'Starsin' HofL

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English House of Lords: Lords Bingham, Steyn, Hoffmann, Hobhouse and Millett: 14 March 2003: [2003] UKHL 12
Steven Gee QC instructed by Holmes Hardingham for the owners
Iain Milligan QC instructed by Clyde & Co for the cargo receivers
Bills of lading: Owners’ or Charterers’ bills: Himalaya clause: application of Hague Rules to Himalaya clause exemptions: CLAIMS IN TORT: TITLE TO SUE
1. The House of Lords overturned the majority judgment of the Court of Appeal in holding that the bills of lading issued in this case were Charterers’, rather than Owners’ bills, despite the existence of an ‘Identity of Carrier Clause’ and a ‘Demise Clause’ on the reverse of the bill.

2 The House of Lords, again overruling the trial judge and the Court of Appeal, held that part 1 of the Himalaya clause that appeared in the bills of lading in this case was an exemption from liability that could be invoked by an independent contractor, and not a covenant not to sue, enforceable only by the contractual carrier. But the protection accorded by part 1 of the clause to an independent contractor, whose service was the carriage of the goods by sea, was struck down by the operation of Article III Rule 8 of the Hague Rules, which were also incorporated into the bill.

3. The House upheld the decision of the Court of Appeal to the effect that three out of the four cargo claimants did not have title to sue the shipowners in tort, since the negligence that caused the damage to the cargo occurred on or shortly after completion of loading and before the claimants acquired title to the cargo.

DMC Category Rating: Developed

In October 1995, the Starsin, a 27,000 tons deadweight bulkcarrier, was timechartered by its owners on an amended NYPE form of charter to Continental Pacific Shipping Ltd of the Isle of Man, for a trip from ports in South-East Asia to Northern Europe. In November and December 1995, the Starsin loaded consignments of plywood and timber from three ports in Malaysia, 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. By the time of the proceedings, the timecharterers had become insolvent, and took no part in the litigation. 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, that is to say, after the negligent stowage had been effected.

The judge at first instance, Colman J., found that it was 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 timecharterers, 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 bills were not, however, signed "for the Master"; rather the Signature Box contained the signature of the port agent, qualified by either a typed or stamped statement reading ‘as agent for Continental Pacific Shipping as Carrier’ (emphasis added).

The reverse of the bill of lading contained a number of relevant clauses, as follows:
‘1. Definitions: (c) "Carrier" shall mean the party on whose behalf this bill of Lading has been signed
5. ‘Himalaya’ Clause
[1]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, 
[2] 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 [acting as aforesaid and for the purpose of all the foregoing provisions of this clause, the carrier] 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
[3] all such persons shall to this extent be deemed to be parties to the contract in or evidenced by this Bill of Lading…….
[*Note1, that the numbers do not appear in the clause itself; they are inserted simply for ease of reference and 2, that the words in square brackets were words that the House of Lords agreed should be inserted in the clause order to rectify a clear omission in the clause as printed]
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 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… 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.

The essential issues in the appeal to the House of Lords were:

  1. Whether the owners or CPS were the carriers under the bills of lading?
  2. If owners were not the contractual carriers, what (if any) protection was afforded to them by the Himalaya clause?
  3. If owners were not the contractual carriers, could they be sued by cargo interests in tort (or any other theory of liability)?

1. Identity of Carrier
The House held unanimously that the bills of lading were charterers’ bills and that CPS were the contractual carriers (agreeing with Colman J at first instance and the dissenting judgment of Rix LJ in the Court of Appeal, and overruling the majority in the Court of Appeal, and Moore-Bick J in the Flecha [1999] 1 Lloyd’s Rep 612 – where bills of lading in identical format had been considered).

In reaching this result, the House placed reliance on the following:

  • It was "plain from the face" of the bill that the parties intended CPS to be the carrier.
  • Words specifically added by the parties (in this case, the form of the signature) took precedence over printed terms in the event of inconsistency. In the words of Lord Hobhouse, "the signatures contradict the form". The special words demonstrated a special agreement, to which effect must be given.
  • A "reasonable reader" of the bill would go no further than face – and certainly no further than the definitions clause on the reverse, clause 1(c).
  • Notice was taken of the provisions in Uniform Customs and Practices for Documentary Credits, UCP 500, to the effect that the actual identity of the carrier must appear on the face of the bill and that banks would not look at the terms on the reverse of a bill, when considering documents for acceptance under letters of credit. Lord Hobhouse said that the value in drawing attention to the UCP was 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."
  • CPS used the wrong printed form (since it was clearly designed to be a owners’ bill) and inconsistent terms in the form they did use must be modified accordingly or treated as inapplicable

Their Lordships dismissed a suggestion that both CPS and owners were contractual carriers. This was a suggestion that had been raised by Lord Justice Rix in his judgment in the Court of Appeal. The House held that the language of the bill itself did not support it.

