In May 1953, the plaintiffs' cargo was loaded onto the Muncaster Castle at Sydney, Australia. This cargo was shipped under a bill of lading for carriage to London, United Kingdom. The ship belonged to the defendants. The bill provided that it had effect subject to the Hague Rules appended to the Australian Sea Carriage of Goods Act 1924 (the Act) and that the defendant carrier was entitled to all privileges, rights, and immunities contained in that Act. Seawater was discovered in the cargo hold during discharge. The plaintiffs sued for cargo damage. The defendants admitted that their ship was unseaworthy.

The issue was whether the defendants had exercised due diligence under art 3.1 of the Hague Rules. Seawater entered the cargo hold because a fitter did not properly tighten nuts for the inspection covers of the storm valves for the scupper pipes of the ship. The negligent fitter was employed by reputable ship repairers employed by the defendants to have their ship complete classification and load line surveys. The defendants also had their ship manager's superintendent supervise on their behalf the works necessary for the surveys. Ordinary prudent practice did not require supervision of the fitter when the fitter was tightening the nuts after the surveys were completed. Tightening is well within the competence of a skilled fitter. No visual inspection or tapping with a spanner will reveal the improper tightening that occurred in this case. There was no negligence on the part of anyone other than the fitter.

The trial Judge found that the defendants exercised due diligence to make their ship seaworthy under art 3.1 of the Hague Rules: Riverstone Meat Co Pty Ltd v Lancashire Shipping Co Ltd (The Muncaster Castle) [1959] 1 QB 74 (CMI292). The plaintiffs appealed. The trial judgment was upheld on appeal because the defendants should not be held responsible for the negligence of the fitter when the defendants had appointed a reputable ship repairer to carry out works for the surveys and – through their ship managers – appointed a competent superintendent to supervise: Riverstone Meat Co Pty Ltd v Lancashire Shipping Co Ltd (The Muncaster Castle) [1960] 1 QB 536 (CA) (CMI2294). The plaintiffs appealed once more.

The plaintiffs accepted that the defendants did exercise due diligence unless they are to be held responsible for the negligence of the fitter. The plaintiffs argued that the defendants were indeed responsible. The defendants relied specifically on s 5 of the Act, which states:

There shall not be implied in any contract for the carriage of goods by sea to which this Act applies any absolute undertaking by the carrier of the goods to provide a seaworthy ship.

The defendants' argument may be summarised as follows: It is a question of fact whether due diligence has been exercised by a carrier. This question is to be answered by deciding whether a prudent shipowner would have acted in the same way. If the shipowner would have so acted the defendants argued that they are not liable. They do not contend that it is sufficient that they employed a competent shipyard to effect repairs. They do, however, maintain that, while the owner remains responsible for supervision and inspection where necessary, yet in the case of specialised work, which is to be regarded as within the competence of ship repairers rather than in that of owners of ships and their servants, this work and everything incidental thereto can properly be left to the ship repairers.

The plaintiffs' argument is summarised in Smith, Hogg & Co Ltd v Black Sea & Baltic General Insurance Co Ltd (1939) 55 TLR 766 (CA) (Smith, Hogg (CA)) 767, which was followed by Australian Newsprint Mills Ltd v Canadian Union Line Ltd [1952] 1 DLR 850 (Australian Newsprint) 854, Canadian Transport Co Ltd v Hunt Leuchars & Hepburn Ltd (The City of Alberni) [1947] 2 DLR 647, and Wilsons & Clyde Coal Co Ltd v English [1938] AC 57 (HL) (Wilsons) 80:

The limitation and qualification of the implied warranty of seaworthiness by cutting down the duty of the shipowner to the obligation to use 'due diligence … to make the ship seaworthy' is a limitation or qualification more apparent than real, because the exercise of due diligence involves not merely that the shipowner personally shall exercise due diligence, but that all [its] servants and agents shall use due diligence. That is pointed out in Scrutton on Charterparties (14th ed., p. 110) which says that this variation will not be 'of much practical value in face of the dilemma that must constantly arise on the facts. In most cases if the vessel is unseaworthy due diligence cannot have been used by the owner, [its] servants, or agents; if due diligence has been used the vessel in fact will be seaworthy. The circumstances in which the dilemma does not arise (e.g., a defect causing unseaworthiness, but of so latent a nature that due diligence could not have discovered it) are not likely to occur often.'

