Great China Metal Industries Co Ltd (GCMI) engaged Malaysian International Shipping Corp Bhd (MISC)'s ship, the Bunga Seroja, to carry 10 20-ft FCL containers said to contain '40 cases of aluminium can body stock in coils alloy' from Sydney, Australia, to Keelung, Taiwan, via Melbourne, Burnie, and Fremantle. MISC issued a bill of lading evidencing the contract of carriage. The bill was subject to the Hague Rules. The shipper, Strang International Pty Ltd, packed the containers by fixing each coil to a pallet. Four coils were stowed to a container. The coils were not packed in cases.

The Bunga Seroja encountered heavy weather as it crossed the Great Australian Bight from Burnie to Fremantle, and the coils were damaged. The wind was assessed to be Force 11 on the Beaufort Wind Force Scale, indicating a 'violent storm'.

GCMI sued MISC. GCMI alleged that MISC breached its obligations under arts 3.1 and 3.2 of the Hague Rules, and attributed the damage to MISC's negligence in loading cargo and navigating the ship. MISC claimed immunities under arts 4.2.a, 4.2.c and 4.2.n of the Hague Rules.

The trial Judge held in favour of MISC that the damage was occasioned by perils of the sea.

GCMI appealed to the New South Wales Court of Appeal.

Held: Appeal dismissed.

Gleeson CJ: MISC was immune to the loss or damage to cargo arising or resulting from perils of the sea (art 4.2.c). GCMI did not establish a case to defeat MISC's perils of the sea immunity.

Loss by peril of the sea is not limited to an extreme and unexpectedly violent weather. Reasonably foreseeable heavy weather conditions can also establish a peril of the sea (Shipping Corp of India Ltd v Gamlen Chemical Co (A/Asia) Pty Ltd (1980) 147 CLR 142, 168 (CMI723)), and fortuitous damage to cargo as loss by the peril (The Xantho [1887] 12 App Cas 503, 509). However, a 'loss' does not include damage or wear and tear resulting from the natural and inevitable action of wind and waves (ibid).

The trial Judge's approach was orthodox and in line with Australian authority. The Australian courts' interpretation of the 'perils of the sea' exception in the Hague Rules does not require the loss or cause of the loss to be extraordinary (Skandia Insurance Co Ltd v Skoljarev (1979) 142 CLR 375, 386-387).

The English courts (see eg Hamilton Fraser & Co v Pandorf & Co [1887] 12 App Cas 518, 527; Canada Rice Mills Ltd v Union Marine & General Industrial Ltd [1941] AC 55, 67-69), but not the US and Canadian courts, share this interpretation with the Australian courts. Under US law, an event must be 'of an extraordinary nature or arise from irresistible force or overwhelming power, and which cannot be guarded against by the ordinary exertions of human skill and patience' (The Guilia (1914) 218 F 744).

Some Australian judges, like Stephen J, prefer the US approach for policy reasons (see eg Port Jackson Stevedoring Pty Ltd v Salmond and Spraggon (Aust) Pty Ltd (1978) 139 CLR 231, 258-260); hence his reservation in Gamlen as to whether an event or circumstance that could have been foreseen and guarded against can qualify as a peril of the sea. However, the majority in Gamlen did not share his view.

Clarke and Sheller JJA: MISC's liability depended on whether a reasonable shipowner in its position would have foreseen that the voyage involved a risk of injury to the cargo and, if so, what it would have done in response to the risk. If the weather encountered was not unexpected, did GCMI do all that was reasonable to protect the cargo from injury?

Foreseeability and negligence cannot be considered in isolation (see Overseas Tankship (UK) Ltd v The Miller Steamship Co Pty Ltd (The Wagon Mound (No 2)) [1967] 1 AC 617, 643-644; Wyong Shire Council v Shirt (1980) 146 CLR 40, 47-48).

A shipowner does not enjoy the perils of the sea exception where the loss is caused by the shipowner's negligence or that of its servants or agents, save in so far as protection is given under art 4.2.a (see Scrutton on Charterparties and Bills of Lading (19th edn, Sweet & Maxwell 1984) 448). If the loss apparently falls within the exception, the burden of showing that the shipowner is not entitled to the benefit of the exception, on the ground of negligence, is upon the person so contending (see The Glendarroch [1894] P 226, 231).

Construing losses by 'perils of the sea' to only those occasioned by extraordinary violence of the wind or waves was too narrow (Hamilton Fraser 527; cp Canada Rice Mills Ltd 68; see also Goodfellow Lumber Sales Ltd v Verreault, Hovington and Verreault Navigation Inc [1971] 1 Lloyd's Rep 185, 189-90; NE Neter & Co Ltd v Licences & General Insurance Co Ltd (1944) 1 All ER 341, 343).

A perils of the sea exception does not qualify the duty to furnish a seaworthy ship or to carry the goods without negligence (see Smith Hogg & Co Ltd v Black Sea & Baltic General Insurance Co Ltd [1940] AC 997, 1004; Paterson Steamships Ltd v Canadian Co-operative Wheat Producers Ltd [1934] AC 538).

GCMI did not show that MISC's negligence or breach of art 3 or the ship's unseaworthiness was a co-operating cause; it was sufficient to show 'a' cause even as unseaworthiness might never be the sole cause of loss and was invariably, or almost invariably, only one of several co-operating causes (see Carver's Carriage by Sea (4th edn, 1905) 1005). GCMI's evidence neither demonstrated that MISC breached art 3.1 or art 3.2, nor established that MISC did not properly or carefully stow or carry the cargo or that the respondent, its servants or agents were negligent in navigating the ship or in failing to establish a sound system for loading the ship.

[For the unsuccessful appeal to the High Court, see Great China Metal Industries Co Ltd v Malaysian International Shipping Corp Bhd [1998] HCA 65 (CMI1950).]