Limitations
Cases
“Starsin”, Owners of cargo & Ors v. “Starsin”, Owners and/or demise charterers
[2003] UKHL [2003] 1 CLC 921, [2003] 2 All ER 785, [2003] 1 All ER (Comm) 625, [2004] AC 715, [2004] 1 AC 715, 2003 AMC 913, [2003] UKHL 12, [2003] 1 LLR 571, [2003] 1 Lloyd’s Rep 571, [2003] 2 WLR 711
LORD STEYN
My Lords,
42. In 1995, while the Starsin was on time charter to Continental Pacific Shipping Limited (“CPS”), bills of lading on CPS’ liner form were issued for the carriage of 17 parcels of timber and plywood. The carriage was between ports in Malaysia and Antwerp/Avonmouth. The cargoes were damaged. Receivers sued the owners for breach of contract, or alternatively in tort in the event that the bills of lading were charterers’ bills.
43. On this appeal the central issues are:
1. Whether the Owners or Charterers were the carriers under the bills of lading;
2. What, if any, protection the Himalaya clause in the bills of lading affords the Owners;
3. Depending on the answer to 2, the question may arise whether the Owners can be sued in tort.
I. The Identity of the Carrier.
44. The issue was whether the bills of lading were charterers’ or owners’ bills. The terms of each of the 17 bills reveal inconsistent provisions. CPS were the charterers. The signature box on the face or front of a specimen bill of lading prominently carried a signature “As Agent for Continental Pacific Shipping (The Carrier).” The face of the bill of lading contained essential commercial provisions such as the identity of the shippers, the name of the vessel and a description of the cargo, as well as a reference to the contract of carriage, the latter being set out in the box commencing with the word “Shipped.” Clause 1(c) is consistent with what appears on the face of the bill of lading: it provides that the “carrier” is “the party on whose behalf this bill of lading has been signed.” So far the document is in harmony. But tucked away in barely legible tiny print on the back of the bill of lading are two clauses which contradict the contractual position revealed by the face of the bill. Clause 33 provides that the contract evidenced by the bill of lading was “between the merchant and the owner of the vessel named herein (or substitute).” Clause 35, a demise clause, provides that the bill of lading shall only take effect as a contract of carriage “with the owners or demise charterers.”
45. How is the problem to be addressed? For my part there is only one principled answer. It must be approached objectively in the way in which a reasonable person, versed in the shipping trade, would read the bill. The reasonable expectations of such a person must be decisive. In my view he would give greater weight to words specially chosen, such as the words which appear above the signature, rather than standard form printed conditions. Moreover, I have no doubt that in any event he would, as between provisions on the face of the bill and those on the reverse side of the bill, give predominant effect to those on the face of the bill. Given the speed at which international trade is transacted, there is little time for examining the impact of barely legible printed conditions at the time of the issue of the bill of lading. In order to find out who the carrier is it makes business common sense for a shipper to turn to the face of the bill, and in particular to the signature box, rather than clauses at the bottom of column two of the reverse side of the bill.
46. Taking advantage of their knowledge of the way in which the market works two commercial judges – Colman J and Rix LJ in the Court of Appeal – adopted the mercantile view. The majority in the Court of Appeal – Morritt V-C and Chadwick LJ – in effect gave preponderant effect to the boilerplate clauses on the back of the bill. In my view it would have an adverse effect on international trade if the latter approach prevails. Professor Debattista (Is the end in sight for chartering demiseclauses?, Lloyds List, Wednesday 21 February 2001, 5) rightly warned that the effect of the judgment of the majority would be to create traps for the unwary: see also the criticism of the majority judgments by Professor Gaskell and others in Contracts for the Carriage of Goods by Land, Sea and Air, LLP, ed. Yates, as updated by service issue No. 21, dated 31 December 2001, para 1.6.4.2.25.1, and by Dr Girvin and Professor Bennett in English Maritime Law 2000, [2002] LMCLQ, at 84-87. As Rix LJ observed, commercial certainty and indeed honesty is promoted by giving greater effect to the front of the bill of lading.
47. This conclusion is reinforced by the ICC Uniform Customs and Practice for Documentary Credits: 1993 revision in force as of January 1, 1994. Article 23(a) reads as follows:
“If a Credit calls for a bill of lading covering a port-to-port shipment, banks will, unless otherwise stipulated in the Credit, accept a document, however named, which:
i. appears on its face to indicate the name of the carrier and to have been signed or otherwise authenticated by:
– the carrier or a named agent for or on behalf of the carrier, or
– the master or a named agent for or on behalf of the master.
Any signature or authentication of the carrier or master must be identified as carrier or master, as the case may be. An agent signing or authenticating for the carrier or master must also indicate the name and the capacity of the party, i.e. carrier or master, on whose behalf that agent is acting . . .”
In paragraph v. it is expressly stated that banks will not examine the contents of terms and conditions on the back of the bill: see further Position Paper No. 4: UCP 500—Transport documents articles. At the very least this material suggests that, faced with the need for prompt decisions in international trade, this is how parties involved in such a transaction would view the bill of lading. It demonstrates how far removed from the real world of commerce the technical approach advocated by the cargo owners in this case is. Moreover, insofar as there is a choice between two competing interpretations, this material strongly suggests that the best interpretation is to give predominant effect to the face of the bill.
48. It follows that in my judgment the ruling of the majority on the identity of the carrier point cannot stand. I would also hold that the ex tempore judgment in Fetim BV v Oceanspeed Shipping Limited (The Flecha) [1999] 1 Lloyd’s Rep 612 was wrong.
49. Counsel for the cargo owners raised an alternative argument. He argued that words like “The Carrier,” “For the Carrier,” and “As Carrier,” can be treated as adding the personal liability of CPS rather than excluding the liability of the owners. This is a question of interpretation. Counsel for the owners showed convincingly that the bill of lading contemplated a single carrier. It is only necessary to mention specifically that the completed signature box, as well as the definition clause, points to a single carrier. I would reject this alternative argument.
50. I conclude that CPS was the sole carrier under the bill of lading. The owners were not parties to the contract of carriage and are not liable under the bill of lading contracts. Their potential liability in tort must now be considered.
II. The Himalaya Clause.
51. The issue whether the owners are protected from liability in tort by the Himalaya clause now arises.
52. The owners rely in particular on that part of clause 5 of the bills of lading which Lord Bingham has recited and labelled part (1). The owners contend that part (1) confers on them a general exemption from liability.
53. Before this question of construction can be considered a preliminary issue must be examined. As Lord Bingham has pointed out by reference to the Himalaya clause contained in the Conline bill of lading form some words have been left out of clause 5: see the clauses in New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd (The Eurymedon) [1975] AC 154 and Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd (The New York Star) [1981] 1 WLR 138. The deletion was plainly a mistake. In these circumstances the court should, in order to give effect to the reasonable expectations of the parties, fill the gap by inserting what had been omitted. What falls to be construed is the clause so reconstructed.
54. The result is that it cannot be argued that part (1) is flawed by reason of a lack of agency or authority. Accordingly part (1) must take effect in accordance with the terms of clause 5 as reconstructed.
55. For my part the language of part (1), contextually considered, is capable of one interpretation only. The shipowners are clearly “independent contractors.” It is not capable of being read as a mere covenant not to sue. In categorical language part (1) confers on the shipowners a general exemption from liability.
56. The various attempts by the cargo owners to argue that part (1) is “not clear enough” are on examination at variance with the benign advance heralded by The Eurymedon, carried forward by The New York Star [1981] 1 WLR 138 and reaffirmed in The Mahkutai [1996] AC 650. In The New York Star Lord Wilberforce commended a wide interpretation of the reasoning in The Eurymedon. He said at 144:
“. . . the decision does not support, and their Lordships would not encourage, a search for fine distinctions which would diminish the general applicability, in the light of established commercial practice, of the principle.”
In The Mahkutai, supra, Lord Goff of Chieveley observed about The Eurymedon (at 664E):
“Nevertheless there can be no doubt of the commercial need of some such principle as this, and not only in cases concerned with stevedores; and the bold step taken by the Privy Council in The Eurymedon [1975] AC 154, and later developed in The New York Star (1981) 1 WLR 138, has been widely welcomed.”
When in ITO Ltd v Mida Electronics Inc 28 DLR (4th) 641 the Supreme Court of Canada followed The Eurymedon, McIntyre J commented (at 667):
“Himalaya clauses have become accepted as a part of the commercial law of many of the leading trading nations, including Great Britain, the United States, Australia, New Zealand, and now in Canada. It is thus desirable that the courts avoid constructions of contractual documents which would tend to defeat them. I would therefore accept the approach taken by Lord Wilberforce and, in doing so, I observe that the court is simply giving effect to that which the parties themselves clearly agreed to in writing.”
This is the approach which should be adopted in the case before the House.
57. In my view the arguments of the cargo owners are of the very type which Lord Wilberforce warned against. I would respectfully also echo an extra-judicial statement by of Lord Goff of Chieveley in Commercial Contracts and the Commercial Court (1984) LMCLQ 382, 391:
“We are there to help businessmen, not to hinder them; we are there to give effect to their transactions, not to frustrate them; we are there to oil the wheels of commerce, not to put a spanner in the works, or even grit in the oil.”
