Chapman Marine Pty Ltd v Wilhelmsen Lines A/S

"Yes, it is close. It will need to be watched." 20 During the twilight shift, employees of Conaust, using a portainer crane, discharged twenty-eight 40 foot containers and fifteen 20 foot containers from bay 09. By the end of the midnight shift, employees of Conaust had also loaded into bay 09 a further fourteen 40 foot containers and seven 20 foot containers. Those containers were loaded right across the width of bay 09 two tiers high. 21 The containers that had been in bay 09 had been removed without incident and all of the containers that were subsequently loaded into bay 09 were stowed without incident. The 40 foot containers would have cleared the Cruiser as would any 20 foot containers stowed or to be stowed in the 40 foot position. However, the containers stowed or to be stowed in the 20 foot position would have had to have been lifted over, under or around the Cruiser. All that happened without incident during the night. 22 At approximately 7 a.m. on 14 December 1996, Mr Cardelli conducted an inspection of Deck 4 to see what work had been completed in the twilight and midnight shifts. When he reached bay 09, he noticed that four of the 20 foot containers which had been loaded into bay 09 on the port side had been placed into the 20 foot position. They were intended to be placed in the 40 foot position and Mr Cardelli therefore spoke to Mr Chris Noon, Conausts's RoRo manager, and told him that the four containers had to be moved and put into the 40 foot position. Mr Noon told Mr Cardelli that no portainer work was planned for the day shift that day but that when "the labour came on" for the later shift, the containers would be moved. 23 However, notwithstanding what Mr Noon had told Mr Cardelli, during the dayshift employees of Conaust began moving the containers which had been incorrectly placed in the 20 foot position rather than the 40 foot position. Specifically, container number WLNU4101547 was moved by means of a portainer crane. In the process of being moved, that container came into contact with the stern of the Cruiser, knocking it out of its cradle. In the process, the starboard side of the aft "v" shaped piece of the cradle sheared off. The Cruiser then slipped over the bolster on the starboard side on to container TPHU6821333, denting it in the process, and then slipped over the side of the Tarago and onto the wharf some 20 metres below. The Conaust foreman at the time of the incident said to Mr Cardelli shortly afterwards: "The crane operator was lifting the first container. He asked me if there was enough room to lift the container without hitting the cruiser. I thought the cruiser was clear of the 20 foot containers so I told him it would be O.K." 24 As a result of impact with the wharf, the Cruiser was a constructive total loss. It was common ground that the landed cost to Chapman of the Cruiser was $88,982.94. Chapman's claim against Wilhelmsen and Conaust is for $98,105.36, determined as follows: $A Landed Cost: 88,982.94 Plus 10%: 8,898.29 97,881.23 Plus duty (in damaged condition): 264.13 Plus cartage: 1,060.00 99,205.36 Less salvage: 1,100.00 Amount of claim: 98,105.36

That quantum was agreed between the parties except for the inclusion in the claim of an amount equal to 10% of the landed cost. THE ISSUES 25 It was common ground that the contract for carriage of the Cruiser was evidenced by the Bill of Lading and that the carriage was regulated by the Carriage of Goods by Sea Act 1936 of the United States of America ("COGSA"). Chapman asserted that it was entitled to recover damages from Wilhelmsen by reason of breach of contractual obligations arising under the Bill of Lading, breach of duties imposed by COGSA and breach of a duty to take care in and about the safety of the Cruiser. In addition, Chapman claimed to be entitled to recover the same damages from Conaust as a result of Conaust's breach of a duty to take care in working other cargo on the Tarago. Wilhelmsen acknowledged that if Conaust was negligent, as Wilhelmsen asserted, Wilhelmsen was in breach of its obligations under COGSA and under the Bill of Lading. 26 However, Wilhelmsen sought to rely on limitation provisions contained in the Bill of Lading and in COGSA, the effect of which is that Wilhelmsen would not be liable for loss in an amount exceeding $US500 per package or, in the case of goods not shipped in packages, $US500 per customary freight unit. Wilhelmsen contended that the Cruiser was a package or a freight unit and that its liability was limited to $US500. Alternatively, it was common ground that, if the relevant freight unit was cubic metres for the purpose of those provisions, because the dimensions of the Cruiser as shown in the Bill of Lading, were 360 inches by 114 inches by 121 inches, the relevant volume was 81.381 cubic metres. On that basis, if the limitation provisions apply, and the Cruiser was not a package or a freight unit, Wilhelmsen's liability would be limited to $US40,690. 27 Chapman contended that Wilhelmsen was not entitled to rely on the limitation provisions because its conduct in stowing the Cruiser above deck, on top of containers, was a breach of an implied obligation to stow the Cruiser under deck, and that that breach constituted a "deviation". Wilhelmsen disputed that there was any obligation not to stow the Cruiser above deck and relied on an express provision permitting stowage of a "yacht" on deck. 28 Conaust also claimed to be entitled to rely on the limitation provisions because the Bill of Lading contained a "Himalaya" clause which relevantly provided as follows: "6(c) …every such person by whom the whole or any part of this contract is performed or undertaken, including but not limited to underlying carriers, stevedores, terminal operators, subcontractors and independent contractors shall have the benefit of every exemption, limitation, condition and liberty herein contained and of every right exemption from liability, defence and immunity of whatsoever nature applicable to [Wilhelmsen]…" 29 Wilhelmsen also sought to restrain Chapman from prosecuting its claim against Conaust on the ground that to do so was a breach of an undertaking by Chapman contained in the Bill of Lading that: "6(b) …no claim or allegation shall be made against any person other than [Wilhelmsen] (whomsoever by whom the Carriage or any part of the Carriage was performed or undertaken) which claim imposes or attempts to impose upon any such person…any liability whatsoever in connection with the goods or the Carriage of the Goods, whether or not arising out of negligence on the part of such person." Alternatively, Wilhelmsen relied on the following provision: "6(e) The Merchant further undertakes that no claim or allegation in respect of Goods shall be made against [Wilhelmsen] by any person other than in accordance with the terms and conditions of this bill of lading which imposes or attempts to impose upon [Wilhelmsen] any liability whatsoever in connection with the Goods or the carrying of Goods… and if any such claim or allegation should nevertheless be made to indemnify [Wilhelmsen] against all consequences thereof." 30 There were three cross claims heard together with Chapman's claims against Wilhelmsen and Conaust. The first cross claim was by Wilhelmsen against Conaust. The second was by Conaust against Wilhelmsen. The third was Wilhelmsen's claim under clause 6(b) to stay Chapman's claim against Conaust and its alternative claim under clause 6(e) for indemnity.

