Jindal Iron and Steel Company Ltd and Others v Islamic Solidarity Shipping Company Jordon Inc.

JurisdictionUK Non-devolved
JudgeLORD BINGHAM OF CORNHILL,LORD NICHOLLS OF BIRKENHEAD,LORD STEYN,LORD HOFFMANN,LORD SCOTT OF FOSCOTE
Judgment Date25 November 2004
Neutral Citation[2004] UKHL 49
Date25 November 2004
CourtHouse of Lords

[2004] UKHL 49

HOUSE OF LORDS

The Appellate Committee comprised:

Lord Bingham of Cornhill

Lord Nicholls of Birkenhead

Lord Steyn

Lord Hoffmann

Lord Scott of Foscote

Jindal Iron and Steel Co Limited

and others

(Appellant)

and others

and
Islamic Solidarity Shipping Company Jordan Inc
(Respondents)
LORD BINGHAM OF CORNHILL

My Lords,

1

I have had the advantage of reading in draft the opinion of my noble and learned friend Lord Steyn. I agree with it, and would dismiss the appeal for the reasons which he gives.

LORD NICHOLLS OF BIRKENHEAD

My Lords,

2

I too would dismiss this appeal. I express no view on the correctness of the interpretation of article III, rule 2 of the Hague and the Hague-Visby rules adopted by Devlin J in Pyrene v Scindia Navigation Co Ltd [1954] 2 QB 402 and by your Lordships' House in GH Renton & Co Ltd v Palmyra Trading Corporation of Panama 1957 AC 149. But for the reasons given by my noble and learned friend Lord Steyn I agree this interpretation should not now be disturbed.

LORD STEYN

My Lords,

3

This appeal concerns the interpretation of the Hague and Hague-Visby Rules. By article III, r. 2 and 8, they provide as follows:

"2. Subject to the provisions of Article IV, the carrier shall properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried."

"8. Any clause, covenant or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to, or in connection with, goods arising from negligence, fault or failure in the duties and obligations provided in this Article or lessening such liability otherwise than as provided in these Rules, shall be null and void and of no effect."

Article IV, r. 2, reads as follows:

"Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from-

(i) Act or omission of the shipper or owner of the goods, his agent or representative;

(q) Any other cause arising without the actual fault or privity of the carrier, or without the fault or neglect of the agents or servants of the carrier �"

The central issue is whether (as shippers and consignees argue) article III, r. 2 of the Rules defines the irreducible scope of the contract of service to be provided by the carrier by sea or (as the carrier argues) article III, r. 2 merely stipulates the manner of performance of the functions which the carrier has undertaken by the contract of service. In cases where the parties to a contract of carriage agree that loading, stowage and discharge are to be performed by shippers, charterers, and consignees, the specific question is whether the carrier is nevertheless liable to cargo owners when the latter, or their stevedores, perform those functions improperly or carelessly. In other words, the question is whether such an agreement, which transfers responsibility for these operations from the shipowners to shippers, charterers or consignees, is invalidated by article III, r. 8.

4

Long-standing precedent is to the effect that such a reallocation of risk by agreement is permissible and that in the postulated circumstances the carrier is not liable: Pyrene Co Ltd v Scindia NavigationCompany Ltd [1954] 2 QB 402 per Devlin J; G H Renton & Co Ltd v Palmyra Trading Corporation of Panama [1957] AC 149. Cargo owners unsuccessfully challenged the existing rule in the High Court (before Mr Nigel Teare QC, sitting as a Deputy High Court Judge) and before the Court of Appeal (Waller and Tuckey LJJ and Mrs Justice Black): Jindal Iron & Steel Company Limited and Others v Islamic Solidarity Shipping Company Jordan Inc. and Another (The Jordan II) [2003] EWCA Civ 144; [2003] 2 Lloyd,'s Rep 87. Cargo owners invite the House to reverse the existing rule.

