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Session 2004 - 05
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Jindal Iron and Steel Co Limited and others (Appellant) and others v. Islamic Solidarity Shipping Company Jordan Inc (Respondents)
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OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT IN THE CAUSE Jindal Iron and Steel Co Limited and others (Appellant) and others v. Islamic Solidarity Shipping Company Jordan Inc (Respondents) ON THURSDAY 25 NOVEMBER 2004 The Appellate Committee comprised: Lord Bingham of Cornhill Lord Nicholls of Birkenhead Lord Steyn Lord Hoffmann Lord Scott of Foscote HOUSE OF LORDSOPINIONS OF THE LORDS OF APPEAL FOR JUDGMENTIN THE CAUSEJindal Iron and Steel Co Limited and others (Appellant) and others v. Islamic Solidarity Shipping Company Jordan Inc (Respondents)[2004] UKHL 49LORD BINGHAM OF CORNHILL My Lords, 1. I have had the advantage of reading in draft the opinion of my noble and learned friend Lord Steyn. I agree with it, and would dismiss the appeal for the reasons which he gives. LORD NICHOLLS OF BIRKENHEADMy Lords, 2. I too would dismiss this appeal. I express no view on the correctness of the interpretation of article III, rule 2 of the Hague and the Hague-Visby rules adopted by Devlin J in Pyrene v Scindia Navigation Co Ltd [1954] 2 QB 402 and by your Lordships' House in GH Renton & Co Ltd v Palmyra Trading Corporation of Panama 1957 AC 149. But for the reasons given by my noble and learned friend Lord Steyn I agree this interpretation should not now be disturbed. LORD STEYNMy Lords, 3. This appeal concerns the interpretation of the Hague and Hague-Visby Rules. By article III, r. 2 and 8, they provide as follows:
Article IV, r. 2, reads as follows:
The central issue is whether (as shippers and consignees argue) article III, r. 2 of the Rules defines the irreducible scope of the contract of service to be provided by the carrier by sea or (as the carrier argues) article III, r. 2 merely stipulates the manner of performance of the functions which the carrier has undertaken by the contract of service. In cases where the parties to a contract of carriage agree that loading, stowage and discharge are to be performed by shippers, charterers, and consignees, the specific question is whether the carrier is nevertheless liable to cargo owners when the latter, or their stevedores, perform those functions improperly or carelessly. In other words, the question is whether such an agreement, which transfers responsibility for these operations from the shipowners to shippers, charterers or consignees, is invalidated by article III, r. 8. 4. Long-standing precedent is to the effect that such a reallocation of risk by agreement is permissible and that in the postulated circumstances the carrier is not liable: Pyrene Co Ltd v Scindia Navigation Company Ltd [1954] 2 QB 402 per Devlin J; G H Renton & Co Ltd v Palmyra Trading Corporation of Panama [1957] AC 149. Cargo owners unsuccessfully challenged the existing rule in the High Court (before Mr Nigel Teare QC, sitting as a Deputy High Court Judge) and before the Court of Appeal (Waller and Tuckey LJJ and Mrs Justice Black): Jindal Iron & Steel Company Limited and Others v Islamic Solidarity Shipping Company Jordan Inc. and Another (The Jordan II) [2003] EWCA Civ 144; [2003] 2 Lloyd's Rep 87. Cargo owners invite the House to reverse the existing rule. I. The Charterparty and Bills of Lading. 5. Islamic Solidarity Shipping Company Jordan Inc are the owners of the vessel Jordan II. By a charterparty on the Stemmor form dated 4 December 1997 at Hamburg the owners chartered the vessel to TCI Trans Commodities A.G. for a voyage from Mumbai in India to Barcelona and Motril in Spain. Jindal Iran and Steel Company Limited and Hiansa S.A. are respectively the sellers and purchasers of 435 steel coils. The goods were shipped from Mumbai aboard the vessel as evidenced by two bills of lading on the Congenbill form, both dated 2 January 1998, which were issued on behalf of the shipowners at Mumbai. The bills of lading contained or evidenced contracts of carriage to Motril, in Spain. The bills of lading named Jindal Iron and Steel Company Limited as the shippers and Hiansa S.A. as consignees. The relevant provisions on the face of the bills of lading were as follows:
On the reverse of the bill of lading, the relevant terms of the contact of carriage provided as follows:
The bills of lading incorporated the voyage charterparty. The Hague-Visby Rules as enacted in Indian legislation were applicable to this shipment. They correspond to the draft Hague Rules as enacted in the United Kingdom by the Carriage of Goods by Sea Act 1924, which in material respects are the same as the Hague-Visby Rules scheduled to the Carriage of Goods by Sea Act 1971. 6. Clauses 3 and 17 of the charterparty, so far as material, provided:
