Carriage of Goods by Sea UK

 1. Discuss the rights and liabilities arising in ALL of the following situations: (a) In January 2020, Worldtrade Inc loaded a total of 10,000 tonnes of cotton in bulk into the No 1 and 2 holds of the bulk cargo carrier Corona at Baton-Rouge, USA, for carriage to Southampton, UK. A bill of lading named Worldtrade as shipper and stated ‘Consignee: Order’. The bill of lading provided that the cargo was ‘in apparent good order and condition’ on loading. Worldtrade sold the cotton to Globcot Ltd and indorsed the bill of lading and sent it to Globcot. On the voyage, there was heavy weather but it was not exceptional for the North Atlantic at that time of year. On arrival of the ship at Southampton, Globcot presented the bill of lading to the Master and took delivery of the cargo of cotton. All the cargo had been badly damaged by seawater. According to a survey report: the damage was caused by the entry of sea water through the hatch covers to the No 1 and No 2 holds; the covers were in a poor state of repair, with it being certain that they were in that state before the start of the voyage from Baton-Rouge. Globcot wishes to sue the owners of Corona for its loss. Advise Globcot. (b) Worldtrade Inc sold a cargo of liquified natural gas to Intergas Ltd. Worldtrade voyage chartered the gas carrier Zeus, owned by Mythos Ltd, to carry the cargo from Malaysia to Rotterdam. The master of Zeus signed a bill of lading naming Worldtrade as shippers. The bill of lading indicated the consignee as ‘Intergas or Order’. On arrival at Rotterdam, Intergas presented the bill of lading to the master for the purpose of taking a sample of the cargo. It was found to have an impurity and so was ‘off spec’. Intergas informed Worldtrade that the cargo was ‘off spec’ but nevertheless sold it on to Venus Inc who had special facilities for dealing with the impurity. Intergas indorsed the bill of lading in favour of Venus who presented the bill of lading to the master and took delivery of the cargo. Mythos now alleges that the impurity in the cargo has corroded the tanks and pipes of Zeus and has strong evidence that the impurity had been present before the cargo was loaded on board the vessel. Mythos wishes to sue Intergas for damages for the cost of repairing the vessel. Advise Intergas. Total word limit: 3000 Referencing: OSCOLA 

Question 1
Under the United Kingdom laws, a vessel contracted to transport goods must be
seaworthy to ensure that the goods arrive safely at their destination. Suffice to say that a
seaworthy vessel is one that can transport goods safely to their intended destination. The ship
must be in a good state of repair, the equipment in the ship must be operational, and the crew
must be qualified. 1 . It is important to note that while on a voyage, the ship may encounter certain
perils that may alter the condition of the cargo in transit or even the condition of the ship itself.
The condition altering occurrences are known as the perils of the sea. Notably, the perils of the
sea are caused by acts of God. 2 . Therefore, under common law and the Visby Rules, a carrier is
not liable for damages occasioned by the perils of the sea.
However, under common law, the owner of the carrier is liable for losses resulting from
the following situations; proximate cause, ordinary wear, and tear, and willful misconduct.
Firstly, we look at ordinary wear and tear; it is not possible for a ship to navigate the waters
without suffering without acquiring decay and value depreciation. The leading cause of wear and
tear results from the usual day to day operations of the ship. Also, the ship may suffer breakage
and leakage arising from the back and forth of the voyage. 3 . A ship's insurer is only liable if the
losses are over and above the ordinary wear and tear. In essence, the only time that the insurer
shall be liable for damage resulting from ordinary leakage and breakage is where there is an
express clause in the agreement between the contracting parties apportioning liability. In J J

1 Chacón, Víctor Hugo. "The Obligation of Practicing Due Diligence in the Carriage of Goods by Sea."
In The Due Diligence in Maritime Transportation in the Technological Era, pp. 101-161. Springer, Cham,
2 Katsivela, Marel. "Perils of the Sea under English, French and Greek Law; A Perilous Venture?." Journal
of International Maritime Law 20 (2014).
3 Du, Jialu, Xin Hu, Miroslav Krstić, and Yuqing Sun. "Robust dynamic positioning of ships with
disturbances under input saturation." Automatica 73 (2016): 207-214.

Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The "Miss Jay Jay." 4 , the hull of a ship
got damaged while on the voyage. The owners of the ship sort compensation, but the insurance
company declined. Consequently, the owners of the ship sued for compensation. The court held
that where the damage gets occasioned through the action of the wind was ordinary wear and
tear; thus, the insurance was not liable.
Secondly, should Globcot proceed to sue, the court shall look at whether Corona's owners
engaged in willful misconduct. Notably, willful misconduct denotes the intentional disregard of
good and prudent performance standards under a contract while being fully aware that the
disregard may result in loss or injury to human life or damage to property. The court's focus shall
be whether the shipowners sent the ship to sail with reckless disregard of its state of repair.
However, the problem arises when seeking to determine whether reckless disregard constitutes
willful misconduct.
Thirdly, we look at the proximate cause, where under common law, an insurer is only for
losses caused by perils that have been insured against. The courts look at proximate cause in
effect instead of proximate cause in time, a position which was established in Reischer v Borwich
(1894) 5 . Notably, a tug had gotten insured against the risk of collision and damage with another
object. However, the vessel was not insured against the perils of the sea. While in the voyage, the
tug hit a floating snag, which fouled the paddlewheel and consequently damaged the tug's
machinery. The immediate damage in the tug was a hole on the condenser, which the captain
blocked. However, while the tug was getting towed, water entered through the condenser,
causing the tag to get abandoned. The plaintiff sued for the loss of the tug, but the court ruled

4 J J Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The “Miss Jay Jay”): CA 1987
5 Reischer v Borwich (1894) 2 QB 548, CA

that they could only get compensation for the damage resulting from the initial collision, not the
Similarly, in Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd 6 , the
plaintiffs owned a ship known as Ikaria that was insured with the defendant. The policy
categorically covered perils of the sea, among other losses. However, the policy contained an f c
and s clause which stated: 'warranted free of capture, seizure, and detention and the
consequences thereof or any attempt thereat piracy excepted, and also from all consequences of
hostilities or warlike operations whether before or after the declaration of war.' The ship was hit
by a torpedo, which got the No. 1 hatch filled with a lot of water. The crew brought the safe to
safety and anchored it on the shore, but a strong wind caused the ship to bang against the quay.
Thus, the port authority got apprehensive that the swinging could damage the ship.
Consequently, the officials ordered that the ship get taken out of the water and anchored in the
outer harbor. Unfortunately, the initial damage from the torpedo caused the ship to the ground
due to the low tides, and eventually, it got damaged. The ship owners sued for compensation,
stating that the loss of the ship resulted from the perils of the sea. The House of Lords rejected
the plaintiffs' claim by finding that the damage was caused by constant grounding. Therefore, the
proximate cause was the torpedo, which had not been destroyed initially, which meant that the
ship owners could not receive compensation.
On the other hand, the Hague Visby Rules recognizes that sometimes damage to cargo on
transit might get occasioned through poor ship management. In other words, the Visby Rules
under Article IV (1) place the burden of proof on the carrier, which implies that the article is
favorable to the shipper. 7 . Specifically, Article IV (1) provides that whenever loss or damage

6 in Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350 HL
7 Article IV, The Hague Visby Rules

