1. Breach of Security Scuttles Limitation
2. Litigation Funding for Ship Finance Loans
3. How About some Proper Management Systems asks Swedish Club
5. Bill of Goods
6. People and Places
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1. Breach of Security Scuttles Limitation
Editor Mike Ryan sent in the Fall Edition of the Cargo Newsletter issued
by the Maritime Law Association of the United States’s Committee on
Carriage of Goods, which as always contains a number of good case notes:-
A shipment of computer parts was stolen while being carried on a truck
owned by defendant. The shipment was pursuant to a 2007 Service Agreement
with respect to the door-to-door carriage of product, including a provision
that the trucker’s damages were limited to a maximum of $250,000. Another
provision of the agreement stated that “[b]reach of security…”
would be “subject to the full replacement value of the product.”
A subsequent addendum to the agreement contained a provision that the
trucker would “not be liable for losses in excess of $100,000.”
The truck was brought to a yard where it was kept over the weekend.
During that time, the gates to the yard were left open and the car and
trailer were left unattended by the driver. The shipment was subsequently
The Court considered the matter covered by the Carmack Amendment which
supplies “the sole remedy for damages” where a shipper seeks
to recover against a carrier for loss of goods during an interstate
shipment. The Court found little question that the plaintiff’s claim
was valid under the Carmack Amendment; having shown: (1) the shipment
was delivered to the carrier in good condition; (2) the shipment was
lost or arrived in damaged condition; and (3) that the shipper was harmed
as a result. As to quantum, the trucker argued its liability was limited
to $100,000 under the terms of a 2013 Released Value Provision subsequently
agreed to as amending the 2007 Service Agreement.
The Court found a plain reading of the subsequent 2013 Schedule as
a whole required that it be read as an addendum to the initial Service
Agreement. The Court also considered that the Amendment met the requirements
of the Carmack Amendment under the “released value” doctrine
(reducing the initial $250,000 limitation to the $100,000 limitation
set out in the 2013 Schedule as a result of informed negotiations between
the plaintiff and defendant and “reflected an actual choice by
plaintiff” to reduce its shipping costs. However, the Court went
on to find the trucker’s right to limit liability was void under the
“material deviation” doctrine, noting the provision referring
to “breach of security” as calling for full reimbursement.
The record indicated that the trucker failed to follow its own security
guidelines in carrying the Shipment; its own Cargo Security Procedures
instructed drivers generally “not [to] leave your vehicle unattended”
and to always park in a “secure area.” In spite of this, the
gate of the yard was left open and the car and trailer were left unattended
over the weekend. The yard had no security guards and as such could
not be considered “secure” under any reasonable interpretation
of the term.
The Court found the trucker breached its security obligations and these
violations constituted material deviations from the agreed-upon terms
of the contract of carriage. Thus, plaintiffs were entitled to recover
the full replacement value of the shipment.
The Court went on to award pre-judgment interest and denied plaintiff’s
request to recover survey costs, noting the Carmack Amendment did not
provide for recovery of expenses.
Royal & Sun Alliance Ins v. E.C.M. Transportation Inc.; USDC SDNY;
14 Civ. 3770 (JFK); Decision of Judge John F. Keenan, dated August 31,
2. Litigation Funding for Ship Finance Loans
Ben Macfarlane of the firm of Finn Ross writes:-
There has been a paradigm shift in litigation over the past year or
so. Litigation funding which used to be a niche activity, and only used
for the very large cases, has now become more common. There are substantial
advantages for the claimant. In return for giving up a percentage of
the winnings, he can take the entire claim off-balance sheet. With ATE
insurance he can insure the potential downside i.e. a costs award against
him. With litigation funding he no longer needs to worry about the cash
flow implications of funding a substantial piece of litigation.
The next question which this raises is the extent to which it permits
claimants to pursue claims that they would not otherwise have contemplated.
For example claims against banks. Banks tend to be a popular target
as they are perceived as having deep-pockets. For the same reason they
can be tenacious litigators unless an early deal can be struck with
them. Hence the litigation could turn out to be too expensive and risky
for the claimant if he were to pursue it on his own.
On top of this, the claims often require technical expertise right from
the start both to identify whether the product sold was suitable for
purpose and to identify the quantum of the loss.
