C v Sheepvaartonderneming Ankergracht v Stemcor (A/sia) Pty Limited

Case [2007] FCAFC 77

FEDERAL COURT OF AUSTRALIA

C V Sheepvaartonderneming Ankergracht v Stemcor (A/sia) Pty Limited [2007] FCAFC 77

SHIPPING AND NAVIGATION – carriage of goods by sea – liability for damage to steel coils by corrosion before or during voyage – effect of amended Hague Rules as defined in s 7 of Carriage of Goods by Sea Act1991 (Cth) – whether vessel unseaworthy for voyage from northern winter to southern hemisphere summer because not fitted with dehumidifiers – seaworthiness – cargoworthiness – whether carriers established exercise of due diligence – whether carrier failed to carry, keep and care for coils properly and carefully – effect of ventilation of non-hygroscopic cargoes during voyage – application of dew point rule – whether packaging of steel coils sufficient – effect of evidence of standard industry practice of wrapping steel coils – whether carriers established inherent defect, quality or vice.

Carriage of Goods by Sea Act 1991 (Cth) ss 7, 17

AE Reed & Co Ltd v Page Son & East Limited [1927] 1 KB 743 cited
Albacora S.R.L. v Westcott and Laurance Line Ltd [1966] 2 Lloyd’s Rep 53 considered
BHP Trading Asia Ltd v Oceaname Shipping Ltd (1996) 67 FCR 211 cited
Burges v Wickham (1863) 3 B & S 669 cited
El Greco (Australia) Pty Ltd v Mediterranean Shipping Co SA [2004] FCAFC 202 cited
Eridania S.p.A. v Rudolf A Oetkeer (The ‘Fjord Wind’) [2000] 2 Lloyd’s Rep 191 cited
F C Bradley & Sons Ltd v Federal Steam Navigation Co Ltd (1926) 24 Ll. L. Rep 446 cited
FC Bradley & Sons Ltd v Federal Steam Navigation Co Ltd (1927) 27 Ll. L. Rep 395 discussed
Gamlen Chemical Co (A’Asia) Pty Ltd v Shipping Corporation of India Ltd [1978] 2 NSWLR 12 referred to
GH Renton & Co v Palmyra Trading Corporation of Panama [1957] AC 149 cited
Grand Champion Tankers Ltd v  Norpipe A/S (The Marion) [1984] 1 AC 563 cited
Great China Metal Industries Co Ltd v Malaysian International Shipping Corporation Berhad (1998) 196 CLR 161 applied
Huddart Parker Ltd v Cotter (1942) 66 CLR 624 cited
Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd [1959] AC 589 cited
McFadden v Blue Star Lines Ltd [1905] 1 KB 697 referred to
Mitsui & Co Ltd v Novorossiysk Shipping Co (‘The Gudermes’) [1991] 1 Lloyds Rep 456 cited
Northern Shipping Co v Deutsche Seereederei G.m.b.H. (The ‘Kapitan Sakharov’) [2000] 2 Lloyd’s Rep 255 cited
Owners of Cargo on Ship ‘Maori King’ v Hughes [1895] 2 QB 550 cited
Papera Traders Co Ltd v Hyundai Merchant Marine Co Ltd (The ‘Eurasian Dream’) [2002] 1 Lloyd’s Rep 692 cited
Riverstone Meat Co Pty Ltd v Lancashire Shipping Co Ltd [1961] AC 807 cited
Rogers v Whitaker (1992) 175 CLR 479 cited
Sanko Steamship Co Ltd  v Sumitomo Australia Ltd (No 2) (1995) 63 FCR 227 cited
Shipping Corporation of India Ltd v Gamlen Chemical Co (A’Asia) Pty Ltd (1980) 147 CLR 142 questioned
Silver v Ocean Steam Ship Co

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AGLC
C v Sheepvaartonderneming Ankergracht v Stemcor (A/sia) Pty Limited [2007] FCAFC 77
Case
[2007] FCAFC 77
Decision Date

CaseChat Overview and Summary

The case of C v Sheepvaartonderneming Ankergracht v Stemcor (A/sia) Pty Limited involved the liability of carriers for corrosion damage to coils transported from Japan to Australia. The primary judge held that the carriers were liable for the corrosion damage, finding that the vessels were not seaworthy for the carriage of the coils due to the lack of dehumidification systems and heating systems. The carriers appealed against this decision, arguing that they had exercised due diligence and that the damage was not caused by their failure to make the vessels seaworthy.

The key legal issue before the court was whether the carriers were liable for the corrosion damage to the coils. The court had to determine whether the carriers had exercised due diligence to make the ships seaworthy and to make the holds fit and safe for the carriage and preservation of the coils. The court also had to consider whether the carriers were liable for the damage despite the lack of specific knowledge about the sensitivity of the coils to corrosion.

