Adm. Suit 35 of 2008
Date Order with signature of Judge
------------------------------------------------------------------------------
Present: Munib Akhtar, J.
Dates of hearing: 28.03, 16.04, 21.05, 31.05 and 08.11.2012
For hearing of CMA 856/2008
Mr. Qamar Abbas, Advocate for the Plaintiff.
Mr. Shaiq Usmani, Advocate for the Defendant
*************
Munib Akhtar, J.: The instant suit is an action in rem against the defendant vessel, m.v. Lady Rea (“the Vessel”) under the Admiralty Jurisdiction of the High Courts Ordinance, 1980 (“the Ordinance”). The application presently before me was filed for the arrest of the Vessel. On 29.08.2008, an ad-interim order was made by which the Vessel was ordered to be detained but was allowed to sail if surety in the sum of Euro 550,000/- was furnished with the Nazir of the Court. The required surety was provided and remains in place. Thus, if the application, which has remained pending since that time, is to be allowed (as contended by learned counsel for the plaintiff) the order of 29.08.2008 shall stand confirmed and the surety will continue for the duration of the suit. If the application ought to be dismissed (as contended by learned counsel for the defendant) then of course, the surety will stand discharged.
2.
Learned counsel for the plaintiff
submitted that the plaintiff is a Greek company, which entered into a contract
with Karachi Electric Supply Company Ltd. For purposes of the contract certain
plant and machinery and other material had to be imported into
3.
Learned counsel submitted that at
the time the cargo was loaded on board the Vessel, it was on time charter with
M/s Worldwide Shipping Company Ltd. (registered in the Seychelles), although
the plaintiff was not aware of the terms thereof. The charterparty between Worldwide
Shipping Company (“the Charterer”) and the owners of the Vessel, M/s Rea
Navigation Inc. (“the Shipowner”) was executed on or about 23.08.2008 and was
in the New York Produce Exchange form. It was subsequently placed on the record
by learned counsel for the defendant-vessel. As will shortly be seen, the
principal issue that falls for determination is whether the bills of lading
were issued by the Charterer or the Shipowner. Learned counsel for the
plaintiff submitted that as per the contract of affreightment, the Vessel was
to proceed straight to
4. Learned counsel referred in detail to various clauses of the charterparty and submitted that when these were read along with the bills of lading, there could be no doubt that the latter had been issued by the Shipowner. The contract of affreightment was between the plaintiff as shipper and the Shipowner as carrier and there had been a clear breach of the same and hence the plaintiff was entitled to bring a suit in rem against the Vessel and have it arrested. In this regard, learned counsel strongly and emphatically reiterated the absolutely fundamental nature of a shipowner’s obligation to provide a seaworthy vessel. He prayed that the application be allowed.
5. Learned counsel for the defendant submitted that a suit in rem did not lie in the facts and circumstances of the present case and hence the Vessel could not be arrested. He submitted, relying principally on the bills of lading but also on the charterparty, that the contract of affreightment was between the plaintiff as shipper and the Charterer as carrier. In other words, the Shipowner was not party to the contract of affreightment. Since the charterer admittedly did not own the ship, learned counsel, relying on sections 3(2)(h) and 4(4) of the Ordinance, contended that an action in rem did not lie. As regards the absolute duty of the shipowner to provide a seaworthy ship, learned counsel submitted that this was an implied term of the contract of affreightment and since no such contract existed between the plaintiff and the Shipowner, no such duty was owed. Learned counsel further submitted, relying on the Hague-Visby Rules (as to which see below) that even the carrier (which, according to him, was the Charterer) was not liable on the facts as alleged, since under the aforesaid Rules, the carrier had only to exercise due diligence and such duty was complied with. All allegations of unlawful breach, whether by way of deviation or of the Vessel not being seaworthy were emphatically denied. In the circumstances, learned counsel submitted that the application merited dismissal and prayed that the surety be discharged.
6. I gave permission to learned counsel to file written synopses and both did so. Learned counsel for the defendant relied on one English decision, and four Pakistani decisions and these are considered below. Learned counsel for the plaintiff relied on a mass of material, in particular extracts from a number of treatises and text books on shipping law and I will refer to the same as and to the extent relevant and necessary.
7.
I have heard learned counsel as
above, examined the record with their assistance and considered the case law
and other material relied upon. The principal question that falls for
determination is one familiar to shipping lawyers: were the bills of lading
charterers’ or owners’ bills? (Since the two bills are identical in all
material respects, it is necessary to refer to only one and for convenience I
will henceforth normally use the singular.) Before proceeding to consider the
issues involved, it will be pertinent to make certain preliminary observations.
The international carriage of goods by sea is the subject of a number of
conventions and agreements. I am concerned with the International Convention (of
1924) for the Unification of Certain Rules of Law relating to Bills of Lading.
The rules agreed upon by this convention were subsequently amended in certain
respects by a protocol of 1968, both by way of substitution as well as addition.
