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Transportation

Swansong for “MY SONG” owner as court hands down judgment on superyacht loss

The recent judgment of the Commercial Court in the case of Weco Projects APS -v- Loro Piana and Others [2020] EWHC 2150 (Comm) provides numerous elements of useful guidance for those in the freight forwarding and cargo / freight liability insurance industries, encompassing findings on the meaning of a ‘contract of transport’, the determination of consumer as against business interests, incorporation of terms (including BIFA law and jurisdiction) and multifaceted jurisdictional considerations. The methodical and precise discussion of consumer rights may in particular be of assistance to carriers facing consumer rights arguments and challenges to limits of liability, even if not all as dramatic as in respect of the loss of the “MY SONG”.

Italian businessman Mr Loro Piana retained a shareholding in a high-end clothing company founded by his family, but was predominately engaged in management of the resultant wealth, and recreational yacht sailing. Following the conclusion of the winter sailing season in early 2019 Mr Loro Piana sought to arrange for the carriage of his yacht, “MY SONG”, from the Caribbean to Europe, in time for a regatta planned for Sardinia shortly after. During that voyage the vessel on which the yacht was stowed encountered heavy seas and the yacht was lost overboard. Although the yacht’s hull section was recovered from the waters near Menorca it had sustained significant damage and was ultimately deemed unsalvageable.

Although Mr Loro Piana was said to have no obligation to the clothing company nor interest beyond his minority shareholding, the clothing company sponsored global regattas including that in Sardinia, its branding featured on the yacht prominently including the crew uniforms, the yacht featured in the company’s marketing and Mr Loro Piana used the yacht as the centrepiece of influencer-based marketing involving celebrities, models and journalists invited to the events and on board.

These ties came to play a more prominent part before the English courts than any of the players involved could have anticipated, as they were discussed in a fascinating and thorough judgment of Christopher Hancock QC, sitting as a judge of the High Court, which also considered the legal nature of booking notes, the incorporation of BIFA terms, and the definition of a consumer in the context of a raft of jurisdictional issues and challenges.

P&M Ltd (PML), the party engaged by Mr Loro Piana to arrange the carriage, deny liability for the loss of the yacht and their preliminary statement following the loss details their primary assessment that the yacht’s cradle (owned and provided by the yacht, warrantied for sea transport, and assembled by the yacht’s crew) collapsed during the voyage.

  • Contractual Structure

    • Mr Loro Piana, through his logistics agent and qualified lawyer Mr Georgio Benussi, concluded a booking note dated 13 November 2018 with PML, having dealt directly with P&M S.r.l (PMS).
    • PML was party to a contract of affreightment with Zeamarine Carrier GmbH and entered into an amendment on 20 March 2019 providing for the yacht to be carried on board “BRATTINGSBORG”.
    • PML procured a non-negotiable liner sea waybill from Zeamarine dated 10 May 2019 which named Mr Loro Piana as shipper and consignee.
    • Zeamarine charterered the vessel from RZ Carrier, who had chartered it from bareboat charterers Weco.
  • Proceedings

    • Mr Loro Piana commenced proceedings in Italy against PML and PMS on 14 June 2019 in the courts of Milan.
    • The Milan court was therefore the first seised, but the action constituted a prima facie breach of the jurisdiction agreements in the booking note.
    • On 27 June 2019 Weco commenced negative declaratory relief proceedings against Mr Loro Piana, Credem (a leasing company and the yacht’s legal and registered owner), and PML, in England.
    • On 18 August 2019 PML commenced Part 20 proceedings against Mr Loro Piana and Credem also seeking negative declaratory relief.
    • On 18 September 2019 P&M Srl commenced essentially the same proceedings.
    • On 13 May 2020 Mr Loro Piana commenced proceedings against Zeamarine and Weco in the Courts of Genoa.
  • Law and Jurisdiction

    • The booking note provided for English law and jurisdiction. (The EJC clause)
    • The booking note contained a Himalaya clause providing that any agent of PML would have ‘every exemption from liability, limitation, condition and liberty herein contained and every right, exemption from liability, defence and immunity of whatsoever nature applicable to the Company or to which the Company is entitled hereunder shall also be available and shall extend to protect every such servant or agent’.
    • The booking note incorporated the standard BIFA terms which included an exclusive English law and jurisdiction clause. The court found the EJC clause in the booking note was the governing clause.
    • The Zeamarine waybill contained a jurisdiction agreement providing for disputes to be determined by the courts and in accordance with the law of where the carrier had their principal place of business. Zeamarine’s principal place of business is in Germany.

