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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    136. To summarise, this judgment establishes that:

      (1)  in situations such as the present there is a bailment and sub-bailment;

(2)  no attornment by the sub-bailee to the goods owner is necessary; (3)  notwithstanding that there is no contract between them, the sub-bailee owes to the goods owner the duties of a bailee for reward; (4)  but the sub-bailee may rely upon the terms upon which he took possession of the goods from the bailee; (5)  the fact that there is a 'Himalaya' clause in the contract between the goods owner and the bailee does not oust the sub-bailee's right to rely upon the terms of the sub-bailment. But the question whether it was open to the sub-bailee to rely upon an inconsistent 'Himalaya' clause rather than the actual terms of the sub-bailment was left unanswered. (p.344) From what Lord Goff said at p.339, it appears that he might well have categorised the present cases as cases of a direct bailment by the shipper to the shipowners. Lord Goff discussing the Elder Dempster case emphasises the physical delivery of the goods direct to the shipowners' servants at the time the goods were shipped on board. But I will continue to assume in favour of the shipowners here that they were sub-bailees. However, in any event, the relevance of this important judgment to the present case is that it explains and defines the relationships between the parties and against which the fourth issue, in particular, must be considered. To quote Lord Pearson (sup), "the obligation is created by the delivery and assumption of possession under a sub-bailment." The sub-bailment creates a specific bailor/bailee relationship between the sub-bailee and the goods owner. It is not the same as the 'neighbour/foresight' relationship exemplified by Donoghue v Stevenson and the duties created are not the same.

    137. The upshot is that the claimant cargo owners (except for Hunter Timber Ltd, who could not prove when they had become the owners of 'their' consignments) would have been entitled to hold the shipowners liable as bailees or sub-bailees and the shipowners would have been entitled to rely upon the terms upon which they had taken the goods into their possession. For that purpose, it is the contract between the bailees and the sub-bailees which must be looked at, not that between the cargo owners and the bailee (unless a question has arisen as to the bailee's authority to sub-bail, which is not the case here). The relevant contract is the timecharter. The timecharter stipulates, for the protection of the shipowners, that the Hague Rules are to be incorporated into the contract between the shipowners and the timecharterers. It also stipulates that a Clause Paramount shall be included in all bills of lading.

    138. Further, by way of comment, the cargo owners could, by relying upon the goods owner/sub-bailee relationship, have put the burden on the shipowners to excuse their failure to deliver the goods undamaged. But at the trial they did not. They relied upon a Donoghue v Stevenson claim and had to discharge the burden of proof which that entailed.

Issues 2 and 3:

    139. The claimants did not adduce at the trial evidence to prove the timing and cause of damage to the individual consignments or indeed the separate consignments of each claimant. They accordingly did not obtain more than global findings from the judge as to what, on the balance of probabilities, was the progress of the damage over all the claimants' consignments as a whole and without distinguishing between them. Before the judge only the Hunter claimants failed to recover. They were unable to prove that they had acquired the title to the consignments in respect of which they were claiming at any time before the end of the voyage. They were in no better position than the claimants in The Aliakmon [1986] AC 785. In the Court of Appeal, Rix LJ pointed out that the same reasoning applied as well to defeat the Donoghue v Stevenson claims of the other claimants, except Makros Hout BV. They could not claim for bare economic loss. They had to prove what actual damage had been done to their consignments after they had acquired their title to them. Having failed to do so they could not recover anything. Rix LJ was clearly correct. The cross-appeal of the two unsuccessful claimants in the Court of Appeal, Fetim BV and Homburg Houtimport BV, should be dismissed. That leaves Makros Hout. They were able to prove that they had acquired their title to their consignments before 8 December 1995 which the judge had found was the date upon which consignments started to suffer significant damage. Macros Hout were therefore entitled to recover in tort subject to the shipowners being able to set up a contractual defence.

Issue 4: The 'Himalaya' defence:

    140. The shipowners submit that, as the actual carrier, they are entitled to be exempt from any liability whatsoever in respect of this cargo, ie they assert a total exemption from any legal liability no matter what breaches of the sub-bailment they may have committed. They are not content that they should have the benefit of the same exceptions and limitations as are available to the 'contracting' carrier (for the obvious reason that those exceptions would not enable them to defeat the claim). They deny any contractual or other application whatsoever of the Hague Rules to them. These are remarkable submissions which seek to carry the reach of a 'Himalaya' clause in a bill of lading far further than any previous decision. If their submissions are correct they are highly significant. They will provide the actual performing carrier with a route for evading by means of a bill of lading clause the Hague Rules scheme. It will put English law at odds with those legal systems which are not based upon privity of contract and where the Hague Rules as amended by later international instruments take direct legal effect as part of their commercial or maritime codes (ie do not have to go through a contractual gateway): see for example Article 437 of the German Commercial Code quoted below. They run counter to the Hague-Visby Rules, Article IV bis, made part of British law by the Carriage of Goods by Sea Act 1971 and Article 10 of the United Nations Convention on the Carriage of Goods by Sea 1978 (the Hamburg Rules).

