Carriage of Carriage of Goods by seaGoods by sea

HistoryHistory No international rules or No international rules or

conventions to govern Bills of conventions to govern Bills of Lading prior to 1924Lading prior to 1924

Common law and civil law – strict Common law and civil law – strict liability of the carrier (Ship owner) liability of the carrier (Ship owner)

Strict liability of ship ownerStrict liability of ship owner

But freedom of contract considered But freedom of contract considered paramount paramount

Ship owning companies – Cartels Ship owning companies – Cartels Exporters had no bargaining powerExporters had no bargaining power Ship owner dominated and Ship owner dominated and

contracted out of strict liability contracted out of strict liability In practice strict liability never In practice strict liability never

appliedapplied

Due to non availability of international Due to non availability of international rules or conventions rules or conventions

Due to the concept of freedom of Due to the concept of freedom of contract contract

The Bills of Lading issued by The Bills of Lading issued by ship owners were different ship owners were different from company to company and from company to company and country to country.country to country.

There was no uniformity. The There was no uniformity. The consignee did not know the consignee did not know the conditions in the B/L.conditions in the B/L.

Position was not conducive to Position was not conducive to international tradeinternational trade

Due to the above reasons Hague Due to the above reasons Hague rules were promulgated in 1924.rules were promulgated in 1924.

Hague visby rules promulgated in Hague visby rules promulgated in 1968.1968.

Hamburg rules promulgated in 1978.Hamburg rules promulgated in 1978.

Period prior to 1924 – strict liability of Period prior to 1924 – strict liability of the ship owner.the ship owner.

Hague and Hague visby rules – fault Hague and Hague visby rules – fault based liability of the ship owner.based liability of the ship owner.

““The carrier shall be bound before and The carrier shall be bound before and at the beginning of the voyage to at the beginning of the voyage to exercise due diligence to-exercise due diligence to-

a)a) Make the ship seaworthy;Make the ship seaworthy;b)b) Properly man, equip and supply the Properly man, equip and supply the

ship;ship;c)c) Make the holds, refrigerating and cool Make the holds, refrigerating and cool

chambers, and all other parts of the chambers, and all other parts of the ship in which goods are carried, fit ship in which goods are carried, fit and safe for their reception, carriage and safe for their reception, carriage and preservation.”and preservation.”

Hamburg rules – presumed fault Hamburg rules – presumed fault liability of the ship owner.liability of the ship owner.

““The carrier is liable for loss The carrier is liable for loss resulting from loss of or damage to resulting from loss of or damage to the goods, as well as from delay in the goods, as well as from delay in delivery, if the occurrence which delivery, if the occurrence which caused the loss, damage or delay caused the loss, damage or delay took place while the goods were in took place while the goods were in his charge as defined in article 4.”his charge as defined in article 4.”

Bills of Lading in Sri LankaBills of Lading in Sri LankaApplicable RulesApplicable Rules

Up to 1982 – Hague rulesUp to 1982 – Hague rules

After 1982 – Hague visby rulesAfter 1982 – Hague visby rulesPlease see the schedule to the Please see the schedule to the Carriage of Goods by Sea Act No. 21 Carriage of Goods by Sea Act No. 21 of 1982of 1982

Applicability of English Law in respect of Bills of Lading after Applicability of English Law in respect of Bills of Lading after the Carriage of Goods by Sea Act No. 21 of 1982.the Carriage of Goods by Sea Act No. 21 of 1982.

Can the English Law apply in respect of Bills of Lading where Can the English Law apply in respect of Bills of Lading where Act No. 21 of 1982 is silent.Act No. 21 of 1982 is silent.