Mr Loro Piana’s consumer protection rights

Mr Loro Piana alleged that the EJC was invalidated either by reason of the consumer contract provisions of the Recast Regulation, or by the provisions of the Consumer Rights Act.

The provisions in the Recast Regulation do not apply to consumer ‘contracts of transport’, so the court had to determine whether the booking note was a contract of transport, and secondly whether Mr Loro Piana was a consumer.

As to the first issue, Mr Loro Piana argued that the booking note was only a contract to arrange transport, carriage of goods was not its principal purpose, and the Regulation only excluded ‘contracts of transport’, not ‘contracts relating to transport’.

PML referred to the opinion of AG Trstenjak before the ECJ in Pammer (C-585/08) in which the purpose of the exemption was said to relate to consumer contracts ‘in the case of contracts the main purpose of which is transportation’. They submitted that it did not matter whether they arranged or carried out the carriage, as the exemption does not limit itself only to carriers, nor does it refer to roles within the contract. It applies where the main purpose of the contract is transport.

The court found that this booking note was a contract of transport. Among the factors considered a number bear similarity to the determination of freight forwarder and first carrier under the CMR Convention, including that PML invoiced for freight, not commission, and effectively subcontracted the carriage and paid a separate rate of freight to the shipowners. Further, the contract was not limited to the arrangement of carriage, as within the incorporated BIFA terms was a liberty to perform the carriage, and the booking note anticipated the possibility of the PML effecting the carriage.

The judge expressed the obiter view that any such freight forwarding contract would likely be a contract of transport, but stopped short of reaching a concluded view.

Although is was unnecessary to determine whether Mr Loro Piana was a consumer as the Recast Regulation excludes contracts of transport, the judge nonetheless considered the point and following a review of the case law determined obiter that, in circumstances such as this where it could be argued that the purpose of the contract was part personal and part business use (owing to the links to the clothing company), for it to be a consumer contract the business use of the yacht would have to be no more than ‘negligible’.

Mr Loro Piana submitted that neither his wealth nor his extensive experience in yacht transport contracts were capable of precluding his being a consumer, and that he had no contract or obligation with the clothing company capable of causing a business use in the yacht. PML referred to the yacht’s (and yachting events’) prominence in the clothing brand’s marketing strategy, and a sponsorship agreement which provided for payment and expense sharing.

The court obiter determination was that the burden was on Mr Loro Piana to show that the business use was no more than negligible, and with reference to the marketing link to the clothing company, he had not managed to do so.

Mr Loro Piana’s alternative argument was that the EJC was unfair in the terms of the Consumer Rights Act, that it hindered his right as consumer to take legal action. It was buried in small print, did not feature in the ‘Key Facts’, and required him as the foreign consumer to be sued in the trader’s domicile in a foreign language, and he had in fact been required to instruct Italian lawyers to instruct English lawyers, whereas PML was familiar with English law and litigation and should have drawn the EJC to his attention.

PML in turn argued that the Consumer Rights Act could not either interfere with or undermine the Recast Regulation exclusion, and the case law made clear the two were to be kept distinct. They further made reference to Mr Loro Piana’s experienced in-house legal advisers and his significant wealth and experience of yacht carriage contracts to rule out him being the ‘weaker party’ with the result that such a term could be unfair.

The court’s obiter conclusion found these elements in no way precluded Mr Loro Piana being a consumer, but that the clause was not unfair, in part as a result of them. Mr Loro Piana had signed the note next to the clause and so cannot be said to have not read it, and was guided by advisers. Further, there was no imbalance as both parties had to instruct English lawyers for the proceedings.

