lloyd's law reports- tasman orient line cv v new zealand china clays and others (the -tasman...

COURT OF APPEAL OFNEW ZEALAND

25 November 2008; 9 April 2009——————

TASMAN ORIENT LINE CVv

NEW ZEALAND CHINA CLAYSAND OTHERS

(THE “TASMAN PIONEER”)

[2009] NZCA 135

Before Justice CHAMBERS,Justice BARAGWANATH and

Justice FOGARTY

Carriage by sea — Deck cargo damaged followingvessel’s grounding — Master failing to alert author-ities of grounding and instructing crew to lie aboutincident — Whether carrier in breach of contract ofcarriage — Whether carrier entitled to rely onexemption of negligence in navigation or manage-ment of ship — Hague-Visby Rules, article IV, rule2(a).

The appellant carrier, Tasman Orient Line CV (Tas-man Orient), operated a freight liner service fromAuckland, New Zealand via Yokohama, Japan toBusan, South Korea. The respondent shippers con-tracted with Tasman Orient for the carriage of theirgoods as deck cargo on Tasman Pioneer from Auck-land to Busan.

On 1 May 2001 Tasman Pioneer left Yokohamabound for Busan. Because the ship was behind sched-ule, the master decided that instead of taking the usualroute which would involve passing west of OkinoShima, he would take the vessel through a narrowpassage between Biro Shima island and the promontoryof Oshime Hana, which was expected to shorten thejourney by 30 to 40 minutes.

Shortly after the master changed course to transit thepassage the vessel grounded, causing significant dam-age and allowing seawater to penetrate the vessel.Pumping and flooding operations commenced. Follow-ing the grounding the master did not alert the Japanesecoastguard. He continued to steam at full speed throughthe passage and into the Inland Sea. He did not advisethe owners’ agents until after he anchored, about twoand a half hours later. The master instructed the crew tolie to coastguard investigators, saying that the ship hadpassed west of Okino Shima and that the impact hadbeen with an unidentified floating object. The chartswere altered to show a false course.

The shippers claimed damages from Tasman Orient,alleging breaches of the contracts of carriage. Theyargued that had the master promptly notified theauthorities of the casualty, their on-deck cargo wouldhave suffered no damage as salvors would have beenable to save it from being wetted or inundated.

Tasman Orient challenged the shippers’ claims oncausation and relied on article IV rule 2(a) of theHague-Visby Rules, contending that the damage hadresulted from the act, neglect or default of the master inthe navigation or in the management of the ship. Theshippers responded that article IV rule 2(a) did notapply because the master’s actions were not performedin good faith in the navigation or management of theship.

At first instance, Hugh Williams J gave judgment infavour of the shippers. He found that had the masternotified the authorities promptly, salvors would havebeen engaged and the cargo would have been saved. Heheld that the post-grounding conduct of the masteroccurred “in the navigation . . . of the ship” within themeaning of article IV rule 2(a), but that Tasman Orientcould not rely on the exemption because article IV rule2(a) imported an obligation of good faith, and theconduct of the master after the grounding occurred wasperformed in bad faith.

Tasman Orient appealed. It submitted that the judgewas right to hold that the conduct of the masteroccurred “in the navigation . . . of the ship” but waswrong to impute an obligation of good faith. The ship-pers contended that the conduct did not occur “in thenavigation . . . of the ship”.

————Held, by NZCA (CHAMBERS and BARAGWA-

NATH JJ, FOGARTY J dissenting), that the appeal wouldbe dismissed:

(1) The Hague Rules were to be construed as acomprehensive international convention, unfettered byany antecedent domestic law. The English pre-HagueRules authorities should no longer be followed. ArticleIV rule 2(a) was not to be read so widely as to rendermeaningless the obligation of the carrier under articleIII rule 2. Broadly expressed exemptions were to beread down to do substantial justice in accordance withthe apparent purpose of the contractual legislation readas a whole (see paras 31, 55, 56 and 69);

————Great Metal China Metal Industries Co Ltd vMalaysian International Shipping Corporation Berhad(The Bunga Seroja) [1999] 1 Lloyd’s Rep 512; (1998)196 CLR 161 considered.

(2) The master’s conduct subsequent to the ground-ing could only be described as outrageous. It wasfundamentally at odds with the purpose of both thecontract of carriage and the Hague-Visby Rules. Themaster’s behaviour, carried out for his own selfishpurposes and wholly at odds with the carrier’s obliga-tions under article III rule 2, was not conduct “in thenavigation or in the management of the ship” within themeaning of article IV rule 2(a) (see paras 59 and 60);

————Brown & Co Ltd v T & J Harrison (1927) 27Ll L Rep 415 and Leesh River Tea Co Ltd v BritishIndia Steam Navigation Co Ltd (The Chyebassa)[1966] 1 Lloyd’s Rep 450 considered.

[Editor’s note: the Court of Appeal also allowed across-appeal by one of the cargo owners, the NewZealand Dairy Board, in respect of a part of its claimthat the judge had disallowed, namely a claim fordamage to dairy products stowed in refrigerated con-tainers and which had been damaged by heat, as aresult of the reefers being left off-power at some stage

308 LLOYD’S LAW REPORTS [2009] Vol 2

PART 6 The “Tasman Pioneer” [NZCA

during the voyage. At trial there was an issue as towhen the heat damage had occurred. The judge hadheld that the Board’s claim was not made out. TheCourt of Appeal held that the damage occurred whenthe generators were rendered unsafe to use by incomingseawater after the grounding; that the damage wascaused by the master’s post-grounding conduct; and(Fogarty J dissenting) that just as Tasman Orient wasnot entitled to article IV rule 2(a) protection for water-damaged goods, it was similarly not entitled to protec-tion for heat-damaged goods.]

——————

This was an appeal by the defendant carrier Tas-man Orient Line CV from the decision of the NewZealand High Court giving judgment in favour ofNew Zealand China Clay and others, the shippersof cargoes stowed on the deck of the vessel TasmanPioneer, in respect of their claims for cargo damagefollowing the vessel’s grounding.

——————

Bruce D Gray QC and Neil Beadle, instructed byDLA Phillips Fox, Auckland, for Tasman Orient;Philip Rzepecky and Matthew Flynn, instructed byMcElroys, Auckland, for the shippers.

The further facts are stated in the judgments ofBaragwanath and Chambers JJ.

Thursday, 9 April 2009

——————

JUDGMENT

Justice BARAGWANATH:1. New Zealand, in common with other states,

has adopted the Protocol to Amend the Interna-tional Convention for the Unification of CertainRules Relating to Bills of Lading (1968) 1412UNTS 128 (the Hague-Visby Rules) to regulatecarriage of goods by sea (in the Maritime TransportAct 1994, section 209(1) and schedule 5). Theystipulate the responsibilities and liabilities of seacarriers and also their rights and immunities (article2). Two provisions are of particular importance forthe purposes of this appeal:

First, article 3.1 and 3.2:

1. The carrier shall be bound, before and at thebeginning of the voyage, to exercise due dili-gence to:

(a) make the ship seaworthy;

(b) properly man, equip and supply theship;

(c) make the holds, refrigerating and coolchambers, and all other parts of the ship inwhich goods are carried, fit and safe for theirreception, carriage and preservation.2. Subject to the provisions of Article 4, the

carrier shall properly and carefully load, handle,stow, carry, keep, care for, and discharge thegoods carried.Second, article 4.2 and 4.4:

2. Neither the carrier nor the ship shall beresponsible for loss or damage arising or result-ing from:

(a) act, neglect or default of the master,mariner, pilot, or the servants of the carrier inthe navigation or in the management of theship.

(b) fire, unless caused by the actual fault orprivity of the carrier;. . .

(q) any other cause arising without theactual fault and privity of the carrier, or with-out the fault or neglect of the agents or ser-vants of the carrier, but the burden of proofshall be on the person claiming the benefit ofthis exception to show that neither the actualfault or privity of the carrier nor the fault orneglect of the agents or servants of the carriercontributed to the loss or damage.. . .

4. Any deviation in saving or attempting tosave life or property at sea or any reasonabledeviation shall not be deemed to be an infringe-ment or breach of this convention or of the con-tract of carriage, and the carrier shall not beliable for any loss or damage resulting therefrom.(Emphasis added.)2. In the High Court (HC AK CIV2002 404 3215

31 August 2007), Hugh Williams J held at para 226that misconduct of the master of Tasman Pioneerfollowing a grounding was to be regarded as an“[a]ct, neglect or default . . . in the navigation or inthe management of the ship”. However, because itwas not performed in good faith, the carrier was notentitled to the protection of article 4.2 in a claim byshippers whose goods were damaged as a result (atpara 242).

3. I have reached a similar conclusion by aslightly different route. It is that in the extraordi-nary circumstances the master’s conduct was not“act, neglect or default . . . in the navigation or inthe management of the ship” within the meaning ofarticle 4.2 and for that reason the carrier’s appealshould be dismissed.

309LLOYD’S LAW REPORTS[2009] Vol 2

[BARAGWANATH JThe “Tasman Pioneer”NZCA]

Facts

4. The appellant carrier Tasman Orient Line CV(TOL) operates a freight liner service from Auck-land, New Zealand via Yokohama, Japan to Busan,South Korea. The respondent shippers (NZ ChinaClays and Imerys Minerals Japan KK) contractedwith TOL for the carriage of their goods as deckcargo on Tasman Pioneer from Auckland to Busan.From Yokohama Tasman Pioneer’s normal coursewas west along the southern coast of the largecentral Japanese island of Shikoku, and from thereroughly north-west through the Bungo Suido(Bungo Channel) leading up to the Hayasui Seto(Hoyo Strait) at the entrance to the Naikai Seto(Japan Inland Sea). From there access is gained toKanmon Strait leading to the Sea of Japan which isthen crossed to reach Busan at the south-east cornerof South Korea.

5. More specifically, the conventional track lay tothe west of the small island of Okino Shima whichlies off the south-west corner of Shikoku and fromthere veered north-north-west towards HayasuiSeto.

6. TOL intended that the voyage from Yokohamalast just under 48 hours and that the ship arrive atBusan at 17.00 on 3 May 2001. To do that it wasnecessary for the ship to passage the KanmonStrait, which is narrow and with a significant cur-rent. Compulsory pilotage is required.

7. The master, Captain Hernandez, with 36 years’experience at sea, was concerned to arrive at theKanmon Strait at a favourable point of the tide.About 14 hours into the journey he realised that theship was behind schedule because of unfavourablesea conditions, and decided not to take the usualroute for vessels entering the inland sea. Instead heelected to take this 22,000 ton vessel inside OkinoShima and indeed through a narrow passagebetween Biro Shima island, to the east of OkinoShima, and the Shikoku promontory of OshimeHana. That was expected to shorten the journey by30 to 40 minutes. He had previously navigated thepassage but, except for a single occasion, in vesselsof only 4,000 tons.

8. Before Tasman Pioneer entered the channelthe master had taken over the navigation of theship. It was nearly 03.00. The sky was completelydark, with visibility down to about two miles. Therewere rain squalls which can blank out radar images.There was a north-westerly gale of some 36 knotsand with a fetch of some 50 nautical miles therewas a swell of about 2 m. There was potential forencountering other traffic and for complex tidalconditions which brought the prospect of addedturbulence. About two minutes after changingcourse to enter the passage Captain Hernandez lostall images on the radar. He instructed the second

mate to reconfigure it, and while he was doing that,Captain Hernandez ordered “hard port”. The sec-ond mate reconfigured the radar which showed theisland of Biro Shima at a distance of only about 800yards on the ship’s port side. He checked from theport wing and shouted to the master “go starboard”.Captain Hernandez confirmed the order but afterabout five seconds Tasman Pioneer grounded. Thecrew felt two impacts from the bow, which werelike grinding vibrations, each of about two to threeseconds in duration, with a similar interval inbetween. Tasman Pioneer had struck Biro Shima onits port side, while travelling at about 15 knots.Although the crew were unaware of the extent ofthe damage they knew almost immediately it washighly likely to have been significant. From a speedof 15 knots the vessel had slowed to six or sevenknots. The ship developed a list to port that grew toabout three degrees after five minutes and eight to10 degrees in five to 10 minutes. All hands wereroused and ballast tanks were flooded to correct thelist. Pumping operations commenced. A port waterballast tank was found to be flooded and shortlyafter it was found that numbers 1 and 2 cargo holdswere also taking water and further pumping wasundertaken.

