Leave to appeal this case to the House of
Lords was refused: Editor, 12 February 2006
DMC/SandT/11/02
Parsons Corporation & Others v. CV Scheepvaartonderneming – the ‘Happy
Ranger’
English Court of Appeal: Aldous, Rix and Tuckey LJJ.: May 2002
SHIPPING: CONTRACT OF CARRIAGE: SPECIMEN BILL OF LADING: GENERAL PARAMOUNT
CLAUSES: WHETHER CONTRACT COVERED BY A BILL OF LADING WITHIN ARTICLE I(B) OF
HAGUE/HAGUE-VISBY RULES: STRAIGHT BILLS OF LADING: WHETHER BILLS STRAIGHT BILLS:
APPLICATION OF HAGUE/HAGUE/VISBY RULES TO STRAIGHT BILLS: LIMITATION OF
LIABILITY:
ARTICLE IV RULE 5: MEANING OF ‘IN ANY EVENT’
Summary
1.In order for the Hague-Visby Rules to apply, it is sufficient that the
contract of carriage provide for the issue of a bill of lading. It is not
necessary that the bill of lading contain the terms of the contract of carriage.
2. Where a bill of lading provides for delivery to the consignee ‘or to his
assigns’, inserting the name of the consignee into the bill does not
necessarily render the bill non-negotiable or non-transferable. This point was
not necessary to the decision.
3. There was no decision in English law on the issue whether a ‘straight’
bill of lading was a bill of lading or similar document of title to which the
Hague-Visby Rules would apply. It would be unwise to assume that the statements
in the text books to the effect that the Rules would not apply to such bills,
were correct.
4. The words ‘in any event’ that appeared in the limitation of liability
provisions of Article IV of the Hague-Visby Rules meant what they said. It was
not a pre-condition of reliance on the limitation provisions that the shipowner
had complied with his obligation to exercise due diligence to make the ship
seaworthy under Article III Rule 1.
DMC Category Rating: Developed
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Facts
By a contract dated 7 October 1997, the claimants, Parsons Corporation of the
United States, contracted with the defendant shipowner for the carriage by sea
on board the purpose-built heavy lift ship, the Happy Ranger, of three process
vessels (reactors) from Porto Marghera in Italy to Al Jubail in Saudi Arabia.
The shipment took place in March 1998. Whilst one of the process vessels was
being loaded on board the Happy Ranger with the use of ship’s gear operated by
the ship’s crew, one of the hooks on the ship’s crane broke. The process
vessel fell to the ground and sustained damage, which the claimants calculated
at US$2.4 million.
The contract of carriage consisted of three documents – a signed front
page, a six-page rider and an attached specimen form of bill of lading. The
front page contained the essential details of the agreement, including a lumpsum
freight. It provided also by clause 5:‘The Carrier’s regular form of Bill of Lading, as per specimen attached,
is applicable and shall form part of this Contract. In the event of a conflict
between the Bill of Lading and this Contract, the terms…. of this Contract
shall prevail…..’.
The Rider, by clause 11, provided:
"The Master will deliver the cargo only upon presentation of duly
endorsed original Bills of Lading….
Clause 15 provided that ‘any dispute arising under this Contract of
Carriage and Bill of Lading shall be decided by the competent Court of London
and English Law shall apply.’
The specimen bill of lading incorporated into the contract of carriage was on
the Mammoet form. The face of the bill contained boxes for the shipper and
consignee to be identified and a ‘Shipped on Board’ clause providing for the
carriage of the cargo to the port of discharge, there to be delivered ‘unto
the Consignee or to his or their assigns’.
On the reverse of the bill, the preamble stated:
‘This Bill of Lading has been issued pursuant to and in accordance with a
Contract of Carriage dated as overleaf. All terms… of the Contract of Carriage
dated as overleaf are herewith incorporated. In the event of conflict between
this Bill of Lading and the Contract of Carriage, the terms…. of the Contract
of Carriage shall prevail….’