Held: Appeal allowed.

The defendants did not perform their due diligence obligation. They were vicariously liable for negligence of a servant of an independent contractor: the fitter.

The issue here is to interpret 'due diligence to make the ship seaworthy' in arts 3.1 and 4.1 of the Hague Rules. It is necessary to consider their history, origin, and context. The Courts below have not considered this sufficiently. The aim of the Hague Rules was broadly to standardise within certain limits the rights of every holder of a bill of lading against the shipowner, prescribing an irreducible minimum for the responsibilities and liabilities to be undertaken by the shipowner. The Hague Rules abolished the old law's absolute warranty of seaworthiness, which was harsh on shipowners and charterers, in the absence of exception or exclusion. The Hague Rules operated to afford relief to shipowners, as well as some protection to shippers. The framers of the Hague Rules were guided by the US Harter Act 1893, the Australian Sea Carriage of Goods Act 1904, and the Canadian Water Carriage of Goods Act 1910. Although there was no British Act, they had decisions of the English courts in which the language of the Harter Act had fallen to be construed by virtue of its provisions being embodied in bills of lading. The Hague Rules had adopted the relevant words, 'exercise due diligence to make the ship seaworthy', which were in all these Acts. But the Hague Rules did not define this phrase.

By deciding not to define that phrase in art 3.1 (like 'management of the ship' under art 4.2.a), the intent must be 'to continue and enforce the old clause as it was previously understood and regularly construed by the courts': Gosse Millerd Ltd v Canadian Government Merchant Marine Ltd [1929] AC 223 (HL) (Gosse Millerd (HL)) 237; cp Stag Line Ltd v Foscolo Mango & Co Ltd [1932] AC 328 (HL) (Stag Line). Thus, consideration of the Hague Rules must not begin with W Angliss & Co (Australia) Pty Ltd v P & O Steam Navigation Co [1927] 2 KB 456 (Angliss). Angliss is only a link in the chain of authority which starts at an earlier date. The examination of the authorities must begin with the Harter Act and the authorities under that and similar Acts which substituted a statutory obligation for the absolute warranty of seaworthiness at common law: Smith, Hogg (CA); Gosse Millerd (HL).

Legislation enacting the Hague Rules was the outcome of an international conference, and the Hague Rules have an international currency: Stag Line 350; Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd [1959] AC 589 (PC) (Maxine Footwear); Hourani v Harrison (1927) 137 LT 549 (CA) (Hourani) 556. '[T]here should be uniformity of construction adopted by the courts in dealing with words in statutes dealing with the same subject-matter': Hourani 556. It is desirable to preserve the uniformity of interpretation which has been given to these words by English, Canadian, New Zealand, and US authorities: Stag Line 350; Maxine Footwear; Hourani 556.

GE Dobell & Co v Steamship Rossmore Co Ltd [1895] 2 QB 408 (CA) (Dobell) determines decisively the meaning of the due diligence obligation. The reasoning and the language embrace any agent employed by the shipowner. These are wide words. Dobell 416 goes against the defendants' argument. The due diligence obligation does not mean that if the shipowner 'personally did all that [it] could do to make the ship seaworthy when [the ship sailed], then, although [the ship] was not seaworthy, by the fault of some agent or servant, the owner is not liable'. Instead, according to Dobell, the due diligence obligation 'must mean that it is to be done by the owner by [it]self or the agents whom [it] employs to see to the seaworthiness of the ship before [the ship] starts out of that port'. It is not enough for the shipowner to claim that a 'proper and competent agent' was appointed to 'ensure that the ship was in a seaworthy condition before [leaving] port': Dobell 416. The intention 'was that the owner should, if not [personally], at any rate by [competent] agents, ensure that the ship was in a seaworthy condition [sailing]': Dobell 416. Judicial and expert opinion supports Dobell's understanding of art 3.1 of the Hague Rules. The due diligence obligation in art 3.1, like the obligation in art 3.2, is personally imposed upon the shipowner which it 'cannot escape on proof that [it] employed a competent independent contractor who was in fact negligent': International Packers (London) Ltd v Ocean Steam Ship Co Ltd [1955] 2 Lloyd's Rep 218, 236. Replacing 'surveyor' for 'contractor' here would not cause a difference.

