Nissho Iwai Australia Limited v Malaysian International Shipping Corporation Berhad

[1989] HCATrans 43

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No Sl21 of 1988

B e t w e e n -

NISSHO IWAI AUSTRALIA LIMITED

Appellant

and

MALAYSIAN INTERNATIONAL SHIPPING

CORPORATION, BERHAD

Respondent

MASON CJ
BRENNAN J

DEANE J

McHUGH J .. ~.	GAUDRON J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON FRIDAY, 3 MARCH 1989, AT 10.16 AM
Copyright in the High Court of Australia
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Nissho(2)
MR A.R. EMMETT, QC:  May it please Your Honours, I appear with

my friend, MR A.W. STREET, for the appellant

(instructed by Thomson, Rich O'Connor)

MR B.W. RAYMENT, QC:  May it please Yo1.JJ:.-Rono:urs, I appear with

my le«J.rned friend, MR J.L.B.~AI.I.SOF_,, for the respondent

(instructed by Ebsworth & Ebsworth)

MR EMMETT:  Might I hand up some copies of two documents: Che

is called "Outline of Appellant's Submissions" and

the other is called "Factual Background" which might just be of some assistance in terms of eliciting the

facts although, no doubt, Your Honours are familiar

with them at this stage.

Your Honours, we start with the proposition

that Your Honours formulated in DARLINGTON FUTURES

V DELCO, namely, that in construing a contract such

as this the Court should have regard to the fundamental

nature and object of the contract or the main nature

and object of the contract. The Court of Appeal paid

lip service to that but, in our submission, did not

properly have cognizance to the significance of what

that requires.

Just by way of broad outline, we submit that

this contract is a bill of lading, the fundamental

obligation of which is to effect delivery in

accordance with its terms. That fundamental obligation

is of great significance in international trade, as

we suggest. A bill of lading is essential to what is

one of the most common forms of internation trade,

that is, the cif contract. That, as a matter of

public policy, is important to Australia as a trading

nation. Those sorts of considerations lead one to

the conclusion that in construing an exemption clause one will either read it down, if it has the effect of negating the fundamental obligation or main object of the contract or alternatively, if one can possibly

construe the contract in a way which does not interfere

with the fundamental object of the contract, then a court will strain to do so. And that by an application	of that approach to construction, the words of this
bill of lading would not exonerate the respondents
from liability in the present circumstances.

(Continued on page 3)

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MR EMMETT (continuing):	Can I take Your Honours to

DARLINGTON FUTURES, (1986) 161 CLR 500, and

the passages we wish to take Your Honours to
are at pages 508 to 511. Starting at the last

line of page 508, referring to some earlier decisions:

Although these three decisions contain

statements giving emphasis to the natural

meaning of the words of exclusion and

limitation clauses read as a whole, we do

not understand the statements to deny the legitimacy, indeed the necessity, of construing the language of such a

clause in the context of the entire contract

of which it forms part. The formulation

by the House of Lords of a new approach
to the construction -

et cetera, and going to the next paragraph - Be this as it may, this Court has in past decisions

authoritatively stated the approach to be

adopted in Australia to the construction of

exclusion and limitation clauses, without

relying on the doctrine of fundamental

breach.

Reference is then made to the facts of WEST's

case and then going down to the passage cited

from that case from the Chief Justice and

Mr Justice Taylor. I had some difficulty making

sense of the passage. It is correctly cited but

it seems to me that the word "much" in the second

line might be "such". I might be wrong about that

but I can make more sense of the passage if it

reads so:

" ... in the case where a contract of bailment

contains an exempting clause such as we have

to consider the protection afforded by the

clause will be lost if the goods the subject

manner other than that authorized by the
contract or if the bailee consumes or destroys

them instead of storing them or if he sells them."

of the bailment are stored in a place or in a

I am not quite sure what it means if the "much" is

correct; it may not matter in the long run.

Their Honours then made it clear that they

reached this result by a process of construction

of the contract and not by applying the doctrine
of fundamental breach ..... we would deny the

application of such a clause in those

circumstances simply upon the interpretation

of the clause itself. Such a clause contemplates

that loss or damage may occur by reason of

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negligence on the part of the warehouseman

or his servants in carrying out the obligation

created by the contract. But in our view

it has no application to negligence in

relation to acts done with respect to a

bailor's goods which are neither authorized

nor permitted by the contract .... Negligence

in these circumstances would be right

outside the purview of the clause.

(Continued on page 5)

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MR EMMETT (continuing): Reference is then made to THOMAS

NATIONAL TRANSPORT where Your Honours adopted

Mr Justice Windeyer's statement, though dissenting, that:

the effect of an exclusion clause must be

"resolved by construing the language that

the parties used, read in its context and

with any necessary implications based upon

their presumed intention".

Then, importantly, the judgment cites what

Mr Justice Walsh said, with whom the Chief Justice and Mr Justice Kitto agreed in VAN DER STERREN

V CIBERNETICS and this, in our submission, is

important:

"The terms of exception clauses must sometimes

be read down if they cannot be applied

literally without creating an absurdity

or defeating the main object of the contract ....

But such a modification by implication of

the language which the parties have used

in an exception clause is not to be made

unless it is necessary to give effect to

what the parties must be understood to have

intended."

Sir Garfield Barwick made a similar observation

in PORT JACKSON STEVEDORING in the passage that

is cited and I will take Your Honours to that

shortly. And in VAN DER STERREN Their Honours

also referred to what the House of lords said

in SZE HAI TONG which I will also take

Your Honours briefly to.

Going back to DARLINGTON:

These decisions clearly edstablish

that the interpretation of an exclusion

clause is to be determined by construing

the clause according to its natural and

ordinary meaning, read in the light of the

contract as a whole, thereby giving due

weight to the context in which the clause

appears including the nature and object

of the contract, and, where appropriate,

construing the clause contra proferentem

in case of ambiguity. Notwithstanding the

comments of Lord Fraser in AILSA CRAIG,

the same principle applies to the construction

of limitation clauses.

And then referring to what the Chief Justice

in South Australia said, the next sentence:

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And the principle, in the form in which

we have expressed it, does no more than

express the general approach to the
interpretation of contracts and it is of

sufficient generality to accommodate the

different considerations that may arise

in the interpretation of a wide variety
of exclusion and limitation clauses in
formal commercial contracts between

business people where no question of the reasonableness or fairness of the clause

arises.

(Continuing on page 7)

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MR EMMETT (continuing):  Then the judgment refers to the

clause, in the last sentence of the next paragraph:

It can scarecely be supposed that the

parties intended to exclude liability on

the part of the appellant for losses

arising from trading activity in which

it presumed to engage on behalf of the

respondent when the appellant had no

authority to do so.

We would say that it could scarcely be presumed that

the parties to a bill of lading contemplated that

the carrier could exclude liability for complete

failure to deliver the goods which are the subject of

the carriage.

If I could just refer Your Honours to what

Sir Garfield Barwick said in PORT JACKSON STEVEDORING

PTY LIMITED V SALMOND & SPRAGGON (AUST) PTY LIMITED,

(1978) 139 CLR 231, the passage is at page 238,

at the bottom of the page:

The relevant law as to the enforceability of a

time limitation clause, in my opinion, is not

in doubt and needs no detailed exploration.

Reference is made to SUISSE ATLANTIQUE.
Then, His Honour says:

In my opinion, whilst exemption clauses which, for present purposes, can be assumed to include a time limitation such as cl 17,

should be construed strictly, they are of
course enforceable according to their
terms unless their application according to
those terms should lead to an absurdity

or defeat the main object of the contract.

So, it is precisely the same principle that was stated

in VAN DER STERREN and the same thing appears in

SZE HAI TONG BANK V RAMBLER CYCLE COMP ANY ,	( 19 5 9) AC 5 7 6 ,
which we put in .the supplementary list or the list of

books which are there for reference.

MASON CJ:  If it is in the same terms - - -

MR EMMETT:  It is the same terms, Your Honour. There is

probably no need to read it. The passage is at

page 587. I should perhaps refer Your Honours to the

approach the Court of Appeal took in this regard; as

I said although the court paid lip service to the principles of DARLINGTON, in our submission, they

did not then go	on_ to consider what was the main
object of a bill of lading.	The court's approach to

construction is in the judgment of the president

at pages 149 and following.

Nissho(2) C2T4/l/,JH 7 3/3/89

MR EMMETT (continuing): There the president, with whom the

other judges in substance agreed, set about setting

out the applicable aids to construction in this

regard. First, it was noted that the respondent

conceded that the onus rested on it to show that

the cause was within an exemption.

Secondly, there was no overt dispute that the flirtation of the common law with the

so-called "doctrine" of "fundamental breach"

of contracts is now over.

His Honour, then, went on to deal at some length

with the history of that doctrine and its subsequent

demise.

MASON CJ:  The common law of Australia never flirted with the

doctrine, did it?

MR EMMETT: Yes, indeed. Well, I think it was thought by the

Court of Appeal that the appellant was putting

forward a doctrine of fundamental breach as

appropriate.

MASON CJ:  But as far as this Court is concerned, it has

never endorsed the doctrine of fundamental breach.

MR EMMETT:	Yes, and we do not make a submission based on the doctrine.
MASON CJ:	No, I realize that.
MR EMMETT:	But, having done that, the learned president

then, after referring to TSE HAI TONG at page 153

but not, with respect, referring to the passage to

which we have referred Your Honours or the passages

in the judgments of the High Court, half-way down

the page, at line 15:

The result is that exclusion and exemption

clauses contained in contracts, including Bills

of Lading, are to be approached by this Court in

the manner required by the instruction of the

High Court in DARLINGTON FUTURES -

and then His Honour sets out a passage that I have

read.

Various competing suggestions of policy

for a differing approach to the clauses of
the Bill of Lading in the present case were

urged by the respective parties.

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Then, reference is made to the judgment of

Mr Justice Stephen and Mr Justice Murphy in

PORT JACKSON STEVEDORING PTY LIMITED V SALMOND

& SPRAGGON which we will be taking Your Honours

to.

In the context of Bills of Lading, each of

those judges pointed to the possible need

for a new approach to their construction in

Australia to protect those in a ship-using

nation -

And, at the end of that paragraph:

Accordingly, until the High Court says

otherwise, this Court should act upon the

basis that the public policy referred to by

Stephen and Murphy JJ cannot control the

application to exclusion and limitation

clauses of Bills of Lading of the normal

rules applicable in this country to the

construction of written contracts

according to the ordinary meaning of the

language used.

(Continued on page 10)

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MR EMMETT (continuing):  Then there is reference to a

book by Mr Livermore. Then at page 155 the learned

president sets out his answers to the policy

submission that was made, in particular line 11:

No court is authorised to bend and twist

achievement of nationalistic, economic or other policies conceived to be desirable.	the language of such an agreement for the only have the slightest understanding of
the competing policy considerations and
little hard evidence upon which to
evaluate them.

Then His Honour refers to insurance, and then the

third answer, line 24:

there is a great deal of legislative

action where Parliament considers that

the particular interest of consumers

need specific protection from the

unabated application of contract law.

That, in our submission, demonstrates though that

His Honour simply did not turn his mind to what

was the main object of this contract, this bill
of lading which, in our submission, was to deliver
the goods at the end of the carriage. That is

fundamental to the bill of lading and to international

trade in so far as it depends on the cif contract,

an essential element of which is the bill of lading.

Can I remind Your Honours of some basic propositions

in relation to a bill of lading, and no doubt Your Honours

will stop me if I appear to be going too far. Can I

start with a statement of principle in SANDERS V

MACLEAN, (1883) 11 QB. 327. The case was concerned

with the extent to which a carrier, where a bill has

been issued in a set, the extent of the obligation of

a carrier or the liability of the carrier to insist

what have you, but the comment that was made by	upon production of all the bills in the set, or
Lord Justice Bowen at page 341 seems to have been
adopted by - the text as being a useful statement of
the nature of a bill of lading. In the second
paragraph on page 341 His Lordship says:

(Continued on page 11)

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MR EMMETT (continuing):

The law as to the indorsement of bills of lading is as clear as in my opinion the

practice of all European merchants is

thoroughly understood. A cargo at sea

while in the hands of the carrier is

necessarily incapable of physical delivery.

During this period of transit and voyage, the

bill of lading by the law merchant is universally
recognised as its symbol, and the indorsement

and delivery of the bill of .lading operates as

a symbolical delivery of the cargo. Property

in the goods passes by such indorsement and

delivery of the bill of lading, whenever it is the intention of the parties that the property

should pass, just as under similar

circumstances the property would pass by an

actual delivery of the goods. And for the

purpose of passing such property in the goods
and completing the title of the indorsee to full

possession thereof, the bill of lading,

until complete delivery of the cargo has
been made on shore to some one rightfully

claiming under it, remains in force as a symbol,

and carries with it not only the full

ownership of the goods, but also all rights

created by the contract of carriage between the shipper and the shipowner. It is a key

which in the hands of a rightful owner is

intended to unlock the door of the warehouse,

floating or fixed, in which the goods may

chance to be.

Now, that sort of exposition is relied upon in the

text writers, for example, in Sassoon's book on

C.I.F. & F.O.B. Contracts at paragraph 3. There is probably no need to read these references but

the learned author there picks up that concept

of"the key to the warehouse"and, in fact, cites

the passage which I have just taken Your Honours

the transfer of the bill of lading,

accompanied by the policy of insurance,

operates as constructive delivery of the goods. Possession of the bill of lading places the goods at the disposal of the

buyer.

to:

Then in the middle of page 5:

The shipping documents required under a

c.i.f. contract have been recognised in

the past to be a bill of lading, a policy

of insurance and an invoice. Such documents

are required today also unless the contract

otherwise provides. Modern methods of

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business, however, often involve a bill of

lading covering more than the goods sold,

and a floating or open policy -

et cetera. Similar observations are made in

Carver at paragraph 1596 and, again, there is

no need to read the material, perhaps, Your Honours,

but again that passage appears set out in

paragraph 1596 on page 1113.

(Continued on page 13)

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MR EMMETT (continuing): So that developing the proposition

that it is necessary to look at the main object

of the contract, basic to that principle in relation

to a bill of lading is its symbolic character

in relation to international trade that the

bill of lading itself represents the goods and it

is symbolic of the goods in the sense that it

is negotiable and assignment of the bill of

lading represents an assignment of the goods

as though there had been delivery of the goods

without the goods changing position.

That notion of the fundamental obligation

to deliver is something that is recognized in

any bailment contract and a bill of lading is,

of course, a form of bailment. We refer you

briefly to what the Court said in JOHN F. GOULDING

V VICTORIAN RAILWAYS, 48 CLR 157. That was

a joint judgment of Mr Justice Starke,

Mr Justice Dixon and Mr Justice McTiernan.

It did not involve a contract for the carriage

of goods by sea but the notion of the main object

of a contract being delivery was referred to.

At page 166 reference is made to the circumstances

of the claim:

The prior loss of the goods -

that is, prior loss before demand was made - upon which the defendants rely as constituting

the plaintiff's real complaint was occasioned
by the negligent misdelivery of the goods,
after arrival, to persons who were not entitled

to receive them.