The Civil Law Ordinance No. 5 of 1852 section 2 states as The Civil Law Ordinance No. 5 of 1852 section 2 states as follows:follows:““The law to be hereafter administered in Sri Lanka in respect The law to be hereafter administered in Sri Lanka in respect of all contracts or questions arising within the same relating of all contracts or questions arising within the same relating to ship and to the property therein and to the owners thereof to ship and to the property therein and to the owners thereof the behaviors of the Master and mariners and their the behaviors of the Master and mariners and their respective rights, duties, and liabilities relating to the respective rights, duties, and liabilities relating to the carriagecarriage of passengers and of passengers and goods by ships , goods by ships , to stoppage to stoppage in transitive, to freight , demurrage, insurance, in transitive, to freight , demurrage, insurance, salvage, average, collision between ships, to salvage, average, collision between ships, to bills of bills of Lading Lading and generally to and generally to all maritime matters all maritime matters shall be shall be the same in respect of the said matters as would be the same in respect of the said matters as would be administered in England in the like case at the administered in England in the like case at the corresponding period, if the contract had been corresponding period, if the contract had been entered into or if the Act in respect of which any such entered into or if the Act in respect of which any such question shall have arisen had been done in England, question shall have arisen had been done in England, unless in any case other provision is or shall be made unless in any case other provision is or shall be made by any enactment now in force in Sri Lanka or by any enactment now in force in Sri Lanka or hereafter to be enactedhereafter to be enacted””

We have a law in respect of Carriage We have a law in respect of Carriage of Goods by Seaof Goods by Sea

The above law covers most of the The above law covers most of the areas in respect of Bills of Lading areas in respect of Bills of Lading

If there is a lacuna could we make If there is a lacuna could we make use of English law?use of English law?

The position was taken in a local The position was taken in a local case but not decided as the case was case but not decided as the case was settledsettled

    BILLS OF LADINGBILLS OF LADINGDEFINITIONDEFINITION::

A bill of lading is a document, which A bill of lading is a document, which is signed by the carrier or his agent is signed by the carrier or his agent acknowledging that goods of the acknowledging that goods of the stated kind, quantity and condition stated kind, quantity and condition have been received for shipment or have been received for shipment or shipped on board a particular vessel, shipped on board a particular vessel, which is bound for a particular which is bound for a particular destination and stating the terms on destination and stating the terms on which the goods are to carried.which the goods are to carried.    

The traditional Bill of lading, a The traditional Bill of lading, a key-shipping document, key-shipping document, serves several purposes:serves several purposes:

  a)   Evidence of a contract of carriagea)   Evidence of a contract of carriage

b)b) Evidence of the receipt of goods Evidence of the receipt of goods

c)c) Document of title to the goodsDocument of title to the goods

1.1 1.1 Evidence of a Contract Evidence of a Contract of Carriageof Carriage

The bill of Lading acknowledges that The bill of Lading acknowledges that the goods have been delivered to the the goods have been delivered to the carrier for shipment to a stated carrier for shipment to a stated destination and repeats in detail or by destination and repeats in detail or by reference the terms of the contract reference the terms of the contract concluded when the space for the concluded when the space for the goods was booked. The bill of lading is goods was booked. The bill of lading is not the contract of carriage itself – it not the contract of carriage itself – it is in law, however, the best available is in law, however, the best available evidence of such a contract. evidence of such a contract.

Thus in Sewell v. Burdick, ( 1884) 10 Thus in Sewell v. Burdick, ( 1884) 10 App. Cas. 74, at p. 105, Lord App. Cas. 74, at p. 105, Lord Bramwell said:Bramwell said:

“ “ To my mind there is no contract in it. To my mind there is no contract in it. It is a receipt for the goods, stating It is a receipt for the goods, stating the terms on which they were the terms on which they were delivered to and received by, the delivered to and received by, the ship, and therefore excellent ship, and therefore excellent evidence of those terms, but it is not evidence of those terms, but it is not a contract. That has been made a contract. That has been made before the bill of lading was givenbefore the bill of lading was given”.”.

