The appellants, Maxine Footwear Co Ltd and J Eric Morin, were shippers and consignees respectively of cargo loaded on the MV Maurienne at Halifax, Canada, in February 1942, to be carried to Kingston, Jamaica. The bill of lading for the cargo contained a clause paramount stating that the bill had effect subject to the Water Carriage of Goods Act 1936 (Canada), to which the Hague Rules were scheduled.

While the cargo was being loaded onboard, the ship's master instructed one of the officers to have three frozen scupper pipes thawed out. An employee of a Halifax firm, Purdy Bros, used an acetylene torch. There was cork insulation around the pipes. The heat of the torch acting on the cork started a fire. The master was forced to scuttle the ship. The appellants' cargo was lost. The appellants sued.

The respondents relied on the Hague Rules, arts 4.1, 4.2.a, and 4.2.b. They argued that they had performed their obligations under art 3.1. The appellants argued that the respondents had not exercised due diligence to make the ship seaworthy under art 3.1; that the unseaworthiness so resulting caused the damage; and that in these circumstances the respondents could not rely on the immunities under art 4.

One issue was whether the qualified obligation under art 3.1 applies only at stages or is a continuing obligation from the beginning of the loading to the beginning of the voyage.

The first instance Judge held (Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd [1952] Ex CR 569) that the warranty of seaworthiness was not a continuing warranty. He held that on the evidence the appellants' cargo had been loaded before the attempt to thaw the ice had begun and that the ship was seaworthy at the 'loading stage'. He further held that the question of seaworthiness for the voyage never arose as the ship never sailed. In these circumstances the respondents were entitled to rely on art 4.

The Judge on appeal held (Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd [1956] Ex CR 234) that the fourth officer, and possibly the captain and chief engineer, were negligent in relation to the use of the torch. The presence of ice did not make the ship unseaworthy. If the respondents met their art 3.1 obligations, they would be entitled to immunity under art 4. The appeal Judge held that the obligations under art 3 had been fully carried out before the thawing out operations started. He further held that on this basis the fire arose from negligence in the management of the ship. The respondents could rely on art 4.2.a. The respondents could also rely on art 4.2.b in that the negligence of the respondents' servants did not constitute actual fault or privity of the carrier.

On further appeal to the Supreme Court of Canada, the majority held (Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd [1957] SCR 801 (CMI2475)) that on the evidence the appellants' goods were not stowed until after the commencement of the fire. On the assumption that a plaintiff can only rely on unseaworthiness at the commencement of the loading, and that for this purpose the commencement of the loading means the commencement of the loading of each shipper's parcel and not the commencement of loading any cargo, the appellants had therefore established a breach of art 3, subject to due diligence. The majority held that the respondents had established due diligence. This was on the basis that due diligence need only be exercised by the owners personally or those who act for the owners in a managerial capacity, that is a class similarly restricted to that to which fault or privity has to be brought home under the fire clause. There was no evidence that members of that restricted class knew that the pipes were frozen or that an acetylene torch was to be used.

Cartwright J, dissenting, agreed with the finding that the appellants' goods were not stowed until the commencement of the fire. He held that an owner only escapes liability for damage caused by unseaworthiness if due diligence has been exercised not only by itself but by its experts, servants, or agents. He further held that this failure to exercise due diligence caused the fire which amounted to unseaworthiness and caused the loss. He would have entered judgment for the appellants.

The appellants appealed to the Judicial Committee of the Privy Council, where parties accepted that: (1) the officer who ordered and supervised the thawing was negligent. The cork insulation created a danger of fire and the man operating the torch should have been warned or some other method used; (2) the fire was due to the heat generated by the torch; and (3) that the presence of ice did not make the ship unseaworthy.

The respondents argued that in cases of fire art 3 never comes into operation even though the fire makes the ship unseaworthy. All fires and all damage from fire on this argument fall to be dealt with under art 4.2.b. If this were right, there was a very strong case for saying that there was no fault or privity of the carrier within that rule, and the respondents would succeed.

Held: Appeal allowed.

The respondents' argument was rejected. Article 3.1 is an overriding obligation. If it is not fulfilled and the nonfulfilment causes the damage the immunities of art 4 cannot be relied on. This is the natural construction apart from the opening words of art 3.2. Article 3.2 is subject to art 4 whereas art 3.1 is not.

The art 3.1 obligation to exercise of due diligence to make a vessel seaworthy (Paterson Steamships Ltd v Robin Hood Mills Ltd (The Thordoc) (1937) 58 Ll L Rep 33 (PC) 40, citing Dobell & Co v Steamship Rossmore Co [1895] 2 QB 408 (CA)) 'is not fulfilled merely because the shipowner is personally diligent. The condition requires that diligence shall in fact have been exercised by the shipowner or by those whom he employs for the purpose'.

The failure to exercise due diligence by the fourth officer was therefore a failure to exercise due diligence by the carrier within art 3.1.

From the time when the ship caught on fire it was unseaworthy. This unseaworthiness caused the loss of the appellants' goods. The negligence of the respondents' servants which caused the fire was a failure to exercise due diligence.

The respondents also argued that, under art 3.1, the obligation is only to exercise due diligence to make the ship seaworthy at two moments of time, the beginning of the loading and the beginning of the voyage. This argument was rejected.

Although it is difficult to believe that construing 'before' in art 3.1 could have been argued, this doctrine of stages was applicable to the absolute warranty of seaworthiness in English law. Nevertheless, for the Carriage of Goods by Sea Act 1924 (UK), which embodied the Hague Rules, as does the Canadian Act (Stag Line Ltd v Foscolo, Mango & Co [1932] AC 328 (HL) 350):

It is important to remember that the Act of 1924 was the outcome of an International Conference, and that the rules in the Schedule have an international currency. As these rules must come under the consideration of foreign courts it is desirable in the interests of uniformity that their interpretation should not be rigidly controlled by domestic precedents of antecedent date, but rather that the language of the rules should be construed on broad principles of general acceptation.

The phrase in art 3.1 'before and at the beginning of the voyage' means the period from at least the beginning of the loading until the vessel starts on its voyage. The word 'before' cannot be read as meaning 'at the commencement of the loading'. If this had been intended it would have been stated. The question when precisely the period begins does not arise in this case, hence the insertion above of the words 'at least'.

Thus, the art 3.1 due diligence obligation to make the ship seaworthy continued over the whole of the period from the beginning of loading until the ship sank. There was a failure to exercise due diligence during that period. The ship consequently became unseaworthy, causing the appellants' goods to be lost.

It is unnecessary to consider the earlier cases as to 'stages' under the common law. The doctrine of stages had its anomalies and some important matters were never elucidated by authority. When the warranty was absolute it seems logical to restrict it to certain points of time. But it would be surprising if a duty to exercise due diligence ceased as soon as loading began, only to reappear later shortly before the beginning of the voyage. It is also unnecessary to consider whether the appellants' goods were not stowed until after the commencement of the fire.