INTERNATIONAL CARRIAGE OF GOODS

→ BY SEA

This is usually when the dispute is between a seller/buyer and a carrier, so when something goes wrong during the
transport. Who will want money here? → the buyer usually from the carrier potentially – since seller does not care
anymore.

1. Does the Carriage of Goods by Sea Act apply?

Intro: In order to determine which legal principles, apply to a dispute between [buyer/seller] and [carrier], it
should be ascertained whether the Carriage of Goods by Sea Act applies, which contains the modified Hague-
Visby Rules. The Rules will apply to a sea carriage document relating to carriage of goods from any place in
Australia to any place outside the country.1 However, since this is an inbound transaction, the Rules will apply
only if the agreement does not stipulate that the 1924 unamended Hague Rules, the Hague-Visby Rules, or the
Hamburg Rules apply.2 In this case, the contract of carriage stipulates that the law of Victoria governs the
contract, so the Act, and the modified Hague-Visby Rules, apply. The Rules apply to goods, wears, merchandise
and articles of any kind whatsoever except live animals and cargo which by the contract of carriage is stated as
being carried on deck and is so carried.3 Here, the goods do not fall within the stated exceptions. Although [buyer]
is not privy to the contract of carriage between [seller] and [carrier], s 92 of the Goods Act 1958 (Vic) affords
[buyer] a statutory right of action if he/she is in possession of the bill of lading.

• Is this about carriage of goods from any place in Australia to any place outside of this country? →
o Section 11(1) – Australian rules will apply with mandatory force to a sea carriage document
involving carriage from any place in Australia to a place outside.
▪ Sea carriage document defined in art 1(1)(g) of the modified rules as including a bill of
lading and seaway bill.
o Hence the Australian rules apply to any outbound carriage contract.
o Note that if the litigation happens outside of Australia – then s11(1) will not apply.
▪ Is it an inbound shipment: The only time when s11 will apply is if it is inbound is if they
choose Australian law as the law. Can have other laws apply if it is inbound.
▪ S10 – Australian modified rules will apply unless one of the three regimes in the statute
have been chose instead → usually autonomy would be given preference.

2. Is there a bill of lading? – contract of carriage per article 1(b)

• Function of a bill of lading:
a. Receipt: It is a receipt for goods to be shipped. Evidence of what is shipped, seller will give bill of
lading to carrier, carrier will make a notification on (endorsing it) it and hand it back. Then it is
given to the buyer who uses it to get the goods and can be used for conformity reasons.
b. Evidence of contract of carriage: In most cases it is also the contract.
c. Document of title: You can pass title through endorsing the bill of lading. S92 of the Act – rights
in a contract of carriage are transferred to the buyer so that he/she can sue, otherwise no privity.

3. Are the goods excepted goods so this Act and the rules do not apply?
• Are the goods live animals and cargo on deck? → Art1(c) – "Goods" includes goods, wares, merchandise,
and articles of every kind whatsoever except live animals and cargo which by the contract of carriage is stated
as being carried on deck and is so carried.

4. Does the carrier have liability?

• If so, then an issue because there is usually no contractual relationship between a buyer and a seller and the
buyer has no statutory right against the carrier for carrying the goods safely. – but s92 of the Act gives the
buyer privity
• How does the carrier have liability → Bill of lading is evidence in working out liability, the carrier endorses
the bill of lading so it cannot deny that the goods were in good condition or shipped and this creates an
estoppel in the carrier – art 3(4) of the Hague Visby Rules

