Burns Philp (South Seas) Company Ltd v Marine Pacific Ltd [1979] FJCA 4; Civil Appeal No 07 of 1979 (25 July 1979)

IN THE FIJI COURT OF APPEAL
Appellate Jurisdiction

Civil Appeal No. 7 of 1979

BETWEEN:

BURNS PHILP (SOUTH SEAS) COMPANY LIMITED
Appellant

AND:

MARINE PACIFIC LIMITED
Respondent

Mr. G.P. Shankar and Mr. A.K. Singh for the Appellant
Mr. H. Lateef and Mr. F.S. Lateef for the Respondent

Date of Hearing: 12 July 1975
Delivery of judgment: 25 July 1979

JUDGMENT OF HENRY J.A.

I have had the advantage of reading in advance the judgment of the learned Vice-President. I respectfully agree that each of grounds of appeal must fail and for the reasons given. I would dismiss the appeal with costs as proposed.

(SGD) T. Henry
JUDGE OF APPEAL

IN THE FIJI COURT OF APPEAL
APPELLATE JURISDICTION

Civil Appeal No. 7 of 1979

BETWEEN:

BURNS PHILP (SOUTH SEAS) COMPANY LIMITED
Appellant

AND:

MARINE PACIFIC LIMITED
Respondent

G.P. Shankar & A.K. Singh for the Appellant Company
H. Lateef & F.S. Lateef for the Respondent Company

Date of Hearing: 12th July, 1979
Delivery of Judgment: 25/7/79

JUDGMENT OF GOULD V.P.

This is an appeal from a judgment of the Supreme Court of Fiji - dated the 16th January, 1979, dismissing with costs the appellant's claim in an action against the respondent for goods lost at sea during a journey from Suva to Labasa. The appellant is a dealer in merchandise and the respondent an inter-island carrier of goods.

In his judgment the learned judge gave the following short summary of the facts:-

"The goods in question were leaded on the defendant's barge 'G.M. 10' at Suva between 14th and 15th June 1977. Other goods belonging to other shippers were also on it. Among the goods were several 44 gallon drums of fuel.

Inside the barge is a built-in tank into which some oil had been pumped to be pumped out at Labasa. The rest of the cargo was carried on deck. The barge left Suva at 5 p.m. towed by the vessel 'Mooea'. They stamed all night. At 2.30 a.m near Levuka light house Emosi, the Captain, handed over to one Lepper and went down to his cabin. Leper sent for him at 5 a.m. He examined the barge with the help of his binoculars. It seemed to be tilting one side, its stern being almost level with the water. He stamed about three miles off his course and went inside the reef near Rukuruku in order to inspect the barge closely. There they went to the barge and found that part of the bulwark surrounding the deck had been broken and some of the goods were missing. Fuel drums had come loose from ropes and some were gone. Two holes in the barge were open and a great deal of water had gone inside. Pins which keep the lids in place had come off and were hanging near lids.

Water was pumping out of the barge and the remaining deck cargo properly secured. The 'Mooea' and the barge left Ovalau the next day at 7 a.m. for Labasa with the remaining cargo.

Defendant admits that plaintiff's goods listed in the statement of claim were lost at sea."

The amount of the loss was not in dispute and the issue at the trial was confined to liability. The Statement of Claim pleaded negligence and alternatively breach of statutory duty or contractual duty, giving particulars. It was claimed that there was an implied term for delivery in good condition at Labasa wharf. The Statement of Defence denied negligence and breach of duty, denied that there was any such implied term as that claimed by the appellant, and pleaded that it was clearly endorsed on all the Bills of Lading that the goods were being carried on deck at shipper's risk without any responsibility for loss or damage howsoever caused.

Two witnesses were called by the appellant. The first, an employee of the appellant, prepared the Bills of Lading and stated that he had dealt with the respondent for a long time and that the respondent always put on the stamp "carried on deck at shipper's risk without responsibility for loss or damage howsoever caused". The second was Emosi Tabuasuka, the captain of the 'Mooea', who said that the barge G.M. 10 belonged to the respondent and the Mooea was under charter to it at the relevant date. He gave his account of the voyage in question.

