OVERVIEW ON CLAIMS FOR LIQUID BULK CARGO SHORTAGE
It is very common in shipping claims on liquid bulk cargo shortage to see differences in evidences relating to shore/ship side quantity readings during loading/discharge, against arguments that the relevant B/L has incorporated contains a "weight and quantity unknown" clause. Most of the time claimants will be arguing that the cargo loss should be assessed by comparing a more favorable shore figure at the discharging port and the figure stated in the B/L. This write up seeks to briefly explore the following issues under Taiwanese law and practice:
- In the case of the cargo quantity calculation, which figures should be preferred by the courts - shore figure or ship’s figure? Are there any precedents and/or judicial notes on this issue?
- What is the validity of the unknown clause that is incorporated in the B/L ?
- What is the validity of the documents regarding the cargo quantity such as dry certificates, quantity reports prepared by the carrier side.
In the case of shortage of liquid bulk cargoes received, the Claimant will spearhead a Taiwan court action against carriers on 2 grounds : Firstly, alleging that the Carriers have breached the contract of carriage because they have failed to deliver the cargo fully and completely based on the indications shown in the Bill of Lading; and Secondly, that the shortage in the cargo was the result of a failure by the Carriers to exercise due diligence during the unloading operations which in turn gave rise to such a shortage. This therefore would be viewed as a breach of Article 63 of the Taiwan Maritime Code which provided that due diligence must be observed by the Carrier during unloading.
The strength in the Claimant’s action against Carriers on the aforementioned 2 grounds rely solely on the following factors :
- (i) Whether the onshore figures of the cargo that were measured after the discharge would be adopted as the primary basis of determining the weight of the cargoes actually delivered, or, whether, this should be ascertained using the onboard figures?
- (ii) Whether the short fall in the cargo received would come under the ambit of the shortage allowance permitted by the court?
If the onboard figures (which showed minimal shortage to the cargo) are adopted by the courts, the Carriers will be poised to argue that cargo shrinkage is an unavoidable incident during the carriage and thus Carriers should not be held to be accountable for the loss. This would neutralize the claim that Carriers had failed to deliver as according to the amount in the Bill of Lading, as well as allegations that Carriers have violated Article 63.
On the same token, where the loss (whether based from measurements taken onboard or onshore) is within the shortage allowance tolerable by the Taiwan courts, the Carriers will then be able to directly raise the issue of natural shrinkage as a defense.
Note that the legal position is that in general there is no law, regulation or concrete case precedent governing the question of whether the onshore figures or the onboard figures should be accepted as the final measurement for cargoes delivered. The question on this issues is a factual one and fundamentally, the Taiwan courts will decide on this entire matter by considering which measurement is more accurate than the other – by looking at all circumstantial evidence. This would include, inter alia, looking at the consistency of the different ship/shore readings, considering whether there were leakages during the pumping operations of the cargoes from the holds to the onshore holding facilities, considering whether the ship’s holds were clear of any residual cargo and that all of the goods have been pumped onshore etc.
Undeniably, the Taiwan Courts have consistently produced Judgments ruling that cargo losses due to natural shrinkage can be tolerated by the court (Supreme Court Resolution No. 4 of 1978). There is however no indication from the courts (or from previous case precedents) on how much shortage allowance the courts would apply to the various forms of cargoes. International trading customs may be used to indicate the shortage allowance to apply but there is really nothing to bind the local courts to consider and adopt these guidelines. Most of the time, the courts will just simply issue questionnaires to the commercial sector and different answers will be received with different views on what the proper shortage allowance should be. The courts will then adopt an overall figure from the feedback received as shortage allowance.
The view taken here would therefore be that the Taiwan Courts would tend to apply a slightly more generous allowance than the usual adopted by the international community (our opinion given at the conclusion would more or less support this point).
What about asserting the unknown clause? Would this be an effective way for carriers to argue against any short falls in the discharged cargo that are claimed subsequently where the quantity/weight of the cargo was in fact annotated in the B/L? The general position is that if the cargo weight has been marked in the B/L, there is certainty that the Carrier will not be able to rely on the Unknown Clause to argue that the actual amount of cargo shipped in unknown to them at the commencement of the voyage and therefore Carriers should not be held accountable for the outturn at the discharge. We have several Supreme Court judgments on this point e.g. Supreme Court Case No. 108 of 1977; Supreme Court Case No. 756 of 1981; and Supreme Court Case No. 1916 of 1983.
The views held in all of these Judgments are similar. All of them support the argument that the Master or Carrier would have a choice before the commencement of the voyage to refuse to state the weight of the cargo on the face of the Bill of Lading in the event of any suspicion on the cargo – since the Master/ Carrier has decided to go on to indicate the weight on the Bill of Lading, he will not be allowed by the Taiwan Courts to later come back to argue that the amount of cargo shipped is unknown to him by merely relying on the convenience of a such a clause inserted into the Bill before the voyage.
FOR ANY QUESTIONS ON MARINE CARGO CLAIMS or potential cases that you may would like to discuss with us on shipping law in Taiwan, please contact the writer of this Article who in all circumstances would be happy to assist.