Clause 3 of the Bill of Lading was a General Paramount Clause. It read in
material part as follows (numbers added by the Editor):
1. The Hague Rules contained in the International Convention for the
Unification of Certain Rules relating to Bills of Lading, dated Brussels 25
August 1924, as enacted in the country of shipment shall apply to this contract.
When no such enactment is in force in the country of shipment, Articles I to
VIII of the Hague Rules shall apply. In such case the liability of the Carrier
shall be limited to £100 per package.
2. Trades where Hague-Visby Rules apply
In trades where the International Brussels Convention 1924 as amended by the
Protocol signed at Brussels on 23 February 1968 – the Hague-Visby Rules –
apply compulsorily, the provisions of the respective legislation shall be
considered incorporated in this Bill of Lading…
3. Trades where US COGSA applies
This Bill of Lading shall have effect subject to the provisions of the
Carriage of Goods by Sea Act of the United States, approved 16 April 1936, which
shall be deemed to be incorporated herein…
4. Trades where the Canadian Water Carriage of Goods Act 1936 applies
All the terms, provisions and conditions of the Canadian water Carriage of
Goods Act, 1936 and of the Rules comprising the schedule thereto, are, so far as
applicable, to govern the contract contained in this Bill of Lading….
In fact, no bill of lading was issued for the damaged process vessel,
although bills of lading on the Mammoet form were issued for other cargo carried
by the Happy Ranger under the contract on that voyage. These bills were ‘straight’
bills, namely bills that were not issued to order and named the consignee. As
such, they were neither negotiable nor transferable.
The relevant provisions of the UK Carriage of Goods by Sea Act, 1971, which
introduced the Hague-Visby Rules into English law are the following:
Section 1(2)
The provisions of the Rules, as set out in the Schedule to this Act, shall
have the force of law
Section 1(4)
….nothing in this section shall be taken as applying anything in the Rules
to any contract for the carriage of goods by sea, unless the contract expressly
or by implication provides for the issue of a bill of lading or any similar
document of title.
Schedule to the Act
Article I(b)
"Contract of carriage" applies only to contracts of carriage
covered by a bill of lading or any similar document of title, in so far as such
document relates to the carriage of goods by sea…..
Article X
The provisions of these Rules shall apply to every bill of lading relating to
the carriage of goods between ports in two different states if:
(b) the carriage is from a port in a contracting state
Note: carriage is this case was from Italy, a contracting state to the Hague-Visby
Rules
On the issue of limitation of liability:
Article IV Rule 5
(a) ….neither the carrier nor the shi p shall in any event be or become
liable for any loss of damage to or in connection with the goods in an amount
exceeding [666.67 units of account] per package or unit or [2 units of account
per kilogramme] of gross weight of the good lost or damaged, whichever is the
higher.
(e) Neither the carrier nor the ship shall be entitled to the benefit of the
limitation of liability provided for in this paragraph if it is proved that the
damage resulted from an act or omission of the carrier done with intent to cause
damage, or recklessly and with knowledge that damage would probably result.
At first instance, the judge had held that the Hague-Visby Rules did not
apply to the contract, as the parties had not intended or expected that, a) as
between themselves, any bill of lading issued would be of any contractual effect
independent of the contract and b) the bill of lading issued would evidence the
terms of their contract. The contract on which Parsons sued was not, therefore,
a contract contained in or evidenced by a bill of lading or any similar document
of title. The Hague-Visby Rules were therefore, by their terms, inapplicable.
Accordingly, the judge had relied upon the default provision in clause 3.1,
under which the Hague Rules Convention applied, limiting the liability of the
shipowner to £100 sterling. Parsons appealed.
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Parsons’ Submissions
1. The overall scheme of clause 3 was to apply the Hague/Hague-Visby Rules
applicable in the country of shipment. It was not necessary to consider whether
the contract of carriage fell within Article I(b), because parties had made
their intention clear in clause 3. This argument had not been raised at first
instance.
