[1996] 2 F.C. 426
T-2067-88
Les Industries Perlite Inc., Pemtex Inc. and Can-Flo International Corporation, carrying on business under the style Lantana Peat & Soil (Plaintiffs)
v.
The Owners and all Others Interested in the Ship Marina Di Alimuri, The Ship Marina Di Alimuri, and Italmare S.p.A. (Defendants)
Indexed as: Industries Perlite Inc. v. Marina Di Alimuri (The) (T.D.)
Trial Division, Nadon J. — Québec City, May 2, 3, 4, 5, August 15, 16, 17, 18, September 14; Montréal, September 20, 21, 22, December 20, 21, 22, 1994; Vancouver, December 8, 1995.
Maritime law — Carriage of goods — Action for damage to cargo of peat moss — Plaintiffs representing peat moss having certain stowage factor, but heavy rain prior to, during loading resulting in much lower stowage factor — Bulkhead collapsing during loading — Gencon-form charter-party excluding shipowners from absolute liability to provide seaworthy vessel, liability arising from loading, stowage — Peat moss cargo “dangerous goods” — Master not at fault in accepting to load cargo and in not stopping loading — No knowledge, possible knowledge of danger — Neither shipper nor carrier aware of danger — Shipper’s implied common law duty not to ship dangerous goods applied.
Maritime law — Contracts — Pemtex selling peat moss to Lantana FOB — Perlite chartering ship for undisclosed principal, Lantana — Perlite, Italmare (shipowners) entering Gencon-form charter-party — Nothing indicating Italmare not willing to treat undisclosed principal as party to contract — Lantana, Perlite bound by charter-party — Under FOB term, seller bearing liability for cost, safety of goods until passing ship’s rail — Risk of loss of cargo loaded on ship with Lantana; risk to cargo on dock with Pemtex — Hague Rules not incorporated in charter-party — Relationship between charterers, owners governed by charter-party only — Cl. 2 relieving carriers from absolute obligation to provide seaworthy vessel — Cl. 16, 19 relieving shipowners from liability arising from loading, stowage — Once plaintiffs show cargo received by shipowners, subsequently damaged, burden on owners to prove damages resulted from cause for which not liable under Cl. 2 — Plaintiffs’ loss caused by peat moss exerting forces on ship’s bulkhead, causing it to collapse — Defendants not liable.
This was an action for damages arising from the shipment of a cargo of peat moss. The plaintiffs had guaranteed a maximum stowage factor, but after heavy rain prior to and during loading the stowage factor was much lower. When so advised, the captain modified his stowage plan. During loading a bulkhead collapsed. The cargo was discharged onto a gravel surface. The plaintiffs alleged that the defendants had failed in their obligations to ensure that the vessel was seaworthy and to safely load, stow, handle, care for, carry, discharge and deliver their cargo. The defendants counterclaimed, alleging that the damage to their ship was due to the plaintiffs’ failure to inform them of the dangerous nature of the cargo.
Pemtex had sold the peat moss to Lantana FOB. Pursuant to the contract of sale, Perlite chartered the ship as an agent for its undisclosed principal, Lantana. Italmare, as shipowners, and Perlite, as charterers, had entered into a charter-party in the Gencon form. Clause 2 provided that the shipowner would only be liable for loss or damage caused by negligent or improper stowage (unless the stowage was performed by the shippers or their stevedores), by the personal want of due diligence on the part of the owners or their managers to make the ship in all respects seaworthy, or by the personal act or default of the owners or their managers. It also provided that the shipowners were not liable for any loss or damage to cargo “arising from any other cause whatsoever”, including the fault or negligence of the captain or crew and of servants or agents. Clause 16 provided that the cargo was to be loaded and trimmed “free of risk and expense to the vessel”. Clause 19 provided that the charterers were liable for any damage caused to the vessel by the stevedores. Clause 32 incorporated into the charter-party and all the bills of lading issued under the charter-party the New Jason Clause, new Both-to-Blame Collision Clause, Chamber of Shipping War Risk Clauses 1 & 2, and the P& I Bunkering Clause. It also provided that the Canadian and U.S. Clauses Paramount shall be “incorporated in all bills of lading issued hereunder”.
Canada Shipping Act, section 2 defines “dangerous goods” as goods that by reason of their nature, quantity or mode of stowage are liable to endanger the lives of the passengers or imperil the ship.
The issues were whether Lantana was a party to the charter-party; whether Perlite was bound by the terms and conditions of the charter-party; whether the charter-party excluded the defendants from liability; whether the master of the ship was at fault for accepting to load the peat moss and/or in failing to stop the loading operation; whether the peat moss was a dangerous cargo; and, whether Lantana and Perlite were responsible for the damages caused by the cargo.
Held, the action should be dismissed; the counterclaim against Perlite and Lantana should be allowed; the counterclaim against Pemtex should be dismissed.
Lantana was Perlite’s undisclosed principal and as such bound by the terms and conditions of the charter-party. It does not matter whether an agent discloses the identity of his principal unless the other party is unwilling to treat an undisclosed principal as a party to the contract. Nothing indicated to Perlite that Italmare was not willing to treat its undisclosed principal as a party to the contract. Also, Pemtex and Lantana, the parties to the contract of sale, intended that Perlite, acting on behalf of Lantana, would be shipper of the cargo in so far as the contract of carriage was concerned, and that bills of lading would be taken out by Perlite, either in its own name or in the name of Lantana. It is not unusual in a sale made on FOB terms for the buyer to assume the role of shipper of the cargo. Perlite was also bound by the terms and conditions of the charter-party. Perlite contracted with Italmare and never advised Italmare that it was acting on behalf of an undisclosed principal. Pemtex was not a party to the contract of carriage. It fulfilled its obligations under the contract of sale by putting the cargo on the ship for Lantana. Pemtex’ recourse was in tort. Under the FOB term the seller must pay the cost and bear the full liability for the cost and safety of the goods until the point of their passing the ship’s rail, at which time delivery is complete and the risk of loss in the goods is transferred to the buyer. The risk of loss of the peat moss loaded on the ship was transferred to Lantana. Title and risk to the cargo which remained on the dock remained with Pemtex.
There were no reasons for not giving effect to the clear language of Clause 2. There is no material difference between Clause 13 of the Baltime form and Clause 2 of the Gencon form. The shipowners will only be liable, in addition to their liability for improper stowage, for loss of or damage to the plaintiffs’ cargo if the loss or damage results from their personal want of due diligence in making the ship seaworthy or where the loss or damage to cargo results from a personal act or default on their part or on the part of their managers. The shipowners will incur no liability for any loss or damage to cargo caused by the fault or negligence of their servants and agents including that of their captain and crew. With respect to loss or damage arising from the unseaworthiness of the vessel, the clause provides that the shipowners shall be liable if, by reason of personal want of due diligence, they fail to make the vessel seaworthy. The purpose of Clause 2 of the Gencon charter-party is to relieve the shipowners from their absolute obligation to provide a seaworthy vessel. Clause 16 rendered the charterers liable for loss or damage arising from improper stowage. The combined effect of Clauses 16 and 19 was to relieve the shipowners of any liability arising from the loading and stowage of the cargo on board their ship.
The Hague Rules were not incorporated in the charter-party. There was no provision in the charter-party stipulating that the clauses paramount were part of the charter-party, except to the extent that Clause 32 provides that the clauses paramount shall be incorporated in all bills of lading issued pursuant to the charter-party. Thus, the relationship between the charterers and the owners was governed by the terms and conditions of the charter-party only.
The burden of proving that shipowners are in breach of contract rests upon the charterers. Once the plaintiffs show that the cargo was received by the shipowners and damage caused thereto, the burden falls upon the owners to prove that, in effect, the damages resulted from a cause for which they are not liable under Clause 2.
The plaintiffs’ loss was caused by the fact that the peat moss exerted forces on the ship’s bulkhead which caused it to collapse. The defendants were not responsible for that cause. The plaintiffs’ loss did not result from the ship’s unseaworthiness or from a personal act or default by the shipowners or their managers.
The moisture content of the cargo exceeded 90% of the flow moisture point, an amount greater than that deemed safe by the Bulk Cargo Code for carriage by sea in general cargo vessels. The peat moss loaded on board the ship was “liable to endanger the lives of crew members” and “to imperil the ship”. The captain was not at fault in accepting to load the cargo, and in not stopping the loading operation. He did not know and could not have known of the danger posed by the peat moss. He expected a very light cargo. Only after loading had begun did he become concerned with the possibility that the peat moss might shift, but he was never concerned that the peat moss might endanger his ship because of the hydrostatic pressure that it might create. The plaintiffs ought to have known the characteristics of their cargo and should have informed the shipowners of those characteristics prior to the loading on board of their cargo. Neither the defendants nor the captain could be blamed for not being knowledgeable with respect to this cargo.
Neither the shippers nor the carrier were aware of the dangers posed by their cargo to the ship. The general rule at common law is that the shipper impliedly warrants not to ship dangerous goods without first notifying the carrier of their particular and/or peculiar characteristics of which he is aware, or deemed to be aware. Failure to warn of the known dangerous propensities of the cargo will result in liability for damage to the ship and other cargo. That liability is varied where the carrier, members of the crew or shipowners ought reasonably to have known of the dangerous nature of the cargo. The exception is based on consent to some of the risks associated with the shipment. Even if the plaintiffs were not aware of the dangerous nature of their cargo, they were liable for the damages caused to the ship.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Canada Shipping Act, R.S.C., 1985, c. S-9, s. 2 “dangerous goods” or “goods of a dangerous nature”.
Carriage of Goods by Water Act, R.S.C. 1970, c. C-15.
International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading and Protocol of Signature, Brussels, August 25, 1924 (Hague Rules), Art. 4, R. 6.
CASES JUDICIALLY CONSIDERED
APPLIED:
Teheran-Europe Company, Ltd. v. S. T. Belton (Tractors), Ltd., [1968] 2 Lloyd’s Rep. 37 (C.A.); Pyrene Co. Ld. v. Scindia Navigation Co. Ld., [1954] 2 Q.B. 402; Gesellschaft Burgerlichen Rechts and Others v. Stockholms Rederiaktiebolag Svea, [1965] 2 Lloyd’s Rep. 546 (Q.B. (Com. Ct.)); Sucrest Corp. v. M/V Jennifer, 455 F.Supp. 371 (N.D. Me. 1978); Brass v. Maitland (1856), 119 E.R. 940 (Q.B.); Bamfield v. Goole and Sheffield Transport Company, [1910] 2 K.B. 94 (C.A.); Giannis N.K., The, [1994] 2 Lloyd’s Rep. 171 (Q.B. (Com. Ct.)); Government of Ceylon v. Chandris, [1965] 2 Lloyd’s Rep. 204 (Q.B. (Com. Ct.)); Canadian Transport Co., Ld. v. Court Line, Ld., [1940] A.C. 934 (H.L.); Itoh& Co. Ltd. v. Atlantska Plovidba (The Gundulic), [1981] 2 Lloyd’s Rep. 418 (Q.B. (Com. Ct.)); Great Northern Railway Co. v. L. E. P. Transport and Depository, [1922] 2 K.B. 742 (C.A.).
DISTINGUISHED:
Anglo-Saxon Petroleum Company, Ltd. v. Adamastos Shipping Company, Ltd., [1958] 1 Lloyd’s Rep. 73 (H.L.).
CONSIDERED:
Mitchell, Cotts & Co. v. Steel Brothers & Co., [1916] 2 K.B. 610; Athanasia Comninos and Georges Chr. Lemos, The, [1990] 1 Lloyd’s Rep. 277 (Q.B. (Com. Ct.)); Amphion, The, [1991] 2 Lloyd’s Rep. 101 (Q.B. (Com. Ct.)).