The rules contained in the 1924 Convention are known as the Hague Rules, and those
rules as amended by the 1968 Protocol are known as the Hague-Visby Rules. The
Hague-Visby Rules were incorporated into English law by means of the Carriage
of Goods by Sea Act, 1971 (“the UK 1971 Act”), the rules being appended as a
schedule to the said Act. Now, the reverse side of the bill of lading in the
present case has printed thereon (in the typical small print resorted to for such
purposes) the “Conditions of Carriage”. These provide in clause 1 inter alia that the terms and
conditions, and in particular “the Law and Arbitration Clause”, of the
charterparty stand incorporated in the bill of lading. Clause 45 of the
charterparty expressly provides that disputes are to be referred to arbitration
and such arbitration is to be governed by English law. Additional clause 90 in
relation to “speed claims” also expressly provides that these are to be settled
in accordance with English law. There was not however, any express submission
to the jurisdiction of English courts. The aforementioned references could
indicate that English law was to apply to the bill of lading and therefore the
8. How does English law deal with the issue of whether a particular bill of lading is a charterer’s or shipowner’s bill? Learned counsel for the defendant placed primary reliance on Sunrise Maritime Inc. v. Uvisco Ltd. (“The Hector”) [1998] 2 Lloyd’s Rep 287, a judgment at first instance of Rix, J. (as he then was). It was submitted that the defendant’s case was on all fours with this decision. Learned counsel also relied on certain Pakistani decisions. These are, in chronological order, Sun Line Agencies Ltd. v. The Psiloritis 1984 CLC 1553 (SHC; SB), Atlantic Steamer’s Supply Company v. m.v. Titisee and others PLD 1993 SC 88, V.N. Lakhani & Co. v. m.v. Lakatoi Express PLD 1994 SC 894 and (in particular) Jaffer Brothers (Pvt) Ltd. v. m.v. Eurobulker II 2002 CLD 926 (SHC; DB). It will be convenient to first consider the Pakistani case law.
9.
In the first mentioned case, the
plaintiff therein had provided certain agency services to the defendant No. 2
for purposes of handling the ships belonging to the said defendant when they
visited
10. As noted above, the last mentioned decision was particularly relied upon by learned counsel for the Vessel. The appellant therein had brought a suit in rem against the respondent vessel and filed an application for its arrest. That application was dismissed by a learned single Judge, and the appeal was against such dismissal. It appears that certain cargo was being shipped on the respondent vessel for which a bill of lading had been issued to the shipper, who had endorsed it to the appellant. It was alleged that there had been a deviation in the voyage and other cargo had also been loaded on to the respondent vessel, which was in breach of contractual obligations and as a result, the plaintiff-appellant had suffered loss and damage. The claim for the action in rem was made in terms of clause (h) of section 3(2) of the Ordinance, which is the provision invoked in the present case. It appears that in fact the respondent vessel was on time charter with another party, which had entered into a sub-charter (by way of a voyage charter) with the shipper. Thus, in respect of the voyage in question, the shipper was itself the carrier. The learned Division Bench held as follows (pg. 931):
“In the instant case, the shipper who is also voyage
or sub-charterer had endorsed the Bill of Lading in favour of the
plaintiff/appellant, where the shipper himself is the charterer then the Bill
of Lading in hand of the charterer is merely a receipt for goods and such
receipts, even if endorsed, as in the present case in favour of the consignee
it will not change its complexion and will remain a receipt of a good. In fact
the endorsee in such case will step in shoes of the Shipper and will be liable
and entitled for all such obligation and rights in relation to affreightment
contract as may be available to the shipper who incidentally in this case is
also charterer of the vessel.”
It was further observed (at pg. 932 and relying on The Rewia [1991] 2 Lloyd's Rep 325) that while there was a presumption that a bill of lading signed by the master of the vessel had been issued on behalf of the shipowner, this was rebuttable and
“… not attracted in the instant case for the reasons
discussed above, as admittedly the plaintiff/ appellant himself has relied upon
and filed the copy of charter‑party which authorizes the Master to sign a
Bill of Lading for the charterer. In case where the charterer himself is the
shipper as in the present case then as discussed above, such Bill of Lading is
reduced merely to a receipt of goods shipped and such receipt when endorsed
will only entitle the holder in due course to all rights of the
shipper/charterer. By whatever angle case is attended, one cannot establish any
nexus in affreightment contract between the holder of such receipt and the
owner of the vessel”.
In my view, with respect, this case is also distinguishable on the facts since the charterer was itself the shipper, which meant that the status of the bill of lading when in its hand was that of a receipt for the goods. Furthermore, the contract of affreightment was contained in the charterparty itself and the suit was filed by the endorsee (the plaintiff-appellant) on grounds of a breach of the terms thereof. This is in sharp contrast with the facts and circumstances of the present case and therefore, despite any apparent similarity, the two situations are actually quite different. In my view, with the utmost respect, the Pakistani decisions relied upon shed no decisive light on the principal issue raised in the present proceedings.
11. I turn therefore to consider The Hector, the English decision so strongly relied upon by learned counsel for the defendant. The owners of the Hector had time chartered her to US Express Lines (“USEL”), an American company. USEL had in turn sub-chartered the ship to an English company by way of a voyage charter. The bill of lading involved contained on its front or face, and in a prominent position, the following typed words: “CARRIER: U.S. EXPRESS LINES”. Its attestation clause was in standard form, and read as follows: “IN WITNESS whereof the Master of the said Vessel has signed the number of original Bills of Lading stated below …”. In the signature box, the bill was stated to have been signed by certain agents on behalf of the master of the vessel. The terms and conditions of the carriage were contained on the reverse side of the bill in the usual small print. One of the clauses was an identity of carrier clause. An identity of carrier clause is a standard feature in many bills of lading and its purpose is to specify who the carrier is in respect of the goods shipped under the bill of lading. The clause used in The Hector (clause 17) was a fairly typical example and read as follows: “The Contract evidenced by this Bill of Lading is between the Merchant and the Owner of the vessel named herein (or substitute) 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….”