The acronym F.I.O.S.T. stands for Free In and Out Stowed and Trimmed. There was, therefore, under the charterparty an agreement that the "Shippers/Charterers/Receivers" were to put the cargo on board, stow it, lash it, secure it, dunnage it and discharge it free of expense to the vessel. It was plainly an agreement designed to transfer responsibility for these particular functions from the shipowners to shippers, charterers and consignees. The cargo owners no longer contest the decisions at first instance and in the Court of Appeal to this effect. 7. Both the bills of lading and the charterparty are governed by English law. II. The claims. 8. In February 1998 the cargo was discharged at Motril. The shippers and consignees alleged that the cargo was damaged by rough handling during loading and/or discharging, and/or inadequate stowage due to failure to provide dunnage, failure to secure the coils and/or stacking them so that the bottom layers were excessively compressed. III. The preliminary issue. 9. Title to sue has been assumed to vest in either the shippers or consignees. On the assumption that the allegations of the claimants are correct the parties agreed to the trial of a preliminary issue. The principal issue was whether the agreement in the charterparty (evidenced by clauses 3 and 17), which purported to transfer responsibility for loading, stowage and discharge from the shipowners to shippers, charterers and consignees, is invalidated by article III, r. 8. That is now the only issue before the House. IV. The Submissions in Outline. 10. The dispute before the House is between shipowners, shippers and consignees: the voyage charterers did not take part in the appeal. The principal submissions of cargo owners (the appellants) were as follows. First, that article III, r. 2 of the Hague and Hague-Visby Rules imposed upon the shipowners as carrier of the goods under the bills of lading the duty to perform the functions described therein and the responsibility for the proper and careful performance of those functions (which involve loading, stowing and discharging the cargo). Secondly, that the agreement evidenced by clauses 3 and 17 of the charterparty transferring responsibility for handling, stowing and discharging the cargo is invalidated by article III, r. 8. Recognising that the decision of the House in Renton stands in the way of this argument, counsel for cargo owners invite the House to depart from that decision under the Practice Statement (Judicial Precedent) [1966] 1 WLR 1234. The shipowners' position is straightforward. While they accept that the whole contract of carriage is subject to the Hague-Visby Rules, they contend that the extent to which loading, stowage and discharging are brought within the carrier's obligations may properly be a matter for agreement between the parties. They say that properly construed the Rules do not invalidate an agreement transferring the responsibility of the shipowners for those functions to the shipper, charterer or consignee. In any event, they rely on the binding authority of the decision of the House in the Renton case to that effect. V. The Existing Rule. 11. Under the common law the duty to load, stow and discharge the cargo prima facie rested on shipowners but it could be transferred by agreement to cargo interests. In Pyrene v Scindia Navigation [1954] 2 QB 402 Devlin J observed that the effect of article III, r. 2 of the Hague-Visby Rules was not to override freedom of contract to reallocate responsibility for the functions described in that rule. He said (417-418):
It is true that, in the language of precedent, this was an obiter dictum. But it was a carefully considered statement by one of the most distinguished commercial judges of the twentieth century, who believed firmly in the principle that it is the task of a judge to administer the law as it stands: see the entry for Lord Devlin, written by Professor Tony Honoré, in the Oxford Dictionary of National Biography, 2004, Vol 15, pp 985-988. 12. Two years after the decision in the Pyrene the very same point came before the House for decision in the Renton case. In the present case the Court of Appeal held (at paras 33 and 34 of the judgment of Tuckey LJ), and it is now common ground, that the ratio decindendi of the House in Renton, is to the effect that an agreement transferring responsibility for loading, stowage and discharge of the cargo from the shipowners to shippers, charterers and consignees is not invalidated by article III, r. 8. In these circumstances it is not necessary to analyse the facts of the case and the detailed treatment of the issues by the Law Lords sitting in Renton. Such an analysis is to be found in the lucid judgments of the judge (at paras. 49-55) and Tuckey LJ in the Court of Appeal (at paras 30-34). The majority in Renton consisted of Lord Morton of Henryton, Lord Cohen and Lord Somervell of Harrow. Lord Morton of Henryton cited the observation of Devlin J in Pyrene in full: at 169 and 170. He expressed agreement with it but added that "not only is the construction approved by Devlin J more consistent with the object of the rules, but it is also the more natural construction of the language": at 170. Lord Cohen agreed with Lord Morton of Henryton: at 173. Lord Somervell of Harrow referred to article III, r. 2, and observed (at 174):