Next, The Colima 82 F 665 (SD NY 1897) (The Colima) held that due diligence was required in the personal acts of the shipowner and also on the part of agents employed by that shipowner, or others whom the shipowner 'may have committed the work of fitting the vessel for sea': The Colima 678, citing The Mary L Peters 68 F 919 (SD NY 1895); The Flamborough (1895) 69 F 470 (2d Cir 1895); The Alvena 74 F 252 (2d Cir 1896); affirmed 79 F 973 (2d Cir 1897); The Rossmore [1895] 2 QB 408 (The Rossmore). It requires 'due diligence in the work itself': The Colima 678. This is the personal responsibility of the shipowner. Otherwise, the shipowners can evade responsibility by employing reputable agents, which was not intended by the Harter Act: ibid. The change from the previous warranty of absolute seaworthiness to 'a warranty only of diligence' is 'of great importance, as it avoids responsibility for latent and undiscoverable defects': ibid. Still, acts 'of the agent are deemed those of the principal': ibid. '[A]gents' means persons whom the shipowner 'may employ, or to whom [it] may have committed the work of fitting the vessel for sea': ibid. Nord-Deutscher Lloyd v President of Insurance Co of North America 110 F 420 (4th Cir 1901) followed The Colima. The Irrawaddy 171 US 187 (1897) decided that the purpose of the Harter Act was to relieve the shipowner from latent defects.

Although the Harter Act did not relieve the shipowners of the absolute warranty of the seaworthiness, this cannot affect the meaning of the relevant words. The Court quoted Smith, Hogg (CA) 767 at length with approval. The 'qualified exception of unseaworthiness does not protect the ship owner' when the ship is unseaworthy; it offers protection against latent defects only: Smith, Hogg & Co Ltd v Black Sea and Baltic General Insurance Co Ltd [1940] AC 997 (HL) (Smith, Hogg (HL)) 1001. Article 3.1 should be construed as being barely distinguishable from the old absolute undertaking except in rare cases of true latent defect: Smith, Hogg (CA). See also Paterson Steamships Ltd v Canadian Co-operative Wheat Producers Ltd [1934] AC 538 (PC) (Canadian Co-operative Wheat Producers) 547. No latent defect was found in the present case. It is unnecessary to discuss the question whether careless work which could obviously have been detected by competent supervision while the work was proceeding could be described as a 'latent defect' merely because subsequent inspection would not necessarily detect it.

The obligation of the carrier is 'not limited to his personal diligence' (Angliss 460). The carrier's responsibility for the diligence of all those whom it employs to discharge its own primary duty has been recognised in Paterson Steamships Ltd v Robin Hood Mills Ltd (1937) 58 Ll L Rep 33 (PC) (Robin Hood Mills); Maxine Footwear 602; Canadian Co-operative Wheat Producers; Wilsons 80-81; Smith, Hogg (CA).

There is no reason to question the correctness of Angliss. Except for a single passage concerning the employment of an inspector to supervise the work, no mention is made in Angliss of the employment of agents to repair a ship. Angliss 462 states that 'the need of repairing a ship may cast on the carrier a special duty to see, as far as reasonably possible, by special advisers for whom he is personally responsible, that the repairs adequately make good the defects'. This passage does not indicate that the carrier would not in any case, with or without inspection, be liable for negligence on the part of those to whom the carrier committed the work of fitting the ship for sea. Angliss did not purport to decide this issue. The passage is a general pointer to the sort of precautions which a carrier would be wise to take. It is not a comprehensive definition of the circumstances in which its responsibility under art 3.1 should be held to have been discharged.