9. Following the grounding Captain Hernandezdid not at any time alert the Japanese coastguard.He continued to steam at full speed through thepassage and into the Inland Sea. He did not advisethe owners’ agents until after he anchored, whichwas about two and a half hours later, near theintersection of his course with the course such ves-sels would normally have taken. After anchoringthe master instructed the crew to lie to investigatorswith a view to persuading them that the ship hadbeen on the usual course and had impacted with anunidentified floating object. The second mate wasinstructed by Captain Hernandez to erase the courseactually sailed from the ship’s chart and substitute afalse course purporting to show Tasman Pioneerpassing on the normal course, west of Okino Shimaand Biro Shima.

10. During this journey after the grounding, for adistance of 22 nautical miles, Tasman Pioneer wasmaking maximum speed, about 15 knots, into thenor’-west gale of some 35 knots, with swell esti-mated at around 2 m in the more exposed parts ofthe passage. By the time the vessel anchored it wasdown at the bow.

11. The coastguard learned of the casualty by amessage from a passing vessel. A patrol boat cameupon Tasman Pioneer at anchor at about 09.00. TheJapanese coastguard found the vessel with numbers1 and 2 cargo holds flooded, and only about 2 m offreeboard on the foc’sle deck, with a five to sixmetre trim by the head. By 10.00 a Lloyd’s OpenForm “No pay no cure” salvage agreement had


BARAGWANATH J] The “Tasman Pioneer” [NZCA

been reached between Nippon Salvage, who hadtugs nearby, and the Swedish Club of P&I.

12. It was accepted by Captain Landelius, anexpert witness for TOL, that it was the duty of themaster to report the episode to the ship’s owners nolater than 03.15 to 03.30 on 3 May. They wouldimmediately have communicated with the Japaneseauthorities.

13. In a careful and detailed judgment the trialjudge, at para 214, found that the master’s conductafter the grounding resulted in the loss of the ship-pers’ deck cargo. This was because had the Jap-anese coastguard been notified the judge found itwas highly probable that with its local expertise itwould have recommended reducing speed and mak-ing for the nearest sheltered anchorage with shelv-ing bottom in case beaching was required. A largebay to the north-north-west called Sukumo Wanmet all those criteria. At a point some eight nauticalmiles from Biro Shima it permits anchorage and isprotected to the north by hills of over 700 m. Thepilot book states that large vessels can anchor there.The sea bottom has a gradual slope from a depth ofsome 40 m and it is possible to beach vessels there.It could have been reached in about an hour atreduced speed. But the master disregarded his obli-gation to report and passed by the bay.

14. Furthermore, had the master reported thegrounding, Nippon Salvage, with salvage tugsnearby on 24 hour standby, would have been noti-fied much earlier. All the actions relating to salvagewould have started some five to six hours earlierthan they in fact did.

15. Hugh Williams J concluded:[197] Even allowing a certain leeway in those

hypothetical calculations, the appropriate conclu-sion is that salvors with pumps would have beenavailable to Tasman Pioneer within about twohours after the 1218 hrs photo, the Seiha MaruNo 2 with its major pumping capacity and heavyportable pumps would have been on site anddeploying pumps well before the 1530 hrs photo-graph and the Hayashio Maru No 2 would havearrived about an hour after that photograph wastaken.

[198] Even if that hypothesis is allowed a littlefurther latitude and the extra pumping capacitynot arrived until a little after the times men-tioned, the same conclusion would be appro-priate. The ship was only sinking relativelyslowly and accordingly, if the extra pumpingcapacity had not been deployed even up to the1550 hrs photograph condition or, possibly, evena little later, the plaintiffs’ on-deck cargo wouldnot have been inundated.It is common ground that neither the ship owner

nor the ship is liable for what Hugh Williams J at

para 181 found was “unwise” behaviour on the partof the master in choosing to take the shortcut. Thereason is contained in article 4.2(a) (see para 1above).

16. While the precise scope of the article is amatter of controversy which must be considered,there is no doubt that, the master having selectedthe narrow passage as what he considered to be alegitimate means of access to the Bungo Suido, thecarrier is entitled to the protection of article 4.2(a)in relation to the damage caused by the rock whichthe vessel struck. The “act, neglect and default ofthe master” did not entail liability on the owner,which was not personally at fault. See to like effectPresident of India v West Coast Steamship Co (ThePortland Trader) [1964] 2 Lloyd’s Rep 443 (USCourt of Appeals) where the vessel ran aground inthe Sulu Sea. Instead he instructed that the vesselsteam at some 15 knots to the north-west in order tojoin the standard track from which he had departedby the shortcut through the passage. He instructedthe second mate to make a false entry on the chartand to have recorded in the log that the vessel hadpassed to the west of Okino Shima. As it continuedto the north-west into the gale and 2 m seas itdeveloped a list to port which grew to 8 to 10degrees after 10 minutes as the vessel took onwater. The master continued this course for two anda half hours, before anchoring in a less protectedposition to the west of Shikoku.

The judge’s decision

17. Hugh Williams J found at paras 204 and 205that, had the master complied with his obligationsand duly reported the event, salvors would havereached the ship before the water level reached theon-deck cargo. The arrival of the salvors’ additionalpumping capacity would probably have saved thatcargo: at para 214. As it was, the ingress of waterincreased progressively to the extent that by thetime the salvors arrived the deck had sunk belowsea level, and the on-deck cargo was unable to besaved.

18. He accepted the evidence of the shippers’expert, Captain Goodrick, that the master’s claimedreason for not anchoring earlier — need to changeto another fuel — was a complete fabrication.

19. Hugh Williams J found that that was notsufficient for article 4.2(a) to apply. He found thatthe exemption does not apply unless the “act,neglect or default of the master” was bona fide inthe “navigation or management of the ship”. Thejudge’s careful reasoning should be reproduced:

[230] . . . the fact that the issue of good faithhas only infrequently been addressed in prece-dent cases may arise from the fact that the fidesof those responsible for the ship has not often



been challenged. Even so, judicial discussions asto whether the actions in contention were in“navigation” or in “management” of the ship andthus Art 4 R 2(a) applied appears to have beenbased on the underlying premise that, no matterinto which category the master’s actions fell,they must still have been undertaken in further-ance of the master’s paramount duty of safelycaring for the ship, cargo and crew.

[231] The Hague-Visby Rules imply such apremise. They require carriers to “exercise duediligence” (Art 3 R 1(a)) and rescind the exemp-tion for “want of due diligence” (Art 4 R 1).

[232] They require the carrier to “properly andcarefully load, handle, stow, carry, keep, care for,and discharge the goods carried” (Art 3 R 2).They exempt shippers from responsibility foractions without their “act, fault or neglect” (Art 3R 3). That the exemption in Art 4 R 2(a) is notabsolute is indicated by comparing the exemp-tion from responsibility under that Rule as con-trasted with exemption from “all liabilitywhatsoever” under Art 3 R 6. All of that presup-poses that the carrier’s intention or actions mustbe in furtherance of its obligations under theRules and in particular the obligation under Art 3R 2.

[233] In addition, authorities have addressedthe question of fides on occasions. The Star ofHope spoke of a master’s “honest intent to do aduty”, Boudoin spoke of a master’s “good faithjudgment”, Phelps, James & Co spoke of a mas-ter “acting bona fide” and, from a different viewof the matter, the theft of the storm valve andremoval of the access hatch in The Chyebassaand The Bulkes were acts of the crew so unre-lated to management as not to be characterised assuch. Further, in The Hill Harmony the Court ofAppeal spoke of the master having a “duty toreach a bona fide decision”. That issue does notappear to have been expressly addressed in theHouse of Lords but, though reversing the Courtof Appeal, there is no reason to suppose theirLordships departed from the Court of Appeal’sobservation about the master’s bona fides sincethere was little doubt the actions of the master ofThe Hill Harmony were taken in an honestthough mistaken view of what he was entitled todo in the navigation of the ship.

[234] There is accordingly both logic andauthority for the proposition that the “act, neglector default” of those in charge of the ship must bebona fide “in the navigation or in the manage-ment of the ship” to entitle the carrier to the Art4 R 2(a) exemption. There would seem to beevery reason to read a good faith requirementinto the Rule to entitle the carrier to qualify for

the immunity from responsibility the Rule pro-vides. That is the case irrespective of whether alack of bona fides is seen as underpinning entitle-ment to the exemptions provided by the Rules orwhether “navigation” or “management” which isnot conducted bona fide in accordance with themaster and crew’s paramount obligation to carefor the ship, cargo and crew safely is so antithet-ical to that paramount obligation and proper sea-faring practice as not to be regarded as qualifyingor amounting to “navigation” or “management”under the Rules.

[235] While it has been held that CaptainHernandez’s actions were in the navigation or inthe management of the Tasman Pioneer, it there-fore becomes necessary to consider whetherthey were bona fide for her navigation ormanagement.

[236] There can be little doubt that the mas-ter’s initial decision to use the passage east ofBiro Shima was motivated by good faith. He wasendeavouring to save time and keep to scheduleas the ship’s managers required. He had used thepassage before. Had it not been for the condi-tions, including the failure of the radar, and hisdecision to try to abort the passage, it may havebeen accomplished successfully.

[237] Even the decision to abort the passage,though probably arising from panic, should beseen as a navigational decision reached in goodfaith.

[238] The same cannot be said of the decisionsand actions taken by Captain Hernandez after thegrounding.

[239] What he did was earlier recounted. Whathe failed to do was take a number of the otheractions Captain Goodrick said a trained and con-scientious master would take in such situations.In particular, he never complied with his duty tonotify the coastguard of the casualty and theship’s position and condition. He also failed forwhat on his own admission was over two hours— and was probably longer — to comply withhis obligation to report the casualty to the ship’smanagers and, when he did report, he said noth-ing about the cause of the reported water ingress,nothing about the grounding, and minimized thedamage to the ship. Later Technomar telexesshow Captain Hernandez was persisting in his lieas they say the “master believes that vessel hit anunidentified object”.

[240] None of those actions can have beenmotivated by Captain Hernandez’s paramountduty to the safety of the ship, crew and cargo.None could have been motivated by his obliga-tions as a master, particularly the obligation to



report and take whatever steps were recom-mended to minimize the danger to life, to naviga-tion and avoid the risk of pollution. All thoseactions can only have been motivated by CaptainHernandez implementing a plan designed toabsolve himself from responsibility or blame forthe grounding and lend a veneer of plausibility tohis falsehood.

[241] It follows that while what happened justbefore the grounding and for several hours after-wards may have been an “act, neglect or defaultof the master . . . in the navigation or in themanagement of the ship” his actions did notamount to an “act, neglect or default” in the bonafide “navigation or in the management of theship”.20. In short, the judge concluded that, while the

conduct of the master occurred “in the navigation. . . of the ship”, it was performed in bad faith and

in breach of what he held to be an implied term ofarticle 4.2(a). He therefore gave judgment for theshippers against the carrier.

Submissions on appeal

21. For the carrier Mr Gray QC submitted thatthe judge was right to hold that conduct of themaster occurred “in the navigation . . . of the ship”but wrong to impute an obligation of good faith. MrRzepecky for the shippers contended to the con-trary. He further submitted that in any event theconduct did not occur “in the navigation . . . of theship”.

22. The shippers pleaded a written contract ofcarriage with TOL evidenced by a bill of lading andsubject to the Hague-Visby Rules.

23. TOL pleaded its standard terms and condi-tions, which included:

20. METHODS AND ROUTES OFTRANSPORTATION

The Carrier may at any time and withoutnotice to the Merchant:. . .

(d) proceed by any route at its discretion(whether or not the nearest or most direct orcustomary or advertised route) at any speedand proceed to or stay at any place or portwhatsoever once or more often and in anyorder;

It also pleaded article 4.2(a).24. The reply to the statement of defence

pleaded:Captain Hernandez’s Post Grounding

Misconduct3.1 Following the grounding of the Tasman

Pioneer, Captain Hernandez failed to take appro-

priate action for the safety of the ship, crew andcargo and to limit or avoid damage to thecargo.

Particulars(1) Proceeding to take the Tasman Pioneer

around the eastern side of Biro Shima Islandand into the inland sea;

(2) Failing to anchor immediately;(3) Continuing to steam into the inland sea

for at least 4 hours at a speed of approximately10 knots;. . .

(7) Failing to immediately alert the JapaneseCoastguard;. . .

(9) Failing to accurately report to the loca-tion of the grounding to the Japanese Coast-guard and the vessel’s management;. . .

(10) Failing to provide accurate informationas to the circumstances of the grounding in atimely manner;. . .