I. The Charterparty and Bills of Lading.

5

Islamic Solidarity Shipping Company Jordan Inc are the owners of the vessel Jordan II. By a charterparty on the Stemmor form dated 4 December 1997 at Hamburg the owners chartered the vessel to TCI Trans Commodities A.G. for a voyage from Mumbai in India to Barcelona and Motril in Spain. Jindal Iran and Steel Company Limited and Hiansa S.A. are respectively the sellers and purchasers of 435 steel coils. The goods were shipped from Mumbai aboard the vessel as evidenced by two bills of lading on the Congenbill form, both dated 2 January 1998, which were issued on behalf of the shipowners at Mumbai. The bills of lading contained or evidenced contracts of carriage to Motril, in Spain. The bills of lading named Jindal Iron and Steel Company Limited as the shippers and Hiansa S.A. as consignees. The relevant provisions on the face of the bills of lading were as follows:

"Freight payable as per CHARTERPARTY dated 04.12.97"

On the reverse of the bill of lading, the relevant terms of the contact of carriage provided as follows:

  • "(1) All terms and conditions, liberties and exceptions of the Charterparty, dated as overleaf, are herewith incorporated �"

  • (2) General Paramount Clause

The Hague Rules contained in the International Convention for the Unification of certain rules relating to bills of lading, dated Brussels the 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, the corresponding legislation of the country of destination shall apply, but in respect of shipments to which no such enactments are compulsorily applicable, the terms of the said Convention shall apply.

Trades where Hague-Visby Rules apply.

In trades where the International Brussels Convention 1924 as amended by the Protocol signed at Brussels on February 23 1968 - the Hague-Visby Rules - apply compulsorily, the provisions of the respective legislation shall be considered incorporated in this Bill of Lading."

The bills of lading incorporated the voyage charterparty. The Hague-Visby Rules as enacted in Indian legislation were applicable to this shipment. They correspond to the draft Hague Rules as enacted in the United Kingdom by the Carriage of Goods by Sea Act 1924, which in material respects are the same as the Hague-Visby Rules scheduled to the Carriage of Goods by Sea Act 1971.

6

Clauses 3 and 17 of the charterparty, so far as material, provided:

"3. Freight to be paid at the after the rate of US$ � per metric ton F.I.O.S.T. - LASHED/SECURED/DUNNAGED �"

17. Shippers/Charters/Receivers to put the cargo on board, trim and discharge cargo free of expense to the vessel."

The acronym F.I.O.S.T. stands for Free In and Out Stowed and Trimmed. There was, therefore, under the charterparty an agreement that the "Shippers/Charterers/Receivers" were to put the cargo on board, stow it, lash it, secure it, dunnage it and discharge it free of expense to the vessel. It was plainly an agreement designed to transfer responsibility for these particular functions from the shipowners to shippers, charterers and consignees. The cargo owners no longer contest the decisions at first instance and in the Court of Appeal to this effect.

7

Both the bills of lading and the charterparty are governed by English law.

II. The claims.

8

In February 1998 the cargo was discharged at Motril. The shippers and consignees alleged that the cargo was damaged by rough handling during loading and/or discharging, and/or inadequate stowage due to failure to provide dunnage, failure to secure the coils and/or stacking them so that the bottom layers were excessively compressed.

III. The preliminary issue.

9

Title to sue has been assumed to vest in either the shippers or consignees. On the assumption that the allegations of the claimants are correct the parties agreed to the trial of a preliminary issue. The principal issue was whether the agreement in the charterparty (evidenced by clauses 3 and 17), which purported to transfer responsibility for loading, stowage and discharge from the shipowners to shippers, charterers and consignees, is invalidated by article III, r. 8. That is now the only issue before the House.

IV. The Submissions in Outline.

10

The dispute before the House is between shipowners, shippers and consignees: the voyage charterers did not take part in the appeal. The principal submissions of cargo owners (the appellants) were as follows. First, that article III, r. 2 of the Hague and Hague-Visby Rules imposed upon the shipowners as carrier of the goods under the bills of lading the duty to perform the functions described therein and the responsibility for the proper and careful performance of those functions (which involve loading, stowing and discharging the cargo). Secondly, that the agreement evidenced by clauses 3 and 17 of the charterparty transferring responsibility for handling, stowing and discharging the cargo is invalidated by article III, r. 8. Recognising that the decision of the House in Renton stands in the way of this argument, counsel for cargo owners invite the House to depart from that decision under the Practice Statement (Judicial Precedent) [1966] 1 WLR 1234. The shipowners' position is straightforward. While they accept that the whole contract of carriage is subject to the Hague-Visby Rules, they contend that the extent to which loading, stowage and discharging are brought within the carrier's obligations may properly be a matter for agreement between the parties. They say that properly construed the Rules do not invalidate an agreement transferring the responsibility of the shipowners for those functions to the shipper, charterer or consignee. In any event, they rely on the binding authority of the decision of the House in the Renton case to that effect.

V. The Existing Rule.

11

Under the common law the duty to load, stow and discharge the cargo prima facie rested on shipowners but it could be transferred by agreement to cargo...

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