This was an action for damages arising from a shipment of a cargo of peat moss. As the cargo was being loaded into the Marina Di Alimuri, a bulkhead between two of the holds collapsed, causing 50% of the cargo in hold 1 to shift into hold 2. Due to this, the Canadian Coastguard would not permit the vessel to sail and the cargo had to be unloaded. The plaintiffs said the ship was unseaworthy and unfit for the voyage and that the defendants had failed to safely load and stow the cargo. In their counterclaim the defendants claimed damage to their ship due to the plaintiffs' breach of the contract of carriage by failing to inform them of the dangerous nature of the cargo.

Two of the plaintiffs (Perlite and Pemtex) were Quebec corporations, while Can-Flo (operating as Lantana Peat & Soil) was incorporated under the laws of Florida. Perlite was dormant; Pemtex had been incorporated to exploit a peat bog and ship the moss to Florida. Lantana's business was blending peat moss with soil for sale to golf courses and other customers. Formerly the peat had been shipped by truck. This was the first time that it was to have been carried by bulk tanker.

A charterparty was entered into between Italmare SpA as owners of the Marina Di Alimuri and Les Industries Perlite Inc. The principals of the plaintiffs had no expertise in the area of carriage of goods by sea but one of them guaranteed the shipbroker that the stowage factor of the peat moss would not exceed 55 cubic feet per metric ton. The cargo was described in the charterparty as 'bulk harmless humus'. The cargo was to be loaded 'free of risk and expense to the vessel'. There was heavy rain when the peat moss was being transported to the dock and during the loading process. The ship’s master had expected a cargo like sawdust but noticed that the cargo being loaded was 'absolutely wet'. He further observed that the cargo was not peaking, as would a grain cargo, but was flat. He became concerned that the cargo might shift. The master modified the stowage plan by loading the peat moss in alternate holds. This stowage plan was approved by the ship's owners but the bulkhead suddenly gave way as loading was in progress. The plaintiffs said their cargo became a total loss as the cargo was discharged onto a gravel surface and became contaminated. They could not charter another ship because of the lateness of the season.

Held: The action is dismissed.

Perlite and Lantana are bound by the terms and conditions of the charterparty dated 4 October 1988 by which Italmare (as shipowner) agreed to carry the peat moss cargo from Sept-Iles to Port Everglades, Florida.

The following clauses in the charterparty are relevant to the plaintiffs' claim:

2. Owners are to be responsible for loss of or damage to the goods or for delay in delivery of the goods only in case the loss, damage or delay has been caused by the improper or negligent stowage of the goods (unless stowage performed by shippers or their stevedores or servants) or by personal want of due diligence on the part of the Owners or their Manager to make the vessel in all respects seaworthy and to secure that she is properly manned, equipped and supplied or by the personal act or default of the Owners or their Manager.

And the Owners are responsible for no loss or damage or delay arising from any other cause whatsoever, even from the neglect or default of the Captain or crew or some other person employed by the Owners on board or ashore for whose acts they would, but for this clause, be responsible or from unseaworthiness of the vessel on loading or commencement of the voyage or at any time whatsoever.

Damage caused by contact with or leakage, smell or evaporation from other goods or by the inflammable or explosive nature of insufficient package of other goods not to be considered as caused by improper or negligent stowage, even if in fact so caused. ...

16. The cargo is to be loaded and trimmed, free of risk and expense to the vessel at the rate of 10,000 metric tons per weather working day Sundays and holidays included. ...

19. Any damage sustained by the vessel due to negligence of Stevedores must be duly substantiated by the Master and served in writing upon the Stevedores or Charterers or their Agents. Owners to endeavour to settle any claims for Stevedore damage directly with Stevedores failing which Charterers to remain ultimately responsible. ...

32. New Jason Clause, New Both-to-Blame Collision Clause, Chamber of Shipping War Risk Clauses 1 & 2, P & I Bunkering Clause, as attached hereto, to be considered as part of this Charter Party and are to be incorporated in all Bills of Lading issued under this Charter Party. Canadian/U.S. Clauses Paramount and General Clause Paramount (1982) (as applicable) as attached hereto, to also be incorporated in all Bills of Lading issued hereunder.

Pursuant to Clause 2 of the charter-party, the owner of the ship will only be liable for loss or damage to cargo where the loss or damage results from:

a) negligent or improper stowage, unless the stowage is performed by the charterer or its stevedores;

b) unseaworthiness due to the personal want of due diligence on the part of the owners or their managers to make the ship in all respects seaworthy;

c) the personal act or default of the owners or their managers.