12. There was thus an apparent contradiction in the bill of lading. On its face or front side, it appeared to indicate that the carrier was the charterer. However, the identity of carrier clause on the reverse indicated that the shipowner was the carrier, and added to this was the fact that the bill had been signed by the master of the vessel. In a time charter (as in a voyage charter), the master continues to remain the servant of the shipowner (subject to the terms of the charter) and as Rix, J. noted (at pg. 293) “it has for long been well established in English law that a bill of lading signed for the master is very likely to be an owner’s bill: see, for instance, The Rewia [1991] 2 Lloyd’s Rep 325, where the earlier authorities were fully investigated…. In the present case, the vessel was not demised but in the possession of her owners, the bill was expressly signed ‘for and on behalf of the master’”. After having considered the matter, Rix, J. concluded as follows (pp. 294-296; emphasis supplied):
“As a matter of construction, then, I have found the
issue an intriguing one, largely I think because of the pressure created by the
general rule that a bill of lading signed by the master is an owner’s bill.
There is also of course the powerful pointer of cl. 17. However, I have not
been able to satisfy myself that the stipulation that the carrier is USEL is to
be shrugged off as ambiguous. What does it mean, and why has it been inserted,
unless it is intended to have effect as the definition of the carrier? The term
“carrier” is a critical term. It is not like an expression which might merely indicate
that USEL was the operator of the vessels or the owner of the line. “Carrier”
is the expression in which the party with the obligations to carry out the bill
of lading contract is clothed. That is made clear by the bill of lading terms
as whole, and by cl. 17 in particular. It is also made clear by
In my
judgment, therefore, the matter can be looked at in two ways. Either the three
elements of the bill—the USEL stipulation, the signature and cl. 17—can be
regarded as being consistent with one another, on the basis that because it is
stipulated that USEL are the carrier, it must therefore follow that they are
owners too; or the typed stipulation of
USEL as carrier on the face of the bill must be regarded as superseding the
printed provisions of cl. 17. After all, that clause does at least
contemplate that, despite its terms someone other than the owners may be
adjudged to be carrier. In the latter case, the signature for the master will
take effect on the basis that the owners have authorized the agents who have
signed for the master to contract in those terms. If the owners have authorized
it, then the fact that the bill is signed by agents for the owners’ servant,
their master, cannot compel the bill to be construed as an owners’ bill. The
rule is only that in the ordinary way a bill signed by or for the master will
be an owner’s bill, not that it must be. [pg. 294]
…
In this case, there is nothing on the face of the bill
to say who the owners (and therefore the carrier) are, save for the clause
stipulating that USEL are the carrier. That,
therefore, becomes the critical provision. [pg. 295]
…
I conclude therefore that as a matter of construction,
the bill of lading contract is with USEL not owners. [pg 296]”
13.
Reference must also be made to the
Starsin litigation (
14. An appeal was preferred to the Court of Appeal (reported at [2001] EWCA Civ 56, [2001] 1 Lloyd’s Rep 437). A majority (Morritt, V-C and Chadwick, LJ.) disagreed with Colman, J. and held that the bills of lading were owners’ bills. Rix, LJ, dissented and would have upheld the decision at first instance.
15. A further appeal was taken to the House of Lords (reported at [2003] UKHL 12, [2003] 1 Lloyd’s Rep 571, [2003] 2 All ER 785). A unanimous House allowed the appeal on the issue of the nature of the bills, and held that the bills were charterers’ and not owners’ bills. All the five Law Lords gave reasoned speeches and it is well worth quoting at some length from some of them. Lord Bingham said as follows (pp. 794-5 of All ER):
“[9]
… [T]here are a number of rules [of construction], some of very long standing,
which give valuable guidance.
[10] First is the rule to which Lord Halsbury
alluded in Glynn v Margetson & Co [1893] AC 351 at 359, “that a
business sense will be given to business documents”. The business sense is that
which businessmen, in the course of their ordinary dealings, would give the
document. It is likely to be a reasonably straightforward sense since, as Lord
Mansfield famously observed (
‘The daily negotiations and property of merchants
ought not to depend upon subtleties and niceties; but upon rules, easily
learned and easily retained, because they are the dictates of common sense, drawn
from the truth of the case’.
In the present case, the suggestion that CPS
contracted jointly on its own behalf and on behalf of the shipowner loses
credibility when one notes that this possibility, although not objectionable in
legal principle, first occurred to a member of the Court of Appeal during
argument: [2001] 1 Lloyd's Rep 437 at 452, para 75.
[11] Secondly, it is common sense that greater
weight should attach to terms which the particular contracting parties have
chosen to include in the contract than to pre-printed terms probably devised to
cover very many situations to which the particular contracting parties have
never addressed their minds….
[12] Thirdly, it has long been recognised by
very distinguished commercial judges that to seek perfect consistency and
economy of draftsmanship in a complex form of contract which has evolved over
many years is to pursue a chimera…. The
court must of course construe the whole instrument before it in its factual
context, and cannot ignore the terms of the contract. But it must seek to give
effect to the contract as intended, so as not to frustrate the reasonable
expectations of businessmen. If an obviously inappropriate form is used, its
language must be adapted to apply to the particular case….
[13] Fourthly,
‘In all mercantile transactions the great object
should be certainty: and therefore, it is of more consequence that a rule should
be certain, than whether the rule is established one way or the other. Because
speculators in trade then know what ground to go upon’….
This observation is, I suggest, particularly pertinent
where the issue is one which, like that now under consideration, has been the
subject of repeated litigation over the years in cases which have included The
Berkshire [1974] 1 Lloyd's Rep 185; The Venezuela [1980] 1 Lloyd's
Rep 393; The Rewia [1991] 2 Lloyd's Rep 325; MB Pyramid Sound MV v
Briese Schiffahrts GmbH (The Ines) [1995] 2 Lloyd's Rep 144; Sunrise
Maritime Inc v Uvisco Ltd (The Hector) [1998] 2 Lloyd's Rep 287; and Fetim
BV v Oceanspeed Shipping Ltd (The Flecha) [1999] 1 Lloyd's Rep 612. In his
accomplished extempore judgment in the last of these cases, on a form of bill
and on facts indistinguishable from the present, Moore-Bick J concluded that
the contract of carriage was made with the owners of the vessel and not with
CPS, a decision which Colman J declined to follow in the present case.