LIABILITY OF WILHEMSEN AND CONAUST 31 Wilhelmsen acknowledged that, if Conaust was negligent, Wilhelmsen was in breach of its obligation under section 3(2) of COGSA that it would "properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried". 32 Mr Cardelli warned Conaust employees of the overhang of the Cruiser and that care must be taken. On the twilight and evening shifts Conaust removed all of the containers from bay 09 and replaced them without incident. Thus, it was possible to move the containers in the incorrect position without striking the Cruiser. Clearly an error of judgment was made by the foreman when directing the portainer operator. If the portainer operator, under the direction of the foreman, had maintained a proper lookout, the container would not have struck the Cruiser. The collision was clearly avoidable. 33 I consider that Conaust owed a duty to cargo owners to take care in carrying out its stevedoring operations on the Tarago. Conaust was also under an obligation to Wilhelmsen to take care in those operations. I consider that the striking of the Cruiser was a breach of duty by Conaust. As a consequence, Chapman suffered loss and damage. As an additional consequence, Wilhelmsen suffered loss in the form of its liability to Chapman. Accordingly, subject to the limitation provisions and the Himalaya clause, both Conaust and Wilhelmsen would be liable for the loss suffered by Chapman. Subject to any question of contributory negligence, Conaust would be liable to indemnify Wilhelmsen in respect of Wilhelmsen's liability to Chapman. QUANTUM 34 Chapman claimed that it is entitled to recover the "sound arrived value" of the Cruiser in Sydney and that that value was at least 10% greater than the landed cost. Wilhelmsen, on the other hand, contended that the appropriate measure of damage was the landed cost plus cartage and duty less salvage and that to add 10% to the landed cost would be to compensate Chapman for loss of profit on the sale of the Cruiser. Wilhelmsen argued that there was no evidence that such a loss would have been in the contemplation of Wilhelmsen as the consequence of the breach of contract at the time when the contract of carriage was made. 35 It may well be that an inference could be drawn that it would indeed be within the contemplation of Wilhelmsen that Chapman was intending to sell the Cruiser upon its arrival in Sydney. The Cruiser was shipped with three other boats in the same Bill of Lading. I would be prepared to draw the inference that it was known to Wilhelmsen that Chapman intended to sell the boats. However, there was no evidence of the likely profit which might have been derived by Chapman on the sale of the Cruiser. To complete a sale, further costs may well have been incurred which would have to be taken into account in determining loss of profit. 36 In any event, that is not the basis of Chapman's claim. Rather, the claim was that the evidence showed that the sound arrived value in Sydney of the Cruiser was at least 10% more than the landed cost. There was uncontested evidence from Mr Mark Chapman, the managing director of Chapman, that if the Cruiser had arrived in sound condition in Sydney "it would have had a market value of more than 10% above its landed cost". That evidence, however, appeared to relate to resale value, not to replacement value. Accordingly, I consider that that evidence does not establish replacement value. 37 I consider that, subject to the limitation provisions, Chapman is entitled to recover the replacement value of the Cruiser in Sydney. There was no evidence of replacement value as such. However, I was asked, in effect, to draw the inference that the replacement cost would be the same as the landed cost to Chapman of the Cruiser. I conclude that the Cruiser would have had a value in Sydney if it had been delivered in the condition in which it was received by Wilhelmsen of $A88,982.94. On that basis, the damages would be $89,207.07, apart from any operation of the limitation provisions.

