Scottish Court of Session Decisions

Charlton & Bagshaw, corn brokers, Liverpool, pursuers, brought an action in the Sheriff Court at Glasgow against Thomas Law & Company, shipowners, Glasgow, defenders, “for payment by defenders to pursuers of £202, 10s. sterling for loss and damage sustained by pursuers on a parcel of wheat carried by the defenders in their ship ‘Elginshire,’ from Sydney to Liverpool, under bill of lading dated 11th April 1911, of which pursuers were endorsees and holders, which damage was caused through the defenders' failure to carry said goods safely.”

The pursuers averred, inter alia—“(Cond. 4) Said damage was caused by the said ship being in an unseaworthy and unfit condition at the commencement of said voyage to carry said cargo safely. In particular, the planking of the starboard side of the fore deck, in the neighbourhood of the forward hatchway, was much worn and very thin, and so decayed as to be unable to withstand the ordinary wear and tear of the voyage undertaken, and of the vessel working in a seaway, with the result that during the ordinary working of the vessel during the voyage water was admitted and damaged the wheat. Further, there was not any dunnage protecting the goods on the middle stringer of the lower hold which it was necessary should have been there, and the dunnage in the neighbourhood of the foremast was quite insufficient to protect the goods from leaking through the mast coat. Further, the ceiling not being grain tight, a quantity of loose wheat was found in the bilges damaged. The defenders' statements in answer are denied. Explained that in loading wheat the ship is in practice to bleed a number of bags for stowage. The certificates are referred to for their terms, beyond which no admission is made. The certificates in no way qualify the obligations of the defenders under their contract.”

The defenders averred, inter alia—“(Ans. 4) Denied and averred that the vessel was in every respect seaworthy and fit to carry said cargo safely. In terms of the charter-party produced herewith, and the terms of which are incorporated in the bill of lading, the vessel was examined as to her seaworthiness, both in respect of the hull and dunnage, by the surveyors of the Sydney Marine Underwriters and Salvage Association, Limited, which embraces the underwriters of the cargo in question who are believed to be the domini litis of this action, and the certificates of seaworthiness by said association as to hull, stowage, and dunnage, are produced herewith. These certificates bear that the vessel was approved and passed as fit for the conveyance of the cargo on the voyage described, and that the cargo was loaded under the special supervision of the surveyors of the association, and stowed in accordance with the stowage and dunnage regulations approved of by the association's committee. If any defect existed at the beginning of the voyage, which is denied, it was a latent defect, and not resulting from the want of due diligence on the part of the defenders or of the ship's husband or manager. In the course of her voyage home the vessel met with very heavy weather which caused leakage into the cargo. Any apparent lack of dunnage either at the middle stringer or in the neighbourhood of the foremast on arrival at Liverpool is accounted for by the working of the cargo during the severe weather. Explained further, with reference to the allegation regarding the ceiling, that the cargo was to be in bags, and but for the weak condition of the bags themselves no damage would have resulted through the grain leaking into the bilges.”

The pursuers pleaded, inter alia—“ (2) The defenders' statements are irrelevant.”

The bill of lading contained, inter alia, the following clause—“Clause Paramount.—This bill of lading is to be read and construed as if every clause therein contained which is rendered illegal or null or void by the Sea Carriage of Goods Act 1904 had never been inserted therein or had been cancelled or eliminated therefrom prior to the execution hereof, and is issued subject to all the terms and provisions of and to all the exemptions from liability contained in such Act”; and the following “exceptions and stipulations”—“… Perils of the sea.… and other accidents of navigation excepted, even when occasioned by the negligence, default, or error in judgment of the pilot, master, mariners, or other servants of the shipowners. But nothing herein contained shall exempt the shipowner from liability to pay for damage to cargo occasioned by bad stowage, by improper or insufficient dunnage or ventilation, or by improper opening of valves, sluices, and ports, or by causes other than those above excepted, and all the above exceptions are conditional on the vessel being seaworthy when she sails on her voyage, but any latent defects in the hull and tackle shall not be considered unseaworthiness, provided the same did not result from want of due diligence of the owner, or any of them, or of the ship's husband or manager.”

