Report only what you know

Feature article written by Capt Barry Thompson HONFIIMS

Although the following account refers to a cargo survey the lessons to be learnt from it by a surveyor apply just as much to a yacht or small craft condition survey — indeed to any ‘fit for purpose’ survey.

In 1985 a New Zealand company ordered just over 22,000 tonnes of compound fertiliser at a C & F cost of US$4.2 million. It was part loaded into the geared bulk-carrier Adelina (26,687 dw, built 1977) in Sweden with the balance in Tampa, Florida. SGS, of worldwide reputation, were the appointed surveyors to certify the holds as clean, dry and fit to receive the fertilizer.

Arriving at Napier, NZ on 1 August 1985 Adelina was initially refused permission by the NZ Government inspectors to discharge her cargo because diseased barley gains were found in all five holds. Although the authorities subsequently relented they imposed a number of restrictive conditions on the fertiliser’s sale and understandably the importers refused to accept receipt of the cargo because of these restrictions.

After several weeks of argument with those responsible in New York for the original purchase, a buyer was found for the cargo ‘as is’ in Belgium and the ship left Napier nearly two months after arrival. The contaminated fertilizer was finally discharged in Antwerp.

The loss on the actual sale of the contaminated fertilizer amounted to just under US$1 million but with extra steaming and port costs and damages under the terms of the Charter Party the claim eventually reached US$2.4 milllion.

It was not until nearly the end of 1989 that the claim came before the New York District Court when SGS was sued, it being alleged that the surveyor failed to detect the grains of barley in the holds and should not have accepted that the ship was fit to receive the cargo.

The holds had been cleaned prior to loading and some hold painting carried out. In fact some painting of residue barley from a previous cargo on ledges arising from the construction in the holds, had taken place!

The difficulties associated with this type of survey are well known to us as surveyors and it is extremely difficult, if not sometimes almost impossible, to be satisfied that all residue of previous cargo, and significant rust, is not present on the ledges of beams and stingers in the holds. These surveys require considerable time and care, often even assistance and equipment to carry them out properly.

In this case of this Adelina claim, the survey company were grateful the District Court judge laid 50% of the blame on the shippers who, he contended, should have drawn to the surveyors’ attention the very high standards of cleanliness required by the NZ Authorities.

The survey fees in Tampa amounted to only $50 per hold and the judge contended that the shippers had to assume a responsibility because a much higher fee should have been expected if SGS was expected to assume a much higher standard of responsibility — or else they should have expected SGS to decline the survey in the absence of an appropriate fee. He was critical that the shippers, in their acceptance of such low survey fees and casual dealings with the surveyors, had shown too little concern regarding the risks involved.

In 1990 the case went to the US Court of Appeal where the judges found that the surveyors in the loading ports failed to carry out their surveys with sufficient care so that SGS were in breach of contract. But the Appeal Court did not award the shippers the full contract damages for similar reasons to those expressed by the lower court judge.

The lessons for surveyors

Apart from the obvious lesson of appreciating the difficulties of surveys of this nature and performing accordingly, another lesson is contained in further comments made by the first trial judge. He made the point that the attending surveyor should have stated only what he actually saw and specifically reported only on the areas of the holds to which he could gain access.

This is sound advice for all types of surveys and we surveyors should always make it clear whenever and wherever, for various reasons, we have been unable to carry out a survey to the required standard.

There are frequently surveys where we have to accept some limitations on the extent to which we can report fully on some part of a structure in ships and small craft. In some surveys of cargo it is impractical (often prohibitively expensive) to examine every item. We may be obliged to form an opinion on a limited sighting or sampling and that may be quite acceptable BUT we need to say so in the report and express any limitations. This applies to all ‘fit-for purpose’ surveys where there are often good reasons why the extent of a survey is restricted BUT it is important that principals are aware of them.

Making the appropriate statement in the report is essential but the surveyor’s responsibility will often arise well before his principal receives the written report. The surveyor must, in these circumstances, inform his principal of the limitations on his survey as soon as possible, maybe by email or even better by telephone or in person. In many cases the written report will arrive too late for the principal to make decisions on what should have been done as a consequence of the limitations of the survey.

It may be very necessary to delay loading a cargo until a very much more extensive survey (doubtless at a much greater cost) can be carried out, perhaps to provide greater safeguards against contamination. Prompt notification may be essential in any other types of condition surveys, i.e. ‘On hire/off hire’ for a charter, or for the purchase of ships and small craft.

Although mention has been made of situations where a surveyor may be constrained in a survey and restrictions legitimately imposed on the extent of his reporting, this should not be seen as an opportunity for an easy excuse for not bothering to do everything reasonable to overcome those obstacles. The use of disclaimers in reports where a little more care and trouble might have permitted a fuller and more useful survey, will rarely be of much protection for the surveyor. The courts are unlikely to accept any excuse for a lazy survey and will see the surveyor as having been negligent. He can expect to pay the price for his lack of care and attention.