[14] It is plain … that the bill was drafted to
express or evidence a contract between the shipper (and any transferee of the
bill) and the owner of the vessel. Conditions 33 and 35 so state. The provision
for signature by the master of the vessel so indicates. But a very cursory
glance at the face of the bill is enough to show that the master has not signed
the bill. It has instead been signed by agents for CPS which is described as
‘The Carrier’. I question whether anyone engaged in maritime trade could doubt
the meaning of ‘carrier’, a term of old and familiar meaning, but any such
doubt would be quickly resolved by resort to the first condition overleaf in
which the term is defined to mean the party on whose behalf the bill of lading
has been signed, that is, the party contracting to carry the goods.
[15] I can well understand that a shipper or
transferee of a bill of lading would recognise the need to consult the detailed
conditions on the reverse of the bill in any one of numerous contingencies
which might arise and for which those conditions make provision. He would
appreciate that the rights and obligations of the parties under the contract
are regulated by those detailed conditions. But I have great difficulty in
accepting that a shipper or transferee of a bill of lading would expect to have
to resort to the detailed conditions on the reverse of the bill (and to
persevere in trying to read the conditions until reaching conditions 33 and 35)
in order to discover who he was contracting with. And I have even greater difficulty
in accepting that he would expect to do so when the bill of lading contains, on
its face, an apparently clear and unambiguous statement of who the carrier is.
[16] I am
fortified in adopting this view of market practice by noting that, although it was
not adopted by Moore-Bick J in The Flecha [1999] 1 Lloyd's Rep 612, it
was adopted by Rix J in The Hector [1998] 2 Lloyd's Rep 287 (in which
there was, as here, an identity of carrier clause but not, as here, a demise
clause), it was adopted by Colman J in the present case ([2000] 1 Lloyd's Rep
85 at 93) and it was adopted by Rix LJ in his persuasive dissent on this point
in the present case ([2001] 1 Lloyd's Rep 437 at 451).”
Lord Steyn said as follows (pp. 803-4; emphasis supplied):
“[45] How is the problem to be addressed? For my
part there is only one principled answer. It
must be approached objectively in the way in which a reasonable person, versed
in the shipping trade, would read the bill. The reasonable expectations of such
a person must be decisive. In my view he would give greater weight to words
specially chosen, such as the words which appear above the signature, rather
than standard form printed conditions. Moreover, I have no doubt that in any
event he would, as between provisions on the face of the bill and those on the
reverse side of the bill, give predominant effect to those on the face of the
bill. Given the speed at which international trade is transacted, there is
little time for examining the impact of barely legible printed conditions at
the time of the issue of the bill of lading. In order to find out who the
carrier is it makes business common sense for a shipper to turn to the face of
the bill, and in particular to the signature box, rather than clauses at the
bottom of column two of the reverse side of the bill.
[46] Taking advantage of their knowledge of the
way in which the market works two commercial judges - Colman J and Rix LJ in
the Court of Appeal - adopted the mercantile view. The majority in the Court of
Appeal - Morritt V-C and Chadwick LJ - in effect gave preponderant effect to
the boilerplate clauses on the back of the bill. In my view it would have an
adverse effect on international trade if the latter approach prevails….”
Finally, reference may be made to Lord Hoffmann’s speech, where he said as follows (pg. 812; emphasis supplied):
“[82] I
respectfully think that where the majority judgments of Sir Andrew Morritt V-C
and Chadwick LJ in the Court of Appeal went wrong is that they conscientiously
set about trying, as lawyers naturally would, to construe the bill of lading as
a whole. In fact the reasonable reader of
a bill of lading does not construe it as a whole. For some things he goes no
further than what it says on the front. If the words there are reasonably
sufficient to communicate the information in question, he does not trouble with
the back. It is only if the information on the front is insufficient, or
the questions which concern the reader relate to matters which do not
ordinarily appear on the front, that he turns to the back. And then he calls in
his lawyers to construe the document as a whole.”
16. Having considered the position at English law, I now turn to examine the features of the bills of lading in the present case. The first and most striking feature is that, like the bill in The Hector, these bills also on the face or front side prominently carry the following legend: “CARRIER: WORLDWIDE SHIPPING”. There is a standard attestation clause (no different from that in The Hector). The signature box contains the signature of Captain Bashar Alnajjar, who has signed as “MASTER OF M/V ‘LADY REA’”. When the reverse side of the bill is examined, clause 1 provides as follows: “All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated”. It is pertinent to note that the conditions of carriage contain neither an identity of carrier clause nor a demise clause. After having considered the matter in the light of the case law referred to above, I am firmly of the view that as a matter of construction, the bills of lading in the present case must, prima facie, be regarded as charterers’ and not owners’ bills. It follows that in my view the contract of affreightment, as evidenced by the bills of lading was between the plaintiff as shipper and the Charterer as carrier, and not with the Shipowner. Learned counsel for the plaintiff placed reliance on various clauses of the charterparty to contend that the bills were Shipowners’ bills. I cannot, with respect, accept this submission. It runs counter to the principles clearly laid down by the House of Lords in The Starsin. The observations of Lord Steyn (at para 45 quoted above) are particularly pertinent. Their Lordships were not willing to countenance that in the facts and circumstances of The Starsin, the reasonable person would even need to look at the reverse side of the bill, whereas if the present bills are to be regarded as owners’ bills, the reasonable person would need to look not merely at the reverse side but at another and separate document altogether, namely the charterparty. This cannot be correct. Furthermore, in my view, learned counsel for the defendant is correct in asserting that the present case is akin to The Hector inasmuch as the front of the bill prominently carries a legend which purports to specifically identify the carrier. It is perhaps even stronger since there is no identity of carrier clause or demise clause on the reverse side of the bill. References to the clauses of the charterparty are also without substance. As already noted it is in a standard and well known form (that of the New York Produce Exchange). It has never been suggested that such a charterparty is decisive for purposes of determining the nature of the relevant bill of lading. No doubt under such a charterparty the master remains the servant of the shipowner, but that was also the position in the English cases referred to above and yet it was held that the bills involved were charterers’ bills. Furthermore, even though the bills were signed in the present case by the master of the Vessel who was the servant of the Shipowner, the presumption that may arise in this regard is rebuttable, as noted both by the learned Division Bench of this Court in The Eurobulker II and Rix, J. in The Hector (see supra). The same point was made by Lord Bingham in The Starsin (at para [8], pg. 793). In my view, the presumption is clearly rebutted in the facts and circumstances of the present case. Learned counsel for the plaintiff also submitted that the contract of affreightment is entered into before the issuance of the bill of lading and referred to certain correspondence by way of emails to contend that the contract had been made between the plaintiff and the Shipowner (through their agents). In this regard, reference may be made to the following passage from Scrutton on Charterparties and Bills of Lading (20th ed., 1996, pg. 67; herein after “Scrutton”):
“The bill of lading is not the contract, for that has
been made before the bill of lading was signed and delivered, but it is excellent evidence of the terms of
the contract, and in the hands of an indorsee is the only evidence.”
