Fri, Oct

Exceptions to liability


Exceptions to liability. Under a bill of lading the carrier undertakes to deliver the goods to their agreed destination unless prevented by “excepted perils” or “exceptions”. In an early case, Grill v. General Iron Screw Collier Co., 1866, it was said:

“In the case of a bill of lading... the contract is to carry with reasonable care unless prevented by the excepted perils. If the goods are not carried with reasonable care, and are consequently lost by perils of the sea, it becomes necessary to reconcile the two parts of the instrument, and this is done by holding that if the loss through perils of the sea is caused by previous default of the shipowner, he is liable for his breach of contract.”

The link between previous default and loss or damage by an excepted peril was confirmed in section 3 of the United States Harter Act 1893, which states: “If the owner of any vessel transporting merchandise or property to or from any port in the United States of America shall exercise due diligence to make the said vessel in all respects seaworthy and properly manned, equipped and supplied, neither the vessel, her owner or owners, agent or charterers, shall become or be held responsible for damage or loss resulting from faults or errors in navigation or in the management of said vessel nor shall the vessel, her owner or owners, charterer, agent or master be held liable for losses arising from dangers of the sea or other navigable waters, acts of God...”

There follows a list of exceptions to liability. This was the first statutory declaration that the carrier was not liable for loss or damage if (a) they had exercised due diligence and (b) the cause of the loss or damage came under the list of situations for which liability was excluded. The exceptions were imitated in the Hague Rules 1924 in Art. IV, r. 2, and copied in the Hague-Visby Rules, 1968. Article III, r. 2, makes the carrier subject to obligations for loading, caring for and discharging the goods, but even these obligations are subject to the provisions of Art. IV. It seems that the exceptions are favorable to carriers as contrasted with the rights and immunities of holders of bills of lading.

Before the statutory exception to a carrier’s liability, exceptions were found in contracts of carriage by sea. However, there is evidence that very early bills of lading did not contain exceptions to liability. The carrier was treated as a “common carrier”, absolutely and then strictly liable for loss or damage or delay in delivery. The earliest reference to an exception can be considered to be a phrase in a bill of lading of 1766: “the danger of the sea only excepted”. In later disputes between shipowners and holders of bills of lading the lack of exceptions clauses increased shipowners’ liabilities so gradually the exceptions clauses were widened to protect owners as carriers.

The exceptions are now controlled by the Hague-Visby Rules.

The exception in Art. IV, r. 2(a) from liability for loss or damage resulting from “Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship” is sometimes called an exception for “error in navigation or the management of the vessel”. Collision would probably result from an error in navigation as would grounding or stranding. The exception gives the carrier fairly wide protection. It is not included in the Hamburg Rules because it may be seen by cargo interests as giving the carrier unfair protection.

The exception from liability for error in navigation poses little problem. That for error in management may, if it is difficult to decide whether the loss or damage was caused by an error in the management of the ship or an error in management of the cargo on board the ship. If the loss or damage was caused solely by an error in management of the ship, the carrier can use the exception laid down in Art. IV, r.2(a). If the loss or damage was caused by an error in management of the cargo, the carrier would have breached the obligation laid down in Art. III, r. 2 and would be liable. It was stated in Gosse, Millerd Ltd. v. Canadian Government Merchant Marine, 1929, the leading case, that:

“If the cause of the damage is solely, or even primarily, a neglect to take reasonable care of the cargo, the ship is liable, but if the cause of the damage is a neglect to take reasonable care of the ship, or some part of it, as distinct from the cargo, the ship is relieved from liability; for if the negligence is not negligence towards the ship, but only negligent failure to use the apparatus of the ship for the protection of the cargo, the ship is not so relieved.”

Therefore if the loss or damage is caused by a combination of errors, ,the carrier’s exception from liability would have to be decided on the facts of the case. In the Gosse, Millerd case, a vessel was being repaired. The hatches were left open to provide access for the repairers. No tarpaulins were used to cover the cargo. Rain damaged the cargo. The House of Lords held that although the uncovering of the cargo was an act directed to the management of the ship, it affected the cargo alone. The shipowner could not exclude liability.

Other exceptions to liability in the Hague-Visby Rules are for loss or damage caused by fire, unless caused by the actual fault or privity of the carrier, perils of the sea, act of God, act of war, and others. A total of 16 specified circumstances allow the carrier to exclude liability. The 17th exclusion, Art. IV, r. 2(q), allows exclusion of liability for: “Any other cause arising without the actual fault or privity of the carrier...”

This last class of exception seems very wide and may permit the carrier to exclude liability for any loss or damage outside the named exceptions provided neither he nor his servants nor agents were in default or were privy to the cause. The exception for fire depends on the actual fault or privity of the carrier. In the United Kingdom, section 18 of the Merchant Shipping Act 1979 came into force in December 1986. This implements the International Convention on the Limitation of Liability for Maritime Claims 1976, and there is no longer any “fault or privity” provision. Before 1986, the carrier had to prove there was no fault or privity on his part. After 1986, the cargo interest will now have to prove that the fire results from the carrier’s personal act or omission, committed with intent to cause the loss, or recklessly, and with knowledge that the loss would have probably resulted. The burden will now be heavier on the holder of the bill of lading, in order to prevent the shipowner / carrier from excluding liability.

The carrier will be able to rely on section 18 of the Merchant Shipping Act because section 6(4) of the United Kingdom Carriage of Goods by Sea Act 1971 states that for the purposes of Art. VIII of the Hague-Visby Rules, section 18 of the Merchant Shipping Act is a provision relating to limitation of liability. The section may also entirely exempt shipowners and others from liability for loss or damage to goods. Article VIII of the Hague-Visby Rules states that the carrier’s rights and obligations under any statute prevail over the provisions of the Rules. Therefore, the carrier may enjoy an advantage under the Merchant Shipping Act, if this applies to a cargo claim, rather than attempt to use the exception in Art. IV, r. 2(b).