Duties of the Shipowner (Carrier)

Duties of the Shipowner (Carrier)

According to Hague-Visby Rules, duties of the shipowner (carrier):

• Obligation to provide a seaworthy ship

Under common law, shipowner (carrier) was under an absolute obligation to provide a seaworthy ship subject only to the common law exceptions:

• Act of God
• Queen’s Enemies
• Inherent Vice

Shipowner’s liability is now abrogated by COGSA (Carriage of Goods by Sea Act) 1971 and replaced by an obligation to use due diligence. Article III Rule 1 provides that:

Shipowner (carrier) shall be bound before and at the beginning of the voyage to exercise due diligence to:

• Make the ship seaworthy
• Properly man, equip and supply the ship
• 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

This obligation embraces the three (3) distinct aspects of seaworthiness recognized at common law:

• Physical condition of the ship
• Efficiency of the crew and equipment
• Cargo-worthiness of the ship

Duration of Obligation: carrier to exercise due diligence to provide a seaworthy ship before and at the beginning of the voyage i.e. it is covering the period from at least the beginning of the loading until the ship commence on her voyage.

In the case from which this quotation is drawn the claimant’s cargo was lost when the defendant’s ship had to be scuttled before ship could set sail on the contractual voyage. After the cargo had been loaded an attempt was made, under the supervision of a ship’s officer, to thaw ice in three scupper holes by the use of an oxyacetylene lamp. The cork insulation on the pipes ignited and the fire rapidly spread, with the result that the ship had to be scuttled. Shipowners sought to rely on the fire exception in Art IV rule 2(b) under which they would not be responsible for the consequences of fire unless it resulted from the actual fault or privity of the shipowners, which it clearly did not in this case. However, The Privy Council held that the loss resulted from a breach of the seaworthiness obligation in Art III Rule 1 since the carrier’s obligation to exercise due diligence continued throughout the entire period from the beginning of loading until the ship sailed. Negligence of the carrier’s servants which caused the fire occurred during this period and constituted a failure to exercise due diligence for which the carrier was liable. In the view of the Privy Council, the implied undertaking as to seaworthiness in Art III Rule 1 constituted an overriding obligation, any breach of which deprived the carrier of the protection of the exceptions listed in Art IV in respect of any resulting damage. Shipowner should have exercised due diligence to make his ship seaworthy in all respects before commencement of the voyage, shipowner will not be liable under this Article should defects develop on the voyage or arise during a call at an intermediate port.

Here the term voyage has been construed as covering the entire voyage covered by the Bill of Lading (B/L), irrespective of calls at intermediate ports. Charter-party doctrine of stages, under which the ship is required to be seaworthy at the commencement of each stage, does not apply.

In the case of Leesh River Tea Co v British India Steam Nav Co, a ship was held not to be unseaworthy within the meaning of Art III when cargo was damaged by the surreptitious removal of a storm valve cover plate by a person unknown while the ship was calling at an intermediate port.

Meaning of Due Diligence: while imposing on the carrier an obligation to exercise due diligence the draftsmen of the Hague Rules adopted a term first used in the United States Harter Act in 1893. The standard imposed by this obligation has been interpreted by the courts as being roughly equivalent to that of the common law duty of care, but with the important difference that it is a personal obligation that cannot be delegated. In the words of Tetley, carrier may employ some other person to exercise due diligence, but, if the delegate is not diligent, then the carrier is responsible. As a result, the carrier will remain liable if the person to whom performance of the obligation is delegated is negligent, whether that person be:

• Servant of the carrier
• Independent contractor
• Lloyd’s surveyor

There will be no defense for the carrier to argue that carrier engaged competent or reputable experts to perform the task or that carrier lacked the necessary expertise to check their work. In these circumstances it is perhaps not surprising to discover that carriers have frequently claimed that their liability under the Hague Rules differs little from that at common law, which imposed on them an absolute duty to provide a seaworthy ship. However, there is important distinction, that the carrier will not be liable under the Hague Rules if neither the carrier nor his delegate has been negligent.

In the case of The Muncaster Castle which a consignment of ox tongue had been shipped from Sydney under a Bill of Lading (B/L) which incorporated the Hague Rules. During the voyage the cargo was damaged by water entering the hold via the inspection covers on the storm valves. Some months earlier, a load line survey of the ship had been undertaken in Glasgow by a reputable firm of ship repairers, during which there had been an inspection of the storm valves under the supervision of a Lloyd’s surveyor. After the inspection had been completed, the task of replacing the inspection covers on the storm valves had been delegated to a fitter employed by the ship repairers. Owing to negligence on his part in tightening the nuts holding the covers, they loosened during the subsequent voyage allowing water to enter the hold and damage the cargo. Despite the fact that there had been no negligence on the part of the carrier in that carrier had delegated the work to a reputable firm. House of Lords held the carrier liable for breach of the obligation to exercise due diligence. In the words of Viscount Simonds: “no other solution is possible than to say that the shipowner’s obligation of due diligence demands due diligence in the work of repair by whomsoever it may be done”.
Interpretation of the carrier’s obligation appears to be generally acceptable in most jurisdictions since it is always open to the shipowner to cover himself by claiming an indemnity from the independent contractor involved. Carrier will not be held responsible for the seaworthy condition of a ship until it comes under his control. For example, if shipowner commissions the construction of a new ship, or charters or purchases a ship from another party, shipowner will not be liable for existing defects rendering the ship unseaworthy unless such defects were reasonably discoverable by the exercise of due diligence at the time of takeover. Carrier can hardly be held responsible for the negligence of shipbuilders or shipbuilder’s employees who were not acting as shipowner’s servants or agents at the material time.

