Note: the House of Lords' judgment in this case was delivered on 14 March 2003. Reversing the majority of the Court of Appeal, it held that the bills of lading in this case were Charterers' bills, not Owners' bills. It upheld the Court of Appeal judgment to the effect that all claimants, bar one, did not have title to sue the Owners in tort. For the case note on the House of Lords decision, click here
DMC’s Category Rating: Confirmed
This case is currently under appeal to the House of Lords
FactsIn November and December 1995, the Starsin loaded consignments of plywood and timber from three ports in South-East Asia, Kuching, Belawan and Port Klang, for discharge at Antwerp and Avonmouth, UK. On arrival, widespread damage to the cargo by wetting was found. As determined by the judgment at first instance, 15% of the damage was attributable to rain prior to shipment and the balance of the damage to condensation caused by negligent stowage, for which the carrier was responsible. The claimants were the buyers of the cargo. The defendants were the owners of the ship. All the claimant buyers - except one, Makrous Hout - obtained title to their consignments only in the course of the voyage after the ship had left Port Klang, its last loading port.
The judge at first instance and the parties had agreed amongst themselves that the 15%/85% assessment of damages applied, not to each individual parcel of cargo, but across the board.
This made it impossible to say that the damage which occurred after the transfer of title to the buyers was a new incidence of damage. Rather the damage was inherent in each parcel of damaged cargo from the very beginning of the long-haul voyage; it was an ongoing process that would have started, albeit slowly, at the early part of the voyage.
The bills of lading were all on the same ‘liner bill of lading’ form prominently bearing the name and emblem of the ship’s time-charterers, Continental Pacific Shipping Ltd (‘CPS’). On the front of the bill of lading, the CPS voyage number was quoted. The face of the bill contained an ‘attestation clause’ which read ‘In witness whereof the Master of the said vessel has signed the number of bills of lading stated below…’. The Signature Box was completed with either a typed or stamped statement ‘as agent for Continental Pacific Shipping as Carrier’.
The reverse of the bill of lading contained a number of relevant clauses, as
It is hereby expressly agreed that no servant or agent of the carrier …… including every independent contractor from time to time employed by the carrier shall in any circumstance whatsoever be under any liability whatsoever to the shipper, for any loss or damage or delay of whatsoever kind arising or resulting directly from any neglect or default on his part or acting in the course of or in connection with his employment and,  without prejudice to the generality of the provisions in this Bill of Lading, every exception, limitation, condition and liberty herein contained and every right, exemption from liability, defence and immunity of whatsoever nature applicable to the carrier or to which the carrier is entitled hereunder shall also be available to and shall extend to protect every such servant or agent of the carrier who is or shall be deemed to be acting on behalf of or for the benefit of all persons who are or might be his servants or agents including ……. every independent contractor from time to time employed by the carrier and  all such persons shall to this extent be deemed to be parties to the contract in or evidenced by this Bill of Lading. The shipper shall indemnify the carrier against any claim by third parties against whom the carrier cannot rely on these conditions, in as far as the carrier’s liability would be excepted if said parties were bound by these conditions. [*Note that the numbers do not appear in the clause itself; they are inserted simply for ease of reference]
33. Identity of Carrier
The contract evidenced by this Bill of Lading is between the merchant and the owner of the vessel named herein… and it is therefore agreed that said shipowner only shall be liable for any damage or loss billed 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 limitation of and exoneration from liabilities provided for by law or by this Bill of Lading shall be available to such other. It is further understood and agreed that [the]line, company or agent who has executed this Bill of Lading for and on behalf of master is not a principal in the transaction and the said line, Company or agent shall not be under any liabilities arising out of the contract of carriage, nor as a carrier nor bailee of the goods.
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 agent and shall be under no personal liability whatsoever in respect thereof.' [This clause was not named in the Bill but it is commonly known as the ‘Demise Clause’]
Clause 34 of the bills was an English law and jurisdiction clause.
1) Were the Bills of Lading Owners’ bills or Charterers’ bills?
He concluded therefore, that the bills were charterers’ bills.Chadwick LJ. however, came to the opposite conclusion, holding that the bills were owners’ bills. He placed particular emphasis on the inclusion in the bill of clause 35 – the Demise Clause - saying ‘there is a significant difference between a bill of lading which includes only [an Identity of Carrier Clause] and a bill of lading which includes [both an Identity of Carrier Clause and a Demise Clause. Where both clauses are included] the proper approach… is to construe the two clauses together on the basis that one is not intended to be a mere repetition of the other. It is plain that the two clauses may overlap. But the approach to construction must be that the parties have intended the clauses to be complementary, not repetitious.’ He accordingly placed emphasis on the words in the Demise Clause reading "(as may be the case notwithstanding anything that appeared to the contrary)", saying ‘the purpose and effect of the words in parenthesis is to emphasise that [the Demise Clause] is intended to apply to a case where, on the face of the bill, it does appear that the person by whom the bill has been issued is the shipowner, but where, with knowledge of the underlying facts, it can be seen that the person by whom the bill has been issued is not the shipowner. This is such a case.’
