In 1998, the car carrier Eurasian Dream suffered a fire. The vessel and its cargo were damaged. The cargo interests (the claimants) sued the carriers. The parties agreed that the first defendant, Hyundai Merchant Marine Co Ltd (Hyundai), a sub-sub-charterer of the vessel, was to be treated as the carrier. The parties accepted that the bill of lading contracts incorporated either the Hague Rules or the Hague-Visby Rules (the Rules).

The claimants alleged that the vessel was unseaworthy, the crew were incompetent, and that the vessel's technical managers, Univan Ship Management (Univan) had failed to exercise due diligence. The claimants argued that Hyundai was in breach of its obligations under art 3.1 of the Rules. As to the alternative case under art 3.2, the claimants argued that the evidence demonstrated the fault or privity of Univan for the purposes of the fire exception under art 4.2.b. The claimants alleged that the crew's fault was directly attributable to the negligence/incompetence of Univan. Hyundai disputed those allegations. Issues on quantum, package limitation, and the relevant legal principles were largely agreed.

Held: Judgment for the claimants.

The claimants have proved that the vessel was unseaworthy before and at the beginning of the voyage in the following respects: equipment, crew competency, and documentation onboard. A reasonably prudent owner, knowing the relevant facts, would not have allowed the vessel to put to sea with the master and crew, with their state of knowledge, training and instruction. The damage was caused by the unseaworthiness of the vessel. The defendants have failed to prove that they and those for whom they are responsible exercised due diligence to make the vessel seaworthy. The defendants are liable. It is unnecessary to consider the claimants' alternative case under art 3.2.

The Court made the following findings of fact. First, during discharge operations, refuelling and vehicle jump-starting operations were undertaken concurrently in the same area by stevedores. The crew did not supervise the stevedores properly and did not prevent this. The master did not instruct the crew to do so because Univan gave no such instructions. The fire started after fuel was poured into a carburettor of a vehicle that would not start. Such refuelling was contrary to the Hyundai Pure Car (Truck) Carrier Operation Manual, which was not on the vessel. Second, the crew did not have enough radios for communications. Third, the fire extinguishers on the vessel were not properly serviced. Some were defective. Fourth, the master and crew were not properly instructed, trained, and drilled for a speedy fire response and were ignorant to the hazards of vehicular carriage. Had the vessel been in a suitable condition, suitably crewed and equipped, the fire could have been prevented from spreading to other parts of the vessel. The fire was initially small, yet nobody used a fire extinguisher. Fifth, the vessel lacked a fire prevention manual, but had a large amount of irrelevant or obsolete documentation which was not digestible. The master was not directed to read the relevant part of manuals dealing with emergency procedures. Pursuant to SOLAS, fire-fighting instructions should have been concentrated in one concise manual, catering specifically for the vessel. The master had no such manual. Univan should have provided the vessel with clear checklists in the event of fire. Overall, the Court doubted the defendants' evidence, witnesses, and expert witness, but found the claimants' expert witness to be impressive.

The Court discussed the Rules in some detail. The differences between the two sets of Rules did not affect liability. Articles 3.1, 3.2, 4.1, and 4.2.b of the Rules are material.

Under art 3.1, the claimants must prove that the vessel was unseaworthy before and at the beginning of the voyage. The claimants must then prove that the loss or damage was caused by that unseaworthiness: The Europa [1908] P 84 (Div Ct) 97-98. If this is done, then the burden passes to the defendants to prove that they, and those for whom they are responsible, exercised due diligence to make the ship seaworthy in the relevant respects: The Toledo [1995] 1 Lloyd's Rep 40, 50. If the defendants fail to do so, the defendants are not entitled to rely upon the art 4.2 exceptions. If the defendants are able to do so, they can rely upon the 'fire' exception as a defence to breach of art 3.2, unless the claimants proves that the loss or damage was 'caused by the actual fault or privity of the carrier': art 4.2.b; The Apostolis [1996] 1 Lloyd's Rep 475 (QBD) 483; Stewart C Boyd, Andrew S Burrows, David Foxton, Scrutton on Charterparties and Bills of Lading (20th edn, Sweet & Maxwell 1996) (Scrutton) 444.

