Perils of the Sea

Perils of the Sea
The "Bunga Seroja"

THE Admiralty Division of the Supreme Court of New South Wales has recently handed down an important decision in connection with the interpretation of the perils of the sea defence under the Hague Rules.

The Bunga Seroja, owned by Malaysian International Shipping Corporation (MISC), was carrying a cargo of aluminium coils in ten containers from Sydney to Keelung. While transiting the Bass Strait, it encountered severe storm conditions and suffered structural damage. On discharge, a number of the coils were found to have been damaged due to shifting within the containers as a result of the heavy weather.

A claim was brought by the cargo owners in the Admiralty Division of the Supreme Court of New South Wales. The trial judge found that the carrier had discharged its responsibilities under Article 3 Rule 2 of the Hague Rules "carefully to carry and care for the cargo". No question therefore arose as to whether the loss or damage had occurred as a result of the carrier not having exercised due diligence to make the ship seaworthy (Article 4, Rule 1). Nor had the loss or damage resulted from any negligence by the carrier, master or crew in the management of the vessel (Article 4 Rule 2a) nor from perils of the sea (Article 4 Rule 2c).

Although the cargo owner's appeals to the NSW appeal court and to the high court of Australia were both turned down, the case is of interest and importance because each of the courts took the opportunity to consider in detail the meaning of the perils of the sea defence, which had been put in issue in the appeals.

Rejecting the stricter US and Canadian approach, which take into account the element of foreseeability, the high court continued to favour the anglo-Australian approach in holding that MISC could still have relied on the perils of the sea defence (although, as it turned out, it didn't have to), even though the weather encountered was foreseeable (the Bass Strait is notorious for bad weather) and had in fact been foreseen as the vessel had received forecasts of heavy weather that it would meet on the crossing.

The Australian high court continued to favour the more lenient approach to the use of the perils of the sea defence because otherwise it would transform the obligation to use due diligence to make the vessel seaworthy into an absolute obligation of seaworthiness which, the court felt, would deny the history of the development of this defence and its place in the context of the Hague Rules as a whole.

The Hague Rules as enacted by the Australian Carriage of Goods by Sea Act 1924 have been replaced by the Australian COGSA 1991, which gave effect to the Hague-Visby Rules, which have themselves been amended significantly by regulations which took effect on July 1, 1998.
(A Bilbrough, managers, London P&I Club).

CMR governed carriage
Gefco (UK) Ltd v Mason

THE Court of Appeal in London has dismissed an appeal in a dispute over damages incurred pursuant to an agreement to carry goods by road from the UK to France under CMR conditions.

Mason had a contract with a manufacturer to carry the goods. Mason subcontracted that work to Gefco under an oral agreement which provided for Gefco to make deliveries as and when asked to do so by Mason. The arrangement broke down.

Gefco sued Mason for unpaid sums due. Mason counterclaimed for failure to perform the contract properly and for damages alleged to have arisen from the loss of the contract with the manufacturer.

Gefco then contended that its contract with Mason was governed by the Convention on the Contract for the International Carriage of Goods by Road (CMR), so that any liability to Mason would be limited to certain heads of loss and would exclude a claim arising from the lost contract.

It was maintained for Mason that the umbrella contract under which individual contracts were made for each journey could not be a contract to which CMR applied because the contract could not be confirmed by a consignment note as required by Article 4 of the convention. The court of first instance disagreed, and held that the convention did apply.

On appeal by Mason, the court found that, simply because the contract set out a framework for each individual trip undertaken by Gefco, it did not follow that the contract was not within the convention. Article 1 (1) of the convention applied to every contract for the international carriage of goods by road. It was plain that Articles 4 and 6, which dealt with the need for a consignment note and its contents, would not necessarily be complied with in the case of an umbrella contract.

The convention was not limited to contracts related to specific and ascertained goods. Mason's argument effectively called for a term to be implied into Article 1 (1). It was undesirable to imply a term into an international convention, which was intended to provide harmonisation across national borders, where there would be no procedure for obtaining consistent application of such an implied term.

In the result, it was appropriate to imply any term into Article 1 (1). The contract was governed by the convention, and Mason's appeal was dismissed.
(Holmes Hardingham)

Due diligence
Andre Toulemonde Wool Co Pty Ltd v Knutsen Offshore (Panama) SA

THE Supreme Court of Western Australia has handed down a ruling in a general average dispute which highlights the need for shipowners to observe proper maintenance procedures and to properly document all maintenance work performed.