1 Carriage of Goods by Sea Act, s 11(1)(a).

2 Carriage of Goods by Sea Act, s 10.
3 Modified Hague-Visby Rules, art 1(c).
 o See section 96(2) of the Goods Act (Vic) – bill of lading is conclusive evidence as against a carrier
in favour of the lawful holder of the bill.
• Duration of liability →In Australia (adopted the Hamburg rules here) article 1 rule 3 – increases the time
during which a carrier is potentially liable to the time from when the goods are delivered to the carrier (within
limits of the port or wharf) and when the goods are delivered to the consignee within the limits of the port
or wharf at the destination.
(Hague Visy Rules – many other countries – usually for the carriage of goods which is according to art 1(e)
is the period from the time when the goods are loaded on to the time they are discharged from the ship.
• Is this a clean bill of lading or not?
o If there is a notion – then it may be a clause bill – art 3(3) Hague Visby Rules → this is how you
can say there was an issue as the carrier. Carriers rarely do this because the payment system relies
on there being a clean bill of lading.
• How far does the liability of a carrier extend and can they sue the seller?
o Limited liability: Art 3(5) of the Hague Visby Rules provides that carrier is indemnified by the seller
against any loss or damage caused by inaccurate description. So the carrier can hold the seller liable
for any faulty or problematic (false) description.
• Is there any oral agreement that can be relied on? → if so, analogise with SS Arden
o SS Arden Case: There may be additional terms apart from what is included in the bill of lading.
Facts: Contract of carriage of oranges, exporter (seller) suffers a loss when the carrier of the oranges
stops in Belgium on the way to UK instead of going straight there. The market price dropped in
between. There was an oral agreement between the parties before the bill of lading was signed. On
this analysis the stope was a breach, the carrier argued that the bill of lading was the whole contract
but there can be extraneous oral agreement before signing.

5. Duties of the carrier – determine if any of these have been breached: → Article 3
• The carrier has a duty to: make the ship seaworthy, man it and supply it and have appropriate storage as well
as carefully load and store the goods:

I) Has the carrier breached the duty to make the ship seaworthy (art 3(1)(a))?
Approach it: is the ship unseaworthy? If so, has the due diligence been met?
Intro: [X] may argue that [carrier] breached art 3, rule 1 of the modified Hague-Visby Rules. This rule
provides that a carrier, before and at the beginning of the voyage, must exercise due diligence to [make the ship
seaworthy/properly man, equip and supply the ship/make the holds, refrigerating and cool chambers, and
all other parts of the ship are fit and safe for their reception, carriage and preservation] (Modified Hague-
Visby Rules, art 3, rule 1). [X] must establish that the vessel was unseaworthy. To be seaworthy, the vessel
must be fit to encounter the perils of the voyage and to carry the cargo safely. Seaworthiness is to be
judged by the particular vessel and voyage (The Great China Case). In this case, the vessel was ill-equipped
to handle the conditions… The burden then shifts to [carrier] to establish that it took all reasonable steps
in due diligence to ensure that the vessel was seaworthy before commencing the voyage (Good Friend
Case). In this case, …

o What is this duty: This is a duty of due diligence - The carrier must before and at the beginning of
the voyage exercise due diligence to make the ship seaworthy. If the carrier fails in this duty, then
it is liable for all loss and damage to the goods
▪ Great China Case – Made it clear that no absolute obligation on the carrier to make sure
that the cargo arrives safely. Seaworthiness is a relative test, it will be applied according
to the particular ship, voyage and cargo and the conditions which were expected to be
encountered. No general or absolute standards.
o Duration of the duty: This duty only applies up until the commencement of the voyage so no
conduct after the voyage has started is relevant.
o What is ‘seaworthy’: The ship is capable of handling the perils of the sea and more specifically it is
capable of carrying the specified cargo in the contract.
▪ Good Friend Case – The holds of the vessel became infested with insects which rendered
soybean cargo useless, the insects had intruded into the cargo before the ship left the
port – hence it was clear that the ship was unseaworthy.
o Did the carrier take all reasonable steps to ensure that the ship was seaworthy before commencing
voyage? (Good Friend Case)
→ Lack of reasonable care would probably show lack of due diligence.
▪ The court may consider industry practice to determine what is reasonable. (Stemcore)
▪ Stemcore Case – Steel coils transported from Japan to Australia, they got here rusted. The
court defined as unseaworthy – ship not being able to reach its destination safely or
 unable to carry the cargo safely. They looked to industry practice – there was a moisture
removing mechanism. Not a breach of due diligence.
If there is a breach of art 3 r1: Since [carrier] has breached this rule, it will not have recourse to the defences in art 4
of the Rules.

II) Properly man, equip and supply the ship (art 3(1)(b))

III) Make the holds, refrigeration and cool chambers and all other parts of the ship in which goods are
carried fit and safe for their reception, carriage and preservation. (art 3(1)(c)).

