Note: This decision was overturned by the Court of
Appeal on May 17 2002.
For a note on the Appeal decision, click here
DMC/S&T/21/01
Parsons Corporation v. Owners of Happy Ranger
English High Court, Commercial Division: Tomlinson J.: July 2001
CONTRACT OF CARRIAGE: INCORPORATION OF TERMS OF CARRIER’S BILL OF LADING:
IN CASE OF CONFLICT, CONTRACT TERMS TO PREVAIL: ‘SHIPPED ON DECK’ CLAUSE:
HAGUE RULES TO APPLY AS ENACTED IN COUNTRY OF SHIPMENT; HAGUE-VISBY RULES APPLY
WHERE COMPULSORILY APPLICABLE: OTHERWISE ARTICLES I TO VIII OF THE 1924
CONVENTION TO APPLY: ENGLISH LAW PROPER LAW OF THE CONTRACT: CARGO DAMAGE DURING
LOADING: NO B/LS ISSUED: PACKAGE LIMITATION
Summary
The parties had entered into a contract of carriage, which had many of the
characteristics of a voyage charterparty. They did not intend or expect that, as
between themselves, any bill of lading issued pursuant to that contract would
have any contractual effect independent of the contract nor that it would
evidence the terms of their contract. In those circumstances, the Hague-Visby
Rules would not by their terms apply to such a contract since it was not a ‘bill
of lading or similar document of title’. Nor were the Hague-Visby Rules
compulsorily applicable under English law. Therefore Articles I to VIII of the
Hague Rules, which had been incorporated into the contract, applied, together
with a clause limiting the carrier’s liability to £100 per package. A clause
exonerating the carrier from liability for cargo carried on deck was not
applicable because, in this case, the cargo, which had been damaged during
loading, had never reached the deck.
DMC Category Rating: Confirmed
Parsons have obtained leave to appeal
Facts
By a contract dated 7 October 1997, the claimants, Parsons Corporation of the
United States, contracted with the defendant shipowners 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 defendants contended that their liability was either
excluded entirely under the ‘shipped on deck’ clause in the contract or was
limited by another term to £100.
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. T
he
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 7, provided:
‘The Merchant has agreed that the cargo may be shipped on deck or under
deck at the Carrier’s option….. If the cargo is shipped on deck it shall be
at the Merchant’s risk and the Carrier not be [sic] responsible for any loss
or damage or delay to the cargo whatsoever and whether due to negligence of
whomsoever or howsoever arising and by whomsoever caused……’
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 rider contained (in the words of the judge) ‘a number of provisions which one would ordinarily expect to find in a voyage charterparty but which one would not expect to find in a straightforward contract of carriage contained in or evidenced by a bill of lading.’
The specimen bill of lading incorporated into the contract of carriage was on
the Mammoet form. Its 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…
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 Submissions
Parsons argued that the contract of carriage on which they were suing
provided for the issue of a bill of lading and was therefore a contract of
carriage as described in section 1(4) of the UK’s Carriage of Goods by Sea Act
1971- the Act giving force of law in the UK to the Hague-Visby Rules - namely a
contract which expressly or impliedly provided for the issue of a bill of lading
or
any similar document of title (emphasis added).
Parsons maintained further that the contract of carriage was one which should be regarded as ‘covered by a bill of lading’ within the meaning of Article 1(b) of the Hague-Visby Rules, even though no bill of lading was actually issued for the process vessel in this case. They relied on the authority of Pyrene v. Scindia Navigation [1954] 2 QB 402. They pointed out that the Hague-Visby Rules applied to the contract also by reason of Article X(b) of the Rules, in that the carriage had been ‘from a port in a contracting State.’ As the contract of carriage was governed by English law, the combined effect of these provisions was to subject it to the Hague-Visby Rules as enacted in the Carriage of Goods by Sea Act 1971, in which case the applicable limit of liability would be in the order of US$2 million.
