Receipt & Release Statement: (ir)revocable signature

In cases connected with the payment of contractual compensation to the seafarers’ next of kin, signing of the Receipt & Release Statement by such beneficiaries is a common practice in Ukraine and abroad.

By the way, the standard form of R&R is provided by the Maritime Labor Convention, 2006 (MLC, 2006), in Annex B4-I. The essence and nature of R&R have repeatedly been the subject of fierce disputes in Ukrainian courts. However, major cases did not reach the stage of cassation appeal, which did not allow to form sustainable court practice and led to an increase of abuses of the right to sue by plaintiffs and blatant blackmail of shipowners and P&I clubs.

Has the situation changed now? Let’s analyze the latest case from ANK’s practice.

Case background

Back in April 2014, a Ukrainian seafarer was hired by a foreign shipowner as a crew member to work on the m/v CARDINAL (IMO: 9274575, the flag of the Republic of the Marshall Islands) as an electric engineer.

Following the usual procedure, before entering into an employment contract, the seafarer provided the shipowner with documents confirming his qualifications, as well as the results of a pre-employment medical examination with a conclusion on his health conditions, namely, that he is fit for duty at sea.

The seafarer joined the crew in a foreign port. However, on the second day of work on board, he was found dead.

The shipowner immediately started an investigation into the mysterious death, since if the seaman was absolutely healthy before the voyage, as evidenced by the seaman’s medical certificate issued as a result of the pre-employment medical examination, what could have caused his sudden cardiac and respiratory arrest at the age of 56? This was the cause of death indicated by the autopsy conducted in India.

After completing all the necessary procedures and paperwork, the body of the deceased was embalmed and repatriated to Ukraine for burial.

As long as the collective bargaining agreement, which, according to the employment contract, covered the labour relations between the seafarer and the shipowner, provided the loss of life compensation in the amount of more than USD 95K his wife, as appointed next of kin, applied to the shipowner for compensation and additional funeral expenses reimbursement.

The shipowner voluntarily agreed to reimburse the family of the deceased for the funeral expenses. At the same time, in order to decide whether or not there were grounds for payment of the loss of life compensation, it was necessary to wait for the results of the investigation, which included a number of requests, including to the medical center that issued the medical certificate based on the results of the seaman’s pre-employment medical examination.

In response to the shipowner’s request, the medical center stated that the deceased seafarer was not registered in its medical file and database, had not undergone a medical examination, and that the medical certificate provided to confirm his fitness for work at sea had not been issued by the center, i.e., was a forgery.

At the same time, the collective bargaining agreement stipulated that a seafarer’s failure to fulfill his obligation to undergo a pre-employment medical examination or providing false information about his health conditions could result in the rejection of the compensation payment, including loss of life compensation.

Taking into account all the circumstances, the shipowner informed the seafarer’s wife that her compensation claim was denied.

However, the seafarer’s family (wife and son) continued to insist on at least part compensation, arguing to the loss of the sole breadwinner and their difficult financial situation.

In view of numerous requests of the family, and recognizing the severity of their loss, the shipowner offered the seafarer’s widow a lumpsum compensation payment of USD 30K and all documented funeral expenses as a full and final settlement of all claims, which she accepted, and signed a R&R Statement according to the established practice which had been certified by the notary.

The shipowner paid the agreed amount of compensation to the widow as promised.

However, two years after the payment, in 2017, the widow filed a lawsuit against the shipowner to the local court to recover “underpaid” compensation in the amount of more than USD 64K as well as moral damage in the amount of USD 10K.

What were the grounds for the claim?

Ignoring the existence of R&R, the claimant grounded her claim on the argument that the shipowner had not fully fulfilled its obligation to pay contractual loss of life compensation and that the payment of more than USD 31K, the fact of which was not disputed, was only part of the compensation she expected, and therefore she claimed an additional USD 64K and USD 10K for the moral and physical suffering allegedly caused by the shipowner.

Progress of the trial

It is worth noting that the foreign shipowner, headquartered in New York (USA), became aware of the court case only after the issuance in 2021 of the default judgement on the satisfaction of the claim. As it turned out later, the Ukrainian court had sent an order to the competent US authority to serve the summons, which was not executed due to non-compliance with the requirements of the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters of 1965 and non-payment of a fee of USD 95,00.

However, upon discovering the case, the foreign shipowner initiated a review of the default judgment by filing a relevant application, which was satisfied by the court, and the default judgment was accordingly cancelled with the case being set for a new trial, where the shipowner was allowed to bring to the attention of the court all the circumstances relevant to the correct resolution of the case.