This evidence supports the following further findings of the learned judge:

"The exclusion clause is additional to the General Conditions printed at the back of the bill of lading and was incorporated into the contract before the parties signed it with full notice of it. This was done before the goods were taken to the wharf. According to Drala, plaintiff's shipping clerk, the two parties have dealt with each other for a considerable time and the plaintiff was fully aware of the exclusion clause. Unlike most ticket cases where the weaker party has little choice or say in the matter, the parties here are both large business firms and were dealing on equal terms. Both knew that the goods would be carried on the deck of an open barge towed by a steamer."

and:

"The evidence before me, on which both the parties rely, shows that, when the barge left Suva, the drums and other goods were tied down by ropes and covered with tarpaulin. I accept that it was in the rough seas near Nasilai that drums came loose and caused damage to the bulwark. They also dislodged the pins that kept the lids to the two holes in place. Coming loose of the drums in rough weather was the main cause of the loss of and damage to goods."

The observation by the learned judge that both parties relied upon the captain's evidence may not be without relevance as counsel for the appellant has raised a question of onus. The captain was on obvious witness and the impression that I received from counsel was that if the appellant had not called him the respondent would have done so. Any party who wished to rely upon his evidence could of course do so.

I proceed now to the findings of the learned judge in the Supreme Court. He considered first the question whether the Sea Carriage of Goods Ordinance applied to the goods in question. The Bills of Lading were declared to take effect subject to the provisions of the rules in the Schedule to that Ordinance, "as applied by the said Ordinance". But the definition of "goods" in the Rules excepted cargo which "by the contract of carriage is stated as being carried on deck and is so carried". These conditions being fulfilled in the present case the learned judge held that the exclusion clause stamped on the Bills of Lading was not made void by rule 8 of Article 3. This finding has not been challenged on appeal.

The learned judge next considered the question of construction of the exclusion clause. He found–

1. That the respondent was a common carrier but has excluded the direct liability of a common carrier "under the Sea Carriage of Goods Ordinance".

2. If there was such a misperformance as to destroy the whole core of the contract – amounting to a fundamental breach – the exclusion clause would not avail the respondent.

3. Failure to deliver, there being no deviation from the contract, did not amount to a fundamental breach so as to deprive the respondent of the benefit of the exclusion clause.

4. On the question whether the exclusion clause should be construed as being wide enough tom include negligence, the respondent for the purposes of the particular goods must be treated as "a carrier being only under an obligation to take reasonable care" and not as an insurer, and therefore the words "howsoever caused" included the negligence of the respondent's servants.

The learned judge accepted that the coming loose of drums in rough weather was the main cause of the loss of and damage to goods and said that the evidence disclosed no fundamental breach of contract; that to hold the respondent responsible for such loss to deck cargo would be to impose on him the liability of an "insurer" and deprive the exclusion clause of all its content.

Before this Court the following grounds were listed in the Notice of Appeal:-

"1. That the learned trial Judge erred in holding that the Respondent/Defendant was exempted from liability by reason of the exclusion clause inserted in the Bill of lading on the grounds:-

(a) the conditions endorsed were vague, ambiguous, and therefore the learned trial Judge ought to have applied the contra proferetem rule;

(b) The Respondent/Defendant failed to prove that it was not guilty of any fundamental breach, as the onus was on the Respondent/Defendant to prove that it was not guilty of fundamental breach.

2. The learned trial Judge erred in law in not holding that the Respondent/Defendant was guilty of fundamental breach on the grounds:

(a) that Respondent failed to adduce any evidence to prove that it was not guilty of fundamental breach;

(b) that the evidence adduced by and on behalf of the Appellant/Plaintiff, in the absence of any evidence to rebut it, is capable of establishing at least a prima facie case of fundamental breach on the part of the Respondent/Defendant, and also failure to exercise duty of care.

3. The learned trial Judge erred in law and in fact holding that "the evidence disclose no fundamental breach" as the Respondent adduced no evidence on whom legal burden of proof was to establish that it was not guilty of fundamental breach, and therefore the learned trial Judge has erred because the Respondent failed to discharge that onus.

