Great China Metal Ind v Malaysian Intl Shipping Corp Berhad

[1997] HCATrans 97

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S134 of 1996

B e t w e e n -

GREAT CHINA METAL INDUSTRIES CO LTD

Applicant

and

MALAYSIAN INTERNATIONAL SHIPPING CORP. BERHAD

Respondent

Application for special leave to appeal

BRENNAN CJ
GAUDRON J
McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON THURSDAY, 10 APRIL 1997, AT 9.32 AM

Copyright in the High Court of Australia

MR R.B.S. MACFARLAN, QC:   If the Court pleases, I appear with my learned friend, MR P.E. KING, for the applicant.  (instructed by Mallesons Stephen Jaques)

MR A.J. SULLIVAN, QC:   May it please the Court, I appear with my learned friend, MR N.G. REIN, for the respondent.  (instructed by Ebsworth & Ebsworth)

BRENNAN CJ:   Yes, Mr Macfarlan.

MR MACFARLAN:   If the Court pleases.  Your Honours, if special leave were to be granted on this application there would arise for consideration by the Court the proper meaning of the expression “perils.....of the sea” which appears in the Hague Rules.  It is a defence available to sea carriers of goods.  The Hague Rules were scheduled to the Sea-Carriage of Goods Act.  They have now been replaced by the Hague-Visby Rules in Australia, but the same expression appears in both.  There is a prospect of further change in the rules but it is not clear as to when, if at all, that would occur.

GAUDRON J:   What meaning would you contend for?

MR MACFARLAN:   Your Honour, the issue that arises is as to whether a peril of the sea may be an event or may result from an event which is both anticipated and foreseen, which was the case here.  There were findings below ‑ ‑ ‑

BRENNAN CJ:   And guarded against?

MR MACFARLAN:   That is not a necessary element, as we see it, your Honour, but if, we say, the event was one that was both foreseen and anticipated, it could not be a peril of the sea.  There were clear factual findings below that that was the case here.  As the master of the vessel said in evidence, what we anticipated materialised.  So if we were successful in our contentions, then there would have to be a finding for my client and the defence would have to be rejected.  So it is, in our submission, a suitable vehicle for the investigation of that question.

GAUDRON J:   Different considerations would apply, would they not, if it were anticipated, foreseen and able to be guarded against?

MR MACFARLAN:   Not necessarily different ones.  It would be a stronger case if that were so but it is sufficient, in our submission, that the event is both anticipated and foreseen.

GAUDRON J:   The reason I ask is this:  is it clear that there would be a different result if the notion of “able to be guarded against” were included in the definition, as it were?

MR MACFARLAN:   Yes, it is, your Honour, because the conditions were foreseen and anticipated prior to the vessel coming into the area in which the particular sea and weather conditions occurred.  So there is always the option of avoiding that area.

GAUDRON J:   Of staying in port.

MR MACFARLAN:   Of staying in port or going somewhere completely different, theoretically, but certainly staying in port until the problem has passed.  

There are three reasons, your Honours, why the application should be granted.  The first is that the position in Australia is out of step with that obtaining in the other major common law countries.  The position in Australia appears to be established by an obiter dictum of the High Court in the matter of Gamlen in 1980.  What is said there is that one can have a peril of the sea even though the event is foreseen and anticipated.  That is not the position in the United States or in Canada, and it is not the position as currently applied in England.

GAUDRON J:   Is the position in the United States entirely clear?

MR MACFARLAN:   We submit it is, your Honour.  Our learned friends, in their response, have referred to a decision which, on analysis, we say entirely supports the position we have proffered because it does emphasise the fact that the weather there was unforeseen.  The other decision referred to is a 1939 decision of the Second Circuit Court of Appeals, but there has been at least one subsequent decision of that court in which the position as I have stated it was clearly enunciated. 

Your Honours, just to say a little more about the position in the United Kingdom.  The seminal decisions in bills of lading cases were two 1887 cases, The Xantho and Hamilton Fraser.  They held that a peril of the sea need not be extraordinary in the sense that there need not be violent or extremely rough sea.  That is a different issue than we submit arises in this case.  There are two issues that one can see concerning the meaning of “peril of the sea”.  One is that one concerning the violence of the sea and, at least so far as English and Australian law is concerned, that has been now well established, that one does not have to have that type of sea condition.  There is a quite distinct issue as to whether one may have a peril of the sea, even if the event is foreseen and anticipated.

