Upholding Contractual Intentions Lord Denning's Dissent in Scruttons Ltd v Midland Silicones Ltd [1962] AC 446
| Author | Catharine MacMillan |
| Pages | 77-104 |
5 Upholding Contractual Intentions
Lord Denning’s Dissent in Scruttons Ltd v Midland Silicones Ltd
[1962] AC 446
6 A Defence of Commercial Certainty in the Wake of Judicial
Pragmatism
Lord Bingham’s Dissent in Golden Strait Corpn v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2007] UKHL 12
7 Through the Looking-Glass and What Alice Found There
Lord Morton’s Dissent in Scottish Insurance Corporation v
Wilsons & Clyde Coal Company Limited [1949] AC 462
8 Removal of Directors
Lord Morris’ Dissent in Bushell v Faith [1970] AC 1099
Lord Denning’s Dissent in
Scruttons Ltd v Midland Silicones Ltd [1962] AC 446Catharine MacMillan5.1 Introduction 79
5.2 Facts 80
5.3 Issue 81
5.4 Lower courts 82
5.5 House of Lords 83
5.5.1 Decision of the majority 84
5.5.2 Lord Denning’s dissent 88
5.6 And if Lord Denning wrote the majority judgment? 92
5.6.1 Narrow interpretation 92
5.6.2 Broad interpretation 94
5.6.3 Lord Denning’s further attempts to relieve privity’s rigours 95
5.6.4 Privity beyond Lord Denning’s attempts: judicial and legislative 100
5.7 Conclusion 103
5.1 INTRODUCTION
Dissenting judgments are important to the common law for many reasons. They underscore the independence of the judiciary, they emphasise freedom of speech at the highest levels, they can illuminate legal changes, they serve to reinforce judicial reasoning in later cases and they can also assist in subsequent changes to the law by judges or legislators. This chapter examines one dissenting judgment to assess how the common law would have differed had the dissenting judgment been the majority judgment. Lord Denning’s dissent in Scruttons Ltd v Midland Silicones Ltd has been chosen not only because of the important commercial consequences which attended it but also because of Lord Denning’s
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reputation for judicial boldness. It is argued that had Lord Denning’s dissent in this case formed the majority judgment, English law would have developed very differently with regard to privity of contract.
5.2 FACTS
The facts were simple and were agreed upon by the parties to the action. In February 1957, Midland Silicones Ltd bought a drum of diffusion pump liquid from the Dow Corning Corporation on c.i.f. terms. The drum was shipped on the American Reporter from New York to London under a bill of lading dated 26 March 1957 and signed by the ship’s owners, the United States Lines. The bill of lading was in the United States Lines’ ‘short form’ which incorporated their ‘long form’ bill of lading and also made subject to, and incorporated the provisions of, the United States Carriage of Goods by Sea Act, 1936 (in which the United States had adopted the Hague Rules with certain modifications). Three significant contracts were present: the contract between the shipper and the carrier (the bill of lading); the stevedoring contract between the carriers and the stevedores; and the contract of sale between the shipper and the consignee.
The relevant contractual terms were as follows. By clause 1 of the short form of the bill of lading (and also by the long form) the parties agreed that it ‘shall govern the relations, whatsoever they may be, between shipper, consignee and the carrier, master and ship in every contingency, wheresoever and whensoever occurring and whether the carrier be acting as such, or as bailee, and also in the event of, or during deviation or of conversion of the goods ...’. In clause 3 of the short form (clause 1 of the long form) the parties further agreed that ‘the provisions stated in [the United States Carriage of Goods by Sea] Act [1936] ... shall govern before the goods are loaded on and after they are discharged from the ship and throughout the entire time the goods are in the custody of the carrier’. The long form, clause 3, defined a carrier as follows, ‘in this bill of lading ... the word “carrier” shall ... include the ship ... her owner, operator and demise charterer, and also any time charterer or person, to the extent bound by this bill of lading, whether acting as carrier or bailee’. The long form, condition 24, also sought to limit liability for delay, loss or damage to goods shipped to the value of US$500 per package ‘unless the nature and a higher value shall be declared by the shipper in writing before shipment and inserted in this bill of lading’. Condition 4 of the long form stated, inter alia, that ‘if it shall be adjudged that the United States Lines Company or any person other than the owner or demise charterer is the carrier or bailee of the goods, all rights, exemptions, immunities and limitations of liability provided by law and all terms of this bill of lading shall be available to it or such other person’. Finally,
by condition 17 of the long form, the carrier and master were given the right to appoint stevedores, master-porters and other agents.
