Judgments - Owners of cargo lately laden on board the ship or vessel "Starsin" and others (Original Respondents and Cross-appellants) v. Owners and/or demise charterers of the ship or vessel "Starsin" (Original Appellants and Cross-respondents) and two other actions

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    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.


    118. The Appellants are companies respectively registered in Liberia and Singapore. At all material times, the former was the owner and the latter the demise charterer of the motor vessel Starsin. No distinction has been drawn between them and I will refer to them simply as the shipowners. The Starsin was a bulk carrier of about 27,000 tons deadweight capacity. She flew the flag of St Vincent and the Grenadines. She had 5 holds and 9 hatches and was crewed by Ukrainian officers and men.

    119. On 3 October 1995, the shipowners time-chartered the Starsin to a company called Continental Pacific Shipping Ltd of Douglas in the Isle of Man. The timecharter was expressly governed by English law. The NYPE form was used. The duration of the charter was to be one timecharter trip (estimate 65/85 days). Under this form of timecharter, the ship remains in the possession of the shipowners and the master and crew remain the shipowners' servants (cl.26). The timecharter contained a number of clauses dealing expressly with the issuing of bills of lading: "the Captain ... is to sign bills of lading for cargo as presented in conformity with Mate's or Tally Clerk's receipts" (cl.8); "the Master to authorise, if required, the Charterers or their Agents to sign bills of lading on his behalf, provided in conformity with Mate's Receipts" (cl.33). As regards the terms of the bills of lading, the timecharter stipulated that certain clauses were both to be deemed to be incorporated in the timecharter and to be included in all bills of lading issued under the timecharter. Clause 56 provided:

    "Both to Blame Collision Clause and General Average, New Jason Clause and General Clause Paramount, as attached hereto, are deemed to be incorporated in this Charter Party and are to be included in all Bills of Lading issued under this Charter Party. Bills of Lading issued under this Charter Party are to be subject to the United Kingdom Carriage of Goods by Sea Act 1924 and subsequent amendments. ......

Clause 24 was to like effect. The undeleted words read:

    "It [the charter] is further subject to the General Clause Paramount which to be included in all bills of lading issued hereunder."

The text of the General Clause Paramount to be included was set out in the timecharter. It read:

    "All bills of lading issued under this Charter Party shall contain the following clause:

    This Bill of Lading shall have effect subject to the provisions of any legislation relating to the carriage of goods by sea which incorporates the Rules relating to Bills of Lading contained in the International Convention, dated Brussels 25th August 1924, and which is compulsorily applicable to the contract of carriage herein contained. Such legislation shall be deemed to be incorporated herein, but nothing herein contained shall be deemed a surrender by the carrier of any of its rights or immunities or an increase of any of its responsibilities or liabilities thereunder. If any term of this Bill of Lading be repugnant to any extent to any legislation by this clause incorporated, such term shall be void to that extent but no further. Nothing in this bill of lading shall operate to limit or deprive the carrier of any statutory protection or exemption from, or limitation of, liability."

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