That seems to be similar to the circumstances

of this case. But then, on page 169, the first

paragraph that begins on that page:

The dominant or principal object of

by the carrier at the place of destination	the bailment was the delivery of the goods
to the persons entitled to receive them.

It perhaps does not take the matter further

but it is a recognition by the Court that when

one is looking at a contract, a contract of

carriage involves - the principal object of

a contract of carriage is the ultimate delivery

of the goods to the person entitled at the other

end.

Your Honours, the fundamental importance of a bill of lading in international trade can

also be seen in the text to which we have referred

Your Honours. Going back to Sassoon,

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paragraphs 1 to 4, state again in elementary

terms the nature of a cif contract. Paragraph 1:

A contract of sale c.i.f. (cost,

insurance and freight) is a contract for the

sale of goods on special and well-recognised

terms. It is a contract which contemplates

the carriage of goods by sea, and for the

better part of this century has constituted

the most important instrument of the overseas

trade.

There is a reference then to paragraphs 431

and following. We did hand up this morning

copies of those two paragraphs - I do not know

whether Your Honours yet have them.

MASON CJ:  Yes, evidently we have them.

MR EMMETT:  Perhaps I just cross over then to paragraph 432.

431 indicates the genisis of the development

of the cif contract, referring first of all
to the more ancient genealogy of the fob contract.

Cif contract developed in the middle of the

19th century.	And that is then developed at
paragraph 432.

(Continuing on page 15)

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MR EMMETT (continuing):

New means of finance were devised, and banks began participating in transactions

as "buyers of exchange." Business could now

be transacted more easily calling for

different methods more suitable to the

conditions of the day and age. In short, the

familiar pattern of international trade as

currently known began to emerge. With the

expansion of commerce the c.i.f. term evolved,

though, as the first cases decided in 1862

and 1871, respectively, illustrate, the

initials were ..... in a different order .....

Where the buyer or his agent were not

physically present at the point of delivery and

payment was to be deferred to a subsequent

date the c.i.f. term better served the interests

of the seller, and it also had certain clear

advantages for the buyer who was relieved of the

responsibility of securing the necessary shipping

space and of arranging for the insurance of the

goods. "Thus" as an early American decision

described it "the purchaser ..... transacts the
various branches of business with one person

instead of three, fixes his liability at a lump

sum, and in case of loss will recover the amount

of his interest under the policy." Because of

reasons such as these the c.i.f. contract soon

gained ground, and gradually replaced the f.o.b.

term as the most widely used form of contract

in seaborne trade.

The authors then go on to deal with the up and downs

of the respective popularity of cif and fob contracts. of finance, the involvement of bankers and the essential character of the bill of lading as a means

of financing international trade, so that one can

in effect obtain payment for goods before delivery

by means of production of the bill of lading against

letters of credit and other documentary credits and

the like.

Going back to page 3, paragraph 1 of Sassoon - and again, as I have said, the basic principle:

Under this form of contract the seller

performs his obligations by shipping, at the

time specific in the contract or, in the absence

of express provision in the contract, within a
reasonable time, goods of the contractual
description in a ship bound for the destination

named in the contract, or by purchasing

documents in respect of such goods already

afloat -

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that is the notion that the seller might not have

shipped the goods but he purchases the goods himself.

The way he does that is by getting hold of the bill

of lading, the insurance contract and becoming an

endorsee -

and by tendering to the buyer, as soon as

possible after the goods have been destined

to him, the shipping documents, i.e. a bill

of lading for carriage of the goods, a policy of insurance covering the reasonable value of the goods, together with an invoice showing

the amount due from the buyer.

It is to be observed that in a contract

of sale c.i.f. there are two subordinate
contracts made by the seller. There is first

the contract of carriage by sea which is known

as the contract of affreightment, under which

the shipowner (the carrier) signs a bill of
lading on receipt of the goods. Secondly,
there is the contract of insurance .....

But aside from the essential ancillary

relationships which every c.i.f. contract
creates with the shipowner and insurer,
respectively, performance of a c.i.f.
transaction normally entails the introduction

of further parties and gives rise to additional

relationships which are supplemental thereto.

The documentary nature of the transaction, for

example, lends itself readily to the introduction

of bankers and other financing or forwarding

agents who may act for either seller or buyer as

intermediaries. Consequently, a variety of

parties often acquire rights and liabilities

with respect to the subject-matter of the c.i.f.

contract in question. It should be noted,

however, that these various relationships are not

governed and regulated by the sale contract.

They are subject to their own terms: as are also

the contract of affreightment and the marine

policy .....

2          The essential feature of a c.i.f. contract

is that delivery is satisfied by delivery of

documents and not by actual physical delivery

of the goods.

Hence the essential nature of the bill of lading in

a cif contract.

"The vital question ..... " said Lord Porter

in an oft-cited opinion, "is whether the buyers
paid for the documents as representing the goods
or for the delivery of the goods themselves." On

the sarre occasion Lord Sim:mds stated that the "salient

characteristic" of a c.i.f. contract was that "the property

docUIIE1ts against which payrrent is ma.de. 11 in the goods not only may but rrust pass by delivery of the

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MR EMMETT (continuing):

On presentation of the shipping documents,

if they are complete and regular, the buyer

is bound to pay the price, irrespective of

the arrival of the goods; but by paying he

is not precluded from subsequently rejecting -

et cetera. Then it goes on to deal with what his

rights are if there is a rejection.

Similar observations can be found in the

paragraphs in Carver which we have cited. There is,
perhaps, no need to take Your Honours to them. It

is in that context, that is, the context of the importance of a bill of lading in international

trade and, in particular, in a cif contract, that

one must, in our submission, take cognizance of

what was said by two members of the Court in

PORT JACKSON STEVEDORING PTY LTD V SALMOND &

SPRAGGON PTY LTD, (1977-1978), 139 CLR 231 and

I take Your Honours back to that. Sir Ninian

Stephen, at pages 258 to 259, made some observations which, in our submission, are germane and should be adopted by Your Honours. Again, this case, as

Your Honours, no doubt, will recall concerned a

bill of lading. At the bottom of page 258:

There is a further public policy

consideration which at one and the same

time bears upon the question of international

connnercial comity. While it is in the interests

of great fleet-owning nations that their ocean

carriers, and the servants and independent

contractors which they employ, should be as

fully protected as possible from liability

at the suit of shippers and consignees,
the interests of those nations which rely
upon those fleets for their import and export
trade is to the contrary. It was in response

to such national interests that the United

States of America and Australia, which both

fell into the latter category, enacted the

HARTER ACT of 1893 and our own SEA CARRIAGE

OF GOODS ACT 1904, measures which circumscribed

the carrier's freedom to contract out of

liability. Each was more stringent than were

the subsequent Hague Rules. Many nations, particularly developing nations, have come

to regard those Rules as unduly favouring

carriers at the expense of cargo owners,

especially because of the quite restricted

duration of the carrier's compulsory period of responsibility which they impose, ending

as it does immediately upon discharge.

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That concept will be significant when we come to look at the actual construction of the exemption

clauses in this bill.

It is not clear to me that Australian courts should regard it as in any way in the public

interest that carriers' exerrption clauses, effective

before loading and after discharge, should be accorded any benevolent interpretation, either so as to benefit carriers or so as to benefit independent contracts by

extending the scope of such clauses to include such

contractors -

McHUGH J: But, Mr Emmett, does that mean that the meaning

of the clause changes as the ship passes the equator?

MR EMMETT:  No, Your Honour. It means

McHUGH J: Well, does it mean it has a different meaning if it is construed in Malaya and a different meaning if it

is construed in Australia?

(Continued on page 19)

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MR EMMETT:	No, Your Honour.	What it means is that as part

of looking at the fundamental or the main object of

a bill of lading one is entitled - at least in

construing the document in Australia - one is

entitled to take into account this public policy.

It is really a graft upon the basic proposition we

put, that one looks first at the main object of the

contract - and I have said what I have said about that.

This is, in effect, something grafted on to that

proposition - - -

DEANE J:  But we are construing according to Malayan law

here, are we not? Does that mean that we take the

opposite approach?

MR EMMETT:  No, it was conceded that Malayan law was the same

as Australian law, as appears from the learned

president's judgment.

DEANE J:	Well, what if that concession is queried - we would
take the opposite approach to that that you are

contending for?

MR EMMETT:  Well, with respect, no. The interests of a trading

nation are such that, according to international comity,

this principle ought to be applied to any bill of

lading. Even under the law of Malaya, or Malaysia rather,

it would be recognized, in our submission, that this

public policy ought to be recognized in relation to a

contract of carriage. But, it does not, in our

submission, involve a change in construction nor

would it involve a different construction in Malaysia.

But it is a matter of public policy which is of concern

to this Court; that is the extent to which contracts

of carriage contain exemption clauses which could, on

one view, be taken to interfere with the main object

of the bill of lading.

As I said, in a sense it is a graft on our basic

proposition, which depends not on Australia's particular
,position, but on the importance of a bill of lading

generally in international trade.	Mr Justice Murphy
adopted those observations at page 285 - - -

MASON CJ:	Does the last part of the paragraph ending on page 259 indicate that even the great fleet-owning
nations of the world are parties to this general trend to exclude denial of liability on the part of carriers?
MR EMMETT:	The last part of that paragraph?
MASON CJ:	Yes.
MR EMMETT:	Yes, yes, indeed. It suggests that there is a

moving back world-wide in terms of international

agreement to extend the - - -

C2Tll/l/JH	19	3/3/89
Nissho(2)

MASON CJ:  So the great shipping nations really have changed

their attitude in relacion to this?

MR EMMETT:  Indeed, the Hague Rules, which were designed to

afford some protection to shippers and consignees,

stop that protection·at the point of discharge.

In other words, the limitation on exemption clauses under the Hague Rules only operated for the period

of carriage and this suggests that there is a tendency

to develop that. That perhaps can be seen in the

development of the Hague Rules and the Hague Visby Rules and other susbsequent - I am also reminded -

the Hamburg treaty. The development of international

law has been to extend the limitation on exoneration

clauses beyond the mere carriage and that is what is

being referred to there; so that, perhaps in
response to what Your Honour Justice McHugh was

putting, that it is a recognition by all nations

including carrying nations such as - and I may well

have to concede that Malaysia is a ship-owning nation
as well as a trading nation.

As I said, at page 285, Mr Justice Murphy agrees

with Mr Justice Stephen's observations on the
aspects of public interest.

(Continued on page 21)

C2Tll/2/JH 20 3/3/89

Nissho(2)

MR EMMETT (continuing):  Your Honours that, 1n our

submission, is the proper approach to the

construction of this bill of lading which

Their Honours in the Court of Appeal should have adopted but which they failed to do so, that is that if the exemption clause has the effect of

defeating the main object of the contract, then

either you would read it down or ignore it if

necessary, but certainly if there is any construction

open which is consistent with the maintenance of the

main object of the contract, then that is a

construction which the Court should adopt, and it

is with that in mind that we now invite Your Honours

to look at the language of the bill of lading to

see how Their Honours erred in their approach.

The bill appears in the appeal book at

pages 62 and 63. However, the language of the

clauses has been transcribed on pages 64 and

following. The copy of the bill has been

enlarged but it is still somewhat difficult to read.

Subject to one or two minor typing mistakes I think

we are reasonably confident that the transcription

at pages 64 to 87 is an accurate transcription of

the small print on the reverse of the bill of lading.

Page 64 is the print on the face of the bill and

the subsequent pages are the material on the reverse

of the bill. The things that we point out,

Your Honours, are, first of all, that it is a bill

of lading. It is called a bill of lading. It

contemplates assignment or negotiability in the second

box on the top left-hand side:

Consignee or order

To the Order of the Shipper -

the shipper having been named, so the bill on its
face contemplates negotiability. The writing in the

box on the right-hand side which, as I said, appears

more legibly on page 64, but it is probably fairly

- legible on page 62, is a receipt by the carrier from

the shipper of the goods: 

to be transported and/or otherwise
forwarded ..... from the Port of Loading,
or other place of receipt to the Port of
Discharge .....

If required by the Carrier this Bill of

Lading duly endorsed must be surrendered

in exchange for the Goods or a delivery
order.

Then at the bottom of the page:

IN WITNESS whereof TWO (2) original

Bills of Lading have been signed,

C2Tl2/l/HS	21	3/3/89
Nissho(2)

if not otherwise stated below.

One of which being accomplished,

the other(s) to be void.

So that it is a bill of lading that contemplates

that the obligation of the carrier is to deliver
the goods in exchange for the bill, not to

deliver them otherwise. That also appears from

clause 19 of the bill, which is found on page 82 of the appeal

book, which deals with, in effect, in more detail the

obligation of the carrier:

The Carrier shall have the right to deliver

Goods at any time from or at a Vessel's side

..... wharf, quay or other place or point

designated by the Carrier at or in the

vicinity of the place of delivery.

(Continued on page 23)

C2Tl2/2/HS	22	3/3/89
Nissho(2)

MR EMMETT (continuing):  Paragraph (3):

Delivery of Goods to a holder of this Bill

duly presenting the same -

passing over three lines -

at the Carrier's terminal or elsewhere

designated by the Carrier at or in the

vicinity of the place of delivery as

provided in sub-clause 19(1) shall

constitute complete and final discharge of

the Carrier's obligations hereunder and
the Carrier's liability and responsibility

for and in respect of such Goods shall

thereupon cease entirely.

So that the bill in its terms contemplates that

the obligations of the carrier continue up until
delivery in exchange for the bill. Paragraph (5)

refers to the possibility of:

Goods are not claimed immediately upon being

made available ..... the Carrier shall not

thereafter have any further responsibility.

But the bill on its face clearly indicates that

the main object of this bill, in the language

that I have been using,is to deliver the goods

at the port of discharge which in this bill was

shown in one of the boxes to be'' Sydney, Australia."

In the document we have handed up concerning the

factual background - and maybe Your Honours are

perfectly familiar with this - the last page,
in effect, sets out what happened to the subject
of this bill. Paragraph 2 indicates that the

subject of the bill was a container containing

a large quantity of prawns. Paragraph 7,

the finding was that that container was discharged

from the vessel for a particular stowage position

and was placed in a particular stack position in

the Glebe Island terminal at Sydney. Although

that was disputed at the trial it was a factual

finding which we accept here.

Paragraph 8, the container was then stolen within a very short time after it was placed in the terminal. Indeed, a witness who the trial

judge accepted said that he would agree that it

was probably stolen within half an hour of its

being discharged from the vessel. That appears

at pages 59 to 60 of the appeal book. The

finding was that if the system, that is, the

system which the stevedores had put in place -

that system is set out in more detail in

paragraph 6,and unless Your Honours need to

be taken to it I do not propose to.

C2T13/1/MB	23	3/3/89
Nissho(2)

If the system operated as it was set up and everyone was performing the role which he

was supposed to perform then it should have been impossible to get the container out of the Glebe

Island terminal except in accordance with that

procedure. The defects in the system, however,

which were adopted by the stevedores were
acknowledged by the terminal manager, Mr Roberts,

who gave evidence and whose evidence was accepted

entirely by Mr Justice Yeldham. The defects

of the stevedores indicate the lack of a proper
system on the part of the stevedores and the

defects were capable of rectification and were,

in fact, rectified. 11. None of the defects

were sheeted home to the respondent. 12. The

evidence - these are findings in the Court of Appeal -
while it falls far short of proving wilful and

conscious wrongdoing on the part of the stevedores,

is consistent with the degree of carelessness,

advantage of which was taken by well-organised

thieves.