4. That the learned trial Judge ought to have strictly construed the exclusion clause."

Counsel for the appellant first put forward argument on the question of onus relating to the question of fundamental breach. It was contended that is was for the respondent to establish what happened to the goods; that it was on the respondent to establish that there was no fundamental breach; that failure to deliver was itself enough to shift the burden. As counsel for the respondent pointed out, on the pleadings the matter had been left the other way. In J.Spurling Ltd. v. Bradshaw [1956] EWCA Civ 3; [1956] 2 All E.R. 121, 122 Denning L.J. said:-

"A bailor, by leading and presenting his case properly, can always put the burden of proof on the bailee. In the case of non-delivery, for instance, all he need plead is the contract and a failure to deliver on demand. That puts on the bailee the burden of proving either loss without his fault (which would be a complete answer at common law) or, if the loss was due to his fault, that it was a fault from which he is excluded by the exempting clause:...................................................................................................Where, however, the only charge made in the pleadings – or the only reasonable inference on the facts – is that the damage was due to negligence and nothing more, then the bailee can rely on the exempting clause without more ado."

The Statement of Claim specifically alleges negligence and breach of statutory duty. The Statement of Defence pleads the exclusion clause coupled with a denial of the other allegations. There is no reply alleging fundamental breach so as to deny efficacy to the exclusion clause.

It does not appear therefore that the appellant is in a very strong position in raising at this stage a question which does not seem to have been canvassed in the Supreme Court. He based his argument on words used by Denning L.J. in Levison v. Patent Steam Carpet Cleaning [1977] 3 All. E.R. 498, 505, where he said:-

"On principle, I should have thought that the burden was on the cleaners to prove that they were not guilty of a fundamental breach. After all, Mrs Levison does not know what happened to it. The cleaners are the one who know, or should know, what happened to the carpet, and the burden should be on them to say what it was."

and –

"It is, therefore, a moot point for decision. On it I am clearly of opinion that, in a contract of bailment, when a bailee seeks to escape liability on the ground that he was not negligent or that he was excused by an exception or limitation clause, then he must show what happened to the goods. He must prove all the circumstances known to him in which the loss or damage occurred."

It should be noted that in dealing with this subject, Denning L.J. had observed that there was a long line of shipping cases in which it had been held that, if a ship owner makes a prima facie case that the cause of the loss was one of the excepted perils, the burden is on the shipper to prove that it was not covered by the exception. He referred to The Glendarroch [1894] p.226; Munro, Brice Steamship Line Ltd v. Imperial Smelting Corporation Ltd [1918] 2 K.B. 78 and The Kingswood [1942] A.C. 154. The learned Lord Justice did not state whether he regarded these cases as exceptions or whether he differed from them. The case of a laundry bailment is of course likely to be very different from one of sea carriage of goods and the case also was one (unlike the present) in which bargaining power was unequal.

It is not necessary to express any conclusion on this submission; it would be merely academic as in this case there was ample evidence showing what happened to the goods. It is even pleaded in the Statement of Claim that they were washed overboard. The captain's evidence, accepted by the learned judge, shows how and where that happened, and as I have indicated above, it is not material whether the captain was called by one party or the other.

On these facts, it was open to the appellant to argue that there had been some fundamental breach of the contract. Counsel had not sought to put any weight on the distinction between fundamental breach and breach of a fundamental term pointed out in Suisse Atlantique Societe v.N.V. Roterdamsche Kalen Centrale [1966] 2 All. E.R. 61 and I think, on the facts of the present case, the usually accepted meaning of a departure from the contract rendering performance totally different from that contemplated, is appropriate.

Counsel has referred to the deviation, meaning the actual physical deviation of some three miles off course, to go inside a reef, where inspection was made, water pumped out and the remaining cargo secured. The cargo, of course, was lost prior to the deviation. No submission has been made on this, but as I see it, a deviation to amount to a fundamental breach must amount to an "unjustifiable departure from the route" – see Scrutton on Charter-Parties and Bills of Lading (17^th Edition) Article 101. Article 102 indicates that a reasonable deviation to effect repairs is justifiable. The barge was listing and taking water and I am confident, that no court could find what was done was unreasonable. I should mention also, that the Bills of Lading contain a deviation exception, but there is no need to construe it.