(12) Causing delay over the appointment ofNippon Salvage Company Limited whichmaintains a 24 hour, 365 per day watch at itsMoji Base;

(13) Steaming for an excessive length oftime and distance before finally anchoring;

(14) Placing the vessel’s hull under exces-sive pressure by continuing to steam at anexcessive speed under all of the circumstancesset out above, which increased the rate offlooding through the damage to holds 1 & 2.3.2 Captain Hernandez’s conduct following

the grounding referred to in paragraph 3.1 above,was intended to allow him to misrepresent and lieabout the true circumstances of the casualty so asto absolve himself from blame and in particularto hide his reckless decision to transit the insidechannel of Biro Shima Island in order to take ashort cut route . . .

Particulars(1) Captain Hernandez lied to the Japanese

Coastguard and the vessel’s owners about thetrue time of the casualty, stating that it hadoccurred at 03.55 hours on 3 May 2001;

(2) Captain Hernandez erased the courseplot from the relevant chart and replotted acourse for the vessel showing a route aroundthe eastern side of Biro Shima Island intendingto hide the fact of the actual route taken by thevessel;



(3) Captain Hernandez informed the ves-sel’s representatives that he had collided witha semi-submerged object, probably a con-tainer, instead of informing them that he hadrun the vessel aground on Biro Shima whiletravelling at a speed of 15 knots.

(4) Captain Hernandez lied about the cir-cumstances to the Japanese Coast guard, giv-ing a similar explanation to that referred to in(4) above.

(5) Captain Hernandez counselled deck offi-cers and crew to lie to the Japanese Coastguardand support his explanation about the circum-stances of the casualty;

(6) Captain Hernandez downplayed the trueextent of the damage to his vessel whichcaused the owners to delay in instructing Nip-pon Salvage and agreeing the terms of thesalvage.

3.3 None of the acts or omissions referred to inparagraph 3.1 and 3.2 above were decisionsmade by Captain Hernandez bona fide and for thenavigation or management of the ship.

3.4 As a result of Captain Hernandez [sic]misconduct referred to in paragraphs 3.1 and 3.2above, the condition of the ship and the amountof flooding into hulls was significantly worsenedcausing more extensive damage to the cargo onboard than would otherwise have occurred.

3.5 Had Captain Hernandez made bona fidedecisions for the management and navigation ofthe vessel under the circumstances, the floodinginto holds 1 and 2 would not have reached pastthe tweendecks in each hold. As a result, theplaintiffs’ cargo would not have been damaged.

Particulars

(1) Slowly moving the vessel to the nearbysheltered anchorages behind Kahiwa on theEastern side of Okino-shima or the bay east ofAsabie headland;

(2) Beaching the vessel in the same shel-tered area . . .

25. The carrier responded:

It . . . admits that following the groundingCaptain Hernandez did not:

(1) Anchor immediately but continued tosteam within Bungo Shido [sic], which is thebody of water that lies to the south of theentrance to the Japanese Inland Sea;

(2) Alert the Japanese coastguard or seekassistance from other vessels in the area;

(3) Accurately report the location of thegrounding to the Japanese coastguard or thevessel’s owners/managers.

The issue

26. The issue is whether the carrier is protectedby article 4.2(a) from the consequences of the mas-ter’s conduct following the collision with the rock.The issue raises a difficult and important questionof construction of the Hague-Visby Rules on whichthere is no binding authority and very limited guid-ance in the authorities.

The text of the rules

27. Articles 3.1 and 3.2, article 4.2(a), (b) and (q)and article 4.4 are reproduced at para 1. The crucialquestion concerns the scope of article 4.2(a).

28. Verbally the phrase “act, neglect or default”can be read broadly so as to embrace any kind ofconduct, even negligence. It can also be read aslimited to conduct which may be negligent or entailother breach of duty but does not extend to wilfulmisconduct.

29. The phrase “in the navigation or in the man-agement of the ship” may also be read broadly, asrelating to anything done with the navigation ormanagement of the ship. Or it may be read morenarrowly. Article 4.4 excludes from infringement“any deviation in saving or attempting to save lifeor property at sea or any reasonable deviation”. Itmay be inferred that other sorts of deviation removethe protection of article 4.

Approach to construction of the rules

30. In Great Metal China Metal Industries CoLtd v Malaysian International Shipping Corpora-tion Berhad (The Bunga Seroja) (1998) 196 CLR161 a majority of the High Court of Australia atpage 168 expressed the view that the Hague-VisbyRules must be read:

(1) as a whole;

(2) in the light of the history behind them;and

(3) as a set of rules devised by internationalagreement as regulating contracts governed byseveral quite different legal systems.

I consider that (1) and (3) are indisputable. (2)presents more difficulty.

31. With regard to (2), the 19th century ascen-dancy of the United Kingdom in shipping continueduntil after WWI. It remained influential in the draft-ing of the Hague Rules. But to what extent can theformer common law of England still be said toinform the interpretation of the rules? I have con-cluded that the rules are to be construed as a com-prehensive international convention, unfettered byany antecedent domestic law, and that the practice



of text writers and some judges to hark back to theold English common law is erroneous. But becausethe practice is deep-seated and relied upon byFogarty J it is necessary for us to outline brieflywhat we are departing from and how the HagueRules took a different course.

32. The former common law had classified car-riers by sea as common carriers: Liver Alkali Co vJohnson (1874) LR 9 Exch 338 at pages 340 and341. The carrier was thus strictly liable for damageor loss to cargo occurring in the course of a voyageunless it could establish both absence of negligenceon its part and that it was due to one of a narrowrange of excepted causes (act of God, act of publicenemies, shipper’s fault and inherent vice ofgoods).

33. But the British and most European courts andwhat later became courts of the Commonwealthviewed such risk allocation as a default rule apply-ing only in the absence of agreement to the con-trary. So, to avoid liability, carriers in England tookadvantage of the common law of contract rule thatparties could agree to exclude liability even fortheir own negligence (In re Missouri Steamship Co(1889) 42 Ch D 321). Common form clausesexcluded liability for deviation and barratry(defined in the Marine Insurance Act 1908, sched-ule 2, rule 11 as “every wrongful act wilfully com-mitted by the master”).

34. In the United States the federal courts heldthat such clauses were contrary to public policy (egCompania de Navigacion la Flecha v Brauer 168US 104 (1889) at page 117). By the Harter Act1893 (US) the United States prohibited clausesgranting exclusion of negligence. By the Shippingand Seamen Act 1903 New Zealand legislated tolimit the scope of contracting out; Australia fol-lowed in 1904 and Canada in 1910. In August 1924the International Convention for the Unification ofCertain Rules Relating to Bills of Lading (1924)120 LNTS 155 (the Hague Rules) was concluded.Its evolution is recounted in Professor Sturley’s TheLegislative History of the Carriage of Goods by SeaAct and the Travaux Preparatoires of the HagueRules (1990). By the start of World War II theoverwhelming majority of the world’s shipping wascommitted to the Hague Rules, which had receivedeffect by the enactment of a series of domesticstatutes including the Carriage of Goods by Sea Act1924 (UK), the Sea Carriage of Goods Act 1940and the Sea-Carriage of Goods Act 1924 (Cth). Theamending Hague-Visby Rules made minor changesin 1968, none of which is important for the pur-poses of this case. The Hague-Visby Rules receiveddomestic effect in the Carriage of Goods by Sea Act1971 (UK), though the corresponding Australianand New Zealand statutes were not enacted until1991 and 1994 respectively.

35. The practice of continued reference to theformer law resulted in a tension between The BungaSeroja’s second and third potential guides to inter-pretation. In Stag Line Ltd v Foscolo, Mango & CoLtd [1932] AC 328, in construing the Hague RulesLord Atkin correctly emphasised the internationalscope of the rules (at page 343):

For the purpose of uniformity it is . . . impor-tant that the Courts should apply themselves tothe consideration only of the words used withoutany predilection for the former law, always pre-serving the right to say that words used in theEnglish language which have already in the par-ticular context received judicial interpretationmay be presumed to be used in the sense alreadyjudicially imputed to them.36. In Gosse Millerd Ltd v Canadian Govern-

ment Merchant Marine Ltd [1929] AC 223 in con-sidering the concept of “management of the ship” inarticle 4.2(a) Lord Hailsham LC focused on Englishdomestic law, an approach with which must now beseen as anachronistic (at page 230):

The words in question first appear in an Eng-lish statute in the Act now being considered; butnevertheless they have a long judicial history inthis country. The same words are to be found inthe well known Harter Act of the United States,and as a consequence they have often been incor-porated in bills of lading which have been thesubject of judicial consideration in the Courts inthis country. I am unable to find any reason forsupposing that the words as used by the Legis-lature in the Act of 1924 have any differentmeaning to that which has been judiciallyassigned to them when used in contracts for thecarriage of goods by sea before that date; and Ithink that the decisions which have already beengiven are sufficient to determine the meaning tobe put upon them in the statute now underdiscussion.37. However useful in identifying the prove-

nance of a concept adopted in the rules, concentra-tion on judicial decisions from the pre-Hague eracarries risk of adopting a construction inconsistentwith its policies. Given the deliberate rejection ofthe former laissez-faire regime, that is especially soin the context of what is here the crucial expression“act, neglect or default . . . in the navigation or inthe management of the ship”.

38. In the sixth (1910) edition of Scrutton onCharterparties and Bills of Lading Sir TE Scruttonand FD MacKinnon stated:

Where an exception of negligence of the ship-owner’s servants is clearly expressed, full effectwill be given to it, so that even the most culpablerecklessness on their part will not render himliable.



They cited at page 216 Marriott v YeowardBrothers [1909] 2 KB 987 where it was held at page996 that the exception “any act, neglect, or default,whatsoever” of servants etc protected the carrieragainst even felonious acts by a servant. In Bulgarisv Bunge & Co Ltd (1933) 45 Ll L Rep 74 Mac-Kinnon J (as he had then become) was prepared atpage 81 to state as obiter that deliberate abandon-ment of a vessel by its crew constituted “act,neglect or default of the master . . . in the naviga-tion or in the management of the vessel” fromwhich article 4.2(a) would protect the shipowner.

39. I accept the submission of Mr Gray QC forthe appellant that certainty is a high interest incommercial matters. As Lord Mansfield observedin Vallejo v Wheeler (1774) 1 Cowp 143; 98 ER1012 at page 1017:

In all mercantile transactions the great objectshould be certainty: and therefore, it is of moreconsequence that a rule should be certain, thanwhether the rule is established one way or theother. Because speculators in trade then knowwhat ground to go upon.40. That passage was adopted in Jindal Iron and

Steel Co Ltd v Islamic Solidarity Shipping Co Jor-dan Inc (The Jordan II) [2005] 1 WLR 1363 by theHouse of Lords who placed at the forefront of theirreasons for dismissal of the appeal the fact that aparticular construction of article 3.2 had been thesubject of a decision of that House in 1956.

41. No doubt for that reason two masters ofcommercial law, Sir Guenther Treitel and ProfessorReynolds, have endorsed the result of Marriott vYeoward without considering citation to be neces-sary. See Carver on Bills of Lading, 2nd Edition,2005, at para 9-211: “it seems that the exceptionextends even to a wilful or reckless act of anyperson within the [4.2(a)] list”. Likewise Cooke andothers, Voyage Charters, 3rd Edition, 2007, state atpara 85.264: “[i]ntentional faults, such as barratry. . . may well . . . fall within the breadth of the

words”.42. But here there are, in my respectful opinion,

four related reasons why it is insufficient in thiscase simply to rely on a Marriott v Yeowardapproach.

43. The first is that the raison d’etre of the HagueRules was to depart to a significant degree from thelaissez-faire of the common law and to prohibitexorbitant exemption clauses. So there should be noassumption that the law remains unaltered.