2. The Himalaya Clause
As set out above, there were three principal parts of the Himalaya clause in the bills of lading. The first part said "no servant or agent of the carrier … shall in any circumstances whatsoever be under any liability whatsoever". The second part (which was "without prejudice to the generality" of the terms of the bill) was basically in the Conlinebill form, to the effect that "every exemption, limitation, condition and liberty herein contained and every right, exemption from liability, defence and immunity whatsoever … applicable to the carrier" was also to be available to "every such servant or agent of the carrier". The third part said that "all such persons shall to this extent be deemed to be parties to the contract contained in or evidenced by this bill of lading".

Their Lordships held unanimously that:

  1. The owners were independent contractors of CPS and were in the class of persons entitled to rely upon the Himalaya clause.
  2. The first part of the clause was a blanket exclusion from liability, which the owners were entitled to rely upon (subject to the effect of Article III Rule 8* of the Hague Rules, to which the bills of lading were expressly subject by their terms) – it was not simply a covenant not to sue, enforceable only at the suit of CPS. On this point, the House overruled both the judge at first instance and all the judges in the Court of Appeal
  3. The first part of the clause was a freestanding term, which was not to be cut down or limited, or to extend no further than the protection available under the second part of the clause. This was made plain by the "without prejudice" wording at the beginning of the second part of the clause. On this point, again, the House disagreed with both the judge at first instance and all the judges in the Court of Appeal
  4. By performing services in relation to the goods, the owners became parties to a contract with the cargo owners to the extent required to enable them to rely upon the protection granted by the clause, but this did not have the impact of imposing upon the owners all the Hague Rules obligations to exercise due diligence to make the ship seaworthy and properly and carefully to load, stow, carry and discharge the goods.
  5. A majority of their Lordships (Lord Steyn dissenting) held that Article III, Rule 8 struck out the blanket exemption in the first part of the Himalaya clause, leaving the owners to rely on the second part. This gave the owners the ability to rely upon the Hague Rules exemptions, but these provided no defence to the claim in this case, namely damage caused by bad stowage.

In Lord Steyn’s view, the words "contract of carriage" in Article III Rule 8, referred to a "contract with the usual incidents and executory obligations of a contract of carriage. In other words, it envisages a contract for the carriage of goods" – and not simply an agreement for an exemption, even though the consideration for the exemption in this case was the carriage of the goods by the ship. On this basis, he held that the exemption in part 1 of the Himalaya Clause was not contained in a contract of carriage and therefore Article III Rule 8 did not apply.

In consequence, the Owners had no defence to a claim in tort, provided that the claimants had title to sue in tort. This was so only in the case of the one claimant who had obtained title to the goods before the damage occurred (see below).

*Article III Rule 8 reads:
"Any clause….in a contract of carriage relieving the carrier or the ship from liability for loss or damage to, or in connexion with, goods arising from the negligence, fault or failure in the duties and obligations provided by this article or lessening such liability otherwise than as provided in this convention, shall be null and void and of no effect…"

The reasoning of the various Law Lords that led to this decision differed one from the other.

Lords Bingham and Hobhouse both held that the Himalaya clause contract was a "contract of carriage". They distinguished the contract in this case from those considered in the cases of The Eurymedon [1975] AC154 and The New York Star [1981] 1 WLR 138, since the independent contractor in those cases was a stevedore, not the actual carrier. The other judges thought it was not – it might be a contract for carriage, but it was not a contract of carriage – see the reference to Lord Millett below. The consequence of Lord Bingham’s and Lord Hobhouse’s conclusion was that the Himalaya clause contract was a contract on the terms of the bill of lading (to the extent required), and that this included (part, at any rate, of) the Hague Rules. The result was that Article III Rule 8 struck down the total exemption of liability contained in the first part of the Himalaya clause.

Whilst holding that the exemption contract was not a contract of carriage, so as to attract the application of the Hague Rules as a whole, Lord Hoffmann held that Article III Rule 8 did apply to it. He relied on part 3 of the Himalaya clause, providing for the independent contractor to be – "to this extent" – a party to the bill of lading contract. Although the independent contractor was a party only for the purpose of taking the benefit of the exemption clause, the provisions of the bill of lading, insofar as they were relevant, applied to him. The one relevant provision was Article III Rule 8; it applied to the exemption clause and restricted its effect.

Although Lord Millett held that the contract between the cargo interests and the shipowners created by the Himalaya clause was not a contract for the carriage of goods by sea, he also reached the conclusion, not without some difficulty, that that Article III Rule 8 applied. His reasoning was that Rule 8 did strike down any exempting provision that sought to relieve "the carrier or the ship" from liability – the words "or the ship" were not mere tautology and were "intended to cover the case where the owner or demise charterer of the ship has not entered into a contract of carriage".

Both Lords Hoffmann and Millett justified their conclusion on the policy ground that to hold otherwise might mean than an aggrieved cargo owner had no right to secure its claim by taking action in rem against the vessel.

Re-writing Clauses
It was in the context of construing the Himalaya clause that the House dealt with this issue.

