BHP Trading Asia Ltd v Oceaname Shipping Ltd

[1996] FCA 271

CATCHWORDS

ADMIRALTY - rust damage to cargo - ship chartered on time charter and subsequent voyage charter - whether time charterer liable for damage to cargo - whether bill of lading signed by captain made time charterer a party liable on the bill.

ADMIRALTY - NEGLIGENCE - whether charterer owes a duty of care to the owner of goods shipped to provide a cargoworthy vessel - content of that duty discussed - whether want of due diligence will breach that duty - content of due diligence discussed.

ADMIRALTY - BAILMENT - whether cargo held by voyage charterers as bailee - whether breach of bailee's duty.

ADMIRALTY - BILL OF LADING - bill silent as to whether "to order or assigns" - whether bill of lading negotiable - nature of bill of lading discussed - whether delivery of goods effected by presentation of the bill - bill presented other than by holder in due course - whether implied contract that goods be delivered in good order and condition on the terms and condition of the bill - whether property in goods passed independently of endorsement.

ADMIRALTY - AGENCY - whether charterer's agent had actual authority to sign bill - whether bill of lading signed by master binds the ship owner or the charterer - whether actions of agent ratified.

Wilford & Ors Time Charters (4th ed)
Scrutton on Charterparties & Bills of Lading (19th ed) 1984
Bowstead & Reynolds on Agency (16th ed)
Grime Shipping Law 1978

Usury, Bills of Lading, and Written Memoranda Act 1902 (NSW): s5 (since repealed and replaced by ss50A-50C of the Sale of Goods Act 1923 (NSW)).
Sea-Carriage of Goods Act 1924 (Cth).
Navigation Act 1912 (Cth) (since repealed by the Limitation of Liability for Maritime Claims Act 1989 (Cth)).

Brandt v Liverpool, Brazil and River Plate Steam Navigation Co Ltd [1924] 1 KB 575; discussed.
Namchow Chemical v Botany Bay Shipping Co (Aust) Pty Ltd [1982] 2 NSWLR 523; distinguished.
The "Berkshire" [1974] 1 Lloyd's Rep 185; applied.
"The Rewia"[1991] 2 Lloyd's Rep 325; discussed.
C P Henderson & Co v The Comptoir D'Escompte de Paris [1873] 5 LRPC 253; applied.
Enichem Anic SpA v Ampelos Shipping Co. Ltd (The "Delfini") [1990] l Lloyd's Rep 252; applied.
Ilyssia Compania Naviera SA v Ahmed Abdul-Qauri Bamaodah (The "Elli 2") [1985] 1 Lloyd's Rep 107; discussed.

- 2 -

Commonwealth v Burns Philp & Co Ltd (1946) 46 SR (NSW) 307; referred to.
Gosse Millerd Ltd v Canadian Government Merchant Marine [1929] AC 223; referred to.
Smith, Hogg & Co Limited v Black Sea and Baltic General Insurance Co Ltd [1940] AC 997; referred to.
James Patrick & Co Ltd v The Union Steamship Co of New Zealand Ltd (1938) 60 CLR 650; applied.
Sonmez Denizcilik Ve Ticaret Anonim Sirketi v The MV "Blooming Orchard" (1991) 22 NSWLR 273; followed.
Compagnie des Messageries Maritimes v Wilson (1954) 94 CLR 577; applied.
Lennard's Carrying Company Limited v Asiatic Petroleum Company Limited [1915] AC 705; referred to.

BHP TRADING ASIA LIMITED & ORS v OCEANAME SHIPPING LIMITED & ANOR

No NG 141 of 1990.

Hill J
Sydney
24 April 1996

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
NEW SOUTH WALES DISTRICT REGISTRY  )     No NG 141 of 1990
  )
GENERAL DIVISION IN ADMIRALTY     )

BETWEEN:BHP TRADING ASIA LIMITED

Second Plaintiff

BHP MATERIALS TRADING PROPRIETARY LIMITED T/A BHP STEEL INTERNATIONAL GROUP

Third Plaintiff

JOHN LYSAGHT (AUSTRALIA) LIMITED

Fourth Plaintiff

AND:OCEANAME SHIPPING LIMITED

First Defendant

SCOTTISH SHIP MANAGEMENT (AUSTRALIA) PTY LIMITED

Second Defendant

CORAM:    HILL J
PLACE:    SYDNEY
DATED:    24 APRIL 1996

MINUTES OF ORDER

THE COURT DIRECTS THAT:

The applicant to bring in short minutes of order on a date to be agreed to reflect these reasons.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
NEW SOUTH WALES DISTRICT REGISTRY  )     No NG 141 of 1990
  )
GENERAL DIVISION IN ADMIRALTY     )

BETWEEN:BHP TRADING ASIA LIMITED

Second Plaintiff

BHP MATERIALS TRADING PROPRIETARY LIMITED T/A BHP STEEL INTERNATIONAL GROUP

Third Plaintiff

JOHN LYSAGHT (AUSTRALIA) LIMITED

Fourth Plaintiff

AND:OCEANAME SHIPPING LIMITED

First Defendant

SCOTTISH SHIP MANAGEMENT (AUSTRALIA) PTY LIMITED

Second Defendant

CORAM:    HILL J
PLACE:    SYDNEY
DATED:    24 APRIL 1996

REASONS FOR JUDGMENT

On 5 March 1989 the "Arawa Bay" sailed from Kaoshiung in Taiwan bound for Port Kembla on the New South Wales south coast with a cargo of 7,500 metric tonnes of galvanised steel coil.  The coil had been placed on board by An Mau Steel Co Limited ("An Mau"), the manufacturer of the coil, for shipment to BHP Trading Asia Ltd (the second plaintiff hereafter referred to as "BHP Asia") the purchaser from it under an FOB contract.

The Arawa Bay was at the time owned by Oceaname Shipping Limited, the first defendant ("Oceaname").  It had, however, been the subject of a time charter dated 5 January
1989 for a term of eight months with an option for a further four months to Scottish Ship Management (Australia) Pty Limited ("Scottish"), the second defendant.  Scottish, in its turn, had entered into a voyage charter with BHP Transport Limited ("BHP Transport"), a subsidiary of the Broken Hill Proprietary Company Limited, fixed on 13 February 1989 for the shipment of the coils to Port Kembla at a freight cost of US$31.00 per metric tonne.  It was the practice within the BHP Group of Companies that BHP Transport was responsible for chartering arrangements on behalf of companies in the Group and for shipment of cargo.

Commercially the shipment of the steel had a particular significance both to An Mau and to the BHP Group.   John Lysaght (Australia) Limited (the fourth plaintiff) ("JLA"), another company in the BHP Group, sold galvanised steel sheet but was unable to keep up with the demand from its customers and thus needed to import the coils.  It was the first time the parties had dealt with each other and it may be assumed that each was hopeful of a good reciprocal trading relationship as An Mau was a prospective purchaser of hot rolled steel coils from BHP.  It was the uncontested evidence of the then President of An Mau that the coils were loaded in Taiwan in good condition.  Further, they were loaded in what the master of the ship in a statement referred to as "good weather conditions".

The voyage to Australia encountered very rough seas and heavy swells.  On arrival of the Arawa Bay in Port Kembla on 21 March 1989 it became apparent, once the holds were opened and the coils inspected, that the coils were subject to considerable white rust damage which adversely affected their marketability.  The majority of them were also subject to discontinuous streaks, described in the evidence as a "seam-like defect".

It took some time to assess the extent of that damage.  That investigation was only completed on 22 June 1989.  Maximum salvage was obtained from the damaged coils so that as far as possible orders placed on JLA could be filled.  Ultimately, however, 852.61 tonnes were scrapped.  The loss to JLA was calculated by the plaintiffs to be $1,075,997.23, made up of $744,190 being the net loss of value on the materials scrapped plus $292,339 for the cost of returning the coils to works, unpacking, recoiling and repacking plus customs duty of $39,468.44.  There is no dispute as to the plaintiffs' calculation of this loss.

Within the BHP Group there had been internal arrangements for the sale by BHP Asia of the coil to BHP Materials Trading Proprietary Limited ("Materials Trading") (the third plaintiff) and onsale to JLA.  It is no doubt for this reason that each of BHP Asia, Materials Trading and JLA
were joined as plaintiffs.  Their claims are, however, alternative, not cumulative.

Save where it is necessary to distinguish the plaintiffs, it is convenient to refer to them compendiously as "BHP".

Oceaname originally appeared to contest the proceedings but later withdrew its appearance.  It took thereafter no part in the proceedings.  It seems likely that any judgment which might be obtained against Oceaname will remain unsatisfied.  Hence in effect, the case has been argued as one concerning the rights, if any, of the plaintiffs against Scottish.