PACKAGE LIMITATION 38 The Bill of Lading contained the following provision: "11. Package Limitation. Neither the Carrier, its servants or contractors or subcontractors or others referred to in clauses 6(b) or 6(c)… shall be or become liable for any loss or damage to or in connection with the transportation of Goods in an amount exceeding US $500 per package, or in case of Goods not shipped in packages, per customary freight unit… unless the nature and value of such Goods have been declared by the Shipper before shipment and inserted in this Bill of Lading… AND the Shipper has paid the additional charges on such declared value. The freight charged on sealed containers or freight units when no higher valuation is declared by the Shipper is based on a value of US $500 per container or freight unit…" Clause 2 of the Bill of Lading contained the following definition: "The words 'customary freight unit' shall mean one or more unit or piece of cargo, including machinery, vehicles, and boats of any amount or description, upon which the freight is charged." 39 Wilhelmsen also relied on section 4(5) of COGSA which was to the same effect as clause 11 of the Bill of Lading. Section 4(5) relevantly provides as follows: "Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading…" 40 The term "package" is defined in the New Shorter Oxford English Dictionary as follows: "A bundle of things packed up or tied up together; especially one of small or moderate size, as an item of luggage; a packet, a parcel. A box, parcel, etc. in which goods are packed." 41 In Webster's Third New International Dictionary, the term is defined as follows: "..the act or process of packing… a small or moderate-sized pack: BUNDLE, PARCEL… a commodity in its container: a unit of a product uniformly processed, wrapped, or sealed for distribution… a pre-assembled unit ready for installation or use… a covering wrapper or container… something that resembles a package:… something organised into or constituting a compact unit..." 42 In Black's Law Dictionary (6th ed.) the term is defined as follows: "A bundle put up for transportation or commercial handling; a thing informed to become, as such, an article of merchandise or delivery from hand to hand. A parcel is a small package; 'parcel' being the diminution of 'package'. Each of the words denotes a thing in form suitable for transportation or handling, or sale from hand to hand. As ordinarily understood in the commercial world, it means a shipping package." 43 Nevertheless, a package must indicate something packed - Studebaker Distributors Ltd v Charlton Steam Shipping Company Ltd [1938] 1 KB 459. In the present case, of course, the Cruiser was packed in the sense that it, and some of the proposed inclusions, were covered by the plastic shrink wrapping. It is not necessary that the packaging completely enclose the goods - Z.K. Marine Inc & Anor v M/V Archigetis 776 F. Supp 1549 (S.D. Fla 1991). In addition, the Cruiser and its contents were delivered to Wilhelmsen on a cradle provided by the shipper. In a number of United States decisions, the $500 package limitation in COGSA has been unexceptionally applied to damaged yachts - SNC S.L.B v M/V Newark Bay 111 F 3d 243 (2nd Cir. 1997); Royal Insurance Co v Sea-Land Service Inc. 50 F 3d 723 (9th Cir. 1995); Pearson v Black King Shipping Co Ltd 769 F. Supp 940 (E.D. Va 1991). In the last case, in particular, the boat was shrink-wrapped and transported in a cradle. 44 Ultimately, however, the question must be determined by reference to the intention of the parties as evidenced by their contract, namely the Bill of Lading - Island Yachts, Inc. v Federal Pacific Lakes Line [1972] 1 Lloyd's Rep. 426. There, a United States District Court held that a 42 foot cruiser shipped on a cradle was a "package" within the meaning of COGSA. In the Bill of Lading in that case under the heading "NUMBER OF PACKAGES" the cargo was described as "1 SHIPPING CRADLE CONTAINING: ONE (1) 41'-10" CRUISER… TOTAL: ONE (1) UNIT ONLY". 45 In the present case, the face of the Bill of Lading contained several boxes for completion of information. One set of boxes was completed as follows: CARRIER'S RECEIPT PARTICULARS FURNISHED BY SHIPPER - CARRIER HAS NOT CHECKED CONTENTS OR WEIGHT CONT. NO. AND NO. PKGS (14) OR UNITS DG MARKS (IF CONTAINERIZED) & DESCRIPTIONS GROSS MEASUREMENT OF GOODS (I) WEIGHT (K) SEAL (13) OR MARKS (IF (J) BREAK BULK) HULL NUMBERS NO SED REQUIRED, SECTION 30.39 FTSR, C.A.S. - FC. WEL CNA18J697 XL BAJD741697 XL BAKF911697 WEL HAA49J697 4 UNITS BOATS ON CRADLE 19900 LB 8474.000 CF 9027 KG 239.951 CM 1X220=281X102X95" 3300LBS COASTAL 1X23=305X102X105" 4500LBS EXCEL 1X26=329X102X110" 5000LBS EXCEL 1X28=360X114X121" 7100LBS MARTINIQUE ON BOARD 11/17/96 FREIGHT COLLECT THESE COMMODITIES LICENSED BY THE U.S. FOR ULTIMATE DESTINATION AUSTRAL . DIVERSION CONTRARY TO U.S. LAW PROHIBITED. GENERAL LICENSE G-DEST "ORIGINAL" TOTAL NUMBER OF PACKAGES OR UNITS IN WORDS (TOTAL COLUMN 14) IMPORTANT: SEE CLAUSE 11: FOUR (4) UNITS ONLY

46 The manner of completion of those boxes suggests that, to the extent that any mind was turned to the matter, each of the boats was a package or unit. Wilhelmsen relies on such a construction for its contention that the package limitation applies to limit Chapman's claim to $US500 in respect of the Cruiser. By that reasoning, each of the other boats comprised in the Bill of Lading was a separate package or unit. 47 Chapman, however, relied on the fact that the freight paid for the carriage of the boats comprised in the Bill of Lading was calculated by reference to their cubic measurement. Further boxes on the face of the Bill of Lading were completed as follows: FREIGHT CHARGES (15) (SEE CLAUSE 11 AND 25) CHARGES CODE REVENUE RATE CURR. Per PREPAID COLLECT TONS OCEAN RATE ORA 239.951 90.00 USD M 21595.59 CURRENCY ADJUSTMENT CAF 21595.59 11.16 USD % 2410.07 BUNKER ADJUSTMENT BAF 21595.59 2.01 USD % 434.07 TERMINAL HANDLING THC 44.621 12.50 USD M 557.76 TERMINAL HANDLING THC 3-LS 580.00 USD U 1740.00

