Topic One Seaworthiness and Common Venture, chapter 15



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Topic One Seaworthiness and Common Venture, chapter 15




HK Fur Shipping Co. Ltd. v. Kawasaki Kisen Kaisha Ltd 1962—cb p24


Issue: whether the obligation of seaworthiness is a condition or warranty

Ratio:


  1. Unless provided for expressly in the K, the legal consequence of a breach does not follow automatically from a prior classification of the undertaking as a “condition” or a “warranty”, but depends on the nature of event to which the breach gives rise (intermediate/innominate/indeterminate).

  2. A condition is a term, the failure to perform which entitled the other party to treat the contract as at an end. A warranty is a term, breach of which sounds in damages but does not terminate, or entitle the other party to terminate the K. An innominate or intermediate term is one, the effect of non-performance of which the parties expressly or impliedly agree will depend upon the nature and the consequences of breach. (another case, “bunge case, cb p27)

  3. Unseaworthiness is not by itself such a breach of a charterparty as to entitle the charterers to treat the charterparty as thereby repudiated by the shipowners.

  4. Seaworthiness is neither a warranty nor a condition, it is an indeterminate contractual undertaking, one breach of which may relieve the charterer of further performance of his undertakings if he so elects, and another breach of which may not give rise to such an event but entitle him only to monetary compensation in the form of damages.



Bunge Corp v. Tradax Export S.A., Panama 1981,


Issue: whether failure of complying with the K, giving notice of probable readiness of the vessel, gives the other party the right to repudiate the K

Ratio:


  1. English law recognizes contractual terms which, upon a true construction of the contract of which they are part, are neither conditions nor warranties but are “intermediate”. The question is the construction of the stipulation and the K of which it is a part.

  2. Time is considered of the essence in “mercantile” contract

  3. It makes commercial sense to treat the clause in the context and circumstances of this K as a condition to be performed b/f the seller takes his steps to comply with the bargain.

  4. definition of “condition” and “warranty”—p27, see the definitions above



Topic Two: The Contracts of Carriage, chapter 9

Pyrene v. Scindia—p35


Issue:

  1. when the risk passes

  2. could the carrier rely on the limitation of liability clause incorporated in the b/l

Ratio:

  1. Carriage of goods covers the period from the time when the goods are loaded on to the time when they are discharged from the ship (tackle to tackle).article 1. HW, in the K of sale FOB, the risk passes from the seller to the buyer when the goods pass the rail of the ship.

  2. whenever a K of carriage is concluded and it is contemplated that a b/l will be issued, that K is from its creation “covered” by a b/l.—p38

  3. explanation of “loading” to include the whole process of loading instead of the particular action of movement itself.



Anticosti [SCC] 1959—p42


Issue: when the b/l filled out but not issued, whether a K of carriage by water of a motor truck was or was not “covered” by a b/l contained in the schedule to the Water Carriage of Goods Act

Ratio: the K was for the carriage to be made under the terms of a b/l, because the b/l is contemplated. Therefore, the liability of the defendant must be limited to $500.



Mediterranean Marine v. Clark [US] 1980—p44


Issue:

  1. whether there was an outstanding b/l which extended the COGSA $500 limitation of liability

  2. whether the metal shear, as mounted on the wooden skid, constituted a “package” under COGSA

Ratio:

1. the deck receipt incorporated “all” conditions of American Export’s “usual form” of b/l. No b/l issued, but the Hague Rule applies.




Topic Three: Application of the Hague and Hague/Visby Rules—chapter 1,2

Canastrand Industries Ltd. v. The Lara S [Federal Court of Canada] 1993—p100


Issue:

  1. the cause of the damage and specifically whether it arose as a result of insufficient packaging

  2. whether the defendants and which of them were “carriers” under bl

  3. whether the shipowner could be held liable in tort

  4. whether the defendants Kim-nav and kim-sail had a valid defence based on expiracy of the limitation period

  5. the value of the damages suffered by the plaintiff------p100

  6. conflict of laws: Canadian of US law applies

Ratio:


1. contract

2. because the foreign law is not proved, the Canadian law apply.

3. general measure of damages
conflict of laws—contractual terms stipulating two different choice of law regimes—contract evidenced by bl to be construed and governed by American law—bl subject to Cogsa—booking note and bills of lading representing in substance single contract—choice of law provision found in carrier’s long form bl should prevail—no operational distinction between defendants kim-sail and kim-nav—both liable as carriers under bl—Canadian and American authorities as to liability of shipowner reviewed—Canadian law applicable as appropriate foreign law not proved—shipowner liable as carrier under Hague Rules

torts—negligence—whether carriers under bl liable in tort for negligent stowage—defendant responsible for foreseeable damage caused to plaintiff----catchwords at p100

“in case of possible alternative interpretations of conflicting provisions, one must give priority to that which was adopted last. Since the kimnav bl were issued later than either the booking note or the charterparty, the choice of law provision found it its long form bl should prevail---p100”—thf us law should apply but because it is not proved, Canadian law applies.

“under Canadian law, the shipowner would be liable as a carrier since the vessel was not under a demise charter and the bl were signed on behalf of the master. Carriage of goods is a joint venture of owners and charterers who should therefore be held jointly and severally responsible as carriers.”—p101

“the amendment adding kimnav was not the substitution of a new party after the limitation period has expired, but merely a clarification of the identity of the defendant”—101

“the arrived sound market value minus admv is the proper test to assess these damages”


“the logic of holding both the shipowner and the charterer liable as carriers seems entirely reasonable under a charter such as that which exists in this case---professor tetley’s argument cited—p111.”