(internal citations omitted; emphasis supplied)
In my view, at this stage when an interlocutory application is under consideration, it would not be safe to rely on any such correspondence as referred to by learned counsel for the plaintiff, and the matter ought to be decided on the basis of a consideration of the bills of lading, the “excellent” evidence of the terms of the contract. Furthermore, even the correspondence referred to is, at best, ambiguous and does not unequivocally establish or show a contract of affreightment having come about between the plaintiff and the Shipowner. Indeed, in his written synopsis, learned counsel for the plaintiff could do no better than submit that the correspondence showed that the Vessel had been “fixed” to carry the plaintiff’s goods. In my view, at this stage this can hardly be regarded as tantamount to conclusively establishing the terms of the contract as contended by learned counsel or that the concluded contract was between the plaintiff and the Shipowner. Furthermore, the plaintiff appears to have accepted the bills of lading as issued without any objection or demur. It must therefore now live with the consequences that, at law, flow from them.
17. It will be noted from the extracts from The Starsin reproduced above that in The Flecha [1999] 1 Lloyd’s Rep 612, Moore-Bick, J. (at first instance) had occasion to consider bills of lading that were identical to the ones before the court in The Starsin but had concluded that they were owners’ bills. The House of Lords disapproved of The Flecha and overruled it. During the course of his speech, Lord Hoffmann (making reference to the fact that bills of lading are routinely negotiated and transferred, and form an integral part of international trade and the financing of such trade) said (at para 83, pg. 813):
“Moore-Bick J, as an experienced shipping lawyer, was
so conscious of the presence of the identity of carrier and demise clauses on
the back of the bill of lading that could not imagine that they could be
overridden by a port agent's stamp and signature on the front. He said that the
term ‘carrier’ on the front was used loosely but I think that what he really
meant was that it must have been a mistake…. But the bill of lading is
addressed, among others, to persons who will try if possible to identify the
carrier simply by what it says on the front. What The Flecha and the
majority decision in the Court of Appeal did was to drive a wedge between the
reasonable perception of a bank taking up the bill and the construction which
would later be given to the bill by a court in litigation, perhaps involving
the same bank. This does not seem to me commercially fair.”
Both learned counsel who appeared in this matter are highly experienced and skilled shipping lawyers. If I may say so, it would seem that learned counsel for the plaintiff has attempted to take the approach adopted by Moore-Bick, J and the majority in the Court of Appeal, which has not been accepted at all by the House of Lords. I would respectfully agree.
18.
In view of the foregoing, I am
firmly of the view that the principles of English law enunciated in The Hector and the House of Lords in The Starsin should be regarded as also
applicable in and part of the law of
19. This does not however conclude the matter. I refer again to the submission reiterated so emphatically by learned counsel for the plaintiff that a shipowner has a duty to provide a seaworthy vessel and that this duty is absolute in nature. Insofar as this obligation is an implied term of the contract of affreightment, it is of no avail to the plaintiff since I have concluded that the bills of lading were the Charterer’s bills. However, after having carefully considered and studied the matter, I am of the view that this obligation has another aspect, which lies in tort. This point has indeed been taken by learned counsel for the plaintiff in his written synopsis (point No. 13) and it is to consider this aspect of the matter that I now turn. In order to properly do so, it will be necessary first to consider the statutory provisions under which the present suit has been filed as an action in rem. Sections 3 and 4 of the Ordinance, as presently relevant, provide as follows:
“3. Admiralty
Jurisdiction of the High Court.— …
(2) The
Admiralty jurisdiction of the High Court shall be as follows, that is to say,
jurisdiction to hear and determine any of the following causes, questions or
claims-
…
(h)
any claim arising out of any agreement relating to the carriage of
goods in a ship or to the use or hire of a ship; ….
4. Mode of exercise of Admiralty jurisdiction.— ...
(4) In the case of any such claim as in
mentioned in clauses (e) to (h) and (j) to (q) of subsection (2) of section
(3), being a claim arising in connection with a ship, where the person who
would be liable on the claim in an action in
personam was, when the cause of action arose, the owner or charterer of, or
in possession or in control of the ship, the Admiralty jurisdiction of the High Court may, whether the claim gives rise
to a maritime lien on the ship or not, be invoked by an action in rem against—
(a) that ship, if at the time when the
action is brought it is beneficially owned as respects majority shares therein
by that person; or
(b) any other ship which, at the time when
the action is brought, is beneficially owned as aforesaid.”