The two 1887 House of Lords decisions deal with that point of violence or extremity of the sea conditions.  So far as the other point is concerned, unforeseen and unanticipated, they are, we say, consistent with the view we press.  Your Honours can see that in the application book at page 67 where there is a passage quoted from The Xantho at line 40 where Lord Herschell said:

There must be some casualty, something which could not be foreseen as one of the necessary incidents of the adventure. 

McHUGH J:   What are we talking about when we refer to reasonable foresight in this context?  Are we talking about reasonable foresight of the very act that causes the loss or are we referring to a class of acts of which the particular peril falls within?

MR MACFARLAN:   We are talking, your Honour, of anticipation of the type of sea condition which is encountered, in our submission, and that is exactly what occurred here.  The seas were high, there is no doubt about that, but it was well known that they could well be so at that time of year in the place where the vessel was travelling.

BRENNAN CJ:   This is one of the passages that has given me some concern because I do not quite understand what his Lordship is speaking about.  He says:

There must be some casualty, something which could not be foreseen as one of the necessary incidents of the adventure.  The purpose of the policy is to secure an indemnity against accidents which may happen, not against events ‑

Now, is he speaking about foresight of the loss that was actually caused or is he speaking about foresight of the sea conditions which cause it?

MR MACFARLAN:   We say the latter, your Honour.

BRENNAN CJ:   Well, it does not read that way, does it, because he is speaking of the casualty, that is that which is indemnified and then speaks of accidents, not events.  I read it the other way and I frankly do not quite understand the relationship between what is said to be an event which causes the loss, in terms of foreseeability and guarding against the results of it, and the element of negligence which can undo the exception of events of the sea.

MR MACFARLAN:   Your Honour, to some extent it raises a question of onus, but it goes a bit further than that.  One of our submissions is that the effect of the view against us is that in a bailment situation, which this is, the onus of proving or disproving negligence is placed upon the cargo owner, bailor.  But, of course, if we are correct in our interpretation of the expression “perils of the sea”, the question of negligence does not arise if the event is foreseen and anticipated because it is not a peril of the sea at all.  We say that is consistent with the scheme of the Hague Rules because, put in general terms, what they provide for is a defence to the shipowner whenever there is an event of a very unusual kind, such as an act of God or, we say, a peril of the sea, or where the shipowner is able to prove that the event occurred without its negligence.  There is a catch-all which is subparagraph (q) which covers that.

McHUGH J:   But take a boat that goes into unchartered waters and hits a reef and goes down.  Now, is that a peril of the sea?  One would have thought that it was reasonably foreseeable, to have reefs there.  Is that a peril of the sea?

MR MACFARLAN:   It is a peril of the sea, your Honour, but it is not foreseeable, we would submit.  If it is known that the rock is there or it is foreseeable that it is, then it is not a peril of the sea.  But if one assumes it is an unchartered rock, then yes, it is.

McHUGH J:   Supposing one knows that there are a lot of reefs around that area, not necessarily in the vicinity but say within several miles, maybe several hundred miles, is it a peril of the sea then?

MR MACFARLAN:   Foreseeability, your Honour, would have to go beyond foreseeability that something of that character might happen.  What we are talking about is an event being foreseeable and anticipated.  Now, the mere speculation that there might be some unchartered rock would not satisfy that requirement.

McHUGH J:   So it is a different test from the test in negligence law?

MR MACFARLAN:   Yes, because we are talking about anticipation as distinct from mere foreseeability.  That was the position in the House of Lords.  The next significant step in the United Kingdom was the Privy Council decision in 1942 in Canada Rice Mills.  That was an appeal from Canada and was in an insurance context.  That decision has been

understood, at least by the Court of Appeal below here, as putting a proposition different from the one I have been contending for.  It was followed again in an insurance context in England in 1944.  That was the English Court of Appeal decision in Neter, which was referred to in the decision below here.