So that it is in that context that one has

to consider the claim made when the bill of lading

was presented and.. the shipper's agent said, "We can't

deliver." As we have· pointed out at the beginning of

that document that the appellant was, in fact,

a consignee of the bill of lading, it was a

purchaser. The shipper had consigned under a

cif contract, or the endorsee. He obtained the

benefit of the bill of lading by assignment by

means of endorsement and that was common ground

in the Court of Appeal as appears from paragraph 4

in our factual background document.

(Continued on page 25)

C2Tl3/2/MB 24 3/3/89

Nissho(2)
BRENNAN J: By paragraph 11, I take it that means simply

that the defects in the system were not

attributable to the respondent itself as distinct

from the respondent's agent?

MR EMMETT:  Yes, Your Honour. That was regarded as important

by the learned president in relation to the

construction of the exemption clause which he

primarily relied upon as exonerating the respondent

from liability and we will be suggesting that

that was a wrong construction but that is relevant

to that question.

So, __ it is- common ground that the appellant

by endorsement and assignment became entitled

to delivery under the bill of lading under a

cif contract. And it is in that context that one must consider the three exemption clauses

which were relied upon by the respondent as

exonerating it from responsibility for failure

to deliver in accordance with the bill upon

its production.

The first one is clause 8(2)(a) and that

appears at page 73 of the appeal book. I might

just indicate the clauses that were relied upon.

First of all there was 8(2)(a), 8(2)(d) and

8(3) which is on page 74. In our submission

it is important to observe the different structure

of subclauses (2) and (3). Subclause (2) is
divided into subparagraphs, each of which has

the preamble that:

Under no circumstances shall the Carrier

be liable or responsible in any capacity

for or in respect of -

certain things. Each of the subparagraphs begins

with the expression:

any loss or damage to or in connection with

Goods -

which will be significant, in our submission.

The structure of subclause (3), however, is that:

The Carrier shall not under any

circumstances be liable or responsible 1n

any capacity for or in respect of -

and then there appear to be three different

events contemplated, the first is -

any non-delivery or mis-delivery of Goods -

C2Tl4/l/ND	25	3/3/89
Nissho(2)

the second is -

delay -

and the third 1s -

loss or damage of any kind -

and then there is a qualification which, 1n our

submission, qualifies all three types of claim -

which arises out of or in connection with -

and then there are two alternatives which have to
be established, either -

the carriage covered by this Bill of Lading or anything done or not done by the Carrier or any Carrier's employee to or in respect
of Goods -

and then there is, in effect, a proviso.

(Continuing on page 27)

C2Tl4/2/ND	26	3/3/89
Nissho(2)

MR EMMETT (continuing):  So, there was, first of all, an

exoneration and then there is a proviso to the

exoneration but, for the purposes of expounding

on subclause (2), it is only necessary to look

at the language of the preamble to subclause (3)

to indicate the distinction between the two which,

we submit, is basic. One does not find in

subclause (2) any reference to non-delivery or

misdelivery. One finds only a reference to the

expression "loss or damage to or in connection
with the goods". It does not, indeed, say "loss

of or damage to or in connection with the goods".

Now that is, in our submission, a conscious

decision on the part of the author of this document

because, if one looks at clause 4(5) which appears

on page 69. Clause 4 deals with the carrier's

responsibility and entitlements concerning

subcontractors, subagents and agents.

Sub clause ( 5) :

In consideration of the Carrier accepting the

liabilities and responsibilities provided

under the terms of this Bill of Lading, each

Merchant hereby undertakes to the Carrier to

make no claim of any description against any

Carrier's employee -

"Carrier's employee" is defined as including

subcontractors -

for or in respect of any loss of or damage to

or in connection with Goods -

So that the draftsman was mindful of the distinction

between "loss of or damage to· or in connection with goods" on the one hand and "loss or damage to OJ:;" in

connection with goods" and when one contrasts that

distinction in the beginning of each subparagraph

of subclause (2) with the express reference in

subclause (3) to "non-delivery or misdelivery",

then, in our submission, one would conclude, .on	the plain meaning of this clause, that subclause (2)
is just not concerned with complete loss of the
goods or with non-delivery of the goods and that is
the case here.

So that our primary decision is that, on its

fair reading, subclause (2) just does not extend to

this situation and particularly when one bears in

mind the approach to construction which, in our

submission, is appropriate; that a court would be

slow to find,in any exoneration clause, a provision

which exempted the carrier from the obligation to

deliver.

C2Tl5/l/SH	27	3/3/89
Nissho(2)

BRENNAN J: 

Could you give an example of a loss to or in connection with goods?

MR EMMETT: 

If somebody bumped them, there would be a loss

to the goods or if some part of them was missing
there would be a loss to the goods.

BRENNAN J: If somebody bumped them, then there may be damage

to or in connection with.

MR EMMETT:  Yes, and that might cause some loss of the goods.

If one had goods which were in several packages, for

example, one of the items might be missing but loss

of goods is one thing; loss to the goods is another.

That is a distinction that was recognized in WEST's

case where this same language was used. The

exemption clause in WEST's case spoke in terms of loss or damage to the goods. It did not speak of loss of the goods and the High Court and all courts

regarded that as a significant distinction.

Another example that is brought to mind by my

learned junior is if you have a live cargo, loss to

the goods could arise from injury or death of animals,

or beasts. So that there is, in our submission,

considerable work to be done for the word "loss".

(Continued on page 29)

C2Tl5/2/SH	28	3/3/89
Nissho(2)

MR EMMETT (continuing):  If that submission is accepted,

then the first two exoneration clauses which are

relied upon by the respondents fall away because the

same language is used in (a) and (d).

McHUGH J:  Well, Mr Emmett, what happens - take 8(2)(d) - if

fire totally destroys goods so that they cannot be

delivered, what clause applies, 8(3)?

MR EMMETT:	Yes, if there is non-delivery or misdelivery.
McHUGH J:	But, if the fire only partially destroys the goods, 8(2) applies?
MR EMMETT:	It may, yes. But, it may be that total

destruction by fire could still be within (2)(d),

because there is not so much a non-delivery or
misdelivery; (2) is concerned with damage or loss to the goods

That could, conceivably, result in non-delivery, but

it might still fall within subclause (2). That would

be consistent with the scheme of this whole clause.

It does not matter that it may conceivably fall within

both and, indeed, the president conceded that claims

may fall within both. But, the basic structure of

the clause is that a distinction is drawn on the one

hand between loss or damage of some form but, nevertheless,

the continued existence at least in some form or

another- fire would not eliminate the matter; there

would always be some debris - whether it is of any use

might be a different matter - but -

McHUGH J:	A ship might be sunk in an act of war.
MR EMMETT:	It may be.
McHUGH J:	It is (2) that applies in that case.
MR EMMETT:	It could be.
McHUGH J:	But not (3)?

MR EMMETT:  No, (3) probably would not apply in that case.

McHUGH J:  Even though there is a non-delivery?

MR EMMETT:  Well, both may apply. As I have said, the fact

that both could in some circumstances apply is not

fatal to our contention. There is no difficulty with

having an overlap between exoneration clauses or

exemption clauses. What we say, though, is when you

look at the scheme of them, they are intended to deal

with different circumstances.

McHUGH J:  Well, (3) has a more extended definition of "loss",

does it not? Because it includes financial and

consequential loss. Oh - it is in this clause, is it?

MR EMMETT:  I am not sure what Your Honour - - -

C2Tl6/l/JH	29	3/3/89
Nissho(2)

McHUGR J:  I am sorry; in clause 8(3), the last paragraph

on page 75, which is the top of the page: In this clause the expression "loss or

damage of any kind" includes -

certain losses which seem to be an extended definition of'~os~ compared to that in 8(2).

MR EMMETT:  Yes, that may be. I am not sure that I see

that anything follows from that at the moment though.

McHUGH J:  Well, I was wondering whether or not (3) gave

wider exemption than (2).

MR EMMETT:  Well, I think it probably does. In many

circumstances it would give a wider exemption than

subclause (2), yes. But what we are saying, though,

Your Honours, is that they are dealing with basically different subject-matters, although there could be a

set of circumstances in which they both apply, but

that is not fatal to our basic proposition.

(Continued on page 31)

C2Tl6/2/JH	30	3/3/89
Nissho(2)

MR EMMETT (continuing):  But unless you can find in

subclause (2) a clear intention to exonerate for

loss of the goods and, indeed, even if there were

total fire it may well be that there is no exoneration

under (2)(d). It is only loss or damage to goods

from fire which is exempted. Our basic proposition

would be that if there is loss of the goods from

fire then it is not covered by (2) (d) if the result

of that is that there can be no delivery so that

there is non-delivery, in which case you would have

to get yourself within subclause (3).

McHUGH J:  Can I ask you just one more question? On page 74

about line 8 are the words:

save only that subject to sub-clause 8(2).

MR EMMETT:	Yes.
McHUGH J:	What is the effect of those words?
MR EMMETT:	Well, I will be coming to that because that is important in terms of the third exemption but it
is the start of the proviso. Having exempted certain types of claims there is then an exception
out of the exemption, it being made clear that even
if you do find a right to claim under 8(3), if you
are within a 8(2) then you cannot make the claim. 8(3), in effect, confers a right to make a claim but the reference to"subject to sub-clause 8(2)" means that if you are otherwise within 8(2) then you are not entitled to make a claim anyway.
If the carrier can bring himself within either 8(2) or 8(3) then he is safe. It is because of the
language used in 8(2),which is perhaps slightly
odd in that it is a positive statement. There being
an exemption there is then an exception saying:

save only that ..... the liability and

responsibility of the Carrier for loss or

damage ..... shall be as follows.

BRENNAN J:  Mr Emmett, is the paragraph at the top of

page 75, the definitional paragraph, apply to

8(2) as well as to 8(3)?

MR EMMETT:  I do not think so. It seems to be within 8(2).

It says "In this clause" and I think that is

probably a reference to subclause, in effect.

It might be more obvious if one looks at the

original form of the bill on page 63, which is

not easy to read even in the blown-up version.

McHUGH J:  It probably indicates that 8(3) was pasted on

at some stage from some other clause.

MR EMMETT:  It may be, yes. But I think it is clear

because each part of clause 8 consists of a

C2Tl7/l/MB	31	3/3/89
Nissho(2)

subclause and those words appear after paragraph (3)(c)

and before subclause (4), although it does come

out to the margin. But it would be an odd thing

that if the definition, stuck in the middle of

a subclause, was intended to cover all.

BRENNAN J: 

Well, it is a curious place to put it but the

phrase which it defines is not restricted, of course,
to subclause (3)?

MR EMMETT:	Indeed, that language is used in subclause (2).
BRENNAN J:	And (4) and (5)?
MR EMMETT:	Yes.  I am not sure that anything turns on it

but - - -

McHUGH J:  Well, I am not sure that is right, is it?

I mean, in subclause (4) it is "loss or damage of

any kind". Now, that is the expression that is

used in subclause (3) but is that expression used

in subclause (2)?

(Continued on page 33)

C2Tl7/2/MB	32	3/3/89
Nissho(2)

MR EMMETT:  No, it is only:

loss or damage to or in connection with -

BRENNAN J:	Yes.
MR EMMETT:	So that it rather does suggest that it is

intended only as a dictionary for subclause (3).

GAUDRON J: Subclause (6) does not help you, does it?

MR EMMETT:  Again, the expression:

loss or damage or any kind -

does not appear there which, again, rather confirms

that the definition is limited to subclause (3),

I think.

Your Honours, as I have said, that is our

basic submission in relation to subclause (2).

That is, whatever its relationship with

subclause (3), and on one view they are mutually

exclusive although there may be some overlap,
that does not matter, in our submission. In

this case, although in other cases it might

not necessarily so, but in this case there was

no "loss or damage to or in connection with

the Goods" within the meaning of that phrase

as it is contemplated by clause 8(2); certainly

not if you apply the approach to construction

which we have submitted is the proper one in

the light of the significance of this bill and

its importance as part of the contract for sale,

that if the parties had intended, in subclause (2)

to exonerate the carrier from failure to deliver
then it would have been very simple to say so,

bearing in mind that in the immediately following

clause non-delivery is especially referred to

and bearing in mind subclause 4(5) where the draftsman was mindful of the notion of "loss

of or damage to or in connection with Goods".

If we are wrong in that proposition, then

we say there is an answer to the exemption based

on both paragraphs (a) and (d). If I can deal

with them separately: the trial judge held

that paragraph (a) did not apply and we would,

with respect, adopt his reasoning and endeavour

to put it to Your Honours. The finding was
that the container had been discharged from

the ship and entrusted to the stevedores; and

I have referred Your Honours to the facts.

Within half an hour or so, the container had

disappeared in circumstances that nobody was

able to explain other than it seems to have

been the result of thieves by reason of defects

in the system.

C2Tl8/1/ND	33	3/3/89
Nissho(2)

We then go to the language of paragraph (a).

It is concerned with:

loss or damage to or in connection with

Goods which arises or is due to any

occurrence -

the only relevant parts, the last three lines -

after such Goods have been delivered or made

available by or on behalf of the Carrier

at the place of delivery.

Now, it really is bending that language to suggest

that because these goods had been discharged

from the ship and entrusted to the custody of

a stevedore who was clearly the agent of the

carrier that those goods had been delivered

or made available for delivery.

(Continuing on page 35)

C2Tl8/2/ND	34	3/3/89
Nissho(2)

McHUGH J:  Mr Justice Yeldham found in your favour ari. this point,

but the Court of Appeal reversed him.

MR EMMETT:  Yes, in passing, though they accepted what he did

in relation to 8(d) and then said, "Well, in any

event, we think he was wrong in relation to 8(a)."

I am told that it might only have been the president

who did that but, we say that Mr Justice Yeldham
was right in relation to 8(a) and the reason is

that there simply was no delivery as this bill of

lading contemplates delivery. Clause 19 indicates

what is meant by delivery and that clearly means
delivery to the consignee or his agent,or making
available for delivery to the consignee or his agent,

not discharged from the ship. Discharged from the

ship is a totally different concept from delivery.

So that paragraph (a) simply has no application.

Paragraph (d) is then relied upon and the

relevant parts, as we apprehend them, are the

first two lines and the last three lines, and the

last word of the fourth last line:

any loss or damage to or in connection with

Goods arising or resulting at any time from

..... any cause or event which the Carrier

could not avoid or the consequences of which

the Carrier could not prevent by the exercise

of reasonable diligence.

Now, the way in which that has been put against us is

that "carrier" there means the company named as

respondent in these proceedings and does not extend

to include his subcontractors. Our answer to that

is that this bill contemplates that the whole of this

carriage if the carrier so elects could be subcontracted.

But be that as it may, it is the carrier's obligation

which is the subject of the contract. The carrier

contracts with the shipper and those rights are

capable of assignment to the consignee or endorsee.

