The CSCL Yantal carried a consignment of frozen seafood in a refrigerated container from Yokohama, Japan, to Melbourne, Australia, under a slot charter arrangement between ANL Singapore Pte Ltd (ANL) and China Shipping Container Lines (Hong Kong) Co Ltd.

ANL issued a bill of lading acknowledging the receipt of the goods in Yokohama in apparent good order and condition. The bill also provided for the application of the Hague-Visby Rules.

The plaintiff, Seafood Imports Pty Ltd, sued ANL for breach of duty and sought damages.

Held: Judgment for the plaintiff.

The acknowledgement that the goods were shipped on board 'in apparent good order and condition' only extended to the external condition of the container, and not to the cartons of seafood (Marbig Rexel Pty Ltd v ABC Containerline NV (The TNT Express) [1992] 2 Lloyd's Rep 636).

The frozen seafood suffered loss and damage. Primarily, the container was stuck in defrost mode well into the voyage, but further damage might also have occurred after discharge.

The damage to the goods was caused by ANL's breach of its obligation under art 3.2 of the Hague-Visby Rules to carry, keep, care for, and discharge the goods properly and carefully. ANL did not discharge the onus of proving that the damage was caused by a latent defect in the container not discoverable by due diligence (art 4.2.p).

Previously, a cargo owner only had to prove the contract of carriage and that the goods were delivered in a damaged condition or not delivered, and the burden shifted to the carrier to prove that the loss or damage had arisen from one of the matters specified in art 4.2 (see Gamlen Chemical Company (A/sia) Pty Ltd v Shipping Corp of India Ltd [1978] 2 NSWLR 12, 24 (Samuels JA), approved in Shipping Corp of India Ltd v Gamlen Chemical Company (A/sia) Pty Ltd (1980) 147 CLR 142, 168 (CMI723)). That position was rejected in Great China Metal Industries Co Ltd v Malaysian International Shipping Corp Berhad (The Bunga Seroja) (1998) 196 CLR 161, 171-172 (Gaudron, Gummow and Hayne JJ), 196-198 (McHugh J) (CMI1950).

The Full Court in CV Scheepvaartonderneming Ankergracht v Stemcor (A/sia) Pty Ltd (2007) 160 FCR 342, 361 (Ryan and Dowsett JJ) (CMI1946) adopted the approach in The Bunga Seroja:

the proper course is to identify negligence (usually a breach of art 3.2) before considering the availability of exceptions pursuant to art 4.2, and that the mere occurrence of loss or damage may not be sufficient to prove a breach of the former rule ...

The Judge followed the CV Scheepvaartonderneming Ankergracht methodology as decided by the Full Court.

Due to a lack of direct evidence, the Judge inferred from a body of circumstantial evidence what steps ANL took to discharge its duty under art 3.2. He found that the master and crew of the CSCL Yantal failed to exercise due diligence to carry, keep, and care for the goods in ANL's container properly and carefully. They departed from the accepted good practice of monitoring and inspecting the container and making proper records.

To test for ANL's liability, art 3.2 was more appropriate than art 3.1. Article 3.2 was not subject to the temporal limit introduced by the prefatory words of art 3.1 'before and at the beginning of the voyage'. Further, the prefatory words of art 3.2 'Subject to the provisions of Article IV' allowed ANL to invoke the 'latent defect' exception afforded by art 4.2.p.

If the duty imposed by art 3.1 obliged ANL to ensure that any refrigerated container supplied by it was not affected by incompatibility between the container's controller and the software with which it was fitted, the facts suggested a breach of the duty of seaworthiness to cast upon ANL the burden of proving due diligence under art 4.1. However, it was unnecessary to express a concluded view on this, because the facts of this case amply raised the inference that there was a breach of the art 3.2 duty.

The exception in 4.2.p was available to ANL if the cargo loss was caused by a latent defect in the container. A competent person using reasonable methods and ordinary care would find it impossible to discover such a defect (Minister of Materials v Wold SS Co [1952] 1 Lloyd's Rep 485). While it was likely that the container became stuck due to the incompatibility between the container's controller and its software, the immediate cause of the plaintiff's loss was the continuous running of the container in defrost mode for more than 77 hours. ANL's employees and agents could have conducted appropriate monitoring and inspection of the container and made proper records to detect and rectify such an event.

Historically, a latent defect was an exception to the implied warranty of seaworthiness, and related to defects in the vessel's hull, tackle, or machinery. In contrast, arts 4.2.m, 4.2.n, and 4.2.o 'apparently refer to inherent defect or vice and insufficiency of packing or marks of the goods' (Carver on Carriage By Sea (13th edn) 382). A footnote to the same passage also suggests: 'But art 4.2.p may include latent defects in other cargo or in shore tackle.'

In Pyrene Co Ld v Scindia Navigation Co [1954] 2 QB 402, 417 (CMI2100), Devlin J observed that '[t]he extent to which the carrier has to undertake the loading of the vessel may depend not only upon different systems of law but upon … the nature of the cargo'.

The observations on the duty properly and carefully to load can be paraphrased to apply with equal force to the corresponding duty to discharge.

The liability imposed on CSCL Yantal to discharge the goods properly and carefully extended to ensuring that the refrigerated container in which they had been carried did not have a propensity to become stuck in defrost mode while at the port terminal and before the goods could reasonably be expected to be removed from the container (cp timber cargo: Nikolay Malakov Shipping Co Ltd v SEAS Sapfor Ltd (1998) 44 NSWLR 371 (CMI2023)).