The figure of 239.951 at the top of the third column is the same as the figure shown above as the "measurement" of the Cruiser. That was said by Chapman to indicate an intention that cubic metres was the freight unit for the purposes of the Bill of Lading. 48 I consider that the definition of "customary freight unit" indicates that a boat may be a customary freight unit, notwithstanding that the freight for the carriage of the boat is in fact calculated by reference to the volume of the boat. In the present case, the Bill of Lading referred to "FOUR UNITS BOATS ON CRADLE" and emphasised "FOUR (4) UNITS ONLY". The obvious intention of the author of the typing in the boxes was to treat each boat as a separate unit. In the circumstances, I consider that each boat on its cradle was a single package or freight unit. Accordingly, liability of Wilhelmsen is limited to $US500 or the equivalent in Australian currency. HIMALAYA CLAUSE 49 If Conaust is a person by whom the whole or any part of the contract evidenced by the Bill of Lading was performed or undertaken, Conaust would be entitled to the benefit of the limitation provisions - Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd (1978) 139 CLR 231. The question, therefore, is whether it can be said that Conaust was performing or undertaking the whole or any part of the contract evidenced by the Bill of Lading. Clearly, Conaust was not performing or undertaking the whole of the contract of carriage of the Cruiser. 50 However, if Conaust was performing or undertaking a part of the carriage, Chapman was in breach of its undertaking contained in clause 6(b) of the Bill of Lading in making and prosecuting its claim against Conaust. Further, in that case, Chapman would also be in breach of its undertaking given in clause 6(e) that no person would make a claim or allegation which imposes or attempts to impose upon Wilhelmsen any liability in connection with the carrying of the Cruiser. That is the effect of Conaust's cross claim against Wilhelmsen. In that cross-claim, to which I shall refer below, Conaust seeks to be indemnified by Wilhelmsen in respect of Chapman's claim against Conaust. The indemnity is claimed under the provisions of the stevedoring contract between Wilhelmsen and Conaust. 51 Wilhelmsen's obligations under the Bill of Lading were not limited simply to carrying the Cruiser. Its obligations extended to loading, handling, stowing, carrying, keeping, caring for and discharging the Cruiser. That is the effect of section 3(2) of COGSA to which I have referred above. Those obligations related not only to the steps taken in relation to the goods carried but also in relation to the carriage of other cargo loaded on board the Tarago. While the carriage of the Cruiser was to be from Savannah to Sydney, by clause 9 of the Bill of Lading, Wilhelmsen had "the right to carry goods by any route whatever". By the same provision, Wilhelmsen also had "the right to call at unscheduled ports and to omit calling at scheduled ports… at the discretion of the master". 52 Mr Cardelli gave evidence, which I accept, that, at the relevant time, Wilhelmsen was conducting a liner service from the United States to Australia. It was a regular service with two ships a month leaving the United States for Australia. The ships were accustomed to load in Norfolk and Savannah on the east coast of the United States and then proceed through the Panama Canal and across the Pacific Ocean to Auckland and then on to Australia. In Australia, the ships would make scheduled calls at the ports of Melbourne, Sydney, Brisbane and Fremantle before proceeding to Singapore and then on to Europe. From Europe they would return to the east coast of the United States across the Atlantic Ocean. From there they would set out once again for Australia. When the ships called at Australian ports they would both discharge cargo which had been loaded in both Europe and the United States and load cargo bound for Asia. 53 There is no evidence as to the extent of the knowledge, if any, of Chapman of the detailed route undertaken by the Tarago. However, the Bill of Lading makes reference to "1620". That is a reference to the particular voyage on which the Cruiser was carried. Chapman must be taken to have known that other cargo would be carried on the Tarago and that it is common place for cargo ships to call at intermediate ports between loading and discharge of particular cargo. Chapman must also be taken to have known of the possibility of cargo being unloaded at such intermediate ports and further cargo being loaded. 54 It is common and routine stevedoring practice for cargo and containers destined for another ongoing port to be moved around on deck or discharged at the port where the ship is presently berthed and then restowed in order to allow cargo and containers to be discharged at the present port of berth. That practice is known in the stevedoring industry as "DLR" which stands for "discharge, land and restow". Under that practice, cargo or containers are discharged from the ship and landed on the wharf and then restowed back on board once any other containers are discharged and out of the way. It is also normal and routine practice for cargo which is not being discharged at an intermediate port such as Melbourne but, for example, being discharged at Sydney or Brisbane or some other subsequent destination, to be moved about and restowed so that other cargo and containers can be discharged. 55 I am satisfied that, in the course of a multiple port voyage, the rearrangement of cargo at any given port is a necessary part of carriage by sea. While Conaust was not unloading the Cruiser for delivery in Melbourne, the activities of Conaust which led to the destruction of the Cruiser constituted an inevitable part of the carriage of the Cruiser from Savannah to Sydney. The Cruiser had to be moved in Melbourne because immediately underneath it and adjacent to it were containers to be discharged in Melbourne. 