The plaintiffs now seek to recover the loss, if any, which was suffered by them by virtue of the damage to the cargo on the voyage to Australia from Taiwan of the Arawa Bay.  The plaintiffs plead their case against Scottish relying on the provisions of the bill of lading directly or by incorporation in an implied contract, as well as alleging breach by Scottish of its duties as bailee, negligence on the part of Scottish or finally in breach of contract by reference to the provisions of the voyage charter party.

THE BILL OF LADING
         Under the time charter to Scottish, the master was authorised to sign bills of lading.  The proper interpretation of the time charter and the resolution of the question whether the master, in signing through an agent, was agent for the owner of the vessel as Scottish contend, or for Scottish as the plaintiffs contend, can be left until later in this judgment.

Blank forms of bills of lading printed with the name and insignia of Scottish were supplied by that company for the vessel's use.

Jardine Matheson & Co Ltd, an international ship agency company ("Jardines"), were the agents handling the call for BHP Transport.  In turn, Jardines had appointed Loong Gon Co Ltd of Taiwan, the port agents, to carry out the ship agency duties at Kaoshiung.  Mr Chao of that company was the individual who handled the call.  According to Mr Chao it was the practice that the ship agent prepare the bill of lading for signature on departure.  It would then be presented to the master to verify the contents with the on-board Mate's Receipts and for signature by him.

Mr Chao asked the master for bills but was told that the master had run out of them.  Mr Chao, however, obtained blank bills (the source from which he obtained the bill is unknown) bearing the name and emblem of Scottish in the top right hand corner and completed them, showing that there had been 952 coils loaded.  On board the master checked the cargo records and noted that there had only been 951 coils.  The master thus refused to sign the bill as prepared by Mr Chao.  Time did not permit Mr Chao to prepare new documents before the ship sailed.  To save time Mr Chao obtained from the master a signed authority addressed to Jardines.  Subsequently Mr Chao prepared new bills identical to the first bills, save that they showed 951 coils loaded.  The bills as signed by Mr Chao showed his signature to be "on behalf of Loong Gon Co, Ltd as agent for Jardine, Matheson & Co Ltd as agents."  He did this because the master's authority was in favour of Jardines.  No point is taken that Mr Chao did not have authority to sign for Jardines and thus to sign on behalf of the master.

After signing the bills Mr Chao, in accordance with his practice, stamped the first of the three copies he made as an "original", the second copy as "duplicate" and the remaining copy as "triplicate".  He sent the "originals" to An Mau.  Other "non-negotiable copies" he sent to Jardines in Taipei.  The original and duplicate found their way to BHP Asia in Hong Kong from whence, on 13 March 1989, the original was sent by air courier to "BHP Materials Trading Pty Limited".  Ultimately, the duplicate original found its way to Patrick & Co, the shipping agents for JLA.
         The bill of lading was in the standard Congenbill form (edition 1978).  It referred to the freight as being payable in accordance with a charter party, although there were no details completed identifying that charter party.    It identified the consignee of the bill as BHP Asia but was not expressed to be at the order of that company.  Nor was reference made to assigns or bearer.

The printed conditions of the bill provided:

"(1)All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, are herewith incorporated.  The Carrier shall in no case be responsible for loss of or damage to cargo arisen prior to loading and after discharging.

...".

The expression "carrier" was undefined, save so far as it could perhaps be inferred to be Scottish, from the fact that the bill bore the label of Scottish and by reference to the incorporation of the terms of the voyage charter by virtue of cl1.

THE TIME CHARTER
         The vessel was, as has already been noted, owned by Oceaname and subject to a time charter to Scottish.  This latter fact was, at all relevant times, known to BHP.

A time charter is not a demise.  It does not pass possession in the ship or the direct control of the ship to the voyage charterer.  Rather, the consequence of a time charter is that during the term of the charter the vessel is at the disposition of the charterer who may turn the vessel to account for the charterer's commercial profit.  Mackinnon LJ, in Sea & Land Securities Ltd v William Dickinson & Co Ltd (1942) 72 Lloyd's Rep 159 at 162, said of the modern form of time charter that it is:

"... in essence one under which the shipowner agrees with the time-charterer that during a certain named period the shipowner will render services as a carrier by his servants and crew to carry the goods which are put on board his ship by the time- charterer...".

This is well reflected in the nomenclature adopted in the charter party in the present case whereby the hirer is referred to as the "disponent Owner", defined by the authors of the Marine Encyclopaedic Dictionary, 3d ed (1992):

"A person or company who controls the commercial operation of a ship responsible for deciding the ports of call and the cargoes to be carried."

(and see The Sanko Steamship Co. Limited and Grandslam Enterprise Corporation v Sumitomo Australia Limited, unreported, 29 November 1995, per Sheppard J at 11, referring as well to O/Y Wasa Steamship Company Ltd., and NV Stoomschip
`Hannah' v Newspaper Pulp & Wood Export Ltd (1949) 82 Lloyd's Rep 936). The fact that the present charter was not one of demise was not left to inference. Thus clause 26 provided:

"26.Nothing herein stated is to be construed as a demise of the vessel to the Time Charterers.  The owners to remain responsible for the navigation of the vessel, acts of pilots and tugboats, insurance, crew, and all other matters, same as when trading for their own account."

The time charter was in the form approved by the New York Produce Exchange, 1913 edition, amended up to 3 October 1946.  Under it the vessel was placed at the disposal of Scottish with "delivery" passing at Brisbane.  The reference to "delivery" is somewhat confusing, but it must be accepted that at no time could it be said that the owner parted with possession of the vessel: Wilford & Ors Time Charters 4th ed at 121, 529-531.  The word "delivery" as used in a time charter is merely a conventional word to denote the time when the charter begins or ends: The Peonia [1991] 1 Lloyd's Rep 100 at 107.

At delivery the vessel was to be "tight, staunch, strong and in every way fitted for the service, free from rust flakes, scales and residues of previous cargoes."  Clause 8 of the time charter, basically took the printed form, with minor amendments and, as amended, provided:

" ... The captain (although appointed by the Owners), shall be under the orders and directions of the Charterers as regards employment and agency; and Charterers are to load, stow trim and discharge the cargo at their expense under the supervision of the Captain, who if required to do so by Charterers, is to sign Bills of Lading for cargo as presented, in conformity with Mate's receipts. (See clause 34)".

Clause 34, which was a typed addition to the standard form, then provided:

"Charterers' Bill of Lading to be used and the Master to authorise Charterers or their Agents to sign Bills of Lading issued in accordance with Mate's receipt."

The charter provided, as is customary, for a bunker survey to be held at the port of delivery (ie at the commencement of the hire) and at the port of redelivery (ie at the completion of the hire).

THE VOYAGE CHARTER
         The voyage charter was made in Melbourne on 13 February 1989.  It is in a form which appears to have been designed for use by BHP.  The parties to it are Scottish, described as "disponent Owners of the good motorvessel called the MV `Arawa Bay'" and BHP Transport, which Scottish conceded was acting as agent for both Materials Trading and JLA.  In various of the printed clauses the word "Owners" is used.  In
the context this is presumably a reference to Scottish.  Clause 2 warrants:

"That the said ship being warranted tight, staunch, and strong, and in every way fitted for the voyage...".

Clause 11 provides:

"The Master to sign Bills of Lading as required by the Charterers, without prejudice to this Charter party."

Clause 30 finally provides:

"Any dispute arising under this charter about events happening in Australia shall, unless the parties agree forthwith upon a single Arbitrator, be settled by arbitration at the capital city of the Australian State in which the Vessel loads, each party appointing an Arbitrator and the two Arbitrators in the event of a disagreement appointing an Umpire whose decision shall be final and binding upon both parties hereto.  For the purpose of enforcing any award this agreement may be made a Rule of Court.

Any dispute arising under this charter, other than as provided in the preceding paragraph, shall be settled in accordance with the provisions of the Arbitration Act 1979 in London, each party appointing an Arbitrator, and the two Arbitrators in the event of disagreement appointing an Umpire whose decision shall be final and binding upon both parties hereto.

The Arbitrators and Umpire shall be commercial men.

Any claim must be made in writing and claimant's Arbitrator appointed within six months of the Vessel's arrival at final port of discharge, otherwise all claims shall be deemed to be waived and absolutely barred.  No award shall be questioned or invalidated on the ground that any of the Arbitrators is not qualified as above, unless objection to his acting be taken before the award is made."

THE INTERNAL BHP TRANSACTIONS
         The first contact with An Mau was made by a Mr Gore who at the time was general manager of JLA.  This notwithstanding, the actual purchase contract is evidenced by a purchase note dated 24 February 1989 on the letter head of BHP Asia addressed to An Mau for the sale of 15,000 metric tonnes for a total price of USD10,893,250, for shipment not later than 25 February 1989 with a minimum tonnage of 6700  metric tonnes, payment by letter of credit on sight.  The sale was to be FOB Kaoshiung.

