A Critical Analysis of Justifiable and Unjustifiable Deviation of Vessel in Carriage of Goods by Sea
The Concept of deviation………………………………….p.4
Critique of the various aspects of the doctrine………….p.18
– Separation of Maritime and Contract Law……p.18
– Precise Nature of Deviation – Time for ………..p.25
– Freedom of Contract…………………………….p.39
‘It is imputed for a fault to the Master, if he directs his course by waies either dangerous through Pirats, enemies, or other evill aventures, and holds not forth his due rout, and damage happen thereby’
The prosaic charm of such a simplistic formulation of maritime law and its approach to the concept of ‘deviation’, if it can be understood in those terms any more, is sadly missing from modern day law. That quotation was taken from a book published in 1613 which is said to have a direct derivation from Roman law. The concept has changed into the modern day into such that it may just have dissolved into a general part of contract law or it may perhaps not exist at all. This work attempts to contribute to this subject in a number of ways, primarily we will relate an in-depth history into the evolution of the concept from its ancient origins to modern day and then I will proceed to critique it on a number of levels, this will be on its status as a concept and also as between those deviations which are justified and unjustified. The concept has a long academic treatment and hopefully this work can come to a conclusion which will contribute to the development of this area of law and map a potential way forward.
This area of maritime law is fascinating nexus of various areas of law such as carriage of goods, contract and insurance, this work will aim to build a deeper understanding of the concept than has been previously attempted and to understand it as much as possible in a holistic manner by analyzing its internal and external consistency with the general rationale of maritime law’s surrounding concepts.
The Concept of Deviation
There are a number of questions that we have to deal with in this work and before I go onto spend some time outlining the concept as it has developed over the years I wish to first just set out some of the more important problems that this area of law suffers from. As I mentioned above the concept writers differ about the origins and age of this concept but there is a suggestion that it is very old and in fact is an inheritance from Roman law however in the case of State Trading Corporation of India Ltd v. M.Golodetz Ltd Lord Justice Lloyd stated:
‘The origin and justification for the rule in deviation cases has always been said to be the need to protect the cargo-owner against loss of his insurance cover. So the ship-owner assumes the mantle of the insurer, subject only to the exceptions of a common carrier. But with the advent of the held covered clause, this rationale has lost all or much of its force’
The identification of such an old rule with one background justification seems to be somewhat suspect but as Lord Justice Lloyd also pointed out in Golodetz any other rationale for the rule could arguably lead to a conclusion that ‘the deviation cases should now be assimilated to the ordinary law of contract’. The concept furthermore has internal challenges, perhaps the least devastating is the rationale for the distinction between justified and unjustified deviation, secondly and more difficult is the confusion surrounding the exact dimensions of the concept given that it has developed over time and through international instruments so as to include or become analogous to unjustified deck carriage of goods, negligent discharge, misdelivery and the arguable subsuming of the concept under the idea of ‘fundamental breach’. It is to all these questions which this work hopes to attend to some degree and provide a critical analysis of the whole area and hopefully come to a conclusion about the future of the concept.
Conventional wisdom would trace the beginnings of the doctrine of deviation from the earliest reported case which was that of Davis v. Garrett and in particular the dicta in that case which stated:
‘The law does imply a duty in the owner of a vessel, whether a general ship or hired for the special purpose of the voyage, to proceed with unnecessary deviation in the usual and customary course’
However, as I mentioned above, and due to the diligence of Dockray in researching the point, we are now aware that such statements abounded in the literature in the area in particular Lex Mercatoria by Gerald Malynes, Treatise of the law relative to merchant Ships and Seamen by Charles Abbott and de Jure Maritimo et Navali by Charles Molloy who very much repeated the work of Welwod from the 17th century. The corpus that had built up by the nineteenth century that implied a general duty on the master or owner of a vessel however was relatively untested and the exact dimensions of the concept unclear. However, the distinctiveness of the decision in Davis was important in a subtle manner. There were a number of prior decisions especially the case of Ellis v. Turner, which treated as wrongful when a chartered ship carried the cargo to and then beyond the agreed place furthermore many maritime contracts had express provisions about this in any case. However the decision of Davis was the first time that a general duty not to deviate was implied into the common law. Interestingly, whilst the court was silent on the rationale that underpinned the decisions, Dockray again points to the fact that Serjeant Wilde, for the plaintiff, argued for three potential rationales: ‘to prevent delay, because the risks associated with usual route were the only thing the freighter could take into account when entering into a contract, and because the effect of deviation by the carrier would be to avoid a freighter’s policy insuring the goods for the declared voyage’. This is a good example of how the origins of this doctrine were a lot more complex than Lord Justice Lloyd suggested in Golodetz and The Antares (No’s 1 & 2) and it is in that vein that we must begin to research the point. Dockray in particular believes that the second of the reasons given in that list was the most important factor because the insurance loss wasn’t in point in Davis and the plaintiff hadn’t actually claimed that they had suffered this kind of loss.