-“under hague and hv, the person who issues the bl contracts both on his own behalf and oon behalf of the other persons who have responsibilities under the hague rules—the contracting carrier contracts in a dual capacity—as principal and as agent. The bl is usally signed by the master or on his behalf, and such a bl normally binds the owner for whom the master acts. The only exception is the master is employed directly by a demise charterer.----when a time or voyage charterer signs as agent for the master, the owner is still bound. This seems to be true even when the name of the charterer appears in the heading of the bl, as was held by the supreme court of Canada in paterson ss. Ltd v. aluminium co. this is also the position taken by Brandon J. in the Berkshire and the Supreme Court of Canada in the Evie W.----carriage of goods is effectively a joint venture of owners and charterers, except in the case of a bareboat charter, and, consequently, they should be held jointly and severally responsible as carriers”----cb 111

measure of damages: “it is agreed that the asmv of the goods was $20 per bale. The 3429 heavily damaged goods were put out for salvage sale. The highest of the few responses which came in, offered less than 13000 for the bales. The plaintiff bought the bales from its insurer for 5 per bale. The plaintiff claims 15 per bale as compensation, i.e., asmv less admv.” Plus surveying fees and handling fees. interests



Canadian Klockner v. D/SA/S [Canadian federal ct trial division, 1973]—p81


Facts: identity of carrier clause, ship owned by first def, managed by second, and chartered to the third (federal commerce and navigation co. ltd.) bl issued by third def for and on behalf of the master. Ship discharged on sept. 27, 1968, ppl sued on june 1, 1970

Issues:


Whether limitation period extended, whether cl. in bl lessing carriers’ liability void—Hague rules, art. Ii68

Held: judgment against the third def and for the first and second def.

Ratio:

1. on evidence the third def estopped from denying that they had granted an extension of the time for bringing an action, until June 6, 1970. so action against them was not time barred. The first and second def no such grant and relieved thanks to the one year period.



2. identity of carrier clause void

3. “Bullock Order”. It is proper to make such an order where, in the opinion of the court, it was reasonable, in all the circumstances, for the ppl to sue all the parties which it did sue. This position was one which the ppl was entitled to take at trial and to try to prove by evidence at trial and that plaintiff should not be penalized in costs bc of its failure to establish this position at trial. Mr. Justice Heald: “I direct that the ppl be allowed to add to its costs against the defendant federal commerce(3rd), any and all costs which are taxable against it by the defendants flint and ubon.(1st and 2nd.)”—pp85


Aris steamship v. associated metals & minerals. [sc of can. 1980]—86

Time charter-party, bl signed by captain

Captain contracts on behalf of owner, not on behalf of charterer.—see p88????
Glynwed steels ltd. Plaintiff, v. great lakes et.al. def.[1979amc]—p92

Under cogsa either the shipowner or the time charterer may be the carrier, depending on who entered into the k of carriage with the shipper where charterer’s bl nowhere mentioned the shipowner, the latter may not be held liable in personam for cargo damage, for cogsa precludes the application of any third party beneficiary doctrine treating cargo claimants as beneficiaries of the shipowner’s warranty of seaworthiness to the charterer.—art. Iii8 doesn’t allow that.


Canficorp appellant v. cormorant bulk, carriers, 1985 amc –p93

Time charterer sued shipper to enforce latter’s undertaking to indemnify it for any delay in discharging at Kuwait resulting from shipper’s representation that the cargo was not “in transit” to iraq.

Def’s undertaking was supported by consideration, and ppl was the “carrier” entitled to enforce it despite “identity of carrier” clause stipulating that bl was a k with the owner of the vessel.


Topic 4: Whom to Sue (who is the carrier), ch.10


The Berkshire [queen’s bench 1974]—p66

Facts: goods shipped under time charter made bw charterers and defendants. From Houston, texas to Massawa. (a port in aisaiebiya) Demise clause. Exclusion clause: “this carrier in making arrangements for any transhipment…shall be considered solely the forwarding agent of the shippers and without any responsibility whatsoever…”

Issue:

1. whether bl evidenced k bw shipowners and shippers



2. whether shipowners liable for damage to goods occurring after transhipment

3. whether shipowners entitled to rely on exclusion clause in bl.

Held: judgment for second plaintiff receiver.

Ratio:


  1. bl contained or evidenced a k bw the shippers and the shipowners (the time charterers had authority to sign on behalf of the shipowners), and not bw shippers and charterers, so receivers entitled to sue shipowners upon k.---judge gave effect to the demise clause

  2. the exception clause did not give shipowners right to discharge goods at Jeddah and forward them by transhipment in another vessel to massawa. By doing so shipowners were in breach of k.

  3. by discharging the goods at Jeddah and transhipping them into another ship not owned or operated by them the shipowners made a fundamental departure from the method of performing the contract contemplated by the parties at the time it was made, and the shipowners were therefore prevented from relying on the exception in clause a “carrier shall not be liable for …while goods are not in the actual custody of the carrier”

obiter dictum: “I hold that the k contained in or evidenced by the bl purports to be a k bw the shippers and the shipowners, andnot one bw the shippers and the charerers”—p68
Paterson Steamships ltd. V. Aluminum co. of Canada [SCC, 1951], p71

Fact: Ship time-chartered. Bl signed by shipowner’s agent on behalf of the master. Cargo lost owing to unseaworthiness. Holder of bl sued as owner and consignee. Appellant contended not bound by the k evidenced by the bl, and there was no privity of contract as bw the parties.

Whether owner of ship liable for cargo lost at sea.