REFERRED TO:
Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd., [1959] A.C. 576 (P.C.); Photo Production Ltd. v. Securicor Transport Ltd., [1980] A.C. 827 (H.L.); Stock v. Inglis (1884), 12 Q.B.D. 564 (C.A.); Wilson (J. Raymond) & Co., Ltd. v. Norman Scratchard, Ltd. (1944), 77 Ll. L. Rep. 373 (K.B.); Overseas Transportation Company v. Mineralimportexport (The Sinoe), [1972] 1 Lloyd’s Rep. 201 (C.A.); Williams v. East India Company (1802), 102 E.R. 571 (K.B.); Acatos v. Burns (1878), 3 Ex. D. 282 (C.A.); Transoceanica Society Italiana di Navigazione v. Shipton & Sons, [1923] 1 K.B. 31.
AUTHORS CITED
Cooke, Julian et al. Voyage Charters. London: Lloyd’s of London Press, 1993.
Sassoon, David M. C.I.F. and F.O.B. Contracts, 3rd ed. London: Stevens & Sons, 1984.
Tetley, William. Marine Cargo Claims, 3rd ed. Montréal: Y. Blais, 1988.
Wilson, John F. Carriage of Goods by Sea. London: Pitman, 1988.
ACTION for damages arising from damage to a cargo of peat on the ground that the defendants had failed to ensure that the vessel was seaworthy and to safely load, stow, handle, care for, carry, discharge and deliver their cargo; counterclaim alleging that the damage to the ship was due to the plaintiffs’ failure to inform them of the dangerous nature of the cargo. Action dismissed; counterclaim allowed.
COUNSEL:
Nick Spillane for plaintiffs.
John G. O’Connor for defendants.
SOLICITORS:
McMaster, Meighen, Montréal, for plaintiffs.
Langlois Robert, Québec City, for defendants.
The following are the reasons for judgment rendered in English by
Nadon J.:
EDITOR’S NOTE #1
The Executive Editor has determined that the 100-page reasons for judgment herein should be published as abridged. This decision is of interest for its exposition on the Gencon and Baltime forms of charter-party with respect to relieving shipowners from the obligation to provide a seaworthy vessel and its review of the law as to the shipper’s implied warranty not to ship dangerous goods without notifying the carrier of their peculiar characteristics. Three portions of the reasons have been deleted and in place of each a very brief summary has been prepared. The three omitted portions are: (1) the nature of the proceedings and facts of the case; (2) review of the evidence as to why the bulkhead collapsed and (3) plaintiffs’ loss and quantum.
EDITOR’S NOTE #2
The plaintiffs’ claim against the defendants was for damages arising from the shipment of a cargo of peat moss. As the cargo was being loaded, a bulkhead between two of the holds collapsed. This caused 50% of the cargo in hold number one to shift into number two. In view of the ship’s condition, the Canadian Coast Guard would not permit the vessel to sail and the cargo had to be unloaded. The plaintiffs said that the ship was unseaworthy and unfit for the voyage and that defendants failed to safely load and stow the cargo. In their counterclaim, the defendants alleged damage to their ship due to plaintiffs’ breach of the contract of carriage by failing to inform them of the dangerous nature of the cargo.
Perlite and Pemtex, two of the plaintiffs, are Quebec corporations while Can-Flo (operating as Lantana Peat & Soil) was incorporated under the laws of Florida. Perlite was dormant; Pemtex had been incorporated to exploit a peat bog and ship the moss to Florida. Lantana’s business is blending peat moss with soil for sale to golf courses and other customers. Peat is decomposed and partly carbonized vegetable matter which is cut out from bogs. Formerly, the peat had been shipped by truck. This was the first time that it was to have been carried by bulk tanker. The principals of the plaintiffs had no expertise in the area of carriage of goods by sea but one of them, Germain, guaranteed the shipbroker that the stowage factor of the peat moss would not exceed 55 cubic feet per metric ton. The cargo to be shipped was described in the charter-party as “bulk harmless humus”. The cargo was to be loaded “free of risk and expense to the vessel”. There was heavy rain when the peat moss was being transported to the dock and during the loading process. The ship’s captain had expected a cargo dry like saw dust but noticed that the cargo being loaded was “absolutely wet”. He further observed that it was not peaking as would a grain cargo but was flat. He became concerned that the cargo might shift. Plaintiffs then advised the captain that the stowage factor could be only 40-45 cubic feet per metric ton. The captain modified his stowage plan by loading the peat moss in alternate holds. This revised stowage plan was approved on behalf of the ship’s owners. The bulkhead suddenly gave way as loading was in progress. Plaintiffs said that their cargo became a total loss. The cargo was discharged onto a gravel surface and thereby contaminated. They could not charter another ship because of the lateness of the season. Defendants’ case was that the cargo could not be transported by bulk carrier and that it was contaminated due to plaintiffs’ failure to protect it.
ANALYSIS
1. The parties to the contract of carriage.
During the summer of 1988, Germain met Keith Cavanaugh of Gibson in order to find a suitable ship to carry peat moss to Florida. The Marina Di Alimuri was the second ship offered to Germain and his partners. It will be recalled that Gibson initially offered the Frota America in early August 1988 but that ship was not found suitable. When Gibson contacted Germain in early October with respect to the Marina Di Alimuri, Germain, after consulting with Caruso, advised Gibson that “they” would take her.
As a result, a charter-party in the Gencon form dated October 4, 1988, was entered into between Italmare, as owners of the ship, and Perlite, as charterers. Even though the charter-party had not yet been signed by Perlite when the bulkhead collapsed on October 28, 1988,[1] I have no hesitation in concluding that the terms and conditions thereof are binding upon owners and charterers.
As I have already stated, Gibson, on October 4, 1988, after speaking to Germain, confirmed to the shipowners that Perlite accepted the ship. The Gibson telex sets out the essential terms of the agreement reached by the parties. Prior to the incident and at least by October 18, Germain and Caruso had seen the charter-party and had, in my view, accepted the terms thereof. In that respect, I wish to refer to Clause 4 of the contract of sale which reads as follows:
The charter contract between Italmare SPA, Italy, owners and LES INDUSTRIES PERLITE INC., Ville St-Pierre, Quebec, charterers, of which one copy is in the hands of LANTANA PEAT & SOIL shall be an integral part of this agreement, including the different attached clauses, above contract already approved by you.
In other words, as of October 18, 1988, Germain and Caruso had copies of the charter-party and had, in effect, agreed to be bound by the terms and conditions thereof.
The defendants submit that the charter-party was entered into by Perlite on behalf of Lantana. In support of this submission, counsel for the defendants referred me to Clause 2 of the contract of sale between Pemtex and Lantana. That part of Clause 2 which is relevant for counsel’s submission reads as follows:
Price for the freight: 7.50 $ U.S. funds per metric ton, fully payable on signing of Bills of Lading to “LES INDUSTRIES PERLITE INC.” who have chartered the vessel for LANTANA PEAT & SOIL and according to your instructions and already accepted by you.
This, counsel submits, clearly indicates that Lantana had authorized Perlite to conclude the charter-party on its behalf. I agree with counsel’s submission.
It cannot be doubted that Lantana authorized Perlite to enter on its behalf into the charter-party contract. Clause 2 of the contract of sale makes it abundantly clear that Lantana accepted the terms and conditions of the charter-party. I should also add that the terms and conditions of the charter-party were incorporated into the contract of sale between Pemtex and Lantana.
I have come to the conclusion that Perlite did, in fact, charter the ship as an agent for its undisclosed principal, Lantana. In reaching this conclusion, I have taken into consideration Clause 2 of the contract of sale and the overall arrangements between Perlite, Pemtex and Lantana.
Germain personally owned the “claims” to prospect and extract the peat from the peat bog. Germain leased these rights to Terrassement Mingan which then undertook to extract the peat and ship it from the peat bog to the loading port. Després testified that, following the extraction and the shipping of the peat to Sept-Îles, Terrassement Mingan immediately sold the peat to Pemtex. Consequently, when the peat arrived at the IOC dock, Pemtex was the owner thereof. It should be recalled that, according to Després, Pemtex had been incorporated[2] to sell and ship peat to Lantana in Florida. That was its business.
It will also be recalled that Perlite, according to Germain who owned all of its shares, was a dormant company. Perlite was neither the vendor nor the buyer of the peat. Perlite was, in effect, Germain’s personal company. Neither Després nor Caruso had any interest in Perlite.
Clause 2 of the contract of sale stipulates what should be obvious and that is that Perlite, in chartering the ship, was acting as agent on behalf of a principal. Perlite could have acted only on behalf of either Pemtex or Lantana, the principals to the contract of sale and the parties interested in the peat. In my view, through Clause 2 of the contract of sale, Pemtex and Lantana put down in words what they understood to be Perlite’s role in chartering the ship. Clause 2 of the contract of sale clearly stipulates that Perlite chartered the ship for Lantana pursuant to Lantana’s instructions.
I am therefore of the view that Lantana was Perlite’s undisclosed principal and that, consequently, it is bound by the terms and conditions of the charter-party. In Teheran-Europe Company, Ltd. v. S. T. Belton (Tractors), Ltd., [1968] 2 Lloyd’s Rep. 37 (C.A.), at page 41, Lord Diplock stated:
Where an agent has … authority and enters into a contract with another party intending to do so on behalf of his principal, it matters not whether he discloses to the other party the identity of his principal, or even that he is contracting on behalf of a principal at all, if the other party is willing or leads the agent to believe that he is willing to treat as a party to the contract anyone on whose behalf the agent may have been authorized to contract. In the case of an ordinary commercial contract such willingness of the other party may be assumed by the agent unless either the other party manifests his unwillingness or there are other circumstances which should lead the agent to realize that the other party was not so willing.
In the case at bar, there are, in my view, no circumstances which would have led Perlite to conclude that Italmare was not willing to treat its undisclosed principal as a party to the contract.
It is also my view that the parties to the contract of sale intended that Perlite, again acting on behalf of Lantana, would be shipper of the cargo in so far as the contract of carriage was concerned and that bills of lading would be taken out by Perlite either in its own name or in the name of Lantana. This arrangement is not surprising in view of the fact that Lantana was purchasing the peat on FOB terms. In Pyrene Co. Ld. v. Scindia Navigation Co. Ld., [1954] 2 Q.B. 402, at page 424,[3] Devlin J. explained that it was not unusual in a sale made on FOB terms, for the buyer to assume the role of shipper of the cargo. His explanation is as follows:
The f.o.b. contract has become a flexible instrument. In … the classic type … for example, in Wimble, Sons & Co. Ld. v. Rosenberg & Sons, the buyer’s duty is to nominate the ship, and the seller’s to put the goods on board for account of the buyer and procure a bill of lading in terms usual in the trade. In such a case the seller is directly a party to the contract of carriage at least until he takes out the bill of lading in the buyer’s name. Probably the classic type is based on the assumption that the ship nominated will be willing to load any goods brought down to the berth or at least those of which she is notified. Under present conditions, when space often has to be booked well in advance, the contract of carriage comes into existence at an earlier point of time. Sometimes the seller is asked to make the necessary arrangements; and the contract may then provide for his taking the bill of lading in his own name and obtaining payment against the transfer, as in a c.i.f. contract. Sometimes the buyer engages his own forwarding agent at the port of loading to book space and to procure the bill of lading; if freight has to be paid in advance this method may be the most convenient. In such a case the seller discharges his duty by putting the goods on board, getting the mate’s receipt and handing it to the forwarding agent to enable him to obtain the bill of lading.
David M. Sassoon in C.I.F. and F.O.B. Contracts (3rd ed.), British Shipping Laws, Vol. 5, 1984, Stevens & Sons, at page 388, paragraph 511, sets out the duties of seller and buyer under FOB contracts pursuant to the definition of the International Chamber of Commerce. The learned author describes the buyer’s first duty as follows:
1. At his own expense, charter a vessel or reserve the necessary space on board a vessel and give the seller due notice of the name, loading berth and delivery dates to the vessel.