Accordingly, he approved the judgment in the case of the ‘Flecha’ – Fetim BV v. Oceanspeed Shipping Ltd  1 LLR 612 and cast doubt on the decision in the case of the ‘Hector’ – Sunrise Maritime Inc v. Uvisco Ltd  2 LLR 287.
He concluded: ‘the question whether the description of CPS ‘as carrier’ in the signature box must yield to the opening words of clause 33 (which identify the carrier as the shipowner) is answered by construing the bill of lading as a whole. When that is done, it is clear …. that the parties have provided the answer to that question by incorporating clause 35 [the Demise Clause] as a term of their contract.’
As a consequence of this finding, the owners were held liable to the cargo interests under the terms of the bill of lading contract.
The Vice-Chancellor agreed with Chadwick LJ.
2) Can the shipowners be sued in tort?
Rix LJ. cited the traditional view that ‘a shipowner can only be sued in tort by a cargo owner whose cargo has suffered damage while on board the vessel by reason of a breach of duty owed to that cargo owner. Thus, damage done to a future owner of the damaged cargo, before the passing of title to that owner, will not give him a cause of action in tort.’ He found that, in the present case, ‘the breach of duty occurred on loading or at the latest on completion of loading on December 8 in the form of negligent stowage at a time when, other than in the case of Makros Hout, the shippers, and not the claimants, owned the cargo. The damage caused by that negligence was progressive throughout the voyage and throughout the damaged parcels; it was also inevitable in that it was common ground that there was nothing that could be done to mitigate the effects of the initial breach.’ The issue, he said, was to determine whether the rules laid down in the cases of the ‘Wear Breeze’  1 QB 219 and the ‘Aliakmon’  AC 785, require both breach of duty and damage to occur at a time when the claimants had title, or whether it is sufficient that damage occurs after the claimants have gained title albeit in respect of a breach of duty which predates the transfer of title. Or, to put the matter in another way, is it right to say that those cases contemplate that a duty can be owed, and thus broken, to future owners of cargo, or only to those who are owners at the time of breach?’In fact, Rix LJ. found that he did not have to answer this question directly. He held that both the original act of negligent stowage and the occurrence of damage had already occurred at a time before all claimants other than Makros Hout acquired title to the damaged cargo. All the subsequent condensation damage continuing beyond the transfer of title in the respective parcels was merely the continuation and progression of the damage already suffered. No new negligence, no new mechanism of damage, postdated the transfer of title. In these circumstances, the shipowners had no exposure in tort to the claimants (other than Makros Hout) since there was only one cause of action, which arose when the damage was first caused. ‘It is not open, therefore, to a new owner to say… that a new cause of action, in respect of damage which has developed after the transfer of title, has come into being in favour of the transferee…. In my judgement…. the progressive damage done in this case does not create new causes of action in respect of the later stages of the same progressive damage, even in the hands of a new cargo owner and even upon the assumption that the new cargo owner was always within the scope of the shipowner’s duty of care.’
Chadwick LJ. did not express any opinion on this issue, as his decision that the owners were liable to cargo under the bill of lading contracts made it irrelevant. The Vice-Chancellor, although agreeing with Chadwick LJ. on the contractual issue, did opine on the tort issue, saying that even if the shipowners owed the claimant cargo owners a duty of care (as found by the judge at first instance), no damage was caused by the negligence of the shipowners after the claimants – other than Makros Hout – had obtained title to the goods. ‘On the judge’s findings the damage was sustained when the voyage commenced. By that time the consequences of condensation were inherent in the cargo; no further breach of duly or element of causation arising from the original breach was needed for their development. Thus when the voyage commenced, the tort of which complaint is made was both committed and complete.’
3) Is the shipowner protected against liability in tort by reason of the Himalaya Clause?
Rix LJ. agreed with Colman J., the judge at first instance in the case, that – in the context of the bills of lading being charterers’ bills – the shipowners were the independent contractors of the charterers for carrying out a large part of the latter’s contractual obligations to the shippers. The argument advanced on behalf of the shipowners was that, as an independent contractor, part 1 of the Himalaya Clause gave them a complete defence. The argument of the cargo interests was that part 1 of the Clause applied only to the carrier, who alone is entitled to enforce, by means of this provision, a total prohibition on any collateral attack on him by means of any suit by the shipper against third parties, and that it is only part 2, with its more limited exemption that applies to such third parties.
Rix LJ. preferred the charterers’ contentions, saying ‘The essence of the matter is that part 1 of the clause …… is only concerned with granting to the carrier an exceptional right, not granted to any other party , to enforce, if necessary by injunction, a complete prohibition on any suit by holders of the bill against third parties within the clause.’ He concluded: ‘I consider…that clause 5 only protects the owner to the same extent as the carrier is itself protected by the bill of lading provisions under its contract of carriage. Since the carrier would have no exemption for negligent stowage, it follows that its independent contractor, typically a stevedore but here the shipowner itself, can have no exemption either.’
The Vice-Chancellor and Chadwick LJ. agreed, the latter saying: ‘…the first part of the relevant provisions has effect only as an agreement between the shipper and the carrier. I reject the submission that persons other than the carrier can take advantage of the protection afforded by the first part, independently of the second part.’
The overall result of the case was that the shipowners were held liable to the cargo interests under the bill of lading contracts. The shipowners had no liability in tort, save in respect of Makros Hout.
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