The carrier's obligation is to deliver in

accordance with the terms of the bill of lading and

that obligation is performed by him or by his

subcontractors. He cannot abrogate his obligations

to deliver by simply saying, "Oh well, I will entrust

the whole of my contract to a subcontractor and if,

as a result of negligence on the part of my

subcontractor this container is lost, that is no

longer my problem because I was diligent in my choice

of a subcontractor and_ therefore these consequences

could not have been prevented by the exercise of

reasonable diligence on my part."

McHUGH J:	But does the question of diligence go only to choice? I mean -why, on the facts of this case, was it not at least
argued - I do not know what the findings were, I

C2Tl9/l/BR	35	3/3/89
Nissho(2)

cannot remember what the findings were - but the

carrier could have prevented the consequences of what

occurred in this case?

MR EMMETT:  That was argued but there was a finding against

us and that was the passage that I think

Your Honour Justice Brennan referred to in the

statement of facts that I handed up. At paragraph 11

in our statement of facts, we have to concede on -

as I say, it was argued in the Court of Appeal but

the finding is against us on both occasions that

none of defects in the system attached to the

respondent itself or to its employees.

McHUGH J:  It is that question of "attach". It was the

stevedores system but was there any evidence as to

whether the carrier had a choice about using that

stevedore and secondly, surely there were steps that the carrier could have taken if it knew of

the defective system or if it should have known of the defective system?

MR EMMETT:  There is no evidence that the carrier knew about

the defective system. I think that was an issue

that was litigated, was it not, and I think we

were unsuccessful in relation to that.

(Continued on page 37)

C2Tl9/2/BR	36	3/3/89
Nissho(2)

MR EMMETT (continuing):  It was an issue, I am reminded,

in which leave was sought to amend on the hearing of the appeal in that regard and leave was refused

in that re~ard, and there is no appeal from that

determination.

McHUGH J:  But the narrower you construe the carrier's

exemption by reason of those last words the less

reason is there to read the words down, otherwise?

MR EMMETT:  I did not mean to concede that the only way in

which the carrier could have used reasonable

diligence is in the choice of the subcontractor.

We would certainly contend that if it be the fact

that the carrier was aware that there was a shonkey

system operating at the terminal and nevertheless

decided to retain the stevedore with that system,

then it would certainly be arguable, and we would

say it would be found, that the loss could have

been avoided by the exercise of reasonable diligence.

All we say is that the carrier cannot get out of it by simply subcontracting, whether he does that

negligently or otherwise, and that is effectively

what the learned president says, that so long as

it is a subcontractor who was guilty of reasonable diligence, and even if you can show that this loss

could have been avoided by the exercise of

reasonable diligence on the part of the subcontractor

it does not matter because there no evidence

that reasonable diligence on the part of the

carrier ".:jlftS himself could have avoided the loss.

McHUGH J:  But that just means on the facts of this case

you did not run your case properly.

MR EMMETT:	I do not know that that is a fair comment, Your Honour. It may well be that the facts did
not come out. What we say, though, is that the
word "carrier" there does not just mean the sing 1 e company which is the respondent; it means the
carrier in the performance of its obligations and
if the carrier choses to perform his obligations
through a subcontractor and reasonable diligence
on the part of that subcontractor could have avoided the loss, then that is something which can be sheeted home to the carrier. In
other words, the clause is not intended to afford
a carrier the right of avoiding complete liability simply by subcontracting, so long as he is careful to ensure that he subcontracts with a competent
subcontractor who does not have a negligent system.
I am reminded of the evidence in the appeal book at the bottom of page 40, the last
two questions:

C2T20/l/HS	37	3/3/89
Nissho(2)

What I am putting to you, to be fair,

is that someone could have obtained

a false delivery order - - -

Perhaps before I read that I should go back to

the system which I did not read to. Your Honours.

GAUDRON J:  While you are doing that, Mr Emmett, could I

ask this? Do you need a finding of fact on

section 8(2)(d) as to the diligence of the

stevedore?

(Continued on page 39)

C2T20/2/HS	38	3/3/89
Nissho(2)

MR EMMETT:  We would submit not. Diligence of

the stevectore?

GAUDRON J:  Yes.

MR EMMETT: Well, there is, in fact - I think it is fair to

say, we do have a finding of fact in our favour

concerning the diligence of the stevedore or the

lack of diligence on the part of the stevedore.

There were defects in the system which were capable

of rectification and which, in fact, had been

rectified.

GAUDRON J: Well, that is not what your paragraph 12 - 11,

is it?

MR EMMETT: Well, no, 11 concerns the respondent. The

respondent is not the stevedore.	The respondent
is the carrier.

GAUDRON J: Yes, I was looking at 12.

MR EMMETT:	I am sorry, 12 - - -
GAUDRON J:	I am asking, do you need a finding as to the

stevedore's diligence or lack of diligence for you

to succeed on 8(2)(d) and then I am looking at

paragraph 12.

MR EMMETT: Well, can I also invite Your Honour to look at

paragraph 10 as well as 12.

GAUDRON J: Is there a finding to that effect or is that the

evidence?

MR EMMETT:  No, that is part of the judgment at page 178.

Perhaps I should first take Your Honour to page 173,

lines 1 to 18. This is in the judgment of the

learned president. Perhaps I should start at the

bottom of the previous page:

The appellant took the court to a great deal

of evidence pointing to the defects in the

system adopted by the stevedores. The defects

of the system were, in effect, acknowledged by

Mr Roberts.

Mr Roberts was the manager of the terminal whose evidence was accepted in its entirety by

Mr Justice Yeldham.

He conceded as much when he outlined the improvements which had been introduced

since this loss to overcome the defects

which it exposed.

C2T21/l/SH	39	3/3/89
Nissho(2)

It is unnecessary to list all of the defects of the stevedores.

Going to the end of the paragraph:

These certainly indicate the lack of a

proper system on the part of the stevedores

and the general confusion which reigned when it was discovered that the subject

container was missing.

And, on page 178 is the bit which appears in

paragraph 12:

the evidence falls far short of proving

wilful and conscious wrongdoing on the part

of the stevedores ..... The evidence is equally

consistent with a degree of carelessness, now

rectified, advantage of which was taken by

well organised thieves.

So that, if we do need a finding of fact - and

we probably do - then, in our submission, there

clearly is one.

GAUDRON J: Yes, thank you.

:MR EMMETT:	I think I was going to take Your Honours back to the system,before reading the passage that my
learned junior has referred me to.  The system which
the stevedores adopted is set out in paragraph 6 of
our document headed "the factual background".
The usual procedure for collection by a consignee was as follows - and this appears, also, from the
evidence of Mr Roberts.  The stevedore - - -
DEANE J:	Mr Ennnett, does it appear what choice there is in Sydney Harbour? I mean, if a shipper says, "I am
not going near Glebe Island" or "I am going to
Glebe Island but I will unload my own ship", one
can imagine what would happen.
:MR EMMETT:	I do not think so, Your Honour.

DEANE J: Is there any evidence?

:MR EMMETT:  I am not aware of any evidence that there was any choice.

(Continued on page 41)

C2T21/2/SH	40	3/3/89
Nissho(2)

MASON CJ: And this was a container, was it not?

MR EMMETT: It is a container, yes.

MASON CJ:  So it has got to go to a container terminal

it must berth at a container terminal?

MR EMMETT:  The nature of the shi~ as my learned Junior 1s

writing,depends upon what terminal you go to

and you do not have a choice of stevedores at

the terminal. There is certainly no evidence

that the carrier could have chosen to go somewhere

or somewhere else which, I think, Your Honour

is putting as against me.

DEANE J:	I was also wondering whether there was any
evidence what would happen if he decided to supervise or check on the activities of the
stevedores.
MR EMMETT:	I am not aware of any but I might be

told about some.

DEANE J: If there is none - I am not suggesting that

you make concessions about Sydney Harbour.

MR EMMETT: 

No, but I do not think we can say that - there

is no evidence that there was a real choice
available as to where this ship would discharge

its cargo.  There is certainly no evidence about

it.  One might be able to take judicial knowledge

that there are different wharves around Sydney

but there is no specific evidence that there was a choice available to this carrier as to which terminal he would take his vessels to.

As I understand it, that was being put against me.

BRENNAN J: 

Was the carrier the ship owner?

MR EMME TT: 

I do not know .  I do not know th a t i t i s re 1 e van t

to the question or I do not see that it is relevant
at the moment.	I cannot say one way or the

other whether the carrier was the owner.

BRENNAN J: 

The question is whether or not it was in the

contemplation of the parties that the whole
of the performance of the contract was to be
subcontracted?

MR EMMETT: It was, clearly - clause 4 recognizes the

possibility of subcontracting. Perhaps I misunderstood

what Your Honour is putting. The carrier was

certainly entitled to the vessel, whether it

was under a charter or whether he was the owner.

In fact, in the statement of claim there

C2T22 /1 /ND	41	3/3/89
Nissho(2)

was an allegation of ownership of the vessel

and that was admitted so the carrier was,

in fa c t , the owner of the v es s e 1 . Ju s t to take

it up, clause 4 does contemplate subcontracting.

At page 68:

the Carrier shall be entitled to sub-contract

on any terms to any person ..... the whole

or any part of the carriage covered by this

Bill of Lading -

so that, there was certainly the right to

subcontract the whole of the carriage.

GAUDRON J: Mr Emmett, can I invite a comment on the

concluding paragraph of clause 4(1)?

(Continuing on page 43)

C2T22/2/ND	42	3/3/89
Nissho(2)

MR EMMETT:	That is the definition in subclause - - -
GAUDRON J:	Yes.
MR EMMETT:	Yes, it applies to subclause 8(3) but not to

8(2).

GAUDRON J:	Yes.
MR EMMETT:	That expression, of course, is used in 8(3) because the exemption extends to carrier and
carrier's employee. That was something which, I think, was relied upon by the learned president,
as distinguishing 8(2)(d) from 8(3).
GAUDRON J:	Whereas you say there is no reference to

carrier's employee in 8(2)(d)?

MR EMMETT:	There is no reference?
GAUDRON J:	Yes.
MR EMMETT:	The learned president put that against us,

that if 8(2)(d) was intended to deal with

carrier's employee negligence, or lack of

diligence, then it would have been referred to.

We say it is equivocal and that when one adopts the approach that we have suggested, it would

be odd that the parties contemplated that by

simply subcontracting the whole of the carriage

one could acquire a greater degree of - or one

could lessen the obligations which one had

simply by making sure that one was diligent in

the choice and the making of contracts with

subcontractors.

I think I was endeavouring to get to

pages 46 and 47. Before doing that I was

endeavouring to indicate the nature of the system

that operated, to put those questions in context.

At paragraph 6 of the factual document the

stevedore notifies all consignees in respect of
the cargo when it arrives.	On presentation to a

shipping company, such as the respondent, of a

bill of lading, then the shipping company will

prepare a document known as a delivery order which

has on it various information concerning the

container and where it can be picked up. The

delivery order is issued to the customs agent,
acting for the consignee, in exchange for the
bill of lading. The customs agent gives the

delivery order to his carrier who attends at

the gate house of the terminal and submits the

delivery order to the clerk at the gate house
who then gives him some information as to where
the container should be found, by means of access

to a computer and he gives a gate pass to the

C2T23/l/MB	43	3/3/89
Nisoho(2)

carrier to enable him to have access to the

terminal. The carrier then takes the gate pass

to the nominated stack where the container is
to be found and delivers the gate pass to a
waterside worker who locates the container
from the information contained in the gate pass
and then loads the container on to the vehicle.

The carrier then takes the gate pass back to

the gate house and on handing in the gate pass

is then permitted to leave the terminal with

his cargo.

So it is in that context that these questions

were put at page 46. This is the subject-matter

of the application to amend which I think came

out of Your Honour Mr Justice McHugh's, and perhaps

Your Honour Mr Justice Deane's questions on this

topic. The last two questions on page 46:

(Continued on page 45)

C2T23/2/MB	44	3/3/89
Nissho(2)

MR EMMETT (continuing):

Q. What I am putting to you, to be fair, is

that someone could have obtained a false

delivery order and then picked up the

container here in question from Glebe Island

Terminal, you would agree with that wouldn't

you? A. Well, how do you see the delivery

order being used? The delivery doesn't go

to the waterside worker.

Q. If someone attended with a false delivery

order at Glebe Island terminal, they could

obtain a gate pass, couldn't they? A. Yes.

HIS HONOUR: Either a false or genuine one.

MR STREET: Q. I think you said that the

delivery orders are kept by the shipping

companies? A. That's right.

Q. Glebe Island terminals issues out shipping companies delivery orders is	to the
that
correct? A. On most occasions, yes.	Some
have their own.
Q.	So far as Malaysian International

Shipping Corporation is concerned, Glebe Island

Terminal had issued to them a number of blank

delivery orders? A. That's correct.

In other words, it was not something that was overlooked.

It was not something that was not adverted to; the

evidence just did not come out. In fact, the carrier,

the respondent, called no evidence about the matter,

inferences were, sought to be drawn from that fact, but

they were unsuccessful and I am not asking

Your Honours to extend the leave to re-argue the facts.

If it is material then I think in response to

what Your Honour Mr Justice McHugh was putting to me -

and I think what Your Honour Mr Justice Deane was	saying - there could be circumstances where the use
of diligence on the part of the carrier could, even
though he had subcontracted, could avoid loss. But,
be that as it may, it is not fatal in our submission
to the proposition that unless one finds a clear
intention, particularly in a bill where the whole of
the carriage can be subcontracted, it would be odd that the carrier was saying, "Well, if I did this myself
and I adopted this degree of lack of diligence, I
would be responsible, but if I use my subcontractor
then it does not matter if he, adopting the same degree
of lack of diligence, causes the loss; I am exempt".

McHUGH J:  But what, if you have a case where the contract

contemplates the use of subcontractors,upon the proper

construction of the exemption clause the carrier

C2T24/l/JH	45	3/3/89
Nissho(2)

can be liable both for his choice of an incompetent

subcontractor and for not supervising properly

what the subcontractor does, why should you then not

exempt the carrier for losses which are not his

responsibility? ·

MR EMMETT:  Because, in clause 8(3) there is express intention

to deal with the extent to which the responsibility

of the subcontractors is passed on. If 8(2)(d) is

given that meaning, then the references to the

subcontractors in 8(3) really become irrelevant. There

is no need to provide the extent to which the carrier

might be responsible for subcontractors if he is

exempted, in effect, by the operation of 8(2)(d).

8(3) refers expressly to, as I have said before,

to the carrier's employee:

The Carrier shall not under any circumstances

be liable or responsible in any capacity

for or in respect of any non-delivery or mis-delivery of Goods, delay, or loss or damage of any kind which arises out of or in

connection with the carriage covered by this

Bill of Lading or anything done or not done

by the Carrier or any Carrier's employee to

or in respect of Goods.

(Continued on page 47)

C2T24/2/JH	46	3/3/89
Nissho(2)

McHUGH J:  But that is with or without negligence in 8(3),

is it not?