56 There were apparently changes in plans concerning the Cruiser. At one stage it was proposed that the Cruiser would be unloaded and then restowed under deck. Mr Cardelli said that the intention at another stage was to stow the Cruiser on Deck 4 itself while the containers underneath it were discharged. The order of work which finally occurred appeared to have been different from both of those proposals. That is to say, a possible move might have been to place the Cruisers in bays 09 and 11 after discharge of the containers from those bays. However, containers were loaded into those bays during the midnight shift before any attempt was made to move the Cruisers. It is possible, of course, that it was intended that the Cruisers be put on Deck 4 in a different bay at a later time, consistently with Mr Cardelli's stated intention. However, the destruction of the Cruiser intervened. 57 The manner in which the Cruiser was presented was such that it could not be stowed underneath other containers. The containers on which the Cruiser's bolsters were stowed were to be discharged in Melbourne. Accordingly, having regard to the route of the Tarago, the Cruiser could not have arrived in Sydney without being moved in Melbourne. However, the necessity to move the Cruiser was not, of itself, out of the ordinary or unusual. Although the collision between the container and the Cruiser which led to the Cruiser's destruction was for the purposes of correcting an error in stowage, that operation was still incidental to ordinary stevedoring operations on the Tarago. 58 Chapman's contention would undermine the clear intention of a Himalaya clause such as the one under consideration. It would be artificial to ignore the reality of carriage of goods by sea under a bill of lading, as distinct from the charter of the Tarago. For example, if two containers were damaged in the same incident, one of which was being discharged and the other one of which was not, different liabilities would obtain in respect of each container. Freight is calculated on the basis that a vessel is able to carry economically viable quantities of cargo, not all of which will be destined for the same port and not all of which, because of its nature, will be able to be stowed in a manner permitting its most efficient discharge. For example, as I have said, items such as the boats could not be stowed under containers. 59 Stowage of boats on the deck itself rather than on top of containers would deprive the carrier of the use of the space in which containers could otherwise be carried. There was evidence that a number of other boats carried on the Tarago were in fact carried on Deck 4 at deck level. Nevertheless, the general proposition still stands. That is to say, it may well be uneconomical for a carrier to stow all boats at deck level thereby depriving itself of revenue earning container space. 60 I consider that, in the circumstances, Conaust's activities in Melbourne must be regarded as incidental to the performance of the contract of carriage between Wilhelmsen and Chapman. While the activities in question which gave rise to the loss were not directly concerned with the Cruiser, they were an incident of the carriage of the Cruiser on the Tarago from Savannah to Sydney. I consider, therefore, that the conduct of Conaust which resulted in the destruction of the Cruiser was engaged in in the performance of part of the carriage of the Cruiser within the meaning of clause 6(b). Acceptance of the proposition that Wilhelmsen would be liable under section 3(2) of COGSA because of the acts of its agent, Conaust reinforces the proposition that what Conaust was doing, and for which Wilhelmsen, ex hypothesi, is liable, was part of the carriage of the Cruiser under the Bill of Lading. It follows, in my opinion, that Chapman's claim against Conaust is in breach of the undertaking contained in clause 6(b). 61 Chapman, however, resisted a stay of the claim against Conaust, on the ground that delay in bringing the application has not been explained and is not excused by the facts of the case. However, the stay was sought in a cross claim filed on 10 July 1998. No point was made of any delay until final address. The proceedings were commenced in April 1997 but the pleadings were still not finalised until during the course of the trial. It may be that failure to move for a stay at an earlier stage has resulted in unnecessary costs being incurred by Conaust and Wilhelmsen. However, I do not consider that any delay is such as to disentitle Wilhelmsen to a stay of the claim brought in breach of the undertaking contained in clause 6(b). 62 Chapman also relied on section 3(8) of COGSA which provides as follows: "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 connection with the goods, arising from negligence, fault, or failure in the duties and obligations provided in this section, or lessening such liability otherwise than as provided in this chapter, shall be null and void and of no effect. A benefit of insurance in favor of the carrier, or similar clause, shall be deemed to be a clause relieving the carrier from liability. 46 U.S. Code Appendix 1303." Chapman contended that the effect of reliance by Wilhelmsen on clause 6(b) and clause 6(e) is to relieve Wilhelmsen from liability for loss or damage to or in connection with goods, being its liability to Conaust in respect of Conaust's cross claim. The effect of the stay is, indirectly, to relieve Wilhelmsen of that liability because Conaust's claim is based on the assumption that it will be held liable to Chapman. Chapman placed reliance on the United States v Atlantic Mutual Insurance Company Ltd & Ors [1952] 1 Lloyd's Rep. 520 at 523 and Tetley Marine Cargo Claims (3rd ed.) at 574. 63 I do not consider that those authorities support Chapman's contention. In Sidney Cooke Ltd v Hapag-Lloyd Aktiengesellschaft [1980] 2 NSWLR 587 at 594B - 595C, the plaintiff submitted that, because a subcontractor had undertaken the sea-leg of the carriage of the goods, that contractor was a "Carrier" within the meaning of Article III r 8 of the Hague Rules. From there, the plaintiff argued that as a "Carrier", the subcontractor could not be relieved of its liability to the Merchant by the Merchant's undertaking in the Bill of Lading not to sue. Yeldham J rejected that argument without hesitation and found that the subcontractor was not a "Carrier" for the purposes of the Hague Rules. His Honour clearly contemplated that the Hague Rules only proscribed the limitation of the liability which exists directly between the cargo owner and the carrier. 