Seaboard Shipping Co Ltd (the respondent) booked a cargo of lumber for Timberwest Forest Ltd (the shipper) to be carried on the Rhone from Crofton in British Columbia to Antwerp in Belgium. The Rhone was owned by Ocean President Maritime SA (the shipowner) and chartered by Gearbulk Pool Ltd (the charterer) (together, the appellants). The cargo booking allowed lumber to be carried on deck at the carrier's option and stated that: '[a]ll cargo carried on deck, carried at Shipper/Cargo Owner's sole risk and expense'. Part of the cargo was stowed under deck and the remainder on deck. The Rhone subsequently loaded a cargo of soda ash at Portland, Oregon. The on-deck lumber was not covered when the soda ash was unloaded in Antwerp, and became contaminated by soda ash dust.

The respondent had issued two bills of lading for each of the two consignees. They contained the following two notations: (1) 'Stowage: 86% OD 14% UD'; and (2) 'ALL CARGO CARRIED ON DECK AT CARGO OWNER'S SOLE RISK AS STATED ON THE REVERSE IN CLAUSE 6 OF THE CONDITIONS.' Two bills were issued instead of one because the cargo quantities described in the mate’s receipt did not distinguish between the two consignees. The stowage notation was derived from the linear quantities noted in the mate's receipt: '1984 MFBM STOWED ON DECK; 321 MFBM STOWED UNDER DECK'. Article 3.8 of the Hague-Visby Rules (Sch 3, Marine Liability Act, RSC 2001, c 6, s 131(1)) prohibited the contractual exemption. However, on-deck cargo might be exempted if it were 'stated as being carried on deck and is so carried' (art 1.c).

The two bills of lading were issued by the respondent under a contract of affreightment (COA) between the charterer and the respondent. The charterer issued one carrier's bill of lading pursuant to cl 16 of the COA with the following notation under 'Extended Comments': 'STOWED ON DECK: 2,304,888 FBM OF WHICH 1,982,204 FBM LOADED ON DECK WITHOUT LIABILITY FOR LOSS OR DAMAGE HOWSOEVER CAUSED.' The appellants contended that their loss resulted from the respondent's issuing of two bills of lading instead of a single bill of lading, in breach of the COA.

The shipper and consignees secured a favourable judgment for CAD 550,000 (the underlying action) against the appellants (Timberwest Forest Ltd v Gearbulk Pool Ltd 2001 BCSC 882 (CMI1017), affirmed in 2003 BCCA 39 (CMI1020)). The trial Judge concluded that the stowage notation 'Stowage 86% OD 14% UD' failed to adequately identify the part of cargo 'stated as being carried on deck and is so carried' to determine quantity and value. As a consequence, the exemption clause did not protect the charterer and shipowner from liability for the crew's negligence.

The appellants sought indemnification from the respondent. The appellants claimed that it was the respondent's duty to have obtained an effective exemption from liability in the bills of lading. The stowage notation of the on-deck and under-deck cargo in the bills of lading had proved inadequate to support the appellants' reliance on the exemption clause in the underlying action. The trial Judge found no breach of duty by the respondent (Gearbulk Pool Ltd v Seaboard Shipping Co Ltd 2005 BCSC 1620). It was the imprecise calculation of the on-deck and under-deck cargo notation on the mate's receipts that caused the mischief, not the fact that the respondent had issued two bills of lading. The trial Judge concluded that issuing several shipper's bills of lading under one carrier's bill was an accepted practice that did not breach the COA or any common law obligation. The appellants appealed.

Held: Appeal dismissed.

There was neither a breach of the express terms of the COA nor a breach of duty on the part of the respondents to warn or otherwise that supported a claim for indemnity under cl 16 of the COA. The appellants' liability was caused by the inadequate description of the on-deck and under-deck portions of the cargo.

The appellants bore the responsibility to ensure that the exemption clause contained a description of the cargo that allowed the extent of the shipper's risk to be determined and for both value and quantity to be sufficiently identified to determine that risk. Its failure was due to the inadequate description of the cargo during loading and Gearbulk's policy of not using suitable means to provide an adequate cargo description.

The issue was why the notation on the mate's receipt did not adequately distinguish what cargo did, or did not, constitute 'goods' under the Hague-Visby Rules. The description should permit a shipper to determine the extent of the risk presented by the cargo stowed on deck. Quantity and value are the elements of that risk. Both must be included in the cargo identification sufficiently to allow the extent of the shipper's risk to be calculated.