It is usual for the shipper and ship owner It is usual for the shipper and ship owner (or his agent) to agree the significant terms (or his agent) to agree the significant terms of the contract – e.g. the cargo, the freight, of the contract – e.g. the cargo, the freight, the freight, the port of shipment, and the freight, the port of shipment, and destination before the goods are loaded on destination before the goods are loaded on board and the bill of lading is issued. As to board and the bill of lading is issued. As to the other terms and conditions under which the other terms and conditions under which the goods are carried, it is the practice for the goods are carried, it is the practice for shippers to accept, without amendment, the shippers to accept, without amendment, the standard clauses printed on the carrier’s standard clauses printed on the carrier’s (long form) bill of lading.(long form) bill of lading.Where it can be proved that the bill of Where it can be proved that the bill of lading differs in terms from the contract lading differs in terms from the contract previously agreed (orally or in writing) previously agreed (orally or in writing) between the shipper and the carrier, the between the shipper and the carrier, the earlier terms will stand supreme: earlier terms will stand supreme: s.s.Ardennes (cargo owners ) v.s.s.Ardennes (cargo owners ) v.

1.2 Evidence of the Receipt of 1.2 Evidence of the Receipt of GoodsGoods

Evidence of the receipt of the goods, Evidence of the receipt of the goods, issued by the carrier and issued by the carrier and acknowledging that he has received acknowledging that he has received the goods, either on board a named the goods, either on board a named vessel or in his custody for the vessel or in his custody for the purpose of placing them on board a purpose of placing them on board a vessel. As a general rule of law it can vessel. As a general rule of law it can be said, that the carrier must “ be said, that the carrier must “ deliver deliver what he received as he received itwhat he received as he received it” ” unless relieved by the excepted perils unless relieved by the excepted perils (Gaskell et.al) 1987, p.240).(Gaskell et.al) 1987, p.240).

The Bill of Lading can be:The Bill of Lading can be:a)     a)     ‘On board’‘On board’ – sometimes called – sometimes called ‘shipped’ Bill of Lading, whereby the carrier ‘shipped’ Bill of Lading, whereby the carrier acknowledges that the goods are loaded on acknowledges that the goods are loaded on board and, at the same time, will note any board and, at the same time, will note any apparent defect in either the goods or their apparent defect in either the goods or their packagingpackaging

  b)    b)    ‘Received for shipment’‘Received for shipment’ – this only – this only states that the goods have been received states that the goods have been received into the carrier’s custody, may be at a into the carrier’s custody, may be at a warehouse or inland container terminal. It warehouse or inland container terminal. It does not confirm that the goods are on does not confirm that the goods are on board the vessel for a particular sailing.board the vessel for a particular sailing.

When the Hague-Visby Rules apply the shipper When the Hague-Visby Rules apply the shipper can demand a Bill of Lading to be issued to him can demand a Bill of Lading to be issued to him showing “ either the number of packages or showing “ either the number of packages or pieces, or the quantity, or weight , as the case pieces, or the quantity, or weight , as the case may be, as furnished in writing by the shipper” may be, as furnished in writing by the shipper” (Art.3.3(b))(Art.3.3(b))  The Bill of Lading is prima facie evidence f The Bill of Lading is prima facie evidence f the receipt of the goods as they are the receipt of the goods as they are described in the document.described in the document. This means that if This means that if the person who issued the Bill of Lading claims the person who issued the Bill of Lading claims that the information is incorrect, he has to prove that the information is incorrect, he has to prove the error.the error.  If the Bill of Lading has been transferred to If the Bill of Lading has been transferred to a third party acting in good faith, proof to a third party acting in good faith, proof to the contrary is not admissiblethe contrary is not admissible