64 I consider that section 3(8) is concerned only with rights as between carrier and cargo owner. It is concerned with provisions which limit the direct liability of the carrier to the owner of cargo. It is not concerned with any arrangement concerning liability of the carrier to third parties. Accordingly, I consider that s3(8) COGSA does not apply to make Clause 6(b) void and therefore, Wilhelmsen is entitled to have Chapman's claim against Conaust stayed. 65 The grant of a stay is warranted in order to restrain breach of the negative covenants contained in the undertakings given by clauses 6(b) and 6(e) - Broken Hill Proprietary Co Ltd v Hapag-Lloyd Aktiengesellschaft [1980] 2 NSWLR 572 at 578G, 581G and 583F-G. Chapman sues Conaust which seeks an indemnity from Wilhelmsen who is in turn entitled to an indemnity under clause 6(e) - Nippon Yusen Kaisha v International Import & Export Company Ltd ("The Elbe Maru) [1978] 1 Lloyd's Rep. 206. The stay will thus prevent circuity of action. 66 The result is not surprising. In return for a carrier's acceptance under a contract of carriage that it will be contractually liable for the acts of its independent subcontractors, the merchant agrees to look only to the carrier for compensation in respect of damage occurring to its goods in the course of carriage. That compensation will be determined by reference to the terms of the carriage to which the merchant and carrier have agreed and to the provisions of COGSA. To construe the clauses otherwise would allow a merchant to circumvent the terms of the Bill of Lading and the provisions of COGSA on the basis of which the merchant has agreed to the carriage of the goods. A merchant would not be able to do that if the carrier performed all of those tasks itself and did not employ subcontractors. 67 It is commercially unrealistic to expect that, in the international carriage of goods by sea, a carrier will itself perform all of the activities concerned with the carriage. It could not be suggested that a consignor or merchant would enter into a contract of carriage with such an expectation. Rather, the scheme of clause 6 of the Bill of Lading is clearly to ensure that all subcontractors are treated as being under the single umbrella of the carrier. Its commercial object is clear, and in my view, should be given effect. DEVIATION 68 Chapman contended that the effect of "unauthorised" deck stowage of goods is to render the ship owner liable under his contract of carriage for damage happening to such goods caused by such stowage. It may be that unauthorised deck carriage in a particular case is so fundamental a breach of contract that it is equivalent to a deviation with the consequence that the carrier is deprived of all limitation provisions - F. Kanematsu & Co Ltd v The Ship Shahzada (1956) 96 CLR 477. Chapman accepted, however, that whether limitation provisions in a bill of lading apply to protect the ship owner in such a case is a matter of construction and that there is no rule of law that, because unauthorised loading of deck cargo was a fundamental breach or "deviation", such exceptions were inapplicable - Kenya Railways v Antares Co. Pte Ltd ("The Antares") [1987] 1 Lloyd's Rep. 424. 69 Chapman relied on the proposition that a ship owner or master will only be authorised to stow goods on deck if there is a custom binding in the trade or port of loading, in relation to goods of that class on such a voyage, or if there is express agreement with the shipper of the particular goods so to stow them - Scrutton on Charter Parties and Bills of Lading (20th ed) at page 168. Clearly, if there is express agreement between the carrier and the shipper, that goods will be stowed on deck, there can be no question of "unauthorised" stowage. The question is whether, in the absence of custom or express agreement, carriage above deck is unauthorised with the consequence that there is a breach if the cargo is so carried.

70 The proposition found in Scrutton was said to find some support in St. John's N.F. Shipping Corporation & Anor v S.A. Companhia Geral Commercial do Rio de Janeiro 263 US 119. There, a preliminary freight reservation agreement provided for carriage of goods "on or under deck, ship's option". The court held that where there was no port custom permitting above deck stowage and no express contract, the issuing of a "clean" bill of lading amounted to a positive representation by the ship owners that the option had been exercised and that the goods would go under deck. By stowing the goods on deck, the ship owners broke their contract, and exposed the goods to a greater risk than had been agreed and thereby directly caused the loss. That decision, however, appears to me to turn on the effect of the option contained in the freight reservation agreement. It cannot stand for a general proposition that issue of a "clean" bill of lading in all circumstances constitutes a representation that cargo will be stowed under deck.

71 Reliance was also placed by Chapman on Wibau Maschinenfabrik Hartman SA v Mackinnon Mackenzie & Co ("The Chanda") [1989] 2 Lloyd's Rep. 494. In that case, however, the carriage of the goods above deck was admittedly unauthorised (see at 496). Chapman also relied on Royal Exchange Shipping Company Ltd v W.J. Dixon & Co (1886) 12 App Cas 11. There, four bills of lading were issued by ship owners in respect of bales of cotton. Three of the bills provided for storage of the bales "under deck" but the fourth bill did not. The House of Lords had no difficulty in concluding (at 16) that the cotton was carried under a contract that it should be stowed under deck. Lord Halsbury LC considered that there was no real difference between the bills. Thus, there is no general principle in the decision that, in the absence of agreement or of a custom, carriage of cargo above the deck is unauthorised.