    141. The Hague-Visby Rules were the result of a protocol up-dating the Hague Rules Convention prepared by the Brussels Diplomatic Convention on Maritime Law and signed there in 1968, since when there have been extensive ratifications and accessions. It was enacted into English law in place of the 1924 Act by the 1971 Act. For present purposes, it had two important features. First it made its application a matter of law not just a matter of contract, thus rendering the peculiarly Anglo-Saxon contractual problems largely irrelevant. S.1(2) of the 1971 Act provides: "The provisions of the Rules, as set out in the Schedule to this Act shall have the force of law." (See also The Hollandia [1983] 1 AC 565 at 572, per Lord Diplock.) Secondly, in a new Article 4 bis it expressly addressed the servant and agent liability problem. Article 4 bis having in r.1 confirmed that the defences and limits of liability provided for in the Rules should apply in any action against the carrier in respect of loss of or damage to goods covered by a contract of carriage whether the action be founded in contract or in tort, went on to provide in r.2

    "If such an action is brought against a servant or agent of the carrier (such servant or agent not being an independent contractor), such servant or agent shall be entitled to avail himself of the defences and limits of liability which the carrier is entitled to invoke under these Rules."

The learned editors of Scrutton on Charterparties have, from the 1974 edition onwards, pointed out that (to quote from the current 20th edition):

    "… it does not purport to protect the 'actual carrier' in cases where the carriage is performed by someone other than the party who issued the bill of lading. ... In other words the actual carrier must still rely on Elder Dempster."

    142. The Hamburg Rules were adopted by a United Nations conference on the carriage of goods by sea at Hamburg in 1978. They made many changes to the previous Rules. Some of them were not well drafted and did not command the same wide support and degree of adoption as the Hague-Visby Rules. However the provisions relating to the actual carrier were hailed by at least one well informed commentator, William Tetley QC, as a "major advance in the law" (1979 LMCLQ 1) and have for example been incorporated in the German Commercial Code. Framework legislation for their enactment was passed in Australia (1991) and Canada (1993) but in neither country has it been taken any further nor has the United Kingdom taken any such step. For present purposes the relevance of the Hamburg Rules is that the international shipping community was again not prepared to support the immunity for which the shipowners contend in the present case. The Hamburg Rules introduce a specific definition of "Actual Carrier" as being (in brief) "any person to whom the performance of the carriage of the goods has been entrusted .... by the carrier ..." (Art 1 (2)) There is an equivalent of the Hague-Visby Article 4 bis. (Art 7) There is a new Article 10 which deals specifically with the liability of the actual carrier and provides that "all the provisions of this Convention governing the responsibility of the carrier also apply to the actual carrier for the carriage performed by him". (Art 10 (2)) Rules 3 to 6 of this Article then go on to identify that the liability of the actual carrier and the (contracting) carrier is joint and several (4), but no more than the Rules monetary limits shall be recovered in the aggregate (5), rights of recourse between the (contracting) and the actual carrier shall not be affected (6) and any surrender or waiver of rights by the (contracting) carrier shall not affect the rights of the actual carrier unless agreed to by him in writing (3). Thus, Article 437 of the German Commercial Code provides, in translation:

    "Acting Carrier

    (1)  Where the shipment is carried out totally or partially by a third party (acting carrier), this carrier shall be liable as the carrier for the damage arising out of loss or damage to the goods or exceeding the term for delivery during the shipment carried out by him. Contractual agreements between the shipper or the consignee by which the carrier expands his liability shall be effective against the acting carrier only to the extent that he has consented to these in writing.

    (2)  The acting carrier may assert all the defences which the carrier could assert based upon the freight agreement.

    (3)  Carrier and acting carrier shall be jointly and severally liable."