One class of claims which I, together with a small team (Sanjay Desai
from brokers JLT who will find the ATE insurers and Litigation Funders
and Hanif Virji a financial expert from AHV Financial Markets who will
provide technical expertise related to the loan), am looking at is potential
claims by Ship-owners against banks or financial institutions in connection
with loans to finance shipbuilding transactions.
The types of problems that arise with these loans have been well-publicised
*Manipulation of London InterBank Offered Rate (LIBOR)
*Mis-sold interest rate hedging products e.g. swaps
An example of the type of case our firm is considering is as follows:-
A ship is ordered with a total construction cost of USD50 million.
The debt portion of the financing is USD 40 million payable to the ship
builder in five equal portions upon the achievement of the milestones.
Once fully drawn-down, the loan is payable on an amortising basis over
10 years. All payment dates are fixed according to the construction
contract. The interest rate is set at LIBOR + 2 per cent. A swap contract
is entered into which reflects the payments on the underlying loan such
that the net cost of the financing is 7 per cent. Subsequent to the
transaction the general level of interest rates falls and there are
several delays in the contract. Each amendment to the hedge might cost
0.20 per cent (USD100,000), thus five amendments would cost USD 500,000.
If the vessel is not delivered and the hedge contract is cancelled the
be circa 25 per cent, i.e. USD 12.5 million.
This presents an interesting new opportunity for those with such claims
to now seriously consider pursuing them.
3. How About some Proper Management Systems asks Swedish Club
Debra Masseyhas sent us word of the latest thinking from the Swedish
A new report from The Swedish Club shows that incorrect maintenance
and repair continues to be the most frequent cause of main engine damage
– a trend which has continued unabated since the Club began monitoring
the issue nearly ten years ago.
Main Engine Damage investigates more than 1,000 Hull and Machinery claims
relating to over 5,400 vessel years of statistics and its findings make
“Main engine damage makes up nearly 35% of machinery claims costs,”
says Lars Malm, Director, Strategic Business Development and Client
Relationship for The Swedish Club. “It is the most expensive category
of claim with an average cost of over half a million USD per claim.
Yet most engine damage, as with so many claims we see in many different
areas of our business, remains related to incorrect repairs and maintenance.
Numerous cases have been noted where damage occurs shortly after the
engines have been overhauled by ship or shore staff.”
And with an average cost per claim of USD 926,000 lubrication failure
is still the most costly cause of damage to the main engine, due to
consequential damage to expensive parts such as crankshafts etc.
“We are seeing crew with insufficient experience and training;
experts not in attendance at major overhauls; contaminated lubrication
oil and contaminated bunkers; and engine components not operated or
overhauled as per management instructions,” explains Mr Malm. ”It
is a catalogue of errors which can only be remedied by the implementation
of a proper management system, backed up by comprehensive audit and
The Main Engine Damage report contains good news for the Korean shipbuilding
industry. It points out that vessels built in Korea, which account for
almost 31% of the Club’s entries, have contributed to only 12%
of the total cost of main engine claims in the last three years.
Despite technical advances since the Swedish Club published its last
report in 2011, vessels with low speed engines still suffer proportionally
fewer claims than those with medium and high speed engines, with 57%
of club entries in this category responsible for only 40% of main engine
To read a copy of Main Engine Damage go to:
Our good friends at Spalsh 24/7 have put together a 64 page Special
on Singapore. They say :-
High local costs and limited human resources remain the two largest
sources of complaints for those involved in shipping in Singapore, according
to our survey of 250 people in maritime in the Lion City which contained
a series of topical questions about conducting business in what has
become – according to many polls – the world’s most vibrant
In addition to the features on the maritime scene the, award winning
author Paul French provides readers with an exclusive history of maritime
Singapore, which also features some great archival photography.
To read the report click here:-
5. Bill of Goods
This trifle, apropos of nothing, appears in the World Wide Words zine
produced by lexicographer Michael Quinion:-
Q. From BJ Wise: I’ve just come across the phrase bill of goods.
I might or might not have read it before, but I had to look it up. Why
would selling someone a bill of goods mean to swindle them? I’m
not even sure what a bill of goods in the plain sense means.
A. Let’s start with your last comment. Other than in the swindling
sense, bill of goods is now hardly known, but unless you understand
its more literal associations, the idiom doesn’t make sense. A
century ago bill of goods was a US expression meaning a consignment
of goods of any sort:
He purchased a bill of goods from Brackton, and, with Creech helping,
carried it up to the cabin under the bluff. Three trips were needed
to pack up all the supplies.