The Sea Carriage of Goods Act (1904) (Australia) enacts—“5. Where any bill

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of lading or document contains any clause, covenant, or agreement whereby … ( b) any obligations of the owner or charterer of any ship to exercise due diligence, and to properly man, equip, and supply the ship, to make and keep the ship seaworthy, and to make and keep the ship's hold, 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 are in any wise lessened, weakened, or avoided … that clause, covenant, or agreement shall be illegal, null and void, and of no effect. 7. The owner, charterer, master, or agent of a ship shall not—( a) insert in any bill of lading or document any clause, covenant, or agreement declared by this Act to be illegal; or ( b) make, sign, or execute any bill of lading or document containing any clause, covenant, or agreement declared by this Act to be illegal. Penalty—One hundred pounds. 8. (1) In every bill of lading with respect to goods a warranty shall be implied that the ship shall be at the beginning of the voyage seaworthy in all respects and properly manned, equipped, and supplied. (2) In every bill of lading in respect to goods, unless the contrary intention appears, a clause shall be implied whereby, if the ship is at the beginning of the voyage seaworthy in all respects and properly manned, equipped, and supplied, neither the ship nor her owner, master, agent, or charterer shall be responsible for damage to or loss of the goods resulting from— (a) faults or errors in navigation, or ( b) perils of the sea or navigable waters, or ( c) acts of God or the King's enemies, or (d) the inherent defect, quality, or vice of the goods, or (e) the insufficiency of package of the goods, or ( f) the seizure of the goods under legal process, or ( g) any act of omission of the shipper or owner of the goods, his agent or representative, or (h) saving or attempting to save life or property at sea, or ( i) any deviation in saving or attempting to save life or property at sea.”

On 9th March 1912 the Sheriff-Substitute ( Fyfe) pronounced this interlocutor— “Sustains pursuers' second plea quoad the defence founded upon the following exception in the bill of lading:—‘but any latent defects in the hull and tackle shall not be considered unseaworthiness provided the same did not result from want of due diligence of the owner or any of them or of the ship's husband or manager:’ Finds that this exception is ruled out of the contract by the terms of the Sea Carriage of Goods Act 1904, which is incorporated in the bill of lading by the clause paramount: Quoad ultra repels defenders' second plea: Allows a proof.”

The defenders appealed to the Sheriff (Gardiner Millar), who on 11th July 1912 pronounced this interlocutor—“Recals the interlocutor of 9th March 1912 in so far as it sustains the pursuers' second plea-in-law quoad the defence founded upon the exception in the bill of lading therein narrated, and the finding that the exception is ruled out of the contract by the Sea Carriage of Goods Act 1904, which is incorporated in the bill of lading by the clause paramount: Quoad ultra adheres to the said interlocutor: Allows both parties a proof of their averments; and remits the cause to the Sheriff-Substitute for further procedure.”

Note.—“… Under the common law a shipowner, apart from express stipulation, is liable in absolute warrandice of the ship as to seaworthiness; that is to say, he not only undertakes due diligence to make the ship seaworthy, but he is liable further for any latent defect in the ship which makes it unseaworthy. That absolute warrandice on the part of the shipowner may be varied by express agreement so as to limit, or even terminate, any warrandice on his part.

“In the bill of lading, which is the basis of the contract in the present ease, the following exception is introduced among the others narrated in it:—‘but any latent defects in the hull or tackle shall not be considered unseaworthiness provided the same did not result from want of due diligence of the owner or any of them or of the ship's husband or manager.’ The reply of the pursuers is that this clause is struck at by the Sea Carriage of Goods Act 1904, passed by the Parliament of the Commonwealth of Australia. This statute is introduced into the contract by the clause paramount, printed in red ink at the top of the bill of lading, which says—‘This bill of lading is to be read and construed as if every clause therein contained which is rendered illegal or null or void by the Sea Carriage of Goods Act 1904 had never been inserted therein or had been cancelled or eliminated therefrom prior to the execution hereof, and is issued subject to all the terms and provisions of, and to all the exemptions from, liability contained in such Act.’ The effect of that is that the words of the Sea Carriage of Goods Act are introduced into the bill of lading and must be ‘construed simply as words occurring in this bill of lading.’ (Lord Esher in Dobell & Company v. The Steamship Rossmore Company, [1895] 2 QB 408.) Excerpts from the Sea Carriage of Goods Act 1904 have been produced, and the terms of the Act so far as relating to this point are given in Carver's Carriage of Goods by Sea, 5th ed. at p. 998. The section upon which both parties relied, although other sections were quoted by way of illustration, was section 5 ( b)—‘Where any bill of lading or document contains any clause, covenant, or agreement whereby any obligations of the owner or charterer of any ship to exercise due diligence, and to properly man, equip, and supply the ship, to make and keep the ship seaworthy, and to make and keep the ship's hold … fit and safe … are in any wise lessened, weakened, or avoided, that clause, covenant, or agreement shall be illegal, null and void, and of no effect.’ It seems to me that the first part of that section expresses the nature of the obligation on the owner or charterer, and the second part the purpose for which that