Held: dismissing the appeal, that the charter party was not a demise of the ship and the appellant was the carrier of the goods; the respondent was the owner and consignee of the goods was entitled to sue upon the bl.

for the purpose of committing cargo to carriage, the captain, the charterer and the ship’s agent are all agents of the owner, acting in the name of the captain. Where the charterer has the authority to sign for the captain, that he may appoint and act by an agent would seem to me to be unquestionable. To hold him to a personal performance would, under modern conditions of traffic, be an intolerable restriction”--p71
Delano co. of America plaintiff v. saguenay terminals defendant. [Canada, 1965]—pp78

Facts: Plaintiff alleged that potatoes damaged while in care and possession of the def, which is liable for the ppl therefore in k and for negligence. Def alleged that bl contained demise clause, so def was only agents under no personal liability.

Whether or not there was a contractual relationship or privity of k bw the ppl and the def in respect of the carriage of the ppl’s goods in the m.v. sunamelia.

Held:


  1. time charterer, defendant, in signing the bl acts only for and is the agent of shipowner. Def was not required to notify or make the ppl aware that it was neither the owner nor the charterer by demise.

  2. under the demise clause, the mere fact that the def was neither the owner nor the charterer by demise being is all that is necessary to make no contractual relationship bw him and shipper exist.

  3. ppl, by accepting the bl, is bounded by the condition excluding privity.

  4. action for contract denied (tetley’s case, succeeded in tort.)


Topic 5: who may sue



Union Industrielle et Maritime v. Petrosul International Ltd. [Fed. Court of Canada] 1985 [The Roseline]—p127—under “who may sue”

Facts: Seller of sulphur cargo, obligated under the sale contract to load it into a vessel chartered by buyer, is not a party to the K of carriage with the ocean carrier even though seller designated itself as “shipper” in the negotiable b/l; in seller’s hand the b/l was merely a receipt or a document of title.

Issue: who are the parties to the K of carriage and the rights and liabilities flowing from that K of carriage.

Ratio:


  1. Under Canadian law seller is not bound by arbitration clause incorporated into ocean carrier’s b/l by reference to voyage charter b/w the carrier and the buyer-consignee of the cargo.

  2. if a receiver of goods accepts a b/l in this form without ascertaining the terms of the charter-party, he must accept that his K with the shipowner for the carriage of goods, contained in or evidenced by the b/l, is subject to the charter-party terms relevant to the loading.

  3. what is usually meant by SHIPPER is the person who arranges for the carriage of goods, i.e., has responsibility for arranging to have them transported from one place to another.

  4. the b/l was not an order b/l to which the defendant became an endorsee. The defendant’s only interest in the b/l was to be able to use it as one of the documents that was required to be delivered to the bank in order to obtain payment for the good under letter of credit. B/l is of the nature of a receipt or a document of title. It does not make a party to the contract of carriage.



E.Y.K. International Inc. v. Sea-Land Service Inc. [US] 1992--p131


Facts: Sea-Land, the carrier, undertook to carry the good for Ready Industries, the shipper. E.Y.K. sued for clothing goods damaged. Sea-Land counterclaimed against the ppl and the Ready Industries for failure to pay freight and related charges.

Issue: whether E.Y.K. could sue?

Ratio: ppl had no legal interest in the allegedly damaged goods.

“carrier’s evidence in support of its summary judgment motion to dismiss cargo damage action established that plaintiff had no legal interest in the allegedly damaged goods, and plaintiff failed to rebut this proof by setting forth material facts showing a genuine issue for trial.”



Hof Van Cassatie BELGIË [1992] ETL—p132


  1. A stipulation contained in the c/p to the effect that the captain is authorized to sign b/l in the name of the charterer, allows the holder of a b/l signed by the captain, on the basis of what is written on the b/l, to bring an action against the charterer in his capacity as carrier.

  2. The function of a negotiable b/l in legal relations implies that the holder of the b/l, by the simple fact that he is a holder in due course, has sufficient right and interest to exercise the rights of action arising from the b.l.



The “Future Express” [1992]--132


Facts: b/l was drawn to the order of the bank for bank issued the letter of credit for the agent of the buyer. Goods misdelivered and the agent failed to pay the amount due to the bank. An attornment by the owners to the bank as the consignee named in the b/l.

Issue: had the bank any title to sue the owners for misdelivery of the goods

Ratio:


  1. the arrangement confirmed that the bank was to have a pledge over the goods, so that the bank has the right to retain the goods until the security was provided and if it was not to sell the goods and reimburse itself out of the proceeds.

  2. the bank never in fact became a pledgee or acquired any security rights over the goods in that Tradax (seller) and Dalali (buyer’s agent) had concluded an arrangement whereby Dalali obtained property and possession in the goods long before the bank obtained possession of the b/l, and at the time the bills were negotiated it was known to the bank that the goods had long since been discharged and dispersed, and it could not have intended that a transfer of the bills should operate as a transfer of constructive possession of the goods. Therefore, the bank had no title to sue either as a pledgee or by reason of an attornment.



Balli Trading Ltd. V. Afalona Shipping Co. Ltd. [The “Coral”] 1993--pp134


Facts: c/p expressly relieved the shipowner the obligation for loading, stowing and trimming, discharging the cargo. Cargo was damaged for lack of care in loading and stowing. H/V was incorporated in the b/l issued b/w the charterparties.

Issue: 1.whether the plaintiffs had title to sue?

