Law Of The Carriage Of Goods By Sea (PART 15)

Pursuant to the earlier topic of Introduction to Maritime Law in Malaysia, published on 22 February 2021, in the coming series the basis and elements of Marine Insurance claims will be explored.

Hague-Visby Rules II – The Carrier’s Duties

1. Period Covered By The Rules

   Under the terms of Art. II, carriers are subject to the responsibilities and liabilities set out in the Rules ‘under every contract of carriage of goods by sea’ in relation to the loading, handling, stowing, carriage, custody, care and discharge of the goods. This is reinforced by the definition of ‘carriage of goods’ in Art. I(e) as covering the period from when the goods are loaded on to the time when they are discharged from the ship. In the same vein, Art. VII gives unrestricted freedom to the parties to make any agreement as to the responsibility and liability of the carrier or the ship for loss or damage occurring prior to the loading on, or subsequent to the discharge from, the ship.In Pyrene v Scindia, the plaintiffs argued that ‘loading’ should be interpreted in accordance with the traditional common law division of responsibility at the ship’s rail. If the goods had not crossed the rail, as in Pyrene v Scindia, they had not been ‘loaded on’ the ship and the Rules did not apply. The weakness of the argument was that it sought to apply purely English notions to the interpretation of the Rules, not principles of general (i.e. international) acceptation.

   In a ground-breaking decision, Devlin J held that Art. III does not mean that the carrier must do the loading but that the carriers’ responsibility is to perform ‘carefully and properly’ whatever duties are imposed on them from loading to discharge by the contract. As the carrier here was responsible for the entire loading and discharge operation, the Rules applied from tackle to tackle, even though the goods were not physically on board the ship at the time when the damage occurred, but merely in the course of being loaded.

   This approach to the interpretation of the Rules was confirmed by the House of Lords in Renton v Palmyra, in relation to the contract voyage and deviation. An unsuccessful challenge was mounted in The Jordan II. There, the Rules were incorporated into a charter party that contained a FIOST clause. FIOST means ‘free in and out stowed and trimmed’ and makes the charterers responsible for loading, stowing, trimming and discharging the cargo at their own risk and expense. The House of Lords declined to overrule Renton v Palmyra and held that the FIOST clause was not contrary to Art. III, r.8 and effectively transferred responsibility for these operations from the carrier to the cargo owner.

   FIOST and similar clauses are not valid under the Hamburg Rules. See Art. 10(2), which provides that a carrier shall ‘in any case’ remain responsible for the entire carriage pursuant to the provisions in the rules even where it sub-contracts performance of part of the carriage.

   However, these clauses are valid under the Rotterdam Rules (Art.13(2)). For these clauses to be valid and binding between the parties, they have to be ‘properly’ referred to in the contract particulars.

2. Duty To Use Due Diligence To Make The Ship Seaworthy

   Section 3 COGSA 71 provides, perhaps superfluously, that when the Rules apply there is no implied absolute undertaking to provide a seaworthy ship. By Art. III, r.1 the carrier has a duty ‘before and at the beginning of the voyage’ to exercise due diligence to:

   1. make the ship seaworthy
   2. man, equip and supply the ship properly
   3. make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation.

   It is clear from these three points that the underlying concept of seaworthiness does not differ significantly, if at all, from that of the common law. It is also clear from the wording of Art. III, r.1, taken with Art. IV, r.1, that no other defences are open to carriers whose ship is proved to be unseaworthy except that they have exercised due diligence. In pointed contrast with the duties imposed by Art. III, r.2, the duty to exercise due diligence to make the ship seaworthy is not ‘subject to the provisions of Art. IV’.

   For this reason, it was said in Maxine Footwear v Canadian Govt Merchant Marine that Art. III, r.1 creates an overriding obligation. The damage there was caused by fire, but as the carriers had failed to exercise due diligence, they were unable to rely on the fire defence in Art. IV, r.2(b). In another attempt to limit the operation of the Rules by importing purely English notions, the carriers argued that ‘before and at the beginning of the voyage’ should be interpreted according to the doctrine of stages, but it was held that the duty applied at least from the commencement of loading and continued throughout until the start of the voyage.

   The Muncaster Castle established that the duty is non-delegable – in other words, that the carrier is responsible if there is a failure to exercise due diligence by any party to whom operations, such as inspection and repair, are entrusted. It is not a defence for the carriers to show that they chose a reputable repairer. However, the carriers are not responsible for acts or omissions occurring before the ship comes ‘into their orbit’ of ownership or service or control (The Muncaster Castle and The Happy Ranger).

   Lack of due diligence is the same as negligence: surveyors who decide not to carry out a particular test have not failed to exercise due diligence unless their decision falls below the normal standard of professional competence (The Amstelslot). As regards the defects in the building, specification and design of a vessel, a carrier’s seaworthiness obligation attaches when the vessel comes into its ‘orbit’ (The Muncaster Castle). Thus, only after taking delivery of the vessel is the carrier required to exercise due diligence to make the vessel seaworthy (The Happy Ranger). The issue is therefore one of fact, but reported decisions can provide useful supporting material when you have to argue for or against the exercise of due diligence in an examination question.

