Federal Flour Mills Ltd (the plaintiff) claimed damages from the owners of the vessel Ta Tung (the first defendant) and stevedores, The Cargo Handling Corp (the second defendant), for contamination of their cargo of wheat by diesel oil. The wheat had been shipped from Australia to Malaysia in good order and condition by a bill of lading incorporating the terms, conditions and exceptions of a charterparty dated 31 August 1966. Clause 39 of the charterparty provided that the vessel must be suitable for grab discharge.

The vessel sailed on 19 October 1966. Notice of readiness was tendered to the plaintiff’s manager and discharge commenced on 3 November 1966. The plaintiff engaged the second defendant to unload the wheat at the rate of USD 1 per tonne. The discharge operations were carried out by a grab attached to the derrick. The grab released the wheat taken from the ship into a hopper on the wharf. The wheat was taken by elevator to the storage area.

The plaintiff alleged a breach of cl 39 of the charterparty as the vessel was not suitable for grab discharge and that there was a breach of art 3.1 and art 3.2 of the Schedule to the Australian Sea-Carriage of Goods Act 1924 (the Hague Rules) when the shipowners failed to make the vessel seaworthy.

Held: The second defendant is not liable to the plaintiff. There is no evidence to show that the diesel oil leaked because of damage caused by the grab. The only inference that can be drawn is that the lid in the inspection hatch had not been properly secured to make it leakproof. The Marine Underwriters Association of South Australia gave a certificate of approval to load grain that certified the vessel had been examined by a surveyor and passed as complying with the applicable regulation of the Association of Stowage and Dunnage Regulations, but it expressly stated that this was not a certificate of seaworthiness.

The first defendant is liable to the plaintiff. The bill of lading was expressly made subject to the rules contained in the Schedule to the Australian Sea-Carriage of Goods Act 1924 (the Hague Rules). Article 3.1 requires the carrier at the beginning of the voyage to exercise due diligence to make the ship seaworthy (art 3.1.a), to properly man, equip and supply the ship (art 3.1.b) and to make the holds and all other parts of the ship in which goods are carried, fit and safe for their reception carriage and preservation (art 3.1.c). Article 3.2 provides that subject to art 4 the carrier shall properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried.

The first defendant knew that it had to carry bulk cargo and that the cargo could be damaged if there was leakage. Therefore, it is reasonable to expect the first defendant to exercise due diligence to ensure the inspection hatch was properly secured and leakproof before loading. In light of the evidence adduced by the plaintiff that shows the nature of the inspection hatch, its situation in relation to the path of the grab and the presence of a deep tank which would carry liquid, this part of the ship is unsuitable for the carriage of bulk cargo, particularly if the cargo is to be discharged by grab. In addition, there could be leakage if the bolts of the inspection hatch were not properly secured. A protection box was placed over the inspection hatch but it was not properly secured. There is no evidence to show that the inspection hatch was leakproof before loading. Therefore, the first defendant failed to show that it exercised due diligence to make the ship seaworthy.

The obligation under art 3 is to carry out certain operations properly and carefully. The mere arrival of cargo in a damaged condition does not constitute a breach of the obligation but in the present case there is an abundance of evidence from which the court can infer a breach of the obligation on the part of the first defendant. The onus is on the first defendant (as the carrier) to prove that it exercised due diligence. In this case, it has not adduced satisfactory evidence to discharge that burden.