Real Case 8: P&I Cover Prejudiced

M.V “Xing Ye” loaded a cargo of rice at Haldia, India for Chittagong. When the vessel arrived at Chittagong, berth congestion caused the vessel to wait at anchorage for several months before she berthed. When the vessel berthed to discharge cargo, the receivers alleged the cargo was damaged and the vessel shifted to anchorage. When the vessel eventually reberthed she continued discharge and sort the sound and damaged cargoes, the cost which the P&I Club paid. Receivers remained silent whether they would accept the cargoes and owners were asked to continue to pay the discharge and sorting the costs which were clearly inflated. The P&I Club instructed surveyors from London to inspect the cargo who opined that the damage was in the nature of poor quality of rice. The vessel was later arrested by receivers in respect of the total loss value of the complete cargo. The receivers’ statement of claim alleged that the shipowners had defrauded them on account of a back dated bill of lading which receivers relied on for purchase of the cargo. On this account the P&I Club advised members that the P&I cover had been prejudiced and that the Club would not assume financial liability for the claim.

The mortgagee bank became involved and instructed a sizeable and well known law firm who advised that it was wrong for the P&I club to withdraw cover and the law firm communicated with the P&I Club. This was of no use and the intervention of the law firm did not change the P&I Club’s decision.

The members were now desperate for assistance and we decided to look into the matter in detail ourselves to assess whether there was any possibility the claim under the P&I cover could be rescued. We examined the receiver’s pleadings, analyzed the sequence of events from the time of loading until arrival and decided there was a strong case to submit to the Club that their decision may not be correct. We wrote our legal opinion with particular reference to the facts of the case and the rules of the P&I Club which was very persuasive. After submitting our legal opinion to the P&I and discussing with their directors, the P&I Club advised that we had submitted a very strong legal argument for the members and if the circumstances we described was indeed correct, it was inferred the P&I Club would agree to assume financial liability for the claim. We were pleased that we were able to assist the owners in achieving this result and making what seemed impossible a reality.