The appellants, Maxine Footwear Co Ltd and J Eric Morin, were shippers and consignees respectively of cargo loaded on the respondent's ship, MV Maurienne, at Halifax, Canada, in February 1942, to be carried to Jamaica. During loading operations, contractors were engaged to thaw out three frozen scupper pipes onboard the ship. There was cork insulation around the pipes. Heat from the acetylene torch used started a fire. That fire was only discovered after some time. The ship had to be scuttled. The appellants sued for their lost cargo but their action (Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd [1952] Ex CR 569) and appeal (Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd [1956] Ex CR 234 (Maxine (Appeal))) were both dismissed. The appellants appealed once more.

The parties agreed that the Water Carriage of Goods Act 1936 (Canada), to which the Hague Rules were scheduled, applied. By s 3 of that Act there is not to be implied in any contract for the carriage of goods by water 'any absolute undertaking by the carrier of the goods to provide a seaworthy ship'.

The appellants argued that it was not shown that the appellant's goods were put on board before the commencement of the fire. The respondent argued that there was no evidence that the goods were not onboard at that time. In any event, unless the fact that there was a fire was evident, the respondent was free of liability on other grounds. The respondent relied on arts 4.2.a and 4.2.b of the Hague Rules.

Held: Appeal dismissed.

Apart from Cartwright J's dissent, the appeal was unanimously dismissed. Nevertheless, every Judge accepted that the cargo was stowed after the fire started but before the fire was discovered and that the contractor/welder was not made aware about the cork insulation.

The majority held that even though the appellant's goods were not stowed until after the commencement of the fire, the appellants were still not entitled to succeed on that basis. In view of s 3 of the Act, art 3.1 of the Hague Rules must be construed as meaning that if before and at the beginning of the voyage the ship is unfit for the cargo before the commencement of the loading of the goods, the carrier may absolve itself for the loss of which a claim is made by showing that it exercised due diligence in that regard. That onus has been met by the respondent. Whoever hired the contractors was negligent in not telling them of the cork insulation. The welder was negligent in the manner in which he applied the flame. Nevertheless, the majority agreed with the Court below (Maxine (Appeal) 248) that 'neither the fact that the pipes were frozen nor that an acetylene torch was to be used to clear them was communicated to anyone who represented the carrier'.

Furthermore, the negligence or default was that of the servants of the respondent in the management of the ship within the meaning of art 4.2.a: Kalamazoo Paper Co v Canadian Pacific Railway Co [1950] SCR 356. The distinction to be drawn is one between want of care of cargo and want of care of vessel indirectly affecting the cargo. The frozen pipes had nothing to do with the cargo, except incidentally and indirectly. Spencer Kellogg & Sons Inc v Great Lakes Transit Corp 32 F Supp 520 (ED Mich 1940) is distinguishable. Moreover, US decisions on the Harter Act must be read with care, in view of the absolute obligation under the Harter Act to provide a seaworthy ship.

Cartwright J, dissenting, found that the ship was initially seaworthy while loading general cargo at Halifax. The frozen pipes did not render the ship unseaworthy. The holds and other parts of the ship in which goods were carried were fit and safe for their reception and carriage.

The fire was caused by the negligence of the employees of the carrier. The welder's work was under the direct supervision of the fourth officer, who knew about the cork insulation. The welder and the fourth officer were employees of the carrier. It was the negligence of either one, or of both, that caused the fire. The captain and chief engineer were also possibly negligent.

The Court below found that: (i) the thawing out of the pipes with an acetylene torch was an act of the servants of the carrier, the respondent, in the management of the ship; (ii) the fire was not caused by the actual fault or privity of the respondent; (iii) the loss of the appellants' goods was 'the direct result of fire only'; and, (iv) consequently the respondent was relieved from liability by arts 4.2.a and 4.2.b. Cartwright J thought that findings (iii) and (iv) did not necessarily follow from findings (i) and (ii), assuming that the latter were correct.