The learned author also states that the buyer must bear all costs and risks from the time when the cargo has passed the ship’s rail at the port of shipment. That is effectively what, in effect, the contract of sale between Pemtex and Lantana provides at Clause 5 thereof. The contract of sale also required Lantana to reimburse the freight money paid by Perlite in connection with the charter-party.
As a result, I agree with the defendants that Lantana is a party to the charter-party contract entered into by Perlite.
I am also of the view that Perlite is bound by the terms and conditions of the charter-party. Perlite contracted with Italmare and never informed, nor advised Italmare that it was acting on behalf of an undisclosed principal. Even though the charter-party was only signed by Perlite after the collapse of the bulkhead, I am still of the view that Perlite is a party to the contract. When Germain signed the charter-party for Perlite, he signed it without any qualification whatsoever.
In so far as Pemtex is concerned, my view is that it was not a party to the contract of carriage. Pemtex fulfilled its obligations under the contract of sale by putting the cargo on board the ship for the account of Lantana. Consequently, Pemtex’s recourse, if any, is one in tort.
2. Ownership of the cargo.
When the bulkhead collapsed, 10,534.3 metric tons of peat moss had already been loaded on the ship. There remained approximately 13,000 metric tons on the IOC dock waiting to be loaded.
As I have already said, Pemtex sold the peat moss to Lantana on FOB Sept-Îles terms. The purchase price of the cargo was payable to Pemtex upon signing of the bills of lading. In my view, Pemtex and Lantana entered into a true FOB contract which David M. Sassoon, In C.I.F. and F.O.B. Contracts, supra, at page 331, paragraph 438, explains as follows:
In both judgments[4] the two basic features of the f.o.b. term are outlined, namely, that (a) the seller must pay the cost and bear the responsibility of putting goods “free on board,” in other words, bear full liability for the cost and safety of the goods until the point of their passing the ship’s rail, and (b) that upon this being accomplished delivery is complete and the risk of loss in the goods is there and then transferred to the buyer.
I am therefore of the view that the risk of loss in respect of the 10,534.3 metric tons loaded on the ship was transferred to Lantana when the goods were loaded. With respect to the cargo which remained on the dock, I am of the view that title and risk remained with Pemtex.
3. The plaintiffs’ action.
a) The charter-party contract.
As I have already stated, Perlite and Lantana are bound by the terms and conditions of the charter-party dated October 4, 1988, pursuant to which Italmare, as owner of the ship, agreed and undertook to carry the peat moss cargo from Sept-Îles to Port Everglades, Florida.
In their statement of claim, the plaintiffs allege that their loss results from the unseaworthiness of the ship and that the defendants failed in their obligation to insure that the ship was, in all material respects, seaworthy and fit for the intended voyage. The plaintiffs further allege that the defendants failed in their duty to safely load, stow and care for of the plaintiffs’ cargo. Specifically, the plaintiffs allege that the bulkhead between holds number 1 and 2 collapsed because it was of insufficient strength in that the bulkhead was corroded to such an extent that it could not withstand forces which a seaworthy bulkhead should have withstood.
On the other hand, the defendants, in addition to denying all of the plaintiffs’ allegations, counterclaim against the plaintiffs and allege that the damages caused to their ship result from the plaintiffs’ breach of charter in that the plaintiffs loaded, without having given them proper notice, a cargo of a dangerous nature. I will deal separately in another section with the defendants’ counterclaim. The present section will be restricted to the plaintiffs’ action against the defendants.
In view of the plaintiffs’ allegations, the following clauses of the charter-party are relevant:
2. Owners are to be responsible for loss of or damage to the goods or for delay in delivery of the goods only in case the loss, damage or delay has been caused by the improper or negligent stowage of the goods (unless stowage performed by shippers or their stevedores or servants) or by personal want of due diligence on the part of the Owners or their Manager to make the vessel in all respects seaworthy and to secure that she is properly manned, equipped and supplied or by the personal act or default of the Owners or their Manager.
And the Owners are responsible for no loss or damage or delay arising from any other cause whatsoever, even from the neglect or default of the Captain or crew or some other person employed by the Owners on board or ashore for whose acts they would, but for this clause, be responsible or from unseaworthiness of the vessel on loading or commencement of the voyage or at any time whatsoever.
Damage caused by contact with or leakage, smell or evaporation from other goods or by the inflammable or explosive nature of insufficient package of other goods not to be considered as caused by improper or negligent stowage, even if in fact so caused.
...
16. The cargo is to be loaded and trimmed, free of risk and expense to the vessel at the rate of 10,000 metric tons per weather working day Sundays and holidays included.
...
19. Any damage sustained by the vessel due to negligence of Stevedores must be duly substantiated by the Master and served in writing upon the Stevedores or Charterers or their Agents. Owners to endeavour to settle any claims for Stevedore damage directly with Stevedores failing which Charterers to remain ultimately responsible.
...
32. New Jason Clause, New Both-to-Blame Collision Clause, Chamber of Shipping War Risk Clauses 1 & 2, P & I Bunkering Clause, as attached hereto, to be considered as part of this Charter Party and are to be incorporated in all Bills of Lading issued under this Charter Party. Canadian/U.S. Clauses Paramount and General Clause Paramount (1982) (as applicable) as attached hereto, to also be incorporated in all Bills of Lading issued hereunder.
Pursuant to Clause 2 of the charter-party, the owner of the ship will only be liable for loss or damage to cargo where the loss or damage results from:
a) negligent or improper stowage, unless the stowage is performed by the charterer or its stevedores;
b) unseaworthiness due to the personal want of due diligence on the part of the owners or their managers to make the ship in all respects seaworthy;
c) the personal act or default of the owners or their managers.
The clause expressly provides that the shipowners shall not be liable for any loss or damage to cargo “arising from any other cause whatsoever”, including the fault or negligence of the captain or crew and of servants or agents.
In Voyage Charters, 1993, Lloyds of London Press, the learned authors, at page 153, make the following comments in regards to Clause 2 of the Gencon charter-party.
Clause 2 of the Gencon form is undoubtedly couched in wide and general terms. The main general question is whether the courts will so construe it as to cut down the width and generality of the protection which its clear and general words appear to give shipowners. In a previous generation, one would have predicted that the width of the words would not be given their full effect.
The authors then go on to discuss the decision rendered by the Privy Council in Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd., [1959] A.C. 576, in support of their view that, “in a previous generation”, the courts would have been reluctant to give effect to the clear words of Clause 2 of the Gencon charter-party. The authors then go on to discuss the decision rendered by the House of Lords in Photo Production Ltd. v. Securicor Transport Ltd., [1980] A.C. 827 which leads them to state, at page 154, the following:
In many material respects, the thrust of the clause in that case was the same as that of Clause 2 of the Gencon form, namely to exclude liability for fault which was not personal to the owner or employer.
The House of Lords was not referred to Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd. specifically, but it seems that the approach of the Privy Council could be said to fit the description of “straining” a construction used by Lord Diplock. If the Privy Council’s approach were to be applied in the case of a claim by a charterer for the wrongful delivery of goods, the owner would probably not be protected by the provisions of Clause 2, but, on the other hand, if the Securicor approach is applied, it seems that the owners would not be liable for such loss. Given the present trend of authority, it must be said that the latter solution seems distinctly the more likely. It may therefore be that some earlier decisions in which the clear words of the clause were not applied need to be reconsidered. See also page 156 (below) on physical loss and damage “arising from any other cause whatsoever”.
In my view, there are no reasons, and none were submitted to me by counsel for the plaintiffs, for not giving effect to the clear language of Clause 2. The meaning of a clause very similar to Clause 2 of the Gencon form was examined by Mr. Justice McNair in Gesellschaft Burgerlichen Rechts and Others v. Stockholms Rederiaktiebolag Svea, [1965] 2 Lloyd’s Rep. 546 (Q.B. (Com. Ct.)) (hereinafter the Brabant). In that case [at page 546], the clause under scrutiny was Clause 13 of the Baltime form which reads as follows:
13. The Owners only to be responsible … for loss or damage to goods on board, if such … loss has been caused by want of due diligence on the part of the Owners or their Manager in making the Vessel seaworthy and fitted for the voyage or any other personal act or omission or default of the Owners or their Manager. The Owners not to be responsible in any other case nor for damage … whatsoever and howsoever caused even if caused by the neglect or default of their servants….
The facts of the case were that a ship, the Brabant, had been chartered on the Baltime form to carry woodpulp and paper. However, her crew failed to properly clean the holds of coal dust which caused damage to the plaintiffs’ cargo. The case came up before Mr. Justice McNair, of the Queen’s Bench Division (Commercial Court) by way of an agreed special case. The parties stipulated, inter alia, [at page 549] that:
The failure to remove coal dust from the vessel’s holds before loading of the woodpulp commenced was not due to any personal act omission default or negligence of the first plaintiffs (as owners) or of the second, third and fourth plaintiffs (as managers). Nevertheless by reason of the presence of such coal dust the holds were not in fact properly cleaned before the cargo of woodpulp was loaded. It was agreed that that was due to negligence on the part of the plaintiffs’ servants or agents, notwithstanding difficulties which were encountered in cleaning the holds thoroughly at the material times having regard to the prevailing low temperatures.
In other words, the parties recognized that the damage did not result from any personal fault on the part of the owners or their managers, but only of the crew. McNair J. concluded that, pursuant to Clause 13 of the Baltime form, the fault of servants or agents of the owners did not render the owners liable. Nonetheless, Mr. Justice McNair found the owners liable under another clause in the charter-party.
For the present purposes, the words of McNair J., at pages 553-555, are relevant and they are as follows:
I now turn to the construction of Clause 13, and in this connection I was referred to the illuminating judgment of Mr. Justice Walsh in the case of Westfal-Larsen& Co., A/S v. Colonial Sugar Refining Company, Ltd., [1960] 2 Lloyd’s Rep. 206, in the Supreme Court of New South Wales. Briefly, the facts of that case were as follows: The plaintiffs’ vessel, the steamship Evanger, was chartered to the defendants for the carriage of sugar on terms that provided that the vessel should be delivered in every way fitted for ordinary cargo service and included an exemption clause in the same language as Clause 13 of the present charter. On delivery, owing to the negligence of the chief engineer, but without any personal fault in the owners, the bunker fuel on board when the vessel was tendered was unsuitable, with the result that on a cargo-carrying passage she became unable to maintain steam and was drifting and out of control. In the result, general average expenses were incurred. In the action the plaintiffs claimed from the defendants the proportion of general average charges chargeable on its consignment of cargo. Their right to recover depended upon whether the owners were protected by the exemption clause, and by his judgment the learned Judge held that this claim succeeded. The most relevant passage in his judgment is to be found at p. 210. Starting toward the bottom of the first column, he says:
Clause 13 is not happily phrased and, on any view of it, it appears to contain some redundancy of expression. But I have reached the conclusion that it does relieve the plaintiff from the liability which the defendant seeks to assert against it.
I think the clause may be said to have two aspects, one of which may be called its positive aspect, and the other its negative aspect. It begins by defining an area of responsibility for delay and for loss or damage to goods. This is done in the first sentence of the clause, which is made up of two parts. One part of the area so defined consists of responsibility for delay or loss caused by want of due diligence on the part of the owners or their manager in making the vessel seaworthy. The second part consists of responsibility for any other personal act or omission or default of the owners or their manager. It is probable, I think, that if the first part of the sentence had stood alone and had been the only provision on the matter, the construction for which the defendant contends would have been put upon it. Even then, there would have been some difficulty in treating the words “the owners” as including the owners, their servants or agents, because of the inclusion in the clause of the words “or their manager”. But the difficulty would be one which ought, probably, to be resolved against the owners. But as the second part of the first sentence has been added, and uses the words “other” and “personal”, I think the conclusion must follow that the first part refers to, and is limited to personal default on the part of the owners or their manager. The first sentence, as a whole, confines the area of responsibility to a personal want of diligence on the part of the owners or their manager, and to other personal acts or omissions or defaults on their part. The area of responsibility thus defined is the whole area of responsibility, as is shown by the word “only”, and, for any default which falls outside it, the owners are not to be responsible, in the sense that they are not to be liable for loss or damage or delay resulting from such default.
