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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    120. This was the charter party under which the vessel was operating when she called at various Malaysian ports in the following year and loaded various consignments of timber and timber products. It appears that at some ports some timber was loaded which had been wetted by rain before shipment. It was loaded nevertheless, notwithstanding the fact that the presence in the holds of wet cargo loaded at earlier ports might make the vessel unfit (ie, unseaworthy) for the carriage of timber to be loaded at a later port (Hague Rules, Art.3 r.1) and/or the loading of wet timber might constitute a breach of duty properly to care for consignments loaded earlier (Art.3 r.2). Clean shipped on board bills of lading were however issued. But the cargo was in any case improperly stowed, without sufficient dunnage to separate the consignments, enable the cargo and the holds to be adequately ventilated and to protect the cargo from being wetted by ship and cargo sweat (ie, condensation). After loading at the various ports, the vessel set out on her voyage to Northern Europe on 8 December 1996. She arrived off Antwerp on about 19 January 1997 and discharged her cargo at ports which included Rotterdam and Avonmouth. Some 17 consignments out-turned seriously damaged by fresh water. It is these consignments which form the subject matter of these actions. The actions were commenced in the Admiralty jurisdiction of the High Court, two in rem, and a third in personam. The shipowners entered appearances in all actions. The charterers although they were sued as well did not appear and have taken no part in the actions. Your Lordships were told that they were now insolvent but it does not follow that this has any relevance having regard to the terms of the timecharter.

    121. The claimants were various merchants who had acquired the title to the relevant consignments and to whom the relevant bills of lading had been endorsed. They were the 'notify parties' at the relevant discharge ports but not the consignees named in the bills of lading. The consignees were either 'order' or the sellers' bankers through whom the documents were to be negotiated. All the bills of lading issued for the voyage to Europe were on the forms used by 'Continental Pacific Shipping', a trading name which does not distinguish between the charterers and their sister company Continental Pacific Shipping NV of Antwerp. This ambiguity cannot be resolved by reference to the bills of lading themselves, only by having regard to other documents, eg the timecharter. Assuming that the usual practice was followed, the shippers' agents would have purchased these forms from stationers or the port agents at the various loading ports. They do not all have exactly the same wording; they contain a considerable number of mis-prints and omissions, not the same ones at every port. None of these defects and variations are material until I get to the 'Himalaya' clause issue and I will ignore them. Thus, the bill of lading forms included, besides the "Basis of Contract" clause (clause 2) contractually incorporating the Hague Rules, to which I will come later, the following:

    "SHIPPED on board in apparent good order and condition, weight, measure, marks, numbers, quality, contents and value unknown, for carriage to the Port of Discharge or so near thereunto as the Vessel may safely get and lie always afloat, to be delivered in the like good order and condition at the aforesaid Port unto Consignees or their Assigns, they paying freight as indicated to the left plus other charges incurred in accordance with the provisions contained in this Bill of Lading. In accepting this Bill of Lading the Merchant expressly accepts and agrees to all its stipulations on both pages, whether written, printed, stamped or otherwise incorporated, as fully as if they were all signed by the Merchant.One original Bill of Lading must be surrendered duly endorsed in exchange for the goods or delivery order.

    IN WITNESS whereof the Master of the said Vessel has signed the number of original Bills of Lading stated below, all of this tenor and date, one of which being accomplished, the others to stand void.

    1. DEFINITIONS In this Bill of Lading both on the front and on the back the following expressions shall have the meanings hereby assigned to them respectively, that is to say

    (a) "shipper" includes the consignees, the receiver, and the owner of the goods, also the endorser and the holder of the Bill of Lading, also the endorsee and the holder of the Bill of Lading

    (b) "receiver" includes the consignee and the owner of the goods, also the endorsee and the holder of the Bill of Lading

    (c) "Carrier" means the party on whose behalf this Bill of Lading has been signed.