44. The second is that the narrow focus on textwithout regard to context, adopted by Scrutton LJin Gosse Millerd Ltd v Canadian Government Mer-chant Marine Ltd [1928] 1 KB 717 (CA), has beenfirmly rejected in favour of the often cited dissent-ing judgment of Greer LJ in that case, confirmed on

appeal from the Court of Appeal’s decision ([1929]AC 223) and relied upon by Hugh Williams J in thepresent case. It is to similar effect as the approachof Wright J In Foreman and Ellams Ltd v FederalSteam Navigation Co Ltd [1928] 2 KB 424, holdingthat (at page 439):

A negligence or exception clause in a statute,as in a contract, ought . . . to be strictlyconstrued.Greer LJ stated at pages 743 and 744:

I think it is incumbent on the Court not toattribute to Art IV, r 2(a), a meaning that willlargely nullify the effect of Art III, r 2, unlessthey are compelled to do so by clear words. Thewords “act, neglect or default in the managementor navigation of the ship”, if they are interpretedin their widest sense, would cover any act doneon board the ship which relates to the care of thecargo, and in practice such an interpretation, if itdid not completely nullify the provisions of ArtIII, r 2, would certainly take the heart out of thoseprovisions, and in practice reduce to very smalldimensions the obligation to “carefully handle,carry, keep, and care for the cargo”, which isimposed on shipowners by the last mentionedRule. In my judgment, a reasonable constructionof the Rules requires that a narrower interpreta-tion should be put on the excepting provisions ofArt IV, r 2(a). If the use of any part of the ship’sappliances that is negligent only because it islikely to cause damage to the cargo is within theprotection of Art IV, r 2(a), there is hardly any-thing that can happen to the cargo through thenegligence of the owner’s servants that the ownerwould not in actual practice be released from. Tohold that this is the effect of Art IV, r 2(a), wouldreduce the primary obligation to “carefully carryand care for the cargo during the voyage” to anegligible quantity. In my judgment, the reason-able interpretation to put on the Articles is thatthere is a paramount duty imposed to safely carryand take care of the cargo, and that the perform-ance of this duty is only excused if the damage tothe cargo is the indirect result of an act, orneglect, which can be described as either (1)negligence in caring for the safety of the ship; (2)failure to take care to prevent damage to the ship,or some part of the ship; or (3) failure in themanagement of some operation connected withthe movement or stability of the ship, or other-wise for ship’s purposes. It is worthwhile notingthat Art IV, r 2(a), is not directed to acts, neglectsor defaults in the course of management of theship, but acts, neglects or defaults in the manage-ment of the ship. All the cases in our Courtswhere the ship has been held to be excused comeunder one or other of these heads.



45. The immediate effect of the judgment was tomake the distinction, now accepted in Europeandecisions on article 4.2(a), between what in Frenchis called “faute nautique” for which the carrier isexempted and “faute commerciale” for which it isheld liable. But this appeal raises the questionwhether that is a sufficient distinction.

46. The third is that modern statutory construc-tion is purposive. Expressed in terms of section 5 ofthe Interpretation Act 1999, regard must be had notonly to text but to purpose. And consequences mat-ter. As was acknowledged in Jindal Iron and Steel,even where there is high relevant authority to thecontrary (at page 1370):

. . . the House might . . . be persuaded . . . todepart from an earlier decision where that deci-sion has been demonstrated to work unsatisfac-torily in the market place and to producemanifestly unjust results.

47. The fourth is that in this case the domesticlegislation gives effect to an international conven-tion. I adopt the formulation by Kirby J in TheBunga Seroja:

[137] The approach of this Court to the con-struction of an international legal regime such asthat found in the Hague Rules must conform tosettled principle. Reflecting on the history andpurposes of the Hague Rules, the Court shouldstrive, so far as possible, to adopt for Australiancases an interpretation which conforms to anyuniform understanding of the Rules found in thedecisions of the courts of other trading countries. . . It would be deplorable if the hard won

advantages of international uniformity, securedby the Rules, were undone by serious disagree-ments between different national courts . . . What is at stake is not merely theoretical sym-metry in judicial interpretation. There is also thepractical matter that insurance covers mostlosses occurring in the international carriage ofgoods by sea. It is therefore important, so far aspossible, that the parties and their insurersshould know in advance who will bear the lossand thus who should carry the direct cost ofinsurance premiums . . . Disparity of outcomesand uncertainty about the Rules produce costlylitigation without positive contribution to thereduction of overall losses to cargo. This said,the achievement of a uniform construction of aninternational standard is often elusive . . .

[138] In construing a text such as the HagueRules, this Court, to the greatest extent possible,should prefer the construction which is most con-sistent with that which has attracted generalinternational support rather than one which rep-resents only a local or minority opinion . . . Thatis a reason why it would be a mistake to interpret

the Hague Rules as a mere supplement to theoperation of Australian law governing contractsof bailment. That law, derived from the commonlaw of England, may not be reflected in, or iden-tical to, the equivalent law governing carriers’liability in civil law and other jurisdictions. TheHague Rules must operate in all jurisdictions,whatever their legal tradition. Similarly, caremust be taken in importing into decisions aboutthe Hague Rules, judicial authority derived fromthe time before those Rules were adopted.(Emphasis added.)

48. There is no authority which discusses thekind of situation with which this appeal is con-cerned. It is therefore necessary to identify andapply the principles underlying the rules. TheVienna Convention on the Law of Treaties (23 May1969) 1155 UNTS 331 requires that a treaty beinterpreted in good faith in accordance with theordinary meaning to be given to the terms of thetreaty in their context and in the light of its objectand purpose (article 31.1). Recourse may be had tosupplementary means of interpretation when theinterpretation according to article 31 leads to ambi-guity or obscurity or leads to a result which ismanifestly absurd or unreasonable (article 32). Aconstruction which allowed one party wilfully todefeat the objects of the other would not complywith the Convention.

49. The Hague-Visby Rules display a plain intentto strike a sensible balance between the competinginterests of shipper and carrier. One starts, likeGreer LJ in Gosse Millerd Ltd v Canadian Govern-ment Merchant Marine Ltd [1928] 1 KB 717, witharticle 3.2. The carrier has a primary responsibilityproperly and carefully to carry, keep, care for, anddischarge the goods carried. But that obligation issubject to article 4. That exempts the carrier fromloss resulting from unseaworthiness unless causedby want of due diligence on the part of the carrier tomake the ship seaworthy. Then, vitally, article4.2(a) exempts the carrier from liability for loss ordamage arising or resulting from:

Act, neglect or default of the master, mariner,pilot, or the servants of the carrier in the naviga-tion or in the management of the ship

50. What is the true construction of that sub-clause? It can be read broadly as in Marriott vYeoward; or narrowly so that “act . . . or default”are read eiusdem generis with “neglect” and notextended to reckless, let alone wilful, misconduct;and it can be read purposefully in the light of otherprovisions of the rules. For example, article 4.4states:

Any deviation in saving or attempting to savelife or property at sea or any reasonable deviationshall not be deemed to be an infringement or



breach of this convention or of the contract ofcarriage, and the carrier shall not be liable forany loss or damage resulting therefrom.

51. It is reasonable to infer that deviation fallingoutside the protection of that provision does con-stitute infringement or breach. Yet such deviationmay well be the result of act or omission of themaster or crew. It follows that the broad languageof article 4.2(a) is to be read down as not conferringimmunity at least for that kind of conduct. That wasthe result in Whistler International Ltd v KawasakiKisen Kaisha Ltd (The Hill Harmony) [2001] 1 AC638 (HL), where the master’s adoption of a longerrhumb line course instead of the shorter great circlecourse was held not to be justifiable in terms ofarticle 4.2(a).

52. It might be argued that, because there thecharterparty required the master to prosecute hisvoyages with the utmost despatch, The Hill Har-mony is distinguishable from the present case,where the charterparty conferred discretion to devi-ate. But a court is reluctant to read an exemptionclause as permitting conduct inconsistent with themain purpose of the contract. A contract is to beread as a whole and any deviation, to be permis-sible, must be consistent with the contract voyage:Glyn v Margetson & Co [1893] AC 351. The courtwill be slow to give an exemption clause such wideambit as to effectively empty of content the obliga-tions of the party relying upon it: Suisse AtlantiqueSociete d’Armement Maritime SA v NV Rotter-damsche Kolen Centrale [1967] 1 AC 361 at page482; Tor Line AB v Alltrans Group of Canada Ltd(The TFL Prosperity) [1984] 1 WLR 48.

53. Lord Steyn has argued that there has been ashift from literal methods of interpretation of con-tracts towards a more commercial approach: SiriusInsurance Co (Publ) v FAI General Insurance Ltd[2004] 1 WLR 3251 at para 19. He cited the exam-ple of the tyrant Temures who, having promised agarrison that no blood would be spilt if they surren-dered, buried them all alive. In construing a statu-tory contract of the present kind a sensible andproportionate approach is required.

54. Certainly, as the cases show, for the most partthe courts must defer to the conduct of the master.The Hague-Visby Rules, hammered out by inter-national expert participants and widely endorsed indomestic legislation, have secured internationalassent to a trade-off between the competing inter-ests of shippers and ship-owners. Article 4.2(a) isnot to be read narrowly so as to substitute secondguessing by lay judges for navigational decision-making by expert mariners.

55. Nor however is it to be read so widely as torender meaningless the obligation of the carrierunder article 3.2. To exonerate a carrier from con-

duct of similar quality to deviation, namely conductthat is radically at odds with the article 3.2 obliga-tion, by sacrificing the shipper’s interests forwholly incompatible selfish interests of the master,goes over the boundary of the article 4.2(a)protection.

56. To treat the former laissez-faire jurisprudenceas settling the interpretation of an international con-vention designed at least in part to do away with thelaissez-faire approach would carry The Bunga Ser-oja’s second guide further than is reasonable. Acentury after the sixth edition of Scrutton there ismuch to be said for the argument that, in construingarticle 4.2(a), the time has come to bury the pre-Hague Rules authorities. In today’s conditions thecontra proferentem approach of Wright J and GreerLJ has developed into a principle that broadlyexpressed exemptions are to be read down to dosubstantial justice in accordance with the apparentpurpose of the contractual legislation read as awhole.

57. Here it is now common ground that the car-rier is protected by article 4.2(a) in respect of lossor damage resulting from collision with the rock.Hugh Williams J found:

[236] There can be little doubt that the mas-ter’s initial decision to use the passage east ofBiro Shima was motivated by good faith. He wasendeavouring to save time and keep to scheduleas the ship’s managers required. He had used thepassage before. Had it not been for the condi-tions, including the failure of the radar, and hisdecision to try to abort the passage, it may havebeen accomplished successfully.58. The British Admiralty Pilot described the

narrow channel between Biro Shima and OshimeHana as “deep and . . . used by large vessels”.Having successfully traversed it previously, themaster’s decision to employ it, albeit in quite unsat-isfactory conditions, could not be described asdeliberately courting hazard and therefore reckless.Still less was the grounding deliberate. Whatever itstrue construction, there is no authority which wouldregard such conduct as infringing article 4.2(a). Thelaw must give effect to the fact that the resolution ofa deep difference between shippers and shipownerswas by a broadly expressed exemption to the rule ofarticle 3.2.

59. The subsequent conduct is another matter andcan only be described as outrageous. It was funda-mentally at odds with the purpose of both the con-tract of carriage and the legislative regime designedto achieve a sensible compromise between compet-ing interests. The judge’s conclusion was clear:

[240] None of those actions can have beenmotivated by Captain Hernandez’s paramountduty to the safety of the ship, crew and cargo.



None could have been motivated by his obliga-tions as a master, particularly the obligation toreport and take whatever steps were recom-mended to minimize the danger to life, to naviga-tion and avoid the risk of pollution. All thoseactions can only have been motivated by CaptainHernandez implementing a plan designed toabsolve himself from responsibility or blame forthe grounding and lend a veneer of plausibility tohis falsehood.60. I am satisfied that such behaviour, carried out

for the selfish purposes of the master, and wholly atodds with the carrier’s obligations under article 3.2,is not conduct “in the navigation or in the manage-ment of the ship” within the meaning of article4.2(a). While the conduct is less extreme than theftsby stevedores, which in Brown & Co Ltd v T & JHarrison (1927) 27 Ll L Rep 415 at page 418MacKinnon J held not to be “in the navigation or inthe management of the ship”, the point is similar.The decision was upheld on appeal and followed byMcNair J in Leesh River Tea Co Ltd v British IndiaSteam Navigation Co Ltd (The Chyebassa) [1966] 1Lloyd’s Rep 450.

61. Such a conclusion is consistent with the judg-ment of the Cour d’appel de Rouen of 26 May 1970cited in Tetley, Marine Cargo Claims, 4th Edition,2008, at page 959 and reported in JurisprudenceFrancaise at page 667. There the vessel was dam-aged in a collision and the captain, instead ofbeaching the ship, spent valuable hours trying toavoid salvage costs. That was held not to be con-duct in the management of the ship.

62. The conclusion is sufficient to resolve thiscase. There is accordingly no need to address fur-ther the interesting question whether, as leadingtexts suggest, article 4.2(a) would protect the carrieragainst reckless or even deliberate misconduct suchas barratry. But it may be thought unlikely that amodern court would endorse the dicta in Bulgaris vBunge.