What has happened in more recent times in England, from 1980, is that first instance decisions are consistent with the United States and Canadian position, that is if an event is able to be foreseen and anticipated, it is not regarded as a peril of the sea.  Thus those decisions are consistent with the House of Lords decisions and consistent with the United States and Canadian position.  One can understand why particular regard would not be given to the Canada Rice Mills decision because that would not strictly be binding in England, it being a Privy Council decision from another jurisdiction and being on an insurance matter.

Your Honours, the second reason we say the application should be granted is this:  we say that the reasoning in Gamlen which led to the obiter dictum in question was unsatisfactory and I can demonstrate that briefly in this way.  There was reliance placed in Gamlen upon the earlier High Court decision in Skoljarev, a 1979 decision.  That was a marine insurance case.  That clearly established for Australia that there could be a peril of the sea, even in calm seas.  So it dealt with that other point which I have already adverted to.  On the question ‑ ‑ ‑

BRENNAN CJ:   We will call on Mr Sullivan.

MR SULLIVAN:   Your Honours, we submit that the application should not be allowed because, as my learned friend rightly concedes, on the state of law in Australia at the moment, the trial judge and the Court of Appeal came to the correct solution.  The real question therefore becomes whether or not this Court should reconsider what my learned friend has styled the obiter of this Court, of four Judges of this Court, in Gamlen.  We respectfully submit the reasoning in Gamlen is correct, but moreover, your Honours, we take issue with my learned friend that it is obiter.  In our respectful submission, when one examines what is said by their Honours Justices Mason and Wilson, and concurred in by the then Chief Justice, Sir Harry Gibbs, and by Justice Aickin, is that their Honours give two separate reasons for reaching their decision, one a narrow issue and then they say, let us consider it on a broader issue. 

Conformably with what Justice Gummow said whilst a judge of the Federal Court in a case called Trawl v Effem Foods, applying an English House of Lords decision, Jacobs, the true analysis, in our respectful submission, in that situation is that each of the two reasons, although each would be sufficient for the decision, forms part of the ratio.  So the question becomes whether, conformably with what this Court has said in Johns and other cases, this is a case which should be - the Gamlen decision should be reconsidered.

BRENNAN CJ:   Let us assume for the purposes of the argument that we can take what was said by Justices Mason and Wilson in Gamlen as representing the law in Australia at the moment.  The next question is, is that law one which either places Australia in a situation distinct from the law of other sea-going nations and, secondly, whether, in its form, it is in a satisfactory condition.

MR SULLIVAN:   Dealing with the first of those two inquiries, it is true there are several first instance decisions in England since 1980 which talk about weather conditions or sea conditions needing to be uncontemplated or unanticipated.  If one examines those decisions, there are two judges involved:  one Mr Justice Sheen and, less clearly, Mr Justice Hobhouse.  Each of those three decisions of Justice Sheen, in our respectful submission, is unsatisfactory, with great respect, in its reasoning.  There is no analysis, there is no reference in any of those cases to any of the previous decisions of the Privy Council or the House of Lords in cases such as The Xantho.  They are cited and, with great respect, they appear to be extempore judgments.  Justice Hobhouse in The Torenia, the other case which my friend relies upon, with great respect, on proper analysis does not even deal with the discussion on perils of the sea.  In our respectful submission, the situation in England is still ‑ the law would still be regarded - the authoritative statements would still be regarded as those of the two 1887 cases plus the Canada Rice Mills one.  It is true to say there is a difference between the Australian position and the American position.  However, in Gamlen, this Court considered that situation and, as a matter of policy reasons or other reasons, adopted what Justice Mason called the Anglo-Australian approach. 

Our researches have revealed in Singapore - and we have photocopies of the cases to hand to your Honours - the same approach is adopted as was adopted in Gamlen, namely that you can have expected or anticipated conditions but they can still be a peril of the sea.  The case which we hand up to your Honours on that regard is a case of Lombard Insurance Co Ltd & Ors v Kin Yuen Co Pte Ltd. It is reported on appeal in (1995) 1 SLR 643. Unless your Honours wish me to take you to it, I will not. Suffice to say for our present purposes that at least in Singapore there is recent authority to the same tune, if one can use that expression, as ‑ ‑ ‑

BRENNAN CJ:   Can you show us the critical passage?