    33 IDENTITY OF CARRIER The Contract evidenced by this Bill of Lading is between the Merchant and the Owner of the vessel named herein (or substitute) and it is therefore agreed that said Shipowner only shall be liable for any damage of loss due to any breach or non-performance of any obligation arising out of the contract of carriage, whether or not relating to the vessel's seaworthiness If despite the foregoing, it is adjudged that any other is the Carrier and/or bailee of the goods shipped hereunder, all limitations of, and exonerations from liability provided for by law or by this Bill of Lading shall be available to such other It is further understood and agreed that as a line, company or agent who has executed this Bill of Lading for and on behalf of the Master is not a principal in the transaction and the said line, company or agent shall not be under any liability arising out of the contract of carriage, nor as carrier nor bailee of the goods."

    34 LAW AND JURISDICTION The contract evidenced hereby or contained herein shall be governed by English law. Any claim or other dispute thereunder shall be solely determined by the English Courts unless the Carrier otherwise agrees in writing."

    35 If the ocean vessel is not owned by or chartered by demise to the company or line by whom this Bill of Lading is issued (as may be the case notwithstanding anything that appeared to the contrary) this Bill of Lading shall take effect only as a contract of carriage with the owner or demise charterer as the case may be as principal made through the agency of the said company or line who act solely as agents and shall be under no personal liability whatsoever in respect thereof."

    122. On the front of the form, the heading is "Liner Bill of Lading No. "; there is a flag or logo and the words "Continental Pacific Shipping". At the foot there is a box saying "Signature". The front and back of the form are therefore unequivocal. The front is to be signed by or on behalf of the Master, that is to say, on behalf of the employer of the master, the shipowner (or possibly a demise charterer of the vessel). The definition in clause 1(c) confirms this and in no way detracts from it. Finally, clause 33 expressly provides that the contract evidenced by the bill of lading is to be with the owner of the vessel to the exclusion of anyone else. Clause 35 stipulates for the same outcome. All this is incontrovertible.

First Question: On whose behalf were the bills of lading signed and issued?

    123. The complications in the present case arise from the fact that, whereas, for a large majority of the consignments shipped on the Starsin, the bills of lading were signed by the port agents simply "as agents", the bills of lading for the consignments the subject of these actions were signed by the port agents as agents "for The Carrier Continental Pacific Shipping" or "for Continental Pacific Shipping (The Carrier)" or "Continental Pacific Shipping As Carrier". For the first of these versions, it appears that all the words are typed; in the second and third, it appears that a rubber stamp was used. Hence the first question raised on the appeal. Are the shipowners liable in contract on these bills of lading, so signed? Colman J and Rix LJ held that they were not but the majority in the Court of Appeal, Morritt V-C and Chadwick LJ, held that they were. No point was taken on the claimants' title to sue on the bills of lading under the Carriage of Goods by Sea Act 1992 (the successor of the Bills of Lading Act 1855). No other contractual claim was made by the claimants against the shipowners at the trial. But, if the claimants could establish this contractual cause of action, they would, by virtue of the 1992 Act, not need to prove what damage had been caused at what stage of the ocean voyage.

    124. The rival arguments were essentially very short. The claimants, through Mr Milligan QC, argued that there was no necessary contradiction between words of description on the front and the unequivocal provisions of clause 33 and that clause 33 should be applied, as should clause 35. They further submitted that if there was any inconsistency it could be resolved by reading the signature as still being for the master and merely lengthening the chain of agency; the local agents signed as agents for the timecharterers who were to be taken as being the agents for the shipowners. He used the analogy of 'undisclosed' principals. The difficulty for Mr Milligan was that he did not seek to prove any such undisclosed agency as a fact and had to make good his argument, if he could, as a matter of the construction of the document. He also pointed out that there were other clauses besides clauses 33 and 35 in the standard terms which would require at the least amendment and adjustment on the shipowners' argument.