63. Nor is it necessary to examine what part, ifany, concepts of good faith may play in such cases.That topic was the subject of a Symposium of theResearch Centre for Business Law, the Universityof Auckland with essays by distinguished contribu-tors: Bigwood (ed) (2005) 11 NZBLQ 371. At para233, Hugh Williams J cited a number of Hague-Visby Rules judgments which refer to conduct asbeing in good faith. My inclination is to regard lackof good faith as bearing on the wider issue ofwhether the conduct takes the carrier outside theterms of its statutory and contractual obligationsrather than the approach of Hugh Williams J, totreat good faith as itself an implied term of therules. But in the event the result is the same.

64. While not part of the reasoning which has ledto my conclusion it may be noted that the rule inarticle 4.2(a) is to be reversed by the new UnitedNations Convention for the Carriage of GoodsWholly or Partly by Sea (2009). The GeneralAssembly adopted the Convention on 11 December2008. It will open for signature in September 2009in Rotterdam, and the rules contained in it will beknown as the “Rotterdam Rules”. They will takeeffect upon ratification by 20 states, and representthe result of several years’ work by the UnitedNations Commission on International Trade Law.The new Convention is less favourable in manyaspects to carriers than are the Hague-Visby Rules.Chapter 5 of the Convention deals with liability ofthe carrier for loss, damage or delay. Article 17provides:

Basis of liability1. The carrier is liable for loss of or damage to

the goods, as well as for delay in delivery, if theclaimant proves that the loss, damage, or delay,or the event or circumstance that caused or con-tributed to it took place during the period of thecarrier’s responsibility as defined in chapter 4[being the period from receipt to delivery ofgoods].

2. The carrier is relieved of all or part of itsliability pursuant to paragraph 1 of this article ifit proves that the cause or one of the causes of theloss, damage, or delay is not attributable to itsfault or to the fault of any person referred to inarticle 18 [which refers to the master].. . .

4. Notwithstanding paragraph 3 of this article,the carrier is liable for all or part of the loss,damage, or delay:

(a) If the claimant proves that the fault ofthe carrier or of a person referred to in article18 caused or contributed to the event or cir-cumstance on which the carrier relies; or

(b) If the claimant proves that an event orcircumstance not listed in paragraph 3 of thisarticle contributed to the loss, damage, ordelay, and the carrier cannot prove that thisevent or circumstance is not attributable to itsfault or to the fault of any person referred to inarticle 18.Article 18 provides:Liability of the carrier for other personsThe carrier is liable for the breach of its obli-

gations under this Convention caused by the actsor omissions of:

. . . (b) The master or crew of the ship;. . .



Decision

65. I would dismiss the appeal.66. For the reasons given by Chambers J I would

allow the cross-appeal.67. The respondents should have costs for a com-

plex appeal. I would certify for second counsel.68. The case should be referred back to the High

Court to deal with any outstanding matters.

Justice CHAMBERS:TOL’s appeal

69. I agree with Baragwanath J, for the reasonshe gives, that TOL’s appeal must be dismissed. Inparticular, I endorse Baragwanath J’s approach tothe construction of the Hague-Visby Rules. In myrespectful view, it is erroneous to place any weightnowadays on the deliberations of the proceedings ofthe Hague Conference in August to September1921 as a guide to how the rules should today beinterpreted. Over 80 countries have now adoptedthe rules in some form or another; most of themwere not represented at the 1921 conference andaccordingly could not remotely be said to havecommitted in any way to the travaux preparatoires.Further, the circumstances surrounding shippingand the carriage of goods by sea are today quitedifferent from those pertaining nearly a centuryago.

The New Zealand Dairy Board’s cross-appeal:introduction

70. Part of the claim against TOL brought by theNew Zealand Dairy Board, the third respondent anda cross-appellant, related to damage to dairy prod-ucts stowed in refrigerated containers (reefers) onhatches 3 and 4. These products, unlike other goodson the ship, were not damaged as a result of immer-sion in seawater; rather, they were damaged byheat, as a result of the reefers being left off-powerat some stage during the voyage. Of the Board’stotal claim of US$498,727, US$187,301 repre-sented the value of the heat-damaged dairyproducts.

71. At trial there was an issue as to when the heatdamage had occurred. The Board argued the dam-age occurred before the grounding, as a result of amalfunction of the generator (genset) put on thedeck for the purpose of supplying power to thereefers. TOL submitted the damage occurred afterthe grounding as a result of action by the salvors.The salvors, it was argued, had had to turn offelectricity supply to the reefers as part of the sal-vage operation.

72. Hugh Williams J held that “no . . . conclu-sion [could] be safely reached”: at para 304. Heseems to have inclined towards the view that the

damage was probably caused after the grounding;he did, after all, describe the alternative thesis as“speculative”: at para 304. In any event, His Hon-our ruled that the Board’s claim was “not madeout”: at para 305.

73. From that determination, the Board hasappealed.

Issues on the cross-appeal

74. Three issues arise on the cross-appeal. Thefirst is when the damage occurred. Mr Rzepecky,for the Board, reiterated the submission he hadmade in the High Court that it was probable thedamage had occurred prior to the grounding. But,he submitted it did not in fact ultimately matterwhether he was right on that; whenever the damageoccurred, TOL was responsible to compensate forit. We think this point does have to be resolved,however, as TOL accepts it would be liable if thedamage occurred pre-grounding. If it happenedafterwards, TOL relies on article 4.2(a) by way ofdefence.

75. For the reasons which follow, I find the dam-age probably occurred after the grounding. Thatleads to the second issue: what caused thedamage?

76. The third issue is: has TOL a defence?

When did the damage occur?

77. According to Mr Gray, the fact there was anissue as to when the damage occurred came to lightonly at the start of the trial. He told us that his sidehad not even realised heat damage was alleged. Hisside had believed that the entire case involved waterdamage. While it is true the schedule to the Board’sstatement of claim did refer to “heat damage” withrespect to some products, I can well understandwhy TOL was taken by surprise. The way the claimitself was structured indicated the damage hadarisen from flooding following the grounding. Para-graph 8.1 referred to the grounding. Paragraph 8.2referred to the breach of Tasman Pioneer’s hull andthe eventual flooding of its holds. Paragraph 8.3then refers to “the plaintiffs’ various cargoes” being“lost or damaged”. A reasonable reading of thatpleading would have led one to conclude that theloss or damage arose from the flooding of the hull,which in turn arose from the grounding.

78. Be that as it may, TOL, both at trial andbefore us, did not take any pleading point to theeffect that it was not open to the Board to allege theheat damage had occurred prior to the grounding.But the state of the pleadings is nonetheless rele-vant to a complaint Mr Rzepecky made both at trialand before us. This complaint related to TOL’s


CHAMBERS J] The “Tasman Pioneer” [NZCA

alleged failure to discover the relevant Partlowcharts. The refrigeration unit on each reefer con-tainer has a temperature recording device whichproduces a chart called a Partlow chart. Thisrecords the refrigeration unit’s operation duringtransit, including the constant operating tempera-ture of the unit. Mr Rzepecky submitted that, hadthe Partlow charts been discovered, the Boardwould have been able to find out whether the refrig-eration units had malfunctioned prior to the ground-ing. Mr Rzepecky invited us to draw an inferencefrom TOL’s failure to discover the charts that therefrigeration units had failed.

79. I am not prepared to draw such an inferencefor these reasons. First, given the pleadings, I canwell understand why TOL would have regarded thepre-grounding Partlow charts as irrelevant andtherefore non-discoverable.

80. Secondly, if the Board had considered themrelevant, it could have sought additional discoveryprior to trial. It did not do so.

81. Thirdly, it could have introduced the charts attrial, either by means of cross-examination of arelevant TOL witness or by serving a subpoenaduces tecum. It did not take either step.

82. Fourthly, it transpired that the general aver-age surveyors, who represented both HyopsungShipping Corporation and the respondents, didreview the Partlow charts on 13 June 2001. Thesurveyors, in their report of 16 November 2001,referred to those charts. That report was part of thevoluminous common bundle of documents, but noone referred it to the judge. Probably, therefore, itdid not become part of the evidence. Whether it didor not, the crucial point is that the Partlow chartshad been available to the Board.

83. In those circumstances, it would be quitewrong to draw an inference adverse to TOL’s inter-ests from the absence of these charts.

84. Before I review the evidence, I record onematter on which counsel were agreed. That is, TOLhas the onus of establishing it has a defence inrespect of the damage caused to the relevant cargo.TOL’s concession was properly made: see Girvin,Carriage of Goods by Sea, 2007, at para 26.43 andAikens and others, Bills of Lading, 2006, at para10.151. Article 3.2 states that subject to the provi-sions of article 4, the carrier shall properly andcarefully load, handle, stow, carry, keep, care for,and discharge the goods carried. TOL acknowl-edged, both at trial and before us, that, if the heatdamage had been caused prior to the grounding,TOL would have no defence under article 4.2(a) asthe damage would not have arisen or resulted from“act, neglect or default . . . in the navigation or inthe management of the ship”. TOL did not pleadany other article 4.2 exception. For this reason, it

was incumbent on TOL to establish first that thedamage probably occurred after the grounding.

85. Unfortunately, the evidence as to when thepower was off is unclear. But, in the end, Mr Grayhas satisfied me that the heat damage was probablycaused after the grounding.

86. First, it is clear from the very detailed logkept by Captain Kuroki, the salvage master, thatbetween 3 and 10 May (ie following the grounding)power supply to the reefers was erratic. His evi-dence was that some of the power cables to thereefers had had to be cut away as they had beendamaged by the swell. It had not been possible toutilise the ship’s own generators as there had beena need to reduce the consumption of diesel oil beingtaken from the settling and service tanks.

87. Secondly, Captain Landelius, a master mari-ner fulfilling the role of Special Casualty Repre-sentative on this occasion, arrived on the salvagescene on 10 May 2001. When he arrived, the gen-erator which was supposed to provide power to therefrigerated containers was not on the deck. He wastold it had been removed by the salvors, but he didnot know the reason. He immediately asked thesalvage master to have the generator brought backonboard. That was done the following day, after thebeaching. After the generator was hooked up again,it worked satisfactorily. The relevance of his evi-dence for present purposes is that it confirms therewas a period after the grounding when the reefergenerator was not in place. The Board’s counsel didnot cross-examine the captain on this evidence.

88. Thirdly, there was in evidence a detailedreport from Clancey Vanguard Ltd, loss adjustersretained for the purpose of adjusting general aver-age, particular average, and the claim on the Pro-tecting and Indemnity Association. The partiesagree this report formed part of the High Courtrecord pursuant to rule 441O(4) of the (then) HighCourt Rules. Clancey Vanguard carefully reviewedthe salvors’ records as to when power was “turnedoff” with respect to each reefer container and then“turned on” again. Clancey Vanguard’s conclusionon this topic was as follows:

The dates and times are somewhat diverse, butdo indicate that broadly speaking the power isrecorded as having been “turned off” sometimeduring 3rd May and broadly restored on oraround 10th May. The Daily Site Reports issuedby the salvors, The Nippon Salvage Co Ltd,copied later, indicate that the salvage masterboarded the vessel at 1928 on 3rd May, by whichtime it appears that most if not all of the contain-ers’ power had been turned off. There are norecords in the salvors’ detailed daily reports toindicate that they required power to the contain-ers to be restricted for purposes connected with


[CHAMBERS JThe “Tasman Pioneer”NZCA]

the salvage operations, until 6th May when theyreport at 1533 that “one of the two generatorswas stopped to save consumption of diesel oil. . . ” and at 1600 they note that “generator of the

vessel was used to supply power to 7 reefercontainers on the deck of No 4 cargo hold byrequest of the vessel’s superintendent”.

We enquired of Mr Goran Rudelius, of TheSwedish Club’s Hong Kong office, who attendedthe casualty from 4th May for his recollection ofevents surrounding the power to the reefer con-tainers. He provided us with a draft statementissued by the vessel’s chief officer at Kokura inMay 2001, in which he reports that the vessel’sgenerators were running when the crew aban-doned the vessel late on 3rd May. He furtherreports that these were still running when themaster, chief engineer, second engineer and hereturned to the vessel with the salvors early on4th May. He also comments: “We had a largenumber of reefer containers on deck. To supplythem with electricity the charterers had placed abig diesel generator in a container on hatch No 3.This power pack worked but the cables to thecontainers were now running through the waterat the forward part of hold No 3 and it wasdangerous to use it. We stopped it and instead weplugged in as many reefer containers as possibleon the ship’s power. The cables then came fromthe aft part and did not run through water”.

Mr Rudelius has confirmed that “the cablesfrom the charterers’ power pack were runningthrough water and it was deemed dangerous touse them. Thus the power pack was stopped andpower was supplied to the reefer containers fromthe ship’s generator”.