Davis was an interesting development of the law but only made certain steps towards the law as it exists currently, the primary points of importance to be taken from the case were the implied duty we have mentioned as well as the fact that in an action for breach of the duty to proceed by the usual and customary route then the value of goods lost or damaged would be recoverable despite exact proof of a causal link between deviation and loss, subject to the defender proving that the loss would have in fact occurred regardless of the deviation. There were a few common law exceptions which were notoriously difficult to prove these are listed as being ‘acts of God, acts of the monarch’s enemies, inherent vice in the goods, defective packaging of the goods and finally intentional loss of goods jettisoned in a general average sacrifice’. The burden of proof on these defences were very high, a good example was the difficulty in establishing this in Scaramanga & Co. v. Stamp where Cockburn, CJ held that although a carrier had deviated to save life initially when the captain agreed for a monetary award to tow the boat as salvage that altered the nature of the deviation in such a manner as to lose the protection despite Cockburn CJ’s statement that:
‘To all who have to trust themselves to the sea, it is of the utmost importance that the promptings of humanity in this respect should not be checked or interfered with by prudential considerations’
At the time there were a number of other cases on the subjective facts that might fit into the somewhat nebulous concepts that the judiciary were applying and it was held in Phelps, James & Co. v. Hill on the issue of necessary deviation to deal with repairs that a master was able to have the discretion in choosing the port in which to seek repairs and needn’t proceed to the nearest port. Another example of such common law defences arose in The Teutonia where Lord Justice Mellish sitting in the Judicial Committee stated:
‘It seems obvious that, if a Master receives credible information that, if he continues in the direct course of his voyage, his Ship will be exposed to some imminent peril, as, for instance, that there are Pirates in his course, or Icebergs, or other dangers of navigation, he must be justified in pausing and deviating from the direct course’
In that case it was about the deviation of a ship to avoid berthing at a port which was now an enemy port following the outbreak of hostilities between Prussia and France in the nineteenth century. The understanding of the concept of deviation, as best we can understand it over a century later, was fairly settled in that things which occurred during geographical deviation were the liability of the ship-owner or carrier apart from a few defences.
In Balian & Sons v. Joly, Victoria & Co. Ltd the law began to be altered significantly as regards the carrier at common law and started the process that has transformed this area of law into ‘a somewhat artificial, and certainly very rigorous, doctrine of deviation under which the master is held strictly to the proper route’. Lord Esher in Balian & Sons made an ambiguous but potentially radical dictum:
‘It was not necessary to lay down all the consequences of a deviation from the voyage contracted for it might be that the true view…the whole bill of lading was gone…It was sufficient to say that the cases showed that if the master deviated from the voyage contracted for in the bill of lading the ship-owner would be deprived of all stipulations in the bill of lading which limited his liability as a carrier by water…’
There are two very significant issues that Lord Esher raised here which were potentially radically different from the orthodox understanding, primarily the meaning of the phrase ‘the whole bill of lading was gone’ and the fact the simple existence of deviation had an effect on the contract such as to remove any stipulations which limited liability in the bill of lading or presumably the charter-party. These two issues were potentially radical because it was in effect treating deviation as a breach of contract rather than an action for damages. This heralded in a line of cases in the twentieth century which began to significantly flesh out this contractual aspect of deviation. In this effect most textbooks point to the case of Joseph Thorley Ltd v. Orchis Steamship Co. Ltd as the beginning of this doctrine however Lord Esher’s dicta in Balian was radical and overruled a good bit of established doctrine that a deviation didn’t give a cargo owner the right to treat the contract as repudiated by deviation. The rationale behind this decision is suggested to be related to the contemporary surroundings in that there was a general feeling that ship-owners were using more and more elaborate bills of lading to avoid liability, statutory reform had failed because of ship-owner opposition and the importance of following the contractual route was being diluted by modern practices.
However, at the time this was an unsupported obiter dicta from a respected mercantile and maritime law judge, it was not therefore set in stone however a few years later the important decision of Joseph Thorley came a long and clarified the law in this respect Collins MR stated:
‘the ship-owner cannot set up the exception clause the bill of lading contract, which only exists for his benefit, if he has not performed a condition precedent upon which his right to rely on that contract depends’
Later on talking about what exactly is left once the deviation has occurred Collins MR echoed Lord Esher and stated that all that was left was ‘such terms…as may be implied from the circumstances and the conduct of the parties by way of new contract arising out of the old contract’ so it was clear from this decision that the effect of deviation was to put the ship owner in the position of a common carrier and not entitled to any of the terms of the contract. This has been followed in numerous cases but the exact effect of deviation on the bill of lading was so vague when taken from Thorley and Balian that many of the subsequent decisions were unclear on what was meant by these cases. It was varyingly stated as void ab initio, a condition precedent to the right of the ship-owner to put the contract in suit, displaced, avoided or terminated.