This is a particularly apposite observation in regard to the ground-breaking development in The Eurymedon. The difficulties created in international trade by the doctrines of privity of contract and consideration had to be overcome. Those doctrines obstructed the process of giving effect to the reasonable expectations of parties. Fortunately, as was pointed out in ITO, at 667, by McIntyre J, “one of the virtues of the common law is that it has never let pure logic get in the way of common sense and practical necessity when a desirable result is sought to be achieved.” The desired result was to give businessmen the freedom to make arrangements for the allocation of risks as they thought right. The decisions in The Eurymedon, and The New York Star, were taken in the context of classical English contract law. It is true that this result can now be achieved more simply and directly by a combination of the Carriage of Goods by Sea Act 1992 and the Contracts (Rights of Third Parties) Act 1999. Nevertheless, the plain objective of the decisions in The Eurymedon and The New York Star was to enable businessmen to make sensible and just commercial arrangements, and thereby further international trade. Legal policy favours the furtherance of international trade. Commercial men must be given the utmost liberty of contracting. They must be left free to decide on the allocate commercial risks. In my view there can be no good reason to set at naught on an interpretative basis the allocation of risk in the Himalaya clause.
58. That brings me to the question of the impact of the incorporated Hague Rules on clause 5. Clause 2 (described as the “Basis of Contract”) incorporated the Hague Rules. This neutral fact tells us nothing about the impact of the Hague Rules on the Himalaya clause. That depends on the proper construction of the relevant Hague Rules. Of course, the ship owner will not be entitled to rely on the Himalaya clause if it offends the Hague Rules. The question is whether the exemption in favour of the ship owners in fact is in conflict with the Hague Rules.
59. I turn to the critical provisions of the Hague Rules. Article III rule 8 of the Hague Rules. This provision reads as follows:
“Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to, or in connection with, goods arising from negligence, fault, or failure in the duties and obligations provided in this article or lessening such liability otherwise than as provided in these Rules, shall be null and void and of no effect. . . .”
The critical question is whether the exemption in the Himalaya clause is contained in a contract of carriage. “Contract of carriage” is a well understood term: it refers to a contractual undertaking for the carriage of goods. It contemplates the usual incidents of such a contract, with the customary executory obligations. Next one has to consider the status of the exemption. In law it is a separate and independent contract. It contains no executory obligations. It merely confers a general exemption on the owners. Is it nevertheless to be treated as “a contract of carriage” within the meaning of article III rule 8? While this is a difficult question I have come to the conclusion that the answer ought to be No. Despite the fact that it comes into existence by the rendering of service by the vessel I am on balance of the view that in its natural and ordinary meaning “a contract of carriage” under article III rule 8 contemplates a contract with the usual incidents and executory obligations of a contract of carriage. In other words, it envisages a contract for the carriage of goods. Focusing simply on article III rule 8 I incline to the view that the exemption is not contained in a contract of carriage.
60. One cannot, however, construe article III rule 8 in isolation. Article III rules 1 and 2 of the Hague Rules are relevant. They read as follows:
“1. The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to –
(a) Make the ship seaworthy.
(b) Properly man, equip and supply the ship.
(c) Make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation.
2. Subject to the provisions of Article IV, the carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.”
Once one has concluded that the exemption is contained in a contract of carriage that must hold good for all the provisions of the Hague Rules including the obligation to make the ship seaworthy, etc. That would indeed be a curious and implausible result flowing from a contract for an exemption clause. It would mean that the cargo owners of damaged parcels on the Starsin would in principle have had contractual remedies not on the bill of lading but on the Himalaya contract. That cannot be right. This factor reinforces my interpretation of article III rule 8. I would therefore hold that in the Hague Rules a contract of carriage means an agreement to carry and not an agreement simply for an exemption albeit that the consideration for the promise involves performance by the vessel.
61. I have noted the reasoning based on the words in para (3) that the independent contractor “shall to this extent be deemed to be [a party] to the contract contained in or evidenced by this Bill of Lading”. For my part this places a weight on those words which they will not bear.
62. For my part this result is in no way anomalous. It is loyal to the rationale of the advance in the rationality of English law achieved in The Eurymedon and The New York Star. It results in a readily predictable scheme, viz all claims in contract and tort have to be channelled to the charterers. That gives effect to what the parties intended to achieve. It has the merit of being a just decision achieved without in any way straining the Hague Rules. I would hold that the exemption contained in part (1) of clause 5 protects the owners against any liability in tort.
63. Regretfully, and in the spirit of accepting that one must not be too confident that one is right, I consider it appropriate to record my disagreement with the majority on this issue.
III. Tort.
64. This issue falls away. Given that it has been fully argued I accept, however, that the House should express a view on it. It is well established that a claim in negligence for damage to property is only maintainable by a person who had either the legal ownership of or a possessory title to the property at the time when the damage occurred: Leigh and Sillavan Ltd v Aliakmon Shipping Co Ltd (The Aliakmon) [1986] AC 785. Accepting this principle, the cargo owners argue that they meet its requirements. Rix LJ convincingly demonstrated the fallacy in the argument. He said (at 459, cols 1-2):
“. . . there is only one cause of action, which arises when (more than negligible) damage is first caused. It is not open, therefore, to a new owner to say, . . . that a new cause of action, in respect of further (albeit progressive) damage which has developed after the transfer of title, has come into being in favour of the transferee. It may be different where entirely different damage is done on different occasions by reason of a different defect, as where, owing to defective hatch covers, one hold is flooded on one day and another hold is flooded on a different day: but that is for another occasion. In my judgment, however, the progressive damage done in this case does not create new causes of action in respect of the later stages of the same progressive damage, even in the hands of a new cargo-owner and even upon the assumption that the new cargo-owner was always within the scope of the shipowner’s duty of care. . . . further consideration of the nature of the damage and the cause of action in question prevents recovery.”
I am in full agreement with the judgment of Rix LJ in this respect. The exception in respect of Makros Hout, which Rix LJ mentions in paragraph 108 of his judgment, arises because Makros Hout obtained title before the voyage began.
IV. Conclusion.
65. I would allow the appeal.
LORD HOFFMANN
My Lords,
66. The appellants (“the shipowners”) are respectively the owners and demise charterers of the bulk carrier Starsin. On 3 October 1995 they time-chartered the vessel to Continental Pacific Shipping (“CPS”) for one trip, estimated 65/85 days. On 8 December 1995 the vessel began a voyage from Malaysia to Europe carrying a number of consignments of timber and plywood which had been shipped under separate bills of lading. On arrival in January 1996 it was found that 17 consignments had been damaged by fresh water; some of the cargo had been wet when loaded and negligent stowage had caused condensation which affected those and other consignments during the course of the voyage. The holders of the bills of lading (“the cargo owners”) sue the shipowners for breach of the contracts of carriage contained in or evidenced by the bills of lading and in tort for negligence in stowing the goods.
67. Whether the shipowners are liable in contract depends upon whether they were parties to the contract of carriage made with the shippers and evidenced by the bills of lading. The time charter provided in clauses 8 and 33 that CPS should be entitled to require the master to sign bills of lading on behalf of the shipowners or authorise their agents to sign bills of lading on behalf of the master who would in turn be contracting on behalf of the shipowners. So there is no doubt that CPS had authority to cause a contract of carriage to be created between the shipowners and the shippers. But the question is whether they did so.
68. The port agents who signed the bills of lading used printed forms headed “Liner Bill of Lading” and bearing the name and logo of CPS. The printed text, if one reads it through carefully, shows that the forms were meant to be used by a master signing on behalf of the owners. The form has printed on the front “In witness whereof the Master of the said Vessel has signed the number of original Bills of Lading stated below”. Then there is a box for the place and date of issue and, below that, another box for a signature. The form does not say expressly on whose behalf the master is signing but the master is the servant of the shipowner and unless he is authorised by the charterers to sign on their behalf and clearly does so the bill of lading will be construed as having been signed on behalf of the shipowner: see The Rewia [1991] 2 Lloyd’s Rep 325, per Leggatt LJ at p. 333.
69. The impression that the forms are meant to be used as owner’s bills is confirmed by a reading of the small print on the back. Clause 33, headed “Identity of Carrier” says in terms that the contract evidenced by the bill of lading is between the cargo owner and “the Owner of the Vessel named herein”, that only the shipowner is to be liable for any breach of the contract of carriage, that the “Line, Company or Agents” which has executed the bill of lading “is not a principal in the transaction” and that “the said Line, Company or Agents shall not be under any liability arising out of the contract of carriage”.
70. Much the same ground is covered by clause 35, which has no heading but is known as the demise clause. It says that if the vessel is not owned by the company or line by whom the bill of lading is issued “(as may be the case notwithstanding anything that appears to the contrary)” the bill of lading shall take effect only as a contract of carriage with the shipowners. It appears from an article in the Law Quarterly Review by Lord Roskill ((1990) 106 LQR 403-406) that this clause was devised to deal with conditions in the Second World War, when requisitioned ships on time charter were frequently operated by commercial liner companies which issued their own bills of lading. As the law then stood, only an owner or demise charterer could limit liability under sections 502 and 503 of the Merchant Shipping Act 1894. The words quoted above in brackets were, as Lord Roskill said, to “to put the bill of lading holder on express notice of the possibility that the ship concerned was chartered.” The rest of the clause was to make it clear that in such case the owner was the carrier. Conformably with this purpose, the demise clause appears originally to have been printed on the front or “business” side of the bill of lading: see The Berkshire [1974] 1 Lloyd’s Rep 185. One question in this appeal is the extent to which it remains efficacious for this purpose after its migration to the small print on the back.
