This was an appeal from a decision of the Seoul Civil District Court on 29 December 1982.

The ship in question was a relatively old vessel built in 1962, and the deck cover of the vessel's hold was worn out, some of the tarpaulin covering it was broken, and there was a hole of about 2cm in the ventilation system of the hold. Although there was a risk that sea water would seep into the hold, temporary measures were taken to prevent the cargo from being submerged in sea water in case the defendant carrier or its employees, the master and crew members, encountered a storm during the voyage. Even though the vessel was supposed to depart from port only after repairing defects in its facilities, the ship was unloaded and departed without repairing them, so sea water entered the hold, and some of the steel plates the vessel was carrying were severely rusted.

After arriving at Nagoya Port, the steel plates were delivered and assessed. As a result, 444 steel plates, or 21.46 per cent of the entire cargo, were so damaged by rust that they had to be destroyed. The defendant carrier's Japanese agency was notified of the reason, and the plaintiff insurer was required to pay out under the insurance policy. Some JPY 13,290,761 was paid out to the consignee, Ssangyong Japan (Ssangyong), in accordance with the maritime cargo insurance policy.

The cause of the above incident was the unseaworthiness of the ship which could have been detected, repaired, and supplemented in advance if the defendant or its employees, had fulfilled merely the normal duty of care required for their work. Since the defects were caused by the negligence of the carrier and the departure of the vessel without significant repair and securing of the vessel, the defendant is responsible for compensating Ssangyong.

The defendant asserts that if a maritime carrier causes damage to others due to the intentional or negligent conduct of itself or its employees, it assumes liability for a breach of its contract of carriage under commercial law, but not tort liability under civil law. However, if the carrier's non-compliance also constitutes an unlawful act under the Korean Civil Code, this argument is without merit because the victim can choose to enforce any responsibility against the maritime carrier. It is clear that insurance money was paid out in relation to the above damages, so the plaintiff argues that Ssangyong, the insured, obtained the right to claim damages against the defendant according to insurance law.

However, the defendant carrier argued that the steel plates, which were transported in this case, was damaged before Ssangyong acquired ownership of them, so even if ownership was acquired after that, unless the right to sue was transferred to Ssangyong, it could not claim damages against the defendant. The defendant contended that this transfer was in accordance with the law of the place where this occurred, but the place where sea water entered the ship's hold and the cargo was damaged was within the territorial waters of Japan. This argument is without merit. As long as it has become the lawful holder of the bill of lading granting the right to claim for compensation, Ssangyong will also be able to exercise the right to claim compensation for damage caused by loss or damage to the goods indicated on the bill of lading. The rights of the parties are to be interpreted in accordance with Korean law, and the fact that the governing law of the contract of carriage in this case is Korean law accords with this analysis.

Further, the defendant, as a marine carrier, not only failed to fulfil its duty of caution when the sailing vessel departed from port, but also the rusting of the steel plates, which were transported in this case, was related to the poor navigation or management of the vessel by the master, seafarers, and other operators of the vessel. Although the defendant claims to be exempted under the Hague-Visby Rules because of perils of the sea; an inherent defect, quality or vice of the steel plates; or damage caused by insufficient packaging; or to be exempted under the terms and conditions of the bill of lading, there is no evidence to support the defendant's claim. After receiving the shipment from Ssangyong, the defendant issued a clean bill of lading to Ssangyong. In the case of loss or damage to transported goods due to a failure to fulfil the required duty of care, arts 787 and 788.1 of the Korean Commercial Act (the KCA, which gives effect to provisions similar to the Hague-Visby Rules even though South Korea is not a party to the Convention) provide that in the case of a conflict between liability for default under the contract of carriage and tort liability for the victim under civil law, the victim can choose to exercise its right to claim compensation for either of them. In this case, in which the shipowner is charged with tort liability, in view of the provisions of art 790 of the KCA that the shipowner's obligations or responsibilities cannot be reduced against the provisions of arts 787-789 of the Commercial Act, the above exemption clauses cannot be applied. The above assertion is also without merit unless there is evidence to admit that there is a reason that the defendant's conduct falls under the exemption clauses in the bill of lading or under the exemption clauses in the KCA

The liability of the ship and carrier expires due to prescription when one year has elapsed from the date the consignee receives the shipment. As one year has elapsed since 25 January 1980, when the shipment was received, it is argued that the defendant's contractual and tortious liability had already expired due to prescription before the lawsuit in this case. According to art 3.6 of the Hague-Visby Rules, the liability of the carrier is extinguished by a prescription term of one year. However, here the defendant had expressed its intention to renounce the benefits of the prescription, so its prescription defence cannot be accepted.

Held: The defendant carrier is ordered to pay the plaintiff KRW 294,875 and interest at the rate of 5 per cent per annum from 1 March 1980 to the completion date.