DUE DILIGENCE - CONSIDERATION
231 The trial judge found that in order to satisfy the obligation of due diligence under Art 3 r 1 of the amended Hague Rules, the carriers had to install dehumidifying equipment, either on a temporary or permanent basis, once they agreed to carry the cargo on each vessel.
232 Here, it was not inevitable that all cold rolled steel in coils would suffer damage from cargo sweat in the ordinary incidents of the voyage from Yokohama to Sydney. That must be so because a considerable number of the coils on both voyages arrived without damage from cargo sweat. So, there was no inevitability of damage being sustained to every one of the coils in the ordinary incidents of the voyage. But, there was, on the evidence, a real and significant risk that cargo sweat would occur - indeed Capt Pyett had said it was inevitable. And if cargo sweat occurred, there was a real risk that ventilation would not be able to be used effectively or at all to remove moisture or the risk of corrosion.
233 Of course, the fact that a considerable number of coils was carried safely is not, of itself, determinative of the issue of seaworthiness. In Burges v Wickham (1863) 3 B & S 669 at 690-691 Blackburn J pointed out that, as a matter of fact, a vessel, though far from seaworthy, may, and often does, successfully perform a voyage, and so proves in one sense capable of performing it, while a seaworthy vessel may, and often does, perish without any extraordinary accident. Thus, he pointed out that there must be some other criterion by reference to which one should determine seaworthiness. He held that because the standard of seaworthiness can be raised by improvements in technology and knowledge, no fixed degree of capacity to encounter the perils of the voyage is necessary to constitute seaworthiness. As he said (Burges 3 B & S at 693-694) of the warranty of seaworthiness in a policy of marine insurance:
'A merchant in old times about to send out a vessel, if he did his utmost to fit her for what was then a perilous voyage, fulfilled his duty to his co-adventurers who risked their goods, and the crew who risked their lives, on board the vessel; if he did so to the extent which was then usual and of course in the transaction, he could not be expected to do more than was then practicable; but a modern ship owner, who was to send a ship on the same voyage no better fitted than the ancient vessel, would not fulfil his duty to either one or the other, for the very reason … that the standard of seaworthiness had been raised.'
234 Blackburn J said that the vessel should be put into that state of fitness into which a prudent owner, uninsured, would, as of course, put his vessel and that that state would increase with the increased power to put her in a fit state. Seaworthiness was therefore to be seen as being relative to the kind of adventure (see also Great China Metal 196 CLR at 174 [27], [30] per Gaudron, Gummow and Hayne JJ; 194 [86] per McHugh J; Cotter 66 CLR at 663).
235 Carriage of goods by sea inherently involves certain risks on each voyage. The amended Hague Rules seek to distribute responsibility for those risks between the carrier and the cargo owner. In both Gamlen Chemical (147 CLR 142 at 166) and Great China Metal (196 CLR 161 at 176-181 [38]-[51]) the High Court held that sea and weather conditions which may reasonably be foreseen and guarded against could nonetheless constitute a peril of the sea for the purposes of the exception of the carrier from liability under Art 4 r 2(c). But, the carrier cannot bring itself within the exception for any loss or damage to cargo by the action of the sea which, as Mason and Wilson JJ explained (in Gamlen Chemical 147 CLR at 166), '… could be avoided by reasonable care on the part of the carrier'. This is important because the obligation under Art 3 r 2 properly and carefully to carry, keep and care for the goods carried is subject to the exception in Art 4 r 2(c), which can apply even where the master knows that the vessel may sail into very rough weather but continues the voyage in circumstances where he or she is acting with skill and prudence (147 CLR at 166). And, of course, carriers know that there will be a risk of encountering such conditions as are comprehended in the expression 'perils of the sea' when they prepare the vessel to sail.
236 Due diligence in Art 3 r 1 does not require the carrier to prepare the ship to encounter every foreseeable incident of the proposed voyage. The emphasis on due diligence in Art 3 r 1 is on the carrier acting as a prudent owner, preparing the vessel and its holds for the voyage and cargo. McHugh J in Great China Metal 196 CLR at 194 [88] described the obligation of the carrier under Art 3 r 1 as being to carry the goods in a ship which is adequate in terms of its structure, manning, equipment and facilities having regard to the voyage (including anticipated weather conditions - see 196 CLR at 194 [86]) and the nature of the cargo.
