Court of Appeal, Malaysia

Aziah Ali JCA, Anantham Kasinather JCA, Umi Kalthum JCA

21 February 2014

KEYWORDS

Bill of Lading – Dangerous Goods – Carried on Deck at Shipper’s Risk – Art. IV(6) Hague Rules – Art. III(2) Hague Rules – Bailment – Negligence

FACTS

A cargo of agrochemicals was shipped from Penang (in Malaysia) to Miri (in Sarawak, Malaysia) under a clean bill of lading and carried on deck. The bill of lading stated that the cargo was shipped on deck at shipper’s risk. The shipper had declared them to be dangerous cargo within the knowledge of the shipowner. The shipowner charged an extra fee for carrying the ‘dangerous’ cargo.

During the voyage, the cargo caught fire and an explosion happened, resulting in the ship sinking with total loss of the cargo.

The shipper sued the shipowner for the loss in negligence and bailment. At the trial before the High Court, neither the master nor the chief officer gave evidence.

The High Court dismissed the claim, hence appeal by the shipper against the shipowner.

HELD (BY COURT OF APPEAL – UNANIMOUSLY)

1. The shipowner was liable for the loss.

2. Appeal allowed, with costs here and below of RM130,000.

OBSERVATION

This judgement must be read with extreme caution. There were many shortfalls. First, the court relied on Hague Rules Art. IV(6) obligations of shipper when shipping dangerous cargo. This is more commonly invoked as a defence for the shipowner when the shipowner has landed destroyed or rendered innocuous before discharge by reason of danger exposed by the cargo. Second, the Hague Rules (made part of Malaysian law by s. 2 of the Carriage of Goods by Sea Act 1950) did not apply because the cargo was stated in the bill to be carried on deck and was accordingly carried (Art. 1(c)). Third, the court commented that the bill issued was a clean one in suggesting that the shipowner must in be liable. Clean bill or claused bill is not about dangerous cargo, but about defects in condition or order of cargo. Fourth, the court asked in its central focus asked a question whether the cargo shipped was ‘fundamentally different’ from that contracted. This line of question is not based on precedents. Fifth, the court did not take the right direction by asking the question whether the shipowner breached its duties as a bailee that can include duty to carry properly adopting a system appropriate to carry the cargo based on the information available to the shipowner.

Despite that, the net result arrived at may be sustainable because the shipowner did not call the master or chief officer to discharge the burden on it to prove that it was not negligent in the carriage (which may include a burden to prove that it deployed the proper system in the carriage of this dangerous cargo and also a duty to ask the shipper questions to satisfy itself of any special requirement when needed).

Overview by ARUN KASI