71. The forms, therefore, were printed for use as owner’s bills. But the port agents signed them, in the signature boxes on the front of the documents, “As Agent for Continental Pacific Shipping (The Carrier)” or “As Agents for the Carrier Continental Pacific Shipping” or “As Agents for Continental Pacific Shipping as Carrier”. That meant, in my opinion, that anyone reading only the front of the document would think that CPS was the party assuming liability as carrier. He might have been slightly puzzled by the statement that the bill of lading had been signed by the master when it evidently had not. He may well have reflected that people often use forms which have in some respects to be adapted for the particular circumstances without deleting the inconsistent parts: see The Okehampton [1913] P. 173. But the reasonable reader of the front of the bill of lading would have had no doubt that CPS, and only CPS, was accepting liability as carrier. “Carrier” is a technical term familiar to anyone who has to deal with a bill of lading. The bill of lading evidences a contract of carriage and “carrier” is the name given to one of the parties to such a contract. As it happens, that is what condition 1(c) on the back of these bills of lading says. But that is what a reasonable reader would have thought it meant even without looking at the back. It is what Article I(a) of the Hague Rules says it means. In The Flecha [1999] 1 Lloyd’s Rep. 612 Moore-Bick J., faced with a similar Continental Pacific Shipping bill of lading signed “as agents for Continental Pacific Shipping as carriers” said that the term “carrier” was being used “loosely” and that this was “not unusual or surprising”. I can well imagine that a timber merchant in Kuching might say over coffee that his goods were being carried by Continental Pacific Shipping without knowing or caring whether the particular vessel was owned, demise chartered or on time charter. But such loose usage of a critical expression in the bill of lading itself does seem to me surprising.
72. On the other hand, a reader who turned the bill over and read the printed conditions might lose confidence in his initial impression. The identity of carrier and demise clauses would suggest deeper waters in which it might be necessary to resolve the apparent conflict between the form of signature and the other printed provisions of the bill of lading which show that it was meant for use as an owner’s bill.
73. How is this conflict to be resolved? The interpretation of a legal document involves ascertaining what meaning it would convey to a reasonable person having all the background knowledge which is reasonably available to the person or class of persons to whom the document is addressed. A written contract is addressed to the parties; a public document like a statute is addressed to the public at large; a patent specification is addressed to persons skilled in the relevant art, and so on.
74. To whom is a bill of lading addressed? It evidences a contract of carriage but it is also a document of title, drafted with a view to being transferred to third parties either absolutely or by way of security for advances to finance the underlying transaction. It is common general knowledge that such advances are frequently made by letter of credit and that the bill of lading is ordinarily one of the documents which must be presented to the bank before payment can be obtained. The reasonable reader of the bill of lading will therefore know that it is addressed not only to the shipper and consignee named on the bill but to a potentially wide class of third parties including banks which have issued letters of credit.
75. Since a bill of lading is a legal document, the merchant or banker to whom it is addressed will know that on some questions of interpretation he will need to consult a lawyer. But he will also expect to be able to find out certain essential things for himself. These will include the identity of the carrier. The normal bill of lading recognises this distinction by having some of its terms written or printed on the front, where the businessman or banker can readily find them without a lawyer at his elbow, and the mass of other clauses printed at the back. Of course there will be cases in which the information provided on the front will be too obscure to provide the businessman or banker with the information he expects. In such a case, he may have to ask his lawyer to see whether the question can be elucidated by plunging into the small print at the back, or, if he is a banker offered the bill of lading pursuant to a letter of credit, he may simply reject it on the ground that he cannot be expected to puzzle out the answer by reference to other parts of the document. On the other hand, if the information is clearly stated on the front, the reasonable merchant or banker would go no further. The banker, for example, will accept the bill of lading when tendered against a letter of credit as having been issued by the named carrier without examining the terms on the back.
76. As it is common general knowledge that a bill of lading is addressed to merchants and bankers as well as lawyers, the meaning which it would be given by such persons will usually also determine the meaning it would be given by any other reasonable person, including the court. The reasonable reader would not think that the bill of lading could have been intended to mean one thing to the merchant or banker and something different to the lawyer or judge.
77. The proposition that bankers do not examine the contractual terms on the back of a bill of lading has long been common general knowledge and for many years the courts have said that they were not expected to do so: see Scrutton LJ in National Bank of Egypt v Hannevig’s Bank (1919) 3 LDAB 213, 214 and Salmon J. in British Imex Industries Ltd v Midland Bank Ltd [1958] 1 QB 542, 551-552. In more recent times, bankers have issued public statements to this effect in the form of the ICC Uniform Customs and Practice for Documentary Credits. Article 23 of the edition which was in force when these bills of lading were issued (UCP 500) provides that if a credit calls for a bill of lading, banks will accept a document which
“appears on its face to indicate the name of the carrier and to have been signed or otherwise authenticated by:
– the carrier or a named agent for or on behalf of the carrier, or
– the master or a named agent for or on behalf of the master.
Any signature or authentication of the carrier or master must be identified as carrier or master, as the case may be. An agent signing or authenticating for the carrier or master must also indicate the name and the capacity of the party, i.e. carrier or master, on whose behalf that agent is acting.”
78. Article 23(a)(v) states that banks will not examine the contents of the terms and conditions of carriage, that is to say, the terms printed on the back. The position is stated even more clearly in the ICC Position Paper No. 4, published on 1 September 1994 to clarify Article 23(a)(i):
“1. The name of the carrier must appear as such on the front of the document. The expression ‘the front of the document’ means the side showing the details of the goods, vessel and voyage, and the expression ‘the back of the document’ means the side showing the details of the contract of carriage.
NOTE – Subparagraph (a)(v) of these UCP Articles states that banks will not examine the terms and conditions of carriage. Banks will therefore reject documents which fail to comply with the requirements set out in ‘1’ above, ie which fail to indicate the name of the carrier on the front of the document, even though the identity of the carrier may be indicated on the back of the document.
3. Where the document is signed by an agent for (or ‘on behalf of’) the carrier, the agent must be named and must indicate the principal for (or ‘on behalf of’) whom he is signing, in one of the following ways:
a. when the word ‘carrier’ has not been used on the front of the document to identify the party acting as carrier, eg
ABC Co Ltd
as agent for (or ‘on behalf of’)
XYZ Shipping, carrier
(signature).”
79. Mr Milligan QC, who appeared for the cargo owners, said that Article 23 of UCP 500 was irrelevant because it only specified the conditions upon which a bank would accept a bill of lading as conforming to the terms of a letter of credit. That had nothing to do with the interpretation of the bill of lading as between the parties (or alleged parties) to the contract of carriage. I do not agree. It is true that the purpose of Article 23, when UCP 500 has been incorporated into the terms of a letter of credit, is to specify what will count as a conforming bill of lading. But what it also shows is that, if the conditions for identifying the carrier have been satisfied, the bank will treat the document as having identified that party as the carrier. In other words, Article 23 and the Position Paper show that if a document bears upon its face the words “ABC Co Ltd as agent for XYZ Shipping, carrier [signature]” the bank will treat it as meaning that XYZ Shipping is the carrier. Since it is common general knowledge that banks almost invariable issue letters of credit on the terms of UCP 500, those terms will be part of the background available to the reasonable reader seeking to ascertain the meaning of the bill of lading. He will know that a bank, one of the potential addressees which anyone issuing a bill of lading must have in mind, would accept it as meaning that the person named on the front as the carrier was indeed the carrier. And the reasonable reader will not think that the bill of lading could have been intended to have one meaning to a bank and another to a consignee or assignee.
80. For this purpose it does not matter whether port agents in Malaysia are likely to have heard of UCP 500. Their knowledge and views on these matters are irrelevant because, unlike UCP 500, they are not reasonably available to everyone in the class of persons to whom the document was addressed. Nor does it matter that, as appears to have been the case here, the same port agents issued other bills in different and non-conforming form: this too is not something which the reasonable addressee of these bills could be expected to know and therefore not admissible background. The construction given to the bill of lading must be objective and uniform and, in the case of the identity of the carrier, determined by an unequivocal statement on the face of the document.
81. Thus it seems to me that in the present case the reasons for treating the words on the front of the bill of lading as determinative and overriding the identity of carrier and demise clauses go well beyond the general common sense rules of construction which give “preponderant importance” to the terms of the signature over the body of the document (see Universal Steam Navigation Co. Ltd v James McKelvie and Co [1923] AC 492, 500) or to written additions over boilerplate print (see Glynn v Margetson & Co [1893] AC 351).
82. I respectfully think that where the majority judgments of Sir Andrew Morritt V-C and Chadwick LJ in the Court of Appeal went wrong is that they conscientiously set about trying, as lawyers naturally would, to construe the bill of lading as a whole. In fact the reasonable reader of a bill of lading does not construe it as a whole. For some things he goes no further than what it says on the front. If the words there are reasonably sufficient to communicate the information in question, he does not trouble with the back. It is only if the information on the front is insufficient, or the questions which concern the reader relate to matters which do not ordinarily appear on the front, that he turns to the back. And then he calls in his lawyers to construe the document as a whole.
83. For similar reasons, I think that The Flecha [1999] 1 Lloyd’s Rep. 612 was wrongly decided. Moore-Bick J, as an experienced shipping lawyer, was so conscious of the presence of the identity of carrier and demise clauses on the back of the bill of lading that could not imagine that they could be overridden by a port agent’s stamp and signature on the front. He said that the term “carrier” on the front was used loosely but I think that what he really meant was that it must have been a mistake. If one were construing the document as a whole, giving equal weight to all its clauses, one might possibly conclude that it was a mistake: compare Mannai Investment Co. Ltd v Eagle Star Life Assurance Co. Ltd [1997] AC 749. But the bill of lading is addressed, among others, to persons who will try if possible to identify the carrier simply by what it says on the front. What The Flecha and the majority decision in the Court of Appeal did was to drive a wedge between the reasonable perception of a bank taking up the bill and the construction which would later be given to the bill by a court in litigation, perhaps involving the same bank. This does not seem to me commercially fair.
84. Mr Milligan argued that in the alternative that the description of CPS as carrier in the signature box was not inconsistent with the shipowners being parties to the contract of carriage. In Fred. Drughorn Limited v Rederiaktiebologet Transatlantic [1919] AC 203 the House of Lords held that a charterparty which described one of the parties as “charterer” was not inconsistent with his being agent for an undisclosed principal who also assumed the rights and duties of charterer. So, in this case, Mr Milligan said that the description of CPS as “carrier” was not inconsistent with giving effect to the demise clause under which CPS were deemed to be agents for the shipowners. They were disclosed agents (the agency being disclosed by the demise clause) for an unnamed principal.