1.3 Document of Title to the 1.3 Document of Title to the GoodsGoods

  Document representing the goods and Document representing the goods and entitling the holder in due course to receive entitling the holder in due course to receive the goods from the carrier on arrival of the the goods from the carrier on arrival of the vessel. The bill of lading also entitles the vessel. The bill of lading also entitles the holder to make any claim against the carrier holder to make any claim against the carrier under the contract of carriage for loss or under the contract of carriage for loss or damage to the goods. damage to the goods. Possession of a Bill of Possession of a Bill of Lading is equivalent in law to possession of Lading is equivalent in law to possession of the goods. It enables the holder to obtain the goods. It enables the holder to obtain delivery of the goods at the port of delivery of the goods at the port of destination and during the transit, it destination and during the transit, it enables him to ‘deliver’ the goods by enables him to ‘deliver’ the goods by merely transferring the Bill of Ladingmerely transferring the Bill of Lading.. When When the term the term “ negotiable”“ negotiable” is used in relation to is used in relation to a Bill of Lading, it merely means a Bill of Lading, it merely means transferable.transferable.

The Bill of Lading is like a cloakroom The Bill of Lading is like a cloakroom ticket- it is the ’key to the goods’. The ticket- it is the ’key to the goods’. The holder must present it before delivery, holder must present it before delivery, and surrender it afterwards. The and surrender it afterwards. The carrier has the corresponding duty not carrier has the corresponding duty not to deliver without presentation and to deliver without presentation and the right to get the Bill of Lading in the right to get the Bill of Lading in return as his receipt of having carried return as his receipt of having carried out his duty to deliver. The carrier out his duty to deliver. The carrier must always exercise care to deliver must always exercise care to deliver to the right person, and will be liable to the right person, and will be liable for damages if he is negligent in this for damages if he is negligent in this respect.respect.  

Information Appearing on the Information Appearing on the Bill of LadingBill of LadingInformation relating to the goods-Information relating to the goods-A Bill of Lading usually contains A Bill of Lading usually contains information regarding the information regarding the quantity, condition and Marks of quantity, condition and Marks of the Cargo. National legislation the Cargo. National legislation based on the International based on the International Conventions for the unification of Conventions for the unification of certain rules relating to Bills of certain rules relating to Bills of Lading also require that certain Lading also require that certain information appears on the face information appears on the face of the Bill of Lading such as.of the Bill of Lading such as.

Either the No of packages or items or the Either the No of packages or items or the quantity or weight as the case may be as quantity or weight as the case may be as furnished in writing by the shipperfurnished in writing by the shipper

The apparent order and condition of the The apparent order and condition of the goods, goods, "taken on board the following goods "taken on board the following goods in apparent good order and condition"in apparent good order and condition" If the If the goods are not in good condition the carrier goods are not in good condition the carrier must state so on the face of the Bill of must state so on the face of the Bill of Lading.Lading.

The distinctive marks intended to identify The distinctive marks intended to identify the cargo given prior to loading. These the cargo given prior to loading. These marks must be stamped or otherwise shown marks must be stamped or otherwise shown clearly that they would remain legible until clearly that they would remain legible until the end of the voyage.the end of the voyage.

Information relating to Information relating to the parties -the parties -CarrierCarrierThe name of the carrier is The name of the carrier is generally found at the top generally found at the top of the Bill of Lading. The of the Bill of Lading. The carrier may be the actual carrier may be the actual owner of the ship or a Time owner of the ship or a Time or Demise Charterer.or Demise Charterer.

Name of the shipName of the shipThis enables the This enables the Shipper/Receiver to identify Shipper/Receiver to identify the owner of the ship. This the owner of the ship. This could be important in the could be important in the event the shipper/receiver will event the shipper/receiver will have to make a claim against have to make a claim against the shipowner for loss/damage the shipowner for loss/damage to cargo in certain to cargo in certain circumstances.circumstances.

ShipperShipperThe Bill of Lading normally The Bill of Lading normally contains the name and address contains the name and address of the shipper. This information of the shipper. This information is particularly important if the is particularly important if the Bill of Landing does not contain Bill of Landing does not contain any information about the any information about the consignee and in such event consignee and in such event the carrier may be able to the carrier may be able to contact the shipper in the contact the shipper in the event of a casualty.event of a casualty.

