Seventeen plaintiffs/consignors shipped chests of tea on the Chyebassa at Calcutta, India. It was to be carried to London and Hull, UK, and Amsterdam, Netherlands, via Colombo, Sri Lanka, and Port Sudan, Sudan. The vessel belonged to the defendants/shipowners, British India Steam Navigation Co Ltd. At Port Sudan, other cargo was discharged and cottonseed was loaded by Red Sea Stevedore Co Ltd, agents of the shipowners for cargo operations at Port Sudan. The vessel's cargo hold for the tea had a storm valve covered by a small brass plate (the cover plate). The cover plate was stolen by one or more of the stevedores at Port Sudan during cargo operations. Seawater could enter the cargo hold if the vessel rolled. This made the vessel unseaworthy from the time it left Port Sudan. The missing cover plate could not reasonably have been detected by the vessel's officers or crew. The vessel encountered heavy weather for part of the remainder of the voyage. Seawater damaged the tea.

The plaintiffs were holders of bills of lading incorporating the Carriage of Goods by Sea Act 1925 (India) and the Rules scheduled thereto. Those Rules are materially identical to the Hague Rules scheduled to the Carriage of Goods by Sea Act 1924 (UK). The plaintiffs sued the shipowners for cargo damage and succeeded at first instance, where the Judge held that the shipowners could not rely on any of the immunities contained in art 4 of the Hague Rules: Leesh River Tea Co Ltd v British India Steam Navigation Co Ltd (The Chyebassa) [1966] 1 Lloyd's Rep 450 (Com Ct). The shipowners appealed. The facts were undisputed. The shipowners conceded that they were liable unless they could bring themselves within the immunities conferred by the Hague Rules. In this regard, the shipowners relied upon arts 4.1, 4.2.a, 4.2.c, and 4.2.q.

Held: Appeal allowed.

Although the shipowners cannot invoke arts 4.1, 4.2.a, or 4.2.c as a defence, this is one of the rare occasions when art 4.2.q can be invoked.

In applying the Hague Rules it is desirable to seek uniformity of interpretation in the many jurisdictions in which they may arise for consideration: Stag Line Ltd v Foscolo, Mango & Co Ltd [1932] AC 328 (HL) (Stag Line) 343, 350. Courts interpret the Hague Rules as if they formed part of the contract between the parties: Dobell (GE) & Co v Steamship Rossmore Co Ltd [1895] 2 QB 408 (CA) 412, 413. The following Hague Rules are material: arts 3.1.a, 3.2, 4.1, 4.2.a, 4.2.c, and 4.2.q.

Turning to art 4.1, the shipowners contended that as the damage was caused by unseaworthiness, they escape liability under art 4.1. No doubt when cargo owners base their claims against carriers upon unseaworthiness alone, and allege that the proper inference from the facts is that this unseaworthiness was due to want of due diligence by the carriers before or at the beginning of the voyage, the carriers may escape liability if they can prove that the unseaworthiness was not so caused. But in this case the plaintiffs have not based their claim on unseaworthiness alone, nor has it ever been suggested that the vessel's unseaworthiness when the vessel left Port Sudan (long after the beginning of the voyage from Calcutta) was caused by any negligence before or at the beginning of the voyage. Art 4.1 is irrelevant. It was also argued that art 4.1 covered any damage due to unseaworthiness, even if the unseaworthiness was caused by the negligence of the carriers, their servants or agents, during the voyage. This is a strained and impossible meaning to put upon art 4.1.

The shipowners next argued that they escape liability under art 4.2.a in as much as the damage was caused by their servant in the management of the ship. This argument was rejected because, even if the 'servant' requirement is met, it is unreal to suggest that what was being done by the stevedores at Port Sudan had anything to do with the management of the ship.

The shipowners finally argued that the damage resulted from perils of the sea; alternatively, that it resulted from some other cause arising without the shipowners' actual fault or privity and without the fault or neglect of their agents or servants, and that they escape from liability either under art 4.2.c or art 4.2.q.

As to art 4.2.c, the plaintiffs argued that the loss or damage did not result from 'perils and dangers of the sea'. Sellers LJ agreed with the first instance Judge that it was necessary to ascertain the cause of the seawater's entry before the art 4.2.c defence could be established. Sellers LJ would be prepared to hold that the entry of the sea was a peril or danger of the sea. Nevertheless, art 4.2.c as a defence fails if the cover plate was removed in circumstances in which the shipowners are responsible for the act of the stevedores' servant(s) who removed it. If not, the defence arises out of art 4.2.q instead.

This was why Salmon LJ thought that whether the cargo damage resulted from perils of the sea under art 4.2.c or some other cause under art 4.2.q was unnecessary to decide. It is impossible to hold that the stevedore was a servant or agent of the shipowners for the purposes of one sub-para of art 4.2 but not of the other. Even if the shipowners establish that the damage did result from perils of the sea, the plaintiffs can still succeed if they show that this peril was caused by the fault or neglect of the shipowners' servants or agents. The outcome depends upon whether the stevedore who stole the plate stole it as a servant or agent of the shipowners.