MR EMMETT:	Yes, there is certainly no reference to lack of diligence in 8(3) but the point I am making is that
8(3) deals expressly and contemplates the possibility
of the carrier being responsible for the acts or
conduct of carrier's employee which is defined as
including subcontractor.  The notion that one
accepts responsibility for one's subcontractors in performing one's primary obligation is recognized
by the House of Lords in RIVERSTONE MEAT V LANCASHIRE SHIPPING CO, (1961) AC 807, and this is concerned with
a bill of lading.  The question involved the
seaworthiness of the vessel and the circumstances
were that the repair of the vessel or the looking
after of the vessel had been subcontracted and it
was sought to rely on an exemption in respect of
lack of diligence on the basis that, although there
had been lack of diligence, it had been lack of
diligence on the part of the subcontractor and unless you find something fairly clearly to the
contrary, you cannot avoid your obligations by simply
subcontracting.

For example, at page 841, at the bottom of

the page:

It is not possible to extract from this

somewhat speculative dictum that the learned

judge thought that the carrier would not

in any case, with or without inspection, be

liable for negligence on the part of those
to whom ..... "he committed the work of fitting
the vessel for sea." It was not a matter for

his decision and he did not, in my opinion,

purport to decide it. But it is upon this

authority that the whole fabric of the

respondents' case appears to rest. It is a reasonable construction of the words, which

case of a ship built for the carrier, or newly	once again I quote, "to exercise due diligence to make the ship seaworthy" to say that in the	come into his hands by purchase, the carrier
fulfils his obligation if he takes the
precautions which the learned judge suggests.
Until the ship is his he can have no further
responsibility. I am aware of no case either
in the United States under the Harter Act or
this country when its words fell to be construed
in which the contrary has been suggested. But
it is far otherwise where the shipowner puts his ship in the hands of third parties for
repair. To such a case the words that I have
cited from The Rossmore and The Colima are
precisely applicable. An attempt was made to

C2T25/l/BR	47	3/3/89
Nissho(2)

draw a distinction between negligence shown by the shipowner's servants, his agents and

independent contractors. But this could but fail.

For no sensible reason could be found for such a distinction. To take a relevant example: repair work might equally be entrusted by a

shipowner to his own servants or to an independent

contractor. To fasten him with liability for

neglience in the one case but not in the other

would wholly defeat the purpose of the Act.

(Continued on page 49)

C2T25/2/BR	48	3/3/89
Nissho(2)

MR EMMETT (continuing): Then, at 845, at the top of the

page:

It was natural that his observations in

the WILSONS case should be pressed upon

the House in DAVIE'S case, and should be
the subject of comment in the speeches of
their Lordships, but in neither case was

the construction of the Hague Rules in

any degree relevant to the decision .....

My Lords, I ought not altogether to

neglect the argument that was urged with

a wealth of illustration to the effect that

where a defendant has properly employed

an independent contractor, particularly

in relation to a matter which calls for

technical or special knowledge or experience,

he is not liable if the plaintiff has been

injured by the negligence of the independent

contractor or his servants, provided such

negligence was not apparent to him.

He refers to some cases.

No one, I think, doubts that in some circumstances a defendant can escape

liability for the negligence of an

independent contractor; nor could he doubt
that in other circumstances he cannot so

escape, for he would be faced by such

authority as GROTE -

et cetera.

It is surely sufficient to say that in the

context of the Hague Rules it is patent that the obligation of the shipowner is

in the latter category. As I have already

pointed out, it was ultimately on the facts

of the particular case that the respondents

were compelled to rely; for the authority

was overwhelming that the broad proposition,

that the shipowner was protected by the

employment of a competent independent

contractor, could not stand.

And perhaps I might just read page 865,

Lord Radcliffe, at the bottom of the page:

Again, it is not necessary that I should

make a detailed citation of what is already

before your Lordships. What is stressed throughout is that the obligation of the

carrier is "not limited to his personal diligence'' (see the ANGLISS case). The

carrier's responsibility for the diligence

C2T26/1/ND	49	3/3/89
Nissho(2)

of all those whom he employs to discharge

his own primary duty has been stated and

recognised by such eminent commercial lawyers

as Lord Roche in delivering the opinion .....

The learned Lord Justice there summarises the

practical effect -

et cetera. At 871, Lord Keith, at the bottom

of the page:

The obligation is a statutory

obligation imposed in defined contracts

between the carrier and the shipper. There

is nothing novel in a statutory obligation

being held to be incapable of delegation .....

I think, more compelling where the obligation

is made part of a contract between parties.

We are not faced with a question in the

realm of tort, or negligence. The obligation

is a statutory contractual obligation.

The novelty, if there is one, is that the

statutory obligation is expressed in terms

of an obligation to exercise due diligence,

etc. There is nothing, in my opinion,

extravagant in saying that this is an

inescapable personal obligation. The carrier

cannot claim to have shed his obligation

to exercise due diligence to make his ship

seaworthy by selecting a firm of competent

ship repairers to make his ship seaworthy.

Their failure to use due diligence to do

so is his failure. The question, as I see

it, is not one of vicarious responsibility

at all.

Those principles apply equally to the question

of non-delivery. The obligation to provide

a seaworthy ship is not satisfied if there is
lack of diligence on the part of a subcontractor

employed to make it seaworthy. Similarly,

~lack of diligence on the part of a stevedore

who is employed to effect delivery is sufficient

to bring one within the terms of paragraph (d).

So that, in our submission, if our primary

submission fails concerning the construction
of clause 8(2), that is, that it does not cover

loss of or it does not cover non-delivery,

as was the case here, then on the proper

construction of clause 8(2)(d), the carrier

is not entitled to exemption.

C2T26/2/ND	50	3/3/89
Nissho(2)

MR EMMETT (continuing): That brings us to the third

exemption clause. I do not think His Honour

Mr Justice Yeldham made any observations about

subclause (3) and the Court of Appeal having

decided - - -

McHUGH J:  Just before you go on to that new one could

I just take you back to get into my mind the

proper construction. Do you not begin with

subclause (3) in looking at this whole question

of exemption of liability because it seems,
in its opening words, to cover every type of
non-delivery, misdelivery, delay, loss or damage

of any kind which arises out of it, no matter

how caused and effect.

MR EMMETT:	Yes, Your Honour.
McHUGH J:	Then it goes on:

save only that subject to sub-clause 8(2)

.... the liability and responsibility of

the Carrier for loss or damage ..... shall

be as follows -

and it sets it out. But you then have to ask yourself whether or not the carrier can bring himself within 8(2).

MR EMMETT:	Yes, I concede that.
McHUGH J:	Well, then, why do you not look at 8(2) quite

independently of 8(3)?

MR EMMETT:	I am not suggesting that one does not but one does need to look at it in the context of the
scheme of the exemption clause.
McHUGH J:	You see, in 8(3) I just noticed that although

on the third line they talk about "loss or damage

of any kind", down at line 10 they switch back

to the words:

loss or damage to or in connection with

Goods -

which is the very same - - -

MR EMMETT:	The same expression that appears before, yes.
McHUGH J:	Yes.

MR EMMETT: That, of course, is in the positive part of 8(3)

as distinct from the negative or exempting part.

McHUGH J:  Yes, thank you.

C2T27/l/MB	51	3/3/89
Nissho(2)

MR EMMETT:  Well, coming then to 8(3) and, as I have said,

8(3) involves, first of all, an exemption and then

an exception to the exemption. The respondent

first has to get itself within the exemption

and our primary submission is that it fails to

do so. As I indicated there are three different

circumstances which are referred to: non-delivery

or misdelivery, delay,or loss or damage of any

kind. Each of those must arise out of, or in

connection with, one of two things. It must
arise out of carriage covered by the bill of lading

or it must arise out of something done or not done

by the carrier or any carrier's employee to or

in respect of the goods.

Now, it is our submission that neither of those is satisfied in the present case. The

carriage had finished because there was a finding

of fact that the container had been discharged

from the vessel. So that the non-delivery did not

arise out of or in connection with the carriage

covered by the bill. That is something that is

referred to paragraphs (a) and (c) as well, this

notion of the carriage. Paragraphs (a) and (c)

both contemplate loss arising out of carriage of

the goods by sea and that is the only type of

carriage that is involved in this case. The only

thing that we complain about was delivery following

completion of the carriage.

Secondly, we say there was no non-delivery

arising out of or in connection with something

done or not done by the carrier or the carrier's

subcontractor to or in respect of the goods.

(Continued on page 53)

C2T27/2/MB	52	3/3/89
Nissho(2)

MR EMMETT (continuing):  The non-delivery arose out of

a defect in the carrier's system which enabled

somebody else to get on to the container terminal

and steal the container.

McHUGH J: 

Well, why is that not done?

MR EMMETT: 

It is not something done to or in respect of

the goods. It was something that arose out of a
failure to adopt a proper system, nothing that
particularly relates to these goods, and again

one has to give these words a strict construction

for the reasons that we outlined in the beginning. deprive the bill of lading of its main object, namely the obligation to deliver, then one would

be slow to read it in that way and even if one

can possibly construe the language in a way which

permits or which requires delivery and does not
result in exemption for non-delivery, then one

would do so.  Even if one has to one would ignore

the language, as Sir Garfield Barwick says, and

as Mr Justice Walsh said in the cases cited in case to which I also referred.

So that our basic proposition is that the respondent does not get itself within the

exemption because there was no non-delivery arising out of the carriage and there was no

non-delivery arising out of something done or not

done to or in respect of the goods.  If that is

correct, then clause 8(3) is no longer relevant

and, of course, we have already said that clause~~

does not cover non-delivery at all - it only covers

loss to the goods - so neither exemption clause

applies.

If we are wrong in our construction of the

preamble to subclause (3), then there is a further

answer.	The structure of subclause (3) is that
if you get within the exemption, then you might

still get within the exception to the exemption,

and that is:

the liability and responsibility of

the Carrier for loss or damage to or in

connection with Goods shall be as follows -

paragraph (a) does not apply because the carriage
by sea had finished following the discharge of
the container from the vessel, and the respondents,

as we apprehend it, rely on paragraph (b) on the

basis that:

upon proof that such loss or damage

to or in connection with goods

C2T21 /1 /HS	53	3/3/89
Nissho(2)

arose ..... out of ..... storage or

handling of the Goods by a sub-contractor

..... the liability of the Carrier shall

be limited to the amount if any which

at the time of such proof is recoverable

by the Carrier from the sub-contractor -

and reliance, as we apprehend, is placed - although
it has never been determined by the court - but

is placed on an exemption clause in the terms of

conditions applicable to the contract between

stevedore and carrier which would limit the claim.

But our submission is that paragraph (b) only

applies where there is proof that there was loss or damage to or in connection, the same

expression as appears at the beginning of each

paragraph in paragraph 8{2). So the same

submissions are made again that in this bill

the draftsman in paragraph 8(3)(b) is not concerned

with misdelivery or non-delivery, he is only

concerned with loss to the goods or damage to or

in connection with the goods. Therefore,

paragraph (b) is not applicable.	Paragraph (c)
then picks up the halance:

(Continued on page 55)

C2T21/2/HS	54	3/3/89
Nissho(2)

MR EMMETT (continuing):

(c) In any case not falling within

subclause 8(3)(a) or (b) the Carrier

shall be liable to the extent provided

by the Hague Rules and for this purpose

the loss or damage shall be deemed

conclusively to have arisen out of the

carriage of the Goods by sea.

McHUGH J:  But does not the positive part of the clause,

where it contains the words "loss or damage to

or in connection with the goods" assume that that may be the result of non-delivery or misdelivery?

MR EMMETT:  Yes. It is an exception to that exemption.

McHUGH J: Yes.

MR EMME TT :  We 11 , with the exception of this , there are three sorts

of things that are covered by the preamble. This is the point I was making before. It is not only

non-delivery or misdelivery which is involved.	It
is delay or loss or damage of any kind.

McHUGH J: Yes.

MR EMMETT:  So, it is - perhaps I misunderstood, Your Honour.

It is not only non-delivery and misdelivery.	It is
other things that are covered by clause 8(3).

McHUGH J:  I may have misunderstood you, Mr Emmett, but

I thought you were saying that 'loss or damage to or

in connection with the goods" there did not cover

misdelivery or non-delivery.

MR EMMETT: In paragraph (b), yes, for the same reasons I

advanced in relation to that expression in

subclause (2).

McHUGH J: Yes.
MR EMMETT:	So that if paragraph (b) does not apply, then one

falls back on to paragraph (c) which has no such

limitation and there is a conclusive agreement that

the loss or damage is deemed conclusively :o have arisen out of the carriage of goods by sea which,

in effect, throws you back on to the Hague Rules

and, as we apprehend it, if the Hague Rules are

applicable, there would be no relevant limitation

to the appellant's entitlement to claim the full

amount of this consignment, which was some $90,000

plus interest. I think that is - there is a

concession to that effect noted in the appeal book

and, no doubt, it can be turned up if there is any

difficulty about it but I apprehend there would be

no difficulty about that.

C2T29/l/SH	55	3/3/89
Nissho(2)

So that, Your Honours, we submit that when one adopts the approach to construction of the

bill of lading that we have suggested which

involves giving due weight to its primary - its main

object, that is, delivery of the goods. If one

can find a construction of these three clauses

which will not exempt the carrier from the

liability and the obligation to deliver, then

one would adopt that construction and we have
advanced reasons as to why one can. Even if one

cannot, one would, as Mr Justice Walsh said and

Sir Garfield Barwick said in the passage cited

in DARLINGTON:

The terms of exception clauses must sometimes be read down if they cannot

be applied literally without creating

an absurdity or defeating the main

object of the contract.

So that even it on the natural meaning of these

words, they still operate to exempt, then they

should be read down in the way in which we have

suggested in order to preserve that basic obligation.

In those circumstances, in our submission,

Your Honours, the appeal should be upheld and

orders made in accordance with the notice of appeal.

MASON CJ:  Thank you, Mr EimI1ett. Yes, Mr Rayment.

(Continued on page 57)

C2T29/l/SH	56	3/3/89
Nissho(2)

MR RAYMENT:  If Your Honours please, I hand up our outline

of argument. Your Honours, may I start with

the suggested rule of public policy said to be

applicable to bills of lading generally in this

country and may I take Your Honours straight to the

Hague Rules set out in the schedule to the

SEA CARRIAGE OF GOODS ACT 1924.

The Court will be aware the structure of those

rules is to impose obligations, with some

restrictions and modifications, upon the carrier

applying from loading of the goods on board the

vessel until discharge. Some of the responsibilities

sea worthiness obligation contained in Article III rule 1, some of them are qualified, such as the

are absolute and the House of Lords held in

obligation in Article III rule 2:

properly and carefully load, handle,

stow, carry, keep, care for and discharge

the goods carried.

They are qualified by Article IV, in particular

Article IV rule 2 - by the way, Article IV rule 2

contains some language similar to one of the
exemption clauses in this case. Article IV rule 2(q)

talks of liability for loss or damage or:

any other cause arising without the actual

fault or privity of the carrier, or without

the fault or neglect of the agents or

servants of the carrier -

and refers to the burden of proof. That is to be
contrasted with the language of 8(2). Your Honours,

then, if one goes to Article VII though, it contains,

and has been construed to contain, a liberty for

the parties to contract as they wish in the period

post-discharge; thus the obligation to deliver,

_ if there be one, can be abrogated by agreement

pursuant to Article VII or can be modified so as to

expose the carrier to liability only in some

circumstances.