There is no explanation given for the participation of BHP Asia in the transaction.  However, by invoice on the same date addressed to the attention of Mr Manadili of Materials Trading, BHP Asia agreed to sell the same quantity of coils to Materials Trading for the same price, again on terms that the sale was FOB Kaoshiung, payment to be by telegraphic transfer in favour of BHP Asia.  Thus if nothing more happened, when the coils were loaded by An Mau upon the
Arawa Bay, title in them passed immediately to Materials Trading.

The evidence is somewhat silent on the role of Materials Trading in the transaction.  It is clear that Mr Manadili, who was at the time employed by BHP's Trading Services Division, arranged for transport of the coils to Port Kembla.  To this end he contacted Mr Orr, an employee of BHP Transport.  The capacity in which BHP Transport acted does not emerge clearly from the evidence.  Mr Manadili, in uncontested evidence, said that both BHP Asia and Materials Trading were acting as commission agents for JLA.  It is somewhat inconsistent with this evidence that, subsequent to the arrival of the coils in Australia and on 12 April 1989, Materials Trading invoiced JLA for the coils (at a slight profit over and above the figure invoiced by An Mau to BHP Asia) showing the transaction to be a C & F sale.  This invoice is expressed to require cash to be against invoice.

On 14 April 1989 BHP Transport invoiced Materials Trading stevedoring costs.  There is no invoice in evidence dealing with the freight costs payable under the voyage charter, but it is common ground that these were ultimately paid by JLA.  I accept the evidence that in the transactions both BHP Transport and Materials Trading were acting as agents for JLA (despite some of the paperwork suggesting the contrary).  It seems always to have been understood that the purchase of the coils was for the benefit of and to the account of JLA.  All costs, whether of the coils or of freight and other expenses, were borne by JLA, and Scottish does not challenge the existence of an agency relationship.

LIABILITY ON THE BILL OF LADING DIRECTLY OR VIA AN IMPLIED CONTRACT

The plaintiffs advanced the following propositions:

1. The master (by the agent) must be taken as signing the bill of lading as agent for Scottish.

2. The bill was a negotiable instrument in the sense that it could be endorsed to the order of the consignee or bearer such that the endorsee would obtain title to the goods.

3. The bill was in fact presented to Scottish, through the agents of that company Patricks, and the goods delivered.

4. Section 5 of the Usury, Bills of Lading, and Written Memoranda Act 1902 (NSW) brings about, on presentation of the bill, privity of contract between JLA or other BHP company and Scottish.

5. Alternatively, if s5 does not apply, there is to be implied a contract of carriage between Scottish and JLA (or other relevant BHP company) along the lines suggested by Brandt v Liverpool, Brazil and River Plate Steam Navigation Co Ltd [1924] 1 KB 575.

For these submissions (except, perhaps the final and alternative submission noted in 5. above) to succeed it is essential for the plaintiffs to show that the bill was a bill to which Scottish was a party.

The plaintiffs accepted, as they must, that prima facie where goods are shipped, even where there has been a time charter, a bill of lading signed by the master will be signed by him as agent for the ship owner: Wehner v Dene Steam Shipping Co [1905] 2 KB 92 at 98. At common law the master has general authority to sign bills of lading on behalf of and binding upon the owners: Wilford at 333.  If that prima facie rule applies here the  submission, except so far as it depends upon the implication of a contract between Scottish and JLA, must fail.  The plaintiffs rely, however, on the decision of the New South Wales Court of Appeal in Namchow Chemical v Botany Bay Shipping Co (Aust) Pty Ltd [1982] 2 NSWLR 523.

That case too concerned a time charter and a sub-charter by way of a voyage charter for the purpose of which there were issued bills of lading.  There too the bills bore the name of the carrier and were signed "for Master".  The bills incorporated the terms of the voyage charter party and freight was paid to the defendant, the time charterer.  The issue, as in the present case, was whether there was a contract between the endorsee of the bill and the time charterer.
         It was held by the Court of Appeal in the circumstances of that case that the time charterer had contracted under the bill as carrier.  Samuels JA, with whose reasons Reynolds AP and Glass JA agreed, accepted (at 527) the existence of a "general rule" that in the case of a charter, other than by demise:

"... `a bill of lading signed by the master or by the charterer as authorized agent of the master is usually a contract with the shipowner'."

However, his Honour continued by emphasising that this was not an invariable rule and that the question fell to be determined having regard to all facts and circumstances of the case, citing with approval Wilston Steamship Co Ltd v Andrew Weir & Co [1925] 22 Lloyd's Rep 521 per Roche J. The critical question as identified by his Honour (at 528) was:

"... whether in signing the bill of lading the defendant intended to make itself personally liable as carrier, or intended only to sign as agent for the master, thus binding (as I will at least assume) the owner."

That critical question was one of construction, to determine what the defendant objectively should be taken to have intended.  "Virtually conclusive" would have been the terms of the voyage charter where the time charterer had been described as owner and where it had stipulated for freight, but for the reference in the bill of lading to "For Master".  His Honour regarded this reference as a mere "historical vestige", such that it should be disregarded.

A number of differences between that and the present case may be noted.  First, there was identified in the bill of lading the charter the terms of which were to be incorporated.  That is, in my view, not of great significance.  The surrounding circumstances make it clear that it is the agreement between Scottish and BHP Transport which is intended in the present case.   Second, that Charter party in the present case does not specifically describe Scottish as "Owner".  Rather it uses, at least in introducing Scottish, the expression "Disponent owner", making clear the fact that Scottish is but the time charterer rather than the owner of the vessel.

Thirdly, the bill in Namchow had been signed by "M Roache", an employee of the time charterer, under a stamp showing the name of the time charterer, whereas in the present case the bill was signed by the master (albeit through an agent).  Fourthly, it had been conceded in Namchow that the bills had been issued pursuant to the voyage charter which the time charterer had executed as "owner" and by which it assumed the role and the responsibilities of carrier.  Finally, there was a clause in the charter party in the following terms, equivalent to cl11 of the present voyage charter:

"24.Bills of Lading.  Bills of Lading in the form appearing below for cargo shipped shall be signed by the Master or Agent of the Owner shall be without prejudice to the terms, conditions and exceptions of this Charter and shall be subject to all such terms, conditions and exceptions."

The third and fourth matters are of considerable significance for they make it clear that the question for my decision must be framed differently from the question in Namchow.  Here the question is whether the master in signing the bill (for it was he who did) did so as agent for Scottish or, as in accordance with the general rule, as agent for the ship, that is the owner of the vessel.  Here the question arises in circumstances where there is no admission that the master did so under the voyage charter.  Further, the attestation clause referring to the "Master" as signing the bill can not be so easily ignored.

There are other cases where the master's signature has been found, having regard to the particular wording of the bill used and the surrounding circumstances, to bind the charterers.  For example in Samuel v West Hartlepool Steam Navigation Co (1906) 11 Com Cas 115, the bills of lading were made out on a form headed with the name of the charterer and referred to a freight contract between the shippers and the charterers which described the cargo and stated the freight to be paid.  Walton J held in the circumstances that the contract of carriage was with the charterers rather than the owners of the ship.  So, too, in The "Venezuela" [1980] 1 Lloyd's Rep 393, a bill of lading was found to constitute a contract with the charterer, but the signature was the signature of the charterer and the documentation did not reveal that the charterer was in fact a time charterer only.

A question which falls to be addressed in the context of the present argument is the proper interpretation of cl8 and 34 of the time charter and their interrelation with each other.  Wilford at 335 ff analyses the New York form containing cl8.  The learned authors refer to Brandon J, as his Lordship was in The "Berkshire" [1974] 1 Lloyd's Rep 185 at 188 (a passage cited also with approval by Clarke J in LEP International Pty Ltd v Atlantrafic Express Service Inc (1987) 10 NSWLR 614 at 618) where his Lordship said:

"The effect of such a clause in a charter- party is well settled.  In the first place, the clause entitles the charterers to present to the master for signature by him on behalf of the shipowners bills of lading which contain or evidence contracts between the shippers of goods and the shipowners, provided always that such bills of lading do not contain extraordinary terms or terms manifestly inconsistent with the charter-party; and the master is obliged, on presentation to him of such bills of lading, to sign them on the shipowners' behalf.

In the second place, the charterers may, instead of presenting such bills of lading to the master for signature by him on behalf of the shipowners, sign them themselves on the same behalf.  In either case, whether the master signs on the directions of the charterers, or the
charterers short-circuit the matter and sign themselves, the signature binds the shipowners as principals to the contract contained in or evidenced by the bills of lading."

