Daewoo v. Klipriver CofA
DMC Category Rating: Developed
Case note contributed by Ann Moore, Law Correspondent, Fairplay International Shipping Weekly. Ann Moore is a contributor to this website.
Thirty four excavators were shipped on board at Inchon on 3 September 2000 in apparent good order and condition, and stowed and lashed underdeck for carriage to Istanbul. Six bills of lading, containing or evidencing the terms of the contract of carriage, were issued on 4 September. None stated the machinery was stowed on deck.
The vessel reached Xingang in China on about 5 September, where 26 excavators were restowed on deck. The cargo interests did not receive notice of this, nor consent to it. Two days after leaving Xingang, the ship encountered heavy weather in the Yellow Sea. Eight of the excavators on deck broke free and were lost overboard, and others suffered minor damage including the effects of wetting. The parties accepted that the loss was caused by one or more of the following: perils of the seas, within the Hague Rules, Art IV Rule 2(c); inadequate lashing at Xingang; carriage on deck; inadequate packing (relating to the remaining excavators). The Hague Rules have not been enacted in Korea.
At a trial of preliminary issues in the Commercial Court in
2002, Langley J decided:
The cargo interests appealed to the Court of Appeal on the issue
whether a carrier by sea, who carried cargo on deck in breach of a contract of
carriage which is governed by the Hague Rules 1924, was nevertheless entitled to
limit his liability for loss or damage to that cargo under Article IV Rule 5.
Article IV Rule 5 provides:
Nigel Hamblen QC, for the appellant cargo interests, argued that a carrier’s obligation to carry underdeck was as important as the obligation not to deviate; deck carriage was a "quasi-deviation". The parties could not have intended to apply the Hague Rules limitation to such a serious breach. He relied on the House of Lords decision in Suisse Atlantic  1AC at 433-4, Evans v Merzario  1 WLR 1078, Scrutton on Charterparties and Bills of Lading (18th and 19th editions), The ‘Chanda’  2 Lloyd’s Rep 494, and cited US authorities which had applied the principle.
For the respondent carriers, Mr Richard Lord QC said there was no English authority for treating unauthorised deck stowage as a ‘deviation’. The concept that any deviation automatically deprived the shipowner of the right to rely on exceptions was "a peculiar doctrine of the common law and should not be extended". The passages cited from Scrutton had been considerably amended in the 20th edition. The force of the words "in any event" in Art IV Rule 5 had not been addressed by the appellant or by The ‘Chanda’ judgment. The obligation to stow underdeck was important, but not more so than other obligations covered by Art IV Rule 5, for example as to seaworthiness (Art III Rule 1). In The ‘Happy Ranger’  2 Lloyd’s Rep 257 it was held that a carrier could limit his liability under Art IV Rule 5 for such breaches, and failure to carry underdeck was no different.
Lloyd LJ had said in The ‘Antares’  1 Lloyd’s Rep 424 that, whatever the position regarding deviation clauses, the unauthorised loading of deck cargo was not a special case. Longmore LJ ruled that the ‘deviation’ cases did not help the cargo owners. "The duty of the court is merely to construe the contract which the parties have made." Judge LJ said authority did not support the proposition that the common law’s "sensitivity" to protect against deviation from an agreed route made the limitation clause "impermissible, or unenforceable" in the case of unauthorised deck loading.
2. Construction of Art IV Rule 5
Longmore LJ dismissed as "exaggerated" the cargo interests’ fears of "dire consequences" for cargo owners if the appeal failed, the sum used in Art IV Rule 5 being 100,000 Turkish lira per package or unit, the equivalent of 5 pence for each lost excavator - amounting to "a total exemption from liability". Art IV Rule 5 provided that cargo owners could ensure recovery of the full value of their goods by declaring it, and having it inserted in the bills of lading. They could also demand the "more favourable" Hague-Visby limitation provisions, rather than those of the old Hague Rules. Judge LJ said the ultimate decision depended on the proper construction of the contract agreed by the parties.
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