If the construction put upon this clause by the learned Judge is correct—a question which for the moment I postpone—it would seem to me that to hold that the clause so construed applied on the facts of the present case to Clause 28 as I have construed it would be almost entirely to deprive the clause of any effect and, in particular, would be in direct conflict with the express terms as to risk contained in that clause. It is difficult to conceive any circumstances in which the owners could be guilty of personal default in the process of proper cleaning of the holds, which work must, of necessity, be done by the crew. With great respect to Counsel for the owners, I feel that the construction contended for by him does not give proper effect to the language used and that his examples of its limited application are farfetched and fanciful and cannot have been the intention of the draftsman of the clause. I, accordingly, conclude that Clause 28, with the construction that I have placed upon it, prevails over Clause 13, accepting for the purpose of this branch of the argument that the judgment of Mr. Justice Walsh is correct. On this view the judgment of Mr. Justice Wright in the case of The Istros (Owners) v. F. W. Dahlstroem & Co., [1931] 1 K.B. 247; (1930) 38 Ll. L.Rep. 84, is distinguishable, as in that case no question of conflict between printed clause and typed or written clause arose.
Mr. Kerr, on behalf of the defendants, however, advancing an argument that the defendants could succeed on Clause 13 without any reliance upon Clause 28, submitted, (1) that the decision of Mr. Justice Walsh in the Westfal-Larsen case was wrong and should not be followed, and (2) that on the true construction of Clause 13 the plaintiffs on the facts stated should be held liable for damage to the cargo by reason of the uncleanliness of the holds and cargo spaces without any reliance upon Clause 28. The argument in support of this submission ran on the following lines: (1) unfitness of the holds and cargo spaces to receive the contemplated cargo at the time of loading constituted a breach of the warranty of seaworthiness, absolute or qualified. This point I accept.
(2) That the decision of the House of Lords in Riverstone Meat Co. Pty. Ltd. v. Lancashire Shipping Co. Ltd. (The Muncaster Castle), [1961] A.C. 807, that the obligation under the Carriage of Goods by Sea Act, 1924, incorporating the Hague Rules, to make the ship seaworthy is a personal obligation placed upon the owners which they cannot delegate. See in particular the speech of Lord Keith of Avonholm, at p. 871, where he says:
… The obligation is a statutory contractual obligation …. There is nothing, in my opinion, extravagant in saying that this is an inescapable personal obligation. …
There are passages in the speeches of the other learned Judges which were also relied upon in this respect. I accept that that is the effect of that decision.
The third point was this, that the reasoning of Mr. Justice Walsh, in holding that the phrase in Clause 13 “want of due diligence” on the part of the owners to make the ship seaworthy referred only to personal default of the owners in performing this obligation to exercise due diligence, was erroneous, and that his judgment would have been in favour of the defendants had the decision in the Muncaster Castle case by the House of Lords been made at the date of his judgment.
In my judgment, the fallacy in this submission is that it fails to realize that a breach of personal obligation which cannot be delegated may arise either by personal default on the part of the person subject to that obligation (in this case, the owners) or by default on the part of the servants or agents whom the owners employ to perform the work involved in the obligation. The submission confuses the obligation which is personal to the owners with the performance of that obligation which may or may not be personal. (See the speech of Lord Wright in Wilsons & Clyde Coal Company, Ltd. v. English, [1938] A.C. 57, at pp. 80 and 81.) Furthermore, I consider that the conclusion to which Mr. Justice Walsh arrived is reinforced by the words immediately following, namely, “any other personal act or omission or default of the Owners or their Manager”. I consider that these words throw a clear light on the meaning in this clause of the preceding words, and I reject the argument that the words whose primary effect is to add other categories for non-excepted personal acts cannot have the effect of cutting down the generality of the preceding words.
In my judgment, accordingly, I accept as accurate the reasoning of Mr. Justice Walsh and reject the submission that on the true construction of Clause 13 alone the plaintiffs should be held liable under Clause 13, even if the construction which I have placed upon Clause 28 is erroneous.
I agree with Mr. Justice McNair that Walsh J.'s reasoning regarding Clause 13 of the Baltime form charter-party is correct. In my view, there is no material difference between Clause 13 of the Baltime form and Clause 2 of the Gencon form. Consequently, on that view, the owners of the ship will only be liable (in addition to their liability for improper stowage), for loss of or damage to the plaintiffs’ cargo if the loss or damage results from their personal want of due diligence in making the ship seaworthy or where the loss or damage to cargo results from a personal act or default on their part or on the part of their managers. The shipowners will incur no liability for any loss or damage to the cargo caused by the fault or negligence of their servants and agents, including the fault and negligence of their captain and crew. Put another way, the shipowners will not be held liable by reason of vicarious liability.
With respect to loss or damage arising from the unseaworthiness of the vessel the clause provides that the shipowners shall be liable if, by reason of personal want of due diligence, they fail to make the vessel seaworthy. As the authors of Voyage Charters, supra, state at pages 159-160, the purpose of Clause 2 of the Gencon charter-party is to relieve the shipowners from their absolute obligation to provide a seaworthy vessel. The learned authors write the following:
The formulation of Clause 2 of the Gencon charter, being the mix of acceptance and exclusion of responsibility, probably owes much to the fact that the common law imposes an implied warranty of seaworthiness upon the owners of seagoing cargo-carrying vessels, subject to any particular express terms in particular contracts of carriage.
Thus, without Clause 2, owners would be under an absolute obligation to provide a seaworthy vessel for the carriage in question. It is an absolute obligation and not merely an obligation to exercise due diligence to make the vessel seaworthy, but on the other hand, it does not amount to a guarantee that the vessel will carry the goods safely to the chartered destination.
For a vessel to be seaworthy for the purposes of the obligation and exemption in question, she and her equipment must be reasonably fit to withstand the perils which may foreseeably be encountered on the voyage and also fit to keep the cargo reasonably safe from those perils: The Good Friend [1984] 2 Lloyd’s Rep. 586 and The Benlawers [1989] 2 Lloyds’s Rep. 51.
The perils to be encountered obviously include marine perils but they are not limited to those perils. As cargoworthiness is an aspect of seaworthiness, a seaworthy vessel must be reasonably fit to receive and carry the cargo tendered so that the perils also include storage perils, but they may even include the operation of sanitary or port regulations, where the enforcement of those regulations will inevitably cause damage to the cargo.
A few words regarding the shipowners' potential liability for improper or negligent stowage of the goods. Clause 2 of the Gencon form provides that owners shall be liable for improper or negligent stowage of the goods unless the stowage is performed by the shippers, or their stevedores or servants.
Clause 16 provided that the peat moss cargo was to be loaded on board the ship and trimmed “free of risk and expense to the vessel”. In my view, the effect of these words is to render the charterers herein liable for loss or damage arising from improper stowage. I do not believe that that proposition can be the subject of much debate. In Government of Ceylon v. Chandris, [1965] 2 Lloyd’s Rep. 204 (Q.B. (Com. Ct.)), Clause 14 of the charter-party provided that the charterers were to appoint stevedores both at the port of loading and at the port of discharge and Clause 16 provided that the cargo was to be loaded, discharged, trimmed and stowed, free of any expense to owners. In examining the effect of these clauses upon the relationship between the charterers and the owners, Mr. Justice Mocatta stated, at page 213, the following:
Mr. Staughton based this part of his argument on the provisions of Clauses 14 and 16 of the charter, the appointment and payment of the stevedores by the claimants [the charterers], and the decisions in Brys & Gylsen, Ltd. v. J. & J. Drysdale & Co., (1920) 4 Ll.L.Rep. 24, and Canadian Transport Company, Ltd. v. Court Line, Ltd., [1940] A.C. 934; (1940) 67 Ll.L. Rep. 161. Mr. Gratiaen, for the claimants, conceded that by reason of those decisions he could not contend that the claimants were not responsible, as between themselves and the respondent [the shipowner], for the tearing and removal of the bags by the stevedores. In my judgment, this concession was rightly made, and I also consider that Mr. Staughton was correct in submitting that those acts of the stevedores constituted breaches of contract as between the claimants and the respondent.
In Canadian Transport Co., Ld. v. Court Line Ld., [1940] A.C. 934 (H.L.), the relevant clauses in the charter-party provided the following [at page 937]:
… charterers are to load, stow and trim the cargo at their expense, under the supervision of the captain.
The House of Lords held, absent evidence of supervision by the captain, the charterers responsible for negligent stowage. With respect to the words “under the supervision of the captain”, Lord Atkin stated, at pages 937-938:
The supervision of the stowage by the captain is in any case a matter of course; he has in any event to protect his ship from being made unseaworthy; and in other respects no doubt he has the right to interfere if he considers that the proposed stowage is likely to impose a liability upon his owners. If it could be proved by the charterers that the bad stowage was caused only by the captain's orders, and that their own proposed stowage would have caused no damage no doubt they might escape liability.
Further, Clause 19 of the subject charter-party makes it clear that liability for any damage caused to the vessel by the stevedores rests with the charterers.
Thus, the combined effect of Clauses 16 and 19 is to relieve the shipowners of any liability arising from the loading and stowage[5] of the cargo on board their ship. (See in that sense the decision of the English Court of Appeal in Overseas Transportation Company v. Mineralimportexport (The Sinoe), [1972] 1 Lloyd’s Rep. 201.) However, it goes without saying that if Captain Garipoli interfered with the charterers’ stowage arrangements and that by reason thereof, damages were caused, then the defendants might be responsible. I will return to this issue later on.
The burden of proving that owners are in breach of contract rests upon the charterers. I find support for this view in Voyage Charters, supra, where, at page 182, the authors of the section on American law write the following:
The burden of proof in connection with claims for cargo loss or damage will usually depend on whether the charter contains a clause paramount which incorporates COGSA. In the case of a Gencon form of charter which does not contain a clause paramount, the burden of proving that cargo loss or damage or delay resulted from an unseaworthy condition is on the charterer. The same burden of proof rules will apply when a bill of lading has been issued for the cargo, but serves only as a receipt and document of title and not as a contract of carriage.
In Sucrest Corp. v. M/V Jennifer, 455 F.Supp. 371 (N.D. Me. 1978), at pages 380-381, the U.S. District Court, District of Maine, held that, where the charter-party (in the Gencon form) was the governing contract, the burden of proving breach of contract rested on the charterer. (See pages 380-381, footnote 16.)
However, proving that owners are in breach of the charter-party does not mean that the plaintiffs have to prove that the damage occurred without any personal want of due diligence on the part of the owners or their managers, or on account of the owners’ personal act or default or that of their managers. In my view, once the plaintiffs have shown that the cargo was received by the shipowners and damages were caused to their cargo, the burden is then upon the owners to prove that, in effect, the damages result from a cause for which they are not liable under Clause 2. In Voyage Charters, supra, the authors at page 174 thereof put it as follows:
In that the clause is essentially an exclusion clause, the burden of proving entitlement to rely upon it lies upon the owner. In order to discharge that burden, he must establish that the loss or damage was not caused by want of due diligence on his part or the part of the controllers of his vessel’s managers or, presumably, no other personal act or default: see The Roberta (1938) 60 Ll.L. Rep. 84. In practical terms, he must prove first what the cause of the loss, damage or delay in issue was and then prove that the cause was not the result of any personal act, neglect or default of himself or his managers, and in so doing, he must prove who was the “controlling” mind, or he must prove that, whatever the cause was, it could not possibly have been due to any personal act or default of himself or his managers: see generally the reasoning of Hobhouse J. in Akts. de Danske Sukkerfabrikker v. Bajamar Cia Nav. S.A. (The Torenia) [1983] 2 Lloyd’s Rep. 210, at pages 230-231.
