In 1972, Shipping Corp of India Ltd (SCI)'s ship was carrying Gamlen Chemical Co (A/Asia) Pty Ltd (Gamlen)'s goods from Sydney to Indonesia. During severe weather while crossing the Great Australian Bight, a large proportion of those goods were lost after they broke out of their restraints in the hold. Gamlen brought a claim against SCI for improperly stowing the goods and causing their loss through its negligence.

The Hague Rules had the force of law in Australia on account of the Sea-Carriage of Goods Act 1924. At first instance, SCI was relieved of responsibility for inadequately restraining the goods and was held to be entitled to rely on art 4.2.c of the Hague Rules, which exempts the carrier from loss or damage caused by 'perils, dangers and accidents of the sea'. Article 4.2.c acts as a defence to liability for causing loss or damage to goods due to not properly and carefully stowing the goods, as is enshrined in art 3.2 of the Rules. That decision was overturned in the Court of Appeal, following which SCI appealed to the High Court.

Held: Appeal dismissed.

Stephen J: As a prelude to his reasoning, Stephen J noted his concern that, as art 3.2 is subject to any defence raised under art 4, whether the carrier in fact adhered to its duties and responsibilities might be inadequate as long as a defence succeeded. In ordinary circumstances it would be expected that carriers would prepare for heavy weather and secure goods accordingly - unless that weather was later interpreted as a peril of the sea. If all heavy weather was read as a peril of the sea, then it would soon become unnecessary for any carrier to ever prepare for that eventuality, which would set an uncomfortable precedent. Stephen J did not expand further on this point but expressed concerns that the Rules could operate to produce that result.

The main points of contention were laid out as follows: the actual impact and meaning of the opening words of art 3.2, which state that it is subject to art 4; the argument that the improper stowage of the goods and the weather were concurrent causes of the loss; and finally, whether the existence of the weather was enough to successfully invoke art 4.2.c and defend against liability.

Regarding the first point, for a carrier to evade liability, art 3.2 (requiring carriers to properly and carefully handle goods) must either be fulfilled, or some cause under art 4 must be the reason for the loss or damage, not the carrier's own negligence. Article 3.2 is qualified by a reference to art 4. However, art 3.1 is not, because the obligation therein to act with due diligence is unaffected whatever the circumstances.

While SCI argued that the advent of the Hague Rules made it so that proof of a carrier's negligence or a ship's unseaworthiness could no longer defeat an art 4 defence, cases decided after 1924 demonstrate that a breach of carrier obligations could actually invalidate an art 4 defence to liability. There was certainly no evidence of a dramatic shift in the direction suggested by SCI.

The first point of contention regarding art 3.2 was therefore rejected.

The second point of contention was that the weather and the improper stowage had been concurrent causes of Gamlen's loss. SCI added to this argument that, if both these things were concurrent causes, it would be enough to rely on the heavy weather aspect and ignore the breach of carrier's duties. Stephen J reviewed a number of authorities and held that, because of the improper stowage, the loss of the goods when heavy weather was encountered became almost inevitable. It was sufficient for the improper stowage to be part of the reason for the loss. If the heavy weather was enough to be a peril, that meant the ship was not as fit as it could have been, or alternatively that the goods were not stowed as securely as possible. The bad weather and the failure to properly stow the goods were not causes of the same calibre. The latter was the dominant cause, while the weather was the trigger for damage to occur.

Stephen J reserved judgment on whether the bad weather had in fact been a peril of the sea when it was foreseeable and further measures could have been taken to guard against it. This also meant that the third point of contention, regarding whether the poor weather was enough to satisfy art 4.2.c of the Rules, could be set aside for the time being.

Mason and Wilson JJ: Their Honours agreed with Stephen J on all general points, and held the appeal should be dismissed.

In addition, the point was made that the Hague Rules, being an international Convention formulated with regard to international transactions, should be interpreted 'in a normal manner, appropriate for the interpretation of an international convention, unconstrained by technical rules of English law, or by English legal precedent, but on broad principles of general acceptation'. This was first suggested by Lord Wilberforce in Buchanan (James) & Co Ltd v Babco Forwarding & Shipping (UK) Ltd [1978] AC 141, 152. Taking this approach assists in generating a more universal view of the Rules and makes it easier for shippers to predict how their case will be handled in different countries' courts. When this case was in the NSW Court of Appeal, an approach favourable to English common law rules was taken. This was not strictly wrong considering that international Conventions and the meanings applied by national courts to instruments of international trade rely on similar words and expressions. The municipal law of nations should also be taken into account when interpreting international Conventions. However, the wording of the Rules themselves is the most important factor, as the Rules are the source of the debated rights and duties.

In this case the carrier was prima facie in breach of its obligations under art 3.2 of the Rules. Liability could be avoided if the perils of the sea defence under art 4.2.c was activated. SCI seemed to argue that even when carriers cause damage or loss to goods through their own negligence, which usually would breach art 3.2, they may nevertheless escape responsibility unless the problem fell under arts 4.2.b, 4.2.p, or resulted from any cause occasioned by the carrier's actual fault or privity or the fault or privity of their servants.

To reach this conclusion would entirely contradict art 3.2's purpose. The general scheme of the Rules relates to the responsibilities and liabilities of carriers that they cannot contract out of, and ensures they are held responsible for incidents arising from their own negligence. Articles 4.2.c-4.2.o, apart from 4.2.l, serve to explicitly address the circumstances when damage or loss is outside of a carrier's control. Other immunities are contained in arts 4.4, 4.5, and 4.6. The existence of the preface to art 3.2 is justified by the presence of those immunities as well as arts 4.2.a and 4.2.b, which explain some of the circumstances in which carriers should be indemnified, within reason.

When a carrier is or is not liable will change from case to case. Article 4.2.c and the notion of 'perils of the sea' could mean a vast number of things. Further, at common law, where carriers' negligence has contributed to loss, they are not immune from liability. The damage that Gamlen suffered did not 'arise or result from' a peril of the sea so as to bring it within art 4.2.c. In this case the carrier's negligence and the bad weather were concurrent and inseparable causes of Gamlen's loss and the appeal must be dismissed.

Aickin J agreed with Mason and Wilson JJ's reasons.

Gibbs J agreed with the majority, adding that, in his opinion, the heavy weather had been a peril of the sea under art 4.2.c of the Rules.