Carriage of Goods by Sea

Part A: Butcher Ltd & KRY Ltd The contract of affreightment is evidenced by the bill of lading where, as here, the goods to be carried only form part of the total cargo. The liability of the carrier under the bill of lading is now subject to a combination of the rules introduced by the Maritime Law Committee of the International Law Association held in the Hague in 1921 as revised by the Brussels Protocol of 1968, known collectively as the ’Hague/Visby Rules’. It is agreed here that the bill of lading is subject to English law which passed legislation (the Carriage of Goods by Sea Act 1971) to implement these rules. It is also necessary to have regard to the Carriage of Goods by Sea Act 1992 which governs all contracts of carriage entered into after 16 September 1992. The object of the Hague/Visby Rules is to establish the minimum obligations of the carrier and to define the maximum immunities to which he is entitled and the extent to which he is able to limit his liability. Article III, rule 2 provides: “Subject to the provisions of Article IV, the carrier shall properly and carefully load, handle, stow, carry, keep, care for and discharge the goods delivered”. So far as the cobras in Container A are concerned, these are expressly excluded by Art.1(c): “Goods” includes goods, wares, merchandise, and articles of every kind whatsoever except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried”. In any event, Art.IV, rule 2 provides the “catalogue of exceptions” which are available to the carrier under the Rules. These include: “Neither the carrier or the ship shall be responsible for loss or damage arising or resulting from – a) Act, neglect, or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship.” While there is little difficulty in interpreting “faults in navigation”, the concept of “management of the ship” is more problematic.

The uncertainty arises because of the distinction between the duty to take care of the ship and a duty toward the safety of the cargo which in reality can frequently overlap. The applicable test was propounded by Greer LJ[1]: If the cause of the damage is solely, or even primarily, a neglect to take reasonable care of the cargo, the ship is liable, but if the cause of the damage is a neglect to take reasonable care of the ship, or some part of it, as distinct from the cargo, the ship is relieved from liability; for if the negligence is not negligence towards the ship, but only negligent failure to use the apparatus of the ship for the protection of the cargo, the ship is not so relieved.” Thus, in Gosse Millerd, a cargo of tinplate was damaged by a failure to secure tarpaulins. The House of Lords held that since the purpose of the tarpaulins was to protect the cargo, the conduct in question related to a failure to protect the cargo rather than the management of the ship. In the case of container A, the failure was due to the failure of the crew to secure one of the side doors of the ship. This might be said to relate to a failure to protect the ship. Conversely, contained C was undamaged so it might be argued that the default was specific to the cargo in Container A and did not impinge upon the safety of the ship. It might be expected, therefore, that the ship owners will argue the “safety of the ship” exception in addition to the exclusion of animals clause and the general exclusion contained in clause 3 of the bill of lading. So far as Container B is concerned, this appears to fall within the exception to the Rules described above.

Two requirements must be satisfied if the carrier is to escape liability: the cargo must actually be stowed on deck and this fact must be apparent to the innocent transferee from a scrutiny of the bill of lading. In Svenska Traktor v Maritime Agencies[2], a consignment of tractors had been shipped under a bill of lading which conferred a liberty upon the carrier to stow the cargo on deck One of the tractors was washed overboard during the voyage. Pilcher J (at p.300) held: “A mere general liberty to carry goods on deck is not, in my view, a statement in the contract of carriage that the goods are in fact being carried on deck.” As is apparent from Encyclopaedia Britannica v Hong Kong Producer[3], even a liberty to do so unless the shipper lodges an objection will not suffice.

