This was an appeal regarding the loss of the respondent's cargo of scrap metal carried on the appellant companies' tug and barge in a tropical storm. The High Court in Sabah and Sarawak at Kota Kinabalu held in favour of the respondent. The appellants appealed.

Held: Appeal dismissed.

By reason of cl 6(1)(A) of the two bills of lading, the Hague Rules apply.

In Alize 1954 v Allianz Elementar Versicherungs AG [2021] UKSC 51 (CMI1619), the UK Supreme Court elaborated on carriers' responsibilities. The effect of this decision is as follows:

(1) A carrier of cargo on a ship has a duty to exercise due diligence with regard to all the matters stipulated in art 3.1.a-c of the Hague Rules (the due diligence duty);

(2) The due diligence duty is only imposed on the carrier -

(a) when the ship 'comes into the orbit or control of the carrier'; and
(b) before and at the beginning of the voyage (not after the commencement of the voyage);

(3) If:

(a) there is a defect or danger to the ship which was caused by an independent third party contractor before the ship came 'into the orbit or control of the carrier'; and
(b) this 'would be reasonably discoverable' by an exercise of the carrier's due diligence when the cargo comes within the carrier's control;

the carrier would then be liable under art 3.1 Hague Rules;

(4) This due diligence duty cannot be delegated to:

(a) the master and crew of the ship;
(b) the carrier's agents; and
(c) independent third party contractors;

(5) The concept of unseaworthiness of a ship is not subject to an 'attribute threshold'. In other words, a ship's unseaworthiness does not require the existence of an attribute of the ship which threatens the safety of the ship or its cargo; and

(6) With regard to the due diligence duty to make the ship seaworthy, if this duty is breached by the carrier:

(a) the carrier cannot rely on the defences provided in art 4.2 Hague Rules; and
(b) the carrier cannot rely on the negligent navigation and/or management of the ship as:

(i) the cause of the unseaworthiness; or
(ii) the unseaworthiness in itself.

A ship's seaworthiness includes 'cargoworthiness'. This is clear from The Owners of the Cargo lately laden on board the Ship or Vessel MV 'Viva Ocean' v The Owners or Demise Charterers of the Ship or Vessel MV 'Viva Ocean' [2004] 6 MLJ 134 [49] (CMI229), and AE Reed & Co Ltd v Page, Son & East Ltd [1927] 1 KB 743, 754, 755, 756. Premised on these decisions, a carrier's due diligence duty to make the ship seaworthy on or before the voyage pursuant to art 3.1.a Hague Rules includes the carrier's duty to exercise due diligence to make the ship cargoworthy, in the sense that when the cargo is loaded onto the ship (before the voyage), the ship is fit to receive that cargo.

Secondly, a carrier has the due diligence duty (before the voyage) to make the 'holds ... and all other parts of the ship in which goods are carried, fit ... for their ... carriage' under art 3.1.c Hague Rules.

The High Court Judge found that the barge was not cargoworthy before the commencement of the voyage because:

(1) The steel sidewalls and supporting structures of the barge were riddled with heavy corrosion (which took years to form). Such defects in the barge could be 'reasonably discoverable' by an exercise of due diligence by the appellants when the cargo came within their control; and
(2) The appellants did not have any record of maintenance of the barge or proof of its cargoworthiness prior to its departure from Kota Kinabalu.

The High Court's findings in this respect were correct.

The second issue is whether the appellants can limit their liability under art 1.1 of the LLMC 1957. The phrase 'actual fault or privity' in art 1.1 of the Convention is also found in s 360(1) of the Merchant Shipping Ordinance 1952 (Malaysia) (the MSO). The meaning of 'actual fault or privity' was discussed in Newfield Peninsula Malaysia Inc v The Owners of the Ship or Vessel 'Tanjung Pinang 1' [2013] 10 MLJ 650 [103]-[108], and Sabah Shell Petroleum Co Ltd v The Owners of and/or Any Other Persons Interested in the Ship or Vessel the Borcos Takdir [2012] 5 MLJ 515 (cp CMI488).

Unlike art 3.1 Hague Rules, the 'actual fault or privity' in art 1.1 LLMC is not confined to 'before and at the beginning of the voyage'. Premised on Newfield Peninsula Malaysia, whether the appellants could limit their liability pursuant to art 1.1 depends on two questions:

(1) What was the 'occurrence giving rise to the claim', ie what was the cause of the cargo loss; and
(2) Whether the cause of the loss 'resulted from the actual fault or privity' of the appellants, who bear the evidential burden here.

The High Court found that the loss was caused by:

(1) The occurrence of the deviation;
(2) The master's decision to leave Pulau Serasan in a tropical storm; and
(3) The appellants' failure to take any step to relieve the master from his duties.

This Court has no hesitation in upholding that factual finding. According to The Owners or Other Persons Interested in the Ship or Vessel The 'Red Gold' v Sarawak Shell Bhd [2012] 8 CLJ 164 [18], [19] (CMI482), whether the appellants had failed to supervise the master's voyage depends on the 'standard of conduct of the ordinary reasonable shipowner'. There is ample evidence here of the appellants' failure to do so.