If the defect of the ship should have been apparent on a reasonable inspection of the ship at the time of takeover, the carrier cannot in that event rely for protection even on the certificate of a Lloyd’s surveyor. For example, in the case of The Amstelslot the delivery of a cargo of wheat was delayed by an engine breakdown which was subsequently attributed to a fatigue crack. Ship in was built in 1922 but had only been acquired by the defendant in 1956 at which time the engines had been inspected by a Lloyd’s surveyor. Cargo owner having claimed that the ship was unseaworthy within the meaning of Art III Rule 1, Lord Reid formulated the issue in the following terms:

“if the appellants (the carrier) are to escape from liability they must prove that due diligence had been exercised not only by themselves and their servants, but by the Lloyd’s Register of Shipping surveyor who surveyed this gear but failed to discover the crack’.

On the facts of the case the House of Lords held that the Lloyd’s surveyor had taken reasonable care in conducting the survey, thus discharging the burden of proof on the carrier that due diligence had been exercised.

Burden of Proof: relating to the exercise of due diligence, some difference of opinion exists as to the incidence of the burden of proof. Article IV Rule 1 provides that the carrier shall not be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence on his part to make the ship seaworthy, as defined in Art III Rule 1. Article IV Rule 1 section then continues:

“Whenever loss or damage has resulted from unseaworthiness the burden of proving the exercise of due diligence shall be on the carrier or other person claiming exemption under this article.”

General assumption is that no onus is cast on the carrier in relation to proof of due diligence until the other party has first established that the ship was unseaworthy and that his loss was attributable to that fact.

Tetley argues that on policy grounds the burden of proof in both cases should rest with the carrier, who is usually the only party to have access to the full facts. According to Tetley, such a construction is contrary to the spirit of the Hague Rules and to the express wording of Art III Rules 1 and 2. Case law tends to favor the majority view.

In the Hellenic Dolphin case, a cargo of asbestos was found, on discharge, to have been damaged by seawater. It was later established that the seawater had gained access to the hold through a four-feet long indent in the ship’s plating, of which the shipowner had previously been unaware. No evidence was available as to whether the damage to the ship had been inflicted before or after the cargo had been loaded. Trial judge allowed the shipowner to rely on the exception of perils of the sea since, in judge’s opinion and in the absence of evidence to the contrary, the type of damage involved was a classic example of damage caused by a peril of the sea. Shipowner would only be prevented from relying on the exception if the shipper could prove that the loss resulted from the ship being unseaworthy before and at the beginning of the voyage. Facts of this case tend to support the thesis advanced by Tetley that it is often extremely difficult for the cargo owner to discharge the burden of proof of unseaworthiness. However, in practice, burden of proof problem is frequently solved by the readiness of the court to treat the presence of seawater in a ship’s hold as prima facie evidence of unseaworthiness. 

According to Hague-Visby Rules, duties of the shipowner (carrier):

• Care of cargo

Hague-Visby Rules Article III Rule 2 provides that: “subject to the provisions of Article IV, the carrier shall properly and carefully load, handle, stow, carry, keep, care for and discharge the goods delivered.’

Hague-Visby Rules Article III Rule 2 has been construed as requiring from the carrier the exercise of a standard roughly equivalent to that of reasonable care. Draftsmen of the Hague-Visby Rules intended a higher duty of care by inclusion of the word carefully in the definition and the addition of properly.

In Albacora v Westcott and Laurance Line case, which was considered by the House of Lords, a consignment of wet salted fish had been shipped ex Glasgow to Genoa. Crates were marked “keep away from engines and boilers”, but otherwise no special instructions for carriage were given by the shippers. It was subsequently established that fish of this type could not be safely carried on such a voyage without refrigeration, although this fact was unknown to the carrier. On arrival at Genoa the cargo was found to have deteriorated substantially in quality as a result of bacterial action and the question was whether it had been carried properly within the meaning of Hague-Visby Rules Art III. In answering this question in the affirmative, Lord Reid expressed the view that properly meant in accordance with a sound system:

“In my opinion, the obligation is to adopt a system which is sound in light of all the knowledge which the carrier has or ought to have about the nature of the goods. And if that is right, then the respondents did adopt a sound system. They had no reason to suppose that the goods required any different treatment from that which the goods received.”