Thus there was a clear ratio decidendi in Renton. That Viscount Kilmuir L.C. and Lord Tucker decided Renton on a different ground does not detract from the controlling force of the decision. 13. This view has consistently been applied in subsequent cases: see The Ciechocinek [1976] 1 Lloyds Rep 489, 493 per Lord Denning MR; The Arawa [1977] 2 Lloyd's Rep 416, 424-425, per Brandon J; The Filikos [1981] 2 Lloyd's Rep 555, 557-558, per Lloyd J; The Strathnewton [1983] 1 Lloyd's Rep 219, 222, per Kerr LJ; The Panaghia Tinnou [1986] 2 Lloyd's Rep 586, 589 (my judgment); The Holstencruiser [1992] 2 Lloyd's Rep 378, 380, per Hobhouse J; The Coral [1993] 1 Lloyd's Rep 1, 5, per Beldam LJ. 14. The existing position is summarised in the 20th edition of Scrutton on Charterparties and Bills of Lading, 1996, as follows [at 430-431]:
In my view this is an accurate statement of the existing law. VI. The course of the argument in the House. 15. Before considering the arguments on interpretation, it is necessary to draw attention to the fact that the rule in Renton has stood for almost fifty years. It is probable that an enormous number of transactions have taken place on the assumption that Renton represents the law. Moreover, it seems likely that there are many open transactions, not yet finalised by judgment, arbitration award or settlement, which were concluded in reliance on the rule in Renton. Against this background, counsel for cargo owners invited the House to rule that Renton was wrongly decided. Even if exceptionally a prospective overruling of a decision of the House could be permitted, it would be of no use to cargo owners: compare R v Governor of Brockhill Prison, Ex p Evans (No 2) [2001] 2 AC 19, at 27B (per Lord Slynn of Hadley); 27E (per Lord Browne-Wilkinson; at 29F, (my opinion); at 36E (per Lord Hope of Craighead); at 48H-49C (per Lord Hobhouse of Woodborough). Cargo owners ask the House not to regard the impact of past transactions as a factor of significance and to decide retrospectively that Renton was wrongly decided in 1957. 16. Against this background an observation in Vallejo v Wheeler (1774) 1 Cowp 143 is apposite. Lord Mansfield observed (at 153):
Recently, in Homburg Houtimport BV and Others v Agrosin Private Limited and Another [2004] 1 AC 715, para 13, at 738, Lord Bingham of Cornhill reaffirmed in an international trade law case the importance of this consideration. That is, of course, not to say that the House might not be persuaded under the Practice Statement to depart from an earlier decision where that decision has been demonstrated to work unsatisfactorily in the market place and to produce manifestly unjust results: see R v G and Another [2004] 1 AC 1034, para 35, at 1056, per Lord Bingham of Cornhill. But, in a case such as the present, if that high threshold requirement is not satisfied, it would not be proper to reverse the earlier decision. 17. At the end of the oral argument of counsel for the appellants, the House was satisfied that it had not been shown that the Renton decision worked unsatisfactorily and led to unjust results. Despite the careful and helpful arguments placed before the House by counsel for cargo owners, the House decided that it was unnecessary to call on counsel for the shipowners to address the House on any aspect of the case. I will explain my reasons for agreeing to this decision more fully later in this judgment. But it is necessary to set out the shape of the arguments on interpretation. It is, however, necessary to emphasise again that the House did not hear any oral argument on behalf of the shipowners. But the House did have the benefit of studying in advance the excellent printed cases prepared by both sides. VII. The Interpretation of the Rules. The Text. 18. In interpreting article III, r. 2, the starting point is the language of the text. Counsel for cargo owners was assisted by the fact that in Pyrene Devlin J accepted that the phrase "shall properly and carefully load" fits more closely the interpretation which he rejected. Moreover, at first instance the judge similarly accepted that this is so: [2003] 2 Lloyds Rep 87, para 62, at 97. It is true that in Renton Lord Morton of Henryton (with whom Lord Cohen agreed) thought that Lord Devlin's interpretation was also supported by the natural construction of the language. I would not accept this part of the reasoning in Renton. Two points in particular made by counsel for cargo owners militate against it. First, the language appears to provide for a single standard of carrying out properly and carefully not only loading and discharging but also caring for the goods carried. Devlin J certainly did not suggest that the owner may by agreement under article III, r. 2, transfer responsibility for caring for the cargo during the voyage. Secondly, the French text of the Hague Rules and Hague-Visby Rules provide as follows:
