In September and October 1999, a cargo of African round logs from three West African ports was shipped to Tuticorin, India, on board Ever Lucky Shipping Co Ltd's (the respondent's) vessel, a bulk log carrier. A total of 2,212 logs were loaded and 21 bills of lading were issued. Most of the cargo was stowed in the holds. However, 430 logs were stowed on deck and this was noted in the relevant bills of lading. The appellants, Sunlight Mercantile Pte Ltd and Liberty Citystate Insurance Pte Ltd, were the owners of the deck cargo.

The vessel suffered multiple problems during the voyage including an explosion in its main engine crankcase. After the explosion, the engine could not be operated, and the vessel lay adrift in the ocean. The vessel was eventually towed to its port of discharge.

The respondent insisted that the cargo owners were obliged to contribute to general average, alleging that of the total general average expenditure of USD 910,288.78, the amount of USD 746,967.18 was attributable to cargo interests.

The appellants asserted that, as the respondent had failed to ensure that the vessel was seaworthy before and at the beginning of the voyage, the question of a contribution did not arise.

The trial Judge considered Rule D of the York-Antwerp Rules (see Ever Lucky Shipping Co Ltd v Sunlight Mercantile Pte Ltd [2003] SGHC 80 (CMI934)). She held that the meaning of the term 'fault' in Rule D of the York-Antwerp Rules referred to an actionable fault (following Goulandris Brothers Ltd v B Goldman & Sons Ltd [1958] 1 QB 74).

To decide whether or not there was an actionable fault in this case, much depended on whether or not the vessel was seaworthy at the commencement of the voyage, and on the effect of the exceptions in the relevant bills of lading. As the appellants' case concerned deck cargo, it was outside the scope of the Hague-Visby rules.

The trial Judge found that the vessel was unseaworthy when it left Port Gentil for its contractual voyage because of defects in its main engine. This breach of the absolute undertaking of seaworthiness by the respondent amounted to an actionable fault that would deprive the respondent of a general average contribution from the appellants unless there was an exception in the contract of carriage that altered the position.

In this regard, the trial Judge found that the words 'howsoever arising' in the first batch of bills of lading and 'howsoever caused' in the second batch of bills of lading were wide enough to absolve the respondent from liability for unseaworthiness. As such, there was no actionable fault by the respondent, and the appellants were obliged to contribute their share of the general average expenses.

The appellants appealed against the trial Judge’s decision.

Held: The appeal would be allowed. As the vessel was unseaworthy when it commenced its contractual voyage, and as the exceptions in the bills of lading for the deck cargo could not be relied on to absolve the owners of liability, there was an actionable fault on the part of the respondent. As such, the appellants were not obliged to contribute in general average. The Court reasoned in detail as follows:

As the contract of carriage for the appellants’ deck cargo was outside the ambit of the Hague-Visby rules, it had to be borne in mind that at common law, a shipowner had an absolute obligation to send its ship out to sea in a seaworthy state at the commencement of the agreed voyage.

It was also well established that an exception that was intended to relieve a shipowner from the consequences of the unseaworthiness of the vessel at the commencement of the voyage had to be 'express, pertinent and apposite' (per Bingham J in Sleigh v Tyser [1900] 2 QB 333, 337). Innumerable cases had shown how difficult it was to frame an exception that would be applicable in cases of unseaworthiness.

The Court had regard to how The Makedonia [1962] 1 Lloyd’s Rep 316 was one of the rare cases where an exception was applicable even though the loss was caused by unseaworthiness. The exception in question provided 'The carrier shall not under any circumstances of any kind whatsoever be liable for any loss of or damage or delay … whether or not the above-named vessel … was unseaworthy … '. In contrast, in most other cases, less exhaustively worded exceptions have proved ineffective where the loss was caused by unseaworthiness.

Contrary to the respondent's submissions, the Court declined to follow the Imvros [1999] 1 Lloyd’s Rep 848 on the basis that it had been criticised, and rightly so, because it was out of line with the authorities. The Court was of the view that insufficient attention had been given in that case to a shipowner's implied duty under common law to provide a seaworthy ship at the commencement of the voyage.

As for the words 'at shipper's risk' in the bills of the lading in the present case, the Court approved The Galileo [1914] P 9, a decision of the English Court of Appeal, in which it was held that the words 'at shipper's risk' were clearly referable to risks other than breach of the fundamental obligation of the shipowner to provide a seaworthy ship.

As for the words 'however caused' or words of similar effect, the Court held they were insufficient to exclude liability for unseaworthiness. In arriving at this conclusion, the Court had regard to Steel v State Line SS Co [1877] 3 App Case 72 in which the House of Lords held that an express exception against negligence did not cover loss due to unseaworthiness. The Court held that the approach of the House of Lords should apply with even more force where the exceptions, such as those in the present case, did not specifically refer to negligence.

Having decided the matter for the reasons set out above, the Court went on to make the following obiter comments:

In circumstances where the Hague Rules apply, carriers may rely on art 4.5 of the Hague Rules to limit their liability even where loss has been caused by unseaworthiness (per the English Court of Appeal in The Kapitan Petko Voivoda [2003] 2 Lloyd’s Rep 1). The Court agreed with Longmore LJ that the most natural meaning of the words 'in any event' in art 4.5 was 'in every case', and art 4.5 could be relied upon by a carrier where unseaworthiness caused loss of cargo.

However, it ought to be borne in mind that a provision that seeks to limit liability is different in character from an exception (The Happy Ranger [2002] 2 Lloyds Rep 357, 364 approved). This is why under the Hague and Hague-Visby Rules the exceptions in art 4.2 cannot be relied upon where unseaworthiness has caused loss because art 3.1 of the Rules, which requires a carrier to exercise due diligence to have made the ship seaworthy before and at the beginning of the voyage, creates an overriding obligation (Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd [1959] AC 589 approved).