Sun, Oct

Due diligence


Due diligence. Article III of the Hague Visby Rules and Hague Rules require the carrier to exercise "due diligence" before and at the beginning of the voyage to make the vessel seaworthy. "Seaworthy" means that the vessel must be physically sound, she must have proper equipment and supplies and efficient and sufficient manpower. The vessel must also be "cargoworthy", that is completely fit and safe to receive, carry and protect the cargo. Before the advent of the Rules, the common law obligation on the carrier was very strict and heavy. "Due diligence" was insufficient.

The phrase "due diligence" is difficult to define. "Diligent" can mean that a person is attentive to duties or uses persistent effort or work to achieve some objective. In shipping, therefore, it may mean that the carrier must be careful, reasonable and honest in his duty to make the vessel seaworthy. He should show reasonable and ordinary care. However, it seems clear that the duty is only an "attempt". Because the obligation is not absolute, if the carrier fails, for some reasonable cause, he may not be liable for a breach of the obligation. If the obligation was "absolute" the carrier would be liable for any loss or damage caused by unseaworthiness irrespective of why or how or when the vessel is alleged by the cargo interest to have been unseaworthy.

Perhaps because the carrier is somewhat protected by the Hague Visby Rules' provision of due diligence, the courts impose a number of conditions before the carrier can take advantage of any protection he may enjoy. In any case, the Hague Visby Rules themselves prevent the carrier from contracting out of his obligation to exercise due diligence. Article III, r. 8 prohibits any clause in a contract of carriage from relieving the carrier from liability for loss or damage to the goods. Therefore, whether the duty is only of attempting to make the vessel seaworthy, it has to be carried out.

The courts' restrictions on the protection of the carrier can be exemplified in what was said in Maxine Footwear v. Canadian Government Merchant Marine, 1959:

"Article III, rule 1, is an overriding obligation. If it is not fulfilled and the non fulfilment causes the damage the immunities of Article IV cannot be relied on."

Article IV, rr. 1 and 2 permit the carrier to exclude liability in specified circumstances, but before the carrier can use these exceptions or, indeed, the limitations to liability contained in Art. III, r. 5, he must show that he did exercise due diligence. The last sentence of Art. IV, r. 1 states:

"Whenever loss or damage has resulted from unseaworthiness the burden of proving the exercise of due diligence shall be on the carnet or other person claiming exemption under this article."

This indicates that once the vessel is proved to have been unseaworthy, the burden then lies on the carrier to prove that he did exercise due diligence. If he can do that, only then can he go on to take advantage of the exceptions in Art. IV, r. 2.

Any restrictions on the carrier's protection can be eased in two situations. First, the obligation to exercise due diligence is only before and at the beginning of the voyage. Secondly, the carrier will not be held to have failed to exercise due diligence if a defect causing unseaworthiness is of so latent a nature the due diligence could not have discovered it.

In the Maxine Footwear case, the vessel experienced a fire after the completion of loading but before sailing. This was caused because of negligent heating frozen pipes. The vessel had to be scuttled. Although, the carriers were not personally and actually at fault for the fire they could not use the exceptions for fire in Art. IV,-r. 2(b), because the deck officer's negligence in ordering the heating of the pipes was a failure to exercise due diligence to make the vessel seaworthy at the beginning of the voyage. The voyage would have commenced when the vessel would have departed from the berth and the port, and at that instant, the obligation would have come to an end.

Cases before the English courts in 1989 and 1990 show examples of how the courts strictly regard the carrier's obligation and restrict his protection. In The Antigoni, 1989, the court of first instance held that the vessel's engineers had failed to carry out routine maintenance on the main engine at regular intervals. The judge held that there was no doubt that the engineers had failed properly to carry out the very clear and detailed procedures recommended by the engine makers before the cargo was loaded and the bills of lading were issued. The owners had failed to exercise due diligence to make the vessel seaworthy. In 1990, the Court of Appeal: confirmed the judge's decision. Had the damage been caused by a latent defect, the owners would probably have escaped liability but here the vessel's engineers could have found the reason for potential damage had they followed the required procedures.

