(back to preceding text)

    21. It is plain that the printing of this clause leaves something to be desired. For example, some punctuation is missing and the word "over" in the last sentence should obviously read "were". It is also plain, and common ground, that there is some omission at the point where I have inserted the asterisk in square brackets. Colman J resolved this problem by interpolating "(who)": [2000] 1 Lloyd's Rep 85 at 98. Rix LJ made the same interpolation, as did Sir Andrew Morritt V-C, although the latter set out the clause somewhat differently: [2001] 1 Lloyd's Rep 437 at 460, 476. Argument was addressed to the House, not addressed to the courts below, on the correctness of this interpolation. While the answer to this problem is not decisive in these appeals, it is as well to resolve how the clause should be read before construing it.

    22. While acknowledging that there was no justification for inserting "who" other than a need to correct an obvious grammatical solecism, Mr Milligan urged that, since it was not the function of the courts to make or re-write the parties' contracts, the interpolation to be made should be the least intrusive reasonably possible to make sense of the clause. Mr Gee contended (a) that it was clear what words have been omitted, and (b) that the omission was explained by the phenomenon, technically known as homoeoteleuton, where one sentence contains a word which closed the preceding sentence and the transcriber's eye has wandered from one to the other, leading to the entire omission of the whole passage lying between them. As to (a), Mr Gee contended that the missing words were "acting as aforesaid and for the purpose of all the foregoing provisions of this clause the Carrier … ." These are the words to be found in the Conline bill of lading form, on which clause 5 as quoted above has been closely modelled, although with some additions, deletions and changes of language. It is a form of bill in very wide use, and was the subject of judicial consideration in A M Satterthwaite & Co Ltd v New Zealand Shipping Co Ltd (The Eurymedon) [1975] AC 154 at 165 and Port Jackson Stevedoring Pty Ltd v Salmond and Spraggon (Australia) Pty Ltd (The New York Star) [1981] 1 WLR 138. After the square brackets the clause again picks up the language of the Conline bill. As to (b), Mr Gee submitted that the transcriber's eye had wandered from "Carrier" immediately before the square brackets to the same word at the end of the suggested interpolation.

    23. I take it to be clear in principle that the court should not interpolate words into a written instrument, of whatever nature, unless it is clear both that words have been omitted and what those omitted words were: see Re Hargraves' Trusts, Leach v Leach [1937] 2 All ER 545 at 547-548, see per Farwell J; In re Murray, decd. Martins Bank Ltd v Dill [1955] Ch 69 at 79-80, per Evershed MR; In re Neeld, decd. Carpenter v Inigo-Jones [1960] Ch 455 at 464-465, per Cross J; [1962] Ch 643 at 677-678, per Upjohn LJ; In re Riley's Will Trusts. Riley v Riley [1962] 1 WLR 344 at 348-349, per Buckley J. In the present case there is agreed to be an omission. It is also plain, in my opinion, for the reasons which Mr Gee gave, what words were omitted and how they came to be omitted. I would accordingly construe the clause as if the words "acting as aforesaid and for the purpose of all the foregoing provisions of this clause the Carrier" appeared in place of the square brackets I have inserted.

    24. It is now necessary to construe the clause to decide the extent (if any) of the protection it affords the shipowner. For this purpose the relevant part of the clause (as quoted above) must be construed as a whole, notwithstanding the convenience of breaking it down into its constituent numbered parts. Part (1) on its face confers wide-ranging immunity on any servant, agent or independent contractor of the carrier, in the course of his employment by the carrier, against any liability to the shipper resulting from (among other things) negligent damage to the goods. It is not suggested that the cargo owners are in any different position from the shippers. Colman J interpreted this provision as a covenant not to sue, enforceable by injunction, such as was considered in Nippon Yusen Kaisha v International Import and Export Co Ltd (The Elbe Maru) [1978] 1 Lloyd's Rep 206: [2000] 1 Lloyd's Rep 85 at 99-100. All three members of the Court of Appeal agreed with him; [2001] 1 Lloyd's Rep 437 at p 461, para 116; p 471, para 169; p 476, para 201. Given this unanimity of opinion, one is reluctant to disagree. But it is in my judgment impossible to spell a covenant not to sue out of the language of this clause, as the Court of Appeal found it to be in Gore v Van Der Lann [1967] 2 QB 31. The language construed in The Elbe Maru (above) was strikingly different.