IV) Has the carrier failed to exercise due care (art 3 (rule 2)):
Intro: [X] may argue that [carrier] has breached art 3, rule 2 of the modified Hague-Visby Rules. This rule
provides that, ‘subject to the provisions of article 4, a carrier must properly and carefully load, handle, stow,
care for, and discharge the goods’. In the Albacora case, a presumption was established that where a carrier
signed a clean bill of lading, and the goods arrived in a damaged state, then the carrier would be prima facie
liable for the loss or damage. However, Australian courts have overturned this view (Great China case).
Now, loss or damage is merely one piece of evidence to be considered in whether a carrier will be liable for
loss or damage to goods.4 The general test to be applied is whether the carrier acted carefully and in
accordance with a sound system for proper care of the goods where it is well known in the industry that
certain factors will damage the cargo.5 In this case, …
• Article III r2 is not subject to the temporal limit introduced by the prefatory words “before and at the beginning
of the voyage”. (Seafood case)
• Case history:
▪ Albacora case – House of Lords - where a carrier signs a clean bill of lading and goods arrive
damaged or they do not arrive at all, then there is a prima facie breach of art 3 rule 2 – presumption
created, now the carrier must show that one of the defences in article 4 is satisfied.
▪ Great China Case – Albacora rejected – HCA, said that art 3 r 2 does not create a presumption. This
is a negligence standard, if there is damage or loss it is just one piece of evidence.
- Responses to Great China:
❖ Stemcore case – Art 3 r 2 also considered, the vessel was adequate but there was a breach
of duty of care standard – the carrier by using the ventilation system – reasonable
carrier would have known this could cause corrosion and fell below industry standard.
Albecora nod here. carrier had ventilated the cargo during the voyage, which
introduced water vapour into the hulls and effect corrosion of the steel coils; carrier
did not foresee that the use of ventilation would lead to corrosion by condensation;
court concluded that use of ventilation was not a sound system for proper care of
the goods because it was well known in the industry that such cargo was susceptible
to damage by condensation → [91] Article 3 r 2 required that the Carriers act carefully
and in accordance with a sound system to prevent condensation, given that it was
well-known that steel cargoes were susceptible to damage as a result of contact with
condensation (Rares J).
❖ Hilditch Case: carrier refused to give evidence at all; FC concluded that on the balance
of probabilities, the carrier was negligent (even though it was entitled to refuse to give
evidence)
❖ Seafood Imports Pty Ltd v ANL Singapore Pte Ltd: refrigeration unit malfunctioned due
to software problems causing deterioration of frozen seafood being shipped from
Japan to Melbourne; court found that the carrier was negligent by not properly
monitoring the software
❖ Tasman Orient: The lying and hiding the crash – was breach of 3 r 2.

• Workings now: The focus of the court in Great China is to show negligence of the carrier. The focus is therefore
to establish negligence at the ship en route which is difficult from an evidentiary perspective. Hence art 4 is
essentially redundant. However the Federal Court has evinced a dislike of this approach and are mindful of the
evidentiary standards which are very onerous for plaintiffs. There appears to be a trend in the judiciary to be
lenient.
(note that if it were under Hamburg – then the carrier is presumed to be liable for all damage to goods in its
care unless it can show reasonable steps take required to protect the goods).

4 Great China Metal Industries Co Ltd v Malaysian International Shipping Co Bhd (1989) 196 CLR 161.
5 Stemcor at [91] per Rares J.
 6. Do any defences apply to the carrier? (art 4)
Intro: [Carrier] may argue that one of the defences in art 4 of the Rules applies. If a defence in art 4 is to be
satisfied, it must be the sole cause of the loss or damage.6 [Carrier] may argue that it should not be liable for
the loss or damage since it was due to negligence by the carrier in the navigation or management of the ship. 7

Article 4 – rule 2: Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from--
(a) Act, neglect or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship.
(b) Fire, unless caused by the actual fault or privity of the carrier.
(c) Perils, dangers and accidents of the sea or other navigable waters.
(d) Act of God.
(e) Act of war.
(f) Act of public enemies.
(g) Arrest or restraint of princes, rulers or people, or seizure under legal process.
(h) Quarantine restrictions.
(i) Act or omission of the shipper or owner of the goods, his agent or representative.
(j) Strikes or lock-outs or stoppage or restraint of labour from whatever cause, whether partial or general.
(k) Riots and civil commotions.
(l) Saving or attempting to save life or property at sea.
(m) Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the goods.
(n) Insufficiency of packing.
(o) Insufficiency or inadequacy of marks.
(p) Latent defects not discoverable by due diligence.
(q) Any other cause arising without the actual fault or privity of the carrier, or without the fault or neglect of the agents or servants of
the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual
fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage.

