Law Of The Carriage Of Goods By Sea (PART 1)

Pursuant to the earlier topic of Introduction to Maritime Law in Malaysia, published on 22 February 2021, in the coming series, as restated by Chakra Thillainathan, the basis and elements of the Law Of The Carriage Of Goods By Sea will be explored in the following 17 parts.

Owner’s implied obligations I – general principles

1. Liability Of Sea Carriers At Common Law

   1. Liability of common carriers
      In the case of Forward v Pittard, it was noted that the fire started accidentally, away from the goods in the carrier’s care and that the carrier was not negligent. However, being a common carrier, he was liable ‘as an insurer’. This means liable for all loss or damage, subject only to the exclusions of those risks that fall under the ‘excepted perils’.
      Hence, it is not sufficient for a common carrier to prove that the loss or damage to the goods was not caused by their negligence. The common carrier is not excused even if the goods are lost to armed robbers.
   2. Excepted perils
      Act of God
      In Nugent v Smith a mare died from injuries suffered when she took fright in a severe storm on the North Sea. The Court of Appeal recognised that there are two elements to the concept of an act of God – carriers are not liable if they can show that:
      1. the accident was directly and exclusively due to natural causes, without human intervention
      2. the accident could not have been prevented by any amount of foresight and care which could reasonably have been expected of them.

      The Court refers to the elementary forces of nature, such as storm and tempest.

      The real task facing the Court of Appeal in Nugent v Smith was to clarify
      the standard of care that the carrier must show. The court below held that the carrier has to show that no amount of human care and skill could have avoided the loss, but the Court of Appeal held that the carrier need only show that they have taken all the care reasonably to be expected of them. They are not liable if they have used all the known means to which prudent and experienced carriers ordinarily have recourse.

      Act of Queen’s enemies

      In effect, common carriers were not liable as insurers if they were caught up in hostilities between their sovereign and the forces of another state. Note the broad interpretation of ‘king’ in Russell v Niemann, not restricting the exception to hostilities in which the English sovereign was engaged.

      Inherent vice

      The cargo must be in a fit state to withstand the normal incidents of the agreed voyage. If special measures are necessary to protect the cargo, which are not evident from the nature of the cargo, the carrier will not be liable for resulting deterioration. In Albacora v Westcott the parties did not appreciate the need for refrigeration.

      Consignor’s fault

      On general principles, the carrier is not liable for damage caused by the fault of the shipper, for example where the goods are insufficiently packed.

2. Liability Of Carriers Who Are Not Common Carriers

   1. Carriers by land
      Carriers by land who are not common carriers are liable as bailees (i.e. persons to whom possession of goods has been given for a limited purpose). Under the principles enunciated by Holt CJ in Coggs v Bernard, a bailee, even for reward, is not an insurer of the goods but must merely do the best they can. The burden of proof is, however, on the bailee to show that the goods were lost without negligence on the bailee’s part.
   2. Carriers by sea
      When the question arose of the liability of sea carriers who are not common carriers, the obvious solution would have been to treat them as bailees in the same way as land carriers.
      In Liver Alkali v Johnson, the carrier’s barge ran aground in fog on the River Mersey without negligence on the carrier’s part. The carrier was not a common carrier. Instead of applying the ordinary law of bailment, the Court of Exchequer Chamber, the precursor of the Court of Appeal, held that the carrier had the liability of a common carrier and was responsible for the damage to the goods. Brett J took the view that all sea carriers had the liability of common carriers by virtue of a recognised custom in England, adopted by the courts in the same way as the custom with regard to common carriers.
      When Brett J repeated this view at first instance in Nugent v Smith, it was roundly rejected by Cockburn CJ in the newly established Court of Appeal. However, the carriers in Nugent v Smith were clearly common carriers, and the discussion entirely obiter.
      Some later judges have followed his view (Hill v Scott); others have criticised it (Watkins v Cottell).
3. Growth Of Contractual Exemptions From Liability
   Although common carriers were in principle not permitted to contract out of their liability, it was accepted from at least the sixteenth century that an agreement to carry ‘excepted the casualties and dangers of the sea’ was valid. The eighteenth century saw the acceptance of other, more extensive exemption clauses and full freedom of contract was established in Leeson v Holt where the court accepted the validity in principle of an agreement to carry household
   furniture ‘entirely at the risk of the owners as to damage, breakage, etc.’.