Under arts 3.1.a and 3.1.c, the respondent was bound, before and at the beginning of the voyage, to exercise due diligence to make the ship seaworthy and to make the parts of the ship in which goods were carried fit and safe for their reception, carriage, and preservation. Prior to the commencement of the fire, the requisite due diligence had been exercised, but the duties of the carrier under arts 3.1.a and 3.1.c were continuing and persisted until the beginning of the voyage. When the cork insulation had begun smouldering, the ship was no longer seaworthy. The cargo holds had ceased to be fit and safe for the reception and carriage of goods. The respondent stowed the appellant's goods on an unseaworthy ship when the exercise of due diligence would have resulted in the discovery of the fact that the ship was on fire.

The carrier is responsible for the failure of its employees to exercise the due diligence required by art 3.1. The effect of the authorities is correctly stated in the following passage in Raoul Colinvaux, Carver's Carriage of Goods by Sea (9th edn, Stevens & Sons 1952) 182:

'Due diligence' seems to be equivalent to reasonable diligence, having regard to the circumstances known, or fairly to be expected, and to the nature of the voyage, and the cargo to be carried. It will suffice to satisfy the condition if such diligence has been exercised down to the sailing from the loading port. But the fitness of the ship at that time must be considered with reference to the cargo, and to the intended course of the voyage; and the burden is upon the shipowner to establish that there has been diligence to make her fit.

It is not enough to satisfy the condition that the shipowner has been personally diligent, as by employing competent men to do the work. The condition requires that diligence to make her fit shall, in fact, have been exercised, by the shipowner himself, or by those whom he employs for the purpose. The shipowner 'is responsible for any shortcomings of his agents or subordinates in making the steamer seaworthy at commencement of the voyage for the transportation of the particular cargo'. [The Frey 92 F 667 (SD NY 1899).]

'The obligation to make a ship seaworthy is personal to the owners, whether or not they entrust the performance of that obligation to experts, servants or agents'. [Northumbrian Shipping Co Ltd v E Timm and Son Ltd [1939] AC 397 (HL) 403.] If such experts, servants or agents fail to exercise due diligence to make her seaworthy the owners are liable under Art. III, r. 1 of the Rules.

However, the respondent argued that, even if it is accepted that the general rule is that the carrier is responsible for loss caused by the failure of its employees to exercise the due diligence required by arts 3.1.a and 3.1.c, the respondent still escapes liability on two grounds. First, the respondent argued that the failure was an act, neglect, or default of the servants of the carrier in the management of the ship: art 4.2.a. Secondly, the respondent argued that the result of that failure was a fire caused without the actual fault or privity of the carrier: art 4.2.b.

Cartwright J was inclined to the view that the duties imposed on the carrier under arts 3.1.a and 3.1.c are paramount and that the carrier is liable for a loss caused by failure to exercise the due diligence required by art 3.1 even though that failure or its result could also be regarded as falling within the wording of arts 4.2.a and 4.2.b. But Cartwright J did not find it necessary to reach a conclusion on this. In Cartwright J's opinion, the direct cause of the loss of the appellant's goods was the action of the carrier's employees in bringing those goods to, and loading them on, a burning and unseaworthy ship, the holds of which were not fit and safe for their reception and carriage. Had the due diligence required by art 3.1 been exercised, this unseaworthiness would have been prevented, or, if not prevented, would have been discovered and the appellant's loss would have been avoided. The effective cause of the loss was the failure to exercise the due diligence required by art 3.1.

Separately, because the appellant's goods were not stowed until after the commencement of the fire, Cartwright J declined to say anything as to the position of the owners of that part of the cargo which was stowed before its commencement. Cartwright J also declined to determine at this stage whether the respondent was entitled to limit liability.

[For the successful appeal to the Judicial Committee of the Privy Council, see Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd [1959] AC 589 (PC) (CMI2293).]