    143. As regards other jurisdictions, the internationally accepted version of the Hague-Visby Rules have been adopted by the majority of major trading nations either specifically as have the United Kingdom, Australia, Canada, Hong Kong and New Zealand, or indirectly by simply incorporating their terms into their commercial or maritime codes. This was, for example, the position in relation to the Hague Rules in Belgium, Holland, Germany, France and many other European countries. According to Tetley (loc cit), France and some other countries have also introduced express provisions in their commercial codes to define the liabilities of stevedores. The contractual subtleties do not arise; the shipowners' liability is determined by the provisions of the relevant commercial code. It is also noteworthy that the Eurymedon type 'Himalaya' clause is not the only type of bill of lading clause that came into use to address the question of servant/agent/independent contractor liability. In the United States of America, a clause came into use which simply used an expanded definition of "carrier". (See The Mormacstar [1973] 2 Lloyds 485, US 2nd Circuit, in which the effectiveness of such a clause was upheld.) This route did not provide greater exceptions than those available to the 'contracting' carrier.

    144. Before examining the decided cases and the principles which they disclose, it is as well to bear in mind a basic rule of construction of contracts of carriage. If a party, otherwise liable, is to exclude or limit his liability or to rely on an exemption, he must do so in clear words. Unclear words do not suffice. (eg. The Pera [1985] 2 Lloyds R 103, CA) Any ambiguity or lack of clarity must be resolved against that party. Further the 'Standard Conditions' of bills of lading are not the subject of negotiation or amendment by the shipper; they are printed conditions which the shipper is required to accept (ie a contract of adhesion); the wording is chosen by the issuer of the bill of lading Here the printed words relied upon by the shipowners are anything but clear, partly by reason of their context in the printed conditions and partly because, owing to misprints, they do not as printed make sense. As transferable documents of title needing to be understood internationally, merchants must be able to take them at face value. For the transferee, the relevant document is the bill of lading itself. The arguments advanced by Mr Gee on the first question now count strongly against him on the fourth.

    145. However, for the purpose of the following discussion I will assume that the missing words in the second paragraph of clause 5 had been filled in with the corresponding words from the Himalaya clause in The New York Star. As regards the argument that the first part of the second paragraph of clause 5 should be construed as a contract not to sue, I do not consider that this is a possible construction of the wording.

    146. The relevant authorities start with the Elder Dempster case. I do not need to add to what has been said about it by Lord Goff in The Pioneer Container (sup.). It enabled the actual carrier to rely upon the same exceptions and limits as the 'contracting carrier'. The case which commences the modern sequence of cases to which reference must be made is Scruttons v Midland Silicones [1962] AC 446. Its historical setting was that the High Court of Australia had recently in Wilson v Darling Island Stevedoring & Lighterage Co 95 CLR 43, another stevedore case, overruled two earlier New South Wales authorities which had enabled stevedores to rely upon the protective limits available to the shipowners under the bills of lading; Fullagar J, who delivered the leading judgment for the majority, acknowledging the principle of a bailment upon terms, distinguished the Elder Dempster decision. ([1956] 1 Lloyds at p.358); and in Adler v Dickson [1955] 1 QB 158 the Court of Appeal in England had held that an injured passenger could recover in full from crew members notwithstanding the exceptions in the passenger's contract with the shipowners. Scruttons were stevedores who had dropped the cargo owners' drum of chemicals whilst lowering it onto a lorry. The purpose of the action was to test whether the stevedores could rely upon the Hague Rules package limitation in the bill of lading. The stevedores were not bailees of the drum, "sub, bald or simple" (p.470). Accordingly no question of bailment on terms could arise and the stevedores could gain no assistance from the Elder Dempster case (p.470). The question was whether there was a principle of 'vicarious immunity' in English law or whether a contract between the tortfeasor and victim was necessary. The answer given (Lord Denning dissenting) was the latter: for the tortfeasor to be protected, he must have a legally enforceable contract with the victim which entitled him to enforce the exception or limitation against the victim. The House of Lords had an obvious distaste for unmeritorious manoeuvres to get round the Hague Rules exceeded only by their distaste for perverting the principled approach of English law in order to do so. To this end, Lord Reid suggested a principled solution. He said, at p.474,

    "I can see a possibility of success of the agency argument if (first) the bill of lading makes it clear that the stevedore is intended to be protected by the provisions in it which limit liability, (secondly) the bill of lading makes it clear that the carrier, in addition to contracting for these provisions on his own behalf, is also contracting as agent for the stevedore that these provisions should apply to the stevedore, (thirdly) the carrier has authority from the stevedore to do that, or perhaps later ratification by the stevedore would suffice, and (fourthly) that any difficulties about consideration moving from the stevedore were overcome. And then to affect the consignee it would be necessary to show that the provisions of the Bills of Lading Act 1855 apply."