2. whether the defendant, the shipowner should be liable, notwithstanding the c/p

Ratio:


1. the plaintiffs were the owners of the goods at the relevant time, and by jan. 21, the plaintiffs had paid for each of the consignments so that the property in the goods had passed to the paintiffs before the date on which the damage was done.

2.the agreement b/w the owners and the charterers that the latter should undertake responsibility for loading and stowing and discharging could not affect the obligations which the defendant owners had undertaken by the b/l.



Topic 6: Measure of Damages




37Nabob Foods, Ltd. V. “Cape Corso” [Canada] 1954--137


Facts: a valuation clause inserted in the b/l to apply a fixing value of the invoice value, plus freight and insurance. The sound market value is greater than the fixing value.

Ratio: Any clause, covenant or agreement in a K of carriage relieving the carrier or the ship from liability for loss or damage to or in connection with goods arising from negligence, fault or failure in the duties and obligations provided in this Article for lessening such liability otherwise than as provided in these Rules, shall be null and void and of no effect.


Crelinsten Fruit Company v. The “Mormacsaga” [The “Mormacsaga”] Canada 1968-139

Facts: the ship with orange entered into the port where it was strike-bound. By the time it arrived to Montreal, the cargos were all damaged. Exemption clause in bl that the defendants should not be liable for loss or damage arising or resulting from strikes or lock outs. Bills contained a clause allowing defendants to deviate. Strike-bound for all American ships at Jacksonville, where the sip called.



Issues:

  1. whether the defendant acted with reasonable care

  2. how to measure the damages

  3. whether defendant can rely on strike exception when heading a strike-bound port? (is there sufficient basis for him to say the strike will end soon?)

Arguments:

  1. due diligence: should have put the Montreal cargo on top, since they knew the strike

  2. liberty clause: should have gone to other place and sent another ship

Ratio:

  1. although there was a liberty clause, by entering the port where the strike was going on rather than proceeding directly to Montreal, the defendant failed to act with reasonable care and prudence and with proper regard to preservation of ppl’s cargo. The defendant couldn’t rely on the strike exemption (art. 4(2)(j))

  2. No local market in Montreal will allow the replacement of the damaged cargo, so the court calculated the damages by cost of the cargo and profit. An allowance of 15% as compensation for loss of profit would be reasonable and just for the plaintiff. –p144


Vana Trading Co. Inc. v. S.S. Mette Skou [US] 1977--pp145

  1. The Vallescura governs the apportionment of damages in maritime cargo cases: the ocean carrier must bear the entire loss unless it can show what percentage is allocable to occurrences for which it is excepted from liability.

  2. the burden rested with the carrier to show what ascertainable amount of the damage was attributable to the packaging, from which it was excepted, and what was due to the improper stowage and negligent stevedoring, which were not excepted and for which the carrier was chargeable. Failing this burden, the carrier was chargeable with the entire loss.


Mitsui & Co. Ltd. And Ataka & Co. Ltd. V. American Export Lines, Inc. [US] 1981--148

  1. In the realm of container shipping, where the b/l specifies the contents, the ship’s container should not be deemed a package – even presumptively only – irrespective of how the goods within it are packed.

  2. The “functional packaging” test is for determining the extent to which items of containerised cargo constitute “packages” – is abandoned.

  3. the carrier waived the limitation of $500/ton when it provided in the b/l that the term “shipping unit” means each piece of cargo “not shipped in a package…irrespective of the weight or measurement unit employed in calculating freight charges”.

  4. Prejudgment interest: it is calculated from the time when the goods should have been delivered; there is no basis for deferring interest until the date of payment by plaintiff’s insurance.



Topic Seven: Due Diligence to make the vessel seaworthy, ch. 15
Patrick Cudady, Incorporated v. S.S. Ponce de Leon [US] 1978-p160

  1. Burden of proof: When a shipment in a sealed container is being handled under a “shippers weight, load, and count” b/l, the Pomerene Act, sec. 101 places the burden on the shipper to prove that the amount specified was, in fact, loaded. “held, shipper could not recover the value of frozen pork found missing from a container in the ocean carrier’s loading terminal, absent from evidence that the quantity stated in the bl was actually in the container when delivered to the terminal.”-p160

  2. Pomerene Act is good law. It was updated to 1994. Sec. 101 is sec. 80113 now.


Federazione Italiana Dei Corsorzi Agrari v. Mandask Compania De Vapores [US] 1968—cb. pp162

Facts: ship caught fire. After fire, the cracks in the hull began to open up, causing sea water to sink the ship. but the cracks in the hull were unrelated to the fire, but were caused by shoddy repairs, and caused the ship to sink. Appellant failed to exercise due diligence to make the ship seaworthy,evidenced by its failure to take action when cracks started on another voyage.

Issue: whether the carrier is liable for the fire and the cracks, which caused sink eventually

Ratio:


  1. fire exception was not proved.

  2. appellant was prohibited from delegating the duty of due diligence to make the ship seaworthy. Duly diligently to hire the reputable shipyard did not exempt this overriding obligation.

  3. limitation of liability denied.(I think this is contrary to prof. Tetley’s view, see 4th edition, “due diligence and fundamental breach”)


Maxine Footwear Co. Ltd. And Another v. Canadian Government Merchant Marine, Ltd. [Privy Council] 1959—p166

Facts: after loading and before sailing, the pipes were found blocked by ice. The heat of the acetylene touch used to thaw out the pipes caused a fire (because the officer who instructed and supervised the thawing was negligent) and the ship was forced to scuttle. Loss of cargo occurred.

Issue:


  1. was the carrier liable for lack of due diligence for the seaworthiness?

