Sarawak Electricity Supply Corp (the plaintiff) shipped a consignment of cargo on board the Ming Soon Jaya owned by MS Shipping Sdn Bhd (the defendant). The vessel sank and the plaintiff obtained payment for the loss of the cargo from its insurer. By right of subrogation, the insurer commenced an action against the defendant in the name of the plaintiff claiming MYR 100,689.05. The defendant contended that it was exempted from liability by r 4 of the Schedule to the Merchant Shipping (Implementation of Conventions Relating to Carriage of Goods by Sea and to Liability of Shipowners and others) Regulations 1960 (the domestic equivalent of art 4 of the Hague Rules) or under common law. The defendant argued that the loss of the cargo was due to bad weather, which was a peril of the sea. On the contrary, the plaintiff argued that the Hague Rules did not apply because there was no bill of lading but only a shipping order, which could not be a document of title. In addition, the plaintiff argued that the Hague Rules did not apply because the cargo was carried on deck and deck cargo was excluded from the scope of application of the Hague Rules. The plaintiff further claimed that the contract between the parties had been in existence for two years and that the parties had contracted out of the Hague Rules, as is allowed under art 6 of the Rules.

Held: Plaintiff’s claim dismissed.

According to art 1 of the Hague Rules, the Rules apply to contracts of carriage covered by bills of lading or any other similar documents of title. In this case, there was no bill of lading but only a shipping order. Therefore, the issue before the court was whether the shipping order could be a document of title. The court compared the nature and features of a bill of lading with a shipping order and found that the shipping order in this case was 'as good as being' a document of title. This was because without the shipping order the plaintiff, being the consignee as well as the shipper, would not be able to claim its cargo from the defendant. In addition, the shipping order in this case displayed other important attributes of a bill of lading. For example, it stated the destination and the description of the cargo. The shipping order had also been used as proof of control or possession of the cargo in the business transactions between the parties for a period of time. This was the case notwithstanding the absence of an endorsement on the shipping order that it was subject to the Hague Rules, because the failure to comply with art 4 of the Hague Rules did not render the shipping order an illegal document or render the contract of carriage illegal. In the circumstances, the Hague Rules were applicable.

The application of the Hague Rules would be excluded ‘if the cargo which by the contract of carriage is stated as being carried on deck and is so carried’. However, in this case the contract did not state that the cargo was being carried on deck. Therefore, the Hague Rules were applicable. Moreover, the plaintiff should not be allowed to claim that the Hague Rules had been contracted out of under art 6 of the Hague Rules since the contract was silent and neutral as regards to whether the Hague Rules were to apply.

It was common ground that for the defendant to rely on defences under art 4 of the Hague Rules, it must show that due diligence as stipulated under art 3.1 and proper care under art 3.2 of the Hague Rules had been exercised. The court opined that since seaworthiness can occur in so many aspects, beginning with the building of the vessel to its maintenance, its equipment, its crew and its voyage, it would be impossible for a defendant to introduce evidence regarding the exercise of due diligence with regard to all of them. The defendant needed only to demonstrate due diligence in respect of areas where the plaintiff had alleged it was lacking. The court was satisfied by the defendant's evidence that it had exercised due diligence and rendered the vessel seaworthy. The plaintiff failed to prove otherwise. In addition, based upon the evidence presented, the court found that the rough and bad weather was the cause of the sinking of the vessel and that was an act of God or a peril of the sea within the meaning of art 4.2 of the Hague Rules.