Learned counsel for the defendant of course relied on these provisions to contend that an action in rem did not lie because the “agreement relating to the carriage of goods” (section 3(2)(h)) was between the plaintiff and the Charterer, who was not the “owner” of the Vessel within the meaning section 4(4). If this were all that there was to it, then on the basis of the conclusion arrived at above, learned counsel’s contention would be decisive for and determinative of the outcome of this application. However, in order to establish the true meaning of clause (h) of section 3(2) one has also to consider the judgment of the House of Lords in Samick Lines Co. Ltd. v. The Owners of the Antonis P Lemos (“The Antonis P Lemos”) [1985] 1 All ER 695.
20.
It is important to note that the
action in rem before the House was based exclusively in tort (on the basis of
alleged negligence) and was not “founded on any breach of any contract made
directly between the two parties to the action” (pg. 698). The statutory
provisions that the Law Lords had to consider were contained in section 20 of
the Supreme Court Act, 1981 (“
“20. Admiralty
jurisdiction of High Court. (1)The Admiralty jurisdiction of the High Court
shall be as follows, that is to say—
(a)
jurisdiction to hear and determine any of the questions and claims
mentioned in subsection (2);….
(2) The questions and claims referred to in subsection
(1)(a) are—
…
(h) any claim arising out of any agreement relating to
the carriage of goods in a ship or to the use or hire of a ship;….”
It will
be seen that section 20(2)(h) of the
21. Lord Brandon, who spoke for a unanimous House, rejected both contentions. It was held that the words “arising out of” in relation to “any agreement” had to be given a broad and liberal interpretation. As to the first contention, Lord Brandon observed as follows (at pg. 703):
“My Lords, having considered the six points argued by
counsel for the appellants, I am not persuaded that any one of those points
singly, or any combination of them together, lead to the conclusion that the
expression ‘arising out of’ in section 20(2)(h) of the Act of 1981 should be
given the narrow meaning of the expression ‘arising under’, rather than the
wider meaning of the expression ‘connected with’. On the contrary, I am
satisfied, on four main grounds, that the expression ‘arising out of’ should be
given the second and wider meaning…. The fourth ground is that the English
authorities, The St. Elefterio [1957]
2 All ER 374, [1957] P. 179 and The
Sennar [1981] 1 Lloyd's Rep. 295 support the wider meaning of the
expression ‘arising out of’ in section 1(1)(h) of the Act of 1956 and section
20(2)(h) of the Act of 1981. The St.
Elefterio as I said earlier, stood unchallenged for some 26 years until the
present case, and, in the interval, the legislature saw fit, in the Act of
1981, to re-enact the provision construed in that case in the same terms as
before.”
The St. Elefterio was also specifically relied upon before me by learned counsel for the plaintiff. Thus, it was held that section 20(2)(h) did apply to an action or claim founded in tort. As to the second contention, Lord Brandon approved the judgment of Parker LJ in the Court of Appeal (reported at [1984] 2 All ER 353). He recapitulated, at pp. 703-4, what had been said there and expressed his complete agreement with it, adding a couple of points of his own.
22. In my view, the decision of the House of Lords establishes the correct approach to and interpretation of section 3(2)(h) of the Ordinance. Therefore, I hold that this provision can sustain a claim in tort and all that is required is that it be “connected with” an agreement of the nature as stated therein. Furthermore, it is not necessary that the parties to the action based on tort be themselves party to the said agreement. It therefore follows that if the plaintiff can establish a claim in tort against the Shipowner on the basis that the Vessel was not seaworthy, that claim would be “connected with” an agreement relating to the carriage of goods in the Vessel, namely the agreement as evidenced by the bills of lading in which the plaintiff is the shipper and the Charterer is the carrier. It is irrelevant when considering such a claim that the Shipowner was not itself directly party to the agreement of affreightment. Since the matter would fall within the ambit of section 3(2)(h) and be a claim against the Shipowner, it would necessarily come within the scope of section 4(4) and hence an action in rem would be maintainable against the Vessel.
23.
The question whether there is in
law a tort of the nature claimed by learned counsel for the plaintiff, namely
that a shipowner is under a duty to provide a seaworthy vessel, must now be
examined. As noted above, there is no question that such a duty is an implied
term of the contract of carriage, and at common law this duty is an absolute
undertaking. However, it may be noted that the Hague Rules (as also the Hague-Visby
Rules) have modified this obligation to the exercise only of due diligence and (e.g.)
section 3(1) of the UK 1971 Act expressly provides that “there shall not be
implied in any contract for the carriage of goods by sea to which the Rules
apply by virtue of this Act any absolute undertaking by the carrier of the goods
to provide a seaworthy ship”. (An identical provision is to be found in our
Carriage of Goods by Sea Act, 1925. However this Act has no relevance since it
applies only to bills of lading issued in
“420. It is
not, however, in every case of a through bill of lading that the first carrier
contracts as agents for the others. If he does not the cargo-owner’s remedy
against the other carriers is in tort.
Unseaworthiness. The cargo-owner may sue in tort either in negligence,
for conversion or for unseaworthiness. As to his right of suit for
unseaworthiness the following case is the leading authority in
In The Termagant
[(1914) 19 Com Cas 239; 30 TLR 377] the plaintiffs shipped goods on an ocean
vessel at
Bargrave Deane J. considered in that case that the defendants were under an absolute liability in tort to provide a seaworthy vessel, and it is submitted that he was clearly right in so doing. Breach of the overriding and fundamental obligation of seaworthiness, if it caused loss of or damage to cargo, excluded even the narrow exception afforded the shipowner at common law to his liability for safe delivery, such as act of God or the King’s enemies.”
