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  • A New Trend in Judicial Decision | Typhoon

  • DATE:2019-5-29
  • A New Trend in Judicial Decision | Typhoon "Hato" Constituted Force Majeure, Terminals and Shipping Lines Could Be Discharged from Liabilities Caused by “Hato”

    Background

    On 23 August 2017, Typhoon “Hato” landed in Zhuhai, attacking Guangdong directly. Cargos stowed at various ports and container yards were soaked and wet-damaged, resulting in various claims for cargo damage against many Terminals and shipping lines. It became a hot topic among Terminals and shipping lines whether they could invoke Force Majeure Clause to defend and discharge themselves from liabilities for the cargo damage arising from the attack by Typhoon “Hato”.

    In fact, be it the strong typhoon “Hagupit” in 2008, or strong typhoon “Rainbow” in 2015, or the typhoon “Hato” in 2017, the affected Terminals and shipping lines tended to invoke Force Majeure Clause to defend claims against them for cargo damage/losses or other property losses caused by typhoon attack. However, for a long time, the Chinese maritime courts adopted comparatively strict standards to test the force majeure defense whilst the Terminals and shipping lines had to undertake heavy burden of proof, making their chances of successful defenses so slim.

    Nevertheless, in a recent judgement issued by Guangzhou Maritime Court (i.e. No.(2018) Yue 72 Min Chu 261 Civil Judgment) it was held that Typhoon "Hato" constituted force majeure and the Terminals and shipping lines should be exempted from compensation liabilities for cargo damage caused by the typhoon. Undoubtedly such court decision is encouraging to the Terminals and shipping lines and has shed light upon burden of proof and defense when they invoke "Force Majeure" Clause.

    The Court Decision

    1. Regarding the core component of force majeure, i.e., whether it is “unforeseeable, unavoidable and insurmountable”, the court held that:

    (1) “Unforeseeable” meant that it was impossible to predict by adopting the current technology and based on the cognitive level of the ordinary. As regards the typhoon, even though people could forecast it to some extent based on the state-of-art technology, it was impossible to accurately and timely foresee its exact landing time, place, duration, scope and extent of effect. Before Typhoon "Hato" landed, although the observatory and news media made forecast on its landing time and wind speed, the combined effect of the subsequent winds, rains, waves and tides and the record high tidal levels in many estuaries along the Pearl River were not mentioned in the forecast. Due to such failure in accurately predicting the scope and extent of effect caused by Typhoon “Hato", the damage/loss occurred.

    (2) “Unavoidable and insurmountable”, indicated that the occurrence of an event was objectively inevitable. “Unavoidable”, meant the parties had tried their bests but still could not avoid the incident to occur. “Insurmountable” meant the parties had done their bests after the incident but still could not surmount damage caused. The objective circumstance referred to a situation which was objectively independent of actions by the parties. The winds, rains, waves and tides brought by Typhoon "Hato" had intertwined into flood and directly caused cargo damage in the subject case. It was established through investigation that the tidal level in Nansha, Guangzhou exceeded the historical tidal record. As a result, flooding in the Terminals was unavoidable. Furthermore, it was unrealistic to take common waterproof measures such as stack of sandbags at the container yards, which was flat structure. Even though those common measures had been taken, the tides could still flood in through the drainage pipes and the city canals. Therefore, flooding caused by the typhoon in this case could not be avoided. The Terminals had worked out special emergency plans for typhoon, wind and flood prevention and before the typhoon landed they had duly notified the cargo owners and the shipping lines for caution, and they adopted measures such as bonding and reinforcing the containers at yards. The measures they adopted conformed to the normal practice of port operators on typhoon prevention, among which the focus should be wind prevention. 

    2. Turning to liabilities of the Terminals and shipping lines, the court reasoned as below: 

    (1) Based on the above analysis, the court held that for the Terminals who stored the involved cargo, Typhoon “Hato” has the components of force majeure and should be regarded as force majeure.

    (2) In terms of liabilities of the carriers, the court opined that Act of God was natural phenomenon that directly resulted in damage to the cargos. The cargos in this case were damaged by water immersed in the container yards of the Terminals due to the impact of Typhoon "Hato", an Act of God, which could not be resisted or avoided despite that the carriers or their trustees (i.e. the Terminals) had taken reasonable measures. If the shippers failed to prove that the carriers had caused cargo damage due to other breach of contract, the carriers should not be held liable for damage caused by Typhoon "Hato" which should be deemed as Act of God.

    Comments and suggestions

    1. First by way of clarification, to judge whether a typhoon in a particular case constitutes "force majeure" to the parties involved is more a factual issue other than a legal issue. It shall be analyzed according to the specific case circumstances instead of making sweeping generalizations.

    Particularly same parties in different cases may have different requirements on risk foresight, avoidance and overcoming. Even in similar cases, different parties may have different capabilities and conditions concerning risk foresight, avoidance, and overcoming. The individual discrepancy between cases and parties exists objectively; hence, specific case circumstances shall be taken into consideration when judging whether an objective situation should be deemed as force majeure or not.

    2. Nevertheless, the court's judicial logic undoubtedly enlightened the parties involved to collect evidence comprehensively and to find the correct direction for defense, including:

    (1) In terms of “unforeseeable” nature, the Terminals and shipping lines shall submit the typhoon forecast/warning information and measured information of the meteorological department to testify that the actual wind force, strength and destructive power of the typhoon are higher than what had been forecast, or the actual landing time, place and moving direction of the typhoon were different from the forecast. For example, in the subject case, the Terminals submitted the typhoon measured information as evidence to prove that the combined effect of winds, rains, waves and tides caused by the typhoon or the record high tidal levels of many estuaries along the Pearl River were not stated in the forecast, thus it should be deemed as "unpredictable".

    (2) Regarding the “unavoidable” nature, the Terminals and shipping lines shall submit evidence to prove they had properly and cautiously taken measures as what responsible, qualified and competent dock companies or carriers with appropriate knowledge and skills should take, but still could not avoid the occurrence of damage. For example, the design approval certificate, completion acceptance certificate, and expert inspection certificate of the terminal can be submitted to prove that the design of the terminal conforms with the specifications and is suitable for cargo stacking. Besides, evidence to prove that the Terminals and shipping lines have duly notified relevant shippers of the forthcoming typhoon, have worked out typhoon prevention emergency plans and taken measures for typhoon, wind and flood preventions is of great importance as well. 

    (3) As to the “insurmountable” nature, the Terminals and shipping lines are suggested to submit evidence to prove that after the incident, they have taken all proactive and reasonable measures within their capabilities, but still fail to overcome the damage caused by the incident. Photos, videos, or written documents, etc. in this connection are of important probative value.

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