Information relating to the Information relating to the VoyageVoyageThe Bill of Lading would indicate The Bill of Lading would indicate the name of the Port of loading and the name of the Port of loading and the name of the port of discharge.the name of the port of discharge.

Endorsement of the Bill of LadingEndorsement of the Bill of LadingGoods shipped under a Bill of Goods shipped under a Bill of Lading may be deliverable to a Lading may be deliverable to a named person to the order of a named person to the order of a person or to the Bearer.person or to the Bearer.

The named Bill of LadingThe named Bill of LadingA Bill of Lading is named when A Bill of Lading is named when the name and the address of the name and the address of the Consignee is given (The the Consignee is given (The shipper may also be named as shipper may also be named as the Consignee) and the phrase the Consignee) and the phrase ""TO ORDERTO ORDER" usually appearing " usually appearing on the Bill of Lading is deleted. on the Bill of Lading is deleted. In this case the goods can only In this case the goods can only be delivered to the named be delivered to the named person. This form of Bill of person. This form of Bill of Lading is normally used Lading is normally used

for non-commercial shipment for non-commercial shipment such as cargo carried under bi-such as cargo carried under bi-lateral agreements between lateral agreements between governments, shipments made governments, shipments made by one branch of a Company to by one branch of a Company to another or shipments of goods another or shipments of goods bought overseas by the same bought overseas by the same Company. The legal Company. The legal consequence of the Consignee consequence of the Consignee being named is that such Bill of being named is that such Bill of Lading cannot be endorsed to Lading cannot be endorsed to another and is thus non-another and is thus non-negotiable.negotiable.

Named Bill of Lading is also Named Bill of Lading is also referred to as a straight Bill of referred to as a straight Bill of Lading Lading

In the recent case of “In the recent case of “Rafaela sRafaela s” 2003 ” 2003 Vol. II page 114 of Lloyd Reports Vol. II page 114 of Lloyd Reports The Court of Appeal of England holds The Court of Appeal of England holds

““a straight Bill of Lading otherwise in a straight Bill of Lading otherwise in the form of a classic Bill of Lading, the form of a classic Bill of Lading, should be viewed as a Bill of Lading should be viewed as a Bill of Lading within the meaning of the Hague within the meaning of the Hague Rules notwithstanding that it was Rules notwithstanding that it was non negotiable……”non negotiable……”

The Order Bill of LadingThe Order Bill of LadingThe order Bill of Lading is drawn to the The order Bill of Lading is drawn to the order of the shipper, the consignee or order of the shipper, the consignee or the Bank. This Bill of Lading contains the Bank. This Bill of Lading contains the phrase "the phrase "To the Order of ……..To the Order of …….. " " followed by the name of the followed by the name of the beneficiary. To endorse this form of Bill beneficiary. To endorse this form of Bill of Lading, the beneficiary may write on of Lading, the beneficiary may write on the reverse side of the Bill of Lading the reverse side of the Bill of Lading ""Deliver to the Order of ……….."Deliver to the Order of ……….." followed by the new Beneficiary and followed by the new Beneficiary and signed. This is called endorsement in signed. This is called endorsement in full. The person to whom it is endorsed full. The person to whom it is endorsed may be the final receiver or an may be the final receiver or an intermediary Beneficiary.intermediary Beneficiary.

Bearer Bill of LadingBearer Bill of LadingIn the Bearer Bill of Lading the In the Bearer Bill of Lading the statement "statement "To the Order of To the Order of ……"……" is replaced by the is replaced by the statement "statement "to Bearerto Bearer". Any ". Any holder of the Bill of Lading can holder of the Bill of Lading can thus take delivery of the goods. thus take delivery of the goods. The Bearer Bill of Lading may The Bearer Bill of Lading may pose a risk to the shipper as pose a risk to the shipper as anyone who obtains the Bill of anyone who obtains the Bill of Lading through fraudulent Lading through fraudulent means can also obtain delivery means can also obtain delivery of the goods.of the goods.

