Albazero, The (Albacruz)

This appeal comes before this House upon a preliminary issue to decide a question of law that is of great practical importance to cargo underwriters and P. and I. insurers, i.e. insurers of shipowners' liability to third parties. The detailed facts which give rise to the point of law are complicated in the instant case; they are set out in the judgments in the courts below. I do not propose to repeat them here since, for the purpose of dealing with the question of law upon which cargo and P. and I. insurers who stand behind the nominal parties in the instant case desire your Lordships' ruling, it is sufficient to mention that (1) The Albacruz was chartered by the Concord Petroleum Corporation ("the charterers") from Gosford Marine Panama S.A. ("the shipowners") under a five year time charter substantially in the Shelltime form. (2) At La Salina in Venezuela there was shipped on board the Albacruz a cargo of crude oil for carriage to a discharging port, which was later designated as Antwerp. The carriage was covered by a bill of lading issued pursuant to the charterparty naming the charterers as consignees. (3) In the course of the voyage the Albacruz and her cargo became a total loss owing to breaches by the shipowners of the charterparty—or so we must assume for the purposes of the preliminary issue. (4) At the time of the loss the property in the cargo was no longer vested in the charterers but in the endorsees of the bill of lading, Raffinerie Belge de Petroles S.A. ("the cargo-owners").

The statement that I have numbered (4) is a conclusion of law as to the passing of the property in the cargo which Brandon J. and the Court of Appeal concurred in drawing from the facts in evidence. The charterers have questioned the correctness of this decision in the argument that has been advanced on their behalf before this House. I think that for the reasons that they gave the courts below were clearly right in drawing that conclusion. The facts on which the conclusion of law was based were peculiar to the instant case; they raise no question of general interest and no useful purpose would be served by providing an additional paraphrase of the lucid ratiocination that can be found in the reported judgments of Brandon J. and Roskill L.J.

The charterers brought an action against the shipowners for breach of the time charter. The cargo-owners, a company in the same group as the charterers, were not parties to the action; they had lost their right to claim under the bill of lading owing to the expiry of the one year prescription period provided for by Article III Rule 6 of the Hague Rules. In the action the charterers claim that the measure of the damages which they are entitled to recover is the arrived value of the goods lost, notwithstanding that at the time the goods were lost they (the charterers) had no longer any property in the goods and suffered no loss themselves by reason of their non-delivery at their destination.

The question of law of general importance to cargo and P. and I. insurers to which your Lordships' answer is sought in this appeal can be stated thus:

Where goods which have been shipped on a chartered vessel under a bill of lading issued by the shipowner are lost or damaged as a result of conduct which constitutes a breach of the charterparty by the shipowner, can the charterer recover in an action against the shipowner as damages for breach of the charterparty the full value of goods lost or the full amount of the diminution in value of goods damaged, notwithstanding that the charterer had no proprietary interest in the goods at the time when they were lost or damaged and had himself sustained no loss or damage as a consequence of the breach?

The general rule in English law to-day as to the measure of damages recoverable for the invasion of a legal right, whether by breach of a contract or by commission of a tort, is that damages are compensatory. Their function is to put the person whose right has been invaded in the same position as if it had been respected so far as the award of a sum of money can do so. Such an award can readily do so in the case of mercantile contracts, since the purpose of the parties in entering into them is to make a money profit. So where the wrong for which suit is brought is the breach of a mercantile contract the measure of damages for the breach is generally the financial loss that the plaintiff has sustained by reason of the defendant's failure to perform the contract according to its terms.

The general rule, however, was slow in its historical development and in the case of contracts for the carriage of goods its seems to have been assumed at any rate until the first quarter of the nineteenth century that if the plaintiff was entitled to bring an action in assumpsit against the carrier for non-delivery of the goods or damage to them he was entitled to recover the full value of the goods or the full amount of the damage even though the goods were not his own and he sustained no loss himself as a result of the defendant's breach of contract. So right of suit appears at this period to have been regarded as carrying with it the right to recover substantial damages. The researches of counsel have not disclosed authority earlier than 1825 in which the distinction has been drawn between the right of a party to a contract to recover only nominal damages for breach of contract where he has himself sustained no loss and his right to recover substantial damages for his actual loss if he has sustained one.

The reason why in the early cases right of suit and the right to recover substantial damages for loss of the goods were treated as always vested in the same person may have been because the contract for the carriage of goods involves a bailment. The person on whose behalf the goods are delivered to the carrier is the bailor and the carrier is the bailee. If sued before the Common Law Procedure Act 1852 whether in case upon the common custom of the realm or in assumpsit, the carrier was estopped from denying his bailor's title to the goods at the time when possession was delivered to him. The question who stood in relation of bailor to carrier and so was entitled to sue him for the full value of the goods lost or the full amount of the damage could only arise where the consignor and consignee were different persons. In such a case the presumption was that the bailor was the person named as consignee and that in delivering possession of the goods to the carrier the consignor was acting and purporting to act as agent only for a designated principal—the consignee. The possibility that the property in the goods might be transferred from consignor to consignee while they were in the possession of the carrier did not arise in practice until the close of the eighteenth century when the bill of lading was recognised in Lickbarrow v. Mason (1794) 5 Term Rep. 683, as a document of title capable of transferring the property in the goods to which it related by endorsement and delivery. So until 1793 as respects carriage by sea and until the abolition...