At
another place (para 146, Vol. I, pg. 110), it is stated that “in its
application to cargo the tort of unseaworthiness stems back to at least about
the thirteenth century at common law, although it has been applied in England
in recent years only by Bargrave Deane J. in The Termagant”. Paras 123 and 420 of Carver, Vol. I, have been accepted in the Federal Court of Canada as
establishing that “a shipowner may be sued in tort in
24. I am of the view, and so hold, that there does appear to be a tort of the nature stated in Carver, namely that a shipowner owes a duty to the cargo owner (i.e., shipper) that his vessel is seaworthy. If this duty is breached, then the cargo owner would be able to bring a suit directly against the shipowner and regardless of whether it is he or the charterer (at least in relation to a voyage or time charter) that is the contractual carrier. (Of course, in the present case, the Shipowner is not the contractual carrier, and therefore its liability to the plaintiff, if any, would lie only in tort.) What is the scope and nature of this tort, i.e., the duty owed by a shipowner to provide a seaworthy vessel? In principle, it ought to be no different from the scope and extent of the duty implied at common law as an absolute contractual undertaking. It is not however necessary to dwell at length on this point. The question that needs to be addressed is whether the basis on which the Vessel is alleged to have not been seaworthy in the present case is sufficient in law. It will be recalled that the allegation here is that the Vessel was due for its annual survey on which its certification depended but the Shipowner failed to ensure that the survey had been carried out with the result that when the Vessel arrived at Jeddah, it was detained by the port authorities and not allowed to sail until the survey had been completed and the certification issued. It is not necessary for me to decide whether the stopover at Jeddah constituted a deviation in the voyage. This is so because such deviation would constitute a breach of the contract of affreightment and the liability, if any, in this regard lay with the contractual carrier, the Charterer. On the other hand, in accordance with well established principles, the seaworthiness of a vessel is to be determined at the time of the commencement of the voyage and hence the question, in law, is whether or not the Vessel was seaworthy when it sailed from Volos, which it would appear, is also essentially the period of the commencement of the charterparty.
25. Before proceeding further, there is one point that may be clarified. I have stated in para 7 above that in my view, it is the Hague Rules that apply to the bills of lading under consideration. Now, there is a difference between the Hague Rules and the Hague-Visby Rules that may cause some confusion. The Hague Rules are silent on the issue of tort. However, the Hague-Visby Rules do contain a provision in relation to tort. This is Article IVbis (which was added by the 1968 Protocol), paragraph (1) of which states as follows (emphasis supplied):
“The defences and limits of liability provided for in
these Rules shall apply in any action against the carrier in respect of loss or
damage to goods covered by a contract of carriage whether the action be founded in contract or in tort.”
Since Article III(1) only requires the carrier to exercise due diligence, the duty imposed on him even in tort is significantly different, and reduced, in respect of cargo shipped under a bill of lading to which the Hague-Visby Rules apply. If at all the Hague-Visby Rules were applicable to the present bills of lading, and the Shipowner also the contractual carrier, it would be entitled to the benefit of Article IVbis (1). Of course, I am of the view, for the reasons stated above, that the bills of lading are the Charterer’s and not the Shipowner’s bills. But could the Shipowner, nonetheless, still be entitled to the benefit of Article IVbis (1) if the Hague-Visby Rules had applied to the present bills? It appears that to this question divergent answers have been given. The following statement is to be found in Carver (para 563, Vol. I, pg. 402):
“It is tempting to construe the Rule as conferring a jus tertii on a carrier who is not a
party to a bill of lading. That is precisely what is submitted by Carver to be
the correct and only possible construction.”
However, a different view is expressed in Scrutton, where it is stated as follows (pg. 454; internal citations omitted):
“Where goods are carried on a chartered ship, and
bills of lading are issued by the charterer, attempts have been made to
circumvent the Hague Rules defences and limits by instituting proceedings
directly in tort against the carrier. On a literal reading of the clause [i.e.,
Article IVbis (1)], the new Rule
could be understood as conferring on the actual carrier the benefit of the
Rules, even though he is not a party to the bill of lading. Although the
argument might be said to gain support from section 1(3) [of the UK 1971 Act]
which applies the Rules to “the carriage of goods by sea” in contrast to
section 1(4) which covers the application of the rules to “any contract for the
carriage of goods by sea”, we submit that this is a reading which the Court is
unlikely to adopt.”
In my
view, the stance taken in Scrutton is
correct and is to be preferred over the view expressed in Carver. In this context, reference may also be made to the decision
of the Court of Appeal in The Captain
Gregos [1990] 3 All ER 967 (referred to in Scrutton in footnote 77 to the passage cited above). It is not
necessary to refer to the facts in any detail. It suffices to note that one of
the issues before the Court was that the cargo owners stated that they were not
party to the bills of lading in question and hence not bound by the Hague-Visby
Rules incorporated therein by the
26. To revert to the question actually at hand, namely, whether the Shipowner is in breach of its duty in tort to the plaintiff to provide a seaworthy ship, it is well established that seaworthiness depends not merely on a ship’s physical state or even the state and status of its master and crew, but also in respect of its documentation. Thus, it is stated in Halsbury’s Laws of England, Vol. 43, 4th ed., para 597 as follows (internal citations omitted):
“The ship must also have on board all papers and
documents necessary for the protection of the ship and cargo and for the due
performance of the voyage, such as her bill of health and manifest.”
The same point is made as follows in Scrutton (pg. 99; internal citations omitted):
“The shipowner must provide the ship with all
necessary documents for the voyage, namely those validly required by the law of
the vessel’s flag or by the laws, regulations or lawful administrative
practices of government or local authorities at the vessel’s ports of call,
where known.”