There were a number of inconsistencies in the law which made it even more difficult to tease some kind of coherent doctrine from the case law. A good example is that in United States Shipping Board v. Bunge y Born Limitada Sociedad  the court held not only did the carriers lose the benefit of any stipulations in their favour but also the right to enforce contractual provisions that dealt with laytime or demurrage. However both the status of the bill of lading and the ability of certain provisions to survive deviation are extremely unclear. For example in Cunard v. Buerger Lord Parmoor seemed to be limiting the effect of deviation to ‘stipulations in a contract of carriage, limiting or negativing the liability of carriers, by land or water, for loss or damage to goods entrusted to them for carriage’ these are very specific provisions but when we compare it to the wording of Lord Philimore in the same case we see a surprisingly larger ambit given to the doctrine; ‘the contract of carriage had, as far as they were concerned, terminated, and the special conditions of the bill of lading no longer remained to protect the Cunard Co’. Further confusion arose when we look at the cases we perused earlier such as Balian and Thorley who explicitly considered that when the contract came to an end due to deviation the obligations of the cargo-owner to pay thing such as freight may still apply. However this implied that the above common law defences may be available to them but in James Morrison & Co. Ltd v. Shaw, Savill and Albion Company, Limited the court specifically relied on a line of cases that stated that they wouldn’t be able to rely on such defences because as wrongdoers, by breaching the contract, they were not entitled to rely on the defences unless they show that the act must have occurred whether or not the deviation had occurred. The analogy of deviation to other actions which breached the bill of lading were obvious and in later years, as we shall see, contributed towards the widening of the doctrine however at this point the law was unable to offer a coherent rationale as to why the doctrine applied in deviation but not for example in respect of failure to provide a seaworthy ship. There was a stark contrast between the approach of the courts in many of these cases cited towards a ship owner who deviated, which was largely very strict, and the lenient stance the courts took in Kish v. Taylor Sons & Co where the unseaworthiness of the vessel was due to a ship-owner overloading on cargo, it was held that a deviation to rectify the problem was justified and therefore did not set the charter-party aside and furthermore Lord Atkinson expressed the idea that a ship-owner should not be forced into continuing his voyage ‘at all hazards’ whether through his negligence or not. These sentiments clash with what was said in James Morrison & Co.
The confusion that existed in the law is amply shown by these few examples, the aim of this work is not to uncover all the inconsistencies that used to operate within this area of law but we have to understand that the expansion of the doctrine from one of liability for losses during a deviation to a repudiatory breach of the contract was far from smooth or guided by any coherent set of principles, a legacy which may well have been inherited by the modern day law and mirrored in the confusion that currently exists. Clarification of the doctrine came in what is considered to be the authoritative statement of the law on this issue; Tate & Lyle Ltd v. Hain Steamship Co. Ltd the most important aspect of this was that rather than the ship owner’s claiming the protection of the charter-party and the cargo-owners trying to avoid the conditions the situation was reversed, the ship-owners were making claims against the cargo-owners in regards of claims for general average contribution and for freight. The inversion of roles seemed to affect the arguments in the case and Lord Atkin laid down a famous dicta:
‘The party who is affected by the breach has the right to say, “I am not now bound by the contract whether it is expressed in charter-party, bill of lading or otherwise.”…but I am satisfied that once he elects to treat the contract as at an end he is not bound by the promise to pay the agreed freight any more than by his other promises. But, on the other hand, as he can elect to treat the contract as ended, so he can elect to treat the contract as subsisting, and if he does this with knowledge of his rights he must in accordance with the general law of contract be held bound’
The approach taken here is that the effect of deviation was to make the contract akin to being voidable, in that it wasn’t void ab initio and it wasn’t related to failure to comply with a condition precedent in the terms of Balian and Thorley. This was different because it left a ship-owner with the discretion to determine whether the contract in its entirety stood or fell because deviation went to the root of the contract. The principle that lord Atkin laid out in Hain was of a radical nature, despite arguing to be founded on general contract law principles it was in fact a radical departure from such principles and thus deviation in many ways became an analogous concept into other areas and seemed to grow outwith it’s original meaning into a concept of ‘fundamental breach’ that is described by Tetley as a rule that ‘limitation and total exclusion clauses in contracts were held not to operate where the person benefiting from such clauses (usually the merchant) created a situation completely different from that contemplated by parties to the contract’. This became an analogous contract law rule which was famously applied by Lord Denning in Harbutt’s Plasticine Ltd v. Wayne Tank and Pump Co. Ltdhowever the use of this concept in analogous lines brought in for some considerable judicial scrutiny which began to refine the doctrine and eventually come to view it with distrust.
The line of logic that informed fundamental breach started to be seriously questioned in both academia and the courts in the late twentieth century there was still confusion as was exhibited by the distinction between Suisse Atlantique Société d’Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale and the later case of Harbutt, Suisse Atlantique is generally cited as dissolving or at least diluting the strength of the doctrine of fundamental breach in particular Lord Wilberforce in that case who stated:
‘…though it may be true generally, if the contract contains a wide exceptions clause, that a breach sufficiently serious to take the case outside that clause, will also give the other party the right to refuse further performance, it is not the case, necessarily, that a breach of the latter character has the former consequence’
This lead to Tetley calling the distinction one between substantive fundamental breach and constructive fundamental breach, the latter had more emphasis on the idea of ‘freedom of contract’ and trying to honour a parties intentions therefore such a breach could go to the root of the contract but on reading of all the circumstances it might not. The confusion of this development was then compounded by the more recent case of Photo Productions v. Securicor this case was very similar to Suisse Atlantique on the facts but the decision of the House of Lords again seemed to differ here the court seemed here to say that when a contract was terminated by acceptance of a repudiatory breach then certain conditions put in place to operate on this eventuality would still be valid because the contract was not void ab initio i.e. the contract was not treated as though it had never been made. The idea was also expressed that there was no difference between a fundamental breach and a breach of a term which goes to the root of the contract. The legal effect of breach of a fundamental term and that of a fundamental breach both is being the same because a fundamental breach can be a serious fundamental breach or a minor breach of a fundamental term. The effect of these cases is unclear because it leaves the law in somewhat of a state of confusion as is exemplified by the difference in approach of Tetley and Debattista in their respective articles because Debattista suggests that the doctrine of fundamental breach has been discredited as not having any force whereas Tetley seems to suggest in his work that the doctrine is still of importance.