Through Bill of LadingThrough Bill of LadingThis is a term that is normally This is a term that is normally used to refer to a Bill of Lading used to refer to a Bill of Lading containing a contract of containing a contract of carriage that is in stages. The carriage that is in stages. The separate stages would be separate stages would be performed by different carriers performed by different carriers by the process of trans by the process of trans shipment. In practice, the shipment. In practice, the through Bill of Lading would through Bill of Lading would usually have 2 characteristics usually have 2 characteristics which may distinguishwhich may distinguish

it from other Bills of Lading i.eit from other Bills of Lading i.e Contain a clause giving the Contain a clause giving the

carrier the right to transship carrier the right to transship cargo.cargo.

Contain a statement that the Contain a statement that the cargo would be transshipped at a cargo would be transshipped at a particular port i.e.,particular port i.e.,

Port of loading Port of loading : Colombo: ColomboPort of transshipmentPort of transshipment : Bombay: BombayPort of dischargePort of discharge : Rotterdam: Rotterdam

In this instance goods will be In this instance goods will be loaded at Colombo and loaded at Colombo and transferred to the second ship transferred to the second ship at Bombay and discharged by at Bombay and discharged by the second ship at Rotterdam. the second ship at Rotterdam. The first carrier issues the The first carrier issues the through Bill of Lading. through Bill of Lading. Consignee/Receiver obtains Consignee/Receiver obtains delivery on through Bill of delivery on through Bill of Lading.Lading.

Received for Shipment Bill Received for Shipment Bill of Ladingof LadingThis is a Bill of Lading issued to This is a Bill of Lading issued to a shipper when he delivers a shipper when he delivers goods into the custody of the goods into the custody of the ship owner or its Agent, prior ship owner or its Agent, prior to the carrying ship has arrived to the carrying ship has arrived at the Port of loading or it has at the Port of loading or it has arrived and not ready to arrived and not ready to receive goods. It is some times receive goods. It is some times called a Custody Bill of Lading.called a Custody Bill of Lading.

Shipped on Board Bill of LadingShipped on Board Bill of LadingA Bill of Lading issued after the goods A Bill of Lading issued after the goods have actually been loaded into the have actually been loaded into the ship is described as a shipped on ship is described as a shipped on Board Bill of Lading. If a received for Board Bill of Lading. If a received for shipment bill of lading has been shipment bill of lading has been previously given, it must be previously given, it must be surrendered in exchange for or surrendered in exchange for or completed into a completed into a "Shipped on Board "Shipped on Board Bill of Lading"Bill of Lading" endorsing upon it the endorsing upon it the name of the ship into which the goods name of the ship into which the goods are loaded and the date of shipment.are loaded and the date of shipment.

Direct Bill of LadingDirect Bill of Lading

This is a Bill of Lading, This is a Bill of Lading, covering the carriage of covering the carriage of goods in one ship direct goods in one ship direct from one port to another.from one port to another.

The Clean Bill of Lading and the The Clean Bill of Lading and the letter of Indemnityletter of IndemnityBills of Lading containing particulars Bills of Lading containing particulars of the goods such as the apparent of the goods such as the apparent condition, quantity, weight, numbers condition, quantity, weight, numbers etc., and the particulars of the goods etc., and the particulars of the goods are filled in by the shipper. In theory are filled in by the shipper. In theory the Bill of Lading has to be completed the Bill of Lading has to be completed by the carrier according to the by the carrier according to the particulars provided by the shipper or particulars provided by the shipper or his representative who would later his representative who would later send it to the carrier for verification send it to the carrier for verification and signature. The Bill of Lading has and signature. The Bill of Lading has a printed statement that the goods a printed statement that the goods are shipped in apparent good order.are shipped in apparent good order.