Thus cl8 does not advance the plaintiffs' case.  Clause 34 is, to say the least, a difficult clause.  The last part of it does no more than operate as an authority to the master to authorise the charterers or their agents to sign bills, which otherwise the master would sign, ie as agent for the owner.  It does not seem to carry cl8 further.  The reference, in mandatory terms, to the use of Charterers' bills is rather mystifying.  It is hard to see that the clause should be construed as mandatory rather than facultative.  Its proper construction may be to suggest that when the charterer is to contract for carriage the charterer will use its own form of bill of lading.  So construed it may marginally help the plaintiffs, but the assistance it gives is somewhat minimal.

The question is not without difficulty.  The cases make it clear that the fact that the name of the charterer appears on the bill will not be determinative.  In "The Rewia" [1991] 2 Lloyd's Rep 325 the bill was drawn on the charterer's standard form and there was nothing in the bill to identify the carrier otherwise. An argument was raised in interlocutory proceedings based upon a sentence in Scrutton on
Charterparties & Bills of Lading (19th ed) 1984 at 69 where the following appears:

"However, although the master is the owner's servant, his signature may in some cases bind the charterer and not the owner."

Leggatt LJ, who wrote the principal judgment, discusses the cases cited by the learned authors of Scrutton, namely, Zwilchenbart v Henderson (1854) 9 Ex 722, Paterson Zochonis & Co v Elder Dempster & Co (1922) 12 Lloyd's Rep 69, and Wehner, (the last of which has already been refered to).  Leggatt LJ concludes that the mere fact that the charterer's name appears on the bill and that nothing else appears to demonstrate that the charterer is not the owner, does not suffice to excuse the owner from liability and presumably fix the charterer as the contracting party.  His Lordship concludes:

"... a bill of lading signed for the master cannot be a charterers' bill unless the contract was made with the charterers alone, and the person signing has authority to sign, and does sign, on behalf of the charterers and not the owners.  Accordingly the bills of lading in this case were owners' bills."

During submissions in the present case, reference was made also to Woodland Limited v The Ship `Degero' (Yeldham J, unreported, 8 June 1978).  In that case there was no evidence that the master signed as agent for the charterer, nor was he in their employ, nor was there any evidence to support the submission that the master had authority to sign bills on behalf of the charterer.

In the present case there are some elements pointing in each direction.  The bill of lading does not stand alone.  It must be seen in the context where the purchaser of the goods free on board the ship arranges for shipping with a shipping contract (through BHP Transport) by means of the charter party.  It is this document which provides for the payment of freight and it is this document which would suggest that the contract of carriage is with Scottish.  However, there is no suggestion that the master was ever authorised by Scottish to sign a bill on its behalf, nor did the master purport to do so.  So there was no actual authority.  Unless there was ratification of an agency by Scottish, I do not think that the present case falls within the sort of circumstances postulated by Namchow as making the charterer a party to the bill.

The plaintiffs seek to argue ratification.  To do so they must first establish that the so-called agent had the intention of entering the contract (that is to say here, signing the bill) as agent.  That they have not done.  They may need to go further and demonstrate that the so-called agent professed to do so.  That they also have not done: see Keighley Maxsted & Co v Durant [1901] AC 240, Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 82 and Bowstead & Reynolds on Agency (16th ed) at 71.  They say that Scottish, through its agents, attended to the unloading of the vessel and the delivery up of possession of the goods.  In my view, however, that is not such an unequivocal act as would constitute a ratification of the agency by Scottish, for the reason that under the voyage charter party Scottish was, in any event, bound contractually to discharge the cargo and to hand it to the consignee.

WAS THE BILL OF LADING NEGOTIABLE?
         The plaintiff's case proceeded upon the basis that the bill of lading was negotiable.

A bill of lading has three characteristics.  First, it provides evidence of the contract of affreightment between the shipper and the shipowner, although it is not necessarily the contract itself, as, for example, in the present case, where the voyage charter is the direct contract of freight.  Second, it is the document which acknowledges receipt of the goods by the carrier, usually, as discussed above, the shipowner.  Third, the bill may also serve as a document of title to the goods, giving the right to call for delivery of the goods at the port of destination.  Where the bill may be negotiated to others so that the ultimate holder can stand in the place of the original consignee, the bill will be negotiable: see generally, Grime, Shipping Law, 1978 at 82, Comalco Aluminium Ltd v Mogal Freight Services Pty Ltd (1993) 113 ALR 677 at 696 and Scrutton on Charterparties and Bills of Lading 19th ed, 1984 at 2.  By statute, as will shortly be discussed negotiation brings about as well a transfer (or novation) of the rights and liabilities of the shipper under the contract of affreightment to the endorsee or assignee of the negotiable bill.

The plaintiffs point to the fact that both the original and the duplicate were endorsed by BHP Asia as indicating that the bill of lading in the present case was negotiable.

Reference to the context of the transaction can scarcely be a guide to the negotiability of a bill.  That is a matter which must appear on the face of the bill.  A negotiable bill may, after all, fall into the hands of a person who was a stranger to the original transaction.  However, so far as the context provides a guide, it may be noted that the arrangements entered into by BHP Trading for the provision of a letter of credit in favour of An Mau refers to "Non-negotiable Bills of Lading ...".

In C P Henderson & Co v The Comptoir D'Escompte de Paris [1873] 5 LRPC 253, Sir Robert Collier, delivering the advice of the Privy Council, noted that it had been the general view of the mercantile world for some time that to make a bill of lading negotiable it was necessary that the words "or order or assigns" or like words appear on the bill.  Absent such words the bill would be non-negotiable, as that case assumed the bill to be.  The only other case where the matter has been addressed, so far as my researches have revealed, is Soproma v Marine & Animal By-Products Corp. [1966] 1 Lloyd's Rep 367. In that case the question was whether a bill to consign to a named consignee, and not expressed to be to order complied with the "Uniform Customs and Practice for Commercial Documentary Credits", incorporated in a letter of credit.  That required a set of bills in "negotiable and transferable form".  McNair J was of the view that there had not been a good tender of the bill, citing Henderson.

Carver, "Carriage by Sea" 1982, 13th ed, para 1598 likewise suggests that there will be a need for a bill to express that it is to "order or assigns", but stops short of expressing this as a dogmatic rule.  Likewise, the learned authors of Scrutton on Charterparties 19th ed, 1984 say:

"Semble. A bill of lading which does not contain some such words as `to order' or `to order or assigns', or which is indorsed in full but without such words (4), is not a negotiable instrument.(5)".

Note 4 is in the following terms: "ie `deliver to A'".  Note 5 refers to Henderson and Soproma discussed above.

I am of the view that I should accept the law to be as assumed in Henderson, namely, that there must be something on the face of the bill which indicates that the bill is transferable before it will be correct to treat the bill as negotiable.  Otherwise the bill will be treated as a bill to deliver to the consignee and not negotiable.  Of course this does not mean that the consignee could not direct that the goods be delivered to another.

The second submission of the plaintiffs must thus fail.

WAS DELIVERY EFFECTED BY PRESENTATION OF THE BILL?
         In the present case the onus lies on the plaintiffs to show, if it be necessary to their case, that delivery was effected by presentation of the bill.  This they have failed to do.

The duplicate bill, bearing the endorsement of BHP Asia, was forwarded to Materials Trading by courier on 13 March 1989.  Nothing is known as to its arrival in Australia.  On 17 March Patricks advised Scottish by telex that the expected time of arrival of the Arawa Bay was to be 20 March.  The telex noted that BHP had not yet received the bill of lading.  On the same day, Patricks advised Scottish that BHP would issue a letter of indemnity to Patricks to enable delivery of the goods to take place.  Scottish confirmed that this would be satisfactory and on 17 March Scottish wrote to Patricks enclosing a copy of the triplicate bill and advising that they had forwarded suggested wording for an indemnity to BHP.  At that time BHP had still not received the duplicate bill.

On 20 March, the bills had still not arrived.  On that day BHP faxed Scottish requesting delivery to BHP Asia (perhaps thereby also confirming the non-negotiability of the bill) on BHP Transport agreeing to indemnify against loss by reason of delivery to BHP Trading Ltd (sic).  The indemnity promised, inter alia:

"As soon as all original Bills of Lading for the above goods shall have arrived and/or come into out possession, to produce and deliver the same to you whereupon our liability hereunder shall cease."

According to a letter from Patricks to Scottish dated 29 March 1989, the vessel was delayed and did not berth at Port Kembla until 21 March when discharge of the cargo commenced at 0900 hours.  Because of rain unloading was not completed until 25 March when the vessel sailed at 1400 hours.  That letter forwarded to Scottish the duplicate original bill of lading which had been endorsed by BHP Asia.  Hence it is clear that, by 29 March at the latest, the original had been received and presented to Patricks.  However, what can not be said is whether the duplicate was received by Patricks at any time before unloading was completed on 25 March.  It is not a matter I can infer from any circumstance.