The available evidence therefore indicates thatthe power to the containers was not restricted toassist in the salvage operations, either at theinsistence of the salvors or at the initiative of anyperson in authority. Rather the facts point to thepower being interrupted due to the charterers’generator cables running through water; attemptsto run the containers from the ship’s generatormay or may not have been successful.89. The only real evidence suggesting the dam-

age may have occurred before the grounding comesin some telexes Captain Hernandez sent in theperiod 20 April to 25 April. In those telexes, Cap-tain Hernandez had recorded that the “deck genset”was stopping from time-to-time, “due to high tem-perature”. He requested that Power Hire, the con-tractors responsible for the machinery, look at theproblem when the ship reached Yokohama.Whether it was repaired at Yokohama is not appar-ent from the evidence given at trial.

90. While it is certainly possible, on the evi-dence, that the heat damage was caused before thegrounding, the more likely explanation is that itoccurred after it, in the prolonged period when weknow the power was off. Prior to the grounding, theproblem appears to have been more intermittent;although the power was cutting off, it appears thatCaptain Hernandez and his crew had been able torestart the generator following the stoppages.

What caused the damage?

91. Mr Gray submitted that, on the evidence,there were two explanations as to why the powerhad been cut off following the grounding. The firstpossibility was that the power was turned off toconserve it for the purpose of salvaging the vesseland its cargo. He submitted that the diesel needed tomaintain power supply was in limited supply as itcould not be pumped from below given the trim ofthe vessel. Obviously, he submitted, the ship’spower was needed to enable pumping of seawaterinto aft ballast tanks and out of numbers 1 and 2holds, which were full of seawater as a result of thegrounding.

92. The alternative explanation, he submitted,was that the generator had to be turned off due to itscables running in water, rendering it dangerous.Either way, he submitted, the loss fell within thedefence available to TOL under article 4.2(a).

93. I find it impossible on the evidence to workout exactly why the generators were turned off orremoved. I suspect the reason why the evidence isskimpy is that, as I have said, TOL was rather takenby surprise on this issue: see above at para 77. Onbalance, the more likely explanation appears to bethe concern that the cables from the charterers’power pack were running through water. This led inturn to the power pack being stopped (and thenremoved), with power being supplied to the reefercontainers, but only after a time, from the ship’sgenerator: see the Clancey Vanguard report, quotedabove at 88. It would certainly seem, however, fromthe evidence of Captain Landelius that, by 10 May,the reefers were off-power, as otherwise he wouldnot have been so concerned to insist that power berestored.

Has TOL a defence?

94. If my analysis above is correct, then theprincipal reason why the reefers went off-powerafter the grounding is that seawater reached decklevel, rendering the generator unsafe to use. If thatis right, then TOL’s problem is Hugh Williams J’sfinding that seawater reached deck level onlybecause of Captain Hernandez’s post-groundingconduct. Hugh Williams J’s crucial finding of factwas set out at para 214 of his judgment:


CHAMBERS J] The “Tasman Pioneer” [NZCA

In the light of all those matters, the answermust be that the plaintiffs have proved that earlyand proper notification by Captain Hernandez tothe authorities would likely have resulted, hypo-thetically, in their on-deck cargo not being lostthrough water damage. There would have beensignificant pumping capacity additional to theship’s pumps available and progressivelydeployed before the sea level reached on-deckcargo.95. Once again, therefore, this damage was a

direct consequence of Captain Hernandez’s post-grounding conduct, which Baragwanath J hasrightly described, as did the trial judge, as “outra-geous”: at para 59 above. Just as TOL is not entitledto article 4.2(a) protection for water-damagedgoods, nor is it entitled to protection for heat-dam-aged goods. All the damage is a consequence ofCaptain Hernandez’s post-grounding actions; butfor them, seawater would never have reached decklevel.

96. I appreciate this is a different conclusionfrom that reached by Hugh Williams J. With respectto him, I have not been able to work out exactlywhy he found in TOL’s favour on this point. MrRzepecky’s explanation is that the judge reversedthe onus of proof, and wrongly considered it wasfor the Board to prove exactly why the loss hadoccurred. Certainly, some of the statements in thispart of the judgment and in particular in para 304 dosuggest the judge thought the onus of proof lay onthe Board. So perhaps that is the explanation; cer-tainly it is clear the judge was far from certain as toexactly what had happened with respect to powersupply to the reefers following the grounding.

97. As I have already indicated, TOL acceptedbefore us that it bore the onus of proving it wasentitled to rely on the article 4.2(a) exception inrespect of the damaged goods; in other words, itbore the burden of proving that the damage wasprobably due to an “act, neglect, or default . . . inthe navigation or in the management of the ship”.Like the trial judge, I have found the evidencedifficult to analyse, but in the end have concludedthat the loss of power to the reefers was probablythe consequence of seawater at deck level, which inturn points to the cause being Captain Hernandez’soutrageous conduct. In those circumstances, thearticle 4.2(a) defence is not available, and theBoard’s claim should have succeeded.

98. As it turns out, therefore, it does not actuallymatter, on my view of the case, whether the heatdamage occurred prior to the grounding or after it.If it occurred prior, the article 4.2(a) defence isplainly not available. If it occurred after, I havefound that the heat damage was probably caused byCaptain Hernandez’s outrageous conduct. Either

way, TOL does not have a defence to its failure toproperly look after these particular goods.

99. For these reasons, I would allow the cross-appeal.

Justice FOGARTY:100. I do not agree with my colleagues. I would

allow the appeal and dismiss the cross-appeal. I donot disagree with any of the findings of fact, at trial,which have not been altered on appeal. I agree thatit is essential to read article 4.2(a) as a qualificationonly of the principal duty on the carrier in article3.2.

The appeal

The appellant’s submissions

101. The principal argument of counsel for theappellant is that the words “act, neglect or default”,as a matter of ordinary language, covers more thanmere negligence, and extends to intentional faults,including recklessness or wilful default. Mr Grayargued that Hugh Williams J had fallen into an errorof law by failing to adequately address the histor-ical background to the making of these rules; thathe did not analyse the rules as a means of allocatingrisk between the carrier (rather than the master) andcargo interests, ie the shippers. He argued that thejudge had incorrectly applied the decisions of theHouse of Lords and Court of Appeal in WhistlerInternational Ltd v Kawasaki Kisen Kaisha Ltd(The Hill Harmony) [2001] 1 AC 638 (HL) and[1999] 4 All ER 199 (CA).

The respondents’ submissions

102. The respondents supported the judgment ofHugh Williams J that the master has a duty to actbona fide in the management and navigation of thevessel. Mr Rzepecky submitted that there is a dif-ference between acts intentionally but misguidedlydone in or incidental to the management or naviga-tion of the vessel and acts done without any regardwhatsoever to the management or navigation of thevessel. Relying on The Hill Harmony he argued thatan act of navigation requires the master to makedecisions which are bona fide and in good faith forthe safety of the ship, its crew and cargo. Similarly,decisions not made bona fide will not be recognisedas decisions made “in” the management of theship.

103. Conscious that it might be difficult to per-suade this court to imply a term into the rules, letalone a qualification of bona fide conduct, Mr Rze-pecky also restated the argument in a way whichfocused on the purpose of the rule. In this way heendeavoured to avoid an interpretation of article4.2(a) which relied on the state of mind of thecaptain. He submitted that, viewed objectively, the


[FOGARTY JThe “Tasman Pioneer”NZCA]

captain’s conduct after the grounding could be seento be wholly incompatible with his duties “in nav-igation and management of the ship” and thereforeoutside the scope of the exemption. The exemptionwas designed to recognise the responsibility of themaster to make decisions in the navigation or in themanagement of the ship during the voyage. It wasnever intended to apply to a situation such as thiswhere the master used his command of the ship totake it on a course designed to protect his reputationby concealing the fact of grounding and allow himto present the lie that while on a normal course thevessel had hit a submerged object. This was acourse of conduct wholly outside the purpose forwhich the master was entrusted with the ship andthe cargo and so outside the purpose of the exemp-tion in article 4.2(a).

104. Developing this submission Mr Rzepeckyemphasised the word “in” and argued that thephrase “in the navigation or management of theship” was intended to be read in the context ofdecisions made for the safety of the ship, its crewand cargo. Rather, what the master did was theopposite of that. It was wilful conduct for his owninterest and so the exemption does not apply.

Analysis

105. The whole of article 4.2 provides:

2. Neither the carrier nor the ship shall beresponsible for loss or damage arising or result-ing from:

(a) Act, neglect or default of the master,mariner, pilot, or the servants of the carrierin the navigation or in the management ofthe ship.

(b) Fire, unless caused by the actual fault orprivity of the carrier.

(c) Perils, dangers and accidents of the seaor other navigable waters.

(d) Act of God.

(e) Act of war.

(f) Act of public enemies.

(g) Arrest or restraint of princes, rulers orpeople, or seizure under legal process.

(h) Quarantine restrictions.

(i) Act or omission of the shipper or ownerof the goods, his agent or representative.

(j) Strikes or lock-outs or stoppage orrestraint of labour from whatever cause,whether partial or general.

(k) Riots and civil commotions.

(l) Saving or attempting to save life or prop-erty at sea.

(m) Wastage in bulk or weight or any otherloss 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 withoutthe actual fault or neglect of the agents orservants of the carrier, but the burden of proofshall be on the person claiming the benefit ofthis exception to show that neither the actualfault or privity of the carrier nor the fault orneglect of the agents or servants of the carriercontributed to the loss or damage. (Emphasisadded.)

Principles of interpretation

106. The Hague-Visby Rules, the 5th schedule tothe New Zealand Maritime Transport Act 1994, arethe enactment of an international convention. Theapproach to these rules was analysed in depth bythe High Court of Australia in Great China MetalIndustries Co Ltd v Malaysian International Ship-ping Corporation Berhad (The Bunga Seroja)(1998) 196 CLR 161. In their judgment Gaudron,Gummow and Hayne JJ said at para 8:

In understanding the operation of the HagueRules, there are three important considerations.The rules must be read as a whole, they must beread in light of the history behind them, and theymust be read as a set of rules devised by inter-national agreement for use in contracts that couldbe governed by any of several different, some-times radically different, legal systems.And further at para 38:

Because the Hague Rules are intended to applywidely in international trade, it is self-evidentlydesirable to strive for uniform construction ofthem. As has been said earlier, the rules seek toallocate risks between cargo and carrier interestsand it follows that the allocation of those risksthat is made when the rules are construed bynational courts should, as far as possible, beuniform. Only then can insurance markets setpremiums efficiently and the cost of doubleinsurance be avoided.107. McHugh J said at para 70:

Treaty interpretation70. The Schedule to the Sea-Carriage of

Goods Act enacts the Hague Rules as domesticlaw. Prima facie, the Parliament intended that thetransposed text should bear the same meaning inthe domestic statute as it bears in the treaty. Theguiding principles of treaty interpretation are


FOGARTY J] The “Tasman Pioneer” [NZCA

found in the Vienna Convention on the Law ofTreaties. Article 31 provides that a treaty must beinterpreted in good faith, in accordance with theordinary meaning of the terms in their contextand in the light of its object and purpose. UnderArt 32, interpretative assistance may be gainedfrom extrinsic sources in order to confirm themeaning resulting from the application of Art 31or to determine the meaning of the treaty whenthe interpretation according to Art 31 leaves themeaning “ambiguous or obscure” or “leads to aresult which is manifestly absurd or unreason-able”. Those extrinsic sources include the trav-aux preparatoires and the circumstances of theconclusion and history of the negotiation ofthe treaty. Primacy must be given, however, tothe natural meaning of the words in their context,as I recently pointed out in Applicant A v Minis-ter for Immigration and Ethnic Affairs [(1997)190 CLR 225]. (Citations omitted.)

In accordance with the ordinary meaning of theterms and their context and in the light of itsobject and purpose

108. This principle of interpretation in article 31of the Vienna Convention is very similar to thestandard principle of the interpretation of statutesnow contained in section 5(1) of the InterpretationAct 1999:

5 Ascertaining meaning of legislation(1) The meaning of an enactment must be

ascertained from its text and in the light of itspurpose.109. With these considerations in mind I think

that the interpretation should be wholly faithful tothe text. Nonetheless the language of particularprovisions must, as always, be read in context, andin particular the context of the whole set of rules,and in the light of the object and purpose of thoserules.

