the goods. In addition, they are supposed to compensate them for the delay caused to their customers. According to the statement in the letter of credit against documents, Qingdao Coffee Importers should receive the goods in order for them to pay. They are right when they refuse to pay because they did not receive the goods as agreed. Some coffee cases are missing while others are damaged. They have the right to sue Supreme Coffee Limited if they are forced to pay. Further more, they have ‘the letter of credit against documents’ which they can use as evidence. Supreme Coffee Limited and Oriental Shipping Limited should take the initiative of amending the bill of lading. It contains an incorrect statement because the date of loading was 15th August and not 10th August. They have violated the bill of lading but this should not prevent them from getting the compensation. This is in relation to the case between Kuehne & Nagel Limited and Agrimax (2010 FC 1303). Commodity Insurance will experience very tough time because there is no enough evidence to show that, the dampness was caused by willful misconduct of the insured. They are to pay for the damaged goods according to Article 1.2.3 because the coffee cases had fermented. However, they are not supposed to compensate Supreme Coffee Limited for all the goods that were transported. They should indemnity which states that, the insurer should restore the position of the goods before the damage or loss. This means that, they will not evaluate the cost of the coffee cases as 50,000 pounds but 30,000 pounds. 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