There are no reasons (and none were submitted by counsel for the plaintiffs) for not giving effect to the clear language of cl 2. The meaning of a clause very similar to cl 2 of the Gencon form was examined by McNair J in Gesellschaft Burgerlichen Rechts v Stockholms Rederiaktiebolag Svea [1965] 2 Lloyd's Rep 546 (The Brabant), who held that the owners of the ship will only be liable (in addition to their liability for improper stowage), for loss of or damage to the plaintiffs' cargo if the loss or damage results from their personal want of due diligence in making the ship seaworthy or where the loss or damage to cargo results from a personal act or default on their part or on the part of their managers. The shipowners will incur no liability for any loss or damage to the cargo caused by the fault or negligence of their servants and agents, including the fault and negligence of their captain and crew. Put another way, the shipowners will not be held liable by reason of vicarious liability.

With respect to loss or damage arising from the unseaworthiness of the vessel the clause provides that the shipowners shall be liable if, by reason of personal want of due diligence, they fail to make the vessel seaworthy. The purpose of cl 2 of the Gencon charterparty is to relieve the shipowners from their absolute obligation to provide a seaworthy vessel.

The plaintiffs submitted that the effect of cl 32 of the charterparty was to incorporate the Canadian Carriage of Goods by Water Act RSC 1970 c C-15. In Anglo-Saxon Petroleum Co Ltd v Adamastos Shipping Co Ltd [1958] 1 Lloyd's Rep 73, the House of Lords decided that the Hague Rules had been incorporated into the charterparty by reason of cl 52 which provided: 'It is agreed that the . . . Paramount Clause . . . as attached, [is] to be incorporated into this charter-party.'

There is no clause equivalent to the above clause in the subject charterparty. Although clauses paramount are attached to the charterparty there is no provision stipulating that the clauses paramount are part of the charterparty except to the extent that cl 32 provides that the clauses paramount shall be incorporated in all bills of lading issued pursuant to the charterparty.

Consequently, the Hague Rules were not incorporated into the charterparty and the relationship between the charterers and the owners is governed by the terms and conditions of the charterparty only. Whether the shipowners are liable for the damages claimed against them will be determined on the basis of the terms and conditions of the contract of carriage.

The true cause of the bulkhead’s collapse was the powerful forces exerted by the cargo. Expert evidence provided that the cargo caused damage to the ship. The moisture content of the peat moss exceeded by far the transportable moisture limit. The master was not at fault in either accepting to load the plaintiffs’ peat moss cargo and in continuing to load the cargo in hold 1.

The plaintiffs cannot succeed in their action since the cause of their loss is the fact that their cargo exerted forces on the ship’s bulkhead which caused it to collapse. The plaintiffs' loss does not result from the ship's unseaworthiness. Consequently there is no need to discuss the issue of the owner’s personal want of due diligence to make the ship seaworthy in all respects. The plaintiff’s loss does not result from a personal act or default on the part of the owners or their managers.

Neither the plaintiffs nor the defendants were aware of the dangerous nature of the cargo. The general rule at common law is that the shipper impliedly warrants not to ship dangerous goods without first notifying the carrier of their particular and/or peculiar characteristics of which they are aware or deemed to be aware. Failure of the shipper to warn of the known dangerous propensities of the cargo will result in liability for damage. This liability for the damage arising out of 'dangerous cargo' is judged on a sliding scale wholly dependent on the knowledge or deemed knowledge of the carrier.

The Giannis NK [1994] 2 Lloyd's Rep 171 (CMI571), a case dealing with a cargo of non-physically dangerous goods, ie ground nuts, seems to address most of the issues that are relevant here, including what constitutes dangerous goods at common law. Longmore J held that the cargo shipped by the defendants was of a dangerous nature within the meaning of art 4.6 of the Hague Rules. The Judge then went on to discuss whether knowledge on the part of the shippers was a prerequisite to a finding of liability. Longmore J stated unequivocally, relying amongst others on Brass v Maitland (1856) 110 ER 940 (QB), that at common law the shippers' liability was absolute. At p 180 Longmore J stated that:

The Hague Rules impose a strict liability on the shipper for damages and expenses arising out of or resulting from the shipment of goods of a dangerous nature. The shipper cannot argue that he did not know and had no means of knowing that the goods were dangerous. As far as physically dangerous cargo is concerned at common law the shipper's liability is likewise strict.

Thus, even if the plaintiffs were not aware of the dangerous nature of their cargo, they must be held liable for the damages caused to the ship.