Sunlight Mercantile v. Ever Lucky Shipping (CofA)

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DMC/SandT/04/23
Sunlight Mercantile Pte Ltd v Ever Lucky Shipping Co Ltd: [2004] 1 SLR 171
Singapore Court of Appeal: Yong Pung How CJ, Chao Hick Tin JA and Tan Lee Meng J
Gurbani & Co for Sunlight Mercantile and Liberty Insurance
Joseph Tan Jude Benny for Ever Lucky
YORK ANTWERP RULES 1974: WHETHER UNSEAWORTHINESS OF VESSEL AFFECTED RIGHT TO GENERAL AVERAGE CONTRIBUTION: WHETHER EXEMPTION CLAUSES IN BILLS OF LADING EXCLUDING LIABILITY FOR DECK CARGO ABSOLVED SHIPOWNERS FROM ACTIONABLE FAULT
Summary
In an action by the shipowner for general average contributions due from a cargo of logs carried on deck and so described in the relevant bills of lading, the Court of Appeal held, overturning the judgment at first instance on this point, that a clause exempting the shipowner from liability for any loss or damage "howsoever" caused or arising was not sufficient to exonerate it where, as here, the general average incident was caused by unseaworthiness.

Facts
"Pep Nautic", owned by Ever Lucky, loaded 2212 logs at Port Owendo, Bata and Port Gentil for carriage to Tuticorin, India. 75% of the logs were stowed in the holds but the rest were loaded on deck. The bills of lading for the logs specifically incorporated the Hague Rules 1924. In addition, the bills of lading for the logs carried on deck noted that the logs were shipped on deck at shipper’s risk and excluded liability of the carrier for any loss or damage "howsoever" arising or caused.

The vessel’s main engine broke down off the coast of southwest Africa. Ever Lucky arranged for the vessel to be towed first to Luanda, then to Cape Town, and finally to Tuticorin, where her cargo of logs was discharged and delivered.

Ever Lucky claimed general average contribution from Sunlight Mercantile, the owners of the cargo, and Liberty Citystate, the cargo insurers, for costs and expenses incurred by Ever Lucky resulting from the breakdown.

In abbreviated form, Rule A of the York Antwerp Rules 1974 provides that there is a general average act when any extraordinary sacrifice or expenditure is made for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure. Rule D provides that rights of contribution shall not be affected by the fault of one of the parties to the adventure, but this shall not prejudice any remedies or defences which may be open against or to that party in respect of such fault. It is undisputed that, under Rule D, if the general average sacrifice resulted from a legal wrong of the shipowner that is actionable (an "actionable fault") by the cargo interests at the time when the sacrifice was made, the shipowners would lose their right to contribution.

The trial judge made the following findings:-
1. The vessel was unseaworthy when she left Port Gentil because of defects in her main engine.
2. With regard to cargo stowed in the holds, Article 3 of the Hague Rules imposes a duty on the carrier to exercise due diligence to make the ship seaworthy before and at the beginning of the voyage. Ever Lucky had failed in this duty and could not claim general average in respect of this cargo because the loss resulted from an actionable fault on its part.
3. With respect to the logs stowed on deck, Article 1(c) provides that the Hague Rules do not cover cargo "which by the contract of carriage is stated as being carried on deck and is so carried." The logs which were stated in the relevant bills of lading to be carried on deck and were actually stowed on deck, were not covered by the Hague Rules. Under common law, a shipowner who contracts to carry goods on board his vessel impliedly undertakes that his ship is seaworthy. This is an absolute undertaking of seaworthiness. The shipowner was in breach of this absolute undertaking of seaworthiness.

But the exemption clause in the bills of lading for the deck cargo provided that the shipowners were not liable for any damage, however the same may have been caused. The words "however caused" were wide enough to cover unseaworthiness. Therefore, in respect of the cargo on deck, the shipowners were not at fault despite failing in their obligation to provide a seaworthy vessel, as a result of which the casualty occurred. As there was no actionable fault on their part, they were entitled to recover the general average contribution from the deck cargo.

Sunlight Mercantile and Liberty Insurance appealed. At the Court of Appeal, the issue was whether the exemption clauses in the bills of lading excluding liability for deck cargo absolved the shipowners from any actionable fault, so that their right to contribution remained intact.

Judgment
The Court of Appeal allowed the appeal and overturned the trial judge’s decision on the exemption clauses. Its reasoning was as follows:

1. An exception that is intended to relieve a shipowner from the consequences of the unseaworthiness of the vessel at the commencement of the voyage must be "express, pertinent and apposite".

2. The Court of Appeal disagreed with Langley J who held in The Imvros [1999] 1 Lloyd’s Rep 848 that the words "howsoever caused" and "at shippers’ risk" were sufficient to avoid liability for unseaworthiness. These words referred to risks other than that of a breach of the obligation to provide a seaworthy ship. An exception that is applicable to negligence does not, without more, apply to loss caused by unseaworthiness.

3. Although Art.IV R.5 of the Hague Rules allows a carrier to limit its liability even where loss is caused by unseaworthiness, the court was presently dealing with the common law obligations of a shipowner and not the Hague Rules. Furthermore, the case concerned the effect of exceptions and not provisions that limit liability. A provision that seeks to limit liability is different in character from an exception.

4. As the exceptions in the bills of lading for the deck cargo were inapplicable, there was actionable fault on the part of Ever Lucky. There was, therefore, no obligation on either Sunlight Mercantile or Liberty Insurance to contribute to the general average expenses the shipowner had incurred.

Comment
From the cases and illustrations cited by the Court of Appeal, it would appear that the word "unseaworthy" or "unseaworthiness" must be expressly mentioned in the exclusion clause before the clause will exclude liability for loss arising from this cause.

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