In Itoh & Co. Ltd. v. Atlantska Plovidba (The Gundulic), [1981] 2 Lloyd’s Rep. 418, the English Queen’s Bench Division (Commercial Court) (Mr. Justice Lloyd) was faced with a claim by the owners of a cargo of rape-seed damaged while carried on board the ship Gundulic from Hamburg to Japan. The owners of the cargo had chartered the vessel pursuant to a charter-party in the Gencon form. There was no dispute with respect to the cause of damage i.e., seawater. There was a dispute, however, with respect to when and how the seawater had entered into the vessel. The plaintiffs contended that the water entered as a result of defects in the hatch covers whereas the shipowners argued that the seawater entered as a result of negligence on the part of their crew in failing to close the hatch covers properly.
Mr. Justice Lloyd held that the plaintiffs were right that seawater had entered by reason of defects in the hatch covers which should have been corrected prior to the commencement of the voyage. Mr. Justice Lloyd went on to find the owners liable and stated that the owners had conceded that the burden was upon them to demonstrate that the damage had occurred “without any personal want of due diligence” on their part. Mr. Justice Lloyd held that the shipowners had failed to discharge their burden.
During his arguments, counsel for the plaintiffs submitted that the effect of Clause 32 of the charter-party was to incorporate into the charter-party the Canadian Carriage of Goods by Water Act, R.S.C. 1970, c. C-15. As I read Clause 32, it purports to incorporate into the charter-party the New Jason Clause, new Both-to-Blame Collision Clause, Chamber of Shipping War Risk Clauses 1 and 2, and the P & I Bunkering Clause. With respect to the Canadian and U.S. Clauses Paramount, Clause 32 provides that they shall be “incorporated in all bills of lading issued hereunder”.
In Anglo-Saxon Petroleum Company, Ltd. v. Adamastos Shipping Company, Ltd., [1958] 1 Lloyd’s Rep. 73, the House of Lords decided that the Hague Rules had been incorporated into the charter-party by reason of Clause 52 thereof which provided the following [at page 73]:
52. It is agreed that the … Paramount Clause … as attached, [is] to be incorporated into this charter-party.
There is no clause equivalent to the above clause in the subject charter-party. Although clauses paramount are attached to the charter-party, there is no provision in the charter-party stipulating that the clauses paramount are part of the charter-party except to the extent that Clause 32 provides that the clauses paramount shall be incorporated in all bills of lading issued pursuant to the charter-party.
Consequently, I am of the view that the Hague Rules [International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading and Protocol of Signature, Brussels, August 25, 1924] were not incorporated in the present charter-party. Thus, the relationship between the charterers and the owners is governed by the terms and conditions of the charter-party only. Whether the shipowners are liable for the damages claimed against them will be determined on the basis of the terms and conditions of the contract of carriage. I have already examined those terms and conditions which I consider relevant for the determination of the plaintiffs’ action.
EDITOR’S NOTE #3
Plaintiffs’ submission was that the bulkhead collapsed due to corrosion while defendants contended that the cause was the pressure created by the semi-liquid state of the cargo in number one hold. Expert evidence was called by plaintiffs to the effect that “the steel was in all probability in a weakened condition when the loading and subsequent failure occurred”. But the witness could not testify as to whether the bulkhead would have collapsed even if its thickness had not been reduced. He did testify that the peat moss could not have been safely carried by defendants’ ship in view of its high moisture content. A naval architect gave his expert opinion that the bulkhead was seaworthy and able to withstand forces for which it was designed but not those exerted by the cargo of peat moss. While the thickness of the bulkhead had been reduced some 21% by corrosion, it remained “adequate with regard to classification society standards and also on a practical point of view”. But another naval architect, called in rebuttal, was of opinion that the bulkhead was not in a seaworthy condition. His view was that with a reduction of 21%, the plating should have been replaced. Even so, this witness did not take the position that the ship could have carried peat moss with a density of 36-38 cubic feet per metric ton. The end result of both opinions was that the cargo caused damage to the ship. The moisture content of the peat moss exceeded by far the transportable moisture limit and a special ship would have been required to carry it. His Lordship concluded that the very powerful forces exerted by the cargo were the true cause of the bulkhead’s collapse.
4. Was the master of the ship at fault for accepting to load the peat moss and/or in failing to stop the loading operation?
I have come to the conclusion that the master of the ship was not at fault in either accepting to load the plaintiffs’ peat moss cargo and in continuing to load the cargo in hold No. 1.
In dealing with the defendants’ counterclaim, I shall examine the evidence which, in my view, supports this conclusion.
Conclusion on Defendants’ Liability to Plaintiffs
As a result, the plaintiffs cannot succeed on their action since I have concluded that the cause of the plaintiffs’ loss is the fact that their cargo exerted forces on the ship’s bulkhead which caused it to collapse. In my view, the defendants cannot be held responsible for that cause. I am satisfied that the plaintiffs’ loss does not result from the ship’s unseaworthiness. Consequently, I need not discuss the issue of the owners’ personal want of due diligence to make the ship seaworthy in all respects. I am also satisfied that the plaintiffs’ loss does not result from a personal act or default on the part of the owners or their managers.
I should perhaps add that had I come to the conclusion that Captain Garipoli had been at fault for loading the cargo and/or failing to stop loading, I would have held that the captain’s fault or negligence did not constitute a cause for which owners were liable under Clause 2 of the charter-party. The Clause, as I indicated earlier, specifically provides that the shipowners are not liable for loss or damage to cargo arising from the fault of the captain and the crew.
I am of that view because on October 26, 1988, Captain Garipoli called his owners to discuss the problem which he was facing at the port of loading. The owners’ representative, Captain Paturzo, authorized Captain Garipoli to get the assistance that he felt was required from the local P & I Club representative. For reasons that I shall discuss shortly, Captain Garipoli did not seek the assistance of the P & I Club. However, should I have found him to be at fault, his fault would not have been sufficient to render the defendants liable.
Finally, although Captain Garipoli interfered in the stowage of the peat moss in order to protect his ship from the danger of shifting, his interference did not cause “bad stowage”. On the contrary, on the facts of which he was aware, his decision to intervene and the course of action which he proposed were entirely reasonable and he cannot, in my view, be blamed for intervening.
EDITOR’S NOTE #4
Even if the bulkhead had collapsed as unseaworthy, plaintiffs’ action would still have to be dismissed. Plaintiffs’ submission, that the entire cargo became a total loss due to the bulkhead collapse, could not be accepted. Since the cargo had to be discharged in order to effect repairs, the shipowners notified Perlite, one of the plaintiffs, to arrange for that. But plaintiffs did nothing and the shipowners had to discharge the cargo at their own expense. Plaintiffs’ position was that the cargo was contaminated in being discharged onto a gravel surface. The entire cargo could not have been contaminated when only the bottom few inches were in contact with the gravel. The fact is that it was abandoned by plaintiffs. Plaintiffs had made no attempt to locate a dock with an asphalt surface when advised the cargo was to be discharged. The portion of the cargo still on the dock when the bulkhead collapsed also became a total loss because it was abandoned by plaintiffs. The Court was not satisfied with the evidence as to plaintiffs’ efforts to secure a replacement ship. The reason they could not get another ship was that their cargo could not be safely transported by bulk carrier. The cost of chartering a special ship would have been prohibitive. Lantana could not recover from defendants and it was conceded at trial that Perlite had suffered no loss. As for Pemtex, it owned the cargo still on the dock but it was not a party to the contract with defendants and any remedy would be in tort. Its loss did not result from the bulkhead’s collapse but from Lantana’s failure to arrange carriage of the peat moss to Florida. There was no way that Lantana could recover from defendants the cost of replacement peat moss in that the venture was doomed by the fact that the moss, in the condition that it was, could not be carried by the type of ship intended. Nor could it recover the cost of the concrete slab it had constructed to receive the peat moss. This item of damages did not flow from any breach of contract and was not foreseeable by defendants.
The Defendants’ Counterclaim
The defendants have counterclaimed against the plaintiffs in an attempt to recover the damages which they claim to have suffered as a result of the collapse of the bulkhead.
The defendants’ position is simply that the peat moss cargo, in the condition that it was when loaded on board their ship by the plaintiffs and their stevedores, was a dangerous cargo. Consequently, the defendants assert that the charterers were under an obligation to inform them of the dangerous nature of their cargo and that their failure to do so, in the circumstances of this case, renders them liable for the damages caused to the ship.
First of all, was the plaintiffs’ cargo of peat moss a dangerous cargo? Section 2 of the Canada Shipping Act [R.S.C., 1985, c. S-9] defines “dangerous goods” or “goods of a dangerous nature” as follows:
2. …
… means goods that by reason of their nature, quantity or mode of stowage are either singly or collectively liable to endanger the lives of the passengers or imperil the ship, and includes all substances determined by the Governor in Council, in regulations made by him, to be dangerous goods,
As I have already stated, Barbeau’s opinion is to the effect that the bulkhead collapsed by reason of the forces exerted upon it by the peat moss cargo. This occurred because the peat moss was in a “semi-liquid” state with a density almost as high as that of water. That fact was not, in effect, contested by the plaintiffs. As the Technitrol and SGS reports clearly demonstrate, the moisture content of the cargo exceeded 90% of the flow moisture point and thus, according to the Bulk Cargo Code and the Coast Guard, was not deemed safe for carriage by sea in a general cargo ship. Put another way, the Coast Guard would not have allowed the ship to depart with the plaintiffs’ cargo.
Section 1.7 of the Bulk Cargo Code is quite explicit in this regard and I again reproduce it:
1.7 Transportable Moisture Limit
— is the maximum moisture content of a concentrate deemed safe for carriage by sea in general cargo vessels which do not comply with the special provisions of section 6.2. It is determined as 90% of the flow moisture point.
There is therefore no doubt in my mind that the peat moss, loaded on board the ship and more particularly in hold No. 1 thereof, was “liable to endanger the lives of the crew members” and to “imperil the ship”.
During the course of his arguments, counsel for the plaintiffs took the position that Captain Garipoli should either have not loaded the plaintiffs’ cargo or that he should have at least stopped the loading operation when he became concerned. Put another way, counsel urged me to find that the real cause of the defendants’ damages was Captain Garipoli’s fault or negligence and not the dangerous nature of the peat moss cargo.
Earlier, I stated that I was of the opinion that Captain Garipoli was not at fault in accepting to load the peat moss cargo and in not stopping the loading operation. With hindsight, it goes without saying that the loading operation should have been suspended prior to October 28, 1988. However, what I have to decide is whether Captain Garipoli knew or ought to have known that the peat moss cargo was dangerous i.e., that it could endanger the lives of his crew members or imperil the ship. In my view, Captain Garipoli did not know and could not have known of the danger posed by the peat moss. I have come to that view for the following reasons.
As I have stated already on a number of occasions, the master was informed that he would be loading in Sept-Îles a cargo having a stowage factor of 55 cubic feet per metric ton. Because of that information, the master expected a very light cargo. Following the arrival of the ship at Sept-Îles, the master discovered that his cargo was peat moss. He first had occasion to observe the cargo while it was on the IOC dock. He then observed the cargo as it was being loaded. The cargo, according to Captain Garipoli, was “behaving well” in that it was peaking in the holds like a regular grain cargo. After a while, however, Captain Garipoli noticed that the cargo was becoming flat. As a result, he became concerned about the possibility of shifting and following discussions with the stevedores and the plaintiffs, he modified his stowage plan. Captain Garipoli’s testimony is to the effect that he was concerned with the possibility that the cargo might shift. All of his discussions, including those with Mr. Guerra, are in relation to that problem. There was never any concern on the part of Captain Garipoli that the peat moss cargo might endanger his ship because of the hydrostatic pressure that it might create. He did not realize that the cargo had almost become “liquid” and that he was exposing his ship to danger by loading the cargo.