Repair work is different from shipbuilding. The defendants' argument that the position of ship repairers is analogous to that of shipbuilders that repairers cannot fairly be distinguished from shipbuilders is rejected. The defendants claimed that Angliss 462 supported the proposition that in respect of the protection of the shipowner by the employment of a specialist of repute there is no distinction in principle between bad workmanship during the original shipbuilding and bad workmanship in subsequent ship repair work. This ignores the ratio decidendi of Angliss, which is based upon the consideration that whether a ship is built for, bought by, or chartered to the carrier, the carrier should not be held liable for bad workmanship for which the carrier had no responsibility before the ship came into the carrier's possession. Angliss is not against the plaintiffs here because Angliss was not about carelessness of ship repairers in carrying out surveys or repairs. The causative carelessness in Angliss occurred before the carrier's obligation under art 3.1 had attached and in circumstances when the builders and their employees could not be described as agents for the carrier 'before and at the beginning of the voyage to … make the ship seaworthy'. Although Angliss has been repeatedly followed, it is important to remember how limited the extent of the actual decision was. Much of what was said in Angliss was obiter dicta.

The analogy between builders and repairers is misleading. It causes confusion because the time situation of shipbuilding and ship repair are different. In ship repair cases, the shipowner already possesses the ship. There is no question of undue retrogression in attaching to the shipowner responsibility for a person in the employ of those to whom the shipowner has entrusted the repair of its own ship. But in ship purchase or shipbuilding, the shipowner does not have prior possession of the ship. Attempt to fix the shipowner with liability for bad workmanship before the ship comes into existence as a ship, or before an existing ship comes into its possession at all, could involve retrogression: Angliss 461. The carrier (Angliss 461) 'may not be the owner of the ship, but merely the charterer; [the carrier] may not have contracted for the building of the ship, but merely have purchased [the ship], possibly years after [the ship] has been built'.

Thus, '[ship]builders and their [employees] cannot possibly be deemed to have been the agents or servants of the carrier': Angliss 461. As stated in Angliss 461:

if the carrier were held liable for the bad workmanship of the builders' [employees], [the carrier] might equally be held liable for bad workmanship by the [people] employed by the various sub-contractors who supply material for the builders […] which would involve an almost unlimited retrogression.

It is a reasonable construction of the words 'to exercise due diligence to make the ship seaworthy' to say that in the case of a ship built for the carrier, or newly come into its hands by purchase, the carrier fulfils its obligation if it takes the precautions which Angliss suggests. Until the ship is the carrier's, the carrier can have no further responsibility.

Shipbuilders bring the ship into existence. The carrier's responsibility for the work itself does not begin until the ship comes into the carrier's orbit, and it begins then as a responsibility to make sure by careful and skilled inspection that what the carrier is taking into the carrier's service is in fit condition for the purpose and, if there is anything lacking that is fairly discoverable, to put it right: Angliss. But if the bad work that has been done is 'concealed' (Angliss 462) and so cannot be detected by any reasonable care, then the lack of diligence to which unseaworthiness is due is not to be attributed to the carrier.

The position is different when the shipowner puts its ship in the hands of third parties for repair (The Rossmore; The Colima) or survey. Here, the duty to have the necessary work done is directly upon the carrier from whatever moment of time is chosen as the date when the duty attaches, and whatever is done is necessarily done by agents on the carrier's behalf. Any faults of such agents, therefore, are attributable to the carrier, provided only that they are employed upon the work.

It is not sensible to draw a distinction between negligence shown by the shipowner's servants, agents, and independent contractors. Ship repair work might equally be entrusted by a shipowner to its own servants or to an independent contractor. To impose liability on the shipowner for negligence in one case but not in the other would defeat the legislative purpose. Given that '[t]he obligation to make a ship seaworthy is personal to the owners, whether or not they entrust the performance of that obligation to experts, servants, or agents' (Northumbrian Shipping Co Ltd v E Timm & Son Ltd [1939] AC 397 (HL) 403), the shipowner should be liable for the negligence of an independent contractor, such as a compass adjuster: Robin Hood Mills; Maxine Footwear 602. This matches the Canadian position where '[t]he duty of the defendants was to exercise due diligence and this applies to their servants and agents and that duty is absolute, except as to latent defects not discernible by the exercise of due diligence': Australian Newsprint 854. See also The City of Alberni; BJ Ball (New Zealand) Ltd v Federal Steam Navigation Co Ltd [1950] NZLR 954; American Linseed Co v Norfolk and North American Steam Shipping Co 32 F 2d 281 (SD NY 1929) 282.

