LIABILITY OF CLASSIFICATION SOCIETIES

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JK
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LIABILITY OF CLASSIFICATION SOCIETIES

Postby JK » Thu Jun 15, 2017 3:51 am

I was sent this in an email:


https://www.skuld.com/topics/legal--def ... societies/
Legal news
Classification Societies play an important role in many respects of maritime business. For all intents and purposes, it is impossible for a vessel to operate and trade without being classed and certified by a classification society. Both port and flag states rely on classification and in some respects statutory certification has been delegated to these societies.
Many parties will therefore have an interest in knowing that the vessel is classed : apart from port and flag states this include insurers (both Hull and P&I), charterers etc.. To take SKULD as an example, the SKULD Rule 28.4.1 that requires an entered vessel to remain fully classed with a classification society approved by the club and 28.4.2 which require that the vessel’s classification society is not changed without the club’s prior consent.
According to the European Maritime Safety Agency (EMSA) there are at present more than 50 organisations worldwide that offer marine classification but only 13 are approved by the EU. EMSA carried out an assessment of the approved classification societies every second year.
With a fairly large number of parties, both private and public, relying (in one way or another) on the work of these societies, it is also relevant to ask to what extent these societies are liable for their work if it is alleged that a mistake has been made, that negligence has been shown and that this has caused a loss.
Much will depend on the jurisdiction where a classification society is held liable : the rules for damages in or out of contract can vary significantly and in many jurisdictions there will also possibly be a difference between whether the party seeking damages is a public or private entity and, quite possibly, whether it is a vessel owner or a third party who is making a claim against class.
The position in English law will usually attract attention as English law is often the chosen law in maritime contracts (although a choice of law in e.g. a charter party will not in itself have an impact on where a dispute with the vessel’s class will be heard). To contrast this, the courts in Italy have recently decided on the question of class liability as well.
The courts in England have dealt with this question a number of times but the prospect of a claimant against a vessel’s class being successful is not promising.
One of the cases in England involved a claimant purchaser of a ship (The Morning Watch) which had been classed be the Lloyds Register. The vessel had a number of defects making it unseaworthy but nevertheless a class certificate had been issued. The claimant buyer of the vessel took the view that he had relied on the class certificate and, by doing so, had suffered a loss when this certificate turned out not to reflect the true state of the ship. The claimant argued that Lloyds register owed a so-called duty of care towards him as class must have foreseen that a purchaser would rely of the class certificate.
The court’s decision and its analysis of the law is sobering reading if one has to contemplate a claim against a vessel’s class. The decision includes a listing of the requirements for establishing a duty of care under English law:
• it must be reasonably foreseeable for the defendant that the plaintiff would rely upon his statement (here the class certificate)
• there must be “necessary proximity” between the pure economic loss and the role of the class society and
• finally it should be “fair, just and reasonable” in the circumstances to impose such a duty of care.
To some, it may be surprising to see that the court found that the claimant purchaser had not been able to prove a sufficient relationship of proximity in this case and stated that “the primary purpose of the classification system is, as Lloyds rules make plain, to enhance the safety of life and property at sea, rather than to protect the economic interests of those involved ...in shipping”. Not all will be persuaded by this conclusion (perhaps certainly not parties from civil law countries) but the fact is that this is the position in English law.
Another case involved claimant cargo interests who brought claim against the vessel’s Japanese Class (NKK) who had certified temporary repairs but where the vessel (The Nicolas H) nevertheless sank with all its cargo as the temporary repairs failed. The cargo interest (who therefore had to pursue a claim outside contract - in negligence) argued that the class had breached their duty of care and made a point of arguing that their loss was physical damage to property rather than pure economic loss and that consequently they only had to demonstrate reasonable foreseeability. The cargo interests no doubt hoped to avoid the problems facing the claimant in the Morning Watch case. They were not successful in this as the court maintained that all of the factors listed in the Morning Watch case were relevant regardless of the nature of the harm (i.e. the type of loss) to the claimant. It was still necessary to consider foreseeability, proximity and fairness, justice and reasonableness. The court’s approach was to examine what could be said against recognising a duty of care by the class towards the cargo interests and the analysis may, again , surprise some. In the eyes of the court, the seaworthiness was the primary responsibility of the ship