The case arose from the failure of a nut which formed part of the engine on the cargoship Hanne Bakke. Eleven hours into a voyage from Fremantle to Hong Kong, the vessel's engine stopped and could not be restarted. One of the twelve cylinder shafts had been ripped apart, resulting in severe damage to the engine. The ship was towed back to Fremantle, where repairs were carried out.

As a result of the incident, delivery of the vessel's cargo was delayed. The shipowner made a claim for general average contribution against the owners of the cargo carried on the voyage.

The case turned on whether the shipowner had exercised due diligence with respect to one crucial nut which formed part of the cylinder assembly of the ship's engine. The owner argued that there was a latent defect in the cylinder which it was impossible to discover. It maintained that the nut was not involved.

The cargo interests, meanwhile, maintained that the engine failure was due to the failure to tighten one nut which formed part of the cylinder. They said there was a failure to conduct a proper general maintenance regime. The issue was important because the entitlement to general average contribution was dependent on the carrier's exercise of due diligence.

After hearing expert evidence from marine engineers, and from those charged with carrying out maintenance on the vessel's machinery, the court concluded that, not only was the ship unseaworthy when it left Fremantle, but the unseaworthiness was due to a want of due diligence on the part of the shipowner. Accordingly, the owner could not make a claim for general average contribution from the cargo interests.

The damaged components of the engine, removed after the failure, were discarded by the owner before they could be properly examined. Although the court did not pursue this point, it was clearly decisive in the reasoning behind its decision because the components were discarded despite clear instructions from the expert engineers that they should not be.
(Phillips Fox)

Limiting liability
Bewise Motors Co Ltd v Hoi Kong Container Services Ltd

The Court of Final Appeal in Hong Kong has held that a container operator could rely on its standard trading conditions limiting its liability against a claim in tort from cargo interests.
(TT Club)

Forum clauses

A US district court has refused to enforce a clause in a cruise ticket providing for an exclusive Greek forum for claims because the owner of the cruiseship was unable to prove that an injured passenger had been informed of the forum clause prior to her purchase of the ticket, and by the time she received the ticket she could not have cancelled without forfeiting the price of same.
(Burlingham Underwood)

Assignment of airway bill
Judgment by Dubai Court of Cassation

THE courts in Dubai have held that an airway bill cannot be assigned to an insurance company or to a third party without the consent of the airline concerned.

The claim had its origins in the carriage by air of a consignment of ink toner cylinders packed in wooden boxes from Germany to Dubai under an airway bill of lading. On delivery to the consignee it was evident that some of the cylinders were rusted, while others were damaged and had leaked and were thus not suitable for use as they had been affected by rain.

The insurance company subsequently paid the insured consignee and brought an action to recover the amount paid from the airline, which had issued the bill of lading.

The Dubai Court of First Instance dismissed the initial action, but the Dubai Court of Appeal reversed the judgment. The airline appealed, arguing that the action should have been dismissed on the basis that the bill of lading was issued in favour of the Standard Chartered Bank, and on the basis that there had been no assignments made of the bill of lading to the consignee. It further maintained that a letter issued by the Standard Bank authorising the trading company to take delivery of the goods, addressed to the customs authority in Dubai, was not a valid assignment deed.

The Dubai Court of Cassation held that, according to Article 12 of the Warsaw Convention, the shipper had the right to withdraw the consignment shipped or to make a request to deliver the consignment to another party or to request to return the goods to the airport. The court added that Article 13 of the convention also states that the consignee may request the airline, once the goods reach destination, to hand the goods to the airway bill holder and to deliver the goods to them in exchange for payment or according to the conditions set out in the airway bill.

Accordingly, said the court, the person who has the right to bring an action against the airline pursuant to a bill of lading is the person named in the bill of lading, whether or not it be the shipper or the consignee, and not any other party. In this case, the bill of lading named the Standard Chartered Bank. It could not be transferred to another person, unless transferred according to an assignment of right specified in the UAE civil code.

The letter from Standard Chartered Bank to the customs authority asking it to deliver the goods to the trading company did not constitute a valid assignment as the airline was not a party to the assignment and there was no evidence that it had accepted such an assignment.

It was held that the Court of Appeal had violated UAE law in its decision in this case, and its judgment was accordingly overruled. (Al Tamimi)