"The term '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." Clause 22 of the Bill of Lading also provides: "Deck cargo, Live Animals Goods described herein as carried on deck, and which is so carried except yachts and Goods carried in containers on deck as per Clause 1(b), and live animals wherever carried are received and carried solely at Merchant's risk (including accident or mortality of animals) and the Carrier shall not in any event be liable for any loss or damage thereto arising or resulting from any matters mentioned in section 4, Subsection 2(a) to (p) inclusive of COGSA, or from any other cause whatsoever not due to the personal design or neglect of the Carrier, any warranty of seaworthiness in the premises being hereby waived and the burden of proving liability being in all respects upon the Merchant. Except as provided above, such shipments shall be deemed Goods and the Merchant shall be subject to all terms and provisions in this Bill of Lading relating to Goods. Goods shipped as deck cargo shall be so designated on the face hereof." 73 Those provisions indicate that each of COGSA and the Bill of Lading contemplate that there might be goods carried on deck, notwithstanding that the contract of carriage does not state that the goods are being carried on deck. The only consequence where there is a statement that goods are carried on deck is that the obligations of COGSA are not imposed. If there is no such statement, the general obligation under section 3(2) would apply. Thus, if it would not be proper and careful loading, handling, stowage, carriage, keeping, caring for or discharge for the Cruiser to be carried above deck, there would be a breach of section 3(2). However, had there been disclosure of intention to carry above deck, there would have been no entitlement under section 3(2).

74 It may be that, having regard to all of the circumstances of a particular case, there would be an implication that a particular cargo would not be carried above deck. In The Chanda, for example, the cargo in question included sensitive electronic equipment. It may well be possible to imply a term that cargo which would be damaged by exposure to salt water would not be carried on deck. Thus, storage on deck may be unsuitable for perishable goods such as hides - The Shahzada per Taylor J (at 489). However, there is no general implication that all cargo will be carried under deck. Any implication will arise from the nature of the cargo and other surrounding circumstances.

75 There is nothing in the surrounding circumstances in this case that would give rise to the implication that a boat, which is intended for use in salt water, could not be carried above deck. In the absence of any further evidence, the mere carriage of the Cruiser above deck was not a breach of an obligation that Wilhelmsen would properly and carefully, load, handle, stow, carry, keep, care for and discharge the Cruiser. Accordingly, there was no "deviation" so as to disentitle Wilhelmsen from relying on the limitation provisions of the Bill of Lading or COGSA.

YACHT 76 In any event, I consider that there is a further answer to Chapman's claim that the limitation provisions had no application because of a deviation. The Bill of Lading contained the following provision in Clause 1(b): "[Wilhelmsen] shall have the right to ship the Goods in containers and to stow any containers, cargo customarily carried on deck, and yachts either on deck or under deck. In the event such cargo is carried on deck, [Wilhelmsen] need not indicate such on deck stowage on the Bill of Lading." Clause 22 of the Bill of Lading also provided as follows: "Goods described herein as carried on deck, and which is [sic] so carried except yachts and Goods carried in containers on deck as per clause 1(b) and live animals wherever carried are received and carried solely at Merchants risk… Goods shipped as deck cargo shall be so designated on the face hereof." There was no specification on the face of the Bill of Lading that any of the boats which were shipped under the Bill of Lading were to be carried on deck. 77 There is no evidence as to the precise nature of the other three boats which were the subject of the Bill of Lading. Chapman is engaged in the business of importing and selling high quality, high performance pleasure craft vessels. I consider that it is fair to assume, therefore, that all four of the boats were pleasure craft. The Cruiser itself was a 28 foot open cockpit fibreglass motor cruiser with more or less flush deck. It had a large forward cabin below deck with a small galley and sleeping accommodation. Photographs of the Cruiser in its damaged condition were in evidence. It is clear that the Cruiser could properly be characterised as a pleasure craft. 78 The term "yacht" is defined in the New Shorter Oxford English Dictionary as including: "any of various (usually light and comparatively small) vessels propelled by sail or engine; spec… (b) an engine-driven vessel of moderate size equipped for cruising." The Second Edition of the Macquarie Dictionary includes the following definition of "yacht": "a large, luxurious motor-powered pleasure craft." Webster's Third New International Dictionary includes the following definition of "yacht": "a sailing or power boat used for pleasure (as racing or cruising) and characteristically built for speed with a sharp prow and graceful lines; as… a steam-driven or motor-driven ship or large powerboat equipped often elegantly for pleasure cruising or private travel (as by a head of state)" 79 There is no reason to conclude that the term "yacht" when used in the Bill of Lading was used other than in its ordinary sense. Accordingly, I consider that the Cruiser was a yacht. It follows that the carriage of the Cruiser above deck was expressly authorised by the terms of the Bill of Lading. I do not consider that any distinction should be drawn between carriage "on deck" and carriage "above" deck. That is to say, I do not consider that the liberty reserved in clause 1(b) should be limited to carriage on Deck 4 itself as distinct from carriage on containers which in turn were stowed on Deck 4. 