In addition, Lord Pearce added the qualification that

“A sound system does not mean a system suited to all the weaknesses and idiosyncrasies of a particular cargo, but a sound system under all the circumstances in relation to the general practice of carriage of goods by sea. It is tantamount, I think, to efficiency.”

In the absence of any breach of duty under this Article, the carrier was accordingly allowed to rely on the defense of inherent vice.
Wording of Hague Visby Rule Art III Rule 2 implies a continuous obligation on the carrier running from tackle to tackle, in other words from the commencement of loading to the completion of discharge. This presupposes that the carrier has undertaken to load and discharge the cargo, whereas occasionally the contract may provide that these operations are to be performed by shore-based tackle at the responsibility of the shipper or consignee. The House of Lords has held in the case of Jindal Iron & Steel Co v Islamic Solidarity Shipping Co that Art III Rule 2 does not oblige the carrier to perform these obligations but merely provides that, if carrier has undertaken to do so, carrier must perform them properly and carefully. Effectively, such a transfer of responsibility does not contravene the Hague-Visby Rules, since it is intended merely to define the scope of the contract of carriage and not the terms on which the cargo is to be carried. However, clear words are needed to affect such a transfer and the fact that the shipper undertakes to perform the loading and discharging operations free of expense to the carrier (FIOST) does not raise the presumption that the carrier is thereby relieved of liability for their proper performance.

A recent case has held that a clause transferring responsibility for loading and stowing cargo to charterers “at their expense under the supervision of the captain” was effective to exclude the operation of Art III Rule 2. In the opinion of the trial judge, Morison J, there was a distinction between a right to supervise and a duty to supervise. Only if shipowners were under a duty would ultimate responsibility revert to them. Duty of care required to be exercised by the carrier is made expressly subject to the provisions of Hague Visby Rules Art IV. This reference to the catalogue of exceptions listed in Art IV Rule 2 raises a query as to the incidence of the burden of proof.

In the event of the cargo being damaged in the course of transit, the onus rest with the carrier to establish that the goods were carried properly and carefully. Once the cargo owner has proved that the goods have been lost or damaged in transit in other words by the production of a clean bill of lading acknowledging the shipment in apparent good order or condition of a specified quantity, the onus shifts to the carrier to bring the cause of damage within one of the exceptions listed in Hague Visby Rules Art IV Rule 2. If carrier fails to do so carrier will be held strictly liable unless carrier can prove that the damage or loss occurred without the actual fault or privity of the carrier, or without the fault or neglect of the agents or servants of the carrier. Carrier will escape liability unless the cargo owner can then establish a breach of the carrier’s duty of care within Hague Visby Rules Art III Rule 2.

According to Hague-Visby Rules, duties of the shipowner (carrier):

• Obligation to issue a Bill of Lading (B/L)

Hague-Visby Rules Article III Rule 3 provides that:

“After receiving the goods into his charge the carrier or the master or agent of the carrier shall, on demand of the shipper, issue to the shipper a bill of lading showing among other things:

• The leading marks necessary for identification of the goods as furnished in writing by the shipper before the loading of such goods starts, provided such marks are stamped or otherwise shown clearly upon the goods if uncovered, or on the cases or coverings in which such goods are contained in such a manner as should ordinarily remain legible until the end of the voyage
• Either the number of packages or pieces, or the quantity, or weight, as the case may be, as furnished in writing by the shipper
• The apparent order and condition of the goods.”

However, in Hague Visby Rules the obligation imposed on the carrier is subject to two provisos:

1. Carrier is not bound to acknowledge the above facts if either carrier has reasonable grounds for suspecting that the information supplied by the shipper is inaccurate, or carrier has no reasonable means of checking For example, if the goods are delivered to carrier in a sealed container
2. Shipper in return is deemed to have guaranteed the accuracy of the information and shipper is required to indemnify the carrier in the event of the latter suffering loss as a result of its inaccuracy. It will be noted that the right to demand the issue of a bill containing the specified information is restricted solely to the shipper and no equivalent right is conferred on the consignee or a subsequent endorsee. As a result, carrier is not bound to issue a bill or provide the required information in the absence of a request from the shipper and the insertion of the words “weight and condition unknown” tends to be a common occurrence. The resultant effect is to defeat the object of Hague-Visby Rules Art III of providing the consignee with a bill of lading which will operate as an effective receipt for the goods. Hague-Visby Rules Article III further provides that the bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described, which shall become conclusive when the bill has been transferred to a third party acting in good faith. There is no mention of any requirement that the transfer should be for value as was previously the case under the common law estoppel rule. However, bills of lading issued under this provision, will normally be received for shipment bills and will merely testify as to the quantity and condition of the cargo at the time of its receipt by the carrier. Bill of Lading will not provide even prima facie evidence of its quality or condition at the time of shipment which is an information that is vital in the event of a commercial credit being involved. This gap is filled by Hague-Visby Rules Art III Rule 7 which confers on the shipper the right to demand, after the goods are loaded, the issue of a shipped bill of lading containing the relevant information.