This passage has been repeatedly quoted in later cases. It forms the express basis of the decision and reasoning in The Eurymedon and The New York Star.

    147. The first case involving what is now called the 'Himalaya' clause (after the name of the cruise liner involved in Adler v Dickson) to come before a court in London was New Zealand Shipping v Satterthwaite (The Eurymedon) [1975] AC 154. New Zealand Shipping was in fact the parent of the shipowners. It had a longstanding course of dealing with them and acted as their stevedores and general agents in New Zealand. The relevant consignment (machinery) had been damaged in the course of discharge from the carrying ship as a result of the negligence of the stevedores' servants. It was not a bailment case. The cargo owners did not commence proceedings within the one year period permitted by Article III rule 6 of the Hague Rules; if that period is allowed to expire the cause of action is extinguished. It is a substantive provision not a procedural time bar: it extinguishes the liability. (The Aries [1977] 1 Lloyds R 334, HoL) The stevedores relied upon the 'Himalaya' clause. Lord Wilberforce delivering the majority opinion said (p.166) that the case was not a challenge to the decision in Midland Silicones and expressly quoted and applied what had been said by Lord Reid (sup). There was no problem with the terms of the bill of lading which clearly gave both the carrier and the stevedore the benefit of the Hague Rules time limit and included appropriate words of agency (Reid, No.1 and No.2) nor in view of the evidence about the relationship between the stevedores and the shipowners, with the question of authority (No.3). The problem for Lord Wilberforce was the question of consideration or mutuality. He did not argue with the necessity for this if there was to be an enforceable contract. He seems to have preferred the view that there was a unilateral contract or offer by the shipper which became mutual when accepted by performance by the stevedores. (pp.167-8)

    "The exemption is designed to cover the whole carriage from loading to discharge, by whomsoever it is performed: the performance attracts the exemption or immunity in favour of whoever the performer turns out to be. There is possibly more than one way of analysing this business transaction into the necessary components; that which their Lordships would accept is to say that the bill of lading brought into existence a bargain initially unilateral but capable of becoming mutual, between the shipper and the [stevedore], made through the carrier as agent. This became a full contract when the stevedore performed services by discharging the goods. The performance of these services for the benefit of the shipper was the consideration for the agreement by the shipper that the [stevedore] should have the benefit of the exemptions and limitations contained in the bill of lading."

But another view which he actively canvassed (p.168) was an exchange of promises, by the shipper at the time of the issue of the bill of lading and by the stevedores at the time they actually became involved.

    "The following points require mention. 1. In their Lordships' opinion, consideration may quite well be provided by the [stevedore], as suggested, even though (or if) it was already under an obligation to discharge to the carrier. .................. An agreement to do an act which the promisor [stevedore] is under an existing obligation to a third party [the carrier] to do, may quite well amount to valid consideration and does so in the present case: the promisee [shipper] obtains the benefit of a direct obligation which he can enforce. This proposition is illustrated and supported by Scotson v Pegg [1861] 6H. & N.295 which their Lordships consider to be good law." (p.168, emphasis supplied)

The importance for present purposes is that they both involve actual mutual obligations owed by each party to the other and that this is one of the contracts contained in the bill of lading: the consideration is real. It follows that the contract is one which either party is entitled to enforce against the other.

    148. I would also observe that a principal theme of the judgment was expressed by Lord Wilberforce in these terms:

    "Thus, if the carriage, including the discharge, is wholly carried out by the carrier, he is exempt. If part is carried out by him, and part by his servants, he and they are exempt. If part is carried out by him and part by an independent contractor, he and the independent contractor are exempt." (p.167, emphasis supplied, where he is clearly using the word "exempt" in the sense of 'entitled to rely upon the 1 year substantive time bar.)

    In the opinion of their Lordships, to give the appellant the benefit of the exemptions and limitations contained in the bill of lading is to give effect to the clear intentions of a commercial document, and can be given within existing principles. They see no reason to strain the law or the facts in order to defeat these intentions. It should not be overlooked that the effect of denying validity to the clause would be to encourage actions against servants, agents and independent contractors in order to get round exemptions (which are almost invariable and often compulsory) accepted by shippers against carriers, the existence, and presumed efficacy, of which is reflected in the rates of freight. They see no attraction in this consequence." (p.169)

These quotations show what he thought was the justification for the 'Himalaya' clause, preventing avoidance of the carrier's protective provisions as had occurred in Adler v Dickson and Midland Silicones.