85. This might be a powerful argument if the bill of lading were a different kind of document. But, for the reasons which I have given, I think that if the carrier is plainly identified by the language on the front of the document, one never gets to the demise clause on the back. The language on the front simply takes priority and no attempt at reconciliation is required. Mr Milligan also submitted that CPS may have contracted both for themselves and the shipowners, the latter being unnamed or undisclosed principals. Rix LJ, who appears to have floated this theory in the Court of Appeal, said that it might be considered “novel and inconsistent with the settled expectation of the shipping trade”. He would know this better than I, but I do not think that any reasonable merchant or banker who might be assumed to be the notional reader of this bill of lading would imagine that there was more than one carrier or that the carrier was anyone other than CPS.
86. It follows that in my judgment the appellants were not parties to the contract of carriage and are therefore not liable in contract.
87. Are they liable in tort? There is no dispute that the damage to the cargo was caused by the negligence of their servants employed on the vessel. The case has been argued on the basis that the shipowners owed the normal duty of care to the cargo owners on the ground that it was foreseeable that bad stowage would damage their goods. The existence of that duty could be reinforced by the fact that the shipowners were bailees or sub-bailees of the goods.
88. But a person who sues for damage to goods must show that he had title to the goods at the time the damage occurred. Otherwise he has suffered economic damage rather than physical damage to his property: he has paid for goods which were damaged and therefore worth less at the time that he acquired title. Such loss cannot be recovered in an action for negligence: The Aliakmon [1986] AC 785.
89. In the present case, only Makros Hout had obtained title before the voyage began. Prima facie, therefore, they are entitled to sue. The other cargo owners obtained title from the shippers at various stages during the voyage. The judge held that notwithstanding that the negligent act was the stowage at the commencement of the voyage and that, once the voyage had begun, progressive damage to the cargo was inevitable, the other cargo owners could recover for the proportion of the damage which had been caused to their consignments after they had obtained title.
90. My Lords, in agreement with the Court of Appeal, I think that this was to treat the progress of the damage as creating new causes of action which accrued per diem in diem. But in my opinion there was a single cause of action which accrued to the persons who owned the cargo at the time when the negligent stowage caused it any significant damage. That cause of action comprised all damage caused by the negligent stowage, even if some of that damage did not manifest itself until after they had parted with ownership. As significant damage was suffered by all the cargo before title passed to the cargo owners (other than Makros Hout), they have no cause of action in tort.
91. The respondents relied upon the decision of the House of Lords in Darley Main Colliery Co v Mitchell (1886) 11 App Cas 127. But that was an unusual case in which the cause of the damage (digging coal under ground) was not a wrongful act. It gave rise to a cause of action only in so far as it let down some part of the surface. So there was no unifying element in the cause of action such as, in this case, is provided by the negligent stowage. Each letting down of the surface was a separate cause of action. In the present case, all damage caused by the negligent stowage is a single cause of action which is complete once any significant damage has occurred.
92. That means that only Makrous Hout have a prima facie claim in negligence. But the shipowners say that even that claim is excluded by an exemption clause on the back of the bill of lading, namely condition 5, known as the Himalaya clause after the decision in Adler v Dickson (The Himalaya) [1955] 1 QB 158. As sub-bailees, they may also have been entitled to rely on any terms of bailment contained in the contract between them and the charterers as bailees, i.e. the charterparty: see The Pioneer Container [1994] 2 AC 324. But no reliance has been placed by either side on those terms. The argument has turned entirely upon the effect of the Himalaya clause. The relevant provisions are quoted in the speech of my noble and learned friend Lord Bingham of Cornhill and I shall adopt his numbering of the relevant parts.
93. A Himalaya clause in a contract of carriage is designed to create contractual relations between the shipper and any third parties whom the carrier may employ to discharge his obligations. It does so without infringing the English doctrines of privity of contract and consideration, which, until the Contracts (Rights of Third Parties) Act 1999, prevented third parties from claiming benefits under contracts. The way it works is this. The shipper makes an agreement through the agency of the carrier with the third party servant or contractor. Such third parties may have authorised the carrier in advance to contract on their behalf or they may afterwards ratify the agreement. The terms of the agreement are that if such a third party renders any services for the benefit of the cargo owner in the course of his employment by the carrier, he will be entitled to the exemptions and immunities set out in the clause. At that stage, the agreement is not a contract. The third party makes no promise to the shipper to render any services and, until he has actually rendered them, no contract has come into effect. It is the act of rendering the services which provides the consideration and brings into existence a binding contract under which the third party is entitled to the exemptions and immunities. The efficaciousness of the clause to achieve these results has been affirmed by the decision of the Privy Council in The Eurymedon [1975] AC 154. The theory of the agreement which becomes enforceable conditionally upon the act providing consideration was developed by Sir Garfield Barwick CJ in his dissenting judgment in the High Court of Australia in Port Jackson Stevedoring Pty Ltd v Salmond and Spraggon (Australia) Pty Ltd (The New York Star) (1978) 139 CLR 231 and adopted by the Privy Council when it affirmed his judgment on appeal: see The New York Star [1981] 1 WLR 138.
94. The first question is whether this version of the clause created the necessary agency. I agree with my noble and learned friend Lord Bingham of Cornhill that words have been omitted because of a common copyist’s error and that it is possible to identify the substance of the missing words. The clause ought therefore to be read as if it contained them. They make it clear that the carrier acts as agent to contract for the exemptions in parts (1) and (2). I do not think that there is any contradiction between the somewhat sophisticated technique of construction which has to be applied to restore clause 5 to its intended form and the more rough and ready approach used to decide who is the carrier. The latter is, as I have said, a question which the reasonable merchant or banker would expect to be able to decide for himself. On the construction of condition 5, he would undoubtedly want to consult a lawyer. For similar reasons, I do not think that it is relevant that the Himalaya clause is preceded by a separate and verbose sentence purporting to confer upon the carrier a series of immunities of which some are probably in conflict with the Hague Rules and others unnecessary.
95. The next question is the nature of the exemption conferred by part (1). It confers immunities upon the carrier’s servants, agents or independent contractors. I agree with Colman J. and the unanimous Court of Appeal, for the reasons they gave, that the shipowners were independent contractors to carry the goods for the charterers. The cargo owners no longer contest this point. The condition then says that no such servants, agents and independent contractors “shall in any circumstances whatsoever be under any liability whatsoever to the shipper”. That seems reasonably clear. It appears to exempt them from any liability. But Colman J. and all the members of the Court of Appeal agreed that it did not. Why not?
96. First it was said that part (1) is not a contract between the shipper and a third party. It is a covenant with the carrier, enforceable only by the carrier, by which the shipper promises that neither he nor his successors in title will sue the third party. The way to enforce it is for the carrier to obtain an injunction prohibiting the shipper from suing the third party: see The Elbe Maru [1978] 1 Lloyd’s Rep. 206. In the Court of Appeal, Chadwick LJ ( at p. 471) made his position on this point very clear: “The starting point”, he said, “is to appreciate that [part (1)] has effect only as an agreement between the shipper and the carrier.” He referred to the words of part (3) (“all such persons shall to this extent be deemed to be parties to the contract contained in or evidenced by this Bill of Lading”) and said that the words which he italicised showed that the agency mechanism was to apply only to part (2).
97. I have two difficulties about this argument. The first is that, read as a whole, the Himalaya clause makes it clear that the carrier contracts as agent for the third party in respect of both parts (1) and (2). The agency mechanism is not in my opinion created by part (3); it is created by the words in part (2) –
“and for the purpose of all the foregoing provisions of this clause the carrier is or shall be deemed to be acting on behalf and for the benefit of all persons who are or might be his servants or agents [etc].”
98. Part (3) has a different function which was in my opinion correctly identified by Beattie J. in his judgment at first instance in The Eurymedon [1971] 2 Lloyd’s Rep. 399, 409:
“the words “shall to this extent” indicate that the stevedore is only made a party to the exemption clause and not the remainder of the main contract”
99. The purpose of deeming the third party to be party to the bill of lading to that extent is to ensure that the exemption clause is enforceable against subsequent assignees. As part of the bill of lading it will be enforceable under the Carriage of Goods by Sea Act 1992 or possibly the common law rule that the consignee is bound by his acceptance of the bill of lading and request for delivery of the goods: see The Eurymedon [1975] AC 154, 168.
100. It may be that Colman J. and the Court of Appeal were misled because they were not given the words which had dropped out of the clause. But even without them I would have decided that the agency covered both parts (1) and (2). That is because in my opinion, and I understand it to be that of all your Lordships, part (1) simply cannot be read as a covenant not to sue. It does not say that the shipper is not to sue the third party. It says that he shall not be under any liability. A similar point arose in Gore v Van Der Lann [1967] 2 QB 31, in which the plaintiff contracted with the Liverpool Corporation that their bus drivers would not be liable to her for any damage however caused. The Corporation did not purport to contract as agent for the drivers and when the plaintiff sued a driver it was conceded that he could not rely upon the exemption: see Midland Silicones Ltd v Scruttons Ltd [1962] AC 446. But the Corporation intervened to claim that the contract was a covenant not to sue the drivers which they could enforce. The Court of Appeal rejected this argument, saying that the agreement could not be construed as containing such a covenant. So it seems to me that part (1) is either a contract of exemption between shipper and third party or it is wholly ineffective. In my opinion it was the former.