The next submission of counsel was that the failure to deliver the goods at the port of destination amounted to fundamental breach. I think that in the circumstances of the case the learned trial judge was correct in rejecting this submission. He relied upon John Carter v. Hanson Haulage [1965] 1 All E.R. 113 where it stated by Davies L.J. that it was obvious that mere-delivery could not amount to a fundamental breach.. That was a case of a private carrier. Hunt & Winterbathem v. B.R.S. (Parcels Ltd.) [1962] 1 All. E.R. 111 relates to common carriers and turns largely on pleadings: but it indicates with some clarity that the failure to deliver the goods per se did not suffice to show fundamental breach, without evidence that the loss had been caused by some act outside the contract of carriage. The evidence in the present case indicates no such act by the respondent – the contract was being carried out in the usual way when the loss was occasioned by a peril of the sea.

I come now to the question whether the exclusion clause should receive the interpretation which the learned judge placed upon it. He posed the question "Is the wording of the clause wide enough to include negligence or must it be confined to causes other than negligence?" It is clear from the judgment that no finding on the subject of possible negligence on the part of the respondent or its servants has been made. The learned judge's finding that the exclusion clause did include possible negligence rendered it unnecessary for him to make a finding on the question.

The learned judge examined the contractual position between the parties, saying –

"It is important, I think, to determine first what exactly defendant undertook to do. He is a common carrier and he contracted to carry plaintiff's goods to Labasa. He, however, excluded strict liabilities that the law imposes upon the common carrier under the Sea Carriage of Goods Ordinance by stating on the bill of lading that the goods would be carried on deck and, in fact, carrying them in that manner. Plaintiff cannot, therefore, demand from him the almost absolute liability that is imposed upon him under that Ordinance. To hold the contrary would be to deprive the exclusion clause of all significance."

But if the Rule are negatived what governs the contract of carriage? The Rules are rendered inapplicable by virtue of the definition of "goods" contained therein, and nothing relevant to this case survives in the Ordinance itself. In Carver's Carriage of Goods by Sea (10^th Edition) p.476 it is stated that the "Act" does not apply to such goods and that is no doubt the position.

Nevertheless the respondent continues to be a common carrier, as the learned judge said in his judgment. But he later said – "In respect of such goods the carrier is not an 'insurer' and is required only to show reasonable care". This may be something of an ever simplification though not, in my view, material one in the circumstances.

There is a concise passage in Scrutton (op. cit.) at p. 200, which reads: -

"In the absence of express of stipulations in the express of stipulations in the contract of affreightment, and subject to certain statutory exemptions from, and limitations of, liability, all shipowners who are common carriers for reward (i.e., who offer their ships as general ships for the transit of the goods of any shipper) are liable for any loss of or damage to such goods in transit, unless caused by the act of God, or the Queen's enemies, or by the inherent nature of the goods themselves, or by their having been proper made the subject of a general average sacrifice."

I think therefore that the position is this. Once it is accepted that the Rules do not apply, the ship owner who is a common carrier is responsible for loss of the goods, subject to certain exceptions but subject also to any "express stipulations in the contract of affreightment". That, in the present case is contained in the Bills of Lading, including what had been stamped on them. As is stated in the same work at p.393, in approaching the subject of the Carriage of Goods by Sea Act, 1924 – "at common law the shipowner, whether he carried the goods under a charter party or under a bill of lading, could modify his prima facie liability as carrier as much as he wished...". The task therefore is to construe the Bills of Lading.

The learned judge relied on the case of Alderslade v. Henden Laundry Ltd [1945] 1 All. E.R. 244, particularly where the judgment compares the position of common and private carriers. In the case of the former the carrier is subject to an imposed liability for loss not necessarily based on negligence. Therefore an exclusion term will, unless in the clearest terms be construed as excluding negligence. But if a carrier is under a duty to take only reasonable care, the clause would fail of any effect unless construed so as to cover the case of negligence. The learned judge held that that was the situation in the present case.