There was furthermore the lack of clarity over the status of the deviation doctrine and the case-law; was this part of the doctrine of fundamental breach or a piece of case law sui generis not to be applied with analogy because of the unique nature of maritime law? The problem is that Securicor didn’t deal with the deviation case law in any way but merely criticised the doctrine of fundamental breach. However the views expressed in both the literature and the recent judicial pronouncements on the issue at the very least seems to require some kind of clarification on the issue because they seem to be saying differing things. We have seen how the common law developed in line with commercial needs at the end of the 19th century and from there developed into a doctrine of fundamental breach in Hain, the doctrine upon which that decision was based was far from clear as we showed there was significant ambiguity over whether a contract was terminated, or just effected the condition precedent to one or more other conditions, whether it was void ab initio or not, the operation of common law defences and when someone would qualify as a common carrier or be treated as a wrongdoer without even those de minimis protections and general extent of the doctrine and its use as an analogous action. For example why the doctrine of fundamental breach was analogous in such cases as Harbutt and Suisse Atlantiquebut un-seaworthiness wasn’t considered a fundamental breach. The whole area is seemingly a morass of unexplained assumptions and the same assertions can be made about its external relationship to the law of contract which really is the fundamental problem that the common law faces at the moment. These issues having thus been identified will be subject to some debate in the following sections but at this moment we must only be aware that the common law is in some disarray.
Since Securicor the position has become slightly more elucidated but many of the problems still exist, one of the things that came out of the judgement in that case was that Lord Wilberforce reinforced his dicta in Suisse Atlantique and specifically stated:
‘It may be preferable that they [the deviation case law] should be considered as a body of authority suigeneris with special rules derived from historical and commercial reasons. What on either view they cannot do is to lay down different rules as to contracts generally from those later stated by this House’
This decision has subsequently been followed and cited with approval in numerous cases and it would be fair to say that the fact that fundamental breach no longer applies as a rule of contract, certainly as understood by the earlier deviation cases and the early fundamental breach cases, that is that it was a substantive piece of law rather than an aid to construction of the contract. Lord Wilberforce also specifically dealt with this issue in Golodetz as we saw above at the introduction to this section.
However, we will come back to consider the common law principles and their problems in some more detail in further sections however this section is about developing a detailed understanding of the evolution of the concept of deviation so that we can then go onto critically asses the various aspects of the doctrine of justified and unjustified deviation, however all this background has to be understood in the context of the supra-national legislation that envelopes all of maritime law and the provisions that are made for this quite clearly contentious issue. The International Convention for the Unification of Certain Rules of Law Relating to Bills of Ladingand the Protocol to the Brussels Convention on Bills of Lading 1924 commonly referred to collectively as the Hague/Visby Rules that govern to a large degree all aspects of international maritime law have specific provisions that deal with deviation which we have to consider before we can have a holistic idea of the concept and doctrine of deviation.
The Hague/Visby Rules were incorporated into our law by the Carriage of Goods by Sea Act 1971 via inclusion in the Schedule of that Act. Article IV Rule 4 specifically states that ‘Any deviation in saving or attempting to save life or property at sea or any reasonable deviation shall not be deemed to be an infringement or breach of these Rules or of the contract of carriage, and the carrier shall not be liable for any loss or damage resulting there from’. The main problem that flows from this is that the definition of ‘reasonable deviation’ is far from clear and no meaning is provided within the Rules. One of the earliest cases on this issue is Stag Line v. Foscolo Mango & Co. where Lord Atkin, the man who was so important in the formation of the common law, laid down a quite distinct test:
‘The true test seems to be what departure from the contract voyage might a prudent person controlling the voyage at the time make and maintain, having in mind all the relevant circumstance existing at the time, including the terms of the contract and the interests of all parties concerned, but without obligation to consider the interests of any one’
One of the interesting points here to note is that the Hague-Visby protection is wider than common law protection because it explicitly includes saving property which if we recall the early common law where it was specifically stated that deviation for property wasn’t allowed. However the discretion was still left to the judges and it is interesting to analyse the distinctive approaches that the varying judges have taken to the case law as opposed to the common law and the main question in this line of thinking has to be whether this creates anything distinct from the common law approach. The Hague-Visby Rules provide for model rules that can therefore be easily included in a bill of lading or a charter party and as such Stag Line made it clear that just as at common law unjustified deviation could potentially deprive the carrier of the benefit of other conditions. The best source of information on this issue is far and away Tetley who devotes an entire chapter to the issues that we seek to paraphrase here whereas many of the other leading texts merely spend a few pages therefore much of what is said will be taken from this text.