    125. Mr Gee QC for the shipowners argued that the typed or stamped words added to the box containing the signature and the designation of 'Continental Pacific Shipping' as the carrier tied in with the definition of 'carrier' in clause 1(c); he was also prepared, at this point in his argument, to pray in aid the provision of Article I(a) of the Hague Rules that "'carrier' includes the owner or the charterer who enters into a contract of carriage with a shipper". He argued that the signature was unequivocal. It showed that the specific intention of the local agents was that Continental Pacific Shipping were the carrier and that this implicitly over-rode the other parts of the form, front and back, including clause 33 and there was no need to do more.

    126. Mr Gee also sought to develop his argument in a number of ways. He referred to the Uniform Custom and Practice for Documentary Credits and the ICC position papers which amplify them. The Uniform Custom is essentially a bankers' code of practice prepared for the purpose of clarifying how documentary letters of credit should be drafted, how the purchaser's stipulations should be given effect to and what are the respective rights and liabilities of the opening bank, the confirming bank and the notifying bank. It is as a matter of the standard practice of banks contractually incorporated into documentary letters of credit. He rightly pointed out that the current version of the code (UCP500) has made significant changes to the previous versions and among other things, requires that the actual identity of the carrier should be disclosed and particularised by naming it or him on the face of the bill of lading. Thus, if it is a master's bill of lading, the actual name of the master must appear on the face of the bill of lading; or if it is the shipowner or a charterer a specific identification of the relevant legal entity must be made. All this is a worthy aspiration and it remains to be seen how deep the new banking practices will penetrate into the former habits of port agents in places such as the East Indies. In the present case they did not. None of the bills of lading issued in respect of any of the cargo carried from Malaysia to Europe were fully compliant. The bills of lading the subject of these actions failed to identify which Continental Pacific entity was being referred to. There was no evidence to suggest that the different signatures to the bills of lading the subject of this action derived from any attempt to comply with the code. The value of drawing attention to the code is that one should now be prepared to look for the identity of the carrier on the face of the bill rather than in the clauses on the reverse. Bills of lading are transferable documents and can be expected, as often as not, to form part of the documentation to be tendered under a documentary letter of credit.

    127. Further arguments of Mr Gee had less relevance. He sought to discredit clause 35 as being a version of the 'demise clause' which was historically obsolete. However it is a standard clause to include in very many types of bill of lading and one would have been surprised not to find it in these bills of lading. But, besides, these bills of lading also include an "IDENTITY OF CARRIER" clause, clause 33, expressly addressing and answering the relevant question of which no criticism is made. He also sought to decry the smallness of the print. This is an old argument which has never been accepted in this context: Elderslie v Borthwick [1905] AC 93; Scrutton on Charterparties and Bills of Lading, Article 9. It can be commented that his criticism did not inhibit him from relying at this and later stages of his argument upon clauses in equally small print which assisted his case.

    128. In my judgment the salient fact is that the signatures contradict the form. The signature is not neutral or equivocal, nor, for that matter, is the form. Where the (original) parties, by issuing and accepting these bills of lading with these signatures, have expressly agreed that Container Pacific Shipping (sic) shall be the contracting party, they have implicitly agreed that inconsistent clauses will be overridden. The special words, typed or stamped, placed in the signature box demonstrate a special agreement. Effect must be given to that agreement. The contracts contained in these bills of lading are contracts with Container Pacific Shipping, now identified by reference to the timecharter as being the limited liability company in the Isle of Man.

    129. There are two observations to made about this conclusion. The first is that 'shipped on board' bills of lading, as all these bills of lading were, will normally have been preceded by some anterior contract ordinarily on the terms of the bill of lading form to be used. By definition the bills of lading will not then have been signed and issued. If the consignment is dropped in the course of loading, as happened to the fire tender in Pyrene v Scindia [1954] 2 QB 402, a bill of lading may never be issued but the contract will still be one which is "covered by a bill of lading" under Article I(b) of the Hague Rules (ib). The operation and the claim of the goods owner is subject to the contemplated bill of lading and the Hague Rules. Transposing the situation to that existing in the present case, to accept the shipowners' argument raises the possibility that the signatures changed the pre-existing contracts. However, there is no evidence or finding on this aspect so it cannot assist either side on the appeal. The second observation is that the claimants are subsequent holders of the bills of lading by endorsement. Their contractual rights must be ascertained by reference to the bill of lading document itself. Look at the bill of lading, front and back, and arrive at a conclusion. That is what I have done and my conclusion is that the contract is not with the shipowners.