The court found that the carriers were liable for the corrosion damage, as they had failed to exercise due diligence to make the vessels seaworthy. The court held that the carriers were responsible for the corrosion damage that occurred during the voyage, as the vessels were not equipped with dehumidification systems or heating systems to prevent condensation and corrosion. The court rejected the carriers' argument that they had exercised due diligence, as the installation of dehumidification systems was practicable. The court held that the carriers' failure to take reasonable steps to prevent condensation and corrosion amounted to a breach of their duty to carry, keep, and care for the coils properly and carefully.

The court dismissed the appeal and ordered the parties to file submissions on the costs of the proceedings at first instance and the appeal. The court held that the carriers were responsible for the corrosion damage to the coils and that Stemcor was entitled to be compensated for that damage. The court's decision reinforces the importance of carriers exercising due diligence to make their vessels seaworthy and to take reasonable steps to prevent damage to the cargo during the voyage.

Orders

Orders of the court

1. Subject to any further or other order as to the costs of the proceedings at first instance, the appeal be dismissed.

2. The appellant file and serve within seven days of this day its submissions in writing in respect of the orders which it contends, in light of the reasons published today, should be made as to the costs of the proceedings at first instance and of the appeal.

3. The respondents file and serve, within three days after receipt by it of the submissions referred to in paragraph 2 of this Order, any written submissions upon which it relies in response to those submissions.

4. The appellant file and serve, within one day of the receipt by it of the submissions referred to in paragraph 3 of this Order, any submissions in reply.

5. The appeal stand over to a date to be fixed for the making of orders as to the costs of the proceedings at first instance and of the appeal.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

RYAN, DOWSETT AND RARES JJ
Section 17 of the Carriage of Goods by Sea Act 1991 (“COGSA”) provides:‘There is not to be implied in any contract for the carriage of goods by sea to which Part 2 or 3 of this Act applies any absolute undertaking by the carrier of the goods to provide a seaworthy ship.’THE CONCLUSIONS AT FIRST INSTANCE In each proceeding the learned primary Judge held the relevant carrier to be liable for the corrosion damage occasioned to the coils in the course of the voyage from Japan to Australia. His Honour’s findings were expressed at [156] to [161] as follows:‘156It is true that the packaging of the coils was not such as would prevent the ingress of water in the form of vapour. However, the coils were packaged in a way that is regarded as adequate in the industry, and in a manner consistent with the general practice in the industry. There was no evidence of any industry practice of wrapping coils in a way that ensures there is no possible ingress of water in the form of vapour or otherwise. The evidence does not support a finding that the internal wrapping was defective or inadequate in any way.157The coils were being transported from a cold northern hemisphere climate to a hot southern hemisphere climate, through the tropics. While the coils were particularly susceptible to damage from corrosion consequent upon contact with water and the Carriers were not specifically informed of any particular sensitivity of the coils, the sensitivity of steel to corrosion generally was well known in the industry. 158I consider that it is more likely than not that the holds were closed in Yokohama with water trapped inside in the form of wet dunnage and liquid water on some cargoes that were wet with rain. Further, ventilation occurred during the course of the voyages, at times when the vessels were likely to have been in the tropics. Ventilation probably resulted in the ingress of air containing water vapour rather than the removal of water vapour from the holds. 159I consider that, on the balance of probabilities, condensation occurred after the loading of the coils on each vessel and during the course of the respective voyages of the vessels. That condensation resulted in corrosion. The corrosion could not have occurred if moisture had not been admitted into the holds or if moisture, once admitted, had been removed by the operation of a dehumidification system installed in the vessels. Alternatively, condensation could have been prevented by the operation of a heating system installed on the vessels to ensure that the surface temperature of the coils did not fall below the dew point temperature of the air in the holds.160In the circumstances, I consider that the corrosion was caused by the failure on the part of the Carriers to carry, keep and care for the coils properly and carefully during the voyages in circumstances where the vessels had neither dehumidification systems nor heating systems installed. In the circumstances, having regard to the apparent difficulty in preventing the ingress of water into the holds in the ways that I have described, the vessels were not seaworthy for the carriage of the coils in question from Yokohama to Sydney on voyages commencing in December and February respectively. Since it was practicable to install dehumidifiers in the vessels, the Carriers failed to exercise due diligence to make the ships seaworthy and to make the holds fit and safe for the carriage and preservation of the coils.161It follows that the Carriers are responsible for the corrosion damage that was occasioned to the coils and Stemcor is entitled to be compensated for that damage.’

Ratio Decidendi

Legal Principle Established

Established by: RYAN, DOWSETT AND RARES JJ

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