   Carriers by sea made full use of this freedom and much ingenuity went into drafting comprehensive exemptions. For present purposes you should concentrate on the following issues:

   1. the meaning of perils of the sea, restraint of princes and strikes
   2. the interpretation of clauses relieving the carrier of liability for negligence or other fault
   3. the interpretation of exemptions for errors of navigation.
   1. Perils of the sea
      To understand what is covered by the term ‘perils of the sea’, start with Lord Herschell’s speech in The Xantho.
      First, there must be a fortuitous event peculiar to carriage by sea, not merely an accident at sea.
      Second, it does not include the ordinary action of the winds and waves. The term does not cover the natural and inevitable action of the wind and the waves (‘wear and tear’) but requires a ‘casualty’, something that could not be foreseen as one of the necessary incidents of the adventure.
      This does not mean that only accidents caused by extraordinary violence of the winds or waves are perils of the sea: striking a sunken, unmarked rock in fine weather is a peril of the sea. Seasonal and frequent storms that ‘may’ happen during the voyage can be considered as perils of the sea, as they are outside the ordinary accidents of wind and sea and are therefore accidental.
      Hence, the concept of perils of the sea is not confined to wholly unforeseeable events. The High Court of Australia considered this aspect in depth, in the context of the Hague Rules exception for perils of the sea, in The Bunga Seroja, and rejected the view (supported by American authority) that the conditions must be unpredictable and unforeseen to fall within the exception. The issue then becomes merely whether the carrier has taken appropriate measures to counter the severe weather; if the master has acted responsibly, the carrier will be protected.As has been established in Hamilton, Fraser v Pandorf, any accidental ingress of water into the vessel is, in principle, covered by the term ‘perils of the sea’. In this case, the term ‘perils of the sea’ is described as ‘sea damage occurring at sea and nobody’s fault’. Thus, carriers can only rely on an exemption for perils of the sea if they can show that they have taken all reasonable steps to protect the goods: failure to take reasonable care will deprive the carrier of the benefit of the exemption.For example, see Paterson v Canadian Cooperative and Bradley v Federal Steam Navigation.
   2. Restraint of princes
      You will observe that there are no recent cases here. The modern form of wording is ‘restraint of princes, rulers and people’. The older cases establish that the exemption refers to action by a foreign state: it did not cover the action of a rioting mob (Nesbitt v Lushington), or the order of a court in civil proceedings (Finlay v Liverpool and Great Western).In Ciampa v British India SN Co, the order for compulsory dératisation at Marseilles (in accordance with French law) could not be relied upon as a restraint of princes, because it was not a ‘supervening’ event: the process was inevitable when the vessel sailed from a plague-infected port in Africa with a foul bill of health.
      One area of difficulty to note is the effect of an impending or threatened restraint. In Noble v Jenkins the cargo of explosives destined for Japan at a time when Japan was at war with China was off-loaded in Hong Kong because of the risk of seizure as contraband if the vessel proceeded with it to Japan. This was held to be covered by the exemption.
      However, in Watts v Mitsui, a charter for a voyage to the Sea of Azov to load a cargo destined for Japan in September 1914 was cancelled on 1 September because of the fear that Turkey would enter the First World War and the Dardanelles would be closed to British shipping: this was held to be merely a potential restraint, not an actual restraint, and not within the clause.
   3. Strikes
      In the early part of the twentieth century, English judges had difficulty coming to terms with the idea that strike action could be lawful or justified, and exceptions for strikes were construed narrowly. However,
      successive decisions have broadened the definition of a strike.
      In Williams v Berghuys it was held that the strikers’ grievance need not be about wages, but extended in that case to refusal of crew to work because of fear of submarine attack.
      In The Laga McNair J expanded the scope of strike clauses to cover ‘sympathy’ strikes (i.e. action taken in support of other workers, not in furtherance of the strikers’ own grievance).In The New Horizon, the Court of Appeal included the refusal of voluntary shift work.
   4. Exemptions from liability for breach
      Although exemption clauses covering the carriers’ liability for breach are possible in principle at common law (leaving aside the provisions of the Hague-Visby Rules), the courts undoubtedly have a tendency to interpret exemption clauses narrowly.
      It is well established that any ambiguities in the wording must be resolved contra proferentem – that is, against the proferens (i.e. the party putting forward the exclusion or limitation of liability), but the courts seem at times to go further than this when interpreting carriers’ exemption clauses.
      The case of Tor Line v Alltrans, The TFL Prosperity is illustrates the hurdles faced by the drafter and the judgment of the court reveals the arsenal the judge or a counsel seeking to make the carrier liable despite the presence of an exemption clause.
      The owners of a vessel let on time charter stated that the free height of the main deck was 6.10m, when in fact it was only 6.05m at one crucial point. The charterers could not fully use the vessel as intended and claimed damages. The owners’ defence was based on clause 13 of the BALTIME Charter, in particular the second sentence: The Owners not to be responsible in any other case [a reference to the previous sentence which dealt with matters not relevant to the charterers’ claim] nor for damage or delay whatsoever and howsoever caused even if caused by the neglect or default of their servants.The challenge facing you is to understand how this clause failed to protect the owners: the grammar may be faulty, but on first impression the meaning could hardly be clearer – ‘no liability even if negligent’.
      The counsel for the charterers persuaded the House of Lords that the clause did not mean what it appeared to mean and managed to secured the overruling of the Court of Appeal authority which seemed to guarantee success for the owners.The key to this understanding is that the very width of the clause made the House unwilling to enforce it. On the contrary, they were prepared to grasp at any straw to narrow its scope. The critical weakness was the failure to refer expressly to financial loss, enabling the conclusion to be drawn that ‘damage’ referred to physical damage only.