MR SULLIVAN:   Yes, your Honour. If I might first take you to the decision of the trial judge, because the appeal proceeds on the basis that the trial judge was correct and talks in elliptical terms. The trial judge - this judgment was reported in (1994) 2 SLR 887. The factual finding which shows anticipation appears at page 889, point 6 at letter D. There were:

adverse sea conditions even though they might have been anticipated.....by the vessel.

The discussion in the judgment, page 898B, where the learned trial judge, on that occasion, expressly applies the case my learned friend referred to of Neter and says that:

‘it is clearly erroneous to say that, because the weather was such as might reasonably be anticipated, there can be no peril of the seas.’

At 901 letter I again the fact of anticipation is referred to.  Then at 903D his Honour says:

In my judgment, the rough rolling and heavy rolling was not caused by the ordinary action of waves but by adverse sea conditions even though they might have been anticipated in the course traced by the vessel.

Then at 904 his Honour quotes in more detail the passage of Mr Justice Tucker in the Neter development at letters G to I which is the same proposition.  So, your Honours, in our respectful submission, that is clear authority.

When it came on for appeal, really one can just go to the last page of the appeal at page 659 where, in the joint judgment ‑ ‑ ‑

BRENNAN CJ:   Can I just take you back to page 904 of the 1994 reports and the passage taken from Justice Tucker’s judgment in Neter at letter H.

because the weather was such as might reasonably be anticipated there can be no peril of the seas.  There must, of course, be some element of the fortuitous or unexpected to be found somewhere in the facts and circumstances causing the loss -

Now, obviously, there is weather and there is ultimately a loss somewhere in between.  Now, does that engage the notion of guarded against?

MR SULLIVAN:   In part it does, your Honour.  There are, of course - let me retrace myself slightly.  There is a finding here by the trial judge that the goods had been properly packed.  It was a case where the shipper packed the containers.  However, therefore one could say it is fortuitous - something is fortuitous if goods which are properly packed become damaged by reason of the operation of the sea or a collision or any other items.  The fortuity comes about by reason of the fact that one would not expect, in the actions of negligence either in the management of the ship of in the packing of the goods or in some other way, that damage to occur given those findings.  Indeed, as your Honour put to Mr Macfarlan, it is quite plain, in our respectful submission, when one reads The Xantho, and indeed the trial judge in the Court of Appeal did, with respect, adopt the correct approach, that the element of fortuity or unexpectedness is in respect of the loss or casualty, not in respect of the weather conditions.  That appears from the passage your Honour quoted.  It also, of course, appears from the Singaporean case. 

But if one examines the trial judge, application book page 17 and at page 64 in the appellate judgment, their Honours below approached the matter in the right way, in our respectful submission, as well.  So the fortuity of the element that comes in is that mixture of circumstances which leads to the casualty.  Whilst I am on that point, your Honours, one of the criticisms that my learned friend made was that The Xantho deals with the extraordinary nature of matters and equates that with ruffled violent weather but does not deal with anticipated or expected. 

With great respect, that is wrong.  That was dealt with also by Justices Mason and Wilson in the Gamlen 147 CLR 142. The relevant passage, if I can take your Honours very briefly to it, in the joint judgment of Justices Mason and Wilson, their Honours, after discussing the case, this is at the top of page 166, say this:

In the United Kingdom and Australia it is not necessary that the losses or the cause of the losses should be “extraordinary”.

They quote Carver and Skoljarev.  Then their Honours go on to say this:

Consequently sea and weather conditions which may reasonably be foreseen and guarded against may constitute a peril of the sea.

McHUGH J:   Now, that is a passage I have a deal of difficulty in understanding.  That seems to say that although you are negligent, and you must be negligent if you can reasonably foresee something and guard against it, nevertheless you can be excused because there is a peril of the sea.

MR SULLIVAN:   No, your Honour.  Whilst something is foreseen and can be guarded against, all the cases say that it depends on its own facts, but even taking the most ‑ ‑ ‑

McHUGH J:   Must be reasonably foreseeable and may reasonably be guarded against.  Now that is clearly negligence, is it not?