results from the carrier's unseaworthiness, the burden of proving the exercise of due diligence
shall be on the carrier or the person who seeks to get an exemption. Suffice to say that the carrier
or the ship cannot suffer liability for loss arising from the unseaworthiness of the ship unless it is
proven that they did not exercise due diligence. Under Article IV (1), due diligence involves
ensuring the ship is seaworthy, that it is properly manned, equipped, supplied. Additionally, the
holds, refrigerating and cooling chambers, and other parts of the ship where goods are carried
should be safe for reception, carriage, and preservation.
Therefore, from the foregoing, for Globocot to sustain a lawsuit against the Corona
owners, they have to establish that the poor state of repair of the ship as a result of combined
negligent factors on the side of the owners of the ship. Firstly, Globocot must prove that the
owners of the ship were aware of the wear and tear in the ship and they did nothing to remedy
the situation; or maybe that the owners had taken a long time without servicing the ship lest they
could have discovered the openings on the hatch covers of No 1 and No 2 holds. Also, the
plaintiffs can argue that the owners of the corona engaged in wilful misconduct of the ship. Thus,
the plaintiffs can seek to establish that under the circumstances the Defendant knew or they out
to have known that the ship was in a poor state of repair.
Lastly, in most cases, and I believe the Corona is not an exception, damage to good in
transit is occasioned by perils of the sea, which are always insured against. For instance, from the
scenario, it is clear that there was heavy weather in the sea. Therefore, the Globocot should argue
that the heavy weather caused the hatch covers of No 1 and No 2 holds to give in to pressure, and
consequently, water flowed in and damaged the cargo of cotton. Consequently, the Defendant
should be made to compensate the Plaintiff for damage occasioned on the goods.

Additionally, as provided under Article IV (1) of Hague Visby Rules, the Defendant
should be made to shed the burden of the steps it took to ensure that the ship was seaworthy.
Suffice to say that the Defendant must show that it exercised due diligence failure to which it
must be made to compensate the Plaintiff.
Question 2
To address this question, we first have to establish which law applies to the situation on
hand; the common law or The Hague Visby Rules. The latter applies if the contract of carriage is
secured by a bill of lading or a related document of title. Notably, in this case, other documents
of title may include a railway receipt, a sea waybill, and ejusdem generis. The door for
considering other non-traditional issuance documents of the title got opened in Official Assignee
of Madras v Mercantile Bank of India Ltd. 8 Lord Wright gives life to the otherwise redundant
words “other documents of title” as used in commercial shipping. The issue of determination was
whether a railway receipt is a document of title and, if so, whether it can be pledged and where
pledged whether it is the same as pledging the goods? It was held that a railway receipt is a title
document, and pledging it would be equivalent to pledging the goods themselves. Therefore, in
this scenario, it might appear that the applicable law is Hague Visby Rules. However, since what
we are dealing with are mercantile goods that are getting moved within different jurisdictions,
then the laws are bound to change. For instance, the Contracting state in Malaysia, while the
cargo is headed to Rotterdam, Netherlands.
Therefore, to establish which rules are applicable, let us examine the duties of all the
parties involved in the actualization of the commercial agreement. Firstly, under Article II, the
carrier has the duty to 'properly and carefully load, handle, stow, carry, keep, care for and

8 Official Assignee of Madras v Mercantile Bank of India Ltd 8 , [1935] AC 53, 58

discharge the goods' However, in our case, on arrival to Rotterdam, the gas consignment gets
discovered to have impurities and consequently is off specs. Therefore, due to the unique nature
of the gas product, it is clear that the product was impure all the way from its source at World
Trade Inc.
Secondly, now we look at the burden of proof to establish who is responsible for the
damage occasioned on tanks and pipes of Zeus the carrier chartered by World Trade Inc. We
have established that once the gas got received in Rotterdam, it was found to contain impurities.
Consequently, it is as a result of the impurities that the tanks and pipes of Zeus got corroded.
Therefore, as per the provisions of Article IV (1) of Visby Rules, it is up to World Trade Inc. to
prove that the gas did not have impurities at the time of loading. But then, in this scenario, the
contracting parties were World Trade Inc. and Intergas Ltd, which means Zeus was a
subcontractor. The implication is that World Trade Inc. can claim that the impurity on the gas got
caused by the negligence of the Zeus carrier. Suffice to say that unless Mythos presents evidence
indicating that there were impurities showing that the gas had impurities before it got loaded on
the vessel, then Intergas can argue that it was a subcontractor that contaminated the gas.
However, should Mythos present evidence showing that the cargo had impurities before it got
loaded on its tanks. Intergas has an option to turn the heat on World Trade Inc. After all, the fact
that after Intergas informed World Trade of the apparent impurities in the gas, no objections
were raised might serve as an implied acceptance of liability.
Thus, the Defendant (Intergas Ltd), even before proving that it acted with due diligence,
can argue that the damage occasioned by act or omission of the shipper of the goods as provided
under Article IV r2 (i). Notably, Lbacora Srl V Westcott & Laurance Line Ltd (The
“Maltasian”) 9 involved an agreement to ship fresh salted fish from Glasgow to Genoa.