      To secure protection against the consequences of their negligence, the carriers need an exemption clause that either expressly refers to negligence or does so impliedly on the principle that the clause would be otiose (i.e. without any purpose) if it did not cover negligence.

      In The Emmanuel C an exemption for ‘errors of navigation’ was held not to protect the owners when the vessel was grounded by reason of negligent navigation. Although counsel was not able to suggest any instances of non-negligent errors of navigation, the word ‘error’ was held to be neutral: the clause did not lack purpose if it did not extend to negligent errors of navigation, since ‘a reasonably informed practitioner in the field’ would probably be aware that the common law basis of sea carriers’ liability has not been settled and that, if Liver Alkali v Johnson is followed, carriers will be liable without negligence. (The Emmanuel C was approved by the Court of Appeal in Seven Seas v Pacifico, The Oceanic Amity).

      In The Irbenskiy Proliv, the exclusion clause purported to exempt the carrier from liability for loss of or damage to or in connection with the goods shipped caused by, among other things, the unseaworthiness of the vessel. It was held that:

      1. however widely drafted, the exclusion clause would not relieve the carrier of liability for any and every breach of contract
      2. irrespective of the breadth of the words used in the exclusion clause, the words would bear a restricted meaning and would in no case cover losses or damages caused by dishonesty on the part of the carrier
      3. the court may refuse to give words ‘their full and complete meaning’, if doing so would produce a result that runs counter to the main purpose of the contract.

      Burden of proof

      An exemption for perils of the sea does not apply if the carrier failed to use reasonable care, but who has the burden of proof?

      In The Glendarroch, the Court followed the model of nineteenth-century pleading: the claimant has to prove the non-delivery, the carrier has to prove that the loss was caused by a peril of the sea, and if the claimant alleges that the carrier failed to use reasonable care, the burden is on the claimant to prove it.

      However, this fails to take account of the earlier decision in Nugent v Smith, putting the burden on the carrier to show that reasonable care had been taken in order to be able to rely on the exception for perils of the sea. The Nugent v Smith approach was followed in Bradley v Federal Steam Navigation and seems to be the better view.

   5. Role of international conventions
      It is important to be aware, however, that in real life the common law with regard to carriers’ liability and exemption clauses will yield to any applicable provisions of the Hague-Visby Rules, as enacted in the Carriage of Goods by Sea Act 1971. For example, a bill of lading clause exempting the carrier from liability for negligence generally would be invalid by reason of Art III, r.8.

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