• Is the defence the sole cause of the loss or damage? → The defences can only apply where the defence is
the sole cause of the loss or damage to the cargo, so when there are more causes they are not available. This
cuts down the utility of defences.
• The effects of Great China have migrated the defences into the analysis of the negligence. It is useful to consider
these defences but bear in mind that the defences are a bit unsure now. Once negligence has been found then
art 4 defences not available (Hilditch case).
I) Loss or damage due to negligent navigation or management of the ship – Art 4, rule 2a: neither carrier
nor ship is liable for loss or damage due to negligence by the carrier in the navigation or management of the
ship; only applies to ship navigation matters, not cargo storage;
▪ Tasman Orient case: voyage from NZ to South Korea; ship ran aground near Japanese coast because
the master of the ship tried to use a shortcut; rule 2A defence was relied on; court concluded that
the defence applied; after the vessel had run aground, the master made no report to the Japanese
coast guard, and did not notify the owner of the ship until days later – the master instructed the
crew to lie to authorities about the route taken; court concluded that these subsequent acts
demonstrated a breach of Art 3, rule 2 – they were not made in good faith. But the problem was
that if he had not engaged in fraud – would be able to escape liability.
II) Loss or damage caused by fire: Art 4, rule 2b: not liable for loss caused by fire (unless caused by the actual
fault or privity of the carrier).
III) Loss caused by perils, dangers and accidents of the sea: Art 4, rule 2c: defence for perils or dangers of
the sea; GCM – this is a wide defence, it includes foreseeable heavy weather incidents; but if the carrier
negligently fails to protect against the weather event, will be breach of Art 3, rule 2
IV) Loss caused by an act of God: Art 4 r2(d): war, government intervention, hurricane – force majeure defence
V) Loss caused by an act of war: Art 4 r2(e)
VI) Loss caused by insufficient packing: Art 4, rule 2n: not liable for damage caused by insufficient packing
of goods by seller/exporter;
- Stemcor – this obligation does not require an exporter to provide packing to protect relevant
goods from all conceivable damage – it will be sufficient if packing is consistent with
normal, well-established practice for worldwide voyages; especially the case where the
seller/exporter issued a clean bill of lading (Rares J at [117]) → There was no inference that

6 Gamlen.
7 Modified Hague-Visby Rules, art 4, rule 2.
 they had to pack them so that moisture could never get in. In any case if clean bill of lading
– satisfied with the state of goods when received.
VII) Liability of a carrier for loss caused by delay – Article 4A – Carrier is liable to a shipper for loss caused
by the shipper’s goods being delayed unless the carrier can establish on balance of probabilities that (a) the
delay was excusable and (b) the carrier took all measures that were reasonably required to avoid the delay and
its consequences.
- Excusable delay – art4A rule 3 → delay (a) caused by a deviation authorised in the contract,
(b) caused by circumstances beyond the reasonable control of the carrier or (c) reasonably
necessary to comply with an express warranty (or implied) or (d) reasonably necessary for
the safety of the ship or its cargo; or (e) for the purposes of saving human life or aiding a
ship in distress; or (f) reasonably necessary for the purpose of obtaining medical aid for a
person on board; or (g) caused by barratrous conduct of the master or crew.
- To work out amount of liability see art 4A r 6.