The Clean Bill of LadingThe Clean Bill of LadingIf the carrier has not If the carrier has not contradicted the particulars contradicted the particulars inserted by the shipper or made inserted by the shipper or made any adverse comment on the Bill any adverse comment on the Bill of Lading regarding the goods, of Lading regarding the goods, the Bill of Lading would be the Bill of Lading would be considered to be a Clean Bill of considered to be a Clean Bill of Lading. A Clean Bill of Lading Lading. A Clean Bill of Lading would thus mean that, the would thus mean that, the carrier who had an opportunity carrier who had an opportunity to inspect the goods prior to to inspect the goods prior to loading agrees with the Shipper's loading agrees with the Shipper's description and confirms that the description and confirms that the goods are in good order.goods are in good order.

Letter of IndemnityLetter of Indemnity

L/C transaction L/C transaction Necessity to present clean B/L to bankNecessity to present clean B/L to bank Fraudulent practice of issuing letters Fraudulent practice of issuing letters

of indemnity to carrier and obtaining of indemnity to carrier and obtaining clean B/Lclean B/L

Fraud on consignee Fraud on consignee If carrier does not honour the courts If carrier does not honour the courts

have refused to enforce as fraud on have refused to enforce as fraud on consigneeconsignee

Present practice of bank guarantee Present practice of bank guarantee

Condition in B/L on the application ofCondition in B/L on the application of General AverageGeneral Average

Ship owners will not issue a B/L without a Ship owners will not issue a B/L without a clause attracting General Averageclause attracting General Average

Standard clause –Standard clause –““General Average to be adjusted at any General Average to be adjusted at any port or place at the carrier’s option, and to port or place at the carrier’s option, and to be settled according to the York-Antwerp be settled according to the York-Antwerp Rules, 1974, this covering all goods, Rules, 1974, this covering all goods, whether carried on or under deck. The whether carried on or under deck. The amended Jason Clause to be considered as amended Jason Clause to be considered as incorporated herein. Such security incorporated herein. Such security including a cash deposit as the carrier may including a cash deposit as the carrier may deem sufficient to cover the estimated deem sufficient to cover the estimated contribution by the goods and any salvage contribution by the goods and any salvage and special charges thereon, shall, if and special charges thereon, shall, if required, be submitted to the carrier prior required, be submitted to the carrier prior to delivery of the goods”to delivery of the goods”

General AverageGeneral Average

““There is a General Average Act when, There is a General Average Act when, and only when, any extra ordinary and only when, any extra ordinary sacrifice or expendituresacrifice or expenditure is is intentionally and reasonably made or intentionally and reasonably made or incurred for the common safety for incurred for the common safety for the purpose of preserving from peril the purpose of preserving from peril the property involved in a common the property involved in a common maritime adventure.”maritime adventure.”

Principle behind General Average –Principle behind General Average –

Every Every voyagevoyage is an is an adventureadventure. .

All interests (Cargo, ship and freight) should All interests (Cargo, ship and freight) should contribute to make the adventure a success contribute to make the adventure a success

One of the most controversial areas in lawOne of the most controversial areas in law

Judicial pronouncements are available to Judicial pronouncements are available to define define

““PerilPeril”, “”, “General Average ActsGeneral Average Acts”, “”, “sacrificesacrifice”, ”, ““expenditureexpenditure”, “”, “Voluntary ActVoluntary Act”, “”, “Intentional Intentional ActAct”, “”, “Reasonable ActReasonable Act”, “”, “Common SafetyCommon Safety” ” etc.etc.

Unfortunately, things are not Unfortunately, things are not always as simple as this. The carrier always as simple as this. The carrier may find reason to disagree with may find reason to disagree with the particulars indicated on the Bill the particulars indicated on the Bill of Lading by the shipper such as:of Lading by the shipper such as:

--The goods may not be in apparent The goods may not be in apparent good order or condition at the time good order or condition at the time they were loaded on board the ship.they were loaded on board the ship.

-The Carrier and Shipper may -The Carrier and Shipper may disagree about the quantity of disagree about the quantity of goods loaded on board.goods loaded on board.