101. The second argument is that if the first part of the clause means what it appears to say, cases like the The Eurymedon [1975] AC 154, The New York Star [1981] 1 WLR 138 and The Mahkutai [1996] AC 650 would have been decided on different grounds or at any rate argued differently by the eminent counsel who appeared in them. This kind of argument is always rather speculative – one seldom knows exactly why some point was not taken – and a close examination of those three cases does not make it any stronger. When The Eurymedon was decided at first instance in New Zealand ([1971] 2 Lloyd’s Rep. 399) Beattie J. had no doubt (at p. 408) that the first part of the clause meant what it said:
“The first part, down to ‘acting as aforesaid’, contains a general exemption from liability for servants and agents of the carrier, while acting in the course of their employment. From there on, is created an agency clause…”
102. Beattie J. noted that the first pleaded defence was simply that the defendants (in that case, stevedores) were not liable because the work was done in the course of their employment. The second defence pleaded a package limitation and the third the time bar under the Hague Rules. The judge noted that all three defences depended upon showing that the agency mechanism succeeded in creating contractual relations between the defendants and the shipper and that if that worked, the time bar would be enough to defeat the action. But he observed in passing that –
“If it were not for the time factor then there would be room for a further issue, namely, whether this purported exemption from liability in clause 1 overrides the Hague Rules…The issue would then be whether the word “stevedore” came within the meaning of the word “carrier””
103. In other words, the only answers which Beattie J. could see to a complete exemption under the Himalaya clause were (1) the agency mechanism did not work or (2) the contract created by the agency mechanism was a contract of carriage, so that the exemption was struck down by Article III.8 of the Hague Rules. Since the decisions of the Privy Council in The Eurymedon and The New York Star it is clear that in principle the agency mechanism can work and I have already explained why I think it works for part (1) of this clause. That leaves the question of whether the purported exemption would be struck down by the Hague Rules. I shall come back to that point later.
104. In the New Zealand Court of Appeal, Turner P. summarised the issue as follows:
“The only defence raised, and the only point argued by the stevedore-defendant, either before Beattie J. or before us, was the efficacy of a clause in the bill of lading which purported to exempt it from liability to the owner of the goods for negligence in stevedoring. Beattie J. held the clause effective, and this appeal is from his decision.”
105. Perry J. clearly held the same view, because he remarked:
“It should be noted here that the clause endeavours to protect the servants and agents of the carrier even further than the carrier himself. Under the UK Carriage of Goods by Sea Act 1924 he may limit his liability but cannot exempt himself from liability and yet here is a clause which purports to exempt his servants or agents.”
106. The New Zealand Court of Appeal allowed the appeal on the ground that they did not think that the agency mechanism worked. They could not find any consideration moving from the stevedores. So they did not consider the point which Beattie J. said would arise if the agency did work but there had been no time bar, namely whether the contract was subject to the Hague Rules.
107. In the Privy Council it was recognised, as it had been by Beattie J., that if the agency mechanism worked, the time bar would be enough to enable the appellants to succeed. So nothing was said about the potential effect of the exempting part of the clause.
108. In The New York Star [1981] 1 WLR 138 there was a general exemption clause and a separate time bar. The stevedores recognised that there was a strong argument that the doctrine of fundamental breach might prevent the exemption clause from applying to the facts. The stevedores had handed over the goods to a thief without requiring production of the bill of lading. (Compare Sze Hai Tong Bank Ltd v Rambler Cycle Co. Ltd [1959] AC 576.) In the Privy Council Mr Gleeson QC, for the stevedores, included reliance upon the “general exclusion provisions” as an alternative at the end of his printed case (paragraph 20) but his stronger argument, upon which he succeeded, was based on the time bar. So there was no discussion of the issues which arise in this case.
109. The Himalaya clause in The Mahkutai [1996] AC 650 was said by Rix LJ (at p. 461) to be similar but not identical. It was similar in that it had words similar to part (2), although in a somewhat narrower form. But it was different in that it did not have part (1) at all. Instead, it had what was plainly a covenant not to sue in a form similar to that in the The Elbe Maru [1978] 1 Lloyd’s Rep. 206. There was no general exemption clause. This difference seems to me rather important and makes it less surprising that the case contains no discussion of the effect of a general exemption clause. It is true that Lord Goff of Chieveley said ([1996] AC 650, 666) that the function of a Himalaya clause was –
“to prevent cargo owners from avoiding the effect of contractual defences available to the carrier (typically the exceptions and limitations in the Hague-Visby Rules) by suing in tort persons who perform the contractual services on the carrier’s behalf.”
110. But this dictum is clearly addressed to the clause used in the case. I do not think it would be fair to treat it as laying down that this was the only function of any Himalaya clause.
111. The third argument is from redundancy. The second part of the clause says that servants and independent contractors are to have the same protection as the carrier. So, it is said, if the first part exempted the independent contractor from all liability whatever, he would not need the protection of the second part. This argument was accepted by Colman J. ([2000] 1 Lloyd’s Rep. at p. 99) and by Rix LJ and Sir Andrew Morritt V-C in the Court of Appeal ([2001] 1 Lloyd’s Rep. at pp. 462, 476).
112. My Lords, I seldom find arguments from redundancy very compelling and I think that in the case of a Himalaya clause they carry little weight. I do not think it surprising that when the clause was drafted (probably after Adler v Dickson (The Himalaya) [1955] 1 QB 158) the draftsman thought it might be prudent to wear belt as well as braces. In the legal climate of that time such prudence would have been justified. Exemption clauses were under threat from extensions of the fundamental breach doctrine and the draftsman might have thought that if the exemption in part (1) failed, the third party should at least be able to fall back upon the exemptions and time limits available to the carrier. That is what happened in The New York Star [1981] 1 WLR 138.
113. That brings me to the fourth argument, which is that the complete exemption conferred by part (1) is cut down by Article III.8 of the Hague Rules, which provides that any clause in a contract of carriage relieving “the carrier or the ship” from liability for negligence shall be null and void. I confess that on this point my opinions have fluctuated but in the end I have been persuaded that the reasoning of Lord Hobhouse of Woodborough is correct and that Article III.8 does have this effect.
114. Putting the argument in my own words, it seems to me to run as follows. I do not think that the collateral contract between shipper and independent contractor is a “contract of carriage” so as to attract the application of the Hague Rules. But part (3) says that the independent contractor “shall to this extent be deemed to be parties to the contract contained in or evidenced by this Bill of Lading”. That means, as I said earlier, that he is a party only for the purpose of taking the benefit of the exemption clause against the shipper and any transferee of the bill of lading. But, for that purpose only, the provisions of the bill of lading, insofar as they are relevant, apply to him. The only provision which has been suggested as relevant in the present case is Article III.8, which applies by virtue of the paramountcy provision in part (2). That does apply to exemption clauses and restricts their effect. I think that this argument was also accepted by Colman J. ([2000] 1 Lloyd’s Rep. 85, 100) and Rix L.J. ([2001] 1 Lloyd’s Rep 437, 462).
115. I think that such a construction is in accordance with the general policy of the Hague Rules, which was to provide an acceptable balance in distributing the risks of loss and damage between carrier and cargo owners. The rules are intended to preserve the common law remedies which cargo owners would have in English law for loss of or damage to the cargo in the circumstances there specified. Of course they do have this effect anyway in relation to the contractual carrier, the charterer. But the preservation of these remedies must also be considered in relation to the procedures available for enforcement. By section 20(2)(g) of the Supreme Court Act 1981 the High Court has admiralty jurisdiction in respect of claims for loss of or damage to goods carried in a ship (which may, as in this case, be a claim in tort) and by section 20(2)(h) it has jurisdiction in respect of any claim arising out of any agreement relating to the carriage of goods in a ship. Jurisdiction may be founded by the arrest of the ship, which will also provide security for the claim. Without the right to these enforcement procedures, a cargo claim against a foreign carrier would in many cases be unenforceable. But by section 21(4)(i), the action in rem may be brought against the ship only if the person who would have been liable in personam was at the time when the action was brought the beneficial owner or charterer by demise.
116. It follows that in the case of goods carried under a bill of lading issued by a time charterer, the liability in personam of the time charterer will not enable the cargo owner to arrest the ship. He may do so only if the shipowner is also liable in tort. But such liability will not exist if the time charterer is able to stipulate for complete exemption on the part of the owner. The remedy which the Hague Rules were intended to preserve may in such cases be unenforceable.
117. I would therefore make the orders proposed by my noble and learned friend Lord Bingham of Cornhill.
Yemgas FZCO & Ors v Superior Pescadores S.A.
[2016] EWCA Civ 101 [2016] WLR(D) 97, [2016] Bus LR 1033, [2016] EWCA Civ 101 Longmore LJ
The Issues
The first issue is whether, on the true construction of the Paramount Clause, it operates as an agreement between the cargo owner and the shipowner, that the (old) Hague Rules apply or that the Hague-Visby Rules apply. If it is an agreement that the Hague-Visby Rules apply, then there is no agreement between the parties that a different regime in the form of the (old) Hague Rules is to apply. But if it is an agreement that the (old) Hague Rules apply, a second issue arises namely whether the Paramount Clause constitutes an agreement to fix maximum amounts other than those contained in Article IV Rule 5(a) of the Hague-Visby Rules for the purposes of Article IV Rule 5(g) of those rules. There is then a third issue namely whether the date of conversion into relevant currency of the limit of £100 gold per package or unit is the date when the cargo was delivered in its damaged condition or the date of the judgment.
The Rules
Article IV Rule 5 of the (old) Hague Rules provided:-
“Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with goods in an amount exceeding £100 per package or unit or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading.
This declaration if embodied in the bill of lading shall be prima facie evidence, but shall not be binding or conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier and the shipper another maximum amount than that mentioned in this paragraph may be fixed, provided that such maximum shall not be less than the figure above named.”
Article IX provided that the limit of £100 per package or unit is to be taken to be “gold value”.