  2. is the fire exemption applying to the unseaworthiness

Ratio:

  1. “before and at the beginning of the voyage” means the period from at least the beginning of the loading until the vessel starts on her voyage. Here, this period continued from the loading until the ship sank. The negligence of the officer constituted a failure to fulfil the obligation to exercise due diligence.

  2. art. III. 1 is an overriding obligation. When the failure to fulfil it causes the damage, the immunities of art. IV cannot be relied on. This is the natural construction apart from the opening words of art. III.2.


N.M. Paterson & Sons Ltd. V. Robin Hood Flour Mills, Ltd. (The Farrandoc) [Canada] 1967—p169

Fact: the second engineer wrongfully turned on the valve with the result that the water entered and damaged the cargo. The engineer was not experienced and familiar with the type of machinery. Second engineered was not inquired prior to employment, no introduction about the peculiarities of the ship, no plan of the engine-room piping system on board.

Issue: whether the carrier should be liable (is this a management exception which can relieve the carrier of liability?)

Ratio:


  1. Art. III of seaworthiness requires the proper seamanship. Did not “properly man and equip the ship”, so it is unseaworthy. In engaging him without prior inquiries was lack of due diligence by the carrier. This obligation is overriding obligation.

  2. The Farrandoc was an old ship with rather unusual valve arrangements about which it was probable that this new second engineer would not know. The neglect of the ship’s owners or representatives to enquire more fully into this new ship’s officer’s qualifications and to adequately instruct him about the valve arrangements at the material time before the voyage began, constituted failure to exercise due diligence, thereby rendering this ship unseaworthy.

  3. the damage occurred in trimming the ship to permit the discharge of cargo and was therefore due to negligence in the care and custody of cargo, for which defendant was not entitled to immunity.


Riverstone meat Co. v. Lancashire Shipping Co. Ltd. [House of Lord] 1961—p177

Facts: ship was unseaworthy due to the carelessness of a fitter, employed by ship repairers of high repute to whom the shipowners had entrusted the ship for passing her survey.

Issue: whether the shipowner will be liable for damages

Ratio: the obligation imposed on the carriers to “exercise due diligence…to make the ship seaworthy” was an obligation that there should be due diligence in the work, and, the negligence of the fitter employed by the ship repairers was a lack of diligence for which the shipowners were responsible.


Union of India v. N.V. Reederil Amsterdam [HoL] 1963—p194

Facts: reduction gear of the vessel broke down and couldn’t finish the voyage.

Issue: whether the operator of the carrier exercised due diligence to ensure the seaworthiness.

Ratio:


  1. Unless they can be successfully criticized for their omissions, a judge is entitled to say that due diligence was exercised.

  2. there is no lack of care and no lack of skilled knowledge.

  3. diligence does not have to be absolute. It only needs to be “due”.


North Star Cement Ltd. V. Bernard Labelle [Canada] 1976—p204

Issue: burden of proof for due diligence

Ratio:


  1. The presence of water in a ship’s cargo hold creates a presumption of unseaworthiness.

  2. Even though defendant carrier proved that a reasonably diligent inspection would not have discovered an hole in the bottom plating, defendant failed to sustain his burden of proving that this hole was in fact the means by which a substantial quantity of water entered the hold during a relatively brief period.


Mimi Lim. Procs. [US] 1979—p206

Facts: mentally-disturbed seaman wilfully scuttled the carrying vessel.

Issue: whether the carrier could exculpate himself under art. 4 (2)(q)

Ratio:


  1. order of prove: after cargo ppl established the prima facie case by showing delivery and non-return of goods, the defendant carrier must prove a defense under COGSA sec. 4 (2). If not, the question of whether it exercised due diligence as to the vessels’s seaworthiness is irrelevant.

  2. Barratry (crew member acts illegally and improperly) is not an exculpating cause of loss under COGSA, art. 4 (2), since the seaman was the carrier’s “servant”.



Topic Eight: Perils of the sea and other exceptions, chp. 18
Great China Metal Industries Co. Ltd. v. Malaysian International Shipping Co. Berhad (Bunga Seroja) [Australia] 1998--212

Ratio: the carrier may not exempt the liability by art. 4 (2)(c), the peril of the sea, when the bad weather was known and expected.—this is tetley’s view, and the judge in this case is wrong. The next case is right.


Zim Israel Navigation Ltd. v. The Israeli Phoenix Assuance Co. Ltd. [Isreal] 1998-p215

Issues:


  1. what is the yardstick for perils of sea? should it be “of unpredicted catastrophic fore at the same time and place and that it was not possible to reasonably guard against it?”

  2. who bears the burden of proof to prove the fitness (or unfitness) of the container and the causal connection bw the state of the container and the damage and what in fact was proven on these issues?—p216

  3. (whether the respondent fulfilled its primary obligation to prove the contents and value of the cargo that was placed in the container prior to delivering it to the appellant for transportation?)--216

Ratio:

  1. the perils of the sea should be unforeseeable in terms of the force, and place and the time.

  2. Order of prove: the carrier bears the burden of proof of perils of the sea if he wants to rely on this exception. He must also prove the damage was not caused by breach of his obligation to render the vessel seaworthy at the beginning of the voyage.

  3. the carrier is bound to perform with due diligence everything which is required to render the vessel seaworthy, taking account of those risks at sea which are reasonably foreseeable.

  4. even if the bl contained a special reservation (“it is said to contain”), the supporting documents were sufficient to prove the contents of the container.--215


(The “Oak Hill”) Federal Commerce and Navigation Col Ltd. v. Eisenerz [SCC] 1975-238

Facts: mixing of pig-iron following grounding of vessel. cargo of pig-iron was reloaded during the repairing of the vessel. Then it was found intermixed, which is against the shipper’s instruction. Loss occurred.

