The defendant, Baker Hughes Singapore Pte (BHS), is part of the worldwide group of Baker Hughes companies. Baker Hughes Drilling Fluids (BHDF) is an operating division in the group. The BHDF office in Aberdeen purchased a consignment of barite on FOB Incoterms from VMC (FOB seller). The defendant was to arrange for shipment and carriage of the cargo from Vietnam to two discharge ports in Australia, and it booked space on the shipowner’s vessel to do so. Booking negotiations were carried out by the defendant and Mocean Shipping Pte Ltd (Mocean), who acted on behalf of the shipowner. The defendant later received a signed copy of the Booking Note. Box 10 of the Booking Note was the freight clause and it contained the terms on which the freight was booked, viz, ‘free in stowed l/s/d/liner out hook’ (fis l/s/d term). Box 12 named the FOB seller as the defendant’s representative at the loading port. The Booking Note was also subject to the Hague or Hague-Visby Rules. During loading of the cargo by the Vietnamese stevedores, the vessel and one of its cranes were damaged.

The shipowner claimed damages against the defendant as the contractual charterer for the breach of the contractual clause. The shipowner argued that the damage was due to the act or neglect of the stevedore and that the defendant was liable for the damage as it was expressly agreed that the loading operations were to be at the defendant’s own risk and expense. The shipowner claimed that the fis l/s/d term in Box 10 was to be understood to, inter alia, mean that the defendant at its own risk and expense would, whether by itself or its representatives at the load port, load, stow, secure, lash, and dunnage the cargo of barite at load port, and/or engage/appoint stevedores necessary for the cargo operations as described.

The shipowner also argued that the agreement to load the cargo at the defendant’s own risk and expense was also based on:

1. The conduct of the defendant, where the defendant appointed the FOB seller as its agents and/or representatives at the load port to carry out the cargo operations, and those operations were carried out by stevedores appointed by the FOB seller;
2. An established course of dealings between the parties since around June 2007, where the shipowner had previously shipped bagged barites for the defendant on the same route on ‘free in, stowed’ terms, and the usual and/or customary procedure adopted by the parties was for the defendant to carry out the cargo operations through stevedores appointed by its agents or representatives at the load port.

The shipowner also claimed that the defendant was responsible for cargo operations, and was therefore obliged to carry them out properly and/or carefully through the stevedoring company appointed by the FOB seller as agents for and on behalf of the defendant.

If the shipowner was responsible for loading the cargo of barite, the shipowner’s fallback argument was that it was an implied term of the contract of carriage that the defendant, through its representatives, would appoint and/or nominate reasonably competent stevedores to carry out the cargo operations. As the stevedore who operated the crane here was incompetent, the defendant had breached its duty.

The defendant argued that it did not agree, whether by Box 10 of the Booking Note, by conduct or through a previous course of dealings, to carry out the loading operations at its risk and expense, as: (a) it did not appoint the stevedoring company; and (b) it was not required and/or did not ask the FOB seller to appoint stevedores on its behalf. The FOB seller appointed the stevedoring company for itself as FOB seller of the cargo of barite and/or as agents for the shipowner.

Held: The common law rule stated that in the absence of express agreement, it was the shipowner’s responsibility to load and stow the goods, at least as soon as the goods are on board the vessel. The Booking Note was also subject to the Hague or Hague-Visby Rules (the Rules) (see the General Paramount Clause (cl 2) in the Booking Note), and art 3.2 of the Rules provided that the carrier (shipowner) was to properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried. The authorities and textbooks on this topic were unequivocal on the point that any departure from the shipowner’s duty to load and stow was founded on express terms and did not arise by implication of law or by implication from the charterparty or, in this case, the Booking Note. Hence, the fis l/s/d term on its own was not clear enough to transfer the risk of loading operations from the shipowner to the defendant. There was also no appropriate term in the Booking Note to effectively transfer the risk of loading operations when read together with the fis l/s/d term. In fact, cls 4, 8 and 18 of the Booking Note supported the finding that the responsibility and risk for loading operations remained with the shipowner.

The cases of Jindal Iron & Steel Co Ltd v Islamic Solidarity Shipping Co Jordan Inc (The Jordan II) [2003] 2 Lloyd’s Rep 87 (CMI627) and Canadian Transport Company Ltd v Court Line Ltd [1940] 1 AC 934 did not support the shipper’s argument that the fis l/s/d term could be given an extended meaning based on the facts and circumstances of the case. Both cases involved clear words which transferred the responsibility for the cargo operations from the shipowner to the defendant. Moreover, the shipowner had not shown any words from which a transfer of responsibility to perform the loading operations from the shipowner to the defendant could be inferred.

The shipowner could not rely on the conduct of the defendant to justify an extension of the meaning of the fis l/s/d term so that the defendant was obliged to carry out the cargo operations at its own risk and expense, and be held liable for the alleged negligence of the stevedore. The authorities relied upon by the shipowner all involved facts whereby there were clear words which transferred the obligation to carry out the cargo operations to the charterers or shippers. In the present case, such clear words were not present.

There was no established course of dealings between the parties to justify the extension of the meaning of the fis l/s/d term as imposing on the defendant the obligation to carry out the cargo operations at its own risk and expense so as to be made liable to the shipowner for the alleged negligence of the stevedore. The three previous shipments were on terms which were different to the fis l/s/d term in the present action.

The shipowner’s fallback argument could not succeed. It was premised on the defendant’s appointment of the stevedoring company. However, on the facts, it was the FOB shipper who appointed and/or arranged for the stevedores to carry out the cargo operations for itself in discharge of its own obligations under the sale on FOB terms. Therefore, it followed that there could be no implied term that the defendant would appoint and/or nominate reasonably competent stevedores to carry out the cargo operations.