7. How much is the carrier liable for? What are they going to pay?
Intro: Since a breach of [e.g. art 3, rule 2] has been established, and no defences apply, the carrier will normally
be liable for an amount not exceeding 666.67 Special Drawing Rights (SDR) per package, unless a provision
in the bill of lading stipulates that loss is fully recoverable. 8 In Australia, this amounts to roughly AUD 2,400
per package. Where a container is used to consolidate goods, the number of packages or units validly
enumerated on the bill of lading is deemed to be the number of packages or units for the purposes of
liability. 9 A valid enumeration uses words that make it clear the number of the packages or units that have
been separately packed.10 In this case, the bill of lading states that the number of packages transported is …

• How much money will you get: Unless the nature and value of the goods have been declared by the shipper
and is on the bill of lading, then 666.67 SDR per unit or package or alternatively 2 SDR per kilo whichever one
is higher (1 SDR is roughly 3.6AUD) (This is for Australia, check if it is a different jurisdiction). → art 4 rule 5
modified Hague-Visby
▪ Art 4 r 5g: Prevents the carrier from fixing an amount which is lower than in the rules. So cannot
lower the SDR (not that they really have to since it is so low).
• Can avoid this and check if this was done: There is scope for avoiding this issue, the exporter can reference the
nature and the value of the cargo, valued at X amount. This will be taken into account for liability of the carrier.
• Cases:
▪ Champan Marine: Inbound shipment from the US to AUS, a cruiser worth millions of dollars. Under
US law the amount per package is around $500USD per unit. This case shows how important
insurance is. During the carriage from the US to AUS the cruiser was dropped by the stevedores
when unloading – the cruiser was one unit so $500USD (weight option not available in US).
▪ El Greco: Posters and prints from Australia to Greece, the posters and prints were described as
200,000 pieces in the bill of lading and placed in 2000 packages in the contained. Goods damages
by rainwater and useless. The carrier admitted negligence but wanted to limit liability under art 4 r
5. The bill of lading did not specify packages or units, only 2000 pieces. Clause 21 in the contract
also said that the goods packed into containers by the seller would constitute one package (the
court said this could be void under art 3 r8 if there were valid enumeration). To have a valid
enumeration, words must be used which make it clear the number of packages or units that have
been separately packed; so it was known that there were 200,000 ‘pieces’, but it was not known
how many packages there were, so the court assumed there was one package; liability was around
$38,000 (it would have been 10-20 times this if valid enumeration)

8. Statute of limitation – 1 year from the date of delivery art 3 r 6

• Need to give the carrier a notice of loss or damage and the general nature of such loss or damage in writing to
the carrier (or his agent) at the port of discharge if the loss is obvious and if not then within 3 days of removal,
in any case the ship and the carrier will be discharged from all liability whatsoever in respect of the goods unless
a suit is brought within one year of their delivery or the date when they should have been delivered (this can be
extended by agreement of the parties).

9. Is there recklessness or intent to cause damage? → art 4 r5(e)

8 Modified Hague-Visby Rules, art 4, rule 5.

9 Modified Hague-Visby Rules, art 4, rule 5(c).
10 El Greco at [305].
• Carrier loses the benefit of the regime – Hague-Visby regime where the damage is caused intentionally or
recklessly – so if can show intentional or reckless misconduct then the damages rules do not apply (but
evidentiary issues). In the real sense this is essentially theoretical.

10. Liability cannot be contracted out of for the carrier – art 3 r 8 →

• Carrier cannot exclude or limit its liability under the rules for loss or damage arising from its negligence or fault
– art 3 r 8.
→ Art 3 r 8: Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship
from liability for loss or damage to, or in connexion with, goods arising from negligence, fault, or failure in
the duties and obligations provided in this article or lessening such liability otherwise than as provided in these
Rules this convention, shall be null and void and of no effect.
• Hollandia 1983 AC 565 (UK) – There is a provision very similar to art 3 r 8, the parties had a contract of carriage,
the clause contained what was foreign exclusive jurisdiction clause. It stipulated that there was Dutch
jurisdiction exclusively. The Netherlands had lower standard so the cargo owner would get less, this is
contracting for lower liability.
• Vimar Seguros vM/V Sky (1995) 515 US 528 – USA Supreme Court, similar clause – arbitration clause. Cannot
send people to arbitration – lower standard there but the US said let the arbitrator decide.
• Note: Section 11(2) → of the Carriage of Goods by Sea Act – Foreign jurisdiction clause is null and void – for
inbound and outbound shipments. Foreign arbitration clause is null and void.