Issue: whether the carrier is liable for the loss.

Ratio:


  1. The stranding was solely caused by serious error in navigation on the part of the pilot and no causal connection b/w unseaworthiness and stranding

  2. The intermixture of the cargo was caused by the lack of care of cargo when discharging and reloading (art. 3 (2)) Therefore, the carrier couldn’t rely on art. 4 (2) (a) for the exemption.

  3. Both the charterer and the shipowner are liable jointly and severally.


CNR (Canadian national railway company) defendant appellant v. Barbour Ltd. [SCC] plaintiff and respondent 1963—p223

Facts: ship sailed to New Foundland during the winter was dispatched on a voyage during which it was expected to be ice condition. Ship sank. Unseaworthy ship for navigation in ice, due diligence not exercised to make the ship seaworthy. Ice on voyage was expected.

Issue: can the carrier rely on the exemption of obligation

Ratio:


  1. The anticipated ice condition is not perils of sea.

  2. Overriding obligation of seaworthiness was not met for lack of due diligence.

  3. Vessel was unseaworthy and unfit to encounter the ordinary perils of the voyage at the particular season in question, so that the exception contained in art. 4 (2)(a) can not be invoked to relieve the shipowner from responsibility.



Topic Nine: Himalaya Clause, ch. 36
Scruttons Ltd. v. Midland Silicones Ltd. [HoL] 1961

Issue: whether the stevedores are entitled to rely on contract contained in b/l as limiting their liability to cargo-owner



Ruled: the case turned down the claim of the stevedores, but gave lord Reid’s conditions to make it applicable to stevedores—important. –----p251

Ratio:


  1. A principle of English law, apart from special considerations of agency, trust, assignment or statute, a person who is not a party to a contract cannot enforce or rely for protection on its provisions. Moreover, the a. stevedores are not within the term “carrier”. B. the k of carriage had not been entered into by the shipowners as agents for the stevedores so as to enable the stevedores to claim the benefit. C. there was no basis for implying a k bw the consignees and the stevedores limiting the latter’s liability.

  2. however, Lord Reid: a possibility of success of the agency argument if –----p251

  • The b/l makes it clear that the stevedore is intended to be protected by the provisions in it which limit liability

  • The b/l makes it clear that the carrier, in addition to contracting for these provisions on his own behalf, is also contracting as agent for the stevedore that these provisions should apply to the stevedore

  • The carrier has authority from the stevedore to do that, or perhaps later ratification by the stevedore would suffice

  • Any difficulties about consideration moving from the stevedore were overcome (the performance of the services for the benefit of the shipper is the consideration for the agreement by the shipper that the stevedore should have the benefit of the exemptions and limitations contained in the b/l [New Zealand Shipping Co. Ltd. v. A.M. Satterthwaite & Co. Ltd.])

  • In order to affect the consignee, it would be necessary to show that the provisions of the bills of lading act, 1855, apply.—also mcciii, p762


Rorbert C. Herd v. Krawill Machinery [US] 1959—p255, also p276

Ratio:


  1. neither the limitation of liability provisions of COGSA nor the parallel provisions of an ocean b/l, limiting the liability of the steamship carrier to a shipper to $500 per package, protect a stevedore who negligently damages cargo while attempting to load it aboard the vessel.

  2. The stevedore’s common-law liability for damages caused by its negligence has been in no way limited.


Salmond and Spraggon (The “New York Star”) [Australia] 1978—p259

Facts: cargo after delivery and under care of stevedores. Stolen by thief without presentation of documents, which was required.

Ratio:

1.Since the stevedores did not, as agent for the carriers misdelivery the goods, but rather as bailees failed to take reasonable care of them, the separate act of negligence was not within cl. 2(p259) and the stevedores were not entitled to rely upon the limitations in cl. 17.



2.the loss of the goods occurred at a time when the stevedores were no longer acting in performance of any of the carriers’ obligations under the b/l ceased to apply and could no longer be availed of by them. The stevedores were unable to claim advantages of the time limitation.
Buenos Aires Mar (ITO v. Mitsui )(The Buenos Aires Maru) [SCC] 1986--260

This case is the turning point to expand Canadian maritime law. See definition of “Canadian maritime law” at p261.

Facts: b/l contained a Himalaya clause by which the carrier Mitsui sought to extend limitation of liability to those it employed in performance of the K of carriage.

Ratio: contractual provisions extending limitations of liability to third parties, known as Himalaya clauses, are recognized as a permissible feature of Canadian maritime law. Both Mitsui and Ito are entitled to the protection of the exclusion clauses in the b/l.—opposite to the following case.


(The Cleveland) Eisen Und Metall v. Ceres Stevedoring Co. [Montral, QC] 1976—p276

Facts: the container was left beside a public road unprotected by fencing and totally unguarded. The container was stolen

Issue:

Whether terminal operators entitled to benefit of exemption clause



whether the exemption clause afforded protection against gross negligence

Ratio: --p276



  1. loss of the container was due to the joint and several negligence of the defendants.

  2. def were not entitled to the benefit of exemption clause in the bl bc there was no contractual relationship bw the plaintiffs and the defendants, and the exemption clause was invalid under Quebec and Canadian law.

  3. the loss resulted fromdef gross negligence.