The Further Issues:

    130. The appellant shipowners therefore succeed on the first question. but that is not the end of the case. The parties have agreed that three further issues arise:

    (2) Can the shipowners be sued in the tort of negligence by each of the claimants in respect of the damage to their respective consignments of cargo?

    (3) If the answer to (2) is in principle yes, do the findings of fact made by Colman J enable each of the claimants to prove both (a) its cause of action, and (b) its loss (ie, the extent of the damage suffered by each claimant's consignment after it obtained title thereto)?

    (4) If any of the claimants can make out claims in the tort of negligence against the shipowners in respect of damage to the cargo (both in principle and on the findings of fact made by Colman J), to what extent if any are the shipowners protected by clause 5 of the bill of lading (the 'Himalaya' clause point)?

    None of these questions would arise if the first question (ability to sue the shipowners in contract) were decided in favour of the claimants. But, at first instance, Colman J, having decided the first issue against the claimants, decided issues (2) to (4) substantially in their favour, except that one claimant, Hunter Timber Ltd, failed on issue (3). In the Court of Appeal, Rix LJ agreed with the judge's conclusion on issues (2) and (4) but held on issue (3) that none of the claimants had proved their case on the facts except for Makros Hout BV. The majority in the Court of Appeal, Morritt V-C and Chadwick LJ, (obiter) expressed agreement with Rix LJ in particular on issue (4). Thus, on issue (4), all the judges below were unanimous in rejecting the shipowners' case.

    131. The parties' formulation of issue (2) substantially represents the present position of the parties and in this form is no longer in issue between them. But before the judge, the shipowners had argued that there had been a bailment on terms. The judge decided the case upon the tort of negligence and the ordinary duty of care of any person not to cause foreseeable physical damage to another's property (or person) by unreasonable conduct: ie the Donoghue v Stevenson duty of care. For obvious tactical reasons Mr Gee did not seek before your Lordships to establish a bailment on terms, or any bailment; he contented himself with the bald assertion that any such analysis was simply wrong. Nevertheless, it is necessary, in order to explain how issue (3) comes to be in the form which it is and to discuss the important fourth issue, to consider the role of bailment and sub-bailment.


    132. A contract of carriage (unlike a contract for carriage or a contract of affreightment) is a contract of bailment. A bill of lading fulfils a number of roles. It is a receipt; it is evidence of a contract of carriage; it is a transferable document of title. Its primary role is as a receipt for the goods at the port of shipment. Thus these bills of lading have on their face the name of the vessel and the particulars of the goods as furnished by the merchant followed by the words

    "SHIPPED on board in apparent good order and condition ...... for carriage to the port of discharge ...... to be delivered in the like good order and condition at the aforesaid port unto consignees or their assigns ....... One original bill of lading must be surrendered duly endorsed in exchange for the goods or delivery order."

These words acknowledge receipt of the goods from the shipper. The acknowledgment is by the person on whose behalf the bill of lading is signed. The representations that the goods are in apparent good order and condition and the date of the bill of lading take effect as evidential admissions by that person and may create a statutory or common law estoppel in favour of subsequent holders of the bill of lading against that person. If fraudulent, they may give rise to a liability for fraudulent misrepresentation. The attornment to future holders of the bill of lading is also by that person.

    133. So far I have only been talking about the position of the timecharterers. They are the persons on whose behalf these bills of lading have been issued. But these bills of lading by stating (as was the case) that the consignments had been shipped on board the Starsin as the carrying vessel, confirm that there has been bailment of the goods to the shipowners, either direct from the shippers to the shipowners as in the Elder Dempster case, or, according to the view I prefer to take of the present case, by way of a sub-bailment by the timecharterers to the shipowners . So, on my preferred view, there is a bailment by the shipper to the timecharterers and a sub-bailment by the timecharterers to the shipowners. The shipowners having the possession of the goods as sub-bailees, what liabilities on their part does this give rise to vis-à-vis the owners of the goods and what are the terms of their sub-bailment? Both these questions were authoritatively answered in the unanimous judgment of the Privy Council delivered by Lord Goff of Cheiveley in The Pioneer Container [1994] 2 AC 324.