Accordingly, I am not prepared to hold that the goods were delivered to BHP upon presentation of the bill.

THE OPERATION OF S5 OF THE USURY, BILLS OF LADING, AND WRITTEN MEMORANDA ACT, 1902
Section 5 of the Usury, Bills of Lading, and Written Memoranda Act 1902 (NSW) provided at the relevant time (it has since been repealed and replaced by ss50A-50C of the Sale of Goods Act 1923 (NSW)):

"Every consignee of goods named in a bill of lading, and every indorsee of a bill of lading to whom the property in the goods therein mentioned shall pass upon or by reason of such consignment or indorsement, shall have transferred to and vested in him all rights of suit and be subject to the same liabilities in respect of such goods, as if the contract contained in the bill of lading had been made with himself."

The section derives from s1 of the Bills of Lading Act 1855 (UK).  The recital to that Act provides the background:

"... by the custom of merchants a bill of lading of goods being transferable by endorsement the property in the goods may thereby pass to the endorsee, but nevertheless all rights in respect of the contract contained in the bill of lading continue in the original shipper or owner, and it is expedient that such rights should pass with the property...".

If, as I have held, the bill of lading issued was non-negotiable, the section could have no operation other than in respect of BHP Asia, the consignee named in it, because no other party could have had property passed to them by endorsement.  The section could likewise have no practical operation to BHP Asia, because, although that company was the consignee, it had, before the coils had even been loaded upon the vessel, contracted to sell them to Materials Trading in an FOB sale.  Thus immediately the coils were placed on board title passed from An Mau to BHP Asia (that contract was likewise a FOB contract) and thence to Materials Trading.
Thus by the time the coils came to be damaged, BHP Asia had ceased to be the owner of them and risk in them had passed to Materials Trading as agent for JLA.

If, contrary to my view, the bill of lading should be treated as negotiable, then the question arises whether s5 could have application to JLA or its agent, Materials Trading.

There is, what Lord Bramwell in Sewell v Burdick (1884) 10 App Cas 74 at 105, "some inaccuracy of expression" in the Statute.  It may be noted that it refers to the property in the goods passing "upon or by reason of ... endorsement".  Yet it will invariably be the case that property will not pass merely by endorsement but by the contract in pursuance of which the endorsement is made.  It must follow that the section must be given a construction which takes account of this "inaccuracy" of expression.  It is, I think, clear that by endorsement in the section is meant a written endorsement coupled with a handing over of the bill of lading.

In Enichem Anic SpA v Ampelos Shipping Co. Ltd (The "Delfini") [1990] 1 Lloyd's Rep 252, Mustill LJ, with whose judgment Purchas and Woolf LJJ agreed, was required to consider an argument that the section could be attracted, notwithstanding that property in the goods passed prior to the endorsement of a bill of lading provided that the contract was one pursuant to which the bill was endorsed in favour of the endorsee. After a discussion of earlier authorities where different opinions had been expressed as to the meaning of the words "upon or by reason of such indorsement", his Lordship continued (at 274):

"The authorities being so thin, it is necessary to go back to the wording of s1 itself, read in the light of the preamble to the Act.  I believe that the Act means what it says in this respect - if not, as more than one Judge has pointed out, in all respects.  Section 1 presents two alternative situations in which the contract is transferred to the endorsee.  The first is where the property passes `upon' the endorsement (and delivery of the document).  This means that the passing of property is simultaneous with the endorsement, and that the endorsement is the act which brings it about: albeit, as Sewell v Burdick teaches, it will do so only if that is what the parties intend.  The second is where the property passes `by reason of' the endorsement.  This must signify something different, since the expression is `upon or by reason of' not `upon and by reason of'.  In my judgment it means that although the endorsement of the bill is not the immediate occasion of the passing of property, nevertheless it plays an essential causal part in it."

The "Delfini" was followed in Anonima Petroli Italiana SpA and Neste OY v Marlucidez Armadora SA  (The "Filliatra Legacy") [1991] 2 Lloyd's Rep 337, a judgment of the Court of Appeal delivered once more by Mustill LJ.

Thus if the facts indicate that the property passed independently of the endorsement, there can be no role for s5, aliter where the endorsement is a step in the passing of property such that it plays an essential role. Here, title passed to Materials Trading as agent for JLA by a contract of sale from Asia eo instanti upon the goods being placed upon the vessel.  There is no suggestion that endorsement of the bill was a step in the passing of the property or that it
played an essential role.  This is not surprising in that transactions within the BHP group of companies were inhouse and conducted with something less than full formality.  As principal, JLA obtained title at the same time as Materials Trading and without regard to the endorsement.

It follows, therefore, that s5 can have no application to the present facts.

IMPLIED CONTRACT
         The alternative submission was based upon the decision in Brandt v Liverpool, Brazil and River Plate Steam Navigation Co Ltd [1924] 1 KB 575. I turn now to that case.

In Brandt endorsees of a bill of lading not entitled to the advantages of s1 of the Bills of Lading Act 1855 (UK) had presented the bill, paid the freight and under protest paid a sum of money which the carrier claimed for expenditure it had incurred.  It was held that, while not entitled to the benefits of the statute, the plaintiffs were entitled to sue in contract, there having arisen by virtue of the presentation of the bill of lading, payment of the freight and delivery and acceptance of the goods, a contract between the parties to deliver and accept the goods according to the terms of the bill.  Although some comments in the judgment may be taken to suggest that the contract came about by the mere circumstance of the offer of the holder of the bill to take delivery and the acceptance of that offer by the shipowner (see Bankes LJ at 589), the judgment of Scrutton LJ makes it clear that this is not the case.  Rather, it is not merely the offer to take delivery followed by delivery itself, but the promise by the person who takes delivery to perform the terms of the bill of lading, which in that case included payment of the freight.

Later cases have tended to make this clear.  Gleeson CJ in Quadro Shipping NV v Bizley & Co (1992) 113 FLR 280, discussing Brandt said (at 287):

"The reasoning in Brandt was as follows.  The shipowners acknowledged receipt of the cargo in apparent good order and condition, and their contractual obligation under the bill of lading was to deliver them in good order and condition, subject to any exceptions or qualifications contained in the bill of lading.  The plaintiffs, who were indorsees of the bill of lading, presented it to the shipowners and thereby offered to take delivery and (according to settled authority) impliedly promised to pay the freight, and any other charges due to the shipowner.  The Court inferred, as a fact, that in consideration for those promises the shipowners agreed to deliver the goods according to the terms and conditions of the bill of lading, which included an obligation to deliver the goods in the same condition as that in which they were shipped, unless they could establish that they were excused from delivering the goods in that condition by one or other of the excepted clauses.  This, it should be stressed, was a process of factual inference, although one undertaken in the light of the particular commercial and legal context."

However, where freight had been prepaid, as in Quadro, the result was different.

In the United Kingdom it is now accepted that Brandt does not stand for the broad proposition that every time a person not being an endorsee having the benefit of s1 of the Bills of Lading Act obtains delivery of goods the subject of a bill of lading there is to be implied a contract to deliver in the terms of the bill.  There must, in particular, be facts which would require a finding of offer and acceptance: cf The "Aramis" [1989] 1 Lloyd's Rep 213 at 224 per Bingham LJ, and at 229 per Stuart-Smith LJ. See also Mitsui & Co Ltd v Novorossiysk Shipping Co (The "Gudermes") [1993] 1 Lloyd's Rep 311, in particular at 320:

"... no implied contract can be inferred unless it is necessary to give reality to the transaction, and unless conduct can be identified referable to the contract contended for which is inconsistent with there being no such contract; and it is fatal to the implication of such a contract if the parties would or might have acted exactly as they did in the absence of such a contract ..."

The plaintiffs seek support from Ilyssia Compania Naviera SA v Ahmed Abdul-Qauri Bamaodah (The "Elli 2") [1985] 1 Lloyd's Rep 107. In that case, as in the present case, there was doubt whether a bill of lading had reached the consignee of the goods before or after discharge and whether the bill had been completed. It was not known whether the
bill had been presented at the port of discharge or whether there had really been a guarantee that it would be produced later.  The consignee sought in interlocutory proceedings to rely upon an implied contract.  It was held that there was an arguable case that a contract should be implied for the supplying of the guarantee, and that that could lead to the inference that the delivery and acceptance of the goods was on the terms of the bill of lading.  Past dealings between the parties were also relevant.

So far as that case depended upon a past course of dealing, it can have no present relevance.  So far as it depended upon the guarantee to provide consideration, it can not help the plaintiffs here because the terms of the arrangement to deliver upon indemnity and guarantee to produce have been reduced to writing by the parties.  There is no reason here to imply some other term (or indeed some other contract).