    25. Part (2) has two obvious purposes. The first is to extend to every servant, agent or independent contractor of the carrier acting as such every right and every exemption, defence and immunity available to the carrier. The second is to establish that the carrier is for purposes of all the foregoing provisions of the clause acting on behalf of all such servants, agents and independent contractors. The intention, plainly, is to fill the lacuna exposed in Adler v Dickson [1955] 1 QB 158 and to achieve the contractual solution based on agency which was presciently described by Lord Reid in Midland Silicones Ltd v Scruttons Ltd [1962] AC 446 at 474 and which was held to be effective in The Eurymedon [1975] AC 154 and The New York Star [1981] 1 WLR 138. It is unnecessary to repeat, but it is helpful to bear in mind, the very clear account of the historical background to Himalaya clauses provided by Lord Goff of Chieveley, giving the judgment of the Privy Council, in The Mahkutai [1996] AC 650 at pp 658-665.

    26. Part (3) again has two purposes. The first is to underline that such servants, agents and independent contractors are to be treated as parties to the contract. The second is to make plain that such servants, agents and independent contractors are only parties to the contract to a limited extent ("to this extent"): that is, while "acting as aforesaid" and for the purpose of asserting the rights, exemptions, defences and immunities already referred to.

    27. Part (4) is an addition to the standard wording of the Conline bill. But it appears to be a straightforward indemnity provision, and it gives rise to no problem in these appeals.

    28. A number of points were raised on the construction of this clause. The first was whether, assuming that CPS was the contractual carrier, the shipowner was an independent contractor. The judge held that it was ([2000] 1 Lloyd's Rep 85 at 99):

"Ordinarily understood the word 'independent contractor' in the context of a head contract means a third party with whom a party to a contract enters into a contract under which the third party contracts to perform some or all of the obligations which that party had undertaken to perform under the head contract, in other words, a sub-contractor. Where a carrier has chartered a vessel to perform the sea carriage which that carrier has contracted with the shipper to perform, he has in effect employed the shipowners to carry out the substantial part of his own contractual obligations. He has therefore employed the shipowner as an independent contractor just as if he had employed a stevedore to carry out the handling of the goods at the port of loading".

    29. Rix and Chadwick LJJ and Sir Andrew Morritt V-C agreed: [2001] 1 Lloyd's Rep 437 at 461, para 113; p.471, para 166; pp.475-476, paras 198-201. 1 also agree. The judge, as I respectfully think, correctly analysed the role of an independent contractor and correctly held that, on the present facts, the shipowner fell within it.

    30. The second question is whether the protection available to servants, agents and independent contractors under part (1) was by virtue of part (2) limited to the protection (to use a compendious term) available to the carrier under part (2). The judge held that the protection was so limited: [2000] 1 Lloyd's Rep 85 at 99-100. All three members of the Court of Appeal agreed: [2001] 1 Lloyd's Rep 437 at pp.461-2, paras 114-117; p.471, para 171; p.476, para 201. There are to my mind two insuperable objections to this construction. First, part (1) is expressed in unqualified (and, if it is relevant, emphatic) language: "in any circumstances whatsoever be under any liability whatsoever". Secondly, part (2) is prefaced by the words "without prejudice to the generality of the provisions in this Bill of Lading". This is the classical formula used by a draftsman to make plain that what follows is not to be understood as restricting the effect of some other provision or provisions. So, since part (1) is a provision in the bill, part (2) is not to be understood as restricting it. That seems to me a compelling reason for not understanding part (1) in any sense more restricted than its ordinary meaning would suggest. I would not regard it as an objection to this construction that part (2) appeared to be unnecessary, given the incidence of repetition and surplusage in instruments of this kind and the number of different jurisdictions in which the clause might fall to be construed. Some weight was attached in the courts below to the words "to this extent" in part (3), but I have indicated my understanding of these words in paragraph 26 above and I do not think they help the cargo owners.