    134. The case arose out of a collision off Taiwan. One of the ships was sunk. It was carrying cargo which it had loaded in Taiwan and was carrying to Hong Kong. The owners of some consignments of cargo commenced an admiralty action in Hong Kong and arrested a sister ship of the vessel which had sunk. The owners of that ship sought a stay of the Hong Kong proceedings relying upon a Taiwan exclusive jurisdiction clause contained in their bills of lading. But two groups of cargo owners had no contractual relationship with the shipowners. The bills of lading issued to them had been issued by others and covered carriage from, in one case, the USA to Hong Kong and, in the other, from Taiwan to Europe. Each of those bills of lading contained a clause: "The carrier shall be entitled to subcontract on any terms the whole or any part of the ........ carriage of the goods and any and all duties whatsoever undertaken by the carrier in relation to the goods." These bills of lading did not contain any exclusive jurisdiction clause but did contain a 'Himalaya' clause (see the arguments at pp.327-332 and Lord Goff at p.344). The actual carriers from Taiwan to Hong Kong were subcontractors of the persons who had issued the bills of lading in the hands of the cargo owners and it was to those persons that the actual carriers had issued their bills. How then could the actual carriers have a right to enforce the exclusive jurisdiction clause against the cargo owners?

    135. Lord Goff, having referred to the obvious advantages of concentrating all litigation arising out of such an accident in a single jurisdiction and to the doctrine of privity of contract as reaffirmed by your Lordships' House in Midland Silicones v Scruttons [1962] AC 446, said (pp.335-342, 344):

    "Bailment and sub-bailment

    Their Lordships are here concerned with a case where there has been a sub-bailment - a bailment by the owner of goods to a bailee, followed by a sub-bailment by the bailee to a sub-bailee - and the question has arisen whether, in an action by the owner against the sub-bailee for loss of the goods, the sub-bailee can rely as against the owner upon one of the terms upon which the goods have been sub-bailed to him by the bailee.


    The question is whether the shipowners can in these circumstances rely upon the exclusive jurisdiction clause in the feeder bills of lading as against both groups of plaintiffs, notwithstanding that the plaintiffs in neither group were parties to the contract with the shipowners contained in or evidenced by such a bill of lading, having regard to the fact that the plaintiffs are seeking to hold the shipowners liable for failing to care for the goods so entrusted to them or failing to deliver them to the plaintiffs - in other words, for committing a breach of duty which is characteristic of a bailee.

    The question whether a sub-bailee can in circumstances such as these rely upon such a term, and if so upon what principle he is entitled to do so, is one which has been considered in cases in the past, but so far neither by the House of Lords nor by the Privy Council. It has been much discussed by academic writers. Their Lordships are grateful to counsel for the citation to them of academic writings, especially Palmer, Bailment, 2nd ed. (1991) and Bell, Modern Law of Personal Property in England and Ireland (1989), to which they have repeatedly referred while considering the problems which have arisen for decision in the present case.

    In approaching the central problem in the present case, their Lordships wish to observe that they are here concerned with two related questions. The first question relates to the identification of the relationship between the owner and the sub-bailee. Once that question is answered, it is possible to address the second question, which is whether, given that relationship, it is open to the sub-bailee to invoke as against the owner the terms upon which he received the goods from the bailee.

