The consignee, Hossain Bros, was the holder of bills of lading in respect of 115 bales of cotton that were shipped from Karachi to Chittagong on board the SS Fatakada, belonging to the shipowner, East & West Steamship Co. When the vessel reached Chittagong the cargo was discharged into a lighter engaged by the shipowner and then carried to the landing jetty. On taking delivery of the goods the consignee found that 33 bales had been damaged by rain water. On survey the damage was assessed at some PKR 13,025 inclusive of survey fees. The consignee claimed that amount plus interest from the shipowner.

The shipowner disclaimed all liability, relying on the terms and conditions of the bills of lading. The Subordinate Judge held in favour of the consignee. On appeal, the judgment and decree of the Subordinate Judge were upheld by the High Court. The shipowner appealed to the Supreme Court. The appeal was argued on agreed facts, namely, that there was no damage caused to the goods either during the time they were in the ship's hold or at the time of their discharge at the outer anchorage, and that the goods were actually damaged by rain water while they were in the lighter. The only question on appeal was whether the shipowner was protected by the terms and conditions in the bills of lading.

Held: Appeal dismissed with costs.

Both bills of lading contain similar terms. There is a paramount clause, the opening words of which are: 'All the terms, provisions and conditions of the Indian Carriage of Goods by Sea Act, 1925, and the Schedule thereto are to apply to the contract contained in the bill of lading'. They further provide: 'In all cases and under all circumstances the Company's liability shall absolutely cease when the goods are free of the vessel's tackle and thereupon the goods shall be at the risk for all purposes and in every respect of shippers or consignees'.

The above provisions are in the printed part of the bills of lading, and the following clauses are typed thereafter:

(a) All general cargo will be discharged at Chittagong at outer anchorage owing to deep draft of the vessel. Under the circumstances all general cargo other than rape-seed bags is accepted for shipment on the distinct understanding that the ship will not be responsible for any damage sustained by such cargo due to its being discharged at outer anchorage into lighters nor will they be responsible for shortage of packages and/or its contents partially or wholly due to any reason including pilferage.
(b) Discharging of Cargo at Chittagong anchorage will be carried out at shipper's risk &/or lighterage department will not be responsible for the loss and/or damage etc. in Cargo.

There is also the following rubber stamp endorsement on the bill of lading:

Discharging of Cargo at Chittagong anchorage will be carried out at shipper's risk & ship and/or lighterage department will not be responsible for the loss and/or damage etc. in Cargo.

Thus the paramount clauses show that the bills of lading are subject to the provisions of the Hague Rules which have been incorporated in the Schedule to the Carriage of Goods by Sea Act 1925.

On behalf of the shipowner it was contended that the obligations it undertook were fulfilled by discharge of the goods into the lighter and that at any rate its liability ceased when the goods were 'free of the ship's tackle'. In support of this contention reliance was also placed on art 1.e of the Hague Rules which defines 'carriage of goods'. In other words, it was argued that as soon as the goods were put into the lighter the sea transit was over and the terms and conditions of the bill of lading were attracted.

It cannot be disputed that one of the objects and intent of the contract in this case was that the shipowner would discharge the goods carried 'properly and carefully' as laid down in art 3.2 of the Hague Rules which have been incorporated in the Carriage of Goods by Sea Act. In other words, the ordinary discharge of goods should be accompanied by the ordinary duties of avoiding negligence. Hence, it was the duty of the shipowner to see that the lighter was seaworthy in the ordinary sense of the word, that is to say, that it was structurally fit for the receipt and carriage of particular goods. Now, the evidence has established that the lighter had no fixed cover to protect the cargo from rain and that it used tarpaulins for the purpose if and when necessary. As the cargo consisted of valuable goods it was the duty of the shipowner or its agents, before discharging the cargo, to be satisfied that the lighter was properly equipped for the purpose. This they did not do. It is not even pretended that any care was taken in the selection of the lighter. Thus, there was lack of due diligence on the part of the shipowner or its servants or agents in discharging the cargo on a lighter which was not properly fitted for reception of the goods.

In order to escape the consequences of damage the shipowner has relied on the exception clauses in the bill of lading. However, an exemption, in general words, not expressly relating to negligence, even though the words are wide enough to include loss by the carrier's servants must be construed as limiting the liability of the carrier as assurer, and not as relieving it from the duty of exercising reasonable skill and care. If the carrier desires to relieve itself from the duty of using reasonable skill and care in the carriage of goods, it must do so in plain language and explicitly, and not by general words. The exception clauses therefore do not exonerate the shipowner from liability for negligence. Even if there was a clause in the bill of landing exempting the shipowner from liability for loss or damage resulting from negligence in discharging the cargo, it would not have helped it because the same would be null and void by reason of art 3.8 of the Hague Rules. The exceptions mentioned in art 4 do not cover a case of failure to discharge the goods 'properly and carefully'. Hence, the exception clauses will not protect the shipowner in this case against the consequences of negligence.

SA Rahman J (concurring): Even if the contract of carriage by sea could be said to have ended with the discharge of goods from the ship into a lighter engaged by the shipowner, the latter would not be absolved from liability as bailee of the goods until they were handed over to the consignee or its agents or assignees. Negligence as a bailee would have sufficed to sustain the claim against the shipowner and here there was clear negligence in damage to the goods.