During the course of these aforementioned discussions, Captain Garipoli asked the plaintiffs to provide him with more information regarding their cargo. The plaintiffs were unable to provide any information to Captain Garipoli. After Captain Garipoli took his decision to modify the stowage plan and so advised the plaintiffs and the stevedores, Mr. Fabien Guerra appeared on board his ship. As I previously indicated, Captain Garipoli testified that Mr. Guerra was introduced to him as the shippers’ expert. The plaintiffs deny that Mr. Guerra was their expert. In fact, both Germain and Després testified that they did not know Mr. Guerra.
The evidence is that Mr. Guerra, a mechanical civil engineer, was called by IOC on October 26, 1988. At that time, it was known, at least at IOC, that Mr. Guerra had considerable experience in the handling of concentrates. Mr. Guerra was familiar with concepts such as moisture content, flow moisture point and transportable moisture limit. In fact, he raised these concepts with Captain Garipoli.
Mr. Guerra was asked to attend at the IOC dock and see Pat Morin. He testified that he attended at the office of Mr. Morin around 4:00 p.m. on October 26, 1988, and there met Germain and Després. Guerra stated that he was introduced to these gentlemen as an expert in cargo handling. Guerra also testified that he advised Germain and Després that it was their responsibility to have tests performed in order to determine the transportable moisture limit of their cargo. Following his discussions with Morin, Germain and Després, Guerra states that they all proceeded to the ship and met Captain Garipoli in his cabin. Guerra states that he was introduced to Captain Garipoli as the plaintiffs’ expert in cargo handling.
Guerra proceeded to explain that he asked the captain if he had information regarding the nature and characteristics of the plaintiffs’ cargo. The captain then explained to Guerra how he would load the peat moss i.e., full in four holds only. Guerra then went with the captain to observe the cargo and saw that it was self-trimming i.e., that it was not peaking. As a result of his observations, Guerra spoke to Pat Morin who authorized him to get quotations with respect to the performance of tests to determine the transportable moisture limit of the peat moss.
On October 27, 1988, Cogemat informed Guerra that they were prepared to perform the relevant tests for the sum of $300. Unfortunately, before the tests could be performed, the bulkhead collapsed. Guerra testified that notwithstanding the collapse, Morin authorized him to go ahead with the tests which he received at the end of 1988. Guerra stated unequivocally during his testimony that his understanding was that the shippers had authorized him through Morin to proceed with the tests. The evidence also revealed that Guerra did not invoice the plaintiffs nor the defendants for his services.
The plaintiffs take the position that they did not retain the services of Mr. Guerra. This is also the position taken by the defendants. On the whole, my view is that Mr. Guerra was acting for the plaintiffs having been retained by Mr. Morin of IOC. It will be recalled that Mr. Morin was IOC’s representative in so far as the stevedoring operations were concerned. Guerra’s testimony is in accordance with that of Captain Garipoli who stated that Guerra had been introduced to him as the shippers’ expert. That was also Guerra’s recollection of his introduction to Captain Garipoli. No one suggested that Pat Morin was acting on behalf of the ship and its owners. Morin appears to have taken the decision of calling Guerra after Captain Garipoli advised him and the plaintiffs that the stowage plan would have to be revised because of the possibility of shifting.
Thus, in my view, the evidence can only lead me to the conclusion that Guerra, in his discussions with Captain Garipoli, represented the plaintiffs.
During his discussions with the master on board the ship, Guerra asked him what he knew about the peat moss cargo and whether he was familiar with the IMO Solid Bulk Cargo Code. Following his discussions with the captain, Guerra suggested to Pat Morin that tests should be carried out in order to determine the transportable moisture limit of the peat moss cargo. This is consistent with the view expressed by Guerra at trial and which view he claims to have expressed to the plaintiffs on October 26, 1988, that it was the shippers’ responsibility to determine the transportable moisture limit of their cargo.
There is no doubt that Mr. Guerra was, in fact, experienced in so far as the carriage by sea of concentrates was concerned. He testified that he had been involved in that field since 1962. Expert Clifford Parfett, called by the defendants, testified that he had met Guerra at an IMO Conference in London where he and Guerra were delegates for Canada. Notwithstanding his experience in the field, Mr. Guerra initially stated to Captain Garipoli that he did not agree with his concerns regarding the possibility of shifting. It was only after Captain Garipoli took him around the ship to observe the cargo that Guerra changed his opinion. I again wish to emphasize that Captain Garipoli’s concern was solely directed at the possibility of shifting. He had not realized nor did he ever realize until it was too late, that the peat moss, because of its “semi-liquid” state, constituted a danger for his ship. It also goes without saying that Mr. Guerra had also not realized the danger of loading the peat moss on the ship.
In addition to the Technitrol and SGS reports which, in my view, conclusively demonstrate the “semi-liquid” state of the cargo, I have the benefit of the visual observations made by Mr. Parfett and Mr. Lemay.
Mr. Lemay attended on board the ship on November 5, 1988, while the ship was still in Sept-Îles. He observed the cargo in holds Nos. 3 and 6 which were half full. He observed that the cargo had formed “a flat, table-top surface, even throughout the holds, although no physical or mechanical spreading had been done”. Lemay observed that the perimeter of the peat moss was more humid than the centre. He performed a test which consisted in placing a wooden plank of approximately 12” x 2’ x 4” vertically at various positions in hold No. 3. He concluded that the peat moss at the perimeter could not support the weight of his plank “which descended in a vertical direction even when no pressure was applied”. With respect to the centre of the hold, Mr. Lemay observed that the peat moss was “more consistent” and could support “some weight”.
Mr. Lemay’s observations corroborate the captain’s observations and those of Mr. Guerra to the effect that the cargo was not “peaking” following its loading on board the ship. The testimony of Régent Bouchard, who was the loading superintendent for IOC, is also to the same effect. Mr. Bouchard stated that the cargo “s’égalisait dans la cale par lui-même”[[translation] “was levelling out in the hold by itself”]. Mr. Bouchard even went to the extent of stating that in his estimation the peat moss cargo had a 40% to 50% moisture content. He stated that the peat moss, as it travelled on the conveyor belt, was “floue” [[translation] “fuzzy”].
With respect to the condition of the cargo on the dock, I agree entirely with the observations made by Captain Parfett in his survey report where he states, at pages 8-9 that:
When stacked on the wharf, it assumes an irregular but stable shape being capable of being piled to a considerable height without any tendency to collapse. From a distance it gives the impression of piles of earth but a closer examination reveals the highly fibrous vegetable nature of the commodity. Our inspection indicated that water would continually run from these piles. The indication was that the water was draining apparently in a pyramid direction, that is from the top of the pile downward but outward towards the edges. We theorized that probably the center of the pile was not draining to any great extent but this could not be established at this time. Certainly the material became drier towards the top of the pile with the cargo below the upper 24” of all piles tending to become totally saturated and consisting of a very large volume of water compared to the quantity of fibrous matter.
The bottom edges of the pile had no weight bearing capacity whatsoever whereas higher on the pile it was possible to walk over the surface with some difficulty but with sufficient support to withstand some weight. Even the apparently dry material however when walked upon, was found to be extremely spongy with only the surface exposed to the air being dry and all other material containing large quantities of water. Any piece of material when squeezed would release quite a large quantify of free water in the nature of a sponge.
Scattered through the pile were small roots, top soil and other partially rotted vegetation.
Our observations therefore indicated that the weight to volume ratio was highly dependent upon the position of the sample within any given pile. We formed the opinion that when allowed to drain naturally on the dock, the upper surfaces would in fact drain and become light and spongy. As the weight of the material above increased then the level of saturation would increase and at possibly 3 or 4 feet below the surface, the material would be sufficiently compressed that it would be fully saturated and have a very high weight to volume ratio, probably in the order of 35 to 36 cubic feet per metric ton.
Obviously, when Captain Parfett examined the cargo on the dock at Sept-Îles he knew by then that the bulkhead had collapsed. In other words, Captain Parfett already had an idea as to what the possible cause of the collapse was and thus he knew what he was looking for in examining the stock pile.
As Captain Parfett states in his report, the peat moss placed on the IOC dock appeared capable of being stacked “to a considerable height without any tendency to collapse”. In my view, prior to being loaded on board the ship, it was not at all apparent, from Captain Garipoli’s perspective, that the peat moss posed any particular problem. It was only after loading had begun and more particularly on October 26, 1988, that Captain Garipoli became concerned with the possibility that the peat moss might shift. During his discussions with Morin and the plaintiffs, the captain asked the plaintiffs if they could provide him with more information regarding their cargo. As I have indicated already, the plaintiffs were of no help whatsoever in that regard simply stating to the captain that the subject shipment was their first venture.
Later on during that day, Mr. Guerra appeared on the scene and discussed with Captain Garipoli his concerns regarding shifting. Guerra, because of his prior experience in the field, believed that the plaintiffs should have tests performed to determine the transportable moisture limits of the peat moss. Notwithstanding his experience, Mr. Guerra never suggested to Captain Garipoli that he should stop loading. All of this leads me to conclude that the true condition of the peat moss as it was following loading on board the ship was certainly not visually apparent. Tests were obviously required to determine the true condition of the cargo. These tests, according to Mr. Guerra, were to be carried out on behalf of the plaintiffs. In my view, Mr. Guerra’s understanding was correct. In effect, Guerra had been retained by Pat Morin who could only have been acting on behalf of the plaintiffs. No doubt there was some confusion in that regard as both Germain and Després did not seem to realize that Guerra had been retained on their behalf and that tests had been authorized. I accept that Germain and Després were sincere in their testimony but nonetheless, it is my view that Guerra was their representative in so far as the discussions that took place on board the ship are concerned.
In any event, I believe that Mr. Guerra’s understanding that it was the plaintiffs’ responsibility to have these tests performed is perfectly defendable. Put another way, it cannot be doubted that the plaintiffs ought to have known the characteristics of their cargo and should have informed the shipowners of those characteristics prior to the loading on board of their cargo. In fact, as we have already seen, when requested by Captain Garipoli to provide these characteristics, they were unable to do so.
From the evidence of Captain Parfett and Mr. Lemay, it appears that the loading operation, by way of the conveyor belt, had a negative effect on the condition of the cargo and contributed to a great extent to the cargo becoming “semi-liquid” and thus causing the collapse of the bulkhead. I again turn to Mr. Parfett’s report, at page 11, where he states:
The major difference between this and any other bulk cargo is that whereas the cargo on the wharf had no tendency whatsoever to flow, and samples taken indicated a high volume to weight ratio, on being loaded and compacted in the Holds by the action of loading, the cargo assumed a fully saturated character, became a form of “slurry”, having a tendency to flow and above all, creating hydrostatic pressures on the walls of the Hold similar in nature to the Hold being filled with a free flowing liquid. It is this hydrostatic pressure rather than the weight itself of the cargo which created the eventual collapse. With regard to the volume/weight ratio of the cargo, it now appears that the opinion of the Master was correct, and the stowage factor of the cargo in the vessel was approximately 36 cubic feet per metric tonne.
Mr. Lemay, in his report at page 5, expresses an opinion similar to that of Captain Parfett when he states:
From experience in loading cargo with a conveyor belt, a centrifugical force is applied on the material by the end conveyor roller, which has for effect to increase the speed and separate momentarily the material, in this case the humus, from the water. This process is called capillary action. Upon impact, the solid cargo stays in the center and the water splashes towards the extremities of the hold.