    The Relationship between the Owner and the Sub-bailee:

    Fortunately, authoritative guidance on the answer to the first question is to be found in the decision of the Privy Council in Gilchrist Watt and Sanderson Pty. Ltd. v. York Products Pty. Ltd. [1970] 1 WLR.1262, an appeal from the Court of Appeal of New South Wales. There two cases of clocks were shipped from Hamburg to Sydney. On arrival of the ship at Sydney the goods were unloaded, sorted and stacked on the wharf by the defendants, who were ship's agents and stevedores. The plaintiffs were the holders of the relevant bills of lading. When their agents sought delivery of the two cases from the defendants, one was missing and was never found. The plaintiffs sought to hold the defendants responsible as bailees of the goods. The Privy Council proceeded on the basis that there was a bailment to the shipowners, and a sub-bailment by the shipowners to the defendants; and that the defendants as sub-bailees received possession of the goods for the purpose of looking after them and delivering them to the holders of the bills of lading, who were the plaintiffs. Accordingly, the defendants

    "took upon themselves an obligation to the plaintiffs to exercise due care for the safety of the goods, although there was no contractual relation or attornment between the defendants and the plaintiffs:" See p. 1267 per Lord Pearson, delivering the judgment of the Judicial Committee.

    In support of that conclusion, the Privy Council relied in particular on Morris v. C. W Martin & Sons Ltd. [19661 1 Q.B. 716, and on the statements of principle by Lord Denning M.R, Diplock L.J. and Salmon L.J. in that case, at pp. 729, 731 and 738 respectively. There a mink stole, sent by the plaintiff to a furrier for cleaning, was sub-bailed by the furrier to the defendants, who were cleaning specialists, under a contract between them and the furrier. The stole was stolen by a servant of the defendants, and the plaintiff claimed damages from them. Both Diplock and Salmon L.JJ. held that the defendants, by voluntarily receiving into their possession goods which were the property of another, became responsible to the plaintiff as bailees of the goods. Lord Denning M.R. invoked an authoritative statement of the law in Pollock and Wright, Possession in the Common Law (l888), at p. 169, where it is stated:

    If the bailee of a thing sub-bails it by authority, there may be a difference according as it is intended that the bailee's bailment is to determine and the third person is to hold as the immediate bailee of the owner, in which case the third person really becomes a first bailee directly from the owner and the case passes back into a simple case of bailment, or that the first bailee is to retain (so to speak) a reversionary interest and there is no direct privity of contract between the third person and the owner, in which case it would seem that both the owner and the first bailee have concurrently the rights of a bailor against the third person according to the nature of the sub-bailment."

    In addition, Lord Pearson invoked two 19th century cases concerned with the liability of railway companies where the plaintiff buys a ticket from one railway company, and claims liability from another which has undertaken responsibility for part of the services to be rendered to the plaintiff under the contract evidenced by the ticket: see Foulkes v. Metropolitan District Railway Co. (1880) 5 C.P.D. 157 and Hooper v. London and North Western Railway Co. (1880) 50 L.J.Q.B. 103. He also relied on the duty imposed by law on the finder of goods who takes them into his possession. He concluded [1970] 1 WLR. 1262, 1270:

    "Both on principle and on old as well as recent authority it is clear that, although there was no contract or attornment between the plaintiffs and the defendants, the defendants by voluntarily taking possession of the plaintiffs' goods in the circumstances assumed an obligation to take due care of them and are liable to the plaintiffs for their failure to do so (as found by the trial judge). The obligation is at any rate the same as that of a bailee, whether or not it can with strict accuracy be described as being the obligation of a bailee. In a case such as this the obligation is created by the delivery and assumption of possession under a sub-bailment."

    In this passage, Lord Pearson was cautious about describing the obligation of the defendants as bailees vis-à-vis the plaintiffs. Even so, both Diplock and Salmon L.JJ. described the relationship between the owner of the goods and the sub-bailee in Morris v. C. W. Martin & Sons Ltd. [19661 1 Q.B. 716 as that of bailor and bailee, and their Lordships are generally in agreement with this approach.