MR SULLIVAN:   With great respect, it depends on the facts, because even though something can be guarded against, the action of the sea itself may be such that even without the best intention of the parties and the best will, those steps to guard are not sufficient or adequate.  There are so many ponderables about the sea.  What their Honours discuss in Gamlen is, when one looks at the scheme of the Hague-Visby Rules - and this appears at the top of page 165:

That scheme is to impose certain responsibilities and liabilities on the carrier of goods by sea, from which he cannot contract out (cf Art. III, r.8), but to give him immunity in respect of loss or damage caused otherwise than by negligence for which he is responsible, save in the special cases to which we have referred.

It is never the case, your Honour, that if one found there was negligence by reason of being improperly guarded against or the like that the carrier could escape because the scheme of the Act provides for liability in the case of negligence.  The cases make that quite plain.  In fact there is an implied exception engrafted on to the exception that perils of the sea ‑ ‑ ‑

McHUGH J:   But if there is a risk of loss from sea and weather conditions which can be reasonably foreseen and reasonably guarded against, surely that is negligence.

MR SULLIVAN:   If reasonable steps are taken to guard against it ‑ ‑ ‑

McHUGH J:   Not if reasonable steps are taken, if reasonable steps could be taken to eliminate the risk of injury.

MR SULLIVAN:   Yes, your Honour, if there was a failure to take reasonable steps, that would clearly be negligence.

McHUGH J:   Well, their Honours seem to be saying in that passage that notwithstanding the risk from sea and weather conditions “may reasonably be foreseen and guarded against”, it nevertheless constitutes a peril of the sea.  Now, I have great difficulty with that.

MR SULLIVAN:   Your Honour, when one looks at it in the context, what they are saying, with great respect, is that however, if, in all the circumstances of the case, there is negligence, then you cannot rely on the exception. 

BRENNAN CJ:   Perhaps a difficulty that I am having with the passage may explain the reason why the problem that Justice McHugh refers to arises and that is, their Honours say at the commencement of that passage:

According to the latter, “perils of the sea” include losses to goods ‑

Now, that is the consequence of whatever happens.  The next sentence:

In the United Kingdom and Australia it is not necessary that the losses or the cause of the losses should be “extraordinary”.

Then, in the final sentence:

Consequently sea and weather conditions.....may constitute a peril ‑

So there seems to be a conflation of the notions of the losses and the weather conditions which might produce the losses.

MR SULLIVAN:   Your Honour, with great respect, I can understand the ambiguity, but the expression.....loss or cause of the losses ‑ ‑ ‑

BRENNAN CJ:   That is right.

MR SULLIVAN:    ‑ ‑ ‑ and the conflation may be overcome if it is seen, your Honours, in a shorthand fashion, in respect.  They are saying that sea and weather conditions may be a cause of the loss.  They may be reasonably foreseen and guarded against because there is no need that they be extraordinary.  If they are not extraordinary, almost by definition they could be reasonably foreseen and, arguably, guarded against.

McHUGH J:   I can understand the argument about reasonable foreseeability if it was confined to reasonable foreseeability, but once you introduce the element of guarded against, it seems to me there are real problems.  And if you go to the first sentence to which the Chief Justice referred you to, what has losses got to do with perils of the sea?  One would have thought that perils of the sea, in that first sentence,  should have referred to those that “are of an extraordinary nature or arise from irresistible force or overwhelming power”.  It has got nothing to do with losses, has it?

MR SULLIVAN:   The expression, in our respectful submission, on proper reading is, again, with respect, shorthand.  They are talking about the exclusion from liability is for losses which are occasioned by the perils of the sea, and what their Honours are saying is that:

losses to goods on board which are peculiar to the sea and “are of an extraordinary nature or arise from irresistible force or overwhelming power.....”

are losses which are attributable to perils on the sea.  They are not, in our respectful submission, saying a peril of the sea is a loss.  Rather it is a shorthand way - and perhaps it could have been amplified - but in our respectful submission it is clear on the reading that that is what they are referring to.

BRENNAN CJ:   Then if that is so, may it not be desirable to grant special leave in order so to say because then one can have the loss, one can have the sea conditions and one can then consider the relationship that is necessary between those two?

