Law Of The Carriage Of Goods By Sea (PART 2)

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 the Law Of The Carriage Of Goods By Sea will be explored.

Owner’s Implied Obligations II – The Duty To Provide A Seaworthy Ship

1. Meaning of seaworthiness

   A ship is not seaworthy unless she has that degree of fitness to encounter the ordinary risks of the voyage that an ordinary careful and prudent owner would require at the commencement of the voyage, and is similarly fit for the safe carriage of the cargo. Apart from such obvious matters as soundness of the hull and machinery, the ship must be properly manned, equipped and supplied.
   Seaworthiness is not an absolute concept, but is relative to the nature
   of the ship and the particular voyage. The statement of the common law principles by Cresswell J in The Eurasian Dream [2002] 1 Lloyd’s Rep 719, at 736–7 deserves careful study.

   Bunkers (i.e. the fuel used to propel the ship, whether oil or, previously, coal) must be adequate in quantity and quality (see The Vortigern).

   The crew must be sufficient in numbers and competent to operate the ship (see Hong Kong Fir v Kawasaki). The master and officers must have the necessary knowledge and experience (see Adamastos Shipping v Anglo Saxon Petroleum and The Eurasian Dream). It is not enough for the master to be generally competent if they do not know the particular characteristics of the ship in question (see Standard Oil v Clan Line).

   It may be difficult to decide whether a failure on the part of the master or crew demonstrates incompetence that amounts to unseaworthiness or merely negligence, which does not. See The Isla Fernandina [2000] 2 Lloyd’s Rep 15: the ship was not unseaworthy when a well-qualified master with an unblemished record failed to supervise navigation by the third officer in an emergency, conduct which was ‘open to severe criticism’. However, see also Cresswell J in The Eurasian Dream [2002] 1 Lloyd’s Rep 719, at 736 where he said: ‘we can find nothing [from the case law] to support the proposition that a series of acts must always be necessary in order to establish incompetence or inefficiency’.

   Hence, Cresswell J acknowledged that it would be possible, in certain circumstances, to draw the inference from one incident that someone had a ‘disabling lack of knowledge’.

   The ship will be unseaworthy if she does not carry appropriate charts and any certificates required by the law of the flag or by ports of call regarding the physical state of the ship (see The Torepo [2002] 2 Lloyd’s Rep 535).

   Cargoworthiness

   The ship must be fit to receive and carry the particular cargo. For example, it must be equipped with:

   1. refrigeration for frozen meat
   2. a strong room for bullion
   3. adequate pumps for wet cargo
   4. cargo spaces that are clean and free from contamination.

   A ship is not considered uncargoworthy because it becomes necessary to lighten in order to enter port or pass through a canal (i.e. discharge some of the cargo into other vessels: see The Aquacharm).

   In principle, stowage of cargo is a separate matter. If cargo is damaged by reason of bad stowage, this does not mean that the ship was unseaworthy: see The Thorsa. However, if the stow affects the stability or safety of the ship, she will be unseaworthy: see Smith, Hogg v Black Sea & Baltic Ins [1940] AC 997, and compare Kopitoff v Wilson (1876) 1 QBD 377, where the ship sank after inadequately secured armour- plates broke free in heavy weather and went through the side. See also Northern Shipping v DSR (Kapitan Sakharov) [2000] 2 Lloyd’s Rep 255, where the stowage of containers of dangerous chemicals below deck with inadequate ventilation made the ship unseaworthy.

2. Nature of the obligation at common law

   Two features of the obligation require attention. First, it is an ‘absolute’ obligation, that is the ship must be seaworthy in fact and it is not
   enough for carriers to show that they did what was reasonable in the
   circumstances known to them. In other words, they will be liable for latent defects as well as defects which were, or should have been, known to them: Kopitoff v Wilson.

   By contrast with the Hague-Visby Rules, carriers do not comply with their obligations by showing that they used due diligence to make the ship seaworthy: McFadden v Blue Star Line. However, this obligation attaches only at the commencement of the voyage, or at the commencement of loading in the case of cargoworthiness. If the ship is seaworthy at that point of time, it is immaterial that she becomes unseaworthy later on.
   The dilemma for carriers on very long voyages such as from Australia to Northern Europe was that it was physically impossible to load enough coal for the entire voyage without using up the cargo space as well, so that, in one sense, every ship leaving Australia for Europe was technically unseaworthy by reason of inadequate bunkers. In practice, the ship had to call at intermediate ports to refuel. In The Vortigern, the Court of Appeal decided that each stage into which the carrier chose to divide the voyage should be regarded as a separate voyage, with an obligation to provide a ship that is seaworthy at the commencement of each stage.

   The doctrine of stages was used in Reed v Page to overcome the difficulty arising from the limitation of the obligation of cargoworthiness to the commencement of loading. There the barge, being overloaded, began to sink while waiting for a tug: it was held that a new stage commenced with the completion of the loading and the barge was unseaworthy at that point.

3. Consequences of breach and the effect of exemption clauses

   In general, the burden of proving unseaworthiness is on the party alleging it. However, unseaworthiness may be inferred – for example, from an unexplained fire in the bunkers (Fiumana v Bunge) or the sinking of the vessel in weather conditions contemplated as liable to be encountered in the ordinary course of the voyage (The Torenia).

   There is also some authority for saying that a carrier who relies on the exception for perils of the sea has the burden of proving that the vessel
   was seaworthy (Bradley v Federal Navigation).

   In principle, at common law liability for providing an unseaworthy vessel may be restricted or excluded by the terms of an exemption clause, but it is evident that very clear words will be required in order to achieve this. General exclusions (e.g. requiring claims to be made within three months or limiting liability to a specific sum per item) are construed as referring only to liability arising during the voyage, not to matters arising before the commencement of the voyage (Atlantic Shipping v Louis Dreyfus; Tattersall v National Steamship).

   A breach of the obligation not to deviate was at one time held to deprive the carrier of the benefit of the contract, thus making the carrier liable for all damage after the deviation, whether or not it was caused by the deviation.

   The Europa decided that this principle was not to be applied to breach of the obligation to provide a seaworthy ship. The claimant must prove not only that
   the ship was unseaworthy, but also that the unseaworthiness was an ‘effective’ cause of the damage to the cargo. It does not need to be the sole cause (Smith, Hogg v Black Sea and Baltic and Elder Dempster v Paterson, Zochonis & Co.

   Finally, you will need to pay careful attention to the judgment in Hong Kong Fir v Kawasaki. The explanation there of the distinction between conditions and warranties is critical to the arguments that arise in relation to a number of terms in charter parties.

   The reasoning which led to the decision that the obligation to provide a
   seaworthy ship is neither a condition nor a warranty but a so-called innominate or intermediate term is also crucial.

   The crucial difference between an innominate term and a condition is that any breach of a condition gives the other party the option of refusing further performance, without the need to prove that the breach caused loss. Breach of condition by one party thus justifies termination of a charter party by the other party (i.e. refusal of further performance), if it chooses.

   Breach of an innominate term, however, will only justify refusal of further performance if the breach is so serious that it deprives the ‘innocent’ party of substantially the whole benefit of the contract.

   While the concept of innominate terms undoubtedly allows for greater flexibility in dealing with the consequences of defective performance, it introduces an element of uncertainty that runs counter to the courts’ general approach to the problems of commercial law, and it has been applied sparingly (Bunge v Tradax).

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