    The Terms of the Collateral Bailment between the Owner and the Sub-bailee

    On the authority of the Gilchrist Watt case [1970] 1 WLR 1262, their Lordships have no difficulty in concluding that, in the present case, the shipowners became on receipt of the relevant goods the bailees of the goods of both the Hanjin plaintiffs and the Scandutch plaintiffs. Furthermore, they are of the opinion that the shipowners became the bailees of the goods for reward. In Pollock and Wright, Possession in the Common Law, it is stated that both the owner of the goods and the bailee have concurrently the rights of a bailor against the sub-bailee according to the nature of the sub-bailment. Their Lordships, like Lord Denning M.R. in Morris v. C. W. Martin & Sons Ltd. [1966] 1 Q.B. 716, 729, consider that, if the sub-bailment is for reward, the obligation owed by the sub-bailee to the owner must likewise be that of a bailee for reward, notwithstanding that the reward is payable not by the owner but by the bailee. It would, they consider, be inconsistent in these circumstances to impose on the sub-bailee two different standards of care in respect of goods so entrusted to him.

    But the question then arises whether, as against the owners (here the two groups of plaintiffs), the sub-bailees (here the shipowners) can invoke any of the terms on which the goods were sub-bailed to them, and in particular the exclusive jurisdiction clause (clause 26).

    In Morris v. C. W. Martin & Sons Ltd, Lord Denning M.R. expressed his opinion on this point in clear terms, though on the facts of the case his opinion was obiter. He said, at p. 729:

    "The answer to the problem lies, 1 think, in this: the owner is bound by the conditions if he has expressly or impliedly consented to the bailee making a sub-bailment containing those conditions, but not otherwise."

    His expression of opinion on this point has proved to be attractive to a number of judges. In Morris v. C. W. Martin & Sons Ltd. itself, Salmon L.J., at p. 741, expressed himself to be strongly attracted by it: see also Compania Portorafti Commerciale S.A. v. Ultramar Panama Inc. (No. 2) [1990] 2 Lloyd's Rep. 395, 405, per Bingham LJ delivering the judgment of the court. Furthermore, on this point Lord Denning M.R.'s statement of the law was applied by Steyn J. in Singer Co. (UK) Ltd. v. Tees and Hartlepool Port Authority [1988] 2 Lloyd's Rep. 164. It was not, however, followed by Donaldson J. in Johnson Matthey & Co. Ltd v Constantine Terminals Ltd. [1976] 2 Lloyd's Rep. 215, a decision to which their Lordships will revert at a later stage.

    In order to decide whether, like Steyn J, to accept the principle so stated by Lord Denning M.R., it is necessary to consider the relevance of the concept of "consent" in this context. It must be assumed that, on the facts of the case, no direct contractual relationship has been created between the owner and the sub-bailee, the only contract created by the sub-bailment being that between the bailee and the sub-bailee. Even so, if the effect of the sub-bailment is that the sub-bailee voluntarily receives into his custody the goods of the owner and so assumes towards the owner the responsibility of a bailee, then to the extent that the terms of the sub-bailment are consented to by the owner, it can properly be said that the owner has authorised the bailee so to regulate the duties of the sub-bailee in respect of the goods entrusted to him, not only towards the bailee but also towards the owner.


    Such a conclusion, finding its origin in the law of bailment rather than the law of contract, does not depend for its efficacy either on the doctrine of privity of contract or on the doctrine of consideration. That this may be so appears from the decision of the House of Lords in Elder Dempster & Co. Ltd v. Paterson Zochonis & Co Ltd [1924] AC 522. In that case, shippers of cargo on a chartered ship brought an action against the shipowners for damage caused to the cargo by bad stowage, for which the shipowners were responsible. It is crucial to observe that the cargo was shipped under charterers' bills of lading, so that the contract of carriage contained in or evidenced by the bills of lading was between the shippers and the charterers. The shipowners nevertheless sought to rely, as against the shippers, upon an exception in the bill of lading which protected the charterers from liability for damage due to bad stowage. It was held that the shipowners were entitled to do so, the preferred reason upon which the House so held (see Midland Silicones Ltd. v. Scruttons Ltd. [1962] AC 446, 470, per Viscount Simonds, following the opinion of Fullagar J. in Wilson v Darling Island Stevedoring and Lighterage Co. Ltd. [1956] 1 Lloyd's Rep. 346, 364; 95 C.L.R. 43, 78) being found in the speech of Lord Sumner [1924] A.C. 522, 564:

    "in the circumstances of this case the obligations to be inferred from the reception of the cargo for carriage to the United Kingdom amount to a bailment upon terms, which include the exceptions and limitations of liability stipulated in the known and contemplated form of bill of lading."