The relevant provisions of the Hague-Visby Rules are:-
“Article III – Responsibilities and Liabilities
…
Rule 8
Any clause, covenant or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to, or in connection with, goods … or lessening such liability otherwise than as provided in these Rules, shall be null and void and of no effect. …
Article IV – Rights and Immunities
…
Rule 5
(a) Unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading, neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the goods in an amount exceeding 666.67 units of account per package or unit or 2 units of account per kilogramme of gross weight of the goods lost or damaged, whichever is the higher.
(b) The total amount recoverable shall be calculated by reference to the value of such goods at the place and time at which the goods are discharged from the ship in accordance with the contract or should have been so discharged. …
…
(d) The unit of account mentioned in this Article is the special drawing right as defined by the International Monetary Fund. The amounts mentioned in sub-paragraph (a) of this paragraph shall be converted into national currency on the basis of the value of that currency on a date to be determined by the law of the Court seized of the case.
(e) Neither the carrier nor the ship shall be entitled to the benefit of the limitation of liability provided for in this paragraph if it is proved that the damage resulted from an act or omission of the carrier done with intent to cause damage, or recklessly and with knowledge that damage would probably result.
…
(g) By agreement between the carrier, master or agent of the carrier and the shipper other maximum amounts than those mentioned in sub-paragraph (a) of this paragraph may be fixed, provided that no maximum amount so fixed shall be less than the appropriate maximum mentioned in that sub-paragraph.
Article V – Surrender of Rights and Immunities, and increase of Responsibilities and Liabilities
A carrier shall be at liberty to surrender in whole or in part all or any part of his rights and immunities or to increase any of his responsibilities and liabilities under these Rules, provided such surrender or increase shall be embodied in the bill of lading issued to the shipper. …”
Paragraphs (a) and (d) of Article IV Rule 5 in their current form set out above were inserted into the Schedule to the 1971 Act by section 2 of the Merchant Shipping Act 1981. The same section provided that the date for conversion of the special drawing rights into national currency under English law was the date of judgment. These provisions are now contained in Schedule 13 to the Merchant Shipping Act 1995.
The package limitation regime contained in Article IV Rule 5 of the Hague-Visby Rules differs from the equivalent Hague Rules regime in several respects. The judge identified five. First, the previous limit of £100 in gold is replaced by a limit calculated by reference to IMF special drawing rights, the value of which is based upon a basket of currencies. Second, paragraph (a) spells out that it is the higher of two figures, calculated by reference to the number of packages or the weight of the goods respectively, which constitutes the relevant limit. Third, paragraph (b) is new, providing for the method by which damages are to be calculated. Fourth, paragraph (c), dealing with containerisation, is new. Fifth, paragraph (e) provides for the circumstances in which the carrier may lose the benefit of limitation. The Hague Rules contained no equivalent provision, although resort would sometimes be had to the common law principles of deviation. Paragraph (g), however, permitting agreement on a higher maximum amount, existed in materially the same terms in the Hague Rules.
The Judgment
Males J decided (1) the Paramount Clause on its true construction incorporated the (old) Hague Rules not the Hague-Visby Rules but (2) it did not operate as an agreement for a higher limit pursuant to Article IV rule 5(g) of the Hague-Visby Rules. The cargo-owners were therefore confined to recover damages limited by reference to Article IV rule 5(a) of the Hague-Visby Rules. That limit was calculated at the date of judgment as required by the Merchant Shipping Acts, so the third issue did not arise. If it had, he would have held that the limit was to be calculated as at the date of delivery of the cargo. Neither side is satisfied with this decision.
Hague or Hague-Visby?
The judge would like to have held that the Paramount Clause incorporated the Hague-Visby rather than the Hague Rules but felt constrained by authority to hold that on its true construction (even in 2015 in respect of a contract made in 2008) the 1924 Hague Rules rather than the 1968 Hague-Visby Rules should apply. It will therefore be necessary to look at those authorities. Before doing so, however, it may be said that the conclusion which the judge unwillingly reached is an odd conclusion. Most maritime nations have adopted the Hague-Visby Rules; the United Kingdom did so as early as 1971 in the Carriage of Goods by Sea Act of that date; it did not come into force until a certain number of other countries had signed up but that happened as long ago as 23rd June 1977. Can it really be the case that a Paramount Clause in a contract made over 30 years later in 2008 is still to be taken as incorporating the 1924 Rules rather than the 1968 Rules?
The actual terms of the Paramount Clause are, of course, important. It identifies the Hague Rules contained in the International Convention of 25th August 1924 but provides that it is those Rules
“as enacted in the country of shipment”
which are to apply to the contract. The country of shipment was Belgium which adhered to the Hague-Visby Rules on 6th December 1978.
The judge had no evidence as to the method by which Belgium in fact enacted the Hague-Visby Rules and had, therefore, to proceed on the assumption that Belgian law was the same as English law, an assumption which is perhaps likelier in the present case than in some cases where the assumption is applicable. In this country the (old) Hague Rules had been enacted by the Carriage of Goods by Sea Act 1924. The Carriage of Goods by Sea Act 1971 (“the 1971 Act”) repealed that Act, see section 6(3) of the 1971 Act and provided by section 1:-
“1 Application of Hague Rules as amended
(1) In this Act, “the Rules” means the International Convention for the unification of certain rules of law relating to bills of lading signed at Brussels on 25th August 1924, as amended by the Protocol signed at Brussels on 23rd February 1968 [and by the Protocol signed at Brussels on 21st December 1979].
(2) The provisions of the Rules, as set out in the Schedule to this Act, shall have the force of law.
…”
The schedule to the Act, referred to in section 1(2) is entitled
“THE HAGUE RULES AS AMENDED BY THE BRUSSELS PROTOCOL 1968.”
The schedule then enacts that Brussels Protocol which, as I have said, is the formal designation of the 1968 Hague-Visby Rules. On any ordinary and sensible view of English law, therefore, the Hague Rules “as enacted” in England are the Hague Rules as enacted by the schedule to the 1971 Act, a schedule which in its title refers to the Hague Rules “as amended”. The position in Belgium must be taken to be the same.
This was the judge’s own inclination. He said (para 34):-
“I would see no real difficulty, if the point were free of authority, in holding that the version of the Hague Rules which is enacted in the country of shipment in the present case is the Hague-Visby Rules, with the consequences that those Rules apply not just as a matter of the compulsory application of the 1971 Act but also as a matter of contract.”
It is, therefore, necessary to consider the authorities by which the judge felt constrained to come to a contrary conclusion.
The first such authority is Nea Agrex S.A. v Baltic Shipping Co. Ltd (The Agios Lazaros) [1976] QB 933; [1976] 2 Lloyd’s Rep 47 a case decided after the 1971 Act had been passed but before it had come into force in respect of a contract made in 1972. It was a charterparty case and neither set of Rules was compulsorily applicable but the charter itself provided “Paramount Clause deemed to be incorporated in this Charter Party”. Donaldson J held that the purported incorporation of a Paramount Clause was ineffective since it did not specify the terms of such a clause; some such clauses only incorporated the Article IV exceptions or only applied if compulsorily applicable by the law of the place of shipment. He therefore disregarded the purported incorporation with the result that the one year time limit for claims imposed by Article III rule 6 of the Hague Rules did not apply.
This court disagreed and held that the intention of the parties was to incorporate all the Hague Rules including the one year time limit for claims. Lord Denning MR held that the right approach was to ask what the phrase “Paramount Clause” would mean to shipping men. He answered that question by saying (pages 943-944):-
“It seems to me that when the “paramount clause” is incorporated, without any words of qualification, it means that all the Hague Rules are incorporated. If the parties intend only to incorporate part of the rules (for example, art. IV), or only so far as compulsorily applicable, they say so. In the absence of any such qualification, it seems to me that a “clause paramount” is a clause which incorporates all the Hague Rules. I mean, of course, the accepted Hague Rules and not the Hague-Visby Ruleswhich are of later date.”
It is not clear why Lord Denning referred to the Hague-Visby Rules at all, since they also included a one year time limit but since England had already enacted the Hague-Visby Rules but they were not yet in force, his expression of opinion is not, perhaps, surprising.
Goff LJ (Sir Reginald not, as counsel seemed to think, Sir Robert) agreed. He referred to evidence having been before the judge that there were a number of forms of paramount clause which led the judge to conclude that there was no means of choosing between them. But he held that the phrase “paramount clause” was a term of art which referred to (and was therefore intended to incorporate) the Hague Rules as a whole. He accepted that a possible area of uncertainty was whether it was intended to incorporate the (old) Hague Rules or the (new) Hague-Visby Rules but he had no difficulty in saying that the intention was to refer to the Hague Rules in their original form (949C):-
“At the date of the charterparty the Visby rules had not been adopted in any country, nor indeed I think have they even now, but that does not matter. The form taken from a bill of lading and entitled Hague-Visby Paramount Clause had not been published and the Visby variant was not in any kind of general use.”
Shaw LJ agreed saying (954A):-
“A more productive approach [than that of counsel for the charterers] in the circumstances of this case is to ask what the shipowners would have supposed the charterers had in mind when the words “paramount clause” were inserted and then to ask the same question with the parties reversed. In the absence of any express words of variation or abbreviation or extension, each party must have assumed that the other party had the Hague Rules in mind in their original form without modification or qualification. This approach does provide a clue as to what the respective parties had in contemplation, namely that by the phrase “paramount clause” they meant simply the Hague Rules.”
This decision is helpful as showing what this court thought shipping men meant by the phrase “clause paramount” in 1972 but is, perhaps of little assistance in determining what the phrase “the Hague Rules … as enacted in the country of shipment” meant to shipping men in 2008.
The judge referred to The Marinor [1996] 1 Lloyd’s Rep 301 in which the paramount clause incorporated the provisions of the Canadian Carriage of Goods by Water Act “as amended”. Colman J had no difficulty in holding that those words did incorporate the (new) Hague-Visby Rules. In the present case, of course, it is not the Hague Rules “as amended” but “as enacted”. The Marinor is not therefore directly relevant save to show that there is a form of words which will lead to the definitive conclusion that the new Rules are intended to apply.