'Any other cause' under art 4.2.q would clearly include theft of part of or malicious damage to the ship, and, if the loss is not to be held to be a loss by perils of the sea, it must be attributed to the removal and theft of the cover plate.

The shipowners established that the theft was without their actual fault or privity and they have to establish also that it was without the fault or neglect of their agents or servants. This is because in art 4.2.q the word 'or' following the words 'privity of the carrier' must be read as meaning 'and': RF Brown & Co Ltd v T & J Harrison (1927) 43 TLR 633 (CA) (Brown) sub nom RF Brown & Co Ltd v Harrison, Hourani v Harrison (1927) 32 Com Cas 305 (CA) (Hourani). Brown established that although stevedores appointed are independent contractors, the personnel employed by them to discharge the cargo must be regarded as servants of the shipowner for that purpose within the meaning of art 4.2.q. An employer is liable for damage caused by any wrongful act of its servant or agent done within the scope or course of the servant or agent's employment, even if the wrongful act amounted to a crime: Lloyd v Grace, Smith & Co [1912] AC 716 (HL). The shipowners could not have escaped liability if the stevedores' personnel in the performance of the work in hand had damaged or stolen the cargo they had to handle. But the thief did not do that. The thief stole a part of the ship.

If a stranger had entered the hold unobserved and removed the plate, art 4.2.q would apply if the shipowner could prove that it was a stranger who removed the cover and reasonable care had been taken to prevent strangers getting aboard the ship and due diligence generally had been exercised. The act of the thief was the act of a stranger. The thief performed no duty for the shipowners. He was not their servant. The theft was outside the scope of his employment. The shipowners were liable for his acts only when he, as a servant of the stevedores, was acting on behalf of the shipowners in the fulfilment of the work for which the stevedores had been engaged. Without that the shipowners were in no relationship at all with the thief. The thief could only be regarded as a servant of (or more correctly as an agent of) the shipowners insofar as he was performing a task for and on their behalf.

However, this theft had nothing to do with cargo handling. The shipowners owed the plaintiffs a duty to take care that no one stole any part of the ship if the theft of such part might render the ship unseaworthy and damage the cargo. But there was no breach of that duty. The fact that the thief was a stevedore was fortuitous. The fact that his employment onboard presented him with the opportunity to steal does not suffice to make the shipowners liable: Morris v CW Martin & Sons Ltd [1966] 1 QB 716 (CA) (Morris); Ruben & Ladenbury v Great Fingall Consolidated [1906] AC 439 (HL).

Morris cannot be distinguished on the ground that it related to bailments on land, whereas the present case concerned the carriage of goods by sea; in the former case the bailee's liability is based on negligence, whereas the latter case (so it is said) must be viewed against the background that, at common law, the carrier's liability was absolute. This is because the carrier's common law absolute liability is no more. Article 2 of the Hague Rules provides that the carrier's responsibilities and liabilities, together with its rights and immunities shall be as set out in the Rules. These responsibilities and liabilities, in so far as they relate to loading, handling, storing, carrying, keeping, caring for and discharging the cargo, all depend upon the exercise of reasonable care by the carrier, its agents and servants. There is no longer any absolute liability unless there is an express term in the bill of lading imposing such liability: art 5. The plaintiffs argued that the Morris principles are peculiar to the UK and should not be applied in construing rules of international application which will be interpreted by the courts of foreign countries and should be given the same meaning everywhere: Stag Line 343, 350. The Court agreed with Stag Line but highlighted that there was no evidence that the principles relating to the law of master and servant and principal and agent are different in foreign countries from what they are in England, so foreign law must be presumed to be the same as English law.

The plaintiffs cited three authorities which did not assist them: Hourani and Brown, which were tried together, and Heyn v Ocean Steamship Co Ltd (1927) 27 Ll LR 334 (KB) (Heyn). Salmon LJ noted that in Heyn the carriers were held liable for cargo theft by stevedores but thought that Heyn was wrongly decided because the stevedores had ceased to be agents of the carriers before the theft took place. In Hourani, the stevedores stole the cargo which they were employed and entrusted by the carriers to handle at the time they stole it. The carriers were clearly liable. Morris is consistent with Hourani. In Brown, the point that the stevedores were not employed to handle the stolen cargo was not taken. But this point arises in the instant case and arose in Morris. Accordingly, Brown is irrelevant. In contrast, Sellers LJ stated that Brown and Heyn were cases of cargo stolen by stevedores' personnel employed to handle the cargo and are therefore distinguishable.

Lastly, if the stevedores had so negligently handled the cargo at Port Sudan that they knocked off the cover plate, there could have been no defence to this claim.