Neither Mr. Lemay nor Captain Parfett are naval architects. They testified as factual and expert witnesses. They gave no opinion with respect to the seaworthiness of the bulkhead nor could they give such opinions as, in my view, they were not qualified to do so. That is why I did not discuss their evidence when I dealt with the issue of seaworthiness which was and is the proper realm of naval architects Barbeau and Daoust. They were the only witnesses who made calculations to determine the nature and extent of the forces which acted upon the bulkhead on October 28, 1988. However, both Lemay and Parfett were surveyors of experience and they obviously based their opinions on what they observed and on their past experience. Mr. Parfett, in particular, testified that he had performed a large number of bulk cargo surveys i.e., of grain, concentrates and iron ore. He testified that he was familiar with concepts such as moisture content, flow moisture point and transportable moisture limits. He was also familiar with the Code of Safe Practice for Solid Bulk Cargoes and had, in effect, been involved in drafting parts thereof. As I have already indicated, Mr. Parfett was appointed by the Government of Canada as a delegate to the IMO Conference in 1981.
When I stated that I preferred Barbeau’s opinion to that of Daoust, I indicated that, in my view, the overall evidence supported Barbeau. In making that statement, I had in mind, inter alia, the evidence of Lemay and Parfett and that of Rossi who, notwithstanding his opinion that the bulkhead collapsed because it was corroded, stated unequivocally that the peat moss cargo should not have been loaded on the ship.
Based on his experience and his visual observations, Mr. Parfett stated in his report at page 11 the following:
The direct cause of this loss was the overloading of the bulkhead between Holds Nos. 1 and No. 2 caused by the hydostatic [sic] pressure and that hydrostatic pressure in turn was caused by the fact that the cargo after loading became a “slurry” and therefore had the properties of a fully liquid cargo, creating an enormous hydostatic [sic] pressure on the bulkhead which would not be standard for any dry bulk cargo. Only vessels constructed as tankers would have bulkheads of sufficient strength to withstand this type of pressure.
Before me at trial, Mr. Parfett defended his point of view and added that “regardless of the condition of the bulkhead, it would have collapsed”. Again, I wish to point out that that statement was not supported by any calculations. If I understood Captain Parfett, his testimony was that following his visual observations of the cargo on board the ship, it was obvious to him that the hydrostatic pressure created by the peat moss had caused the bulkhead to collapse. In any event, Parfett’s opinion is certainly supported by the calculations made by Mr. Barbeau.
During his testimony, Captain Parfett stated that he had “never seen such a phenomena” as that created by the peat moss cargo.
It should not be forgotten that the plaintiffs’ attempt to ship peat moss on a bulk carrier was their first attempt to do so. Also, the Coast Guard has never approved a shipment of peat moss on a bulk carrier. Further, it would appear that, in fact, peat moss has never been carried on a bulk carrier. Thus, I do not think that the defendants nor Captain Garipoli can be blamed for not being knowledgeable with regard to this cargo.
Mr. Parfett expressed the opinion that Captain Garipoli did not have enough knowledge to foresee the danger posed by the peat moss. In cross-examination, Mr. Parfett stated that with his experience he would have suspended loading. He added, however, that he did not believe that the master was sufficiently knowledgeable to have taken that decision.
Barbeau’s testimony is to the same effect as Captain Parfett’s. Barbeau testified that Captain Garipoli was not in a position, nor could he, make the calculations which would have led him to conclude that he should not carry on with the loading of the peat moss. Further, Barbeau added that cargo ships did not usually have on board the technical data required to make the relevant calculations. Mr. Daoust, in his report at page 4, agreed with Mr. Barbeau’s view that “ships are not usually documented technically such that the master would be able to carry its own calculations”.
I am therefore led to the conclusion that although the loading operation should have been stopped, the master cannot be blamed for not having done so. He did not have sufficient information nor the required knowledge to conclude that the continuation of loading might endanger his ship. In the circumstances, Captain Garipoli was concerned with the possibility that the cargo might shift and he took appropriate steps to make sure that that did not happen i.e., by amending his stowage plan to provide for the loading of four holds “full”. Thus, with the holds full to the brink, the cargo would not shift.
I therefore conclude that in the circumstances of this case, the defendants were not aware nor should they have been aware of the dangerous nature of the cargo. I also conclude that the plaintiffs themselves were not aware of the potential danger which their cargo posed for the ship. It appears to me quite clear from the evidence that no one knew much, if anything, about the particular characteristics of this cargo and the potential danger that this cargo, when wet, could pose to the ship. I therefore have before me a situation where neither the shippers nor the carrier were aware of the dangers posed by the cargo to be carried. The question then is whether Lantana and Perlite, as charterers and shippers of the cargo, must bear responsibility for the damages caused by the cargo even though they were not aware that their cargo was dangerous.
The general rule at common law is that the shipper impliedly warrants not to ship dangerous goods without first notifying the carrier of their particular and/or peculiar characteristics of which he is aware, or deemed to be aware. Failure of the shipper to warn of the known dangerous propensities of the cargo will result in liability for damage to the ship and the resulting damage to other cargo, etc. unless some limitation of liability applies. This principle is not without exception, however.
The liability for the damage caused by casualty flowing from the shipment of dangerous cargo is varied where the carrier, members of the crew, or ship owner(s), know or ought to reasonably have known of the dangerous nature of the cargo. As will be seen from the jurisprudence, this exception is based on the assumption that a carrier who is aware of the dangerous nature of the cargo accepted for carriage, consents or accepts to assume some of the risks associated with that shipment. Put another way, where there is an indication that the carrier was made aware of the dangers involved in a shipment, or where the dangers are self-evident, and the carrier proceeds in the face of that knowledge, the general principle stated above is trumped. Therefore, whatever warranty exists (absolute or qualified) on the part of the shipper as to the suitability of goods for carriage, the liability for the damage arising out of “dangerous cargo” is judged on a sliding scale wholly dependent on the knowledge, or deemed knowledge of the carrier.
Finally, while the above principles are not problematic, Tetley in Marine Cargo Claims, 3rd ed., 1988, at page 463 indicates that one question still remains unresolved:
In very rare cases, neither the shipper nor the carrier knew or should have known of the dangerous nature of the goods. This raises the question of whether the shipper is deemed to have known that the cargo is dangerous. In other words, is the warranty of the shipper as to the suitability of the goods for carriage absolute?
I now turn to that issue.
The orthodox view on the carriage of dangerous cargo under English common law is found in the seminal and often cited case of Brass v. Maitland (1856), 119 E.R. 940 (Q.B.) (see also the earlier case of Williams v. East India Company (1802), 102 E.R. 571 (K.B.). In that case, a consignment of bleaching powder containing chloride of lime had been shipped in casks. During the voyage the chloride of lime corroded the casks and resulted in the destruction or damage to other cargo being shipped. The majority of the Court took the position that the shipper was duty bound to advise the carrier of any danger inherent in the cargo and that the obligation to do so was an implied term of the contract of carriage. The majority also held that the duty was absolute and that the shipper would be liable even though he was unaware of the dangerous nature of the goods, having shipped the casks immediately upon receipt from a third party, without any inspection.
As was hypothesized by Wilson in Carriage of Goods by Sea, 1988, at page 17: “in the absence of knowledge on either side, the majority dealt with the issue purely as a question of allocation of risk.” The policy explanation for the majority decision by Wilson, makes sense in light of the quote by Lord Campbell, where his Lordship explains, at pages 945-946, the rationale for the allocation of liability as follows:
If the plaintiffs and those employed by them did not know and had no means of knowing the dangerous quality of the goods which caused the calamity, it seems most unjust and inexpedient to say that they have no remedy against those who might have easily prevented it. Although those employed on behalf of the shipowner have no reasonable means during the loading of a general ship to ascertain the quality of the goods offered for shipment, or narrowly to examine the sufficiency of the packing of the goods, the shippers have such means; and it seems much more just and expedient that, although they were ignorant of the dangerous quality of the goods or the insufficiency of the packing, the loss occasioned by the dangerous quality of the goods and the insufficient packing should be cast upon the shippers than upon the shipowners.
Lord Tenterden, in the Chapter of his Treatise on Shipping, where he treats of “The general duties of the Merchant” …, lays down the general principle on which the doctrine rests: “the hirer of anything must use it in a lawful manner, and according to the purposes for which it is let.” He then gives, as an instance, “the merchant must lade no prohibited or uncustomed goods, by which the ship may be subjected to detention or forfeiture.” Pari ratione, the merchant must not lade goods of a dangerous nature, which the master and those employed in the navigation of the ship have no means of knowing to be of a dangerous nature, without giving notice of their nature, so that the master and those employed in the navigation of the ship may exercise an option to refuse to accept them, and, if accepted may stow them where they will not endanger the rest of the cargo.
The minority opinion authored by Crompton J. considered that the duty of a shipper of goods was qualified. His Lordship took the view that there was no authority to substantiate an absolute obligation, and furthermore, that fairness required that a party should not be held liable for something he does not know, and could not reasonably be expected to know.
Shortly after the decision in Brass v. Maitland, supra, there were cases that expressed scepticism as to the soundness of the absolute duty approach, and others that applied the general principles enunciated in Brass v. Maitland without taking a firm position on the correct distribution of duty, namely: Acatos v. Burns (1878), 3 Ex. D. 282 (C.A.); Bamfield v. Goole and Sheffield Transport Company, [1910] 2 K.B. 94 (C.A.); Mitchell, Cotts & Co. v. Steel Brothers & Co., [1916] 2 K.B. 610; Great Northern Railway Co. v. L. E. P. Transport and Depository, [1922] 2 K.B. 742 (C.A.); Transoceanica Society Italiana di Navigazione v. Shipton & Sons, [1923] 1 K.B. 31.
In Bamfield v. Goole and Sheffield Transport Company, supra, the Court held that there did in fact exist an implied duty on the shipper not to send dangerous goods via a common carrier without first informing the carrier of their dangerous nature. This concept is summarized in the following quote at page 108:
… where a man calls upon a common carrier to carry general cargo, thus relying simply upon the common law duty of the carrier so to do, and without informing the carrier of the nature of those goods so as to enable him to judge of their fitness, there is implied by law a contract by the person making the request to keep indemnified the person having the duty against damages arising from the fact that the goods are not such that he had the right thus to call upon the common carrier to carry.
An example of the general reluctance to hold a shipper liable for breach of an implied warranty that goods were suitable for carriage and not dangerous, irrespective of actual knowledge, is best seen in the comments of Atkin J. in Mitchell, Cotts & Co., supra, wherein his Lordship states at pages 613-614:
I was referred to Brass v. Maitland (1), where the majority of the Court seem to have laid down that there is an absolute obligation on a shipper to make good damage caused by a shipment of dangerous goods. Crompton J., however, delivered a judgment in which he took a narrower view of the duty of the shipowner [shipper?] and which is stated in Carver on Carriage by Sea, 5th ed., s. 278, to be more in accordance with later authorities. I agree with that view. Crompton J. said (3): “Suppose, for instance, that a shipment was made of goods for a foreign port, to which, according to the information known at the shipping port, such consignments might be properly and safely made, but that by some recent law the foreign country has made such shipment illegal, would the shipper be liable in such case?” I entertain great doubt whether either the duty or the warranty extends beyond the cases where the shipper has knowledge, or means of knowledge, of the dangerous nature of the goods when shipped, or where he has only been guilty of some negligence as shipper, as by shipping without communicating danger which he had the means of knowing, and ought to have communicated. Probably an engagement or duty may be implied, that the shipper will use and take due and proper care and diligence not to deliver goods apparently safe, but really dangerous, without giving notice thereof, and any want of care in the course of the shipment in not communicating what he ought to communicate might be negligence for which he would be liable; but where no negligence is alleged, or where the plea negatives any alleged negligence, I doubt extremely whether any right of action can exist.