In Lauritzen Reefers v Ocean Reef Transport Ltd S.A. (The Bukhta Russkaya) [1997] 2 Lloyd’s Rep 744 a “general paramount clause” was to apply in a 1995 charterparty. The claim was made by a charterer who had settled with bill of lading holders and wanted to claim an indemnity from the shipowner. The Hague-Visby Rules permitted a claim for an indemnity to be brought if it was brought within 3 months of the settlement (Art III Rule 6bis) but the original Hague Rules required any claim to be brought within one year of delivery. It was therefore critical to determine which Rules applied. For the charterers, Mr Michael Coburn of counsel relied on a passage from the 4th edition of Wilford Coghlin & Kimball on Time Charters page 561 which, after referring to the Agios Lazaros stated:-
“However, if a paramount clause is incorporated into a Baltime charterparty governed by English law it is likely, following the coming into force in 1977 of the Carriage of Goods By Sea Act 1971, the Hague-Visby Rules would be regarded as incorporated.”
Thomas J did not deal with this argument of Mr Coburn because he held, on the evidence before him, that the words “general paramount clause” in a time charterparty referred to a particular clause or more accurately any of a number of clauses that had the following essential terms (page 746):-
“(1) if the Hague Rules are enacted in the country of shipment, then they apply as enacted; (2) if the Hague Rules are not enacted in the country of shipment, the corresponding legislation of the country of destination applies or, if there is no such legislation, the terms of the Convention containing the Hague Rules apply; (3) if the Hague-Visby Rules are compulsorily applicable to the trade in question, then the legislation enacting those rules applies.”
In the light of this conclusion Thomas J held that, since the Hague-Visby Rules were specifically referred to in the “general paramount clause” as being applicable (by contract) if compulsorily applicable (presumably by the proper law) which they were not in the case before him, it was the old Hague Rules which applied to the case, the voyage being one from Mauritania to Japan neither of which countries had enacted the Hague-Visby Rules by the date of the charter. That is perhaps not a surprising decision in a case where the incorporating clause itself expressly refers to both the Hague Rules and the Hague-Visby Rules and makes clear that the Hague-Visby Rules are only to apply in certain defined circumstances. The judge went out of his way to say (page 747) that it was, therefore, not necessary to consider Mr Coburn’s argument and it was not apposite to deal with it.
On the facts, of the present case, however, it is necessary to consider the argument which Mr Coburn made in that case and whether Mr Wilford’s book on Time Charters was correct in the view it expressed. Subject to any further authority which remains to be considered, I think the late Mr Wilford was indeed correct to say that since 1977 a typical clause paramount, which did not differentiate in terms between the two sets of rules, would be taken by shipping men to incorporate the Hague-Visby rules in a Baltime charter governed by English law and, by extension, to other charters and to bills of lading subject to such a clause (such as the Conline bills in the present case).
We were, by agreement, shown the present (or, at least, an updated) form of the Conline bill which (in clause 3(a)) incorporates the Hague Rules “as amended” by the Protocol signed at Brussels on 23rd February 1968 (“the Hague Visby Rules”). Counsel for the cargo-owners argued that since it was possible to incorporate the Hague-Visby Rules by express words and it had been done in a later form than that used for the instant cargo carrying voyage, the court could safely assume that there was no intention to incorporate the Hague-Visby rules in the present case. Such an argument is not to my mind decisive. The court has to construe a contract made by shipping men in 2008; the fact that they could have used a clause which made the position clear does not absolve the court from deciding what the clause means when the position is not clear. I see little argument against Mr Wilford’s view as expressed in his book and much to commend it. Thomas J’s decision in Seabridge Shipping AB v Acorsleff’s Eftf’s A/S [1999] 2 Lloyd’s Rep 685 takes the matter no further.
There remains, however, the authority on which the judge chiefly relied to hold that in these bills of lading it was the 1924 rather than the 1968 rules which were incorporated. That is Parsons Corporation v C.V. Scheepvaartonderneming Happy Ranger (The Happy Ranger) [2001] 2 Lloyd’s Rep 530 (Tomlinson J) and [2002] 2 Lloyd’s Rep 356 (CA). The main point of contention was whether the Hague-Visby Rules applied if the contract was contained not “in a bill of lading or any similar document of title” but in what might be called an ordinary contract for goods to be carried (from Italy to Saudi Arabia) which merely provided that the carrier’s regular form of bill of lading was to form part of the contract. Tomlinson J held that no bill of lading or document of title was in fact issued and, therefore, that the Hague-Visby Rules were not “compulsorily applicable” because the contract was not covered by a bill of lading or any similar document of title as required by Articles I (b) and X, but that the Hague Rules did apply. This court held that there was in fact a bill of lading and the Hague-Visby Rules were “compulsorily applicable” (with their, in that case, higher limit).
The relevant general paramount clause was in the form discussed by Thomas J in The Bukhta Russkaya with its express reference to the incorporation of the 1924 Convention but of the Hague-Visby Rules where they “apply compulsorily”. Its precise terms were:-
“GENERAL PARAMOUNT CLAUSE
The Hague Rules contained in the International Convention for the Unification of certain rules relating to Bills of Lading, dated Brussels 25th August 1924, as enacted in the country of shipment shall apply to this contract. When no such enactment is in force in the country of shipment, Articles I to VIII of the Hague Rules shall apply. In such case the liability of the Carrier shall be limited to £100 – sterling per package.
Trades where Hague-Visby apply
In trades where the International Brussels Convention 1924 as amended by the protocol signed at Brussels on 23rd February 1968 – the Hague-Visby Rules – apply compulsorily, the provisions of the respective legislation shall be considered incorporated in this Bill of lading ….”
At first instance the cargo-owners contended that the version of the Hague Rules enacted in Italy was the Hague-Visby Rules so that it was those rules which were applicable pursuant to the first sentence of the clause; the shipowners argued that the Hague-Visby Rules were not “the Hague Rules … as enacted” in Italy
“not only because of the various important differences between the two codes but also because … the wording of clause 3 itself draws a clear distinction between enactment of the Hague Rules and enactment of [the] Hague-Visby Rules.”
Tomlinson J accepted this submission saying at para 31:-
“I also reject the argument that the Hague-Visby Rules are to be regarded as the Hague Rules “as enacted” in Italy so as to be incorporated by reason of the first limb of cl. 3 of the specimen bill of lading. Quite apart from the important difference between the two codes, in the first two sub-clauses of cl. 3 a clear distinction is drawn between the Hague and the Hague-Visby Rules and their enactment. Italy has repealed its enactment of the Hague Rules and has enacted the Hague-Visby Rules.That is not the situation to which the first sub-clause of cl. 3 refers.”
My Lord can, of course, speak for himself but I do not regard this paragraph of the judgment as saying that the words “as enacted in the country of shipment” could not refer to the Hague-Visby Rules if, for example, the particular paramount clause made no specific reference to the Hague-Visby Rules in some other part of the same clause but those Rules had in fact been enacted in the country of shipment. If he were saying that (and the judge seems to have thought that he was), I would, very respectfully, disagree with him and prefer the views of Mr Wilford in respect of the differently drafted clause with which we are concerned.
In the Court of Appeal Tuckey LJ observed (at para 11):-
“The Hague Rules are not enacted in Italy so the first sentence of the first paragraph of clause 3 of the bill is not applicable.”
The judge regarded this as an endorsement of what he (Males J) thought Tomlinson J was saying. But I respectfully doubt that. Tomlinson J had expressly held (para 35) that the (old) Hague Rules did apply with their limitation of £100 sterling per package. As I read Tuckey LJ’s sentence as cited above, he is saying (obiter) that the (old) Hague Rules were not (any longer) enacted in Italy with the result that if the Hague-Visby Rules were not compulsorily applicable pursuant to the second part of the clause, there would be no limitation at all. That, however, was not the position because there had been a bill of lading and the Hague-Visby Rules were therefore compulsorily applicable and the claim was limited to about US$2 million by reason of Art IV rule 5 of the Hague-Visby Rules (see para 32).
But on any view of the matter, Tuckey LJ’s remarks were obiter and I would regard this court as free to form its own view of the matter. For the reasons I have given I consider that any case, in which a bill of lading is issued in 2008 incorporating the Hague Rules as enacted in the country of shipment and in which the country of shipment has (as here) enacted the Hague-Visby Rules, should be regarded as a case which is subject to the Hague-Visby Rules rather than the (old) Hague Rules.
I am confirmed in this view by the fact that it is the same view as that of the second circuit of the United States Court of Appeals in an appeal from the District Court for the Southern District of New York where the Hague-Visby Rules have not been enacted. Nevertheless in JCB Sales v Wallerian Lines (The Seijin) 124 F 3d 132 (1997), [1997] AMC 2705, to which Mr Goldstone QC for the shipowners referred us, a contract which stated that it was to be governed by “the Hague Rules contained in the international convention for the unification of certain rules relating to bills of lading … as enacted in the country of shipment” was held to be governed by the Hague-Visby Rules where the country of shipment (England) had enacted those rules at any rate where that enactment described the new rules as being “the Hague Rules as amended by the Brussels 1968 Protocol”, see paragraphs 27-34 of the judgment of the court delivered by Van Graafeiland CJ. That seems to me the good sense of the matter.
Mr Robert Thomas QC sought to rely on an Additional Clause B at the foot of the bill of lading headed Scandinavian Trades providing for the Hague-Visby Rules to be incorporated
“in trades where one of the Scandinavian Maritime Codes apply compulsorily.”