237 Nonetheless, the carriers argued that it is a large thing to require a shipowner to undertake substantial structural work, even on a temporary basis, to alter its vessel in circumstances like the present where this cold rolled steel had a particular susceptibility to damage from cargo sweat. They argued that the practice to wipe or mop up moisture on cargo and the vessel together with proper ventilation of the vessel during the voyage could have avoided the incidents of cargo sweat entirely. Thus, they contended, no breach of Art 3 r 1 could be found because the vessels were seaworthy, since they could carry the coils safely and they were following appropriate practices to remove moisture by the methods they adopted.
238 The common law warranty of seaworthiness required of carriers 'not merely that they should do their best to make the ship fit, but that the ship should really be fit': Steel 3 App Cas at 86 per Lord Blackburn. Thus, a ship will be unseaworthy if she is not equipped with the latest, most up-to-date, charts for use on the intended voyage. The corollary of this is that the carrier will not have exercised due diligence for the purposes of Art 3 r 1 of the amended Hague Rules simply by appointing a competent master and leaving all questions of safe navigation entirely to that master, including the obtaining, at their expense, of all necessary charts and other nautical publications: Grand Champion Tankers Ltd v Norpipe A/S (The Marion) [1984] 1 AC 563 at 572 D-E per Lord Brandon of Oakbrook; Sanko Steamship Co Ltd v Sumitomo Australia Ltd (No 2) (1995) 63 FCR 227 at 274G per Sheppard J. Those cases involved the somewhat different considerations which arise under Art 3 r 1(b), which commences by using the word 'properly' to qualify the obligation to man, equip and supply the ship. Nonetheless, they illustrate that the obligation of the carrier to exercise due diligence under Art 3 r 1 is not insulated from improvements or changes which are capable of affecting the safety of the vessel or the cargo which the carrier agrees to take on board.
239 And these cases show that the obligation of the carrier to exercise due diligence to make a vessel seaworthy or cargoworthy before or at the beginning of the voyage requires attention to the actual nature of the voyage and the cargo to be carried. The obligation to ensure that charts are up to date does not impose on a carrier a requirement to update every possible chart which might be used on every possible voyage, at the beginning of each voyage. Rather the obligation is to ensure that the charts are up to date for the actual voyage which is to be undertaken.
240 Likewise, when a carrier accepts cargo known to be particularly susceptible to corrosion caused by moisture, such as the coils in this case, Art 3 r 1 imposes on it an obligation to exercise due diligence to make the vessel cargoworthy for that cargo, including all its known susceptibilities. Tenterden's Law of Merchant Ships (11th ed, Shaw & Sons, 1867, edited by Shee J) at p 305 adopted Lord Ellenborough CJ's description of the carrier's obligation at common law to provide a seaworthy vessel. He said it required the vessel to be 'tight, and fit for the purpose or employment for which he offers and holds it forth to the public. It is the very foundation and immediate substratum of the contract that it is so': Lyon v Mells (1804) 5 East 428 at 436.
241 Here, the relevant purpose was to carry coils known to have the characteristic of being particularly sensitive to corrosion. Each vessel had to be 'fit for the purpose' if it were to be seaworthy. And each carrier, before and at the beginning of the voyage from Yokohama, had to exercise due diligence to make the vessel seaworthy for the purpose of carrying those very coils.
242 The carriers relied on the absence of evidence of any practice of installing dehumidifiers in vessels, or of the use only of vessels fitted with them, to carry coils of the kind in question. They argued that the Court should not set a standard which was not reflected in the practice of those experienced in the maritime industry.
