A consignment of 40 cases of aluminium can body stock in coils owned by Great China Metal Industries Co Ltd (GCMI) was loaded onto the Bunga Seroja at Sydney, Australia, for carriage to Keelung, Taiwan, via Melbourne, Burnie, and Fremantle. The owner of the Bunga Seroja, Malaysian International Shipping Corp Bhd (MISC), issued three bills of lading acknowledging receipt of the goods in apparent good order and condition. These bills incorporated the Hague Rules.

The Bunga Seroja encountered heavy weather as it crossed the Great Australian Bight from Burnie to Fremantle. The wind was assessed to be Force 11 on the Beaufort Wind Force Scale, which indicated a 'violent storm'. The coils were damaged. GCMI sued MISC. The issue was whether the damage was caused by 'perils of the sea', exempting MISC from liability.

The trial Judge held in favour of MISC that the damage was occasioned by perils of the sea. There was no neglect or default by the master or other servants of MISC in the management of the ship. GCMI appealed to the New South Wales Court of Appeal. The appeal was dismissed: see Great China Metal Industries Co Ltd v Malaysian International Shipping Corp Bhd [1996] 39 NSWLR 683 (CMI1952). GCMI appealed to the High Court.

Held: Appeal dismissed.

Gaudron, Gummow, Hayne JJ: In February 1921, the British Imperial Shipping Committee recommended uniform legislation throughout the British Empire. Draft rules were prepared, considered, and amended. By 1922 the Comité Maritime International had adopted a draft. The Diplomatic Conference on Maritime Law then took up the matter, and in August 1924 the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading was concluded and opened for signature. Australia enacted the Sea-Carriage of Goods Act (Cth) as soon as the final diplomatic steps had been taken. The new Rules quickly gained international acceptance, although United States legislation was not passed until 1936. By the start of World War II the overwhelming majority of the world's shipping was committed to the Hague Rules. The Hague Rules represent a compromise about the allocation of risk of damage to cargo (a compromise which was different from what had been represented in domestic statutes).

It is necessary to recall that the Rules were reached as a matter of international agreement. Several things follow from their origin. First, the Rules necessarily take a form different from domestic statutes like the Harter Act (and equivalent Australian, Canadian, and New Zealand Acts) because, while those domestic Acts were written to be read in the context of domestic law, the new Rules were designed to create a self-contained code (at least in the areas it covered) that would not require reference to domestic law. Secondly, because the rules were created by international agreement, it is not desirable to begin from an assumption that they are to be construed like a contract governed by Australian law or some other Common Law system. Thirdly, while any action brought in a national court on a contract of carriage governed by that nation's law will be framed in a way that reflects that law, it cannot be assumed that the Rules take the form which they do in order to reflect some particular cause of action or body of learning that is derived from, say, the Common Law. Thus questions of burden of proof and the like are questions that may well arise in any action brought in a Common Law court but it cannot be assumed that the Hague Rules reflect, say, the rules about burden of proof as between a bailor and bailee for reward at common law. For this reason, it is very doubtful that principles established in cases like The Glendarroch [1894] P 226 can be used as an aid to construing the Hague Rules. They are principles which apply in common law actions between bailor and bailee but that is very different from using them as some guide to understanding what the Hague Rules mean.

Accordingly, there must be real difficulty in construing the Hague Rules by reference to the common law rules of pleading, particularly when it is understood that, as to the substantive law, 'pro tanto the Hague Rules upon their enactment displaced the common law': Effort Shipping Co Ltd v Linden Management SA [1998] UKHL 1, [1998] AC 605, 622 (CMI571).

The Hague Rules must be read as a whole. The 'perils of the sea' exception cannot be properly understood if it is divorced from its context. It is an immunity created in favour of the carrier and the ship and it is necessary, then, to consider what are the responsibilities of the carrier. Article 3 is headed 'Responsibilities and Liabilities' and art 4 is headed 'Rights and Immunities'.

The responsibilities cast on the carrier by arts 3.1 and 3.2 may be seen as central to an understanding of the Hague Rules and their operation. In the present case, the trial Judge found that when the Bunga Seroja sailed from Burnie it was fit in all respects for the voyage and that the respondent had properly and carefully loaded, handled, stowed, carried, kept and cared for the cargo. It followed from those findings that the respondent, the carrier, had discharged its responsibilities under arts 3.1 and 3.2. There was thus no loss or damage to the goods arising or resulting from unseaworthiness of the ship and no question arising under art 4.1 as to whether the loss or damage had been caused by want of due diligence on the part of the carrier to make the ship seaworthy.

Nor if, as the trial Judge found, the carrier had properly and carefully loaded, handled, stowed, carried, kept and cared for the cargo (thereby discharging its responsibility under art 3.2) did any question arise of the immunity from what otherwise would be the responsibility of the carrier, by reason of the loss or damage having arisen or resulted from any act, neglect, or default of the master in the navigation or in the management of the ship (art 4.2.a), or from perils of the sea (art 4.2.c).

Nevertheless, his Honour went on to make express findings about 'perils of the sea'. In the Court's view one must begin by recognising that the inquiry is, in large part, a factual inquiry - is the carrier immune in respect of what otherwise would be its failure to discharge its responsibilities under art 3 because the loss or damage to the goods arose or resulted from a cause which brings the carrier within the immunity conferred by art 4.2? If cargo has been lost or damaged and if the vessel was seaworthy, properly manned, equipped and supplied, what led to the loss or damage? Did it arise or result from want of proper stowing (art 3.2)? Did it arise from the 'act, neglect or default of the master ... or the servants of the carrier in the navigation or in the management of the ship' (art 4.2.a)? Or, did it result from some other cause peculiar to the sea? The last is a peril of the sea.