110. History has shown that uniformity of inter-pretation across legal systems has not been a featureof the Hague Rules. But that fact does not displacethe need to approach the task of application of therules keeping in mind the intention of the Conven-tion that they be an international set of rules.McHugh J said in The Bunga Seroja at para 73:

The historic development of the Hague Rulesand the travaux preparatoires is described insome detail in the reasons for judgment of othermembers of the Court. The aim of the Rules wasto harmonise the diverse laws of trading nationsand to strike a new arrangement for the allocationof risk between cargo and carrier interests. How-ever, the Hague Rules were a compromise ratherthan a codification of any accepted and uniformpractice of shippers. Consequently, one needs to

be cautious about using the pre-existing law ofany country in interpreting the Rules. But thatsaid, the fact is that the “immediate impetus forthe Hague Rules came from the British Empire”[citing Professor Sturley’s The Legislative His-tory of the Carriage of Goods by Sea Act and theTravaux Preparatoires of the Hague Rules(1990), vol 1 at 8]. Furthermore, British lawyersand representatives of British carrier and cargointerests dominated the Committees responsiblefor the drafting of the Rules which eventuallybecame the Hague Rules. That being so, it seemslikely that the English common law rules pro-vided the conceptual framework for the HagueRules — certainly the key terms of Arts III andIV are the subject of much common law doctrine.The Rules should be interpreted with that frame-work in mind. (Citations omitted.)

111. An examination of the deliberations of theproceedings of the Hague Conference on 31 August1921 reveal that the content of article 4.2 is largelytaken from provisions which commonly appearedin British bills of lading. In broad terms article4.2(a) adopted a common law as distinct from con-tinental code approach inasmuch as it enumeratesexceptions rather than stating a principle. The origi-nal draft of the rules used different criteria in sub-rule (a) coming from the United States Harter Act.It also had a clause excluding the carrier from theresponsibilities for barratry — meaning an act ofthe master or crew to defraud the ship owner or thecargo interest. Each one of the subparas (a) throughto (p) inclusive refer to causes of loss which arebeyond the control of the carrier, treating the carrierone removed from the master, mariner, pilot orservants of the carrier on board the vessel at sea.

112. Clause (q) is a wrap-up clause which isintended to capture other such causes not due to theactual fault or privity of the carrier or its agents orservants. During the deliberations of the Confer-ence on the second day of the proceedings on 31August the chairman said:

With regard to (q) the Committee appears tome to have adopted the principle that the shipowner ought not to be an insurer against theinterference of other parties. If that is so, it isdifficult to see how you are going to balk at (q),how you fail to adopt (q), it is merely to givegeneral effect. Then is (q) agreed? (Agreed.)

113. That principle fits (q) precisely but also fallswithin a general policy that a ship owner ought notto be an insurer against loss caused beyond the shipowner’s control.

114. This analysis is, I think, consistent withCallinan J’s analysis of the whole of article 4 inThe Bunga Seroja, where he said at page 241,para 221:



In my opinion, a detailed analysis of the Rulesleads to a different result from what might bereached on the basis of the statements made inmany of the cases cited and does, with respect,form a sound basis for the observations made byMason and Wilson JJ in Gamien. It is imme-diately obvious that the Rules are intended toconfer a very wide range of immunities uponcarriers. Rule 1 strongly conveys the notion thatliability should be sheeted home to the carrieronly in respect of a want of appropriate care (duediligence) on its part. In some respects therefore,the specific instances of immunities set out in r 2might be regarded as superfluous. Each of items2(d), (e), (f), (g), (h), (j), (k), (l), (m), (n) and (p)in all or most cases would involve no fault on thepart of the carrier. The notion that the carrier isnot to be liable without actual fault is reinforcedby (q). It seems to be going a long way, as (a)does, to exculpate the carrier from vicarious lia-bility for its servants or agents in managing andnavigating the ship. However the antidote maybe that the carrier does have a duty “to properlyman . . . the ship” pursuant to Art III, r 1(b) andby doing that should be regarded as having ful-filled its obligations in that regard to theshipper.115. Subpara (a) fits naturally into the reality, at

that time, that the master, at sea, being in commandand responsible for the safety of the crew, its cargo,and the ship, has to make decisions in the naviga-tion and management of the ship all the time. MrGray is right to caution the court against taking intoaccount the modern day constant contact betweenthe owner or charterer or their agents on shore andthe bridge of the ship.

116. The Conference could have adopted a pol-icy that the ship owner was going to be liable forthe consequences of such decisions by the master. Itdecided to the contrary. That decision is plain fromthe language of subpara (a) read as a whole in theimmediate context of the surrounding subpara-graphs of article 4.2 and in the broader context ofthe function of the rules and the responsibilities ofthe master at sea. All of these factors then go towhat is “the ordinary meaning of the terms in theircontext and in the light of its object and purpose”:article 31 of the Vienna Convention.

Consideration of natural meaning

117. I have no doubt that the phrase “act, neglector default of the master” includes intentionalconduct.

118. There is nothing in that phrase or in theclause as a whole which suggests that its applica-tion depends on the motive of the master.

119. However, act, neglect or default of the mas-ter must be “in the navigation or in the managementof the ship” so it is not any act, neglect or default ofthe master.

120. I keep in mind also that the phrase isintended to apply in respect of “loss or damage”arising or resulting from such conduct of the masterin the navigation or in the management of theship.

121. Furthermore, the clause is intended to applyvis-a-vis the carrier and the shipper or cargo inter-ests. So obviously it is intended to apply to loss ordamage of cargo.

122. Reading “loss or damage” as being “loss ordamage of cargo” is not adding or implying any-thing into the rules. It is another way of remindingoneself that the function of article 4 is to qualify theduty on the carrier to look after the goods beingcarried (the cargo) imposed by article 3.2.

123. I think it is contrary to the natural andnormal meaning of subpara (a) to confine its appli-cation to loss or damage arising from the negli-gence of the master. Were the word “act” notpresent, that summation might well be possible. Butthe word “act” is neutral as to quality and so appliesindependently of culpability. That must be itsmeaning unless it can be argued that the next phraseafter the comma — “neglect or default” — some-how places the first word “act” into some subset ofnegligent conduct.

124. I am fortified in this view by a considerationof the case law authorities. I know from the delib-erations of the Hague Conference that article 4.2(a)was adopted from English bills of lading. Thephrase “act, neglect or default” was at the time usedin common law contracts of carriage. This wasbefore the Hague Rules came to be negotiated in1921. An important decision is the case of Marriottv Yeoward Brothers [1909] 2 KB 987. This was anaction brought by Mrs Marriott to recover damagesfor the loss of certain personal effects which werecarried by Yeoward Brothers on board their shipArdeola on a voyage. On the back of her passengerticket were a number of exemption clauses of whichnumber 7 was in these terms (at page 988):

The steamer her owners and/or charterers arenot responsible for any loss, damage, injury,delay, detention (or maintenance or expense dur-ing same) of or to passengers or their baggage oreffects, or for the non-continuance or non-com-pletion of the voyage, by whatsoever cause or inwhatever manner the matters aforesaid may beoccasioned, and whether arising from the act ofGod, King’s enemies, restraint of princes rulersor people, disturbances, perils of the seas riversor navigation, collision, fire, thieves (whether on



board or not), accidents to or by machinery, boil-ers or steam, unseaworthiness of the steamereven existing at the time of sailing, or from anyact neglect or default whatsoever of the pilotmaster mariners or other servants of the steamerher owners and/or charterers, or from restrictionof quarantine or from sanitary regulations or pre-cautions which the ship’s officers or Local Gov-ernment authorities may deem necessary, or theconsequences thereof or otherwise howsoever;the passengers taking upon themselves all riskwhatsoever of the passage to themselves, theirbaggage and effects, including risks of embark-ing and disembarking, and whether by boat orotherwise.125. The similarity between this clause and the

whole of article 4.2 can be noticed immediately.This decision focused on the words:

. . . from any act neglect or default whatsoeverof the pilot master mariners or other servants ofthe steamer her owners and/or charterers . . . 126. The difference between this clause and arti-

cle 4.2(a) is that the rule does not contain theemphatic words “any” and “whatsoever”. I willreturn to that difference shortly.

127. The goods which Mrs Marriott, the plaintiff,lost were stolen from two of her trunks. Much ofthe argument was as to whether or not the condi-tions on the back of the ticket bound Mrs Marriott,so also the reasoning of the judge, Pickford J.

128. The judge approached the meaning of theexemption clause contra proferentem. He said atpage 994:

Assuming that the conditions form part of thecontract, the next question is whether they pro-tect the defendants against the felonious act oftheir servants. In order to answer that one mustexamine closely the language of the conditionupon which the defendants rely, bearing in mindthe principle that a man cannot by stipulationexcuse himself for the wrongful act of his ser-vants unless he does so in plain and unambiguouslanguage. If the language is ambiguous it must beconstrued against him, and whether particularlanguage is ambiguous or not is a matter which itis not always easy to determine.129. Having considered similar terms and deci-

sions upon them in other cases, the judge reasonedas follows at page 996:

The words “any act neglect or default whatso-ever” are quite unqualified. They are not “any actunless felonious,” but “any act”.130. Mr Rzepecky submitted that this court

would be wrong to place any weight on the decisionin Marriott because of the emphatic word “whatso-ever”. It is a characteristic of English drafting then,and to a lesser extent now, to use more words than

necessary. There is no doubt that the emphaticwords “any” and “whatsoever” ensure that the totalphrase is quite unqualified. It does not follow that ifthose emphases are removed that the phrase “act,neglect or default” becomes qualified. Qualified bywhat? The qualification would have to appearexpressed in the text or be necessarily implicit inthe text. It is expressed in the text in article 4.2(a).It is qualified by the words “in the navigation andmanagement of the ship”. That is the qualification.Otherwise it is unqualified. If the conduct is in themanagement or navigation of the ship then theconduct includes all acts, neglects or defaults andso by necessary inference any act, neglect ordefault.

131. Marriott was followed by MacKinnon J inthe case of Bulgaris v Bunge & Co Ltd (1933) 45 LlL Rep 74. Mr Bulgaris and others were owners of asteamship Theodoros Bulgaris which had beenabandoned by her crew because of damage by agale in the Bay of Biscay. It was ultimately sal-vaged. The owners sought from the cargo interestsa contribution to the cost of salvage, a claim whichwas admitted. But the cargo interest counterclaimedfor damages which they allege they had sustainedbecause the vehicle had been improperly aban-doned in breach of the bill of lading andcharterparty.

132. The bill of lading provided:The shipowner shall not be responsible for loss

or damage arising or resulting from: act, neglect,or default of the master, mariner, pilot, or theservants of the shipowner in the navigation or inthe management of the ship. (This is, of course,what I now recognise as article 4.2(a).)133. MacKinnon J reasoned (at page 81):

Now, supposing it was a breach of duty by thecaptain and crew of the Theodoros Bulgaris todesert her as they did, the question is whether theshipowner would be nonetheless relieved fromliability for damages for the consequences of thatdesertion of the ship, by reason of the terms ofthis clause. First of all, even if it had been thegrossest and deliberate and wilful desertion ofthe ship in calm weather, I think that would stillbe an act, neglect or default of the master forwhich, under these words, the owners would berelieved. With regard to that, I must bear in mindthat it has been held that even culpable reckless-ness on the part of the captain or crew is, vis-a-vis the owner, an act, neglect or default forwhich under such a clause he is relieved ofresponsibility. The strongest case, I think, of thatis the case of Marriott v Yeoward Brothers [1909]2 KB 987.134. That dictum is technically obiter because

the judge also held that the master and crew did not



prematurely abandon the vessel. It was in the con-text of saying that even if they did such a wilful anddeliberate act it would be an act in the navigation ormanagement of the ship.

Are there authorities to the contrary?

135. As set out above Hugh Williams J relied atpara 233 of his decision upon a number of author-ities finding that a master has a duty to act in goodfaith.

136. There are numerous situations whereby it isnatural for a court to find that the master has a dutyto act reasonably under all circumstances and tomake decisions which are bona fide and in goodfaith. The master is after all an employee. Depend-ing on the contractual arrangements the master’sobligations can be owed not only to his personalemployer but also, as we will see, to other persons,by contract. The fact that the master will have aduty to his employer and possibly other persons toact reasonably and in a bona fide manner is not ofitself sufficient to justify construing article 4.2(a) asconfined to conduct by the master falling withinthat duty.

137. The best case for the respondents on thisappeal is that of The Hill Harmony, also the caseprincipally relied on by Hugh Williams J at para233.

138. Whistler were the charterers of Hill Har-mony and they subchartered her to Kawasaki. Thisparticular charterparty provided among otherthings:

8. That the captain shall prosecute his voyagewith the utmost despatch, and shall render allcustomary assistance with ship’s crew and equip-ment . . . The captain shall be under the ordersand directions of the charterers as regardsemployment and agency.139. This particular charterparty also incorpo-

rated the Hague Rules and so the article 4.2(a)exception.

