Mitsubishi v. Eastwind Transport

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DMC/SandT/05/02
Mitsubishi Corporation v Eastwind Transport Ltd and Others
English High Court, Commercial Division: Mr. Ian Glick, QC: [2004] EWHC 2924 (Comm): 15 December 2004
John Russell, instructed by Clyde & Co., for Mitsubishi
Michael Ashcroft, instructed by Evershed LLP, for the Defendants
CARRIAGE OF GOODS BY SEA: BILL OF LADING: EXEMPTION CLAUSE: WHETHER REPUGNANT TO PURPOSE OF CONTRACT: INTERPRETATION: RISK ALLOCATION UNDER COMMERCIAL CONTRACTS: INSURABLE RISKS
Summary
The claimants argued that a carrier's exemption clause in the bills of lading was so wide as to be repugnant to the purpose of the contract. But the judge agreed with the carriers that the clause was valid. It was not inconsistent with the purpose of a commercial contract for certain risks to be allocated, particularly as the bearer of the risks would normally be expected to insure against them.

DMC Category Rating: Confirmed

This case note is based on an Article in the January 2005 Edition of the ‘Bulletin’, published by the Marine and Insurance teams at the international firm of lawyers, DLA Piper Rudnick Gray Cary, which is an International Contributor to this website.

Background
The action concerned the shipment of 155,895 cartons of frozen chicken parts from Brazil to Japan between October 2001 and January 2002. The goods were said to have been in good order and condition when shipped. Mitsubishi, the holder of the bills of lading, however, alleged that 109,344 cartons were delivered in a damaged state because the vessel's refrigeration systems were not working and/or the vessel was unseaworthy and/or uncargoworthy.

The carriers, Eastwind, relied on an extensive carrier's exemption clause in the bills of lading. This provided that the carrier would not be responsible for loss of or damage to or in connection with goods shipped of any kind whatsoever, however caused "whether by unseaworthiness or unfitness of the vessel… or by faults, errors or negligence, or otherwise as howsoever" and, in particular, arising from or relating to a large number of specific causes including (again) unseaworthiness and from "any other cause whatsoever, whether or not of a like kind to those above-mentioned, and including negligence on the part of the Carrier, his servants, agents or others".

Mitsubishi argued that this clause was so wide as to be repugnant to the whole purpose of the contract and should be rejected in its entirety. It effectively meant that the carriers had no liability at all for any breaches of contract and reduced the contract of carriage to a mere declaration of intent. The clause had to be construed against the party who produced it and sought to rely on it.

The carriers, however, said that the clause had to be construed on a case-by-case basis. In commercial matters, where risks are normally borne by insurers, the parties should be free to apportion risks as they thought fit.

Judgment
The judge agreed with the carriers. This was not a consumer contract to which the Unfair Contract Terms Act 1977 or the Unfair Terms and Consumer Contracts Regulations 1999 applied. If giving the words their literal meaning would be at odds with the main object of a contract then, under the common law, the court could apply a more restricted meaning consistent with that object (Glynn vMargetson & Co [1893] AC 351).

In the judge's view, it was plain that the words used did not operate to relieve the carrier of all liability for any and every breach of contract. The clause would not, for example, cover loss or damage caused by dishonesty or by the carrier arbitrarily refusing to ship the goods to the port of discharge. It was true that the clause shifted most risks which might result in loss of or damage to goods to the holder of the bill of lading. But this was not inconsistent with the purpose of a commercial contract of carriage where the bearer of the risk could insure against it. The fact that the application of the clause had to be determined on a case-by-case basis did not make its meaning uncertain. Nor did the principle of construing a contractual provision against the person who produced and sought to rely on it extend to applying the widest possible meaning so as to render the clause repugnant to the object of the contract as a whole.

The clause was, therefore, a valid exemption and operated to protect the carriers where goods were damaged because of their negligence or because of the unseaworthiness or uncargoworthiness of the vessel.

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