Reference may also be made to Alfred C. Toepfer Schiffahrtsgesellschaft GmbH v. Tossa Marine Co. Ltd. (The “Derby”) [1985] 2 Lloyd’s Rep 325, where Kerr LJ (with whom the other members of the Court of Appeal agreed) made the following observations which are pertinent for the issue at hand (pg. 331; emphasis supplied):
"For present purposes, we are concerned with certificates bearing upon the seaworthiness of the vessel. The nature of such certificates may vary according to the requirements of the law of the vessel's flag or the laws or regulations in force in the countries to which the vessel may be ordered, or which may lawfully be required by the authorities exercising administrative or other functions in the vessel's ports of call pursuant to the laws there in force. Documents falling within this category, which have been considered in the authorities, are certificates concerning the satisfactory state of the vessel which is in some respect related to her physical condition, and accordingly to her seaworthiness. Their purpose is to provide documentary evidence for the authorities at the vessel's ports of call on matters which would otherwise require some physical inspection of the vessel, and possibly remedial measures – such as fumigation – before the vessel will be accepted as seaworthy in the relevant respect. The nature of description of such certificates, which may accordingly be required to be carried on board to render the vessel seaworthy, must depend on the circumstances and would no doubt raise issues of fact in individual cases. But I do not see any basis for holding that such certificates can properly be held to include documents other than those which may be required by the law of the vessel's flag or by the laws, regulations or lawful administrative practices of governmental or local authorities at the vessel's ports of call."
Finally, reference may also be made to Golden Fleece Maritime Inc. v. ST Shipping and Transport Inc. [2008] EWCA Civ 584, [2008] 2 Lloyd’s Rep 119 (Court of Appeal), where some of the authorities (including The Derby) were reviewed. It was observed (at para 17, pg. 124) that:
It was thereafter concluded as follows (emphasis supplied, pg. 126):
“19. … It was thus clear that documents required by an officious
outside body could not be regarded as documents relating to the seaworthiness
of the vessel but documents required by a
relevant law such as that of the vessel's flag or of any port to which the
vessel might be ordered to go could fall within the category of documents
relating to seaworthiness and thus be required before the Owners could be said
to have fulfilled their obligations. It was all a question of fact; to
which one might add it would also be a question of construing the individual
charterparties.”
27.
In my view, the foregoing extracts
from the leading treatises, and case law, clearly establish that if a vessel
requires a document that may, inter alia,
be required by or at or called for by the port authorities of any port that the
vessel may visit, such a document may well be something that the shipowner is
required to provide as part of his obligation to provide a seaworthy ship. A
specific example that Kerr, LJ., gave in this regard, namely a certificate
connected with the “satisfactory state of the vessel which is in some respect
related to her physical condition” is particularly relevant for present
purposes. In the case at hand, the allegation is that the survey of the Vessel
had not been completed with the result that her certification, which was about
to expire, could not be renewed and thus she would be without a valid
certificate. This caused the Jeddah port authorities to take the action as
described above. In the present context, clause 1 of the charterparty is also
relevant. This provided the trading areas over which the Vessel could be taken
by the Charterer. These were as follows (subject to certain exceptions, not
presently relevant, contained in clause 81): “Mediterranean Sea (excluding
28.
As noted above, the duty to
provide a seaworthy ship is determined at the commencement of sailing. It
appears (although it is not clear from the record) that the Vessel’s
certification may have been current when it sailed from
29.
In my view, the contents of the
email prima facie show a breach of the duty to provide a seaworthy ship. I may
note that the claim that the Vessel visited Jeddah only because the Charterer
so instructed is irrelevant in the present context. This is so because the
Vessel was on time charter and obviously would have to go wherever the
Charterer directed within the trading ranges (and subject to the terms of the
charterparty). In the context of the duty to provide a seaworthy vessel, it is
no answer to the cargo owner’s claim that the time charterer took the ship to
an unanticipated port as long as it was within the permissible trading area.
The absolute duty cast on the shipowner is to provide a vessel that, at the
time of commencement of sailing is seaworthy to visit any of the ports that
fall within the permissible range (subject to any special or specific
limitations, restrictions or conditions) and the documentation that, in law, is
or may required for this purpose at any such port must be in place. In any
case, Jeddah was a port that lay along the route from
30. Keeping the foregoing in mind, and to summarize the various conclusions arrived at in the paras herein above, I am of the view that in the present case it is prima facie established as follows: (a) the Shipowner owed a duty, in tort, to provide a seaworthy Vessel; (b) this duty was owed, among others, to a person such as the plaintiff whose cargo was shipped on board the Vessel under a contract of affreightment; (c) for purposes of (b) it was irrelevant that the Shipowner was not the contractual carrier and the bills of lading were the Charterer’s bills; (d) the duty owed by the Shipowner to the plaintiff was breached in the facts and circumstances of the present case; (e) a claim for breach of the foregoing duty could be made by the cargo owner (i.e., the plaintiff) in terms of section 3(2)(h) of the Ordinance; and hence (f) by virtue of section 4(4) thereof, an action in rem was and is maintainable against the Vessel. In my view, the equities clearly lie in favour of the plaintiff and against the Vessel and the Shipowner. All the ingredients for the grant of interim relief are in place and such relief ought not to be denied the plaintiff. Finally, needless to say, these are tentative observations made for purposes of the present application, which will not affect the outcome of the suit should it go to trial, where it will be decided on its own merits.
31. Accordingly, the present application is allowed with the result that the order dated 29.08.2008 is confirmed. The surety furnished pursuant to that order is to remain in place for the duration of the suit.
JUDGE