    Of course, there was in that case a bailment by the shippers direct to the shipowners, so that it was not necessary to have recourse to the concept of sub-bailment. Even so, notwithstanding the absence of any contract between the shippers and the shipowners, the shipowners' obligations as bailees were effectively subject to the terms upon which the shipowners implicitly received the goods into their possession. Their Lordships do not imagine that a different conclusion would have been reached in the Elder Dempster case if the shippers had delivered the goods, not directly to the ship, but into the possession of agents of the charterers who had, in their turn, loaded the goods on board; because in such circumstances, by parity of reasoning, the shippers may be held to have impliedly consented that the sub-bailment to the shipowners should be on terms which included the exemption from liability for bad stowage.

    The Johnson Matthey case:


    Their Lordships wish to add that this conclusion, which flows from the decisions in Morris v Martin & Sons Ltd [1966] 1 QB 716 and the Gilchrist Watt case [1970] 1 WLR 1262, produces a result which in their opinion is both principled and just. They incline to the opinion that a sub-bailee can only be said for these purposes to have voluntarily taken into his possession the goods of another if he has sufficient notice that a person other than the bailee is interested in the goods so that it can properly be said that (in addition to his duties to the bailee) he has, by taking the goods into his custody, assumed towards that other person the responsibility for the goods which is characteristic of a bailee. This they believe to be the underlying principle. Moreover, their Lordships do not consider this principle to impose obligations on the sub-bailee which are onerous or unfair, once it is recognised that he can invoke against the owner terms of the sub-bailment which the owner has actually (expressly or impliedly) or even ostensibly authorised. In the last resort the sub-bailee may, if necessary and appropriate, be able to invoke against the bailee the principle of warranty of authority.


    2. Superimposition of terms

    The next point taken on behalf of the plaintiffs was that the shipowners' form of bill of lading, like many others, contained a "Himalaya" clause which, following the decision of the Privy Council in New Zealand Shipping Co. Ltd. v. A. M Sattherthwaite & Co. Ltd. [19751 A.C. 154, may be effective to provide protection for sub-contractors of carriers by enabling them to take advantage of exceptions in the bill of lading on the basis that the carrier has contracted for the exceptions not only on his own behalf but also as agent for the sub-contractors. The submission of the plaintiffs in the present case was that the "Himalaya" clause gives sufficient effect to the commercial expectations of the parties, and that to allow a sub-bailee to take advantage of the terms of his own contract with the bailee was not only unnecessary but created a potential inconsistency between the two regimes. In their Lordships' opinion, however, this argument is not well founded. They are satisfied that, on the legal principles previously stated, a sub-bailee may indeed able to take advantage, as against the owner of goods, of the terms on which the goods have been sub-bailed to him. This may, of course, occur in circumstances where no "Himalaya" clause is applicable; but the mere fact that such a clause is applicable cannot, in their Lordships' opinion, be effective to oust the sub-bailee's right to rely on the terms of the sub-bailment as against the owner of the goods. If it should transpire that there are in consequence two alternative regimes which the sub-bailee may invoke, it does not necessarily follow that they will be inconsistent; nor does it follow, if they are inconsistent, that the sub-bailee should not be entitled to choose to rely upon one or other of them as against the owner of the goods: see Mr. A. P. Bell's "Sub-bailment on Terms," ch. 6, pp. 178-180, of Palmer and McKendrick, Interests in Goods (1993). Their Lordships are therefore satisfied that the mere fact that a "Himalaya" clause is applicable does not of itself defeat the shipowners' argument on this point."

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