Limitation of actionsLimitation of actions

Section 6Section 6 of the Hague Visby Rules state of the Hague Visby Rules state as follows:as follows:

““subject to paragraph 6 bis thesubject to paragraph 6 bis the carrier carrier and the ship and the ship shall in any event be shall in any event be discharged from all liability whatsoever discharged from all liability whatsoever in respect of the goods, unless suit is in respect of the goods, unless suit is brought brought within one yearwithin one year of their of their delivery or of the date when they delivery or of the date when they should have been delivered. This should have been delivered. This period may however be extended if the period may however be extended if the parties so agree after the cause of parties so agree after the cause of action has arisen”action has arisen”

According to the Hague Visby Rules (Carriage According to the Hague Visby Rules (Carriage of Goods by Sea Act 21 of 1982) if action is of Goods by Sea Act 21 of 1982) if action is not instituted within one year against the not instituted within one year against the ship or carriership or carrier they will be discharged from they will be discharged from liability.liability.

Consider the position whereConsider the position where Carrier supplies cargo damaged during Carrier supplies cargo damaged during

voyage (supplied not in accordance with voyage (supplied not in accordance with B/L)B/L)

No action filed by consignee within one No action filed by consignee within one year from deliveryyear from delivery

After 1 ½ years from the delivery of the After 1 ½ years from the delivery of the cargo carrier sues consignee for non cargo carrier sues consignee for non payment on general averagepayment on general average

Hamburg Rules Article 20Hamburg Rules Article 20

““Any action relating to carriage of Any action relating to carriage of goods under this convention is time goods under this convention is time bared if judicial or arbitral bared if judicial or arbitral proceedings have not been instituted proceedings have not been instituted within a period of two years.within a period of two years.

The limitation period commences on The limitation period commences on the day on which the carrier has the day on which the carrier has delivered the goods or part thereof or delivered the goods or part thereof or in cases where no goods have been in cases where no goods have been delivered on the last day on which the delivered on the last day on which the goods should have been delivered”goods should have been delivered”

Remedies when carrier has not Remedies when carrier has not delivered cargo in terms of the delivered cargo in terms of the B/L.B/L.

Action in the District Court Action in the District Court

Action in personam in the Admiralty CourtAction in personam in the Admiralty Court

In rem action in the Admiralty court In rem action in the Admiralty court

Action in the District CourtAction in the District Court

Time consumingTime consuming

Action filed against the ship Action filed against the ship owner or charterer – Difficulty of owner or charterer – Difficulty of enforcement -enforcement -

they may not have assetsthey may not have assets

Action in personam in the Action in personam in the Admiralty CourtAdmiralty Court

In the Admiralty Court two In the Admiralty Court two types of actionstypes of actions

1)1) Action in personamAction in personam

2)2) Action in remAction in rem

Action in personamAction in personam

Normally filed against the ship Normally filed against the ship owning companyowning company

Reasons for not filing action against ship Reasons for not filing action against ship owning companyowning company

i)i) Ship owners flag outShip owners flag outii)ii) Reasons for ship owners to flag outReasons for ship owners to flag outiii)iii) Ship registry of the flag of Ship registry of the flag of

convenience require a link between convenience require a link between the ship owner and the country of the ship owner and the country of registrationregistration

iv)iv) The company (ship owning company) The company (ship owning company) created for the purpose of created for the purpose of registration generally do not have registration generally do not have assetsassets

Action in remAction in rem

First step after filing papers is to move First step after filing papers is to move for arrest of shipfor arrest of ship

Ship is available as an assetShip is available as an asset In the alternative the ship owner will In the alternative the ship owner will

provide security by way of a bank provide security by way of a bank guarantee guarantee

Due to the above reasons the most Due to the above reasons the most effective remedy to enforce a claim effective remedy to enforce a claim against a carrier is to file an action against a carrier is to file an action in rem in the Admiralty Court.in rem in the Admiralty Court.