Shipowner’s legal position

The shipowner, of course, did not recognise the claims in full, arguing that:

• Firstly, shipowner has no obligation to pay contractual compensation due to disclosing of false information by the seafarer about his health condition at the moment of employment, particularly submission of a forged medical certificate, which is an independent ground for refusing to pay compensation under the terms of the collective agreement;

• Secondly, the shipowner voluntarily paid the claimant more than USD 31K as an exception and on the basis of the R&R Statement signed by her and certified by the notary, in which she confirmed the waiver of any claims and demands against the shipowner, and waived to initiate any legal proceedings against him in any jurisdiction;

• Thirdly, R&R is a unilateral legal deed (ukr. “pravochyn”), which, nevertheless, is binding for both parties. Therefore, having received the agreed amount, the claimant is not entitled to additional payments;

• Finally, there is a contradictory behaviour of the claimant, which is out of line with her previous behaviour and the signed statement, and therefore the doctrine of venire contra factum proprium (prohibition of contradictory behaviour) should be applied, based on the Roman maxim – non concedit venire contra factum proprium (no one can act contrary to his previous behaviour).

The shipowner provided the court with all the necessary evidence, including the original R&R signed by the claimant, a notarised witness statement, evidence of compensation payment in accordance with the R&R, etc.

Is it possible to withdraw a signature from R&R?

It is noteworthy that after submitting the original R&R to the court, the claimant provided a copy of the statement of withdrawal of the release with a request to consider it null and void, arguing the impact of grave circumstances at the time of its signing. In the claimant’s view, the release is simply a statement that can be revoked in any notary office.

War impact on the trial

Taking into account that the case was pending before the Kherson City Court of the Kherson Region, the examination of the case after the start of the full-scale invasion and occupation of Kherson was not possible.

Notwithstanding the Supreme Court’s order assigning the territorial jurisdiction of the court cases to the Malynovskyi District Court of Odesa and then to the Bilozerskyi District Court of Kherson Region, the resumption of the court proceedings on the basis of the materials of the case available in the digital form at the shipowner’s motion was delayed and the prospects for resumption of the proceedings were unpredictable.

However, after the liberation of Kherson in November 2022, it turned out that the materials of the court case had surprisingly survived despite the fact that the court building had been shelled for many times.

After the court resumed its work, the case was appointed for examination on the merits in May 2024.

What the court ruled?

Following a new trial, the court dismissed the claim of the seafarer’s widow in full. The relevant decision was issued by the court in July 2024.

The court found that the shipowner’s decision to refuse to pay contractual loss of life compensation was sufficiently justified and complied with the provisions of the employment contract and the collective agreement.

At the same time, the court concluded that despite the fact that the withdrawal from a unilateral act is provided for by Article 214 of the Civil Code of Ukraine and had to be made in the same form as the act, which was formally done by the claimant, the latter did not return the compensation she received on the basis of the R&R, and therefore the withdrawal from the transaction did not actually take place. Therefore, the R&R is valid and has legal consequences for the claimant.

In such circumstances, the court found no legal grounds to pay any additional amounts in her favour and sided with the shipowner, making an important decision for the practice of litigation on recovery of compensation under seafarers’ employment contracts.

Court practice

The court practice in this category of disputes began to form only in December 2019, when the Supreme Court issued a resolution in a similar case No. 501/3065/16-ц (m/v CROWN TOPAZ).

In this resolution, the Supreme Court concluded that a signed and notarised R&R is a unilateral legal deed (ukr. “pravochyn”) that is binding for both parties, despite the fact that only one party signs it, as it creates obligations not only for the claimant. Moreover, as the Supreme Court noted, in English law, one of the ways to resolve disputes before trial is to conclude a document, and therefore R&R is equivalent to a contract.

The Supreme Court also concluded that since the claimant did not invalidate the R&R in court, the consequences of the invalidity of the act in the form of bilateral restitution did not apply, i.e. the claimant did not return the money, and no evidence was provided that she had entered into the statement under the influence of difficult circumstances, there were no grounds to consider the statement invalid.

The Supreme Court also examined another similar case No. 522/3586/20 (m/v MILITOS). The resolution under this case was issued recently, in June 2024.

In this case, the Supreme Court underlined that by receiving compensation for moral damage, which, according to the receipt, could be caused by the employer or any other persons, regardless of the content of the legal relationship, but on the basis of actions related to service on board and/or illness and subsequent death, the claimant committed a legally significant act that deprives her of the right to re-submit claims for moral damage.

Furthermore, the Supreme Court also concluded that filing a claim for moral damage after receiving the relevant compensation in the amount of USD 96K demonstrates the claimant’s violation of the principle of prohibition of contradictory behaviour (Lat. venire contra factum proprium) and Article 3 of the Civil Code of Ukraine, and therefore the courts of previous instances reasonably dismissed the claim in this part for the reasons stated above.

Instead of an epilogue

Thus, the important conclusions on the application of the law in such legal relations set out in the above resolutions of the Supreme Court comply with the conclusions of the Kherson City Court of Kherson Region in the case of m/v CARDINAL, which demonstrates a tendency of Ukrainian courts to define R&R as a unilateral legal deed (ukr. “pravochyn”) binding for both parties, which is in line with international practice and experience of applying R&R and is certainly a positive signal.