Unfortunately, when the fish reached the Consignee, it had already gotten destroyed due to the
prevailing hot weather conditions. The Consignee sued, claiming that the shipper was liable
under Article III r2 10 on proper loading and handling, stowing, carrying, keeping, caring, and
discharge of the goods carried. The House of Lords cleared the shipper of liability on the
grounds that the parties had agreed to use the unrefrigerated vessel. Consequently, the damage
occasioned fell within the meaning of Article IV r2 (m).
As much as we might, it is the subcontractor that is seeking to sue for losses that it has
suffered, it is important to indicate a contracting party cannot place blame on the subcontractor.
This position was established in Riverstone Meat Co Pty Ltd v Lancashire Shipping Co Ltd: HL
1961 11 , where cargo in transit got damaged when a fitter neglected to place an inspection cover in
the storm valve properly. The owner of the goods sued for compensation. Consequently, the
shipowner claimed that the repairs had been carried out by a reputable independent contractor.
The court rejected this argument by stating that the obligation to ensure the seaworthiness of a
ship under Article III r1 cannot be delegated.
Possible Remedies
It is important to note that at common law, the shipper may escape liability for the
damage occasioned on Mythos. Notably, under common law, the shipper, in this case, Mythos
agents Zeus, ought to have conformed to the condition of the has before it got loaded in the
tanks. The question before the court shall be, what if the damaging factor was in the tanks but not
in the gas? What if it is the impurities in the tanks that messed the gas and not vice versa? If it
comes down to the word of mouth, the subcontractor will face the difficult task of proving that,
in fact, the impurities were in the gas but not in its tanks.
9 Notably, Lbacora Srl V Westcott & Laurance Line Ltd (The “Maltasian”) [1966]
10 Article III, Hague Visby Rules
11 Riverstone Meat Co Pty Ltd v Lancashire Shipping Co Ltd: HL 1961

In Hadley v Baxendale 12 , the issue in question was on the remoteness of damage. The
plaintiff operated a mill when the crankshaft broke down, leading to the shut down of the mill.
Consequently, the plaintiff contracted a common carrier to take the crankshaft to the
manufacturer for replacement. However, the Defendant delayed shaping the crankshaft, which
apparently occasioned the loss of profits to the Plaintiff. The Plaintiff sued for the loss of profits,
but the Defendant sort to excuse himself from liability, claiming that the losses were too remote.
Also, the Defendant argued that it could not have contemplated losses. The issue of
determination was whether the Defendant is liable for the damages in terms of lost profits. It was
held that the damages were too remote; thus, the Defendant was not liable. Consequently, the
court established two rules for determining the remoteness of damage.
Firstly, the Defendant shall only be liable for damages that could have been contemplated
in the ordinary dealings. Secondly, that the Defendant shall be liable where despite special
knowledge arising from communication by the Plaintiff concerning the cargo in question, the
Defendant still occasions losses. Therefore, if Intergas can convince the court that the damage
occasioned on the tanks was not foreseeable in the ordinary nature of the business, then it won’t
be liable.
Unfortunately, the problem presented by the Visby Rules is that the only possible
evidence of damage points at goods getting damaged in transit. Therefore, the burden of proof
lies with the shipper to show that the carrier breached his duty. On the other hand, the carrier
shall argue that he took all the reasonable care, thus calling on the court to find that the damage
occasioned was the shipper's fault. The carrier (Mythos) cannot seek to rely on the exclusion
grounds provided by Article IV since it is the one seeking to show that the damage occasioned
on its tank was the fault of the shipper.
12 Hadley v Baxendale [1854] EWHC Exch J70



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