243 The concept of the role of practice as being relevant to seaworthiness may introduce a confusion into the discussion. Seaworthiness is not an absolute concept but is related to the purpose for which the vessel is engaged at the time of assessment: FC Bradley 27 Ll. L. R. at 396 per Viscount Sumner; see too Papera Traders Co Ltd v Hyundai Merchant Marine Co Ltd (The 'Eurasian Dream') [2002] 1 Lloyd's Rep 692 at 736 [126] per Cresswell J. But the vessel is either fit for the purpose of the particular voyage or it is not (Great China 196 CLR at 174 [28], 194 [86]; Cotter 66 CLR at 663). And, Cresswell J said that seaworthiness is to 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 'Eurasian Dream' [2002] 1 Lloyd's Rep at 736 [127]). That question of reasonableness is one of law. And the rigour of the requirement is regulated by the qualification in Art 3 r 1 that the carrier must use 'due diligence' to make the ship seaworthy.
244 The senior officers in the crew of each vessel knew of the ambient conditions at the time of loading and of the inadequacy of the methods of wiping and mopping to remove all moisture from the cargo and holds. They also were aware of rain during the loading operations and of wet cargo and dunnage being loaded. This demonstrates that unless it were possible to remove the moisture during the voyage before condensation could occur, the vessels were unseaworthy at the commencement of their voyages from Yokohama, as his Honour found.
245 The argument that there was no practice for dehumidifiers to be present on vessels carrying such coils is, in this situation, unpersuasive. Indeed, as Capt Koenen said:
'If I was to have rejected all cargo to be loaded at Japanese ports such as Yokohama because the cargo had been wetted prior to loading but not otherwise damaged, I would not have carried very much cargo from Japan during that country's winter months.'
246 That was a frank recognition that the carriers' systems for loading cargo during the Japanese winter accepted the risk that it would be wet together with dunnage, and not all the moisture would be able to be removed from vessels' holds. When the carriers loaded coils that were particularly sensitive to moisture, such as those the subject of these proceedings, their failure to have on board the vessels at the time each voyage commenced a dehumidification system meant that the holds and vessels were uncargoworthy for that cargo. There was, moreover, the added risk that if the vessels were to stop at another Japanese port prior to sailing south, more moisture would enter into the holds which could not, with certainty, be removed before any condensation could form. Far from indicating that the crew were mopping the cargo to remove moisture before condensation formed, Chief Officer Van Wijk's evidence showed that the mopping activity occurred after that particular horse had bolted.
247 In Morris v West Hartlepool Steam Navigation Co Limited [1956] AC 552 at 574, Lord Reid said that if a practice had been generally followed for a long time in similar circumstances and there had been no mishap, a reasonable and prudent man might well be influenced by those matters and it might be difficult to say that the practice was so obviously wrong that to rely on it was folly. In Podmore v Aquatours Pty Limited [1984] 1 NSWLR 111 at 116C-D Glass JA (with whom Samuels JA agreed) said that a finding of want of due care could properly be made even though the defendant had obeyed all statutory requirements and followed a common, or even universal, practice. Here, the phenomenon of condensation or cargo sweat was well known. And when the two vessels were being prepared for their voyages, dehumidifiers were a ready means of avoiding the damage which condensation might occasion to coils of the kind in question.
248 Ultimately, it is a matter for the Court to determine whether or not a vessel was seaworthy and whether or not the carriers exercised due diligence to make them so. Evidence, or lack of evidence, about the practices of carriers may be of assistance in reaching such a conclusion. However, it is the responsibility of the Court to determine the question of law on the evidence by the application of a legal standard to the facts. This was emphasised in Rogers v Whitaker (1992) 175 CLR 479 at 487 where Mason CJ, Brennan, Dawson, Toohey and McHugh JJ said that the standard of care to be observed by a person with some special skill or competence is that of the ordinary skilled person exercising and professing to have that special skill. But, they cautioned, 'that standard is not determined solely or even primarily by reference to the practice followed or supported by a responsible body of opinion in the relevant profession or trade'. Rather, they held, that was a question for the Court to determine after giving appropriate weight to any professional practice or opinion.
249 So, in Waterwell Shipping Inc v HIH Casualty & General Insurance Ltd (1997) Aust Torts Reports s81-444 Giles CJ in Comm D said that practice is not conclusive as to the appropriate way in which the Court would apply the standard of reasonableness to the conduct of a chief engineer of a vessel in closing or not closing a suction valve (an appeal was dismissed on other grounds: HIH Casualty & General Insurance Ltd v Waterwell Shipping Inc (1998) 43 NSWLR 601).