In my view, there is nothing in the present facts from which there is to be inferred a contract between Scottish and the plaintiffs or any one of them, that there be delivery of the goods on the terms and conditions of the bill of lading.  It is not necessary to infer such a contract to give business efficacy to the relations of the parties.  This is particularly so in a case such as the present where there was an express contract between the parties constituted by the voyage charter.  Nor do I see how there could be consideration so as to infer such a contract in a case such as the present, where freight was effectively prepaid.  The present case, like The "Aramis", involves no more than the mere fact of taking delivery of the cargo and is insufficient to permit implication of a contract.

THE CASE IN BAILMENT
         The finding that the bill of lading signed by the master as agent for the ship owner constituted a contract between the ship owner and the shipper precludes, in my view, any case which the plaintiffs seek to make that the goods were held by Scottish on bailment and damaged in circumstances where Scottish could be liable as bailee.

Possession of the ship was at all times in the owner, not Scottish.  When the goods were placed on board they were not delivered to Scottish for subbailment to the owner, but were placed directly into the possession of the owner.  Despite the fact that there was a voyage charter for the carriage of the coils, the fact that Scottish had the power to direct the master to sign a bill of lading, and the fact that the coils were loaded on board, none of these matters requires or results in the conclusion that there was a bailment, actual or constructive, of the goods to Scottish.  Nor is it right to say as counsel submitted that the reality of bailment is reflected in the conduct of Scottish at Port Kembla where it delivered the goods.  Scottish was required, as between it and BHP, to give delivery.  But although Scottish had power to require the owner to discharge the cargo in favour of BHP, it at no time had possession of that cargo.

THE CASE IN NEGLIGENCE
         The plaintiffs alleged that a duty of care arose in Scottish by virtue of the relationship of carrier undertaken by Scottish.  That duty is expressed to be a duty to take reasonable care in the provision of a vessel which was cargoworthy.  So, it is said, in breach of that duty Mr Willings:

(a)failed to take any steps to check the transverse rubber seals on the hatches;

(b)failed to admit to the nature and degree of rusting evidence on inspection of the ship;

(c)was aware of the heavy scaling around the hatches; and

(d)did not require the owners to attend to proper maintenance of the hatches.

While the existence of a contract of carriage can, no doubt, give rise not only to a claim in contract but also a claim in tort by a contracting party arising from the same facts, the claim in tort will not be sustainable if excluded under the contract.  Hence it is unnecessary in the present case to pursue independently the question whether the plaintiffs have a claim in tort.  I turn thus to consider the question of liability under the voyage charter party, containing, as it did, a specific warranty of seaworthiness.

LIABILITY UNDER THE VOYAGE CHARTER
         It is conceded by Scottish that BHP Transport, as the other party named in the voyage charter, was acting as agent, inter alia, for JLA and hence that JLA could sue under the voyage charter for breach by Scottish of its terms.

As already noted, the voyage charter contained in clause 2 what appears to be an unlimited warranty that the ship would be "tight, staunch, and strong, and in every way fitted for the voyage."  It was not in dispute that unless this warranty were cut down (but subject to the limitation question later to be noted) JLA would be entitled to sue for breach of this warranty and recover damages.

However, cl25 provided:

"The owners shall not be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence on the part of the Owners to make the vessel seaworthy, and to secure that the Vessel be properly manned, equipped and supplied, and to make the holds and all other parts of the Vessel in which goods are carried fit and safe for their reception, carriage and preservation.  The Owners shall not be responsible for loss or damage arising or resulting from: Act, neglect, or default of the Master, mariner, pilot, or the servants of the Owners in the navigation or in the management of the Vessel: Fire, unless caused by the actual fault or privity of the Owners ... Any other cause arising without the actual fault or privity of the Owners, or without the fault or neglect of the Agents or servants of the Owners...".

Clauses 2 and 25 have their origin in the Hague Rules, although modified by BHP to serve its purposes, perhaps as ship-owner, rather than, as at present, the charterer.  Those Rules were adopted by an international convention  signed in Brussells on 24 August 1924 and made part of municipal law by Sea-Carriage of Goods Act 1924 to which they are scheduled. They have, of course, no direct application here.

The Hague Rules operate to impose an obligation upon the carrier to exercise due diligence to make the ship seaworthy and the holds fit for the reception, carriage and preservation of cargo.  That obligation is, however, subject to a defence of the carrier that there was no want of due diligence on its part.  It is also a defence if the carrier shows that the loss or damage was not due to the actual fault or privity of the carrier, or the carrier's servants and agents.

Both of these defences have been the subject of some consideration in the context of the Hague Rules, and it is thus instructive to consider that authority, there being, to use the language of the High Court in Nissho Iwai Australia Ltd v Malaysian International Shipping Corporation, Berhad (1989) 167 CLR 219 at 226:

"... sufficient identity between them to suggest that the purpose of cl ... was to give the carrier the same protection in respect of loss or damage to goods occurring before loading or after discharge as it would have if the Hague Rules applied to loss or damage occurring at those points."

First, it was said in Commonwealth v Burns Philp & Co Ltd (1946) 46 SR (NSW) 307 at 312, that the cargo owner is entitled to point to the damage to goods, in that case, as in the present case, by water, as affording prima facie evidence of damage by unseaworthiness.  The concept of "seaworthiness" covers what may be referred to as "cargoworthiness" so that there is to be found an obligation:

"... that the ship shall be reasonably fit to receive and carry the cargo and deliver it at the specified destination"

cf Empresa Cubana Importaga de Alimentos "Alimport" v Iasmos Shipping Co SA ("The "Good Friend") [1984] 2 Lloyd's Rep 586 at 592.

Next, it may be noted that the Hague Rules, like cl25, draw a distinction between want of care of cargo on the one hand and a want of care of vessel which indirectly affects
the cargo on the other.  The first is not and the second is negligence in the management of the vessel for which the carrier is not liable: see Gosse Millerd Ltd v Canadian Government Merchant Marine [1929] AC 223 at 241.

Further, damage to cargo will be taken to be caused  by unseaworthiness, even where there may be some other intervening cause, for example, negligence of the master.  It suffices if unseaworthiness is "a" cause of the damage: Smith, Hogg & Co Limited v Black Sea and Baltic General Insurance Co Ltd [1940] AC 997 at 1008 per Lord Wright.

The obligation of seaworthiness in the Hague Rules is qualified by due diligence.  This resulted in the courts taking the view that there would be a liability imposed upon the carrier in all cases of unseaworthiness, except where there has been a latent defect which due diligence could not discover.  The different structure of cl2 (as an unqualified warranty) and its interrelationship with cl 25 probably brings about the same result.  Be that as it may, where unseaworthiness is proved as a cause of the loss, the carrier will be liable unless there has not been on its part a want of due diligence.  So, in the present case, the issue for decision may be stated to be whether the unseaworthiness of the vessel (its non-cargoworthiness) was caused by want of due diligence on the part of Scottish.

Once this issue is identified it becomes unnecessary to consider, for the purposes of cl25, whether there has been "actual default or privity of the Owners". However, that issue will not be irrelevant as a result of Article 1(1) of Schedule 6 to the Navigation Act 1912 (Cth) (then applicable, although now repealed by the Limitation of Liability for Maritime Claims Act 1989 (Cth)). For it is a condition of a carrier's right to limit its liability that the loss occurred without the actual fault or privity of the carrier.

Given that the "actual fault or privity" must be that of the carrier, in the present case a corporation, it will be necessary to look to undertake a search for the "directing mind and will" of the corporation: Lennard's Carrying Company Limited v Asiatic Petroleum Company Limited [1915] AC 705 at 713-4, although in a particular fact situation that will not necessarily be a director of the company. In the present case Scottish is in substance a one man company and that man is Mr Willings. He was the Chairman of the Board which comprised, in addition to himself, an accountant and a solicitor, neither of whom took any part in the shipping affairs of Scottish. The remaining director was a Mr Getty who was a commercial man, but not a shipping man. The shipping decisions were ultimately Mr Willing's responsibility, although they may have been delegated to others. Scottish was Mr Willing's company. He had acquired it from the original Scottish parent Scottish Ship, Margaret of Glasgow, when that company went into liquidation and indeed was personally funding the present litigation. He agreed he controlled Scottish and ran it as his company personally. He agreed too that it was his responsibility to ensure that any ship taken on hire was seaworthy.

It is clear from James Patrick & Co Ltd v The Union Steamship Co of New Zealand Ltd (1938) 60 CLR 650 at 655-6 per Dixon J that the:

"... fault or privity ... must be fault or privity in respect of that which causes the loss or damage in question...".