In Shipping Corp of India Ltd v Gamlen Chemical Co A/Asia Pty Ltd [1980] HCA 51, (1980) 147 CLR 142 (CMI723) Mason and Wilson JJ said that 'sea and weather conditions which may reasonably be foreseen and guarded against may constitute a peril of the sea'. The fact that the sea and weather conditions that were encountered could reasonably be foreseen, or were actually forecast, may be important in deciding issues like an issue of alleged want of seaworthiness of the vessel, an alleged default of the master in navigation or management, or an alleged want of proper stowage. Similarly, the fact that the conditions encountered could have been guarded against may be very important, if not decisive, in considering those issues. (Their decision may then make it unnecessary to consider the 'perils of the sea' exception.) But if it is necessary to consider the 'perils of the sea' exception, the fact that the conditions that were encountered could reasonably be expected or were forecast should not be taken to conclude that question. Such an approach, even if it is different from the US and Canadian approach, better reflects the history of the Rules, their international origins, and is the better construction of the Rules as a whole.

The appellant submitted that the master should not have left port or should have diverted so as to avoid the weather which was forecast. The former contention appears not to have been made at trial. The latter was, but was rejected. The trial Judge, having heard the evidence of experts called by both parties, said that he was 'unable to conclude that any deficiencies in the conduct of the ship and her cargo by [the ship's master] have been demonstrated'. There is no basis for departing from that finding. Contrary to the appellant's contentions, nothing in this case turned on the allocation of the burden of proof. The trial Judge made the findings which he did in light of the evidence that was called on the issues.

McHugh J: Once the trial Judge found that there was no breach of the carrier's obligations under art 3 in this case, the immunities conferred by art 4.2 became irrelevant. In this case, knowledge of the weather in the Great Australian Bight was a critical factor in determining whether the carrier was negligent. However, the trial Judge held that the carrier was not negligent in the precautions which it took to meet the expected weather conditions and that the cause of the loss or damage was a peril of the sea. The only identifiable cause of the damage was the extreme pounding of the waves as the result of the heavy weather encountered in the Great Australian Bight. The damage to the owner's goods, therefore, resulted from a peril of the sea.

Kirby J: The approach of this Court to the construction of an international legal regime such as that found in the Hague Rules must conform to settled principle. Reflecting on the history and purposes of the Hague Rules, the Court should strive, so far as possible, to adopt for Australian cases an interpretation which conforms to any uniform understanding of the Rules found in the decisions of the courts of other trading countries. It would be deplorable if the hard won advantages of international uniformity, secured by the Rules, were undone by serious disagreements between different national courts. What is at stake is not merely theoretical symmetry in judicial interpretation. There is also the practical matter that insurance covers most losses occurring in the international carriage of goods by sea. It is therefore important, so far as possible, that the parties and their insurers should know in advance who will bear the loss and thus who should carry the direct cost of insurance premiums. Disparity of outcomes and uncertainty about the Rules produce costly litigation without positive contribution to the reduction of overall losses to cargo.

The achievement of a uniform construction of an international standard is often elusive. In construing a text such as the Hague Rules, this Court, to the greatest extent possible, should prefer the construction which is most consistent with that which has attracted general international support rather than one which represents only a local or minority opinion. That is a reason why it would be a mistake to interpret the Hague Rules as a mere supplement to the operation of Australian law governing contracts of bailment. That law, derived from the Common Law of England, may not be reflected in, or identical to, the equivalent law governing carriers' liability in Civil Law and other jurisdictions. The Hague Rules must operate in all jurisdictions, whatever their legal tradition. Similarly, care must be taken in importing into decisions about the Hague Rules, judicial authority derived from the time before those Rules were adopted. In particular, there may be dangers in using authority concerned with marine insurance where the expression 'perils of the sea' defines the scope of the insurer's risk. Such a context invites a wider connotation than where the phrase is used (as it is in the Hague Rules) to mark out an area of exemption from liability.

Callinan J: Reference to authority beyond the Common Law countries is not novel in marine matters. Whilst no chauvinistic view of the Rules should be taken, it has to be remembered that Australia is a cargo country: it is one of the largest exporters in the world of seaborne commodities such as coal, beef, sugar, iron ore, and wheat. The construction and application of the Rules in other jurisdictions should therefore have relevance and persuasive value in this country, according to the extent that the Courts of other jurisdictions give due weight, in cases of uncertainty, to reciprocity of obligation and interest between shippers and carriers.

There is authority for, and much to commend, the proposition that the expression 'perils of the sea' should be confined to unforeseen or exceptional events, or overwhelming force of the sea: in short, events that could not be reasonably guarded against. The fact that advances in shipbuilding technology, communications, and navigational aids provide the means of significantly reducing exposure to the perils of the sea however defined, make such a proposition in modern times more attractive still. However, the thrust of the relevant Rules taken as a whole is clear. They are designed principally to exonerate shippers and more particularly, carriers who have not been guilty of want of due diligence or fault. Accordingly, in cases in which the carrier has acted as expressly required by the Rules, and is not guilty of negligence, and, events at sea can be shown to be the cause of the loss and damage, the carrier should be entitled to immunity.

This interpretation does not, however, resolve the problems of proof and onuses that may confront the parties and judges in shipping cases. The form and order of pleading referred to by Lord Esher in The Glendarroch and endorsed by Mason and Wilson JJ in Gamlen throws light upon the correct procedure and the carrying of onuses in a case of this kind.