  4. it is illegal to contract out the liability resulting from gross negligence. Therefore, the terminal operator could not benefit from the exclusion clauses.—p276

  5. what constitutes gross negligence or “faute lourde” – follow Pothier in his Treatise on Obligations, p280, mcc p106

“gross negligence, or culpable fault, consists of not bringing to the affairs of another the care that persons who are the least careful and the most stupid would not fail to bring to their own affairs. This fault is the opposite to good faith.”
Nippon Yusen Kaisha v. International Import and Export Co. Ltd. (The “Elbe Maru”) [Canada] 1978—p282-----important

Fact: Goods stolen during the stay of proceedings under the custody of hauliers. The b/l includes an exemption clause which benefit the hauliers.

Issue: whether the exemption clause will be struck down by the breach. Whether indorsee, the claimant bound by exception clause

Ratio: although the evidence showed that there had been gross negligence, this did not establish a situation which would amount to a fundamental breach of the K. ”—p283, 286 HW, Tetley thinks gross negligence is fundamental breach.

Circular indemnity clause, p282



Topic Ten: fundamental breach of the contract
Foscolo, Mango v. Stag Line Ltd. 1931—289—wonderful headnote

Fact: vessel bound from Swansea to Istanbul with coal. It altered the course for St. Ives to land engineers and wrecked soon after leaving St. Ives

Issue:


        1. the meaning of an exception clause (liberty clause) “with liberty to sail without pilots, to call at ay ports in any order, for bunkering or other purposes or to make trial trips after notice or adjust compasses all as part of the contract voyage”

        2. what is reasonable deviation

        3. damages

Ratio:

              1. The carrier was at liberty “to call at any ports in any order, for bunkering (storage the coal) or other purposes”. The ejusdem generis rule (the general words must be limited so that they shall be consistent with and shall not defeat the main object of the contracting parties) applied so that the clause would be limited to bunkering or any purposes like it.

              2. Reasonable deviation.

  1. Scrutton L.J.: the interests to be considered must be those of the parties to the K adventure, which may include consideration of the position of their underwriters…

  2. Greer L.J.: the words mean a deviation whether in the interests of the ship or the cargo-owner or both, which no reasonable minded cargo-owner would raise any objection to.

  3. Slesser L.J.: the reasonableness must depend upon what would be contemplated reasonably by both parties, having regard to the exigencies of the route, known, or assumed to be known, to both parties---289

3. Damages – although it is argued that the property in coal had not passed to the buyers under the CIF, and the damages should be measured by what suffered by the sellers, not the buyers, this is WRONG. Court granted asmv.--293

4. ejusdem generis. “the presence of the word bunkering shows that there is a limitation on the general words following. ” p292.

"ejusdem generis" rule of contractual construction, whereby "...where several words preceding a general word point to a confined meaning the general word shall not extend in its effect beyond subjects ejusdem generis (of the same class)...." A classic application of this rule is found in the well-known decision of the English Court of Appeal in Foscolo Mango v. Stag Line, where it was held that a liberty clause in a bill of lading authorizing the vessel to "...call at any ports in any order, for bunkering or other purposes..." did not authorize a geographic deviation for the purpose of landing two engineers who had been aboard the vessel in order to test a superheater.

Scrutton L.J. applied the ejusdem generis principle as follows:(61)

"... the presence of the word 'bunkering' shows that there is a limitation on the general words following. If they were unlimited its mention would be unnecessary. To land a maker's engineer and a ship's engineer who have been detained on the ship, while making a trial trip not authorized by the contract of affreightment, because of the drunkenness of the firemen, and to land them at a port on a dangerous coast and not in the course of the voyage does not seem to me to be a purpose or voyage permitted by the contract."

In a similar vein, Greer L.J. decided:(62) –the same case

"In my judgment, construing these words in light of the general objects of the contract recorded in the bill of lading and of the contiguity of the word 'bunkering', I think the true meaning of the words is that the purposes must be purposes relevant to the furtherance of the joint adventure, and that they are not wide enough to include the visit of the ship to St. Ives Bay, a visit which was not in any way essential to the carriage of the respondents' goods from Swansea to Constantinople."

The ejusdem generis rule only applies, however, where the particular words appearing before the general word belong to some identifiable genus. Consequently, where no such genus exists, the meaning of the general word is not restricted by the preceding particular words. Thus, for example, in Effort Shipping Co. Ltd. v. Linden Management S.A. (The Giannis K),(64) the House of Lords, interpreting art. 4(6) of the Hague Rules on the shipping of "goods of an inflammable, explosive or dangerous nature", held that: "...it would be wrong to apply the ejusdem generis rule to the words 'goods of an inflammable, explosive or dangerous nature.' These are disparate categories of goods. Each word must be given its natural meaning, and 'dangerous' ought not to be restrictively interpreted by reason of the preceding words." In consequence, the term "dangerous goods" in art. 4(6), taken in its ordinary sense, was found wide enough to include a cargo of ground nuts infested with Kharpa beetles.---mcc iv chapter 4.



Krupp International v. Federal Atlantic Lake Lines [US]—p298—problem case, partly wrong at p 298

Fact: 93 packages of machine components were shown in B/L as having been shipped on carrier’s first vessel, but in fact only 71 were transported; the remaining 22 packages arrived later on carrier’s second vessel. Damages found. Suit was commenced within one year of delivery. Still in one year limitation

Held: by shipping in two separate vessels, the carrier unreasonably deviated for the terms of the original b/l.

Ratio:


        1. As a general rule, the 1 year statute of limitations does not begin to run in cargo damage cases until all cargo listed in the b/l has been delivered.