Likewise, as his Honour said at 670 in the same case:

"Actual fault or privity implies some culpability on the part of the owner.  It may consist in being privy to the neglect, unskilfulness or improper act or omission of a servant or agent.  It may be the neglect or the imprudent or wrongful act of the shipowner himself.  But the shipowner must in some way be to blame in respect of an act or omission on his own part or of his privity to the act of omission of someone else.  A failure to make himself aware of what he ought to know is or may be an actual fault.  To limit his liability he must show that he himself has not in any such manner been blameworthy in respect of a cause of the loss or damage...".

The onus will lie on the defendants to establish that the loss was not caused by the defendant's actual fault or privity: James Patrick at 654 where Dixon J said:

"Unless [the shipowners] discharge the burden of excluding actual fault or privity on their part, they cannot obtain a decree for the limitation of their liability, and, if a given fact or state of facts would stand in the way of their doing so, it is enough that its existence appears probable or even to be a reasonable supposition.  It is not necessary that it should be positively found."

The question will ultimately be one of fact.  The cases, however, make it clear that where the carrier is the ship owner, at least, there is a trend toward the imposition of greater responsibility upon the carrier: Alstergren v Owners of the Ship "Territory Pearl" (1992) 36 FCR 186 at 191, and see Arthur Guinness Son & Company (Dublin) Ltd v The Freshfield (Owners) (The Lady Gwendolen) [1965] P 294.

The plaintiffs rely upon the following matters as constituting the want of due diligence, or the actual fault or privity of Scottish:

*the failure on the part of Scottish to make adequate inspection as to the water tightness of the hatch covers; and

*the failure to follow up the references in Captain William's report to "heavy scaling", indicating as it did, lack of maintenance;

The time charter provided, as has already been noted, for the vessel to be surveyed upon "delivery" to Scottish at the joint expense of the owners and Scottish.  This "on hire" survey was carried out in Hobart by a Captain Williams, a qualified marine surveyor.  Mr Willings and Mr Getty of Scottish also inspected the vessel while it was in dock in Hobart.  I shall return to that inspection later.

In his report, under the heading "General", Captain Williams wrote that:

"The vessel is painted and in fair used condition, consistent with the ship's age, and holds are clean and dry and suitable for the proposed cargo of metal products, general cargo and coke".

Under the heading "Main Deck - General" Captain Williams wrote, inter alia:

"The McGregor hatch pontoons are heavily scaled.  Pull chainways are heavily scaled."

A McGregor hatch is a form of hatch cover.  There are two kinds, one which jack knifes to open, that is to say opens in the middle, and one where the pontoons which are joined to each other are pulled back and stacked on each other.  Although there was a conflict in the evidence with Captain Williams suggesting that the McGregor hatches on board the Arawa were of the jack knife variety rather than the single pull variety, and Captain Seymour, who had inspected the vessel at the time of unloading when the damage had been discovered and the cause of it was being investigated, suggesting that they were the single pull variety, I accept the evidence of Captain Seymour.  Captain Williams had little real recollection.  Captain Seymour, on the other hand, was investigating the condition of the ship with the knowledge that there was a claim and his observations in this regard are likely to be correct.  The relevance is that it was easier to view from underneath the single pull variety than the jack knife variety.

The reference in the report to "scaling" is a reference to rust.

The report noted that all coamings and shelves were heavily scaled and rusty, but that the main deck starboard had been recently scaled.  The port side remained to be done.

Under the heading "No 1 hatch area", Captain Williams wrote:

"Coaming  Chain shelves Port and Starboard heavily scaled."

Under both of the headings "No 2 Hatch Area" and "No. 3 Hatch Area", Captain Williams wrote the same comment.

Under the heading "Holds - General", Captain Williams recorded:

"Fair condition - All Tank Tops are scaled".

Captain Williams, at the same time wrote a document which was headed "Bunker Survey Report".  This was a report on the fuel consumption of the vessel and irrelevant to the present proceeding.

Captain Seymour an ex-master and experienced marine surveyor, gave evidence on behalf of the plaintiffs.  He had been employed by BHP to survey the condition of the vessel when it stood in Port Kembla in March 1989.  He had prepared a report at this time and also had taken photographs as best he could of the condition of the hold and the hatch covers.

Captain Seymour was of the opinion that the damage to the coils originated from salt water which had entered the hold as a result of deterioration in the transverse rubbers across the hatches, upon which the sealing bars being part of the McGregor hatch covers rested.  Put simply, there was in the result poor sealing of the hatches through which salt water flowed in the seas between Taiwan and Australia.  He rejected a suggestion which appeared in other evidence that the damage was a result of condensation.  So do I, particularly as it seems clear that condensation could not have caused the damage in fact suffered in the short amount of time the vessel was on the water with the cargo.  Salt water, on the other hand, could and did.  In his written statement Captain Seymour reached the following conclusion, which I accept:

"The condition of the hatch cover seals which I inspected was poor and in my opinion not capable of providing a water tight seal.  This would have been especially so if the vessel was shipping seas or heavy spray on deck such as during heavy weather.  In my opinion water also entered the holds through the hatch joints."

The rubbers, being underneath the hatch, are extremely difficult to maintain.  Indeed to maintain the transverse joints properly it would be necessary to lift off the hatches.  However, proper maintenance is, as Captain Seymour said, vitally important.  Photos taken by Captain Seymour in one of the holds actually showed the rubber coming out of the socket.  There was very heavy scaling visible as well as rust marks.  Mr Seymour said that, had he been asked to advise as to the state of maintenance, he would have informed his principals that maintenance was required, or at the least that a water test be performed.  He was of the view that the ship was not well maintained.

In his evidence in chief Captain Seymour gave evidence that had each hold been sealed with Ramnek tape the damage would not have occurred.  Ramnek tape would have provided a water tight seal.  There was evidence in March 1989 that such tape had been used on a previous voyage, but it had not been on the voyage from Taiwan.  More importantly, he said that given Captain William's report with its references to scaling he would have sought clarification from Captain Williams.

Captain Williams gave evidence that he had observed the transverse rubbers were in place when he had carried out  his survey but that he had been unable to inspect them closely.  He said that nothing he saw suggested that the hatch covers could not be adequately secured.  Captain Williams was not a particularly satisfactory witness.  It was clear that he perceived a danger that he could be liable for negligence in conducting the survey and at times this was reflected in his evidence.
         Captain Williams assumed that the rubber had been checked in a C class survey which would have had to have been conducted on the Arawa Bay one or two years before.  He did not have access to that survey.  He said that he had been told by the Chief Officer that there had been a hose test of the hatches only nine months before with no evidence of leakage.  He did not carry out such a test himself, although it seems clear from Captain Seymour's evidence that this should have been done.  To the extent that his evidence conflicts with that of Captain Seymour, I would prefer the evidence of Captain Seymour.  If it be necessary to make a finding upon the matter I would find that Captain Williams did not look closely at the rubbers, but that had he done so he would have noted that some of the rubber was damaged.  I would find also that the vessel was not well maintained, as was clear from the scaling which Captain Williams observed, and that this should have led to his examining the rubbers more carefully.  Further, to remove the scale on the underside of the pontoons it would have been necessary to take the pontoon covers off, which would have revealed the damage to the rubber.

As noted above, Mr Willings and Mr Getty undertook a cursory inspection of the ship.  They took, in all, about one and a half hours.  According to Mr Willings half of this time was occupied in looking at the hatches.  The inspection could not have been too detailed because each wore a business suit.  To inspect the underside of the hatch it would have been necessary to wear overalls or other appropriate clothing.  I do not understand it to be contended that such a cursory inspection would constitute due diligence.  So the question becomes whether Mr Willings was entitled to rely upon Captain Williams' report.

Given Captain Williams' report, the least one might have expected was that Mr Willings would have investigated further, particularly as Captain Williams' report was not particularly detailed.  Mr Willings was very experienced in the industry.  In his witness statement Mr Willings annexed a copy of Captain William's survey and said of it:

"This is not the detailed survey report that I was in the practice of arranging for vessels which were to be taken on long term time charter.  The responsibility for organising such surveys, in the Scottish Ship Management (Australia) Pty Limited organisation at that time was Andrew Jeff who is now deceased.  Unfortunately I am not aware of the reason why he did not organise a more detailed inspection to be done."

Perhaps shortly before giving his evidence Mr Willings became conscious of the difficulty for his case if he accepted that Captain Williams' report was inadequate and lacking detail, for on entering the witness box Mr Willings said that this evidence was erroneous.  He said that when he initially drafted the statement he was referring to the single page "bunker report" to which reference is made above (a report which could have had no conceivable relevance at all to the condition of the vessel).  He said that the actual full report was a detailed report of the kind he would ordinarily arrange.