In relation to due diligence, proof of unseaworthiness fulfils the same function as res ipsa loquitur does in ordinary cases of negligence: Union of India v NV Reederij Amsterdam (The Amstelslot) [1963] 2 Lloyd's Rep 223 (HL) (The Amstelslot) 235; Eridania SpA v Rudolf A Oetker (The Fjord Wind) [2000] 2 Lloyd's Rep 191 (CA) (The Fjord Wind (CA)) 205. In practical terms, the reasoning is 'a ship should not be unseaworthy if proper care is taken': The Fjord Wind (CA) 205.

The absolute duty at common law to provide a seaworthy ship is displaced by art 3.1, which requires the carrier to exercise due diligence to provide a seaworthy ship 'before and at the beginning of the voyage': Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd [1959] AC 589 (PC) (Maxine Footwear) (CMI2293). This is an 'overriding obligation' (Maxine Footwear 603).

The classic definition of seaworthiness is contained in FC Bradley & Sons Ltd v Federal Steam Navigation Co (1926) 24 Ll L Rep 446 (CA) 454:

The ship must have that degree of fitness which an ordinary careful owner would require [its] vessel to have at the commencement of [the] voyage having regard to all the probable circumstances of it. Would a prudent owner have required that it (sc the defect) be made good before sending [its] ship to sea, had [the owner] known of it?

Seaworthiness is not an absolute concept; it is relative to the nature of the ship, to the particular voyage and even to the particular stage of the voyage on which the ship is engaged: The Fjord Wind [1999] 1 Lloyd's Rep 307, 315; appd The Fjord Wind (CA) 197. Seaworthiness must be judged by the standards and practices of the industry at the relevant time, at least so long as those standards and practices are reasonable. The components of the duty are as follows: first, the vessel must be in a suitable condition and suitably manned and equipped to meet the ordinary perils likely to be encountered while performing the services required of it. This aspect of the duty relates to the following matters: (1) physical condition of the vessel and its equipment; (2) competence/efficiency of the master and crew; (3) adequacy of stores and documentation. Second, the vessel must be cargoworthy, in the sense that it is in a fit state to receive the specified cargo.

As to the competence or efficiency of the master and crew, incompetence or inefficiency may consist of a 'disabling want of skill' or a 'disabling want of knowledge' (Standard Oil Co v Clan Line Steamers Ltd [1924] AC 100 (HL) (Standard Oil) 120-121). The incompetent master is (Standard Oil 120-121):

unfit and unqualified to command, and therefore makes the ship he commands unseaworthy. And the owner who withholds from the master the necessary information should […] be as responsible for the result of the master's ignorance as if he deprived the latter of the general skill and efficiency he presumably possessed.

Incompetence or inefficiency is a question of fact, which may be proved from one incident and need not be demonstrated by reference to a series of acts: Manifest Shipping & Co Ltd v Uni-Polaris Insurance Co Ltd (The Star Sea) [1997] 1 Lloyd's Rep 360 (CA) 373-374 (The Star Sea (CA)). However, one mistake (or more) does not necessarily establish incompetence: The Star Sea (CA) 374.

Incompetence is to be distinguished from negligence and may derive from: (a) an inherent lack of ability; (b) a lack of adequate training or instruction: eg lack of adequate firefighting training (The Star Sea (CA)); (c) a lack of knowledge about a particular vessel and/or its systems: Standard Oil; Robin Hood Flour Mills Ltd v NM Paterson & Sons Ltd (The Farrandoc) [1967] 2 Lloyd's Rep 276 (The Farrandoc); The Star Sea (CA) (operation of the carbon dioxide fire-fighting system); (d) a disinclination to perform the job properly (The Makedonia [1962] 1 Lloyd's Rep 316 (PDA) 335 (CMI2749) (The Makedonia); (e) physical or mental disability or incapacity (eg drunkenness, illness) (Moore v Lunn (1923) 15 Ll L Rep 155 (CA); Rio Tinto Co Ltd v Seed Shipping Co Ltd (1926) 24 Ll L Rep 316 (KBD)).