[My emphasis] In context the word "procédera" means "to undertake": Robert-Collins, Dictionnaire Français~Anglais, Anglais~Français, s.v. "procéder", p 560; Le Nouveau Petit Robert, s.v. "procéder." The French text is the authoritative language of the Hague Rules and the English and French texts are equally authentic in the case of the Hague-Visby Rules. The French text tends to support the interpretation put forward by cargo owners. (It is to be noted that in Pyrene Lord Devlin referred to the French text: at 421.) For my part, the concession of Devlin J was realistic. It follows that the common thread and ratio decidendi of the majority judgments in Renton is a purposive rather than literal reading of article III, r. 2. 19. Devlin J did not base his interpretation on linguistic matters. He relied on the broad object of the Rules. It has often been explained that the Hague Rules and Hague-Visby Rules represented a pragmatic compromise between the interests of owners, shippers and consignees. The Hague Rules were designed to achieve a part harmonisation of the diverse laws of trading nations. It achieved this by regulating freedom to contract on certain topics only: Chandris v Isbrandtsen-Moller Co Inc [1951] 1 KB 240, at 247. In interpreting article III, r. 2, its purpose and context is all important. For example, it is obvious that the obligation to make the ship seaworthy under article III, r. 1, is a fundamental obligation which the owner cannot transfer to another. The Rules impose an inescapable personal obligation: Riverstone Meat Co Pty Ltd v Lancashire Shipping Co Ltd [1961] AC 807. On the other hand, article III, r. 2, provides for functions some of which (although very important) are of a less fundamental order e.g. loading, stowage and discharge of the cargo. Those who are not attracted to literal interpretations of an international Convention, reliant principally on linguistic matters, may find it entirely possible to conclude that the context and purpose of article III, r. 2, would not be undermined by permitting owners to transfer responsibility for loading, stowage and discharge to shippers and others. Devlin J thought that it was difficult to believe that the Rules were intended to impose a universal rigidity about such essentially practical secondary functions. This reasoning is supported by the reality that in practice shore based stevedores rather than the crew load and discharge vessels. Who must pay them? This can not unreasonably be viewed as an economic matter which the parties may determine by their specific contracts. A literal interpretation of the Rules no doubt leads to the conclusion that, where shippers and consignees select and pay for stevedoring, as they often do in practice, cargo claimants may recover compensation from owners for the negligence of cargo owners or the negligence of their stevedores. The point was touched on by Greer J in Brys & Gylsen v J and J Drysdale & Co (1920) 4 Ll L Rep 24. He said, at p 25:
A purposive interpretation such as Devlin J preferred, which permits transfer of the responsibility for such functions to the party who selects and pay for the stevedores, avoids these unreasonable results. On balance I am satisfied that Devlin J adopted a principled and reasonable approach to the interpretation of article III, r. 2. And his interpretation was not based on any technical rules of English law: it was founded on a perspective relevant to the interests of maritime nations generally. Moreover, it may be right to say that where conflict arises between purely linguistic considerations and the broad purpose of an international convention, the latter should generally prevail. In my view the case for the adoption of Lord Devlin's interpretation, if it were proper to reconsider the matter afresh today, is formidable. Travaux préparatoires. 20. With the aid of Michael F Sturley's The Legislative History of the Carriage of Goods by Sea Act and the Travaux Préparatoires of the Hague Rules (1990), Vols 1 to 3, counsel for cargo owners took the House on an extended tour of the travaux. It is, of course, a well established supplementary means of interpretation: article 32 of the Vienna Convention on the Law of Treaties, Vienna, 23 May 1969 (Cmnd 4140); Fothergill v Monarch Airlines Limited [1981] AC 251. It is, however, equally well settled that the travaux can only assist if, as Lord Wilberforce put it in Fothergill, they "clearly and indisputably point to a definite legislative intention": 278B. The general thrust of the travaux closely match the interpretation put forward by cargo owners. The judge recognised this. But he also pointed out that nowhere in the travaux is there any statement that article III, r. 2, prevents an owner and merchants from reallocating responsibility for loading, stowage and discharge of the cargo to the merchants. It is not enough to show that the draftsmen proceeded on the basis of the normal common law rule that loading stowage and discharging is the duty of the shipowner, without considering the effect of different contractual arrangements. If the issue had been directly confronted by draftsmen, it is far from obvious that they would have concluded that a shipowner should be liable to cargo owners for damage caused by cargo owners themselves when they undertook the relevant duty and did it badly. In these circumstances the judge held that the requirements enunciated in Fothergill were not satisfied. In my view he was entirely right to do so. The travaux cannot therefore assist the argument of the cargo owners. The views of the textbook writers. |
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