MR SULLIVAN:   Your Honour, we would obviously resist that course, with great respect, because we respectfully submit that leaving aside ‑ and one can see the arguments as a result of the word “guarded” - leaving aside that, the decision of the four Justices of the Court in Gamlen is consistent with authority, is, in our respectful submission, logical as a matter of policy reasons because we are talking about one of the most uncertain elements of all, the sea.  The reason why this exception has been granted in was because of the imponderables that one has with carriage of goods by sea.  It is not, as my learned friend says, a situation where there is a universal practice.  To the contrary, we have already taken you to Singapore where it is different and, in our respectful submission, as Justice Gaudron mentioned, the American position is not universal and that the Second Circuit Court of Appeal’s judgment to which Mr Macfarlan referred to, is of a very strong court including Judge Learned Hand, which adopts the same position.

The second matter why we say it is not appropriate to grant special leave is although my friend has tried in his normal skilful way to expose this as a question of law, inextricably there will be questions of fact involved.  Because if one has to take into account whether it was reasonably guarded or could have been reasonably guarded against, there is going to be a factual entanglement in the case, especially ‑ ‑ ‑

GAUDRON J:   Have findings not been made in that regard?

MR SULLIVAN:   Your Honour, the findings which have been made is there was no negligence, effectively, on the part of the carrier.  In our respectful submission, for that very reason, by reason of those findings, if they were upheld, the result would not be inevitable, as my learned friend contends, even if he was successful on a point of law because we seek to raise ‑ we did raise as part of the defence at the trial the general immunity under (q) that you are immune from liability if there is no care on your part.  That was raised in the defence and opened upon at the trial but was abandoned at submission level.  But, in our respectful submission, it is not a case such as Sutton v Gundowda where it could be said that other evidence would have been advanced.  An examination of the trial judge’s reasoning and of the reasoning of the Court of Appeal would indicate that all relevant factual matters were considered which would enable a finding under (q).  So, in our respectful submission ‑ ‑ ‑

GAUDRON J:   But if it was abandoned, it was abandoned.

MR SULLIVAN:   But, your Honour, the test, as I understand it, is that it can be raised again on appeal unless the principles in Holcombe v Coulton come into play or Sutton v Gundowda and here, we respectfully submit ‑ ‑ ‑

GAUDRON J:   Who abandoned it?

MR SULLIVAN:   We did, your Honour.

GAUDRON J:   Yes, well once it is abandoned, it is abandoned, is it not?

MR SULLIVAN:   It was not formally abandoned.  There were no submissions made on it at trial level, although it was raised in the defence and opened on.  The other aspect, your Honour, which has not been abandoned is that if the appeal was allowed, we would be seeking to challenge the findings about sufficiency of packing.  So that we would respectfully submit, for those reasons, if one takes the appeal, there would be entanglement of facts which would make this not a proper vehicle.

BRENNAN CJ:   Mr Sullivan, I think I interrupted the course of your argument where you wanted to take us to the Court of Appeal’s decision in the Singapore case.

MR SULLIVAN:   Thank you, your Honour.  Your Honour, for present purposes it is sufficient only to go to the last page of the judgment which is page 659, letters D to E:

We do not also propose to deal with the principles of law applicable to the facts of this case.  These are already well settled.  The relevant authorities have been admirably summarised by the learned judge in his judgment at pp 897-901.

I have taken your Honours to it.  The appellate court then quotes from Arnold’s Law of Marine Insurance and the appeal is dismissed.  So, in our respectful submission, that appears to be the position in another common law jurisdiction as recently as 1995.

BRENNAN CJ:   Just one further question.  Was there any finding as to whether the weather conditions encountered in the Great Australian Bight on this occasion were unusual - not foreseeable, but unusual?

MR SULLIVAN:   Not as such, your Honour.  I think it was force 10 to 11 and there was evidence that from time to time such conditions occur in the Bight in the Roaring Forties.

BRENNAN CJ:   Thank you.

MR SULLIVAN:   Your Honour, they are our submissions.

BRENNAN CJ:   We need not trouble you in reply, Mr Macfarlan.  The Court will grant special leave to appeal in this case.

AT 10.09 AM THE MATTER WAS CONCLUDED