The suggested rule of public policy would,

therefore, we would submit, be inconsistent with the

provisions of Article VII, a part of the law of this

country. The remarks of Mr Justice Stephen and

Mr Justice Murphy in the SALMON V SPRAGGON case

were not made in the context of something which is

expressly permitted by the Hague Rules. Rather,

Their Honours were considering whether this Court

ought to, in effect, follow THE EURYMEDON and

allow the use of a Himalaya clause; Their Honours,
in the minority on the point, held that for those

reasons of public policy, the Court should not.

But that is not to say that the Court would find a

rule of Australian public policy inconsistent with the

Hague Rules themselves.

C2T30/l/JH	57 /58	3/3/89
Nissho(2)

MR RAYMENT (continuing): In the second place, Your Honours,

we give Your Honours references to a number of

overseas decisions on the same rules which have

all applied articleVIIaccording to its tenor

so as to permit a shipowner to modify or vary

the delivery obligation after discharge.

Your Honours, we go first to ANSELME DEWAVRIN V WILSONS

AND NORTH-EASTERN RAILWAY SHIPPING COMPANY LTD,

(1931) 39 LLR 289 at 291. Pursuant to the liberty

in article VIIthere was an exemption clause in

wide terms which appears in the right-hand column

on page 291:

When goods are ... awaiting ... removal after

discharge, or are carried at through rates

or consigned from or to places beyond the

port of ... discharge, the shipowner is not

liable for damage thereto or loss thereof,

notwithstanding any negligent or wrongful

act or default of any person whatsoever in

his employ ...

Then the trial judge, Mr Justice Roche, said:

I cannot imagine words stronger or more apt to

free the defendants from responsibility in

this case than those -

and gave effect to them. Similarly, in Singapore

in a case which is reported in the Lloyd's Law

Reports; CHELLARAM & SONS LTD V NISSHO SHIPPING

COMPANY LTD, (1967) 2 LLR 578. The court in

Singapore gave to a carrier the benefit of a general exemption clause applying after discharge,

consistently with the Hague rules. There were

two questions dealt with in that case, Your Honours,

the only one relevant being that to do with the

Hague rules. The first concerned the statutory

liability of a stevedore. The words of the

clause one can find in the headnote - it is

clause 15 set out at the beginning of the headnote

on page 578:	In any case, all risks and expenses (including expenses for landing, lighterage, storage, cartage, etc.) incurred by delivery
otherwise than from ship's tackles shall be
borne by the owner of the goods; and the
responsibility of the Carrier or the ship
shall cease as soon as the goods are lifted
from and leave the ship's deck and/or
ship's tackles, notwithstanding any custom
of the port to the contrary and/or any
special arrangement as to expenses beyond
the ship's side.

C2T31/l/MB	59	3/3/89
Nissho(2)

MR RAYMENT (continuing): At page 586 in the report the court

found on the basis of that clause that there was

no liability and it was not said to be inconsistent

with the Hague Rules to have so provided since it

applied after discharge. Similarly, Your Honours,

by the law of Quebec as the Prins Willem III shows -

and we have given Your Honours the reference in the

outline - a clause having application after discharge

will be given effect consistently with article VII.

Your Honours, we would put that the result of

a finding in this Court that Australian public policy

would not permit such a clause to be given effect to,

would be to create great uncertainty in the dealings

between this country and its trading partners. These

are, after all, internationally adopted rules following

a maritime conference of 1931 which are enacted in

similar terms in many nations. We give Your Honours

the reference in the outline of_argument to some
passages in decisions of the _House of Lords about the

desirability of uniformity in_ interpretation of such

instruments..

Your Honours, in the next place there was no

concession that Malaysian public policy was the same

as Australian public policy. There was, at page 147

of the appeal book,noted by the president that the

trial had been conducted - and I will read from line 4:

in the absence of evidence of any applicable
differences between the law of Malaysia and
the law of Australia in this regard, the

Court should assume that the two bodies of law were, relevantly, identical.

That is just the ordinary rule that if you do not lead evidence of foreign law it is presumed to be the same

as local law. There was, in fact, tendered in this

case the relevant legislation embodying the Hague Rules

but it does not follow from that, in our submission,

.that the Court should assume that the rules of public

policy, if any, in this country will apply in Malaysia.

And, Your Honours, this being an ordinary matter of

the interpretation of a contract, in our submission,

one would look to the proper law, that is to say

the law of Malaysia, to determine a question like that.

Cheshire and North's 11Private International Law" We have given Your Honours a reference to

where some instances are discussed where public policy

will be determined according to the law of the forum notwithstanding that it is not the proper law of the

contract. But it is sufficient to submit to Your Honours

that none of those cases apply here. There is no

question of affront to public decency or the like.

C2T32/1/BR	60/61	3/3/89
Nissho(2)

MR RAYMENT (continuing):  Your Honours, the second

submission of my learned friend was that the

obligation to deliver was, in effect, a

paramount or fundamental objective of the contract -

I think he said, "a main object of the contract".

In our submission, this contest is really about the
apportionment of risk as between the shipper's
insurer, the cargo interests, on the one hand

and the carrier, or Protection and Indemnity

Club, or perhaps the independent contract, in

many cases, and his insurer, on the other hand.

It affects freight rates for risk to be allocated

to the carrier in circumstances not in accordance
with existing law.

The traditional transaction that my learned friend referred to of cost insurance freight

contracts, of course, envisage that there are

many circumstances in which the goods will be

lost or damaged and that is why one buys, in

addition to the bill of lading, the insurance

policy which will cover one for the kind of

loss which occurred in this case whether on

board the ship or after discharge.

It may be sufficient to answer those submissions

by referring to clause 8(6) itself in the bill

of lading which expressly says that its provisions

will apply notwithstanding any breach of contract

and notwithstanding even that the breach stemmed

from a lack of provision of a seaworthy vessel.

Clause 8(6) at page 75 says:

The provisions of sub-clauses 8(2),

(3), (4) and (5) apply with respect to loss

or damages (including loss or damage to

or in connection with Goods) which is wholly

or partly caused by or attributable to
unseaworthiness or unfitness of any Vessel,

or breach of contract by the Carrier, or

negligence or wrongful act on the part of

well as to loss or damage arising from any	the Carrier or any Carrier's employee, as
other cause whJtsoever.

It is to prevail over any presumed main object

of the contract, in our respectful submission.

Your Honours, traditionally, before the

doctrine of fundamental breach was abrogated,

the fundamental obligations which have been
identified by the courts with respect to bills
of lading were two: they were the duty to

provide a seaworthy ship and to carry the goods

without negligence. And one sees that, for

example, in PATERSON STEAMSHIPS LIMITED V CANADIAN

CO-OPERATIVE WHEAT PRODUCERS LIMITED. If I

C2T33/l/ND	62	3/3/89
Nissho(2)

might go to that. It is (1934) AC 538. Could

I go straight to 544 in the opinion of the board.

This was an appeal from Canada. Their Lordships,

at the foot of 544, say this:

It will therefore be convenient here,

in construing those portions of the Act

which are relevant to this appeal -

that was a Sea Carriage of Goods Act -

to state in very summary form the simplest

principles which determine the obligations

attaching to a carrier of goods by sea or

water. At common law, he was called an

insurer, that is he was absolutely responsible

for delivering in like order and condition at the destination the goods bailed to him for carriage. He could avoid liability

for loss or damage only by showing that
the loss was due to the act of God or the

King's enemies.

(Continuing on page 64)

C2T33/2/ND	63	3/3/89
Nissho(2)

MR RAYMENT (continuing):

But it became the practice for the carrier

to stipulate that for loss due to various

specified contingencies or perils he should

not be liable: the list of these specific

excepted perils grew as time went on. That

practice, however, brought into view two

separate aspects of the sea carrier's duty which it had not been material to consider
when his obligation to deliver was treated

as absolute. It was recognized that his

overriding obligations might be analysed into

a special duty to exercise due care and skill

in relation to the carriage of the goods and

a special duty to furnish a ship that was fit

for the adventure at its inception. These

have been described as fundamental undertakings,

or implied obligations. If then goods were

lost (say) by perils of the seas, there could

still remain the inquiry whether or not the

loss was also due to negligence or
unseaworthiness. If it was, the bare

exception did not avail the carrier.

And, to the same effect, one finds a statement of

Lord MacNaghten in WILSON, SONS & CO V OWNERS OF

CARGO PER THE "XANTHO", ( 1887) 12 AC 503 at 515.

Lord MacNaghten said, at about the tenth-last line

on page 515, with respect to a bill of lading:

Underlying the contract, implied and involved in it, there is a warranty by the shipowner

that his vessel is seaworthy, and there is

also an engagement on his part to use due
care and skill in navigating the vessel and

carrying the goods. Having regard to the

duties thus cast upon the shipowner, it

seems to follow as a necessary consequence,

that even in cases within the very terms of
the exception in the bill of lading, the

shipowner is not protected if any default or

negligence on his part has caused or

contributed to the loss.

That being, then, the position before the Hague Rules.

Your Honours, according to a statement in the House of

Lords, even those duties could be modified by clear

words and that appears in SMITH, HOGG & CO V BLACK

SEA AND BALTIC GENERAL INSURANCE CO, (1940) AC 997

at 1004 but, Your Honours, could I - it is just a

statement but unless clear words were used those

rules would apply. Now, half-way down 1004,

Lord Wright said this:

C2T34/l/SH	64	3/3/89
Nissho(2)

But when the practice of having express exceptions limiting that obligation -

that is, an obligation to deliver the goods safely -

became common, it was laid down that there

were fundamental obligations, which were not

affected by the specific exceptions, unless

that was made clear by express words. Thus

an exception of perils of the sea does not
qualify the duty to furnish a seaworthy ship

or to carry the goods without negligence -

He goes on later:

The contractual exception of perils of the seas does not affect the fundamental

obligation, unless the contract qualifies

the latter in express terms.

(Continued on page 66)

C2T34/2/SH	65	3/3/89
Nissho(2)

MR RAYMENT (continuing):  Your Honours, it was held in

CHARTERED BANK OF INDIA AUSTRALIA AND CHINA V

BRITISH INDIA STEAM NAVIGATION COMPANY LIMITED,

(1909) AC 369, that the obligation to deliver

was not an obligation of the same nature as

that fundamental obligation to provide a seaworthy

ship or to carry the goods safely. That was an appeal

from Penang to the Privy Council. The terms of

the exclusion clause appear in the headnote:

Goods were shipped on board the defendant's

ship to be carried to Penang and delivered
there to order or assigns under bills of
lading which contained the condition that
"in all cases and under all circumstances
the liability of the company shall absolutely

cease when the goods are free of the ship's

tackle, and thereupon the goods shall be

at the risk for all purposes and in every

respect of the shipper or consignee." They

were delivered to landing agents appointed by

the defendants, and for that purpose had been
discharged from the ship's tackle into lighters
sent by the said agents, but by fraud, in

which the said landing agents participated,

never reached the consignees.

At page 375 in the report Their Lordships referred to an argument that that clause could not prevail

over fundamental obligations contained in the bill.

Their Lordships say:

In addition to the arguments relied on in the Courts below, the learned counsel on behalf of the bank prayed in aid two recent decisions of the House of Lords -

and they were ELDERSLIE STEAMSHIP V BORTHWICK and

NELSON LINE V JAMES NELSON & SONS, LTD. They

---- were two examples of the application of the

fundamental obligation to provide a seaworthy

ship -

in which the House had occasion to reaffirm

and apply the wholesome rule that if a

shipowner wishes to relieve himself from

liability to the shipper in case his vessel should

be found to have been unseaworthy he must say

so plainly. That is an old rule. It has

never been questioned or doubted. But

their Lordships do not recognize any very close
analogy between a case where it is sought

to get rid of a legal obligation, which is presumed to be the basis of every contract of carriage by sea, and a case like this,

where the parties are perfectly free to make

any stipulation they please, unembarrassed

by any implied condition or any original

underlying obligation.

C2T35/l/MB	66	3/3/89
Nissho(2)

At the foot of the page they say the clause,

in effect:

seems to be perfectly clear. There is no

reason why it should not be held operative

and effectual in the present case.

That case, in turn, was looked at in this Court

in THE AUSTRALASIAN UNITED STEAM NAVIGATION COMPANY

LIMITED V RISK.ENS, (1914) 18 CLR 646. As

Your Honours will see from the headnote at page 646,

the exclusion clause as discharged was, again,

in general terms:

(Continued on page 68)

C2T35/2/MB	67	3/3/89
Nissho(2)

MR RAYMENT (continuing):

"and all liability of" the shipowner

"to cease as soon as the goods are

free from the ship's tackles" -

it being held that under what would be
article III rule 8 today it was not inconsistent

with the rules contained in the 1904 SEA CARRIAGE

OF GOODS ACT of this country, which was a

predecessor to the 1924 Act and which was repealed

by the 1924 Act.

At page 675 reference was made by

Mr Justice Isaacs to CHARTERED BANK OF INDIA, at

the foot of the page, and could I just read that

whole paragraph beginning "The custom of the port":

The custom of the port may be excluded

by apt words and then the cargo is

deliverable over the rail. Or, as in

PETROCOCHINO V BOTT, the place may be

specifically mentioned, namely, "from

the ship's deck" which, according to

the established usage, so far as

consistent, meant delivery to the dock

company's servants. And that was done.

But then comes the important point that

apart from the Act delivery may be

altogether excused by special condition.

CHARTERED BANK OF INDIA V BRITISH INDIA

STEAM NAVIGATION CO LTD is an example,

and a binding authority. There the

agreement provided that the shipowners'

liability should absolutely cease when the

goods were free of the ship's tackle. The

Privy Council held, agreeing with the Chief

Justice of the Court below that delivery

was thereby excused, and although the

obligation to deliver - that is, the

inherent obligation to deliver as modified

by the option given - was not discharged,

yet the condition freed the shipowners

from any liability for non-delivery.

Precisely the same construction applies here; and the question is whether such

a release of liability is permissible.

Over at page 679 the same matter was discussed

in the joint judgment of Mr Justice Gavan Duffy and

Mr Justice Rich.	The terms of the bill are set
out at the foot of page 679.	Over the page they
say:

We think that these provisions taken as a whole are intended to specify the delivery

which is to be given by the carriers and

C2T36/l/HS	68	3/3/89
Nissho(2)

accepted by the owner of the goods,

and that the words "and all liability
of the Company to cease as soon as the

goods are free from the ship's tackles,"

which in another context might be read

as not dealing with the nature of the

delivery to be made, but as providing

for cesser of liability even where there

has been no delivery, cannot be so read

here.

They refer to CHARTERED BANK and say that:

almost identical words were held to

relieve the carriers, not because the

delivery had in fact been made as soon
as the goods were free from the ship's

tackles, but because, though delivery had

not been made, the clause relieved them

from any liability for failure to deliver.