   The most helpful recent decisions are:

   1. The Kriti Rex (failure to take standard precautions to discover contamination in the lubricating oil)
   2. The Fjord Wind (inadequate investigations when the existence of a problem was known but not the cause)
   3. The Kapitan Sakharov (failure to follow the safety code for stowage of a container with dangerous chemicals: the carriers had not shown the reasonable skill and care to be expected of a reasonable shipowner, but due diligence was shown in respect of a container, the dangerous contents of which had not been declared)
   4. The Eurasian Dream (inadequate fire-fighting equipment and the crew not properly trained in the use of the equipment), where the principles are usefully summarised
   5. The Happy Ranger (failure to appreciate that crane hooks for heavy lifting had not been proof tested to sufficient load before first use).

   It is settled that the burden of proving that the ship was unseaworthy falls on the bill of lading holder (The Fjord Wind). Under the Hamburg Rules, the carriers’ obligations are defined in general terms. The carriers’ liability is based on presumed fault.

   By virtue of Art. 5: the carrier is liable for loss resulting from loss of or damage to the goods, as well as from delay in delivery, if the occurrence which caused the loss, damage, or delay took place while the goods were in his charge as defined in Article 4, unless the carrier proves that he, his servants or agents, took all measures that could reasonably be required to avoid the occurrence and its consequences.

   Where loss or damage to a cargo is caused by the unseaworthiness of the vessel, the carrier can thus only escape liability if it can bring itself within the general exception under Art. 5 of the Hamburg Rules.

   Under the Rotterdam Rules, the seaworthiness obligation is continuous (Art. 14), but not overriding (Art. 17(6)). Furthermore, duty of seaworthiness is expressly stated to cover fitness of containers supplied by the carrier.

   Leaving aside these differences, the seaworthiness obligation in the Rotterdam Rules has some common features with the Hague-Visby Rules: the obligation still attaches before and at the beginning of the voyage, and it remains based on the carriers’ exercise of due diligence.

3. Duty To Carry The Cargo ‘Properly And Carefully’

   Under Art. III, r.2 the carrier must load, handle, stow, carry, keep, care for and discharge the goods ‘properly and carefully’. As you have already seen, it is settled in English law that responsibility for loading, stowing and discharge may be transferred from the carrier to the cargo owner by the terms of the contract of carriage, and Art. III, r.2 merely requires that the carrier must perform whichever of the listed functions are laid on the carrier by the contract ‘properly and carefully’.Notwithstanding the comment by Beldam LJ in The Coral (‘it is now settled that Art. III, r.2 does not impose upon the carrier an obligation to load, handle, stow, carry, keep, etc. the goods carried’) it seems beyond argument that the agreement cannot validly transfer responsibility for carrying the goods.

   In Albacora v Westcott & Laurance Line, the House of Lords had to consider an argument that the carrier was in breach of Art. III, r.2 when a cargo that (unknown to the parties) should have been refrigerated was carried without refrigeration and deteriorated. It was held that ‘properly’ meant only that carriers must adopt a sound system in the light of the knowledge which they have, or ought to have, about the nature of the goods, and that the carriers were not in breach.

   The decision in Albacora v Westcott & Laurance Line has recently been considered by the Court of Appeal in Volcalfe Ltd v Compania Sud Americana de Vapores SA. There, the Court of Appeal took the view that once the carrier has shown a prima facie case for the application of inherent vice in Art. IV r2)(m), the burden shifts to the cargo interest to establish that the exception should not apply because of the carrier’s negligence.

   The Hamburg Rules do not talk of a carrier’s obligation to care for cargo, although this obligation can undoubtedly be brought within Art. 5(1), which defines carriers’ obligations in very general terms. In the Rotterdam Rules, the obligation to care for cargo is spelled out in Art. 13(1), whereby the carrier is required to properly and carefully receive, load, handle, stow, carry, keep, care for, unload and deliver the goods.

   The obligation provided in Art. 13 applies throughout the carrier’s period of responsibility, which is determined by reference to Art. 12.

4. Duty to issue bills of lading

   The essential point with regard to the bills of lading to be issued by the carrier is that the operation of r.3 is only triggered by a demand of the shipper. Provisions in the Hague-Visby Rules on the issuance and content of the bill of lading do not become applicable per se: the Rules impose a duty on the carrier to issue a bill of lading on demand of the shipper and ‘after receiving the goods into his charge’, where contract of carriage expressly or by implication provides for the issue of a bill of lading (see section 1(4) of COGSA 71). Accordingly, a shipper who cooperates in the issue of a bill of lading worded ‘quantity unknown’ has not made a demand for a bill containing a statement of the quantity of the goods, as required by r.3(b), and the provisions have no effect (The Mata K).

   A clause that reads ‘weight, and quantity unknown’ or a similar clause in a bill of lading is not struck down by Art. III, r.8 (The Mata K and The Atlas), as these clauses are treated as mere representations (see the wording of Art. III, r.8, which only refers to clauses, covenants and agreements, but not representations). Although this or similar clauses remove the evidential effect of bills of lading in relation to the weight and quantity of the cargo loaded, they routinely appear as a printed clause on bill of lading forms (example CONGENBILL, Wilson, Appendix 18). This demonstrates that the provisions of Art. III, rr.3–5 regarding the contents and effect of bills of lading are of little practical importance.

   Article 14 of the Hamburg Rules provides that the carrier’s obligation to issue a bill of lading arises on the shipper’s demand after shipment of the goods. Under the Rotterdam Rules, the carrier has a duty to issue one of the transport documents identified in the rules to the contractual shipper, unless there is an agreement between the parties or a custom of the trade not to use one (see Art. 35 of the Rotterdam Rules).

If you have any questions or require any additional information, please contact our lawyer that you usually deal with.

This article is written by our Principal Associate, Chakaravarthi