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Fifth Circuit Holds Vessel Owner Not Liable for Claims When Charterer Exceeded Their Authority by Failing to Sign Bills of Lading in Conformity with Mate's Receipts

On May 11, 2011, the Fifth Circuit Court of Appeals held in QT Trading, L.P. v. M/V SAGA MORUS that a vessel owner is not liable in personam for claims if the charterer exceeds their authority and fails to sign the bills of lading in conformity with the mate's receipts, the charter party, and the Master's instructions. The Court also held that no tort claim for breach of bailment could proceed because Clause 8 of the charter party did not support a finding that the Owners had exclusive possession and control over the cargo.

QT Trading L.P. (QT) brought an action for rust damage to its steel pipes that it alleged occurred during their transport from Dalian, China to Houston, Texas. Daewoo Logistics Corp (Daewoo) chartered the vessel M/V SAGA MORUS for the transport of the pipes under a two year time charter party agreement from Defendant Saga Forest Carriers International AS (Saga). Saga signed the charter party as "owners," even though they chartered the vessel from Defendant Attic Forest AS (Attic), the actual owner of the ship.

Attic's P & I Club hired an independent cargo surveyor that prepared a report indicating that a large number of the pipe bundles were damaged pre-shipment. The Captain of the SAGA MORUS authorized Daewoo's agent to sign on his behalf all bills of lading covering the present shipment according to the mate's receipt and the P & I Club report. The mate's receipts described the goods as "clean on board" and incorporated the Pre-shipment Report by the P & I Club. The charter party specifically stated that the charterer sign the bills of lading in accordance with the mate's receipts. Daewoo exceeded their authority under the charter party by failing to incorporate or mention either the mate's receipts or the pre-shipment report as directed by the charter party and the Captain. The District Court granted summary judgment to in personam Defendants Attic, Saga and Patt Manfield & Co., Ltd (Patt) on QT's claims for damages under the Carriage of Goods at Sea Act (COGSA). The District Court held that QT made no showing that either Attic or Patt were parties to the bills of lading or otherwise had authorized Daewoo to sign on their behalf.

The Fifth Circuit stated that a cargo owner may only recover under COGSA from the "carrier" of goods. COGSA defines a "carrier" as the owner or the charterer who enters into a contract of carriage with a shipper, and noted that the contract of carriage applies only to those contracts covered by a bill of lading or any similar document of title. The Fifth Circuit held that in order to bind Saga as "owner" of the vessel and confer COGSA carrier status, the charterer must have authority to sign the bill of lading for the Master, and the Master must have authority to sign bills of lading for the shipowner. In this case, the owner of the vessel, Attic, could not be held liable for the alleged damage to the pipes because QT failed to present any evidence that Attic was a party to the bills of lading or otherwise authorized Daewoo to sign on its behalf. The Fifth Circuit also rejected QT's claim that Saga was a "carrier," because even though Daewoo's agent had authority to sign the bills of lading on behalf of Saga and the Master, Daewoo failed to sign the bills of lading in conformity with the mate's receipts as required by the charter party.

Finally, the Fifth Circuit denied QT's tort claim for breach of bailment against Saga because Clause 8 of the charter party destroyed QT's argument that Saga has exclusive possession over the cargo. QT's argument was further undermined by the fact that Daewoo's agent signed the bills of lading on behalf of Daewoo, indicating that Daewoo was in exclusive possession of the cargo.

Accordingly, a vessel owner is not liable in personam for claims if the charterer exceeds their authority and does not sign the bills of lading in conformity with the mate's receipts, the charter party, and the Master's instructions. Also, no tort claim for breach of bailment could proceed because Clause 8 of the charter party did not support a finding that the Owners had exclusive possession and control over the cargo.

Read a copy of the Fifth Circuit Court of Appeals Decision

For more information concerning this case and its application to any specific set of facts and circumstances, please do not hesitate to call on us at info@chaloslaw.com.

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