They then refer to BOTT's case:

somewhat similar words in a different

context were read as prescribing and

limiting the nature of the delivery which
the carrier was bound to make under his

contract, as we think the words in question

do here. If this be so the parties

contemplated that the shipowners should be

at liberty to take the goods out of the

ship's hold -

and so on. Your Honours, the only case where, so

far as we are aware, it has been suggested that any

delivery obligation might itself be a fundamental

obligation is that case of SZE HAI TONG, which my

learned friend referred to in passing, in-chief.

That is (1959) AC 576.

(Continued on page 70)

C2T36/2/HS	69	3/3/89
Nissho(2)

MR RAYMENT (continuing): In part, at least, that seems to

be a good example of application of the outmoded

doctrine of fundamental breach. This was a case

where the stevedore had deliberately delivered
the goods without the bill of lading to a person

who, I think, indemnified them for delivery without

the bill. So there was a disregard of the obligation,

similar to the one found in the present bill, to

deliver to a holder of the bill of lading.

At the foot of page 586, Their Lordships say

that, as a matter of construction, the bill did not permit this kind of delivery. Their Lordships say,

having referred to the exemption which was also in

general terms:

" ..... the responsibility of the carrier .....

shall be deemed to commence only when the goods are loaded on the ship and to cease

absolutely after they are discharged therefrom." Their Lordships say this:

The exemption, on the face of it, could

hardly be more comprehensive, and it is

contended that it is wide enough to absolve

the shipping company from responsibility for

the act of which the Rambler Cycle Company

complains, that is to say, the delivery of

the goods to a person who, to their knowledge,
was not entitled to receive them. If the

exemption clause upon its true construction

absolved the shipping company from an act

such as that, it seems that by parity of

reasoning they would have been absolved if
they had given the goods away to some
passer-by or had burnt them or thrown them
into the sea. If it had been suggested to

the parties that the condition exempted the

shipping company in such a case, they would

both have said: is, therefore, an implied limitation on the "Of course not." There	clause, which cuts down the extreme width
of it: and, as a matter of construction,
their Lordships decline to attribute to it
the unreasonable effect contended for.

But Their Lordships go further:

If such an extreme width were given to the exemption clause, it would run counter to

the main object and intent of the contract.

For the contract, as it seems to their Lordships, has, as one of its main objects, the proper delivery of the goods by the shipping company,

C2T37/l/SH	70	3/3/89
Nissho(2)

"unto order or his or their assigns,"
against production of the bill of lading.

It would defeat this object entirely if the

shipping company was at liberty, at its own

will and pleasure, to deliver the goods to

somebody else, or to someone not entitled

at all, without being liable for the

consequences. The clause must therefore

be limited and modified to the extent

necessary to enable effect to be given to

the main object and intent of the contract.

To what extent is it necessary to limit

or modify the clause? It must at least be

modified so as not to permit the shipping

company deliberately to disregard its

obligations as to delivery. For that is

what has happened here. The shipping

company's agents in Singapore acknowledged:

"We are doing something we know we should

not do." Yet they did it. And they did it

as agents in such circumstances that their

acts were the acts of the shipping company

itself. They were so placed that their

state of mind can properly be regarded as the state of mind of the shipping company itself. And they deliberately disregarded

one of the prime obligations of the contract.

No court can allow so fundamental a breach

to pass unnoticed under the cloak of a general

exemption clause.

(Continued on page 72)

C2T37/2/SH	71	3/3/89
Nissho(2)

MR RAYMENT (continuing): That was, of course, not just

an obligation to deliver but it was put in the

context of an obligation to - I should go on

in that case, Your Honours. There was then

reference made to CHINA NAVIGATION and

Their Lordship said, in effect, that it was

a case where there was, in any event, no vicarious

liability for the fraudulent act of the landing

agent.

So for the first time there seems to have been discerned, in 1959, a fundamental obligation

of some kind in the Privy Council in the SZE
HAI TONG case which had not been perceived at

the time of the CHARTERED BANK case or in HISKENS'

case. Your Honours, in the next place, we submit

that the suggested main object is itself

inconsistent with the Hague Rules because the

obligation to deliver may, consistently with

the Hague Rules, be abrogated if the case comes

within article IV. Article IV operates by way

of an exception to any obligation to deliver

so as to excuse liability for non-delivery and

if there be any main object which would require

one to read down clauses that surely cannot

apply to article IV.

Moreover, we submit article VII expressly permits such a stipulation and we submit that

that article is to be construed according to

its tenor. Could I go to KEANE's case in this

Court, 41 CLR 484. That was a case after the

Hague Rules were enacted. Your Honours will

see that:

The plaintiff consigned a package of

goods by the defendant's ship from Melbourne

to Sydney under the terms of a bill of lading
which provided that all liability of the

defendant should cease "as soon as the goods

are free from the ship's tackles," and by

another clause, indorsed thereon, that

"should the owner fail to take delivery
of the goods in accordance with the terms
of this contract, such goods may be without

notice transhipped into lighters or other

craft, landed, warehoused, stored, or in

any other way provided for, at the owner's

sole risk and expense." Evidence was given

that the invariable practice on the part

of the defendant in discharging cargo of the kind in question was that instead of the consignee taking delivery at the ship's

slings the goods were taken by the defendant's

servants and tallied into a store, and were

subsequently tallied out by the defendant's

C2T38/l/ND	72	3/3/89
Nissho(2)

servants to the consignees; that a small

charge was made by the defendant for

stacking the goods; that the package in question was tallied into the store but

could not subsequently be found.

And it was held by a majority in this Court

that:

the plaintiff was not entitled to succeed.

At 492 in the report Mr Justice Issacs, one

of the majority, referred to the passing into

law of the statute. At the foot of page 491

he said:

The Act, by art. I. of the Schedule, limits

the carrier's statutory obligations to the

period between the loading of the goods

and their discharge from the ship.	That
is one distinct feature of the new

provisions. Art. VII. affirmatively permits

a stipulation exempting the carrier from

responsibility and liability for the loss

of goods subsequent to discharge from the

ship.

At the foot of that page too, His Honour said,

having referred to the clauses:

So far, no possible question of liability

can, in my opinion, arise although delivery

was not given or taken. The authority, if

one be needed, for this conclusion is the

CHARTERED BANK OF INDIA -

and His Honour applied the clause.

(Continuing on page 74)

C2T38/2/ND	73	3/3/89
Nissho(2)

MR RAYMENT (continuing): At 496 in the judgment of Mr Justice Rich,

at the foot of the page, the last paragraph,

His Honour says:

Upon these facts -

having set out the circumstance of non-delivery -

it might appear to be enough to treat the

case as governed by the Court's decision

in RISK.ENS' case. But in that case

it was, to quote from the joint judgment of

my brother Gavan Duffy and myself, .

"conceded that the terms of the bill of

lading purport to relieve the defendants

from responsibility in the event that has

occurred, and the only question that

remains for determination is whether these

½erms are·in fact binding on the parties.

The answer to this question depends on the construction·of the bill of lading and of the Act of Parliament' 1 • The plaintiff,

the appellant, contends that although in
this case the terms are binding upon the

parties, the defendant is responsible, and

thus he disputes the correctness of the

concession made in HISKENS' case.

Having set out _a pas?age from: the judgment, he

refers to CHARTERED BANK. He says:

Almost identical words were held to relieve

the carriers, not because the delivery had in

fact been made as soon as the goods were free

from the ship's tackles, but because, though

delivery had not been made, the clause

relieved them from any liability for failure

to deliver.

And he refers to PETROCOCHINO V BOTT by way of contrast.

·Finally, Mr Justice Starke, Your Honours, at page 500

refers to CHARTERED BANK and the clause contained in

it cites from Lord Macnaghten's opinion in

delivering the judgment of the Privy Council and then

refers to HISKENS, at the foot of page 500 and at

page 501 applies the decision in HISKENS' case to the

new statute.

So, Your Honours, we would submit that the

problem of avoiding absurdity_ - I do not know that

my learned friend actually put that it was necessary to construe the clause in some way in order to avoid absurdity - we submit that the problem does not arise

here . '!-' here is express liberty to have such a

clause as is contained in the bill.

C2T39/l/JH	74	3/3/89
Nissho(2)

MR RAYMENT (continuing): Now, Your Honours, can I go to the

detailed submissions made by my learned friend about

questions of construction and, Your Honours, I start

with 8(2)(d) because that is the only basis upon

which we succeeded in the Court of Appeal. There

was a dictum in the judgment of the learned president

which does not appear to have the concurrence of
the other members of the court, at least, not

expressly because they refer only to his decision

on 8(2)(d) which would refer to clause 8(2)(a).

I only want to make some limited submissions about

8(2)(a) because there is a factual difficulty that

whether it was actually was proved to apply.

Can I go first to 8(2)(d). Your Honours, the

words, "loss or damage to or in connection with

Goods" do include, in our respectful submission,

loss of the goods themselves and the loss that flows

from losing the goods themselves. The expression is

used against that assumption in clause 8(3) in the

passage Your Honour Justice McHugh referred to on page

74 of the appeal book. Having given a long enumeration

of various kinds of causes of action, responsibility:

in any capacity for or in respect of any

non-delivery or mis-delivery of Goods

et cetera. The clause goes on to speak of:

the liability and responsibility of the Carrier

for loss or damage to or in connection with

Goods -

at line 10 and 11, and that use assumes, in our

submis.sion, that the words are wide enough to
comprehend a complete non-delivery or misdelivery

which is part of the express enumeration beforehand.

(Continued on page 76)

C2T40/l/BR	75	3/3/89
Nissho(Z)

MR RAYMENT (continuing): Again, over the page in clause 8(4),

the clause speaks of:

Loss or damage to or in connection with goods -

in very general terms in such a way as would have been
intended to catch up the earlier clauses. And again,

clause 8(5), one of the general provisions, uses the

same expression. Your Honours, we would submit that

the reason given by the learned president at page 167

and 168 of the appeal book, for a conclusion that

clause 8(2)(d) covers the case are compelling in

point of the reach of the expression "carrier". The

word "carrier" is defined in the Bill at page 165 to

mean the present respondent, not to include it.

Clause 8(3) is a good example of the use of the

expression "carrier's employee" so as to comprehend a

wider class of persons. It would have been a simple

matter to use the expression "carrier's employee"

in clause 8 (2) (d) if that was 'What was intended.	That
expression, of course, is defined to include subcontractors.

Thirdly, Your Honours, the whole of 8(2)(d)

seems to be about loss which arises without the

fault of the carrier himself. It speaks of the

"fault or privity" of the carrier in relation to fire,

acts of God and the like, and that would be consistent

with a meaning of the word "carrier" taken from

the definition clauses, that is to say, the respondent.

Moreover, Your Honours, we contrast 8(2)(d) with article IV(2) (q) of the Hague Rules which applies during

the sea carriage of these goods. The structure of

the bill, Your Honours, is to adopt the Hague Rules
for the sea carriage entirely. That is by clause (3) (2)
of the bill and then to leave the rest of the

provisions of the bill to operate prior to loading

and after discharge.

(Continued on page 77)

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MR RAYMENT (continuing):  The contrast between article IV(2) (q)

and 8(2)(d) is apparent by comparison of the words.

Article IV(2)(q) talks of the carrier, its servant

or agent, whereas this clause talks of the carrier

alone.

DEANE J:  Mr Rayment, one peripheral problem here is that

when one reads article IV, if your meaning of (2)(d)

is accepted one would have the strange result that

under the terms of the bill if the carrier

subcontracted the whole of the carriage and the
subcontractor lost the goods in the course of
carriage at sea due to its negligence, the

shipper would have no recourse against anyone

which would be -

MR RAYMENT:	Except under the Hague Rules.
DEANE J:	But it would only have recourse under the Hague Rules

by reason of the Hague Rules, as it were, overriding

the provisions of the bill?

MR RAYMENT:  Well, the bill actually allows the Hague Rules

to have their full force, that is clause 3 (2).

DEANE J:  What about the indemnity to your client? I mean,

the Hague Rules would not preclude your client

indemnifying its subcarrier, would it, when it

is not the owner of the goods?

MR RAYMENT:	If the damage occurs during sea carriage then the only document you need to look at is the
Hague Rules and it will not exclude - if the
actual carrier loses the goods otherwise than in
circumstances within article IV(2), then the
contractual carrier will be responsible under
this bill. That is what clause 3 (2) says.

(Continued on page 78)

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:MR RAYMENT (continuing):  Now, it is only either before

loading or after discharge that you look at

anything which might cut down the Hague Rules.

DEANE J:	I see. That answers my question, thank you.
:MR RAYMENT:	So, Your Honours, we would shortly submit that

the court was right to find that this case was

covered by clause 8(2)(d).

Your Honours, can I go, then, to 8(2)(a).

MASON CJ:  Mr Rayment, it might be a convenient time to adjourn

now and we will resume at 2.15 pm.

AT 12.50 PM LUNCHEON ADJOURNMENT

C2T43/l/SH	78	3/3/89
Nissho(2)
UPON RESUMING AT 2.17 PM:
MASON CJ: Yes, Mr Rayment.

MR RAYMENT:  Your Honours, could I just offer a slightly more

complete answer to the question I was asked by

Your Honour Justice Deane before lunch. We submit

that clause 3(1) and clause 3(2) of the printed

clauses subject the bill as a whole to the Ha8ue

Rules. Clause 3(5) would operate to read down any

provision of the printed clauses so as to make them

consistent with the Hague Rules during sea carriage.

So that when one comes to a clause like

clause 8(2)(d), it will never apply during the sea

carriage because it is a matter which is covered by

article IV rule 2 and will go, during the sea

carriage, to article IVrule 2. The only scope therefore

for clause 8(2)(d) is preloading and post-discharge.

Your Honours, just before coming to clause 8(2)(a),

may I put these propositions about the relationship

between clause 8(2) and clause 8(3).

First, each of them is introduced by the words

"in any circumstances" and neither should therefore

control the other. And in the second place,

clause 8(3) is expressly subject to clause 8(2) and
therefore nothing in 8(3) should be read to cut down

clause 8(2) - I think the point Your Honour

Justice McHugh made. Your Honours, as to clause 8(2)(a),

the goods were by concession not delivered. There was

a submission made at first instance that the goods were

made available for delivery because they had been put in the stack of goods awaiting collection in the area

on the wharf from which consignees would come and

pick up goods.

(Continued on page 80)

C2T44/l/BR	79	3/3/89
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MR RAYMENT (continuing): That submission was rejected by

Mr Justice Yeldham, although he found the facts

and accepted in part - on other grounds perhaps by

the president. Your Honours, we have noticed

that at page 42 of the appeal book there is some

evidence that relates to it. They were not merely

just put in the stack but the evidence was

that Mr Robert's company, that was the stevedore,

between lines 15 and 22, had a practice of

notifying consignees that cargo was ready to

be collected, and it seems that that was in advance
and that the notice would relate to the time

when it was anticipated that the whole cargo

discharged would be available for collection.

Now, there seems to be no evidence about any such notice and we do not know whether the notice

nominated a time before the goods were stolen.