80 Chapman submitted that Wilhelmsen is not entitled to rely on the provisions of Clause 1(b) because it was not specifically pleaded. Chapman complained that allowing reliance on Clause 1(b) would cause possible prejudice because Chapman was taken by surprise and not in a position to bring evidence as to the meaning of "yacht". Chapman's statement of claim alleged that, in breach of duty or contract, Wilhelmsen failed properly and carefully to keep, handle, carry and care for the goods safely or at all. Particulars of that paragraph were supplied, claiming inter alia "(i) carriage of the cruiser on deck". That paragraph was expressly denied in the Defence. The question of whether stowage on deck was a breach of contract was therefore an issue in the proceedings. 81 Furthermore, counsel for Chapman squarely raised the issue on the first day of the hearing in his opening address. Evidence was also led by Wilhelmsen to show that cruisers and boats were "goods customarily carried on deck", so that even if the Cruiser was not a "yacht" within the meaning of Article 1(b), there was nonetheless authorisation under the same clause to carry it on deck. Mr Cardelli gave evidence that, in his experience, around 80% of Wilhelmsen Lines' ships plying between the United States and Australia carry pleasure boats as deck cargo. He also gave evidence that, from his experience, other shipping lines also carry boats as deck cargo. There was also evidence from Mr James Cobb, a marine surveyor, that it was customary and usual practice in the Port of Savannah to stow boats and yachts both below deck and above deck. 82 In the light of my conclusion that the Cruiser is a "yacht", the question of whether that evidence establishes that the Cruiser fits the definition of "goods customarily carried on deck" does not have to be decided. I consider that Wilhelmsen, therefore, is entitled to rely on the limitation provisions. CROSS CLAIMS 83 Wilhelmsen sought indemnity from Conaust in respect of any liability which Wilhelmsen may be found to have to Chapman. The claim was founded on the provisions of the stevedoring agreement between Conaust and Wilhelmsen. Alternatively, the claim was based on a breach of a general law duty allegedly owed by Conaust to take care in providing stevedoring and associated services. The measure of damages would be the same irrespective of the basis upon which Wilhelmsen succeeded against Conaust. I consider that Conaust was negligent in the performance of its obligations to Wilhelmsen for the reasons outlined above. 84 The real question, however, was whether Wilhelmsen was partly responsible itself for the loss. The claim made by Conaust was that Wilhelmsen was in breach of a promise contained in the stevedoring contract in the following terms: "4.2.2 To ensure as far as it is able that any vessel to be discharged and/or loaded by [Conaust] will be presented in a manner which will assist in efficient terminal operations including the provision of properly maintained lashing, mobile equipment and other shipboard gear which are to be readily accessible at the required locations." It was contended by Conaust that the stowage of the Cruiser, such that there was a protrusion of its stern beyond bay 07, was a breach of that provision. Alternatively, it was said that by stowing the Cruiser in that way, Wilhelmsen contributed to the loss and damage. 85 I do not consider that the evidence supports a conclusion that the stowage of the Cruiser in the way in which I have described was a failure to present the Tarago in a manner which would assist in efficient terminal operations. Further, as I have indicated above, Mr Cardelli expressly drew the attention of responsible employees of Conaust to the stowage of the Cruiser. There was no written notification of that stowage. However, Mr Cardelli took reasonable steps to ensure that he was present when any working was to occur which might jeopardise the safety of the Cruiser. 86 He was told that there would be no working in bay 09 during the day shift. On that basis, there was no reason for him to remain present. I draw the inference that had Mr Noon told Mr Cardelli that work was going to be carried out in bay 09 to correct the incorrect stowage of containers, Mr Cardelli would have been present and would have warned the foreman and operator of the possibility of damage to the Cruiser. I do not consider that Wilhelmsen was relevantly in breach of any obligation to Conaust either under contract or under the general law. It follows that Wilhemsen is entitled to be indemnified by Conaust in respect of Wilhelmsen's liability to Chapman. 87 Conaust sought indemnity from Wilhelmsen in respect of the claim made against it by Chapman. Having regard to the conclusion which I have reached concerning stay of Chapman's claim against Conaust, this question does not arise. CONCLUSION 88 I consider that Chapman's claim against Conaust should be stayed. Chapman is entitled to recover damages from Wilhelmsen in the sum of $US500 or the equivalent of that sum in Australian currency. Wilhelmsen is entitled to be indemnified by Conaust in respect of that liability. Chapman is entitled to a verdict, although it has been unsuccessful on several important issues. My present inclination, therefore, is that there should be no order for costs. However, before making any orders concerning costs, I propose to give the parties the opportunity of making further submissions in the light of the conclusions which I have reached on liability. I will then direct them to bring in short minutes to give effect to my conclusions. I certify that the preceding eighty-eight (88) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate: Dated: 5 March 1999 Counsel for the Plaintiff: P.E. King Solicitor for the Plaintiff: Withnell Hetherington Counsel for the First Defendant: G.J. Nell Solicitor for the First Defendant: Ebsworth & Ebsworth Counsel for the Second Defendant: A.S. Bell Solicitor for the Second Defendant: Phillips Fox Date of Hearing: 2-4 February 1999; 11 February 1999 Date of Judgment: 5 March 1999