        2. “In any event” in COGSA sec. 4(5) shows the intention of legislation that the $500 package limitation should apply to all shippers who fail to declare the full value of the cargo, even if the ocean carrier committed an unreasonable deviation by failing to ship the entire quantity of package shown on the B/L.


Swindell-dressler int’l ppl, v. M/V Hellenic ideal, carrier, def. 1981, amc, p301

Held:


1.consignee failed to show that goods were in a damaged condition when delivered by carriers’ stevedore into Saudi customs custody or that goods were damaged when delivered by customs into possession of consignee’s agent

2. no unreasonable deviation



  1. sanctions were to be imposed against carrier for obdurate, long continued endeavor to impede consignee’s discovery and obstruct progress of the case.

  2. claimant dismissed, sanctions for ppl.

Ratio:

Deviations, as occurring in carriage of cargo of construction materials from Texas to Saudi Arabia, were not unreasonable where one deviation involved call at unscheduled port to change crews and added only 29 miles to voyage and involved insignificant amount of time,(ratio 1) and second deviation involved carriage of certain large pieces of steel on the deck in contravention of imputed term of clean bl, as risk of handling damages to construction member was reduced by above deck storage and there was no showing that damage was due to either deviaton.(ratio 2)”-pp301

ratio 3: the first deviation had no causal relationship with the damage. Nor was the storage above deck improper.—p302

sanctions for impede consignee’s discovery, carrier was ordered to pay reasonable expenses including attorney’s fees.


Suisse Atlantique v. N.V. Rotterdamsche [house of lords, 1966]—p303

Ratio: “there is no rule of law that an exceptions clause is nullified by a fundamental breach of k or breach of a fundamental term, but in each case the question is one of the constructionof the k whether the exceptions clause was intended to give exemption from the consequences of fundamental breach”—p303

held: appellants, having elected to affirm the charterparty, continued bound by its provisions, including the demurrage provisions, which were not limiting the respondents’ liability but were provisions for payment. Appellants were entitled only to the agreed damages, and not to damages for loss of profit.”—pp303

“fundamental breach of k” and ”breach of fundamental term”—p304—tetley seems to think they are the same


Photo Production v. Securicor [1980]—p304

Issues:


effect of exception clause, whether def able to rely on exception clause to limit their liability

facts: Ppl owned factory, def security. An employee of def deliberately lit a small fire which got out of control. Exception clause: “…def not responsible for anyinjurious act or default by any employee…unless such act or default could hve been foreseen and avoided by the exercise of due diligence on the part of the defendants as his employer, nor responsible for any loss suffered by ppl through …fire or any other cause, except in so far as such loss was solely attributable to the negligence of the defendant’ employees acting within the course of their employment.”—p304

----in commercial matters, equal bargaining power -----see p304 “fundamental breach” and “breach of condition”-----------are they the same?—304-5



Topic Eleven: General Decisions, cb p307
Pacific Employers Insurance v. M/T Iver Champion [US]--308

Ratio: 3 parties are all carriers under COGSA



              1. absent clear evidence of a contractual relationship b/w the vessel owners and time charterer which would absolve the vessel and her owners from liability for cargo damage, the owners are “carriers”.

              2. the entity which time chartered a vessel and also acted as the operator and scheduler of the vesselis a carrier for purpose of cogsa liability.

              3. The time charterer’s parent company, which entered into a voyage charter with the cargo shipper is also a COGSA “carier”


Canadian Pacific Forest Products v. Belships (Far East)—pp308

Ratio: exemption clause must be precise



        1. A b/l issued “on deck at shipper’s risk” and stating that the carrier “shall in no circumstance whatsoever be under any liability for loss or damage to deck cargo, howsoever the same may be caused” is not sufficient to shield carrier for loss due to negligence in loading and carrying lumber cargo. (on-deck clause did not include negligence)

        2. A common carrier is liable for damage due to sea-water, rain or wind absent negligence or an exemption in the b/l, and considering the use of “negligence” in other clauses here, the broad on-deck exemption does not include exemption for negligence

        3. be precise. if you want escape liability caused by negligence, you must write negligence in the clauses.


Nelson Pine Industries v. Seatrans New Zealand (The “Pembroke”) [New Zealand]--309

Facts: booking note required all cargo to be loaded underdeck. Bl did not state that the goods were to be carried below deck. But some cargo including open top container 494 was stowed on deck.

Ratio: under hv, defendants were entitled to rely on the package limitation clauses unless I terms of a. iv53, it could be shown that the stowage on deck was reckless and with knowledge that damage would probably result.

“…he must have known it was probable that some of the contents of the containers would get wet…” – Recklessness proved, so that the carrier loses the benefit of package limitation.

the defendants could not rely on the package limitation clauses in either the hague rules or hague Visby rules.
ETS Gustave Brunet v. M.V. Nedlloyd Rosario [US] 310

Facts: carrier breached duty of proper care and custody of cargo and committed an unreasonable deviation because over-height, opened-topped containers on deck increased danger. Shippers failure to insist on underdeck did not overcome his reasonable expectation of underdeck stowage. Carrier lost pack limitation.



Ratio:

              1. the insufficiency of packaging defence is not available to the carrier since packaging was sufficient for under deck stowage which the shipper reasonably expected. Even if the defense were available, the shipper sustained its burden of proving the carrier was negligent in accepting cargo for ondeck stowage with visible packaging inadequacies, failing to attempt repairs of tarpaulins during transit, and failing to carry extra tarpaulins.

              2. Damages is limited to the fair market value of used machines, where post-casualty repair costs to used lace are 6 times their purchase price

              3. Prejudgement interest awarded, computed from the date when the cargo should have been delivered..




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