140. The charterers gave orders to the master thatthe vessel was to take the shorter northern GreatCircle route but the master proceeded by the moresoutherly rhumb line route, with the resultingincrease in the time taken for two voyages and thebunkers consumed. On the first voyage Hill Har-mony took six and a half days longer to get to herdestination and consumed 130 tonnes more fuel andon the second she took three days longer and con-sumed some 69 tonnes more. The loss to the chart-erers was about US$89,800. The owners deniedliability for the charterer’s loss. They contendedthat they were not obliged to send the vessel on theshortest route and furthermore were entitled toreject orders from the charterers to take the shortestroute.

141. In an influential article, by an experiencedarbitrator, Mr Donald Davies (“Right to Routes”(1999) LMCLQ 461), cited by Lords Bingham andHobhouse, the author summed up the dispute asdepending on whether or not the routing instructionto the master from the charterers is an order as toemployment under clause 8 (in which case he saidthat the master is obliged to comply with it unlesshe can justify a contrary position on the grounds of,for example, safety) or an order as to navigation (inwhich case he said that the master can make hisown decision and the owners are absolved fromliability by way of the article 4.2(a) exception).

142. The majority of the arbitrators and a unan-imous House of Lords decided that the routinginstruction to take the Great Circle route was anorder as regards employment which the Captain hadto prosecute with the utmost despatch. Clarke J inthe Queen’s Bench Division and a unanimousbench of the Court of Appeal held that the decisionof the master to take the more southerly rhumb lineroute fell within the article 4.2(a) exception as adecision in the navigation of the vessel.

143. Nourse LJ in the Court of Appeal at page216 said:

It seems to me, as Mr Hamblen submitted, thatthe master’s decision was a decision on naviga-tion because it was a decision upon what courseor combination of courses to follow in prosecut-ing the overall voyage, and because of the reasonfor the decision, made bona fide, was the mas-ter’s concern for the safety of the vessel.

144. Potter LJ, whose judgment was regarded asthe leading judgment by the House of Lords, alsoused the concept of bona fide. He said at page211:

In my opinion the structure and terms of thecharterparty in this case, so far as the materialobligations of the master/owners are concerned,are such that they do no more than reflect thepattern of implied obligations which are imposedon the parties to a time charter in the absence ofsuch express terms. The obligation of the master/owners was to proceed with the “utmostdespatch” (which in my view adds nothing to theconcept of reasonable despatch) from port to portor other nominated destination without deviation,ie by the direct route or by a route which, thoughnot direct, was a usual and reasonable route.They were also obliged to operate the ship inaccordance with the charterers’ orders as to itsemployment. However, neither obligation dis-placed the right and responsibility of the masterin matters of navigation and, in particular, todecide upon the course or courses to be followedwhen prosecuting the voyage as properlydefined, having regard to weather conditions and



other hazards of navigation. In that respect hehad a duty to reach a bona fide decision basedupon his own judgement and experience. As tothe question of the reasonableness of that deci-sion, if the master was negligent or unreasonablein his judgment, then the liability of the ownersfor such negligence depended upon the scope ofany relevant exemption clause in that respect,and in particular in this case art IV, r 2a.145. It is not necessary to go into the detail of the

House of Lords’ reasoning. Suffice to say theirLordships rejected the proposition that the master’sdecision had been “in navigation” for the purposesof article 4.2(a). Rather, they considered that theorder to take the Great Northern Circle route plainlyrelated to the employment of the vessel.

146. The majority decision of the arbitrators andthat of the House of Lords proceeds on the premisethat a direction to take the Great Circle route was areasonable one, or to put it another way, goodseamen could safely take appropriate vessels on theroute. There was evidence that there had been 360passages within a relatively short period of theinstruction. On the other hand, the master con-cerned had taken a vessel on the route and sufferedsignificant storm damage. The arbitrators and theHouse of Lords were distinguishing between acharterer’s decision to take the strategic decision asto whether or not to deploy the vessel on a difficultvoyage, from the tactical decisions which the mas-ter of the vessel would inevitably have to makeduring the course of that voyage. See Lord Hob-house at pages 657 and 658:

The meaning of any language is affected by itscontext. This is true of the words “employment”in a time charter and of the exception for negli-gence in the “navigation” of the ship in a charter-party or contract of carriage. They reflectdifferent aspects of the operation of the vessel.“Employment” embraces the economic aspect —the exploitation of the earning potential of thevessel. “Navigation” embraces matters of sea-manship. Mr Donald Davies in the article I havereferred to suggests that the words “strategy” and“tactics” give a useful indication. What is clear isthat to use the word “navigation” in this contextas if it includes everything which involves thevessel proceeding through the water is both mis-taken and unhelpful. As Lord Sumner pointedout, where seamanship is in question, choices asto the speed or steering of the vessel are mattersof navigation, as will be the exercise of laying offa course on a chart. But it is erroneous to reason,as did Clarke J, from the fact that the master mustchoose how much of a safety margin he shouldleave between his course and a hazard or howand at what speed to proceed up a hazardouschannel to the conclusion that all questions

of what route to follow are questions ofnavigation.That is what the case was about. It was not in any

way an examination of the consequences of deci-sions made by a master under personal stress fol-lowing a grounding. I cannot have any confidencethat the reasoning of their Lordships in Hill Har-mony is appropriate to guide me in deciding theapplication of article 4.2(a) to this set of facts.

147. It is true that in a number of passages in thespeeches of the House of Lords their Lordshipsnaturally refer to article 4.2(a) in the context of anexception for negligence. The passage quoted fromLord Hobhouse above is an instance of this. But itdoes not follow that the judgment should be read asa considered opinion of their Lordships as to thescope of article 4.2(a) in respect of misconduct. Thefocus of their Lordships was on a dispute betweenthe charterers and the owners and upon the balanceto be achieved between article 8 requiring the cap-tain to be under the order of the charterers asregards employment and its reconciliation with arti-cle 4.2(a). The use of the term “bona fide” mayhave been because of some scepticism as to thereason given by the master to take the rhumb lineroute. The master never sought to justify this deci-sion. See Lord Bingham at page 643, viz:

. . . despite his lack of candour concerning hisreasons for taking the rhumb line on the seconddisputed voyage . . . 148. The Hill Harmony is not an authority for

qualifying article 4.2(a) as being preconditioned onthe decisions being made by the master bona fide.Nor do any of the other decisions relied upon byHugh Williams J support that proposition.

149. As already noted, Mr Rzepecky had analternative argument, namely that it is necessary forthe charterer to show that the conduct was for thepurpose of the voyage. He argued that The HillHarmony draws a clear distinction between thepower of the charterer to define the voyage, distinctfrom the judgements as to seamanship employed bythe master in operating the vessel during the voy-age. Mr Rzepecky argued that the master has abasic obligation to take the vessel on the voyagerequired by the charterer.

150. Mr Rzepecky argued that when CaptainHernandez took the damaged Tasman Pioneer awayfrom the grounding, at full speed into the nor’-wester, to the plain disadvantage of the carrier andthe cargo interests, he was no longer operating thevessel for the purpose of the charterer’s voyage. Hewas in fact “in flight” from the event of grounding,knowledge of which would bring an end to hiscareer. He was using the vessel for his own pur-poses, not the charterer’s. So while he was in factnavigating the vessel and managing it (for example,



he was directing pumping) he was not doing it forthe purpose of the charterer’s voyage from Yoko-hama to Busan in Korea. Therefore, the exemptiondid not apply. The exemption avails the carrier onlywhen the master is complying generally with thecharterer’s instruction as to the voyage the vessel isto undertake.

151. This argument has the same deficiencies asthe bona fide argument. It makes the application ofarticle 4.2(a) depend upon the purpose of the masterwhen navigating and managing the ship. It qualifies“act” by purpose.

152. Were this construction of article 4.2(a) to beadopted it would raise many problems as to uncer-tainty. Consider the particular aspects of the factshere. The argument relies on drawing a distinctionbetween the voyage from Yokohama to Busan andthe “flight” of the vessel to the point where it finallyanchored in Bungo Suido but close to the coastnorth of the island of Yokoshima. The line of thesecond flight voyage was actually towards Busanand appears to have been plotted in order to inter-sect with what would have been the normal track ofthe vessel, as part of the cover-up as to what hadactually happened. So it is a different voyage notbecause of the direction in which the vessel wentbut because of the purpose or reason why the mas-ter was navigating it in that direction.

153. We also need to pause to reflect that perils atsea are anticipated in article 4.2. If the master hadcontacted the local coastguard and taken theiradvice, found by Hugh Williams J to be likely to beto go into the Bay of Sukumo Wan, that journey toowould have been a voyage distinct from the plannedvoyage from Yokohama to Busan. After thegrounding, the fact is that the planned voyage hadcome to an end prematurely. Yet, no one couldsuggest that the proper response to the groundingwould fall outside article 4.2(a).

154. Accordingly, were this interpretation of arti-cle 4.2(a) to be adopted it would impose on adjudi-cators a judgement as to whether or not the master’sresponse to a calamity at sea was proper or not. Iacknowledge that this set of facts is a reasonablyclear case of wilful misconduct. No one has sug-gested disturbing the findings of misconduct madeby the trial judge. But I can also envisage that therecan be many circumstances following a shippingcalamity where there may well be some kind ofcompromise by the master motivated in part by aneffort to protect his or her career, reflecting thatfragility of judgement by a professional personwhen called upon to make difficult decisions fol-lowing upon a mistake.

155. Ultimately one has to go back to considerwhether or not this proposed refinement of theapplication of article 4.2(a) can be confidently

found to be a true interpretation of the rule. I do notthink so. I acknowledge that this is an extraordinaryset of facts. But the natural language of rule 2(a)appears not to qualify the word “act” by any notionof the quality of the act, be it laudable orculpable.

156. For these reasons I am of the view that thejudgment of the High Court should be reversed.There is no threshold requirement of bona fideconduct. Nor is there a threshold requirement thatthe decisions must be made as part of the charter-er’s voyage. It is sufficient that the loss occurs byreason of an act, neglect or default of the master inthe navigation and management of the ship. HughWilliams J was right to find that this was the causeof the loss of the cargo.

157. Since preparing the above reasoning, I havehad the benefit of reading in draft the reasons ofBaragwanath and Chambers JJ. Their reasoning hasnot changed my opinion. It is always difficult tosummarise competing opinions and indeed one’sown. But I do attempt some explanation as to whyI think we differ, and why I find I am not persuadedto join with them in dismissing the appeal. I confinemyself to points not already self-evident from myreasons so far.

158. I think it is not self-evident that article 4.4 isintended to complement article 4.2(a). So I do notthink the presence of article 4.4 justifies an inter-pretation of article 4.2(a) which allows “other sortsof deviation [to] remove the protection of article 4”:see Baragwanath J at para 29. Deviation seems tome to be a special topic which merited a specialrule.

159. I think the reasoning of Greer LJ in GosseMillerd needs to be read in the context of thematerial facts of that case, which were that cargowas damaged by being exposed to rain while thecargo hatches were off. As the quoted extract atpara 44 shows, Greer LJ was examining whetherarticle 4.2(a) “would cover any act done on boardthe ship which relates to the care of the cargo”. Theproblem posed by the facts in that case was thatthey could be characterised either as want of care ofthe cargo or management of the ship. In this casewe are examining acts of the master, most of thematerial ones being in the navigation of the shipafter the grounding. The challenge in construingarticle 4.2(a) can be as to what extent it extendsbeyond navigation: see Lord Hailsham in GosseMillerd at page 231 citing Gorell Barnes J in TheFerro [1893] P 38 at pages 44 and 46.

160. I think it is legitimate to use the commonlaw cases interpreting the common law predeces-sors to article 4.2, because the terms of this rulewere deliberately adopted by the delegates at the



convention, knowing their common law prove-nance, without any intention that they would begiven a different meaning.

161. I would allow the appeal.

Cross-appeal

162. I agree with the findings of fact in thereasons of Chambers J. The question becomeswhether the decisions to turn off the generatorswere made in management of the ship, as distinct

from the cargo. Whatever the reasons the salvorsturned off the generators, their decisions were madein management of the ship, rather than the cargo.Therefore, the article 4.2(a) defence applies. Iwould dismiss the cross-appeal.

General conclusion

163. Accordingly, I would find that TOL has thebenefit of article 4.2(a) in respect of all the losssuffered by the plaintiffs so that there should bejudgment for TOL against the plaintiffs.



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