The basic position and test remains as it was in Stag Line the question is primarily one of fact which takes into account all the surrounding circumstances, the lack of examples in the UK case law forces us to draw, as influential authorities, on jurisprudence from other jurisdictions whose maritime trade is customarily or often regulated by use of the Hague / Visby rules or similar terms. Tetley provides us with a comprehensive list of examples of the external substantive facts which may affect the reasonableness of a particular deviation. It is clear that the nature of the cargo may affect reasonableness thus the existence of perishables in the US case of The Ruth Ann was held to be a relevant factor. The issue of stopping for fuel may well be reasonable however it would appear as though the situations in which it will be so are fairly circumscribed in that it must be necessary in connection with the voyage at hand rather than any future voyages and it must be on the usual trade route or on the itinerary the cheapness of the fuel cannot be a factor. There does seem to be respect for supervening factors such as war or strikes within the case law that Tetley cites in that only the most unreasonable or fraudulent uses of such defences will not be allowed, therefore the existence of a strike can in fact entail sizeable deviations if they cover a wide geographical area however it again must be a strike and it consequently will be considered unreasonable behaviour to continue on into a strike bound port. Similarly with war the courts have shown an understanding approach and have allowed war as a supervening factor however there are restrictions because there must actually exist a state of war and if such a state is to come to an end the carrier is bounden to continue onto that port or to seek the permission of the cargo-owner to go elsewhere. One of the interesting issues is the standing case-law under The Hague / Visby rules that only a claim for damage to the cargo during a deviation is actionable, there is no action for delay even where the deviation was potentially unreasonable. It seems clear also from a line of cases that issues such as transhipment, a common device whereby relay ships are used to get the journey completed on a much quicker basis this seems to be based on a holistic view of the facts to consider whether or not the deviation to the port was usual, consented to, able to handle the transhipment in a safe manner or any other such relevant facts such as prior use of the carrier and awareness of commercial practices.
What is clear from the foregoing on the Hague/Visby rules is that the distinctions between it and the common law seem to be very similar to that which was discussed and in fact they may seem prima facie distinct but the factual approach that Lord Atkin advocated in Stag Line is very similar to the latter developments that have occurred within the common law with a movement away from treating deviation as a matter of law which causes a fundamental breach and onto a more holistic approach that considers deviation could be a fundamental breach in light of the surrounding issues i.e. it is a constructive fundamental breach. However this really all turns on what is justified and unjustified in deviations, it appeared as though in the early cases all deviations were in effect considered to be unjustified given that the common carrier defences were so easily bypassed and left carriers without any protection at all. In the next sections we will now begin to form a considered opinion on the direction that the law ought to take.
Critique of the various aspects of the doctrine
As we saw in the last section, it was imperative that we understand the antiquity and history of the doctrine of deviation both under the common law and the Hague / Visby rules, in many respects such attention is lacking in a lot of the texts because it is extremely useful to understand the development and understand that the concept is not some immoveable doctrine that has survived unscathed, it has changed radically and we really need to assess whether any of those changes have been or have become unwarranted given the modern approach. In the following subsections this work intends to focus on both the internal and external inconsistencies that exist, I will draw on wider areas of law and be able to tailor some kind of advice at the end of this work which will improve, streamline and update the doctrine for whatever my observations are worth.
- Separation of Maritime and Contract Law
The problem here only needs the briefest of recaps, the courts having struck at the logic of fundamental breach and in Securicor and subsequent cases it has been suggested that the courts are unwilling to specifically overrule the deviation case law despite its apparent similarity with the fundamental breach, specifically Lord Wilberforce in Securicor suggested that they may be a sui generis. The problem with law is that as the anti-realist movement within legal theory has clearly pointed outit needs to have a justification; it is not satisfactory, as a legal commentator, to merely say that the deviation case law is in fact a set of cases not having general applicability. The justification for a separation of Maritime and Contract law must be sought or we must admit that on a theoretical basis the rule ought to be abolished or at least reformed so as to reflect contract law.
Primarily we need to elucidate the precise distinction between contract law and deviation that we are referring, here Debattista provides us with what a reformed position would be like:
‘Primary obligation would be performance obligations and would include…the duty not to deviate, and so on. Secondary obligations would be default duties which would come into force when something went wrong…Once a deviation is accepted, both parties are discharged from their primary obligations but the secondary obligations which were devised specifically a propos breach, would survive’
The position as we currently stand is that of the leading maritime dicta in Hain which views the position as deviation being a primary obligation upon which secondary obligations are precedent and thus when the primary obligation not to deviate is breached then the secondary ‘deviation clauses’ which limit liability are void.
There are not many writings on this particular issue and we must therefore use our common sense and limited resources to critique the situation as it currently exists. Debattista writes specifically on this point and concluded that the doctrine of deviation was subsumed into contract law or at least ought to be. He considers three potential defences that might be put up for keeping the distinction alive but rejects them all, these must be considered briefly and then I will suggest some alternative defences and conclude whether or not a distinction is feasible.
The first reason that Debattista hypothesises is that without the rule an exception clause for things such as perils of the sea would survive a deviation, however the ‘contra proferentem’ rule of contract, whereby ambiguous terms in a contract which have been prepared by one of the parties rather than being the outcome of negotiation between the parties are construed against the person putting forward that clause as a defence, an approach which is atypical of the jurisprudential approach to any clauses which limit liability, this approach would ensure that the judiciary could negate any abuses of the lack of protection and use their discretion to decide on a factual basis whether there is a direct causal link between deviation and the loss caused.