Alderslade's case has been considered judicially, for example, in Hollier v. Rambler Motors (AMC) Ltd [1971] EWCA Civ 12; [1972] 1 All. E.R. 399, 406 where Salmon L.J. refused to give it too strict a construction. He emphasised that rules of construction are merely guides and "in the end you are driven back to construing the clause in question to see what it means". Latey J. said, at p.409 –

"In each case one has to look at the words which are claimed to exempt. When in fact A can be liable in negligence only, the law, I believe, is that that fact... 'will more readily operate to exempt him'. But the law goes no further than that."

In Guillespic Bros & Co. Ltd v. Roy Bowles Transport Ltd [1973] 1 Q.B. 400 Lord Denning, having considered these cases summed the matter up thus, at p.415 –

"The correct proposition, as I have always I understood it, is this: Even though the words of a clause are wide enough in their ordinary meaning to exclude liability for negligence, nevertheless if it is apparent that sufficient content can be given to them without doing so ( as in the case of a common carrier), then they will be given that content only. They will not be held to cover negligence."

In Phote Production Ltd v. Securior Transport Ltd [1978] 3 All E.R. 146 there is reference to the construction of the contract not in its natural and literal sense but in the wider context of the presumed intention of the parties. Such an approach may be helpful in some circumstances. I do not think, with respect, that it carries the matter of the mandane relations of shipper of cargo and carrier much further. But I set out this final summation, once again by Lord Denning, at p.153.

"It seems to me that the two ways can be seen to meet in practice so as to produce a result in principle which may be stated thus: Although the clause in its natural and ordinary meaning would seem to give exemption or limitation if the court can say, 'The parties as reasonable men cannot have intended that there should be exemption or limitation in the case of such a breach as this'. In so stating the principle there arises in these cases the figure of the fair and reasonable man; an the spokesman of this fair and reasonable man, as Lord Radcliffe once said, is and must be the court itself: see Davis Contractors Ltd v. Earcham Urban District Council.

Thus we reach, after long years, the principle which lies behind all our striving: the court will not allow a party to rely on an exemption or limitation clause in circumstances in which it would not be fair or reasonable to allow reliance on it; and in considering whether it is fair whether it was in a standard form, whether there was equality of bargaining power, the nature of the breach, and do forth."

With these authorities in mind I turn to the question of construction. The actual words of the exclusion clause are amply wide enough to include the negligence of the respondent's servants. The use of the two "howsoever caused" is all embracing. The following passages from the judgment of Phillimore L.J. in Joseph Travers & Sons Ltd v. Cooper [1915] 1 K.B. 73, 101, is I think, apt –

"This then is the distinction. It is a fine one, and I am sorry to think that it is so fine; but it seems to be this. If you say 'any loss' you are directing attention to the kinds of losses and not to their cause or origin, and you have not sufficiently made in plain that you mean 'any and every loss' irrespective of the cause, and therefore you have not brought home to the person who is entrusting the goods to you that you are not going to be responsible for your servants on your behalf exercising due care for them, or possibly even for your own personal want of care. But if you direct attention to the causes of any loss, if you say 'any loss,' 'however caused' or 'under any circumstances,' you give sufficient warning, and it is not necessary to say in express terms 'whether caused by my servants' negligence,' or in the bill of lading phrase, 'neglect or default or otherwise'."

In favour of the respondent is the fact that the parties were not in any way upon unequal terms, Both were experienced in what they were doing and had done it often before.

The next matter is the construction of the contract of affreightment. The Bills of Lading contain the usual great number of clauses governing in detail the rights and liabilities of the shipowner in particular, though of course the contract to deliver the goods remains. It is not possible to mention more than a few of the provisions. Clause 5 protects the respondent against responsibility for loss, damage or delay from labour troubles, theft, inherent defects, entry of water and perils of the seas – these serve only as examples. Clause 7 contains a comprehensive right to deviate. Clause 9, 10, and 11 place limits upon the value of various items of goods for which the respondent may be accountable. Certain kinds of goods, livestock, perishables etc. Whether carried on deck or below are at shipper's risk. Clause 18 provides that the respondent will not be responsible for over carriage, "from whatever cause", but will remedy the same.