Parsons also argued that the words ‘apply compulsorily’ in paragraph 2 of clause 3 of the bill of lading – ‘required resort to the provisions of Italian law in order to determine whether the Hague-Visby Rules are compulsorily applicable to this trade’. In their submission, Italian law did in fact so require.
Finally, Parsons contended that it was irrelevant that straight bills were issued for the other cargo carried on the March 1998 voyage, since there is ‘no reason why straight bills should be regarded as outside the ambit of section 1(4) of the 1971 UK Act’.
For their part, the defendant shipowners argued that the contract of carriage in this case was not one to which the 1971 Act applied, since it was not a contract of carriage ‘covered by a bill of lading or any similar document of title. The contract of carriage was in fact a voyage charterparty, which did not contemplate the issue of a bill of lading within the meaning of the 1971 Act. The purpose of the Hague and Hague-Visby Rules was to regulate the responsibilities of parties to bills of lading, not to contracts of the type in the present case. Article X(b) related only to bills of lading and the preparatory works of the Hague Rules Convention indicated that they were intended only to cover contracts of carriage which were also documents of title. They also maintained that they were entitled to rely on the ‘shipped on deck’ clause (clause 7 of the Rider) as a complete defence to the claim, on the grounds that the word "shipped" included the process of loading.
There were, therefore, two questions for the judge to answer:
1 Did the Hague/Hague-Visby Rules apply to the contract of carriage and,
if so, which Hague Rules?
2 Did the ‘shipped on deck’ clause exclude liability on the part of
the shipowner defendants?
The Judgment
On the first question, the judge preferred the Owners’ submissions. Relying
on the decision in the case of The Captain Gregos [1990] 1 Lloyd’s Reports
310, he concluded that, in that case, the Court of Appeal had envisaged ‘that
the bill of lading, issue of which would be a necessary condition of the
application of the [1971 Act] would be a contractual document with commercially
well-known consequences when endorsed and transferred.’ In the present case,
‘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 evidence the terms of
their contract. The terms of their contract were already adequately and
completely evidenced by the contract and the 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, and had
provided that the latter were to prevail. The judge continued: ‘In my judgment
therefore, the contract on which Parsons sue is not, as between themselves and
the owners, a contract covered by a bill of lading or any similar document of
title. The Hague-Visby Rules are therefore by their terms inapplicable and are
not, as a matter of English law, compulsorily applicable… I would, however,
add that it also seems to me plain that the expression bill of lading, as used
in both section 1(4) of the [1971 Act] and in Article I (b) of the [Hague-Visby
Rules] must refer to a negotiable or transferable document of title.’
The judge also found that Article X(b) of the Hague-Visby Rules was inapplicable to this case, because ‘Parsons do not sue upon a contract contained in or evidenced by a bill of lading’. He also held that the words ‘ bill of lading’ where used in Article X have the same meaning as in section 1(4) of the 1971 Act and as in Article 1(b) of the Hague-Visby Rules themselves.
As to the Italian law point, the judge said that this was founded on the
submission that the reference to "the respective legislation" in
paragraph 2 of clause 3 must be ‘a reference to legislation other than that of
the State whose law has been chosen as the proper law….’ He found however,
that as a matter of first principle, ‘the question whether the Hague-Visby
Rules apply compulsorily to this trade/transaction must fall to be determined by
the proper law of the contract… [namely English law]. He did not consider the
reference in paragraph 2 of clause 3 to "the respective legislation"
to be of itself sufficient to displace this basic principle.
He accordingly held that in accordance with paragraph 1 of clause 3 of the specimen bill of lading form, Articles I –VIII of the Hague Rules applied to the contract with the liability of the Carrier being limited to £100 sterling per package.
On the second question, the judge held that the ‘shipped on deck’ clause had no application in this case. In his view, the cargo had never been shipped on deck, because – having been dropped during loading, it had never reached the deck.