When comparing the clause in this case with the standard form of the Conlinebill text, it was apparent that the words "acting as aforesaid and for the purpose of all the foregoing provisions of this clause the carrier" had been omitted. Whoever copy-typed or typeset the CPS bill of lading skipped from one appearance of the word "carrier" to another, omitting the words in between.

All of the Law Lords (with the exception of Lord Hobhouse who did not decide this point, but appeared to doubt the legitimacy of the practice – "If a party chooses to put an ineffective exclusion clause in his contract, it is not for the courts to fashion one which will give him what he ought to have asked for.") agreed that the omitted words should be read into the clause. They dismissed cargo interests’ argument that, this being an exemption clause, they should not take any steps to protect it from typographical errors.

Lord Millett said that, where a court "can see, not only that words have been omitted, but what those words are, then it is its duty to supply them."

Title to sue
Once it was accepted that the owners’ exemption from liability under part 1 of the Himalaya clause was invalidated by Article III Rule 8 of the Hague Rules, the shipowners were potentially exposed to claims from the cargo interests in tort.

In this regard, however, the case of the "Aliakmon" [1986] AC 785 had established that, in order to prove title to sue in tort, the claimants had to show that, at the time the cause of action arose, they had either the legal ownership of or a possessory title to the goods.

One of the claimants could show that it was the owner of the goods prior to shipment. Its claim succeeded.

All the others obtained their title during the course of the voyage. They claimed they were entitled to recover their entire loss or (if not) at least in respect of the progressive damage that occurred after they became the owners of the goods.

This argument was rejected. The damage to the goods was the result of improper stowage and/or stowing the goods in a wet condition (or adjacent to goods that were wet). This was a single breach of the duty of care. All the damage to the goods flowed from that single breach. Although the damage itself was progressive, and occurred during and throughout the voyage, there was no "continuing" breach of the duty of care by the owners and, thus, no breach of that duty after the time the claimants became the goods owners.

The remaining cargo claimants, accordingly, were unable to recover.

Lord Hobhouse’s judgment
This is by far the longest of the judgments, and covers ground not touched upon by the others. The following points are worthy of note:-

  • The use of the charterparty between owners and CPS to determine which of the CPS companies (there were two of them) were the contractual carriers.
  • The discussion of bailment/sub-bailment on terms, and the suggestion (to put it at its lowest) that cargo owners’ difficulties might have been overcome had they chosen to plead their case on this basis, rather than simple negligence. Lord Hobhouse held that "a contract of carriage, unlike a contract for carriage… is a contract of bailment. In this case, there was a bailment by the shipper to the timecharterers and a sub-bailment by the timecharterers to the shipowners. In determining the liabilities on the part of the shipowners to which the sub-bailment gave rise and the terms of it, he quoted extensively from the judgment of Lord Goff in The Pioneer Container [1994] 2 AC 324. He concluded 1) that in cases such as the present, there was a bailment and a sub-bailment; 2) no attornment by the sub-bailee to the goods owner was necessary; 3) notwithstanding that there is no contract between them, the sub-bailee owes 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. The result was that the cargo interests would have been entitled to hold the shipowners liable as bailees or sub-bailees and the shipowners would have been entitled to rely on the terms upon which they had taken the goods into their possession.
  • The terms of the sub-bailment (that is, the bailment from CPS to the owners) were those of the time charter. The time charter incorporated the Hague Rules by way of clause paramount, and authorised the issue of bills of lading subject to the Hague Rules.
  • The shipowners’ claim to total exemption from liability for any breach of the sub-bailment that they might have committed sought to carry the reach of a Himalaya clause "far further than any previous decision. If their submissions are correct, they. …will provide the actual performing carrier with a route for evading by means of a bill of lading clause, the Hague Rules scheme."
  • In examining the authorities relating to Himalaya clause, Lord Hobhouse noted that 1) there was no question of bailment in the stevedore cases and
    2) the function of the Himalaya clause was to prevent cargo interests from avoiding the effect of contractual defences available to the carrier by suing in tort persons who perform the contractual services on the carrier’s behalf.
  • In the present case, the shipowners, by taking possession of the goods, entered into a bailee-bailor relationship with the shipper. The service the shipowners were to perform for the cargo owners was the carriage of the goods. The shipowners thus entered into a contract of carriage with the shipper, which lasted as long as the shipowners remained bailees of the goods as the actual performing carrier. Further, this contract of carriage was "covered" by a bill of lading, which in turn brought the contract within the ambit of the Hague Rules. As a matter of construction of the bill of lading, the protective provisions to which the shipowners were entitled under the Himalaya clause were only those which were not invalidated by Article III Rule 8. That meant, in the circumstances of this case, that the shipowners could not rely on those provisions to exonerate them from the consequences of their servants’ negligence in the stowage of the timber and plywood consignments.
  • The differentiation drawn between a sub-contractor in the position of the owners, who actually performs the carriage of the goods, and a sub-contractor such as stevedores. Sub-contractors in the position of stevedores are not bailees or sub-bailees of the goods.



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