The second rejected defence was that a deviating carrier would be in as good as, or perhaps better position, than a non-deviating carrier as the deviating carrier would have the common law and contractual provisions protecting himself however this argument is obviously fallacious, as Debattista points out, because the non-deviating carrier would lose contracted rate of affreightment and other key provisions as only secondary provisions would apply after the breach. Furthermore, the difficulty that we witnessed above of establishing such defences and the ambiguity over the exact application of common law defences in these cases indicates that this will probably not be of any added advantage to a deviating carrier.
Thirdly, and perhaps more difficult to refute the argument is based on the idea that the rule of deviation is fundamentally premised upon the law as it relates to bailment rather than to the law of contract. The distinct origins are supposed to justify having a fundamental inconsistency. Bailment is the law which deals with how far the bailee is responsible for the safety of any goods entrusted to him and is premised on the law of negligence, the law of bailment as it applies to maritime law specifies a higher standard of care than in other spheres and it is viewed that perhaps deviation is best viewed as a common law rule of bailment despite its seeming contractual premise. The riposte of Debattista here is perhaps at its weakest as he feels that whilst this an acceptable explanation of its origins that it doesn’t explain the approach of the courts which has since Hain been unanimously based on contractual principles furthermore he argues that the doctrine of deviation is more concerned with the effect of the principles of bailment on a contract than its operation as a discreet area of law. Given that the whole issue is based on specific limitation of liability clauses within a contract this argument is, with respect, a forceful one.
The forceful nature of Debattista’s analysis however is lacking in a somewhat holistic view of maritime law. Undoubtedly we cannot deny the unbelievable importance of contracts in the maritime world the bills of lading and charter-parties are complex, difficult, subject to a large degree of case law on the distinction between various charter-parties and the general contractual rules of construction appear to apply to them. The statutes specifically classify them as contracts and in that manner draw them into the general framework of contract law, it would be artificial to try and distinguish them as a set of cases sui generis based on some kind of unique origin or status. However, if we return to the logic that guided the courts in deciding to overrule fundamental breach then we may be able to find some kind of conditions there which may justify a distinctive approach.
The doctrine of fundamental breach as it was understood under the common law and as it developed from the deviation case law was considered guilty of contravening fundamental contract law principles. The distinction reflects the various effects in contract law which pertain when a contract is breached; namely the distinction between reduction and rescission of a contract. Rescission is fundamentally distinct from reduction because it does not involve setting the respective parties back to their original positions but is prospective and termination of the contract in circumstances that require rescissions will still leave conditions in the contract which provide for this eventuality. The distinction and scope of whether or not a contract is void ab initio by reduction or merely able to be rescinded by the innocent party is one of great importance and great controversy in modern contract law. The various factors such as lack of capacity, force, fraud, circumvention, undue influence and good faith are obviously not in issue and only an expansive interpretation of the concept of error, which would be akin to re-opening fundamental breach, would be possible. We cannot try and find existing reasons for reduction and re-interpret them so as to be potentially justificatory for the doctrine of deviation. The thing we are looking for is potential exceptions to the application of rescission whereby it applies in a distinct manner from the general principles of contract law which inform the courts approach to fundamental breach.
There is one example of this which occurs in a different sphere of law; employment law. In General Billposting Co Ltd v. Atkinson where the House of Lords were considering the effect of wrongful dismissal on the existence of a restrictive covenant in the contract, this was held to be a repudiatory breach however Lord Robertson specifically stated:
‘It seems to me that the covenant not to set up business is not only germane to but ancillary to the contract of service, and that once the contract of service is rescinded the other falls with it’
This position appears to have been followed and is cited in a number of texts as a rule sui generiswhich is in opposition to the prevailing doctrine within contract law. This approach was also followed in the Scottish Courts, whilst not authoritative but given it was a court of appeal decision certainly persuasive, in Living Design (Home Improvements) Ltd v. Davidson Lord Coulsfield specifically stated:
‘In my view, a restrictive covenant which is phrased so as to operate on the termination of the employment of an employee however that comes about, and whether lawfully or not is manifestly wholly unreasonable’
The logic in the latter case was couched in the language of reasonableness but the effect of these cases is clear; the repudiatory breach of the employer deprives him of the right to rely on the restrictive covenant, the court in Billposting specifically rejected an argument by counsel for the appellants that suggested that it was a matter of construction whether one covenant (in this case the right to notice of 12 months) was precedent upon the performance of the other (in this case the restrictive covenant) and that in this case repudiation of the contract didn’t bring the covenant to an end. The judgement was incredibly limited and the court didn’t explain why they felt that the covenant was an ancillary term rather than a ‘secondary obligation’ which survives repudiation. The main question for this work is whether there are material distinctions between the operation of a restrictive covenant in an employment contract and a restriction of liability for deviation in maritime contracts.
The approach seems to be premised on two potential justifications for the ratio decidendi in Billposting one which is that a covenant is ancillary to the contract and thus falls when it is rescinded by the employee’s actions or it apparently revolves around the intention of the parties to be bound by the contract which presumably is lacking however the former seems to be closer to traditional contract principles which specifically states that rescission has no effect on contractual terms which are drafted with the specific idea that they will have effect on the breakdown of the contract therefore issues which are ancillary to the contact will fall as they aren’t specifically part of the contract. However, it is a clear example where the courts have exercised their equitable powers to override traditional contractual principles because of the potential hardship that might be caused to a person who is wrongfully dismissed and is then unable to earn employment due to a restrictive covenant through no fault of his own. This is identical to the position of the cargo owner, and as we saw this was undoubtedly the motivation behind the Thorley decision, as it seems distinctly unfair that through the deviation and thus repudiation of the contract causes them an identifiable loss and then they are unable to recover the loss, or perhaps a limited amount, due to contractual clauses.