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obligation is to be enforced. The obligation on the owner or charterer is to exercise due diligence and to properly man, equip, and supply the ship, and the purpose is to make and keep the ship seaworthy, and to make and keep the ship's hold, &c., fit and safe. In other words the owner or charterer is to exercise due diligence and to properly man, &c., so as to make the ship seaworthy and to make and keep the ship's hold, &c., fit and safe. The part of the clause as to properly manning, equipping, and supplying the ship does not apply to the exception in the bill of lading in question, and therefore we are left with the words ‘any obligation of the owner or charterer to exercise due diligence, to make and keep the ship seaworthy and to make and keep the ship's hold, &., fit and safe.’ The result of that examination of the clause is that section 5 declares that where any bill of lading or document contains any clause, covenant, or agreement whereby any obligations of the owner or charterer of any ship to exercise due diligence, to make and keep the ship seaworthy, and to make and keep the ship's hold, &c., fit and safe, that clause, covenant, or agreement shall be illegal, null and void, and of no effect. Now if the clause only refers to exercising due diligence, that does not apply to a clause which exempts the owner from liability for a latent defect of which he had no knowledge and therefore could not have avoided by any diligence on his part. The clause in the bill of lading in question is one which does deal with latent defect, and therefore I do not think that the Sea Carriage of Goods Act declares it illegal, null and void, and of no effect.

“The question may be illustrated by the effect given in the American Courts to the Harter Act, which has a similar clause to that in the Sea Carriage of Goods Act, although not exactly in the same terms. The Harter Act is set out on page 144 of Carver on Carriage by Sea above referred to, and the section is section 2 of the Act. At section 103 (c) of his book, p. 147, he says—‘On the other hand there seems to be no prohibition of clauses framed to relieve shipowners of the absolute warranty of seaworthiness of the ship on sailing, which, under United States law as well as English law, is implied in the absence of express agreement … thus an exception of latent defect in the hull or machinery has been held to be valid,’ and he quotes two cases that have been decided in the United States to that effect. That opinion in Carver's book supports the view which I have ventured to take. Accordingly I think the interlocutor must be recalled in so far as it sustains the pursuers' second plea, and that a proof should be allowed to both parties of their averments.”

The pursuers appealed to the Second Division of the Court of Session.

Argued for the appellants—The clause in the bill of lading which purported to relieve the defenders of liability for latent defect was overridden by the provisions of the Sea Carriage of Goods Act 1894 (Australia), which was incorporated by the bill of lading. By section 8 (1) of that Act a warranty of seaworthiness “in all respects” was implied in every bill of lading, and such a warranty involved a liability for latent defects. Further, section 5 ( b) of the Act declared null and void any clause in a bill of lading which lessened or weakened the liability of the owner “ to make and keep the ship seaworthy.” The words “to exercise due diligence” occurring in the same sub-section referred to another and a different duty, which of itself constituted a distinct obligation. So also the words “ to properly man, equip, and supply the ship” constituted another distinct obligation, and had no qualifying effect on the obligation “to keep the ship seaworthy the obligation “to keep the ship seaworthy “—Carver's Carriage by Sea (5th ed.), p. 20 et seq.; “Maori King” (Owners of) v. Hughes, [1895] 2 QB 550, per Kay (L.J.) at p. 558. The decisions on the Act of Congress known as the Harter Act (see Carver's Carriage by Sea, 5th ed., p. 144) had no bearing on the question in the present case, because that Act permitted an owner to stipulate that he should be free from liability for unseaworthiness provided he should have used due diligence.

Argued for the respondents—The clause in the bill of lading which relieved the defenders of liability for latent defects was not overridden by the provisions of the Sea Carriage of Goods Act 1894 (Australia). Section 8 (1) was merely declaratory of the common law warranty, which might be, and in the present case had been, contracted out of. The analogous Harter Act permitted such contracting out—Carver's Carriage by Sea (5th ed.), p. 147; “ The Carib Prince,” (1898) 170 U.S. 655; Macfadden v. Blue Star Line, [1905] 1 KB 697, per Channell (J.) at p. 707.—Section 5 ( b) did not annul the clause in the bill of lading whioh relieved the owner from liability for latent defects. It struck at any attempt to relieve the owner of liability for “due diligence to make and keep the ship seaworthy,” but these words did not apply to a latent defect, because a latent defect eo ipso could not be provided against by the exercise of diligence however great. The words “to exercise due diligence” must be read along with the words “to make and keep the ship seaworthy,“ because ” the exercise of due diligence“ was too vague and meaningless an expression to constitute an obligation by itself. Similarly, the intervening words ” to properly man, equip, and supply the ship” fell to be read along with the words “to make and keep the ship seaworthy.” They then constituted a second intelligible obligation, viz., “ to man, equip, and supply the ship (so as) to make and keep the ship seaworthy.” The seaworthiness of the ship depended on its being properly manned, equipped, and supplied — Rowson v. Atlantic Transport Company, [1903] 1 KB 114, per Kennedy (J.) at p. 116, affid. 2 K.B. 666.

In any event, the clause in the bill of lading relieving the owner from liability should

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override any contrary provision in the Act, because the clause in the bill of lading was express, and further, the provisions of the Act should be construed in favour of the defenders, since it was a penal Act (section 7).

At advising—