Accordingly, the qualification (applicable in the event to Contained B) “if sufficient space is not available below deck” will be unlikely to save the ship from an action in this regard by Butcher Ltd since the bill of lading does not make it sufficiently clear that the cargo will be carried on deck. In this instance, it is unlikely that the carrier will be able to rely upon the exception to the Rules discussed above since the loss of Container B from the deck would appear to be reasonably foreseeable and not related to the management of the ship as opposed to care for the safety of the cargo. It is perhaps fortunate for Butcher Ltd that the carrier will incur primary liability in respect of Container B since their policy of insurance with Max Insurance Corporation is likely to be held to be seriously defective in respect of Container B. In Rozanes v Bowen[4], it was held: “It has been for centuries in England that the law in connection with insurance of all sorts, marine fire, life, guarantee and every kind of policy, that, as the underwriter knows nothing and the man who comes to him to ask him to insure knows everything, it is the duty of the assured…to make full disclosure to the underwriters, without being asked, of all the material circumstances.” This principle was applied in Hood v West End Motor Car Packing Co[5] in which a policy of insurance was avoided on the basis that the assured had failed to declare that the cargo may be carried on deck thus increasing the risk. The subject of deviation is treated strictly by the Rules. Article IV, rule 4 limits permissible deviation to “any deviation in attempting to save life or property at sea or any reasonable deviation…”. It is said[6] that “the courts in the United Kingdom have given an extremely restricted interpretation to the term ‘reasonable deviation’ with the result that there are few reported cases in which the concept has been successfully invoked”. However, in this instance, the bill of lading contains an express clause allowing deviation in ‘special circumstances’. Since clauses of this type are principally inserted for the benefit of the shipowner, they will be interpreted strictly and contra preferentem. In Glynn v Margetson[7], a cargo of oranges was loaded in Malaga for shipment to Liverpool. The bill of lading gave the vessel express permission to “proceed to and stay at any port or ports in any rotation”. Despite the breathtaking breadth of this provision to which the shippers had agreed, it was held not to protect the shipowner when the vessel called at ports not on the geographical route to Liverpool when the oranges consequently arrived in a damaged state. In this instance, it may be argued that the inclusion of a reference to “special circumstances” means that this liberty should be construed more strictly and Master Gabetta’s deviation to Valletta does not fall within the definition of such circumstances and the purported protection should be struck down in any event in accordance with the principle propounded in Glynn. Traditionally, such an unjustifiable deviation was regarded as a fundamental breach of the contract of affreightment.

Doubt was cast upon this as a result of the decisions in Suisse Atlantique[8] and Photo Production v Securicor[9] but the best guidance is probably to be obtained from the Court of Appeal judgments in The Antares[10] in which Lloyd LJ expressed the view that “the deviation cases should now be assimilated into the ordinary law of contract”. Wilson[11] opines: “Such an approach would require the courts to take into consideration the entire terms of the contract, including both exceptions and liberty clauses, with a view to discovering whether, on their true construction, the parties intended them to apply to the new situation, I.e. the substituted voyage.” On such a construction, it appears highly unlikely that the personal imperatives of Master Gabetta would absolve the ship owners from liability in respect of the damage to the watermelons. However, it should be borne in mind that such damage could be argued not to have been caused by the diversion to Valletta but rather by the ensuing delay of some three weeks that was enforced by the port workers strike. Butcher Ltd may be argued to be at the mercy of the strike but the reasons for it will have to be scrutinised. In The New Horizon[12], Lord Denning MR stated: “I think a strike is a concerted stoppage of work by men done with a view to improving their wages or conditions, or giving vent to a grievance, or making a protest about something or other, or supporting or sympathising with other workmen in such an endeavour. It is distinct from a stoppage which is brought about by an external event such as a bombscare or an apprehension of danger [emphasis supplied].” However, unless the strike can be blamed upon such an external factor, it is probable that the shipowner will be protected by the exception supplied by Art.IV, rule 2(j) of the Rules which expressly provides for “strikes or lockouts or stoppage or restraint of labour from whatever cause, whether partial or general”. So far as KRY Ltd is concerned, the bill of lading will act as a document of title to the goods in Container C. This is now expressly provided for by the Carriage of Goods by Sea Act 1992 which provides that title to sue is vested in the lawful holder of the bill of lading with “lawful holder” being defined, inter alia, as an indorsee of the bill. The ability of KRY Ltd to sue in tort is subject to the qualification provided in Margarine Union v Cambay Prince[13] in which a cargo of copra was seriously damaged as a result of the negligence of the ship owner. The plaintiff was the holder of a delivery order for part of the cargo issued by the seller under a c.i.f. contract. As the plaintiff did not become owner of the goods until they were ascertained on discharge, it was held that an action in negligence could not lie. This betrays an underlying public policy consideration, namely, the reluctance of the courts to allow recovery for pure economic loss and the undesirability of allowing an indorsee to sue in negligence, unconstrained by the terms of the contract of carriage.

This principle, therefore, may well prevent KRY Ltd from pursuing an action in negligence alone and they will therefore be limited by the principles applicable to Container C discussed above. Part B: Amount of Cargo At common law the bill of lading in the hands of the shipper is prima facie evidence of the quantity or weight of goods shipped. Accordingly, if the Master is unable to check the quantity, he is at risk of exposing the carriers to liability in the event that the discharged cargo fails to amount to the quantity recorded. The burden upon the carrier is a heavy one since it will then require him to prove that the goods were not in fact shipped. The balance of probabilities test does not apply in this situation and therefore it will not be possible to argue that it is more likely than not (as would appear common sense) that the goods delivered equate to the goods loaded. In Smith v Bedouin Steam Navigation Co[14] 988 bales of jute were delivered under a bill of lading which stated that 1000 bales had been shipped.