The court should not decide on a case-by-case basis whether the shipowner should be held liable for the negligence of an independent contractor. It is impossible to distinguish between one independent contractor and another, or between one kind of repair and another. It is impossible for the court to examine the facts of each case and determine whether the negligence of the independent contractor should be imputed to the shipowner. It is not known what criterion or criteria should be used, nor were any suggested. The many possible criteria show that no other solution is possible than to say that the shipowner's obligation of due diligence demands due diligence in the work of repair by whomsoever it may be done.

In Wilsons 80, the legislation enacting the Hague Rules was referred to as an example of the creation of an absolute obligation which is not discharged by the shipowner taking reasonable care to appoint a competent expert. The obligation imposed is not to 'exercise due diligence … to provide a seaworthy ship' but 'to make the ship seaworthy': ibid. Angliss concerned a shipowner, who had a ship built for itself and could presumably be said to 'provide' the ship, was not, due precautions being taken, liable for the negligence of the shipbuilders' workmen.

Admittedly, there are some circumstances where a defendant can escape liability for the negligence of an independent contractor. It was argued that where a defendant has properly employed an independent contractor, particularly in relation to a matter which calls for technical or special knowledge or experience, the defendant is not liable if the plaintiff has been injured by the negligence of the independent contractor or its servants, provided such negligence was not apparent to the defendant: Searle v Laverick (1874) LR 9 QB 122;  Phillips v Britannia Hygienic Laundry [1923] 1 KB 539 (Div Ct) (Phillips); Haseldine v CA Daw & Son Ltd [1941] 2 KB 343 (CA) (Haseldine); Green v Fibreglass Ltd [1958] 2 QB 245 (Green v Fibreglass). Nevertheless, there are other circumstances where the defendant cannot so escape: Grote v Chester & Holyhead Railway Co (1848) 2 Ex 251; Wilkinson v Rea Ltd [1941] 1 KB 688 (CA); Francis v Cockrell (1870) LR 5 QB 501. These cases need not be reconciled because in the context of the Hague Rules the obligation of the shipowner is in the latter category where the shipowner cannot so escape.

Since Angliss, shipowners have successfully claimed exemption under the Hague Rules in some judgments. However, so far as it turned on the negligence of an independent contractor in respect of work upon the shipowner's ship, it was incorrect to hold that the shipowner was entitled to exemption.

The defendants relied upon Cranfield Bros Ltd v Tatem Steam Navigation Co Ltd (1939) 64 Ll L Rep 264 (Cranfield Bros) where the defect leading to unseaworthiness was only discoverable by a method that a reasonably careful shipowner would not have done. After referring to The Dimitrios Rallias (1922) 128 LT 491 (CA) 495, Cranfield Bros doubted, without deciding the point, whether this was a latent defect within the strict meaning of art 4.2.p of the Hague Rules. But the important earlier judgment of Smith, Hogg (CA) on latent defects was neither cited nor considered in Cranfield Bros. Had Smith, Hogg (CA) been referred to, Cranfield Bros might have been decided against the shipowner instead.

Separately, common law tort cases such as Wilsons, Haseldine, and Woodward v Mayor of Hastings [1945] KB 174 (CA) do not assist in construing art 3.1 of the Hague Rules.

Meanwhile, loading excessive deck cargo is consistent with the shipowner failing to perform its due diligence obligation to make the ship seaworthy: Smith, Hogg (HL) 1001.

According to Lord Radcliffe, the carrier must answer for anything that has been done amiss in the work of keeping or making the vessel seaworthy. It is the work itself that delimits the area of the obligation, just as it is the period 'before or at the beginning of the voyage' that delimits the time at which any obligation imputed to the carriers can be thought to begin. With this, the difficulties about 'an almost unlimited retrogression' (Angliss 461) tend to disappear: for there is a point in each case at which defective work is not the work of any agent of the carrier and the duty to be diligent is no more than a duty to be skilled and careful in inspection. But the inspection that is relevant in such a case is not merely the carrier's inspection of its contractor's work: it is inspection on the part of anyone working for the carrier who is concerned to make sure that the contractor does not accept defective materials or use defective tools.