"Latent defect" can be defined as "a defect which could not be discovered by a person of competent skill using ordinary care". The exception from liability for latent defect is contained in Art. IV, r. 2(p): neither the carrier nor the ship is responsible for loss or damage resulting from "Latent defects not discoverable by due diligence". This is only a defect of the vessel itself and not of the cargo. A defect of the cargo would come under "inherent defect, quality or vice of the goods" in Art. IV, r. 2(m) where the carrier is not responsible for loss or damage resulting from these causes. The exception from liability for latent defects of the vessel seems to conflict with the obligation in Art. III, r. 1 to exercise due diligence to provide a seaworthy vessel. However, the obligation is on the carrier before and at the beginning of the voyage while the exception could operate at any time.

In The Theodegmon, 1989, the vessel loaded a cargo of oil in the River Orinoco in ' Venezuela under a bill of lading which incorporated the U.S. Carriage of Goods by Sea Act 1936: This generally implements the Hague Rules. The exceptions to liability are contained in section 4 of the Act as in Art. IV of the Hague-Visby Rules. After departure from the loading berth, and while proceeding down-river, the vessel stranded. The cargo interests suffered considerable financial loss and claimed this from the shipowners on the basis that the stranding and the financial loss were caused by the owners' breach of contract. The judge concluded, from all the evidence before him that the vessel's steering gear had failed, thus causing the vessel to fail to respond to the river pilot's helm orders. This failure caused the stranding. The owners could not satisfy the judge that the breakdown of the steering system was not attributable to any lack of due diligence on their part. Therefore, the owners were not permitted to enjoy the exceptions in section 4 of the Act. In The Damodar Tanabe, 1990, the U.S. Court of Appeals also had to consider the issue of cargo damage caused by alleged unseaworthiness. The vessel loaded wood pulp from Chile to China. Clean bills of lading were issued. The wood pulp was improperly stowed, according to the statements in the mate's receipts, but the bills of lading were not claused. On the voyage the cargo caught fire. The vessel was not fitted with a fixed fire extinguishing system using carbon dioxide. The crew partly flooded the hold in an attempt to extinguish the fire. The cargo swelled, pushed open the hatch covers and the fire increased. Further flooding was necessary. The cargo was mainly damaged by flooding. The District Court in the United States held that the lack of a carbon dioxide fixed fire extinguishing system rendered the vessel unseaworthy to carry wood pulp, a high risk cargo. However, the court also held that the cargo interests were not able to prove that such a fixed system would have prevented the need to flood the hold to control the fire. The carrier was not liable. The U.S. Court of Appeals also held the carrier to be not liable. It was clear that because the cargo interests could not prove that the shipowners caused the damage in not providing a fixed fire smothering system, their claim failed.

Another major condition imposed by the courts is that the obligation to exercise due diligence cannot be delegated to another unless that person is, and is known to be, diligent. In the leading case of The Muncaster Castle, 1961, the carrier was liable because the ship repairers were not diligent. In The Amstelslot1963, the carriers could show that they had exercised due diligence because they had employed skilled and competent persons to carry out necessary inspections and these persons had acted carefully and competently. Delivery of the cargo of wheat was delayed because of an engine breakdown. The breakdown was caused by a crack in the engine due to metal fatigue. The vessel had been inspected by a Lloyd's Register of Shipping surveyor who had failed to discover the crack despite having taken reasonable care in conducting the survey.

Classification Societies' certificates will not always protect a shipowner/carrier who may attempt to use such a certificate as evidence that he exercised due diligence. Classification Society requirements are the barest minimum and compliance with these may not be an acceptable exercise of due diligence to make the vessel seaworthy but this depends on how the court may view the compliance. In The Good Friend, 1984, there was failure to inspect trunking within the cargo compartments. This caused infestation of the cargo. The cargo interests claimed that surveys by a Canadian inspector or even by the charterer's surveyor was no evidence that the shipowner had exercised due diligence. It was said:

"Whatever the position as to Classification surveyors, I would not accept so severe a test in connection with the inspectors and surveyor in this case. They were not chosen or employed or engaged by the owners, but imposed upon them. It seems to me that their approval must be of some relevance to due diligence. Perhaps the right answer is that it is some evidence of due diligence that the inspectors and the surveyors approved the ship."

In the. Hamburg Rules, there is no explicit requirement that the carrier must erase due diligence to make the vessel seaworthy. However, Art. 5, r. 1. makes the carrier liable for loss or damage and also for delay in delivery, unless he can prove that reasonable measures were taken to avoid the occurrence and its consequences.