2. If contract had to be within Article I(b), then the contract in this case
was ‘covered by a bill of lading or similar document of title. This was the
point on which Parsons lost at first instance. The judge had held that:
"… the present is not in my judgment a case in which Parsons were
entitled to demand, at or after shipment, a bill of lading setting forth the
terms of the contract…The contract of carriage as between Parsons and the
owners was always to be found in the contract of 7 October 1997. Those parties
did not intend or expect that as between themselves any bill of lading issued
would be of any contractual effect independent of the contract made on 7 October
1997 and in particular they did not intend that an bill of lading issued would
evidence the terms of that contract. The terms of their contract were already
adequately and completely evidenced by the contract and specimen form of bill of
lading attached thereto. The parties envisaged that any bill of lading issued
might in fact contain terms at variance with those which they had already
agreed, which latter were to prevail."
Parsons submitted that the question was not whether the bill of lading to be
issued would contain the terms of the contract but simply whether one was to be
issued. They submitted that the language of section 1(4) of the 1971 Act makes
it clear that that Article I(b) simply requires that the contract should provide
for the issue of a bill of lading. Here the contract did so provide, so the
Rules applied.
3. Even if the bills of lading that the parties contemplated would be issued
were ‘straight bills’, they would still have been subject to the Hague-Visby
Rules. (For a definition of ‘straight bills of lading, see paragraph 2. of the
Judgment below) This submission was not made to the judge at first instance. He
had concluded that, as the bills of lading contemplated by the parties were not
negotiable and did not transfer title, they were not within section 1(4) of the
1971 Act or Article I(b) of the Rules.
4. On the question of limitation of liability under Article IV Rule 5 of the
Hague-Visby Rules, Parsons argued that the words ‘in any event’ in that
clause referred to the exempting events set out in Article 4 and not to other
causes. They should be read as subject to the pre-condition that the owners had
complied with the obligation to exercise due diligence to make the ship
seaworthy under Article III Rule 1, similar to the approach adopted in regard to
the exceptions set out in Article IV Rule 2 - Maxine Footwear v. Canadian
Government Merchant Marine [1959] AC 589, and as regards dangerous cargo under
Article IV Rule 6 – The Kapitan Sakharov [2000] Lloyd’s Rep. 255.
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Judgment
The leading judgment was given by Lord Justice Tuckey. The other Lord
Justices agreed with his judgment, save that Lord Justice Rix found for Parsons
also under submission 1.
1. Although the judge agreed that the word ‘Trades’ in clause 3 included
voyages or carriage of cargoes within the scope of Article X, he did not accept
the first of Parsons’ submissions. Whilst the issue of a bill of lading was a
necessary condition of the application of the Hague-Visby Rules, that was not of
itself sufficient. The scope of Article X must be subject to Article I(b) so if
the contract in this case was not one which was covered by a bill of lading or
similar document of title, then the Rules, including Article X, did not apply.
If they did not apply, they were obviously not compulsory. The judge did not
think it permissible to manipulate the wording of clause 3 to delete the words
‘apply compulsorily’. He acknowledged that this conclusion meant that
paragraph 2 of clause 3 was surplusage, because the Rules would apply
compulsorily with or without it, but said that "no real significance can be
attached to this in a document of this kind".
2. Accordingly, there was a need to consider the issue under Article I(b)
because, unless the contract of carriage in this case was one which was covered
by a bill of lading or similar document of title, the Hague-Visby Rules would
not apply compulsorily by the proper law of the contract, as paragraph 3.2
required. On this point, the Lord Justice Tuckey disagreed with the judge at
first instance – see paragraph 2 in Parsons’ Submissions above.