Weco’s jurisdiction arguments – Recast Regulation

Weco, as the party commencing the English proceedings with the intention of seizing the English court through pursuit of negative declaratory relief, had to prove their case on establishing that English jurisdiction. They relied on two arguments in that regard:

1) The provisions of Article 8(1) of the Recast Regulation

2) The benefit of the EJC in the booking note by virtue of the Himalaya clause in the same document

Article 8(1)

On Article 8(1), Weco argued that PML (a co-defendant in the action) were domiciled in England, and the facts of the casualty required that the interconnected claims be determined in the same way. That they had taken this action specifically in order to bring Mr Loro Piana within the jurisdiction of the English courts was no barrier to that result as a matter of English law. Mr Loro Piana disputed the interconnection of the claims and made reference to the artificial nature of the action. He argued that the English court could defer decision in any action between PML and Weco until the Italian court had determined his claim and, further, that he could not have contemplated being sued in England by a Danish bareboat charterer of a vessel performing a voyage from Antigua to Genoa during which his yacht had been salvaged (and so Weco suffered no direct loss) merely because the forwarder was English.

The court concluded both that there was no freestanding requirement of foreseeability, and that Mr Loro Piana should have foreseen this outcome given the EJC.

On the interconnected nature of the claims, the court determined that what matters was the interconnection between the claims against the various defendants, as opposed to other individual claims in the overall matter. There was a close connection between Weco’s two claims for negative declaratory relief.

The Himalaya clause

The court’s conclusion under Article 8(1) meant they were not required to determine the argument on the Himalaya clause, but did so given the extent of the submissions.

Weco argued that they, as a servant, agent or subcontractor of PML, were entitled to benefit from the clause in the PML booking note, and so from the same exemptions, defences, limitations and liberties.

Mr Loro Piana made reference to “THE MAHKUTAI “ [1996] AC 650 (PC) in which Lord Goff declined to incorporate an English EJC into a Himalaya contract as the clause in that case was concerned with terms inserted to benefit the carrier, and so could not extend to a mutual agreement such as an EJC. Mr Loro Piana argued that the Himalaya clause in the booking note was similarly concerned with terms which benefit the principal.

Weco sought to distinguish the clause from that in “THE MAHKUTAI” on the grounds that the booking note clause did not contain the same requirement for exemptions benefiting the carrier (only). The clause extended to conditions and Weco described the EJC, located within the ‘Booking Note Terms and Conditions’ and ‘BIFA Standard Conditions’ as just such a condition.

Further, where Mr Loro Piana had argued that Weco could not be PML’s servant or agent in forwarding obligations in a forwarding contract, Weco argued that as bailee or sub-bailee of the yacht it was delegated performance of PML’s obligations.

The court found that Weco was a servant or agent of PML and so can claim benefit from the Himalaya clause, as the contract was a contract of transport under which PML undertook to carry the goods.

However, as to whether the EJC was passed on as part of that benefit, the court upheld “THE MAHKUTAI” and concluded it could not. The judgment argued there was no material difference in the wording, and no importance in the reference to ‘conditions’ in the clause.

The court agreed with the Thomas -v- Portsea line of authorities which also establishes that clauses in bills of lading purporting to incorporate the terms of charters do not incorporate dispute resolution clauses related to disputes under that charter in the absence of a clear and express term to this effect. The EJC in this case referred to disputes arising out of or in connection with the booking note. The disputes between Weco and the yacht interests arise out of alleged torts and breaches of bailment.

Other claims

The court also considered PMS’s ability to benefit from the EJC as against Mr Loro Piana, who had commenced proceedings in Milan against them. The court found that as (there was a good arguable case that) Mr Loro Piana had sued on the booking note in Italy, Mr Loro Piana was then bound by its terms, including the EJC.PMS’s alternative Himalaya clause argument failing for the same reasons as Weco’s.

Conclusion

The court concluded that PML was entitled to rely on its EJC as against Mr Loro Piana and Credem, finding that Mr Loro Piana’s consumer rights could not avoid this outcome.

Weco could found jurisdiction in England against PML, Mr Loro Piana and Credem under Article 8(1) of the Recast Regulation with the English Court first seised. Weco were entitled to claim against PML in England owing to their domicile, and the interconnected nature of that claim with their claim against Mr Loro Piana and Credem extended that jurisdiction to those claims.

PMS could benefit from the EJC as against Mr Loro Piana further to the principle of conditional benefit.

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