Monsanto Europe SA (the plaintiff) brought this action to recover damages arising from a cargo shipped from Rotterdam to Montreal on the defendant vessel, the Stolt Atlantic. The cargo was an oily liquid primary plasticiser, described as clear, colourless, nearly odourless, and mobile. One of its specifications was that moisture cannot exceed 0.15% as otherwise it becomes unmarketable as a plasticiser.

It was proved by an analysis based on samples taken from the vessel on arrival at Montreal on 1 November 1968 that the water percentage had reached 0.34%. The total cost of reconditioning the cargo was CAD 34,614.76. The cargo had been transported under a tanker voyage charterparty dated 9 September 1968 between A/S Rederiet Stolt Nielsen, the owner of the Stolt Atlantic, and Monsanto Europe SA, the charterer. Prior to loading, the vessel was inspected by the plaintiff's agents and they concluded that 'the vessel with colorite coating was in every way suitable for santicizer transport'.

The defendants argued that Avenir Maritime SA were the owners of the Stolt Atlantic at all material times; the bill of lading named Monsanto Europe as the shipper, the charterparty by A/S Rederiet Stolt Nielsen was in favour of the self-same shippers, Monsanto Europe; and the consignee was Monsanto Canada, a subsidiary thereof. When the holder of a bill of lading is also the charterer, the bill of lading is only a receipt and the Hague Rules do not apply. Therefore, the only contract involved here is the charterparty, to which the defendants were not a party.

Held: Judgment for the plaintiff.

It is true that the Hague Rules do not apply to charterparties: the Hague Rules were drafted to regulate bills of lading. But the Hague Rules do apply to carriage under charterparties when a bill of lading is issued and regulates the relations between the carrier and the holder, or when the charterparty specifically incorporates the Hague Rules. The second paragraph of art 5 of the Hague Rules reads as follows:

The provisions of this Convention shall not be applicable to charter-parties, but if bills of lading are issued in the case of a ship under a charter-party they shall comply with the terms of this Convention. Nothing in these rules shall be held to prevent the insertion in a bill of lading of any lawful provision regarding general average.

Clause 24 of the charterparty referred to the bill of lading form to be used, which is printed at the end, and includes the normal bill of lading paramount clause and a reference to the US Carriage of Goods by Sea Act, which incorporates the Hague Rules.

A basic principle evolved from the jurisprudence under the Hague Rules is that the carrier is prima facie liable for loss or damage to cargo received in good condition and out-turned short or in bad order. Thus the onus shifted to the defendants to rebut the presumption of liability, and they have not done so. They accepted on board marketable plasticiser, for which the master of the vessel issued a clean bill of lading, and they delivered in Montreal a product unmarketable because of the presence of water in the cargo, admittedly from an extraneous source. Alleging condensation, or contamination, or some other mysterious cause or effect, is not sufficient.