Naturally Mr Willings was cross-examined on this matter at some length.  It is clear that Mr Willings understood at all times the critical importance of Captain Williams survey report and that he in fact had that full survey report in his possession at the time his statement was drafted.  I have no doubt that the full survey report was always available to Mr Willings, whether or not he read it at the time it was obtained.  Mr Willings at one point in his evidence said that he could not remember seeing the report when it was initially handed over and I suspect that he was being truthful in saying that.  However, at another point in his evidence Mr Willings asserted that he had not seen Captain Williams' survey at the time.

It is clear that Mr Willings was not correct to say, as he did, that at the time he made his statement he could not find the full report.  It is equally clear that reference to the bunker report as an answer to the plaintiffs' claim would have been ludicrous.  The result of Mr Willings seeking to change his evidence and the subsequent cross-examination was to place a considerable question mark over Mr Willing's credit.
         Mr Willings sought to say that had he read Captain Williams' report he would have done nothing about it because he had inspected the ship in December, three weeks before the survey, and there could not have been such a deterioration in such a short space of time.  He said that he had looked at the holds carefully enough in December to make sure that the rubbers and the chainways were perfectly alright and that he had ascertained that the ship had no history of previous cargo damage.  However, it is clear that the rubbers and chainways can not have been in order at the time Mr Willings inspected the ship.  Indeed, Mr Willings agreed that the photos taken by Captain Seymour in March showed that the condition of the underneath of the hatch covers appeared "very bad" and indicated that the ship looked to have been badly maintained, as indeed I have held that it was.

The inspection he personally undertook was clearly inadequate to satisfy any obligation of due diligence, as Captain Seymour's evidence and common sense would make clear.  The deterioration of the rubber is unlikely to have occurred just in the period between December and March.  It would not be due diligence merely to inspect the vessel for one and a half hours dressed in a business suit.  Whether or not an inspection of the underside of the hatch covers would have been difficult and dangerous, as Mr Willings suggested, it was discoverable in the same way that Captain Seymour discovered the problem in March.  Nor was Mr Willings entitled to rely on the fact that because a special survey of the ship had been carried out in the preceding year, the holds must continue to have been cargoworthy.  Clearly the obligation would have been on Mr Willings to have read Captain Williams' survey and to have noted what was there said.  Failure to do so would again involve lack of due diligence.  But more importantly, I agree with Captain Seymour's evidence that what was said in that survey would lead to the conclusion that maintenance was a problem and that further inquiries should have been made.  The failure so to do would constitute lack of due diligence and likewise actual fault on the part of Mr Willings and thus Scottish.

I would accordingly find that there was an absence of due diligence on the part of Scottish in failing to make adequate inspection as to the water tightness of the hatch covers; in failing to read Captain Williams' report, if that indeed was the case; or if the report was read, in failing to follow up the references in that report to the condition of the holds indicating, as those references did, a lack of maintenance of the vessel.  These same matters lead me to the conclusion that there was actual fault or privity on the part of Scottish.  I should say that, it is no answer to say that had tape been used by the master of the vessel to seal the holds the damage would not have happened.  It is sufficient that the lack of due diligence or fault is a cause of the damage.  Had the seals been secure there could have been no damage to the cargoes and there would then have been no need to have used a sealing tape.

There remains, however, in the way of success to JLA, the provisions of cl30 which Scottish submits operate to bar the plaintiffs from pursuing its case under the voyage charter.  It is said that the claim was not brought within the period of six months stipulated in cl30, nor has the matter within that time been submitted to arbitration so that the plaintiffs are not entitled to rely on the voyage charter.

I have already set out the terms of cl30 (at p11).  Suffice it to say here, that it purports to require the parties to go to arbitration, either in Australia where the dispute is "about events happening in Australia" or in London, in other cases.  There is a difficulty of construction because that part of the clause which concerns disputes about events happening in Australia requires arbitration to take place at a capital city at which the vessel loads.   Hence, if the present dispute were one about an event happening in Australia, there would be difficulty in determining where the arbitration should have taken place, the vessel having been loaded in Taiwan and merely having been unloaded in Australia.  However, the present is probably not a case where the dispute can be said to be about events happening in Australia.

The plaintiffs rely upon s9(2) of the Sea-Carriage of Goods Act 1924 which, although now repealed and replaced by the Carriage of Goods by Sea Act 1991 (Cth), applied at the time when the cause of action arose. That sub-section provided:

"Any stipulation or agreement, whether made in the Commonwealth or elsewhere, purporting to oust or lessen the jurisdiction of the Courts of the Commonwealth or of a State in respect of any bill of lading or document relating to the carriage of goods from any place outside Australia to any place in Australia shall be illegal, null and void, and of no effect."

Carruthers J of the Supreme Court of New South Wales, sitting as a judge in Admiralty, decided in Sonmez Denizcilik Ve Ticaret Anonim Sirketi v The MV "Blooming Orchard" (1991) 22 NSWLR 273 that a voyage charterparty was for relevant purposes a document relating to the carriage of goods and that a requirement to submit to arbitration abroad in such a contract was void. I would follow his Honour as a matter of comity, unless I was of the view that his Honour was clearly wrong. This is of particular importance in Admiralty where uniformity of legal opinion is necessary to ensure that the mercantile law is certain (cf Carrington Slipways Pty Limited v Patrick Operations Pty Limited (1991) 24 NSWLR 745 at 747 per Kirby P). I am not of the view that his Honour was at all wrong. Counsel for the plaintiffs reserved his position to argue that The "Blooming Orchard" was wrong on appeal, but did not press the matter strongly before me.

I would but say that I should have thought there was little doubt that a voyage charter of the kind here was a document relating to the carriage of goods.  Indeed, the written submissions of Scottish appear to accept this when it is said that:

"Since BHP Materials and Lysaght are parties to the voyage charter, their rights against the carrier are found in that contract of carriage, not in the bill of lading...".

Clearly that carriage was from a place outside Australia to a place in Australia.  The only real question can be whether the requirement to submit to arbitration is a stipulation which purports to oust or lessen the jurisdiction of the Courts.  That an arbitration clause satisfies those words was held to be the case in Kim Meller Imports Pty Ltd v Eurolevant SPA (1986) 7 NSWLR 269, a judgment of Rogers J. See also Compagnie des Messageries Maritimes v Wilson (1954) 94 CLR 577 where at 583 the Chief Justice explained s9 in the following terms:

"... it can hardly be doubted that its object was to ensure that Australian consignees of goods imported might enforce in Australian courts the contracts of sea-carriage evidence by the bills of lading which they held.  Section 9(2) is expressed in the strongest words and makes a stipulation or agreement falling within its terms illegal, null, void and of no effect."

Counsel for Scottish, accepting that I would follow the New South Wales law as expressed in these decisions, submitted with some ingenuity that while s9(2) operated to strike down the requirement to arbitrate, the submission to arbitration was severable from the remaining part of the clause with the consequence, presumably, that unless notice in writing of the claim was given in six months the claim was barred.

Although I accept the possibility of severance in an appropriate case (cf Ferris v Plaister (1994) 34 NSWLR 474) I do not think that the present is such a case. It is a necessary precondition to a severance that once the void stipulation is struck what remains can stand on its own feet. In my opinion, the final clause of cl30 is so intertwined with the requirement to submit to arbitration that it can not stand on its own. This is particularly so because the six month period there referred to is related to the appointment of an arbitrator within that period. It can not be said that the requirement that the claim be in writing is independent of the requirement that it be arbitrated and the claimant's arbitrator appointed in the six month period.

THE CLAIM AGAINST THE OWNER
         The plaintiffs' case against the owner does not suffer the same difficulties.  The reasons which lead to the conclusion that Scottish was not a bailee of the goods, leads also to the conclusion that Oceaname was.  As bailee, Oceaname was liable to JLA for the loss it suffered.  Clearly it could not set up a defence that it took such care of the coils as was reasonable in the circumstances; (cf Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd (1966) 115 CLR 353. The vessel was not cargoworthy, a matter for which the bailor was responsible. To the extent that this lack of cargoworthiness was capable of being alleviated by the use of tape, the vessel's master did not tape the holds.

I would accordingly find in favour of JLA against both Scottish and Oceaname.  I would direct the applicant to bring in short minutes of order on a date to be agreed to reflect these reasons.  I understand from what was said from the bar table that the parties will be able to agree as to the necessary figures.  If that not be the case it will be necessary for directions to be given for the further disposition of the case.

I certify that this and the preceding fifty-eight (58) pages
are a true copy of the Reasons for Judgment herein of his Honour Justice Hill.

Associate:  Date:  24 April 1996

Counsel and Solicitors      S D Rares SC with G Nell

for Plaintiffs:             instructed by Douglas Coleman

Counsel and Solicitors      J Allsop instructed by

for Second Defendant:       Ebsworth & Ebsworth

Dates of Hearing:           4 - 11 march 1996.

Date Judgment Delivered:         24 April 1996.