Wildfire, by Zane Grey, 1917.
This is confusing for us today because we would think of this sort
of bill as being a piece of paper, most commonly the sort giving notice
of money to be paid. This comes from bill having once meant any formal
written document, a sense which survives in a number of special cases,
such as parliamentary bill, dollar bill and handbill . It can also be
a list, as in bill of rights or the old-fashioned bill of fare for a
Based on this idea, bill of goods originally really did mean a list
of goods to be provided, what we might today call a consignment note
or despatch note:
The merchant, who receives a bill of goods from his correspondent in
London or Liverpool, is particular not only to file that bill for future
reference, but to copy it entire into an invoice book, that he may at
pleasure look to the quantity, quality, and price of the various articles.
Gould’s Universal Index, And Everybody’s Own Book, 1842.
At some point in the nineteenth century, it changed from being a list
to the goods that were listed. Incidentally, bill comes from the classical
Latin bulla for various globular objects such as a bubble, boss or stud.
In medieval Latin it shifted to being the seal on a document; in time
it came to mean the document instead. In English bulla became bill.
It also became bull, as in a Papal bull and similar edicts.
Sometime around the 1920s bill of goods took on the meaning that you’re
asking about — to cheat, swindle or get something over on somebody.
We don’t know exactly when or why. However, the two ideas are intimately
connected, since there’s nothing new in the idea of somebody cheating
another by selling them inferior items or taking money for goods that
never arrive. The link is expressed pithily in the first example of
the phrase’s use we know about:
What has become of the old fashioned salesman who got his customer
drunk and then sold him a bill of goods?
Atchison Daily Globe (Kansas), 5 Jan. 1933.
More recently, as the literal sense of bill of goods has fallen out
of memory, the expression has contracted again:
He’s already indicated plans to draw sharp contrasts between his
ideas on the economy and the Republican approach, which the president
recently dismissed as a “bill of goods” that amounts to little
more than slashing spending on vital programs like education and Medicare.
Carroll Daily Times Herald (Carroll, Iowa), 15 Aug. 2011.
In the reverse of the coin, people may sometimes buy a bill of goods.
6. People and Places
Daniella Horton and Jonathan Lux have been elected as Aspiring Full
Members of the LMAA.
Andrew Gray will be joining Clyde & Co as a partner in the global
Marine team in early 2016. Andrew joins the Clyde & Co Clasis Singapore
office from Hill Dickinson where he was a partner in the Marine, Trade
and Energy team.
Randolph Donatelli has joined Lyons & Flood as a partner after
being with another leading New York maritime law firm for the past 17
Maritime Authority of Jamaica’s (MAJ) Director General Rear Admiral
Peter Brady has been elected as the Vice Chairman of the Board of Governors
of the World Maritime University (WMU) in Malmo, Sweden.
Non-Executive essDOCS Board Member, Andre Toet, has been appointed
Chairman of the Board of Directors. He succeeds Barry Williams, who
is standing down after chairing the board since 2013, having previously
served a term as Chairman from 2006 to 2011.
From the Avo Archive
The website of this newsletter contains all the editorial material
since the inception of the Maritime Advocate as a print based quarterly
in 1997 under the founding aegis of John Guy, Chris Hewer and Manfred
Arnold. Readers can go to the site and search the database on the home
page in its entirety. If you are looking for an old case, an old controversy
or you would just like to see how many times you and your firm have
featured in our annals feel free to access the archive. It is like this
e-zine, free to Readers and we always appreciate the support of advertisers
During a long surf of the Archive the other day, we discovered that
the range of subjects covered is very wide. Life not Logic sort of thing.
Issue 263 of July 25th, 2006 refers:-
How to sing the blues
1. Most blues begin, “Woke up this morning”.
2. “I got a good woman” is a bad way to begin the blues,
unless you stick something nasty in the next line, such as, “I
got a good woman with the meanest dog in town”.
3. The blues are simple. After you have the first line right, repeat
it. Then find something that rhymes … sort of, “Got a good woman
with the meanest dog in town. He got teeth like Margaret Thatcher and
he weigh 500 pound”.