We will move onto consider the internal nature of deviation in the next section but we must remember at this point that it was the feeling of necessity from the judiciary in Balian that flowed from the overbearing power that ship-owners possessed in negotiating their terms in the charter parties and bills of lading, the imbalance of the powers was supposed to support a more aggressive attitude by the courts to protection of consumers and cargo-owners interests at their expense. The modern maritime world is extremely complex and whether or not these rationales still apply to every contract is certainly by no means clear however inequality of bargaining power as between those chartering a boat and the owners of the ship still tends to favour the ship-owners. I would argue that the existence of an exception to the rule that cases such as Securicor and Suisse Atlantique suggest may lead to the demise of the deviation rule are misguided. There may well be material differences between employment law and maritime law but the very fact that seemingly equitable concerns can mean that within specialised contracts, or specialised terms of contracts, distinct rules can apply lends a large degree of support to the separation theory. I believe that this basis gives us a prima facie argument that the existence of the doctrine of deviation is not necessarily under as much threat as the courts and commentators may think. I do not present the fact that there is potential for their to be a distinction as necessary evidence that their ought to be a distinction, merely that any critical analysis of the doctrine of deviation as a whole would not be complete unless we recognise that there is authority for considering it as an area of sui generis, a failure to do this would be tantamount to destroying the whole concept because the new approach to fundamental breach would overrule the deviation cases and subsume it under the general contractual principles of rescission or termination.
- Precise Nature of Deviation – Time for Clarification
The foregoing analysis of the separation of maritime and contract law in respect of the law of deviation is one step of critiquing the doctrine whilst it is able to maintain an external consistency in a legal framework, a jurisprudential and academic necessity, that does not mean that the concept should be accepted wholesale. The history of the development of the concept has taken us some way to understanding what exactly the concept is however this section aims to go somewhat further than this, we will consider many of the internal inconsistencies that the case law has identified and furthermore analyse the background justifications.
The first issue that we need to consider in this sphere is what the precise effect of deviation is, whilst we know that under the general contract principles that we outlined above rescission of a contract leaves such provisions still standing if they limit the liability for breaches of contract. If we wish to critically assess the effect of deviation on the contract of carriage then we need to accept that once we abandon general contract principles that we are in unguided territory and the case law this far has very much left it open . The equitable concerns that guided the formation of the principle were amply expressed by Lord Wilberforce in Securicor:
‘The doctrine of “fundamental breach’ in spite of its imperfections and doubtful parentage has served a useful purpose. There was a large number of problems, productive of injustice, in which it was worse than unsatisfactory to leave exception clauses to operate’
The doctrine of fundamental breach and its origins in the case law of deviation have always centred more on the outcome of a particular case so as to reflect the equitable concerns of the judiciary. The problem with such a crafted test is that it lacks any conceptual coherence. This does not mean that we can not bring clarity to the concept. In attempting to understand the nature we ought to understand more fully the precise nature of the obligation not to deviate.
The common law approach to deviation made it very clear in Davis v. Garrett that there was a duty implied into any contract of carriage that the ship ought to proceed on the voyage without departure from the proper course. This can either be a contracted route or a usual and customary route but any deviation will be breach of an implied term or if it is governed by Hague-Visby then breach of Article IV Rule 4. Lord Atkin specifically stated in Hain that deviation was a breach which was so serious as to go to the ‘root’ of the contract. It is what the law describes as a material breach and normally entails rescission but in deviation this is not the case.
As I discussed above there is considerable confusion about what occurs however given the characteristics the common law has set out it is untenable to convey any idea of reduction. In this vein I would submit, respectfully, that the comments above variously by Lord Esher in Balian that the ‘bill of lading is gone’, Lord Atkinson in Kish v. Taylor that the contract of carriage was ‘void ab initio’, and furthermore Lord Atkin in Hain that the effect was to be ‘no longer bound by any of its terms’ cannot be considered as correct. The reason is that in the vast majority of cases restitution in integrum is not going to be practically available, the reason is that deviation will usually only occur once the voyage has begun and could occur some considerable distance into the contract and if damage has occurred to the cargo then reduction is the wrong analogy. However, as we shall see, what occurs is some kind of quasi-reduction where the contract is treated as at an end completely however the liability as between the parties has still to be established.
Undoubtedly as with rescission and premised on the concept of mutuality of contract the main provisions of a contract of carriage fail on deviation, no one is arguing whether it is a breach of the contract, it is furthermore clear that it is a repudiatory breach however the only issue is whether the whole contract is demolished by it or whether any conditions survive. The case law is emphatic that not only clauses limiting liability disappear but also other contractual conditions. In United States Shipping Board v. Bunge y Born Ltda Sociedad the court said that deviation deprived the ship-owners of a claim of demurrage for the lay days, the scope isn’t therefore restricted purely to stipulations such as Lord Parmoor suggested in the quotation cited above at p.8 because demurrage is a clause which is inserted not to restrict liability but to enable the ship-owner to have a claim against the charterers if their time is wasted during loading or discharging, their breach of the contract deprived them of that clause. This leaves a number of unanswered questions does, for example an arbitration clause, an ‘off hire’ clause or any other such clause which may provide for the restitution of damages in the event of certain events. There is no logical link between the repudiation and the end event, because there is no method of distinguishing which clauses are secondary clauses in a charter party that regulate things on the event of repudiation.