The United States Carriage of Goods by Sea Act, 1936 provided in s 1(a) that ‘the term “carrier” includes the owner or the charterer who enters into a contract of carriage with a shipper’. By the 1936 Act, s 4(5), it was provided that ‘neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of the goods in an amount exceeding 500 dollars per package lawful money of the United States ... unless the nature and value of such goods have been declared by the Shipper before shipment and inserted in the bill of lading’. No declaration as to the value of the drum was made or inserted into the bill of lading in this case.
Scruttons Ltd acted as the stevedores and agents of the United States Lines pursuant to an existing contract between the two parties. By that contract, Scruttons Ltd agreed that while they were fully responsible for any damage to, or loss of, inter alia, the cargo if this was caused by their negligence or that of their servants while the cargo was ‘being handled or stowed, unshipped or delivered, or while in stowage’, it was also agreed that ‘stevedores to have such protection as is afforded by the terms, conditions and exceptions of the Bills of Lading Westbound and Eastbound’. Where a declaration had been made by a shipper that a package was worth more than US$500, the stevedores undertook ‘to effect an insurance policy on Lloyds to cover any damage or loss on which a value in excess of $500 per package has been declared’. The plaintiffs, Midland Silicones, were unaware of the terms or existence of this contract.
The American Reporter discharged her cargo in London at the Royal Victoria Dock in mid-April 1957. Scruttons’ servants discharged the drum from the vessel and stored it in a transit shed on the quayside. United States Lines paid an annual rental to the Port of London Authority for the use of the quay and the transit shed. At the beginning of May, once the drum had cleared customs, a landing order was sent from the Port of London Authority to a servant of Scruttons to deliver the drum to a firm of cartage contractors. It was while the drum was being lowered onto the contractors’ lorry that it was dropped and damaged as a result of the negligence of Scruttons’ servants. The loss suffered by the defendant as a result of this damage was £593 12s. 2d, an amount in excess of US$500.
5.3 ISSUE
The case was brought as a test case to determine whether parties in the position of stevedores, such as Scruttons, were entitled to the protection of an exceptions
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clause in the bill of lading when they were performing the carrier’s obligations under that bill of lading in delivering the goods. Put more succinctly, if English law recognised vicarious liability, did it also recognise vicarious immunity? In the background of the litigation were the Hague Rules, formulated at the Brussels International Convention of 1924, and the question of whether or not the limitations in the Hague Rules could be evaded by a goods owner who sued not the carrier but servants, agents or independent contractors in tort.
Scruttons’ case was argued throughout by Eustace Roskill QC, who advanced the position that in such a situation the stevedores were within the protection of the exceptions clause because by the bill of lading, the United States Lines were bailees of the drum; Scruttons were the agents of the United States Lines to perform certain obligations of their contract with the plaintiff; as such, Scruttons became sub-bailees of the drum; in the course of acting as agents and/or subbailees, Scruttons negligently dropped the drum; that the United States Lines would have been, if sued, able to limit their liability to US$500 for the drum; and Scruttons were entitled to the same protection in this situation because the contract between the United States Lines and the plaintiff clearly contemplated that some of this contract would be performed by persons other than the United States Lines and the United States Lines lawfully sub-bailed the drum to Scruttons as agents to allow them to perform some of the United States Lines’ obligations under the contract of carriage.
5.4 LOWER COURTS
Diplock J, in the High Court, found that Scruttons were not entitled to the protection of the exceptions clause.
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