4. The blues are not about limitless choice. Blues cars are Chevys
and Cadillacs. Other acceptable blues transportation is a greyhound
bus or a southbound train. BMWs and Mazdas just don’t cut it.
5. Walkin’ plays a major part in the blues lifestyle. So does fixin’
6. Teenagers can’t sing the blues. Adults sing the blues. Blues ‘adulthood’
means being old enough to get the electric chair if you shoot a man
7. You can have the blues in New York City, but not in Hamilton, Ontario,
or Vancouver, BC. Hard times in Saskatchewan or Nova Scotia is just
depression. Chicago, St. Louis, Kansas City and Tallahassee are still
the best places to have the blues.
8. The following colours do not belong in the blues: tangerine, beige
9. You can’t have the blues in an office or a shopping mall. The lighting
10. Good places for the blues are the highway, the jailhouse, and an
empty bed. Bad places are gallery openings and weekends away.
11. No-one will believe it’s the blues if you wear a suit, unless you
happen to be an old black man, and you slept in it.
12. Do you have the right to sing the blues? Yes, if your first name
is a southern US state (like Georgia), you’re blind, you shot a man
in Memphis, and you can’t be satisfied. No, if you were once blind but
now can see, you’re deaf, or you have a trust fund.
13. Neither Celine Dion nor Anne Murray is permitted to sing the blues.
14. If you ask for water and baby gives you gasoline, it’s the blues.
Other blues beverages are wine, Irish whisky, and muddy water. The following
are NOT blues beverages: any mixed drink, any wine kosher for Passover,
and Snapple (all flavours).
15. If it occurs in a cheap motel or a shotgun shack, it’s a blues
death. Stabbed in the back by a jealous lover is another blues way to
die. So is the electric chair, substance abuse, or being denied treatment
in an emergency. But it is not a blues death if you die during liposuction.
16. Some blues names for women are Sadie, Big Mama, and Bessie.
17. Some blues names for men are Joe, Willie, Little Willie, Big Willie,
18. Persons with names like Autumn, Sequoia, and Rainbow will not be
permitted to sing the blues, no matter how many men they shoot in Memphis.
19. Other blues names are composed of the following elements: the name
of a physical infirmity (blind, cripple, etc), the first name (see above)
plus the name of a fruit (lemon, lime, kiwi, etc), and the last name
of a president (Jefferson, Johnson, Fillmore, etc). For example, Blind
Lemon Jefferson, or Cripple Kiwi Fillmore.
20. You can’t sing the blues if you are gay. Show tunes, yes. Blues,
A day without sunshine is like, night.
On the other hand, you have different fingers.
I feel like I’m diagonally parked in a parallel universe.
You have the right to remain silent. Anything you say will be misquoted,
then used against you.
Honk if you love peace and quiet.
Remember half the people you know are below average.
Atheism is a non-prophet organization.
He who laughs last thinks slowest.
I drive way too fast to worry about cholesterol.
Borrow money from a pessimist – they don’t expect it back.
If Barbie is so popular, why do you have to buy her friends?
The only substitute for good manners is fast reflexes.
Support bacteria – they’re the only culture some people have.
When everything’s coming your way, you’re in the wrong lane and going
the wrong way.
If at first you don’t succeed, destroy all evidence that you tried.
Experience is something you don’t get until just after you need it.
Bills travel through the mail at twice the speed of cheques.
No one is listening until you make a mistake.
Success always occurs in private and failure in full view.
The hardness of butter is directly proportional to the softness of
The severity of the itch is inversely proportional to the ability to
To steal ideas from one person is plagiarism; to steal from many is
Monday is an awful way to spend 1/7th of your life.
You never really learn to swear until you learn to drive.
The problem with the gene pool is that there is no lifeguard.
A blonde gets an opportunity to fly to a distant country. She has never
been on an airplane before and is very excited and tense. As soon as
she boards the plane, a Boeing 747, she starts jumping in excitement,
running over seat to seat and shouts, “BOEING! BOEING!! BOEING!!!
She sort of forgets where she is. Even the pilot in the cock-pit hears
the noise. Annoyed by the goings on, he comes out and shouts, “BE
There is pin-drop silence throughout the cabin. Every one looks at
the blonde and the angry pilot. She stares at the pilot in silence for
a moment and resumes shouting, “OEING ! OEING!! OEING!!! OE…”
[Source: Paul Dixon]
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