An illustrative approach may be to consider the effect of deviation on a contract under The Hague / Visby Rules where the carrier is construed as losing all the exculpatory clauses in a contract and also in the Rules themselves. In Z.I. Pompey Industrie v. Canmar Fortune (The) the court specifically cited Tetley in support of this proposition:
‘>From Art. 4 we learn that a “reasonable deviation shall not be deemed to be an infringement of this Convention or the contract of carriage”. Conversely, we must presume that an unreasonable deviation does constitute an infringement of both the Convention and the contract…and in the event of an unreasonable deviation, such as that in the present instance, the carrier loses, among other things, the protection of the contract’
In Pompey the court was specifically concerned with clauses dealing with jurisdiction, they were therefore refused a stay for litigation in Antwerp which was the stated jurisdiction in the bill of lading, despite being an interdict proceeding the court felt obliged to comment. One of the quotations from Tetley’s masterful work is particularly pertinent to the question and may well elucidate the point that my work is attempting to make at this point:
‘The problem is complicated in carriage of goods by sea cases because of the long established principle of geographical deviation and because the international conventions on carriage of goods have legislated in part on fundamental breach. Nor does fundamental breach fit conveniently into the traditional principles of either the common or the civil law’
Tetley also says, in his most recent edition, that the deviation of a carrier under the Hague Rules will mean that the carrier will lose the package limitation, one year suit delay, defence of due diligence and the exculpatory defences contained within Article 4 (2) (a) – (q) which includes perils of the sea, acts of god, war, public enemies, saving or attempting to save property or life at sea and other such defences. This would be a considerable weight on any ship owners mind if he were suddenly to be forced back to the position of a common carrier, given the lack of clarity in this position. The position appears to be, as I suggested above that, the ship owner has three defences at common law ‘Act of God, the Queen’s enemies and inherent vice of the goods’ however because deviation breaches the contract he is deprived of these defences so as soon as he deviates, from then he takes unlimited liability for any damages caused howsoever unless in the very limited situation that the damage must have occurred whether or not the deviation occurred. This is an extremely unattractive position given the high standard of proof that the loss must have arisen whether or not the deviation occurred. An illustrative distinction is made by Scrutton in that he insists that the time limit in The Hague Rules Article III Rule 6 which specifically uses the phrase ‘in any event’. However, as we shall see below the use of the phrase ‘in any action’ under Article IVbis Rule 1 doesn’t seem to subsist or if it does then the balance between what is justified and unjustified is altered radically to severely limit the impact of the doctrine.
Tetley’s assertions above regarding the effect of deviation on the Hague / Visby Rules whilst persuasive are hardly authoritative in any meaningful manner especially considering that Ivamy specifically states that there is a requirement of a judicial pronouncement on the issue. The problem is further compounded because what is considered justifiable and unjustifiable is unclear, this means that a lot of the case law seems ill thought out. In Article IVbis the Hague / Visby Rules specifically state:
‘1. The defences and limits of liability provided for in these Rules shall apply in any action against the carrier in respect of loss or damage to goods covered by a contract of carriage whether the action be founded in contract or in tort…
4. Nevertheless, a servant or agent of the carrier shall not be entitled to avail himself of the provisions of this Article, if it is proved that the damage resulted from an act or omission of the servant or agent done with intent to cause damage or recklessly and with knowledge that damage would probably result’
On a public policy level the signatories to the convention have surely made their intention clear that a ship owner’s liability shouldn’t be diluted unless he knew the probability of damage and then wilfully or recklessly continued to act or not act. It is questionable whether it is justified to create another category under which the defences and limits of liability will be deprived. The basis for this is stated to be the statement in Article IV (4) cited at p.13 where it is stated that a reasonable deviation ‘shall not be deemed to be an infringement or breach of these Rules or of the contract of carriage’, the inference is argued to be therefore that an unreasonable deviation is to be a breach of the rules and the contract of carriage. This is then, without much reflection, combined with the common law understanding of the consequences of deviation and the result is to circumvent Article IVbis. Furthermore the circumvention shows the same lack of clear definition that the common law suffers from and the case law and commentaries on the issue are extremely vague. The conclusion may be one that the judiciary has hinted at, that the doctrine was created to protect certain interests of the cargo owner, not least his insurance, now these conditions no longer exist the doctrine makes no sense.
However, before this argument is allowed there is one objection which we ought to consider and that is through an indirect criticism of the general doctrine of fundamental breach:
‘An exemption clause is not always unfair and there are many unfair provisions that are not exemption clauses… There is no indication in the recent cases that the courts are to consider whether the exemption is fair in all the circumstances or is harsh and unconscionable’
These criticisms of the doctrine of fundamental breach are largely to be accepted however as I mentioned above it is clear that the courts in regard of deviation do not limit the impact merely to exclusion clauses but also to unrelated conditions such as demurrage. Therefore the criticisms of the commentators of fundamental breach, namely that the doctrine suppresses a particularistic discretion exercise by the judiciary, are equally applicable. The unfettered power of the judiciary seems not to be guided by any principles