    31. Account must however be taken of the Hague Rules, which were expressly stipulated to be the basis of this contract of carriage by clause 2 on the reverse of the bill. The Hague Rules impose certain duties on the carrier, notably the duties in article III rules 1 and 2:

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

Make the ship seaworthy.

Properly man, equip and supply the ship.

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."

    32. Article IV provides various grounds of exoneration and provides a provisional financial limitation applicable to claims for loss or damage to goods. Article III rule 8 provides

"Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liablity for loss or damage to, or in connexion 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 this convention, shall be null and void and of no effect ….."

    33. The cargo owners rely on this last rule to support their contention that part (1) must be understood to limit the protection of servants, agents and independent contractors of the carrier to the protection available to the carrier, since otherwise the exemption would fall foul of this rule. The counter-argument was that "carrier" is defined in article I(a) to include "the owner or the charterer who enters into a contract of carriage with a shipper" and that the party which had entered into a contract of carriage with the shipper on the present facts was CPS, not the shipowner. Therefore, it was said, there was no reason why the liability of the shipowner should not be excluded altogether. Until a late stage I was inclined to accept this counter-argument as correct, but I am ultimately persuaded that it is not, for a reason which did not, I think, loom large in the courts below or in argument before the House.

    34. The Himalaya clause itself, and the undoubted artificiality of the reasoning relied on to uphold it in The Eurymedon [1975] AC 154 and The New York Star [1981] 1 WLR 138, were a deft and commercially-inspired response to technical English rules of contract, particularly those governing privity and consideration: per Lord Goff in The Pioneer Container [1994] 2 AC 324 at 335 and The Mahkutai [1996] AC 650 at 664-665. In both The Eurymedon and The New York Star the problem arose because there was no contract between the cargo owner and the stevedore made in the ordinary way by a mutual exchange of promises: the stevedore had never promised to do anything. The problem was overcome by holding, in effect, that a bilateral contract came into existence upon the performance by the stevedore of stevedoring services, the stevedore thereupon becoming entitled to the benefit of the Himalaya clause exemption provided by the carrier acting as agent of the stevedore. In this situation the question whether the stevedore had itself become party to a contract of carriage could scarcely arise, since on no showing could it be said to have done so. The present case however is factually different, because the act performed to bring any contract into existence between the shipowner and the cargo owners is the carrying of the goods. The question is whether that factual difference gives rise to a legal difference, whether (in short) the resulting contract is properly to be regarded for Hague Rules purposes as a contract of carriage and the shipowner as entering into it with a shipper. I have not found these to be easy questions, but I conclude that to answer them negatively would be to elevate form over substance and to invest what is essentially a legal device with a wholly disproportionate legal significance. If the act performance of which brings a contract into existence between the shipowner and the cargo owners is the carrying of the cargo owners' goods it would seem to me anomalous to give the shipowner the benefit of clause 5 but take no account of article III rule 8 of the Hague Rules which were incorporated into the contract by clause 2 (where they were described as the "BASIS OF CONTRACT"). Thus the shipowner is not protected by an exemption provision invalidated by article III rule 8. Since the object of joining third parties to the contract was only to give them the benefit of the contractual exemption, that object was (in the case of the shipowner) frustrated. But since the object of joining third parties (here the shipowner) to the contract was only to give the shipowner the benefit of the contractual exemption, the shipowner did not become subject to the positive obligations laid on the carrier by article III rules 1 and 2 of the Hague Rules, and this was not suggested.