And later on Atkin J. concludes at page 614:
Whatever may be the full extent of the shipper's obligations, it appears to me that it amounts at least to this, that he undertakes that he will not ship goods likely to involve unusual danger or delay to the ship without communicating to the owner facts which are within his knowledge indicating that there is such risk, if the owner does not and could not reasonably know those facts. I think that is placing the obligation of the shipper within very moderate limits, and it may be considerably wider.
Great Northern Railway Co., supra, is to the effect that at least with respect to common carriers the obligation of the shipper was considerably wider than stated in Mitchell, supra. That case dealt with the liability of forwarding agents who delivered to a railway company carboys containing corrosive fluid and bales of felt on terms of consignment that exempted the railway company from liability under various circumstances, including that the company would not undertake to carry dangerous goods except on special conditions. As the carboys were not strong enough to contain the fluid, damage resulted to the felt goods. The owner of the felt goods claimed damages against the company. The company settled the claim and sought indemnification from the forwarding agents to recover the sum as damages for breach of warranty. The railway company was successful. The relevant part of the headnote summarizing the findings of the Court of Appeal (Lord Justices Bankes, Scrutton and Atkin) on obligations of the shipper or consignor reads:
A consignor who tenders to carriers for carriage goods apparently harmless but in fact dangerous, whether the carriers are common carriers bound by the custom of the realm to carry goods provided they are safe and fit for carriage or whether they are a railway company bound by statute to afford reasonable facilities for the receiving forwarding and delivering of goods, must give warning of the danger; otherwise he impliedly warrants that the goods are safe and fit for carriage.
The Court expressly followed the decisions of Brass and Bamfield, supra, in arriving at this conclusion. An excellent summary of these cases can be found in the reasons for judgment of Scrutton L.J. and more particularly at pages 762-764.
More recently, the English Queen’s Bench Division (Commercial Court) in Athanasia Comninos and Georges Chr. Lemos, The, [1990] 1 Lloyd's Rep. 277[6] revisited the issue as to the distribution of liability in the shipment of dangerous goods. In the Athanasia Comninos, the Court was concerned with an action arising by virtue of an explosion on a vessel transporting coal which caused substantial damage to the forward part of the ship. That case included claims against the shippers as well as the charterers, but the main allegations against both was that the coal that was shipped did not comply with the description “coal”. In essence, the carrier's case against the shipper was founded on the assertion that the shipment was such as to create danger which the plaintiff had not consented to when it agreed to carry a cargo described as “coal”; that the excessive gassiness of the coal was not apparent to the master or the crew on reasonable examination nor was this the subject of any warning by the shipper or its agents; that the cargo was carried in accordance with current practice; and that the casualty was caused by the dangerous nature of the cargo. After reviewing the general contractual obligations implied by the common law as to the suitability for carriage of goods which a party tenders to be shipped, Mustill J. stated the following at page 282:
It has been established for more than a century that a shipper, party to a contract of carriage, is under certain contractual obligations as to the suitability for carriage of the goods which he ships, and as to the giving of warnings concerning any dangerous characteristics of the goods: Williams v. East India Company, (1802) 3 East 192; Brass v. Maitland, (1856) 6 E. & B. 470. These obligations are not confined to cases where the goods are tendered to a common carrier, but are capable of applying, in appropriate circumstances, to all contracts for the carriage of goods by sea. The precise scope of the shipper's duty has long been a source of controversy. Various aspects of this debate were touched on during argument at the trial, but do not require elaborate discussion here. Thus, for example, the question arose whether the shipper’s obligation should properly be expressed in absolute terms, or whether it should be limited to matters of which the shipper knew or ought to have known: i.e. whether the plaintiffs first, or their second, way of formulating their claim was in principle correct. There has been a difference of judicial opinion on this question since Brass v. Matiland, sup., where Lord Campbell, C.J. and Mr. Justice Wightman decided in favour of the absolute warranty, whereas Mr. Justice Crompton favoured the qualified version. This conflict still exists: see the authorities cited in favour of the rival opinions in Scrutton on Charterparties, 18th ed., pp. 100-102, and Carver on Carriage by Sea, 12th ed., par. 690. My own view is that the weight of authority supports the absolute character of the warranty: see, in particular, per Lord Justice Scrutton in Great Northern Railway Co. v. LEP Transport and Depositary, [1922] 2 K.B. 742, at p. 762. It is, however, unnecessary to decide the point, since it seems to me absolutely clear that if the cargoes which are the subject of this action did have dangerous characteristics, this is something which Devco either knew or ought to have known.
Unfortunately, Mustill J. concluded that it was not necessary for him to definitively conclude the point because of the fact that the cargo of coal did have dangerous characteristics, that it was something that the shipper knew or ought to have known in any event. The ultimate disposition of the case appears to have been decided on the fact that the shipowner, while accepting some degree of risk as to the dangerous qualities of a shipment of coal, did not accept “a special danger”, which amounted to a risk falling outside the area of risk agreed to by the shipowner. (See also Amphion, The, [1991] 2 Lloyd's Rep. 101 (Q.B. (Com. Ct.)) which dealt with the problem of overheating fishmeal that was improperly treated. The Court addressed the problem in terms of a misdescription of the goods which vitiated the agreed upon risk, avoiding altogether the sticky issue of, what, if any, implied term of the contract relating to the fitness of goods for carriage existed; the result, however, was the same.)
The most recent case from England is that of Giannis N.K., The, [1994] 2 Lloyd’s Rep. 171 (Q.B. (Com. Ct.)). That case, which dealt with a cargo of non-physically dangerous goods, i.e. ground nuts, seems to address most of the issues that are before me, including what constitutes dangerous goods at common law. Mr. Justice Longmore held that the cargo shipped by the defendants was of a dangerous nature within the meaning of Article IV, Rule 6 of the Hague Rules. The learned Judge then went on to discuss whether knowledge on the part of the shippers was a prerequisite to a finding of liability. Longmore J. stated unequivocally, relying inter alia, on Brass v. Maitland, supra, that at common law the shippers’ liability was absolute. At page 180, Longmore J., stated that:
The Hague Rules impose a strict liability on the shipper for damages and expenses arising out of or resulting from the shipment of goods of a dangerous nature. The shipper cannot argue that he did not know and had no means of knowing that the goods were dangerous. As far as physically dangerous cargo is concerned at common law the shipper’s liability is likewise strict. In Brass v. Maitland, 6 El. & Bl. 470 itself, this was decided by the majority judgment of the Court of King’s Bench. Mr. Justice Crompton dissented on this aspect and said the absence of negligence should be a defence. In Bamfield v. Goole and Sheffield Transport Co. Ltd., [1910] 2 K.B. 94, the majority of the Court of Appeal preferred the majority judgment in Brass v. Maitland and that concludes the matter for a Judge at first instance.
I agree entirely with Longmore J. that Brass v. Maitland and Bamfield v. Goole, both majority decisions of the English Court of Appeal, leave no choice to a trial judge. In any event, I am in full agreement with the views expressed by the majority in these two cases. Thus, in my view, even if the plaintiffs were not aware of the dangerous nature of their cargo, they must be held liable for the damages caused to the ship.[7]
I should perhaps point out that in the Athanasia Comninos, Mr. Justice Mustill (as he then was) stated, at page 282, that his own view was that the weight of authority supported the absolute character of the warranty.
I wish to recall that counsel for the plaintiffs argued that the Hague Rules had been incorporated into the charter-party. I have decided that they were not. However, even if I were wrong on that point, I wish to point out that Article IV, Rule 6 thereof, clearly imposes on the shipper of dangerous goods liability for all damages and expenses caused by his goods. Thus, whether the Hague Rules apply or not, Perlite and Lantana are liable for the damages caused to the ship by their dangerous cargo.
Consequently, Perlite and Lantana must pay to the defendants the sums of CAN$1,202,459.62 and US$485,007.25. These amounts, as I previously indicated, were agreed to by the parties before the end of the trial.[8]
The sum of US$485,007.25 equals the sum of CAN$582,008.70 converted at a rate of US$1.00 equals CAN$1.20. Thus, plaintiffs Perlite and Lantana must pay to the defendants the sum of $1,784,468.32.
In their agreed counterclaim amounts (Exhibit D-43) the parties explain how the agreed amounts are to be allocated in relation to the defendants’ specific claims. The agreement provides as follows:
Pre-judgment interest at 9% per annum will begin to run from the following dates:
With respect to post-judgment interest, the parties, should they be unable to reach an agreement, should speak to me as soon as possible.
| 41(a) |
CAN |
$ 33,216.53 |
| 41(b) |
CAN |
$ 114,509.98 |
| 41(c) |
CAN |
$ 1,054,733.11 |
| 43 |
US |
$ 79,007.25 |
| 44 |
US |
$ 406,000.00 |
| TOTAL |
CAN |
$ 1,202,459.62 |
| TOTAL |
US |
$ 485,007.25 |
Pre-judgment interest at 9% per annum will begin to run from the following dates:
—on the sum of:
CAN $33,216.53 = November 8, 1988
—on the sum of:
CAN $114,509.98 = November 13, 1988
—on the sum of:
CAN $1,054,733.11 = December 23, 1988
—on the sum of:
US $79,007.25 = November 1, 1988
(or the Canadian equivalent $94,808.70)
—on the sum of:
US $406,000 = December 23, 1988
(or the Canadian equivalent $487,200)
With respect to post-judgment interest, the parties, should they be unable to reach an agreement, should speak to me as soon as possible.
Finally, the defendants shall be entitled to their costs both on the plaintiffs’ action and on their counterclaim.
In conclusion, therefore, the plaintiffs’ action is dismissed with costs. The defendants’ counterclaim against Perlite and Lantana is allowed with costs in favour of the defendants. The counterclaim against Pemtex is dismissed without costs.
[1] Germain, on behalf of Perlite, signed the charter-party after October 28, 1988.
[2] Després testified that Pemtex had been incorporated shortly before the shipping arrangements herein were made; in fact, Pemtex was incorporated on August 8, 1984 (see Exhibit D-1).
[3] Also reported at [1954] 1 Lloyd’s Rep. 321, at p. 332.
[4] The author is here referring to 2 English cases namely Stock v. Inglis (1884), 12 Q.B.D. 564 (C.A.), at p. 573 and Wilson (J. Raymond) & Co., Ltd. v. Norman Scratchard, Ltd. (1944), 77 Ll. L. Rep. 373 (K.B.), at p. 374.
[5] In Voyage Charters, at p. 263, the authors state that: “Stowage is part of the operation of loading, and is entirely the responsibility of the shipowner unless the terms of the charter transfer responsibility to the charterer: see Court Line v. Canadian Transport [1940] A.C. 934, 943. It includes all aspects of arranging and securing the cargo in the ship or on deck in such a way that ship and cargo are fit for the voyage. It includes such matters as bagging for the purposes of trim and stability (Argonaut v. Ministry of Food [1949] 1 K.B. 572) and lashing the cargo (Svenssons v. Cliffe [1932] 1 K.B. 490). The shipowner is entitled to and often does employ a stevedore to do the work, but that does not affect his responsibility.”
[6] Although the decision is reported in Lloyd’s Reports in 1990, the decision was rendered by Mr. Justice Mustill (as he then was) on December 21, 1979.
[7] In the United States, it appears that a shipper who has neither actual or constructive warning of the dangerous nature of his cargo will not be held liable for damages caused to a ship. (See Sucrest Corp. v. M/V Jennifer, 455 F. Supp. 371 (N.D. Me. 1978); also see Voyage Charters, supra, at pp. 118-119.)
[8] The parties filed a document entitled “Agreed Counterclaim Amounts” (Exhibit D-43).