Lord Shand stated that: “The evidence must be sufficient to lead to the inference not merely that the goods may possibly not have been shipped, but that in point of fact they were not shipped.” In Grant v Norway[15], the position was more extreme still: the Master had signed a bill acknowledging that 12 bales of silk had been shipped where in fact none had been taken on board. It was held that the indorsees of the bill were not entitled to recover when it was in fact established that no bales had been shipped. Jervis CJ stated: “It is not contended that the captain had any real authority to sign bills of lading unless the goods had been shipped; nor can we discover any ground on which a party taking a bill of lading by indorsement would be justified in assuming that he had authority to sign such bills, whether the goods were on board or not.” This created an anomaly in that it rendered meaningless the signature of the Master upon a bill of lading where it was subsequently possible to prove that his acknowledgement of quantity had been incorrect. The Hague/Visby Rules (Art.III, rule 4) remove this protection from the Master in this situation by providing that statements as to quantity in a bill of lading are conclusive evidence in favour of a consignee or indorsee who takes the bill in good faith. This is reinforced by s.4 of the Carriage of Goods by Sea Act 1992 which provides that representations in a bill of lading are conclusive evidence against the carrier in favour of the lawful holder of a bill. However, the Master here has the advantage of being able to contract out of the representation of quantity in the bill. In New Chinese Antimony Co Ltd v Ocean Steamship Co[16], a bill of lading expressly stated that 937 tons of antimony oxide had been shipped.

However, the bill contained a standard clause to the effect that “weight, measurement, contents and value (except for the purpose of estimating freight) [are] unknown”. This was a powerful decision in favour of carriers since the Court of Appeal held that this pre-printed clause even had the effect of displacing the express statement as to quantity and that such a statement in such circumstances was evidence only of the amount which the shipper maintained to be comprised in the cargo. It is recommended therefore that the Master in this situation protect the position of his owners by an indorsement on the bill in such terms as “shipper’s count”, “said to be…” or even a flatly contradictory “weight and quantity unknown. He should be aware, however, that under the Hague/Visby Rules, (Art.III, rule 2) the shipper is able to demand that the carrier issue a bill of lading showing “either the number of packages or pieces, or the quantity or weight as the case may be, as furnished in writing by the shipper”. The carrier is under no obligation to issue a bill acknowledging the quantity of cargo unless required to do so by the shipper. Failure to observe this procedure will of course generally operate to the prejudice of the ultimate consignee.

However, it also provides valuable protection to a Master in a situation such as this. This Master should therefore exercise care since the basic position under the Rules is the same as that at common law in terms of the prima facie evidentiary value of the bill of lading so far as determining quantity is concerned with the important qualification that the Rules also provide protection in this regard to a third party to whom the bill has been transferred acting in good faith. The very fact of acting in good faith would give rise to an estoppel preventing the carrier denying the quantity of the bill of lading (no consideration is required) and the Master should have regard to this potential consequence in addition to any duty immediately apparent. Bibliography Dockray, M., Cases and Materials on the Carriage of Goods by Sea, (3rd Ed., 2004) Treitel, G., The Law of Contract, (11th Ed., 2003) Wilson, J., Carriage of Goods by Sea, (5th Ed., 2004) Westlaw International Convention for the Unification of Rules of Law Relating to Bills of Lading, Brussels, August 25, 1924 (“The Hague Rules”)

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Footnotes

[1] Gosse Millerd v Canadian Government Merchant Marine, dissenting judgment upheld by the House of Lords at [1929] AC 223

[2] [1953] 2 QB 295

[3] [1969] 2 Lloyd’s Rep 536

[4] (1928) 32 LlLR 98 at 102

[5] [1917] 2 KB 38

[6] Wilson, J., Carriage of Goods by Sea, (5th Ed., 2004), p.19

[7] [1893] AC 351

[8] [1967] 1 AC 361

[9] [1980] AC 827 [10] [1987] 1 Lloyd’s Rep 424 [11] Op. Cit., p.22 [12] [1975] 2 Lloyd’s Rep 314 at p.317 [13] [1969] 1 KB 219 [14] [1896] AC 70 [15] (1851) 10 CB 665 [16] [1917] 2 KB 664

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