    35. I would accordingly resolve this second issue in favour of the cargo owners, reaching the same destination as the Court of Appeal but by a different route. This makes it necessary to consider the third major issue in the case, which is whether the cargo owners (other than Makros Hout) have a tort claim maintainable against the shipowner.

The third issue

    36. In Leigh and Sillavan Ltd v Aliakmon Shipping Co Ltd (The Aliakmon) [1986] AC 785 at 809, Lord Brandon of Oakbrook, in an opinion with which all members of the House agreed, said:

"My Lords, there is a long line of authority for a principle of law that, in order to enable a person to claim in negligence for loss caused to him by reason of loss of or damage to property, he must have had either the legal ownership of or a possessory title to the property concerned at the time when the loss or damage occurred, and it is not enough for him to have only had contractual rights in relation to such property which have been adversely affected by the loss of or damage to it".

    37. The issue between the present parties concerned not the correctness of this principle, but its application to the facts of the present case, which were very economically summarised by Rix LJ ([2001] 1 Lloyd's Rep 437 at 453, para 78 as follows:

"78  In the present case, the breach of duty occurred on loading or at latest on completion of loading on Dec. 8 in the form of negligent stowage at a time when other than in the case of Makros Hout the shippers and not the claimants owned the cargo. The damage caused by that negligence was progressive throughout the voyage and throughout the damaged parcels: it was also inevitable in that it was common ground that there was nothing that could be done to mitigate the effects of the initial breach. The claimants make no claim in respect of the damage which had occurred before they obtained title respectively to their goods, only in respect of the continuing damage which occurred after title had passed. The Judge was able, at any rate on the across the board interpretation of his judgment, to determine the respective percentage of the damage which had occurred before and after the passing of title. He held that a duty of care was owed at the time of loading to all those, such as the claimants, who would become owners of the cargo during the course of the voyage, that there was a breach of that duty at the outset, and that the cause of action in tort was completed when once further damage had occurred after the transfer of title to each claimant in respect of their goods."

    38. Makros Hout had already obtained title to their goods before damage to those goods occurred. Thus they were owners when the damage occurred and their cause of action became complete. It follows that, the second issue having been answered in favour of the cargo owners, the shipowner has no defence to a claim in tort by Makros Hout. Another cargo owner, Hunter Timber, was unable to show when it acquired title to the goods and so was unable to show that it was the owner of the goods consigned to it when its cause of action arose. For the purpose of the ensuing discussion the claims of these two cargo owners must be excluded.

    39. The Court of Appeal was unanimous in rejecting the judge's conclusion that because the damage was progressive each exacerbation of pre-existing damage gave rise to a new cause of action exercisable by the owner of the goods at that time, thus permitting an allocation of causes of action to different shippers and consignees and an apportionment of the resulting damage. Rix LJ ([2001] 1 Lloyd's Rep 437 at 457, para 96) said

"In my judgment, however, the cause of action in respect of the negligent stowage was in the present circumstances completed once and for all when more than insignificant damage was caused by that negligence to the respective parcels of timber".

    40. At that time neither Fetim nor Homburg were cargo owners. Rix LJ regarded Darley Main Colliery Co v Mitchell (1886) 11 App Cas 127 as applying to a special and exceptional situation: pp 457-459, paras 99-105. Chadwick LJ reached the same conclusion (p 464, para 132), as did Sir Andrew Morritt V-C (p.476, para 204). I would for my part also reach that conclusion, for all the reasons given by Rix LJ in paragraphs 77-107 of his judgment, at pages 453-459, which I am content to adopt as my own.

    41. I would therefore dismiss the cargo owners' cross-appeal. But I would allow the shipowner's appeal, save in the case of Makros Hout, the judgment in whose favour must stand. I would invite the parties to make written submissions on costs in the House and in the courts below.

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 demise clauses?, 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.