The test as to whether the incompetence or inefficiency of the master and crew has rendered the vessel unseaworthy is: would a reasonably prudent owner, knowing the relevant facts, have allowed this vessel to put to sea with this Master and crew, with their state of knowledge, training and instruction? (Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (Hongkong Fir) [1962] 2 QB 26 (QBD) 34)

As to causation, unseaworthiness must be 'a cause or, if it is preferred, a real or effective or actual cause' and 'unseaworthiness ... must … always be only one of several co-operating causes.' (Smith, Hogg & Co Ltd v Black Sea and Baltic General Insurance Co Ltd [1940] AC 997 (HL) 1005). If a fire is not caused by unseaworthiness in that its origin is unrelated to unseaworthiness, but it spreads in a way that it would not have done because the vessel is unseaworthy, then the carrier is liable for the loss caused or aggravated by the unseaworthiness, unless it exercised due diligence.

The duty of 'due diligence' is an 'inescapable personal obligation' (Scrutton 429); it is non-delegable. The carrier is responsible for negligence of those to whom it delegates due diligence. The question is whether unseaworthiness is due to any lack of diligence in those who have been implicated by the carrier in the work of keeping or making the vessel seaworthy. Such persons are the carriers's agents whose diligence or lack of it is attributable to the carrier: Riverstone Meat Co Pty Ltd v Lancashire Shipping Co Ltd (The Muncaster Castle) [1961] AC 807 (HL) (CMI2131) 843-844, 862. This principle is relevant in two respects: (1) the carrier under the bills of lading is liable for the want of due diligence by the owners or managers (The Fjord Wind [1999] 1 Lloyd's Rep 307, 315; Guenter Treitel, FMB Reynolds, Carver on Bills of Lading (1st edn, Sweet & Maxwell 2001) (Carver) para 9-125); (2) the carrier is liable for the want of due diligence of the master in so far as the carrier or the owners or managers have delegated to the master their duties as to seaworthiness.

The exercise of due diligence is equivalent to the exercise of reasonable care and skill. 'Lack of due diligence is negligence': The Amstelslot 235. See also Scrutton 429. It is relevant to consider 'what other skilled [persons] do in comparable circumstances' (The Amstelslot 230). General practice is relevant but not conclusive; it is inexcusable that everyone else was negligent too: Morris v West Hartlepool Steam Navigation Co Ltd [1954] 2 Lloyd's Rep 507 (CA) 510. Next, the 'fact that with hindsight it is possible to see that extra precautions could have been taken does not necessarily mean that due diligence was not exercised' (Carver para 9-123). The question is 'whether a reasonable [person] in the shoes of the defendant, with the skill and knowledge which the defendant had or ought to have had, would have taken those extra precautions': The Amstelslot 230.

If the vessel is found to have been unseaworthy due to the incompetence or inefficiency of the master or crew, the carrier must show that it has exercised proper care in relation to the following: (1) the appointment of a competent master/crew 'suitable … for the post' (Moore v Lunn (1922) 11 Ll L Rep 86 (KBD) 93; see also The Makedonia 337-338; Scrutton 430); and (2) the specific competence of the master in relation to the vessel and voyage in question. Certificates of competence are insufficient: The Farrandoc; Scrutton 430. The owners/managers must provide the master/crew with reasonably necessary specific instruction and supervision, on an ongoing basis, in relation to the vessel and voyage(s). See also Standard Oil; The Makedonia 338. As for supervision, that includes 'regular or random checks by marine superintendents' when ships are in port, where 'chart rooms and their contents' are to be inspected: Grand Champion Tankers Ltd v Norpipe A/S (The Marion) [1984] AC 563 (HL) (The Marion) 575.

By analogy with the approach to owners' or managers' 'fault' in the context of limitation actions, it is impermissible, in the exercise of due diligence, 'for owners or managers to wash their hands ... of all questions ... or to leave everything to the unassisted discretion of their masters' (Rederij Erven H Groen v The England [1973] 1 Lloyd's Rep 373 (CA) 383; appd The Marion 577).

As for art 3.2, the obligation is to carry and care for the goods 'properly and carefully'. This rule imposes a duty to adopt a sound system (Albacora SRL v Westcott & Laurance Line Ltd [1966] 2 Lloyd's Rep 53 (HL)) and to exercise reasonable care in its operation.

As for the art 4.2 exceptions, these are inapplicable where the carrier breached the 'overriding obligation' to provide a seaworthy ship under art 3.1 and that breach is causative of the loss/damage: Maxine Footwear; Standard Oil; Scrutton 444.