He submitted that this showed the parties to the bill of lading could refer to the Hague-Visby Rules when they wished to do so and that the bills of lading in the present case were therefore similar to those before Thomas J and Tomlinson J which referred to the Hague-Visby Rule in the incorporating clause itself. I cannot accept that this Scandinavian tail can wag the general ocean-going dog. Nor did the judge who said that if he had had to decide the point
“I would have been cautious about construing a reasonably prominent and widely used clause paramount by reference to another clause buried in the small print of the bill which stated that it was “to be added” in a trade with Scandinavian and therefore, at least arguably, did not even form part of the contract in a case having nothing to do with Scandinavia.”
I would applaud the judge’s instincts in this respect just as much as his instincts on the main point of the case, if not his actual decision on the point.
Agreement “fixing” other maximum amounts within Art IV rule 5(g)
My conclusion that clause 2 of the bills of lading incorporated the (new) Hague-Visby Rules rather than the (old) Hague Rules makes it unnecessary to consider whether clause 2 constituted an agreement fixing other amounts within Article IV rule 5(g). The judge thought it did not because it would be odd in a case, governed compulsorily as a matter of English law by the 1971 Act, to find that £100 gold value came in “by a side wind” as a result of a clause purporting to incorporate the Hague Rules which the parties must be taken to know would, in general, not be applicable. There is much to be said for the judge’s view although it might be said, against it, that it was by no means obvious at the time when the contract was made that English law was applicable at all. The bill of lading was governed by the law of the country where the carrier had his principal place of business which might or might not have made the Hague-Visby Rules compulsorily applicable. It was only over 4 years later that English law was agreed to be the law applicable to the contract. In the event it is unnecessary to express any view on the matter.
Date for Conversion under the Hague Rules
Nor is it necessary to express any concluded view about the date of converting £100 gold per unit into the national currency. I would only express my agreement with the judge that I would be entirely happy to decide the point in accordance with the unarticulated assumptions of Hobhouse J in The Rosa S [1998] QB 419. The judge’s statement that, in a case of this kind, Hobhouse J’s unarticulated assumptions are “worth quite a lot” is a considerable understatement.
Conclusion
As it is, I would dismiss this appeal and uphold the judge’s conclusion that the Hague-Visby limit applies, even if my reasons for doing so are not the same as those in the judgment below.
Lord Justice Tomlinson:
I agree with my Lord, essentially for the reasons he has given.
The contracts contained in or evidenced by the bills of lading were, when made, governed by the law of the country where the carrier has his principal place of business. The carrier is a Panamanian company, although it seems doubtful that its principal place of business is to be found there. There is no evidence on that score.
The history of this litigation is curious. The Particulars of Claim simply asserted that the Hague-Visby Rules were applicable to the contracts of carriage pursuant to the Carriage of Goods by Sea Act 1971, whilst at the same time asserting that the contracts of carriage incorporated the Hague Rules.
The Defence admitted liability to pay the Hague-Visby limit, did not take issue with either proposition set out at paragraph 45 above, but as my Lord has recorded, denied the Claimants’ entitlement to pick and choose between the two package limit regimes.
Perhaps when, nearly five years after the contracts of carriage were made, and five months after pleadings were closed, the cargo underwriters and the shipowners’ P. & I. Club agreed that the claims for damage to cargo arising out of the alleged breach of these contracts should be subject to English law, they were giving effect to an unspoken assumption that the Hague-Visby Rules were applicable. However that may be, retrospective agreement that English law governed the claim had the effect, as my Lord has described at paragraph 5 above, of rendering the Hague-Visby Rules applicable by reason of Article X of Schedule 1 to the Carriage of Goods by Sea Act 1971.
I am not sure what is the provenance of the expression “the Hague-Visby Rules”. Strictly speaking there are no such Rules. There was signed at Brussels on 23 February 1968 a “Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading (“Visby Rules”)”. Those “Certain Rules” are of course the Hague Rules. The Protocol prescribes a series of amendments to the Hague Rules, and it is that series of amendments which in the title to the Protocol is termed the “Visby Rules”. Visby is a port on the Swedish Island of Gotland. I am indebted to Professor W Tetley QC of the Faculty of Law at McGill University, Montreal, for the information in Marine Cargo Claims (4th ed.) (2008) Vol. 1 pages 11-12 that:-
“The Visby Rules (the Brussels Protocol of 1968 amending the Brussels Convention of 1924) were the outcome of the successful deliberations of the Comité Maritime International Conference in Stockholm in 1963, where changes to the Brussels Convention of 1924 were adopted. The Comité met in the historic City of Visby after the Conference and thereby gave the Visby Rules their name.”
Professor Tetley also states:
“The Visby Rules (the Brussels Protocol of February 23, 1968) should not be considered as a separate convention. The Visby Rules are amendments to the Brussels Convention 1924 and art. 6 of the Protocol stipulates:
“As between the Parties to this Protocol the Convention and the Protocol shall be read and interpreted together as one single instrument. A Party to this Protocol shall have no duty to apply the provisions of this Protocol to bills of lading issued in a State which is a Party to the Convention but which is not a Party to this Protocol.”
Thus the result of ratification of or accession to the Visby Protocol by a nation is that the nation consents to be bound by the Hague/Visby Rules.”
It is perhaps inevitable that the Convention and the Protocol should have become together known compendiously as the Hague-Visby Rules, although I note that Professor Tetley terms them the Hague/Visby Rules.
Had I been as well-informed about these matters in 2001 as I am now as a result of studying the materials helpfully produced by Counsel for the purposes of this appeal, I think that in my judgment in The Happy Ranger, above, I would have expressed myself differently at paragraph 31. I do not think that I would simply have said that Italy has enacted the Hague-Visby Rules, because I am confident that when I said that I did not appreciate that the Hague Rules as amended by the Visby Rules had never in fact been promulgated as a single autonomous instrument, the Hague-Visby Rules. It would have been more accurate to say that Italy, like the UK, has enacted the Hague Rules as amended, which is exactly what is said in the sub-title to section 1 of the Carriage of Goods by Sea Act 1971.
Accordingly, I fear that in the first sentence of paragraph 31 of my judgment in The Happy Ranger I was intending to say that the words “the Hague Rules as enacted in the country of shipment” could not refer to the Hague-Visby Rules even if the particular paramount clause made no specific reference to the Hague-Visby Rules in some other part of the same clause, but those Rules had in fact been enacted in the country of shipment. I agree with my Lord that in the light of the manner in which “the Hague-Visby Rules” came into being, that is a mistaken approach.
I still consider that my approach to the construction of the paramount clause in that case may have been correct, subject of course to the point on which I was overruled by the Court of Appeal, which was a separate point as to whether there had in that case been issued a bill of lading or similar document of title. The paramount clause there under consideration drew a distinction between the Hague Rules and the Hague-Visby Rules.
As Males J points out at paragraph 30 of his judgment below, when The Happy Ranger reached the Court of Appeal the arguments were different.
“30. . . . The cargo claimants no longer suggested that the first sentence of the clause (“The Hague Rules … as enacted in the country of shipment”) referred to the Hague-Visby Rules. Instead they contended that the Hague-Visby Rules applied by virtue of the second part of the clause in that case, referring to trades where the Hague-Visby Rules applied. That argument was rejected as a matter of construction: the majority (Tuckey and Aldous LJJ, Rix LJ dissenting) held that the second part of the clause only operated when the Hague-Visby Rules applied compulsorily, which would only be the case when there was a bill of lading or similar document of title. However, reversing Tomlinson J, all three members of the Court held that there was such a bill in this case and therefore the Hague-Visby Rules did apply compulsorily. It did not matter, therefore, whether the clause purported to apply the Hague or Hague-Visby Rules. It is nevertheless of interest that Tuckey LJ said at [11]:
“The Hague Rules are not enacted in Italy so the first sentence of the first paragraph of clause 3 of the bill is not applicable.”
31. Although strictly this point did not arise for decision in view of the fact that the shipowners’ reliance on this part of the clause as a route to the application of the Hague-Visby Rules was no longer pursued, this constitutes a clear statement of the position for which Mr Thomas contends in the present case.”
Although it does not perhaps greatly matter, as what was said on this point was on any view obiter, for my part I do consider that Tuckey LJ was agreeing with my approach when at paragraph 11 of his judgment he remarked: “The Hague Rules are not enacted in Italy so the first sentence of the first paragraph of clause 3 of the bill is not applicable.” I had held that the Hague Rules applied by virtue of the second limb of the first sub-clause of clause 3 of the bill of lading. I think that Tuckey LJ was recording the by then common ground that if the second paragraph, or second sub-clause, of clause 3 applied the Hague-Visby Rules, there would be no scope for the application of the second limb of the first sub-clause because that was a default provision, and there was no default.
However that may be, we are at liberty to form our own view as to the effect of the paramount clause in this case. I agree with my Lord that the Hague Rules as enacted in the UK are the Hague Rules as enacted by the Schedule to the Carriage of Good by Sea Act 1971. Those are the Hague Rules as amended, as pointed out both by the sub-title to section 1 of the Act and the title to the Schedule. It may be that it was common ground before the judge that the position in Belgium is the same – see paragraph 13 of his judgment. But in any event, as my Lord points out, the position in Belgium must in the absence of evidence to the contrary be taken to be the same as in the UK.
I am sorry to have been in part responsible for preventing the judge following his first inclination. As it is, I agree that he came to the right overall conclusion, albeit for the wrong reason.
Lord Justice McCombe:
I am happy to say that, having read the judgment of Males J below, having read and heard the admirable arguments in this court and having read the drafts of my Lords’ judgments in this case, my own inclination on first reading of the documents as to the correct outcome of the matter was precisely the same as that of my Lords. Having been educated by all these materials, I am also pleased to find that our mutual inclination also corresponds with the law that my Lords have so carefully explained in their judgments, with both of which I agree. I too would dismiss the appeal.