Arguably if he had, one would be able to say

that the goods were made availabe for collection

at the port, but there seems to be a gap in the proof and therefore the full extent to which we would seek to rely upon 8(2)(a) is to say that

if that matter be not regarded as fatal we seek

to rely upon it. We do not seek to support any

proposition that delivery is the same as discharge

under this bill, especially in the light of clause 19.

McHUGH J:  That is, you do not support the president's

reasoning on this point?

MR RAYMENT:  We do not seek to support it, Your Honour.

(Continued on page 81)

C2T45/l/MB	80	3/3/89
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MR RAYMENT (continuing):  Indeed, we would accept that the

stevedore, in holding the goods for collection, is
the agent of the carrier to either deliver them,

or at any rate, make them available for delivery

under the bill.

BRENNAN J:  On your first point about "made available", I

suppose that would involve questions of whether

notification itself amounts to making available,

does it?

MR RAYMENT:  Yes, if it is not necessary, then we would

submit that they were made available for collection

merely by being placed in the position from which they could be taken. The system was that you

went to the ship's agent with your bill of lading

and he checked it and checked that custom's duties

had been paid,then he issued you a delivery order

which you took to the wharf. And, against the delivery

order the gate keeper would give you a pass which

would enable you to pick up the goods and then you

just took them away.

The bill does not require notice to be given

but the evidence seems to be that the practice was,

of the agent for delivery- that he was, in fact,

notifying persons that they could come to the wharf

and pick up their goods. And, as I say, there is no

evidence that he did so or what date he notified.

It would seem that the carrier had the onus of

bringing himself within 8(2)(a).

Your Honours, then can I go to 8(3), which would

only arise,in our submission,if 8(2)(d) or 8(2)(a)

were not applicable. Your Honours, the amount

recoverable from the stevedore was $10,000; that

appears from two documents in the appeal book.

The contract as between the carrier and the stevedore - the relevant part of it - is at pages 110-111. _ By

article VIII of that contract, rule 2 on page 110,

_there is a limitation of liability of the stevedore

in the case of goods damaged by his negligence. (Continued on page 82)

C2T46/l/JH	81	3/3/89
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MR RAYMENT (continuing):  The printed clauses talk of

$5000 for the total loss or destruction of a
container on page 111 but that was modified

by a later document which is an addendum at

pagesl02 to 103 and from page 103 it appears

that the sum was $10,000 for total loss or

destruction.

Your Honours, the trial judge so found at

page 133 and the president notes that it was

common ground in the Court of Appeal that that

was the sum subject only to one matter. He

notes that at 14R and the matter to which it

was subject was .a question of construction of

clause 8(3) which appears at page 173 of the
appeal book, those being arguments similar to
those already advanced.

We submit that clause 8(3) covers the case

for those reasons and we put a cost consequence
suggested in paragraph 4 of the written submissions.

May it please Your Honours, those are our submissions

MASON CJ:  Thank you, Mr Rayment. Yes, Mr Emmett.

MR EMMETT:	Might I deal briefly with the construction questions. I think, basically, we are at issue
in relation to those but my learned friend referred to clause 8(6) of the bill. If anything, that tends to confirm that 8(2) was not intended to be limited to the named carrier and this
might be what Your Honour Justice Guadron was
putting to me.

8(6) is concerned with an extension but

it makes clear that clause 8(2) might operate

to cover liabifity arising from negligence:

or wrongful act on the part of the Carrier

or any Carrier's employee -

(Continuing on page 83)

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:fR EMMETT (continuing):  So that although clause 8(2)

does not refer to carriers employee, clause n

makes it clear that clause 8(2) is intended to

cover that sort of question which would be

consistent with our submission that "carrier'l

in clause 8(2)(d) should not simply mean the

named carrier but includes all of the obligations

of the carrier in the way that I was putting before.

My learned friend also responded to Your Honour

Justice Deane's proposition and referred to clause 3

which we agree makes clear that the parties, on no

view, were intending to contract out of the Hague

Rules in so far as the Hague Rules apply, but in so far as one can get any assistance from the

language of clause 8(2) and clause 8(3) one would

assume that the structure was intended to be

consistent with the Hague Rules. Now, my friend's

initial answer was that clause 8(3)(a), in effect,

preserved the Hague Rules but, with respect, that

is not quite right because, as he subsequently said,

clause 8(3) is subject to clause 8(2). So just
looking at clauses 8(2) and 8(3) together, they
could have the operation~ if the construction of

clause 8(2)(d) is accepted they could have the

operation of excluding any liability which would be

imposed by the Hague Rules.

That follows from the structure of clause 8(3).

As I have said, it is first of all an exemption,

then an exception to the exemption, but even that is

subject to clause 8(2). So clause 8(3) is not

intended to give you any right at all if you are

excluded by clause 8(2). If I could deal then

with the general propositions. First of all, my

friend suggests that article VII of the Hague Rules

is inconsistent with the public policy which we

rely upon as stated by Mr Justice Stephen and

Mr Justice Murphy. All that article VII does is

to purport to say, "In so far as the Hague Rules

must apply to a certain extent to any carriage';

that is at least up to the time of discharge,

"the Hague Rules are not compulsorily applied to

the relationship of the carrier thereaftei'.

(Continued on page 84)

C2T48/l/HS	83	3/3/89
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MR Er1METT:	Now, as 8(7) does not create any rights, it simply says we are limiting the compulsory application of
the Hague Rules. They are set out in the appeal
book -that is the Hague Rules in so far as they
are applied to this contract -are set out in exhibit 3
which is pages 114 and following and article VII is on page 121. All it says is:

Nothing herein contained shall prevent

a carrier or a shipper from entering into

any agreement -

et cetera, limiting liability in respect of the -

handling of goods prior to the

loading on and subsequent to the

discharge.

So that is just a limitation on the compulsory

application of the rules and it does not purport to

create any rights and there is nothing wrong then in

Mr Justice Stephen saying, in the second half of that

paragraph that Your Honour the Chief Justice referred

me to, there is nothing inconsistent with international

agreement in effect extending the compulsory

application of the Hague Rules. And what

Mr Justice Stephen was saying, in effect, is that

there really ought to be a public policy in favour of

that, and as Your Honour the Chief Justice has

pointed out, that the tendency is towards extending

the compulsory operation of provisions such as the

Hague Rules.

There is no reason, of course, why the public

policy of Australia might be different from the public policy of some other country such that a provision that might be given effect to in some countries may not necessarily be given effect to in

Australia if Australia perceives such a provision as

being contrary to public policy.

In any event, public policy is something which

back to that page 121,article VI,which also speaks	is recognized by the Hague Rules themselves, going
about limitation of liability:

Notwithstanding the provisions of the preceding Articles a carrier, master ..... shall

in regard to any particular goods be at

liberty to enter into any agreement in any

terms as to the responsibility and liability

of the carrier for such goods, and as to the

rights and immunities ..... so far as this

stipulation is not contrary to public policy.

C2T49/l/BR	84	3/3/89
Nissho(2)

MR EMMETT (continuing):  So that the Hague Rules themselves

recognize that public policy must be taken into

account in the application of exemption provisions.

My friend suggested that this case was just a

question of apportionment of risk between insurers

and self-insurers and that really just means a

question of how it affects freight rates. That

really emphasizes the public policy that

Mr Justice Stephen is referring to. Where there

is a situation where one of two parties to the

contract has it within his or its power to take

care, then public policy would recognize, in so far

as this is a question of where the risk should lie,

that imposing the responsibility on the person who

could reduce the prospect of loss will ultimately

lead to the lessening of costs and charges.

I think what my friend was suggesting is that

by imposing the responsibility on the carrier, that

would result in higher freight rates. But it may

not because the question arises as to whether or not

insurance is going to be applied. If the carrier knows

that he has the responsibility, he is going to take

much more care and, therefore, with a view, in effect,

to limiting his liability or, alternatively, limiting

the insurance premiums that he might have to make.

So that by pushing the liability back on the person

who is capable of avoiding the damage then, ultimately,

public policy is served - the public policy that

Mr Justice Stephen is talking about; that is, the

cost of trade is served by more than likely reducing

the cost of freight than increasing it.

Going then to the first proposition we put,

that is, the main object of a bill of lading as

being delivery. That again is something which is

not, as I think my friend suggests, inconsistent

with the Hague Rules but is recognized by them

in. article III which is consistent with the notions

of delivery that this bill itself contemplates.

Page 117 of the appeal book - this is article III.

Rule 3 provides that:

(Continued on page 86)

C2T50/l/SH	85	3/3/89
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MR EMMETT (continuing):

the carrier ..... shall, on demand .....

issue to the shipper a bill of lading.

Then rule 6:

Unless notice of loss or damage and the general nature of such loss ..... be given

in writing ..... at the time of the removal

of the goods into the custody of the person

entitled to delivery thereof ..... such

removal shall be prima facie evidence of

the delivery by the carrier of the goods
as described in the bill of lading.

Then at the top of 118, the second paragraph: In any event the carrier ..... shall be

discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the
goods or the date when the goods should

have been delivered.

So the Hague Rules themselves recognize the
significance and importance of delivery as the

time at which the bill is accomplished or it

is exhausted and the carrier has discharged

his obligations. Reference was made to earlier

judgments of this Court in HISKENS and KEANE,

and also to the CHARTERED BANK case. Those

cases were concerned with a bill of lading in

language different from this bill. The bills

of lading in that case, as in SALMOND AND SPRAGGON,

were concerned with the language of the liability

of the carrier ceasing when the goods are free

from the ship's tackle. If one looks carefully

at what is said, for example in KEANE - sorry,

first of all, HISKENS, 18 CLR 680, perhaps going

back to the bottom of page 679. This is the

judgment of Mr Justice Gavan Duffy and

Mr Justice Rich,_ the terms of the bill of lading are set out:

(Continued on page 87)

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MR EMMETT (continuing):

"Received for shipment subject to the terms

conditions ..... and all liability of the

Company to cease as soon as the goods are

free from the ship's tackles". We think

that these provisions taken as a whole are

intended to specify the delivery which is

to be given by the carriers and accepted

by the owner of the goods, and that the

words

set out in quotation marks -

which in another context might be read as

not dealing with the nature of the delivery

to be made, but as providing for cesser

of liability even where there has been no

delivery, cannot be so read here.

So what Their Honours were dealing with was

language which simply said "What is meant by

delivery?", not a provision which purported

to exclude liability for non-delivery.but .simply

says, "This is the obligation which the carrier

accepts . 11 , and th a t becomes c 1 ear when one 1 o o ks

at what is said by the High Court subsequently

in KEANE's case. First of all, at 498 - this

is 41 CLR 7 at the bottom of the page,

Mr Justice Rich explains what he and

Mr Justice Gavan Duffy meant in that joint judgment.

Five or six lines from the bottom:

My brother Gavan Duffy and I pointed out in HISKENS' case that their purpose was

not to provide that although there was no

delivery liability should cease, but they
dealt with and determined the nature of

the delivery itself.

So that these two decisions, in effect, underlie

the notion that what they were dealing with
was delivery.	They were not speaking of a clause

which exempted liability for non-delivery but

simply clauses which purported to describe what

delivery entailed.and in that context they are

not inconsistent with the propositions which

we have advanced.

(Continuing on page 88)

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MR EMMETT (continuing): As I have said, the bill of lading

in tho&ecases was not the same as the bill of lading in this case, which has clause 19 that deals with the nature of the delivery obligation.

The bills involved in SALMON AND SPRAGGON did,

however, have the ship's tackle provisions. The

Privy Council, in 144 CLR 300, at 309, having referred to the decision in KEANE, Their Lordships go on to say, at the bottom of page 309, the last

paragraph - there is a reference to KEANE V

AUSTRALIAN STEAMSHIPS PTY LIMITED:

The bill of lading takes account of both

possibilities. The first sentence of cl 5,

quite consistently, provides that the

carrier's responsibility as a carrier

terminates as soon as the goods leave the

ship's tackle. But, since the carrier may

not have insisted that the consignee take
delivery at this point, the rest of cl 5

continues by recognizing that the carrier

may continue to have some responsibility

for the goods after discharge. He cannot

after all all dump them on the wharf

and leave them there. So to suppose would

be commercially unreal and is not

contemplated by the bill of lading.

The sort of language that we suggest is reminiscent

of what is said by Mr Justice Jacobs. The same

thing, in our submission, is to be found in what

this Court said in the same case,

PORT JACKSON STEVEDORING PTY LIMITED V SALMOND &

SPRAGGON (AUST) PTY LIMITED, (1978) 139 CLR 280,

in_ the judgment of Your Honour the Chief Justice

and Mr Justice Jacobs - the top of page 280.

(Continued on page 89)

C2T53/l/JH	88	3/3/89
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MR EMMETT (continuing):

We do not mean thereby that the operation

of the bill of lading is exhausted. Clearly

it is not. The exemption and limitation

provisions continue to operate according
to their terms. There remains the obligation
under the contract to deliver the goods in

exchange for a copy of the bill of lading.

Again, a recognition of that underlying obligation.
At 282, at the top of the page:

requiring the production and exchange of a copy of the bill of lading would be an act

The stevedore was the agent of the carrier
to deliver the goods to the consignee in

exchange for a copy of the bill of lading.

which, even though unauthorized by the

carrier, might create a vicarious liability

in the carrier. Further, it might be outside the immunity provisions of the bill of lading on the true construction of the latter.

Then, there is reference made to the SZE HAI TONG

BANK LTD V RAMBLER CYCLE CO LTD case. Those

provisions, in our submission, indicate that there
is express recognition in relation to bills of
lading of the importance of the obligation to
deliver and, unless one can find an express

exclusion of the obligation to deliver, then the

exoneration clause should have no effect.	May
it please Your Honours.

DEANE J:	Mr Emmett, am I correct that the matter has not
been approached either below or on your side on
the basis that the structure of the Hague Rules provides a context within which the last three lines of subclause (d) are to be construed by
reference to article IV(2)(q)?
MR EMMETT:	I think, so far as I am aware, that has not been

put. It was something my learned friend put. We

certainly have not approached it on that basis, no.

DEANE J:	If you look at clause (2), and I am not suggesting you
pursue this but it seems to be something that has not been approached. It is very easy to read (2)(a) as
relating to article VII which would mean (b), (c)
and (d) relate to what can be done during carriage.

C2T54/l/SH	89	3/3/89
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DEANE J (continuing): If you look at (d), it takes on

word for word article IV(2) which could have led

to some discussion that in that context (q) is

relevant to the last three lines and the last

three lines could be read, as it were, as a

summary of (q).

MR EMMETT:  That the last three lines of (d) could be

read as a summary of (q)?

DEANE J:  Yes. I was wondering where all those strange

phrases come from, and they come straight from the

Hague Rules in relation to the carriage at sea.

MR EMMETT:  The language, yes. I do not know

whether Your Honour is suggesting that maybe - - -

DEANE J:  I am not suggesting you develop it.

I iust want to be clear that it was not put that way.

MR EMMETT:  No, it has not been put on that basis, Your Honour.

I do not wish to say anything further, thank you,

Your Honour.

MASON CJ:  Thank you, Mr Emmett. The Court will

consider its decision in this matter and adjourn

until 10.15 am next Tuesday.

AT 2.49 PM THE MATTER WAS ADJOURNED SINE DIE

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