Clause 25 provides that the shipper shall be liable in respect of the handling of goods before loading and after discharge notwithstanding that the loss resulted from the act or neglect of the carrier – the carrier contracted as bailee (presumably in respect of the particular clause) and not as common carrier.

Clause 26 states that all goods shipped as deck cargo were to be carried at owner's risk.

Having read the Bills of Lading I am satisfied that whether or not the learned judge was strictly correct in holding that the respondent was responsible only for loss caused by lack of reasonable care, the exceptions provided are so comprehensive that any area not covered by them (as has been seen they even cover negligence in one case) must be negligible. I would held therefore that the learned judge's approach to the question of construction was justifiable.

There is another factor to be considered. Clause 26 of the Bills of Lading had already put deck cargo at owner's risk. That would not include loss due to negligence of he respondent's servants. Why then should the exclusion clause be worded by way it was, unless to exclude that particular form of liability. It could be said that the exclusion clause was inserted in order to negative the operation of the Rules. But to effect that object all that was necessary was to state that that was necessary was to state that the goods were carried in deck ( and so to carry them). When the Rules were negatived clause 26, being operative, negatived all normal forms of liability, or at least these consequent upon that method of stowage. But the parties thought fit to add a further exclusion, by words "without responsibility for loss or damage however caused". The addition advantages the respondent little if it did not extend to negligence. I think a further guide to the intention of the parties emerges from this consideration.

For these reasons I think the learned judge was correct in holdings that the exclusion clause applied. It followed that the respondent could not be held responsible, whether or not there had been negligence.

I would dismiss the appeal with costs, and as all members of the Court are of that opinion, it is so ordered.

(SGD) T. Gould
VICE PRESIDENT

IN THE FIJI COURT OF APPEAL
Appellate Jurisdiction

Civil Appeal No. 7 of 1979

BETWEEN:

BURNS PHILP (SOUTH SEAS) COMPANY LIMITED
Appellant

AND:

MARINE PACIFIC LIMITED
Respondent

Mr. G.P. Shankar and Mr. A.K. Singh for the Appellant
Mr. H. Lateef and Mr. F.S. Lateef for the Respondent

Date of Hearing: 12 July 1975
Delivery of judgment: 25 July 1979

JUDGEMENT OF SPRING J.A

I have had the advantage of reading the judgement of the learned Vice President in this appeal and with respect agree with his reasoning and conclusions.

According to the evidence, the appellant and respondent have had a lengthy business association and no doubt each had confidence in the other that any contract entered into between them would be carried out in terms of their agreement. The contract of affreightment is governed principally by the terms of the Bill of Lading which includes an exception clause stamped thereon which reads:-

"Carried on deck at shipper's risk without responsibility for loss or damage howsoever caused."

The exemption clause is incorporated into the contract between the parties and it is apparent that the appellant was fully aware of the terms thereof as the learned Judge in the Court below said:-

"The exclusion clause is additional to the General Conditions printed at the back of the bill of lading and was incorporated into the contract before the parties signed it with full notice of it. This was done before the goods were taken to the wharf. According to Drala, plaintiff's shipping clerk, the two parties have dealt with each other for a considerable time and the plaintiff was fully aware of the exclusion clause. Unlike most tickets cases where the weaker party has little choice or say in the matter, the parties here are both large business firms and were dealing on equal terms. Both knew that the goods would be carried on the deck of an open barge toed by a steamer."

The question, as I see it, is one of interpretation. The exemption clause in the instant case was part and parcel of the contract made between the appellant and the respondent and the scope and ambit of the exemption clause is a question of construction having regard to the contract as a whole.

Effect has to be given to every part of a contract; effect must be given to the exemption clause just as much as to the body of the contract unless they are clearly contradictory of one another.

Therefore, I respectfully agree with the learned Vice President that interpreting the contract of affreightment, including the exemption clause as a whole, the respondent has, with the acquiescence of the appellant, limited its liability and is not liable for loss suffered by the appellant.

Accordingly I would dismiss the appeal with costs to the respondent.

(SGD) B.C. Spring
JUDGE OF APPEAL