Lord Radcliffe thought that, without background provided by authority, the natural meaning of the words in art 3.1 did not make it easy to choose between the contentions of the defendants and the plaintiffs. If the defendants' interpretation is accepted, one must treat the words 'due diligence to make the ship seaworthy' as if they were equivalent to 'due diligence to see that the ship is made seaworthy', and that is not the same thing. Meanwhile, the plaintiffs' interpretation is not consistent with grammatical meaning, for the exercise of due diligence to which the carrier would be held would include the performance or omission of acts that were not in law the acts of the carrier at all. Nevertheless, general considerations appear to favour the plaintiffs' claim.

According to Lord Keith, the plaintiffs' contentions are more practical than the defendants' contentions. If the carrier was not liable, the shipper, now without the carrier's absolute warranty of seaworthiness, would be dependent for a remedy for unseaworthiness. Nevertheless, the carrier cannot, subject to one qualification, be liable for unseaworthiness in a ship which results from lack of due diligence at a time when the ship was not the carrier's to possess and control, and which could not be detected by due diligence after the ship came into the carrier's possession. This is implicit in the language of the Hague Rules themselves and was recognised in Angliss. There may be shipbuilding contracts where the property in a ship passes in stages to the prospective owner. But the ship as a whole cannot pass until it is completed, and it is impossible to say what defects may exist by the time it is completed. The vessel then comes into the possession of its owner for the first time. No distinction can, in general, be made between this case and the case of a ship bought from a previous owner.

Lord Keith's one qualification was that the prospective owner may have taken some part in the shipbuilding project, either in design, or by supervision during shipbuilding, or otherwise. In such cases, the owner could be responsible for unseaworthiness of which the owner is the cause, or which the owner should have detected during shipbuilding. In some circumstances a measure of supervision is required. These considerations were referred to in Angliss. They stand quite apart from the issue that is raised here. They do not make the carrier responsible for the negligence of the builders, as agents of the carrier, but, if at all, for the carrier's own negligence operating retrospectively from the time when the carrier took over the ship and put it into service for the carriage of goods. The carrier then knew or ought to have known of defects occurring during the construction of the ship.

Lord Keith also referred to the argument about the carrier's duty to exercise due diligence to provide a seaworthy ship. But that is not what the statute says. The former common law implied an absolute obligation to provide a seaworthy ship. The qualified duty now is to make a ship seaworthy. A carrier generally cannot make a ship seaworthy unless the carrier has first a ship.

In Lord Keith's view, the due diligence obligation is an inescapable personal obligation. Failure of competent ship repairers to use due diligence to do so is the carrier's failure. This is a matter of statutory obligation and not vicarious responsibility. Repairers include sub-contractors brought onto the ship by the repairers to enable them to perform the work which they contracted to do. Their failure must also be the failure of the carrier on whom the statutory duty rests, unless in some very exceptional circumstances their employment can be said to be without any authority, express or implied, of the carrier.

According to Lord Keith, latent defects are defects not due to any negligent workmanship of repairers or others employed by the repairers, and against defects making for unseaworthiness in the ship, however caused, before it became the carrier's ship, if these could not be discovered by the carrier, or competent experts employed by the carrier, by the exercise of due diligence.

Lord Hodson noted that it could be argued that Angliss, in so far as it deals with shipbuilders, was dealing with something outside the scope of art 3, for to make a ship seaworthy is not the same as to make a seaworthy ship, but the expression 'to make a ship seaworthy' is wide enough to cover the work of repair however extensive those repairs may be.

According to Lord Hodson, legislation enacting the Hague Rules was not passed for the relief of shipowners but to standardise within certain limits the rights of the holder of every bill of lading against the shipowner. The obligation in art 3 is unqualified. While ships have become more complicated over time, this does not justify a more lenient construction being put upon the Hague Rules in favour of shipowners.