250 A similar approach has been applied in the United States: see Wabash Railway Co v McDaniels 107 US 454 (1882) at 460-461 per Harlan J giving the opinion of the Court. In The TJ Hooper v Northern Barge Corporation 60 F2d 737 at 740 (CA2: 1932) (cert. denied 287 US 662) Judge Learned Hand, writing for the Second Circuit Court of Appeals, upheld a finding that tugs were unseaworthy because they had not been equipped with radio receiving sets. He said:
'Is it then a final answer that the business had not yet generally adopted receiving sets? There are yet, no doubt, cases where courts seem to make the general practice of the calling the standard of proper diligence; we have indeed given some currency to the notion ourselves. Ketterer v. Armour & Co. (C. C. A.) 247 F. 921, 931, L. R. A. 1918D, 798; Spang Chalfant & Co. v. Dimon, etc., Corp. (C. C. A.) 57 F.(2d) 965, 967. Indeed in most cases reasonable prudence is in fact common prudence; but strictly it is never its measure; a whole calling may have unduly lagged in the adoption of new and available devices. It never may set its own tests, however persuasive be its usages. Courts must in the end say what is required; there are precautions so imperative that even their universal disregard will not excuse their omission. Wabash R. Co. v. McDaniels, 107 U. S. 454, 459-461, 2 S. Ct. 932, 27 L. Ed. 605; Texas & P. R. Co. v. Behymer, 189 U. S. 468, 470, 23 S. Ct. 622, 47 L. Ed. 905; Shandrew v. Chicago, etc., R. Co., 142 F. 320, 324, 325 (C. C. A. 8); Maynard v. Buck, 100 Mass. 40. But here there was no custom at all as to receiving sets; some had them, some did not; the most that can be urged is that they had not yet become general. Certainly in such a case we need not pause; when some have thought a device necessary, at least we may say that they were right, and the others too slack.'
That approach was cited with approval by Brennan J, giving the opinion of the Court, in Salem v United States Lines Co 370 US 31 (1962) at 37, and described as a 'classic opinion' recently in Surles v Greyhound Lines Inc 474 F3d 288 (CA6: 2007) at 301. (See too Tug Ocean Prince, Inc. v United States 584 F2d 1151 (CA2: 1978) at 1156-1157 and Marshall v Ove Skou Rederi A/S 378 F2d 193 (CA5: 1967) at 201-202.)
251 Here, water was in the holds and it could not be readily removed on the voyages with the vessels in their then state. It follows that the carriers had not exercised due diligence at or before the commencement of the voyages to make them seaworthy: Cotter 66 CLR at 663-664.
252 However, the carriers knew or ought to have known that there were real risks that weather conditions would not permit such ventilation to occur and because of the moisture (including in the air) admitted into the holds during loading which had not been removed that cargo sweat could cause corrosion. Weather conditions which might be experienced in an ordinary voyage from Yokohama to Sydney at the time of year at which each of these voyages occurred may make ventilation difficult or impossible. Because of this characteristic of the incidents of the voyage, which were known to the carrier, the primary judge determined that each vessel was unseaworthy at the commencement of each voyage because the exercise of due diligence should have prepared her to encounter the known perils of moisture in the holds (as water and vapour), an inability to ventilate and cargo sweat. That is why he said that, unless the cost was prohibitive or it was otherwise unreasonable to incur it, due diligence would require that the cost of installing the dehumidifiers had to be borne by the carriers prior to offering the vessels for loading.
253 I am of opinion that the primary judge was correct in that finding. The test applicable to due diligence is not one which requires a carrier to take every precaution which might guard against any possibilities of damage to the cargo. But each vessel was unseaworthy at the beginning of its voyage and there were means reasonably available to make her seaworthy. Here, in a practical sense, damage from cargo sweat was a known risk and the ventilation capacities of each vessel when the voyages commenced were insufficient to protect the coils properly from their known susceptibility to corrosion. I am of opinion that, applying the tests in the authorities to which I have referred, an ordinary prudent owner would not have been able to put to sea with the vessels in the state in which they actually were having regard to all probable consequences of what might occur during the course of the voyage. Due diligence to make the vessels seaworthy required, in the circumstances, the installation of dehumidifiers.