owner with class having only a subsidiary responsibility. Even though the class surveyor may have been careless or negligent this did not mean that direct physical damage had been inflicted. There was also no contract between the cargo and class - indeed there had been no contact and cargo had not even been aware that class had inspected the vessel - they found out after the event and took the view that class was should be held liable for the lack of seaworthiness. As a third and significant consideration, the court mentioned that if a duty of care were held to exist in this case the potential exposure to claims for class societies would be large and such a large exposure would lead to higher costs for the class societies who in turn would pass these on to vessel owners. This was seen as likely to disturb the balance created by the Hague-Visby Rules. Perhaps most of all, policy considerations (risk of double insurance, costly and complex litigation and other factors) weighed in against holding that there should be a duty of care.
The Nicolas H therefore concluded that a vessel’s class did not owe a duty of care toward cargo interests as this would not be just, fair and reasonable.
The reasoning in the Nicholas H case has been confirmed and followed in a later case from 1994 (Reeman v Department of Transport). Again the claimant was a purchaser of a vessel (just as in the Morning Watch) and a negligent surveyor made an error resulting in the vessel being unable to put to sea without costly modifications. This case involved a surveyor from a public body (the Department of Transport) but with the Department of Transport performing functions similar to a classification society, the court applied the same reasoning.
It therefore seems very difficult for a claimant to be able to be successful in a claim against a vessel’s class under English law at least and this seems to be the case regardless of whether the claims is in or out of contract.
The situation can, of course, be different in other jurisdictions and this seems to be the case in Italy. It was recently reported that the court in Genoa had decided on a claim brought by time charterers against the vessel’s class. Their case was that the vessel was fully classed but nevertheless was withheld by port state control (in Germany) due to a number of deficiencies and was detained. The detention made it necessary for the charterers to unload the cargo and find alternative tonnage for the onward carriage. The charterers suffered a somewhat significant loss. This they now pursued against class as the vessel had been sold shortly after the incident, their claim was unsecured and likely to be unenforceable against the now previous owners. The class on their part argued that the time charterers should have pursued a claim against the owners instead but also that there was no basis for a claim at all against the class. They argued that the deficiencies that caused the vessel to be detained were caused by negligence not by class but by the vessel’s master and crew and the vessel owners themselves who had failed to maintain seaworthiness.
The Italian court took the precaution of appointing two surveyors to assist with an expert opinion to say whether it was possible to say, on the basis of the inspection in Germany, what the condition of the vessel had been just over one year before when class had made its inspection and issued its certificate. On the basis of the evidence (including the court appointed surveyor’s conclusions) before it, the Italian court held that the vessel had been in extremely poor condition when inspected by class. The behaviour by the class surveyor at the relevant time had there been grossly negligent. This, in itself, perhaps marks a harsher attitude in some countries than would be the case in e.g. England. What is remarkable is that this decision from Italy is based on the consideration that classification societies play a significant role and have such strong reputations that operators in the shipping industry rely strongly on their certifications when concluding contracts and making commercial decisions. The time charterers were entitled to rely on the class certificate and charterers were therefore successful for the major part of their claim.
Each particular situation will therefore depend very much on a number of factors such as how “remote” the claimant is from the direct relationship between the vessel owners and the classification society, the nature and gravity of the alleged negligence by class, the nature or type of losses, in which jurisdiction the claim can be pursued etc.. All of this will have to be considered carefully from case to case.
________________________________________
/ Mariola Shipping v Lloyds Register of Shipping (The Morning Watch) [1990] Lloyds Rep Vol 1. 547
/ Marc Rich & Co AG and others v Bishop Marine et.al (The Nicholas H) [1995] Lloyds Rep Vol 2. 299
/ Reeman and another v Department of Transport and Others [1997] Lloyds Rep Vol 2.648
/ Maurizio Dardani and Marco Manzone of Genoa Chambers have published an excellent summary of the Italian case on 2 March 2011 on the International Law Office web-site

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JollyJack
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Re: LIABILITY OF CLASSIFICATION SOCIETIES

Postby JollyJack » Sun Jun 18, 2017 8:08 pm

Nobody wants liability of any kind, least of all TC. ergo, self-inspected small passenger vessels and delegated ships of all vessels over 150 GRT. Nothing to do with me!
Discourage incest, ban country "music".


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