He held that the Rules are not concerned with whether the bill of lading
contains terms which have been previously agreed or not. It is the fact that a
bill of lading is issued, or that its issue is contemplated, that matters. If a
bill of lading is or is to be issued, the contract is ‘covered’ by it or ‘provides
for its issue’ within the definitions of Article I(b) and section 1(4) of the
1971 Act. He therefore concluded that the Hague-Visby Rules did apply
compulsorily to the contract of carriage in this case.
3. That decision made it strictly speaking unnecessary to decide the third
issue argued, namely if the bill of lading which the parties contemplated would
be issued was in the same form as those actually issued for the other reactors
on this voyage, the Rules would not apply because they were ‘straight’
bills. Nevertheless, he felt that as the court had heard a good deal of argument
on the issue, he should express a view, at least on some of the points.
a) The first question was whether the bills of lading issued (or to be
issued) in this case were ‘straight’ bills. Lord Justice Tuckey
acknowledged that the term ‘straight bill’ had no English law definition
but noted that the term derived from earlier US legislation. This referred
to a straight bill as one in which the goods are consigned to a specific
person, as opposed to an ‘order’ bill where the goods are consigned to
the order of anyone named in the bill, or bearer. "Bills ‘to order’
or ‘bearer’ are transferable by endorsement and delivery and entitle the
holder to possession of the goods upon production of the bill. They will not
necessarily transfer title to the goods and are not negotiable in the strict
sense of that word either, although colloquially such bills are described as
documents of title, which are negotiable."
He further noted that in this case, there were printed words on the front
of the bill of lading, which referred to ‘delivery to the consignee or his
assigns’ – meaning ‘to order’. "Those words," he said,
"did not appear in the consignee box [on the face of the bill, which
contained only the name of Parsons’ subsidiary company in Saudi Arabia]
but there is nothing in that box or anywhere else in the bill to show that
it was not intended that they should have that effect. One cannot spell out
such an intention from the mere fact that only a named consignee appears in
the consignee box. As a matter or construction, the two have to be read
together."
b) Parsons had also argued that, even if the parties had contemplated the
issue of ‘straight’ bills, such a bill would be a bill of lading or
similar document of title within the meaning of the Rules. In making this
submission, Parsons "defied the unanimous views of the text book
writers". Their argument was that a consignee is within the class of
persons which the Rules are designed to protect and because (in this case)
the bill was his only key to possession of the goods, it must be regarded at
least as a document of title in the sense contemplated by the Rules if it is
not a bill of lading within the meaning of the Rules. The arguments about
this needed also to take into account the provisions of the UK Carriage of
Goods by Sea Act, 1992, which defined ‘straight’ bills of lading not as
bills of lading at all but as sea waybills.
As Lord Justice Tuckey had already held that the bills actually issued in
this case were not ‘straight’ bills, he did not have to decide this
second question. He noted, however, that there was no case which directly
decided this point and added that in his view, "it would be unwise to
assume that the statements in the text books are correct".
4. On the limitation point, Lord Justice Tuckey did not accept Parsons’
arguments. Although there was no English case on the point, there were decisions
both in Canada and in the United States to the effect that the carrier was
entitled to limit his liability to the stated amount, even if he had failed to
exercise due diligence to make the ship seaworthy. Lord Justice Tuckey held that
the words ‘in any event’ meant what they said. "They are unlimited in
scope," he said, "and I can see no reason for giving them anything
other than their natural meaning. A limitation of liability is different in
character from an exception. The words ‘in any event’ do not appear in any
of the other Article IV exemptions, including Rule 6 (dangerous cargo) and, as a
matter of construction, I do not think that they were intended to refer only to
those events which give rise to the Article IV exemptions…..If Rule 5(a) had
the meaning contended for by [Parsons], Rule 5(e) would be unnecessary."
The appeal was therefore allowed, in that the Hague-Visby Rules applied to
the contract of carriage, but Parsons’ claim was subject to the limitation of
liability under Article IV Rule 5.
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