    149. The next case was The New York Star [1981] 1 WLR 138. Its facts were held to be indistinguishable from those in The Eurymedon. This time the appeal was from the High Court of Australia. Again, the cargo owners had omitted to commence their proceedings within the 1 year time limit and sought to get round this by suing instead the stevedores whose servants' negligence had caused their loss. The stevedores relied upon the 'Himalaya' clause. The cargo owners, ultimately unsuccessfully, relied upon a number other arguments which are not relevant to the present case. There were a wide range of opinions expressed in the Australian courts. In the High Court a dissenting judgment was delivered by Barwick CJ. ([1979] 1 Lloyds 298) The Privy Council, through Lord Wilberforce, expressly approved and adopted what he had said. (pp.144 and 148) Again the critical question was Reid No.4. No.1 was not in dispute and No.2 and No.3 (actual agency and prior authority) had been proved as facts. Barwick CJ proceeded from the Reid formula, which he quoted (p.303) but he was not wholly happy with the solution given in The Eurymedon to the problem of finding mutuality and consideration and suggested his own solution. The whole of his judgment is of value but for present purposes the quotations must be more limited (pp 304-305, 308):

    "As the authority of the carrier to make with the consignor an arrangement for the benefit of the appellant was made out, it cannot be doubted, in my opinion, that the carrier acted with the authority of the appellant as its agent to make an arrangement with the consignor for the protection of the appellant, as an independent contractor participating in the handling of the cargo, again using "handling" in a neutral sense. To that arrangement there were two parties, the consignor and the appellant. By later accepting the bill the consignee became party to the arrangement with the consignor.


    For my part, I find no difficulty in interpreting the arrangement made by the bill of lading and its acceptance by the consignor as providing that if, in fact the appellant stevedored the cargo, leaving aside for the moment what the stevedoring involved, the appellant should have the benefit of the clauses of the bill including the benefit of the time limitation expressed in cl.17 of the bill of lading. I am unable to treat the clauses of the bill of lading as in any respect an unaccepted but acceptable offer by consignor to stevedore. Indeed, I do not think the bill can be interpreted as containing an offer at large by the consignor. The consignor and the [stevedore] were ad idem through the carrier's agency upon the acceptance by the consignor of the bill of lading as to the protection the stevedore should have in the event that it stevedored the consignment. But this consensus lacked the essential of consideration. The appellant through the bill of lading made no promise to stevedore the cargo. Thus, while I would not analyse the situation obtaining on the acceptance of the bill of lading as an exchange of promises, I would not analyse it as merely the making of an offer susceptible of acceptance by an act of the stevedore done in purported acceptance of the offer. For this reason I have described the bill of lading in so far as the carrier there purports to act for the appellant as an arrangement. To agree with another that, in the event that the other acts in a particular way, that other shall be entitled to stated protective provisions only needs performance by the doing of the specified act or acts to become a binding contract. ....................... Here the act was done. The performance of the act or acts at the one moment satisfied the test for consideration and enacted the agreed terms.


    Their Lordships' decision in The Eurymedon was of great moment in the commercial world and, if I may say so, an outstanding example of the ability of the law to render effective the practical expectations of those engaged in the transportation of goods. It is not a decision of its nature to be narrowly or pedantically confined. It established, as I have said, that the acceptance of the bill of lading by the consignor followed by the acts of the stevedore produced a binding contract to which consignor and stevedore were parties. If I may say so, I entirely and most respectfully agree with their Lordships' decision and I have indicated my own explanation, not disconformable to that adopted by their Lordships, of the legal justification for it."

Before concluding his judgment Barwick CJ added (pp 309-310):

    "In the course of the case, both at trial and before the appellate Court, there was discussion as to whether or not those parts of cl.2 which purported to exempt the carrier and the independent contractor from all liability for breach of obligation were enforceable. Having regard to my expressed view as to the availability to the stevedore of the time limitation contained in cl.17 there is no need for me to examine the question whether the exempting clauses were available in whole or in part to protect it against all liability. On these matters I express no opinion. There are obvious differences between the operation of time limitation clauses and of clauses which purport to displace liability. Suffice it to say that I see no reason in principle or authority why cl.17, however strictly construed, should not be held to be enforceable according to its terms and effective to bar the respondent's action."

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