Mitsui & Co Ltd v. The Owners of the Ship "Sun Flower" and Another

Case No.HCAJ 130/1973

Court

HCAJ

Date—

Judge—

Case Document

100%Judiciary

HCAJ000130/1973

IN THE SUPREME COURT OF HONG KONG

ADMIRALTY JURISDICTION

ACTION NO. 130 OF 1973

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Admiralty Action in Rem against the Ship "Sun Flower" and in personam against Gold Star Line Ltd.

BETWEEN
	Mitsui & Co. Ltd.	Plaintiffs
	and
	The Owners Of The Ship "Sun Flower"	1st Defendants
	Gold Star Line Limited	2nd Defendants

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Coram: Leonard J.

Date of Judgment: 15th July, 1974.

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JUDGMENT

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1. The plaintiffs' claim against the second defendants was for damages for breach of contract of carriage, evidenced by two bills of lading is said to have been issued by the second defendants.

2. The matter comes before me in consequence of an order made by consent on the 17th of May, 1974 whereby it was directed that:

"the point raised in paragraphs 7, 8, 9 and 10 of the Defence of the 2nd Defendants namely whether the 2nd Defendants in issuing the said Bills of Lading merely acted as agents for the 1st Defendants and were under no personal liability thereunder, be tried as a preliminary issue and be set down for hearing and disposed of forthwith and before the trial of this action."

I decided the said issue in favour of the second defendants herein and ordered that this action be dismissed as against the second defendants under Order 33 rule 7 with costs for the reasons which follow.

3. Paragraphs 7, 8, 9 and 10 of the defence read as follows:

Clause 17 of each of the said Bills of Lading provided as follows:

If the vessel is not owned by or chartered by demise to the company or line by whom this Bill of Lading is issued (as may be the case notwithstanding anything that appears to the contrary) this Bill of Lading shall take effect only as a contract with the owner or demise charterer as the case may be as principal made through the agency of the said company or line who act as agents only and shall be under no personal liability whatsoever in respect thereon.'

	8.	The said vessel was chartered to the 2nd Defendants by Time Charter in New York Produce Form dated 1st March 1972 for about 6 months plus 12 months charterers option.
	9.	The said vessel is and was at all material times neither owned by nor chartered by demise to the 2nd Defendants.
	10.	In the premises the 2nd Defendants in issuing the said Bills of Lading acted as agents only for the 1st Defendants and are under no personal liability to the Plaintiff in respect of the matters complained of in the Statement of Claim."

When the hearing of the issue commenced before me, Mr. Ching for the plaintiffs suggested that the consent order was bad and should be set aside. He did not however seek an adjournment to enable his clients to commence proceedings to set aside on Mr. Mills-Owens for the second defendants indicating that the issue as framed in the consent order would be argued on the basis that paragraph 10 of the defence, by its use of the words "In the premises", referred only to paragraph 7 of the defence so that the only issue before me was whether the effect of the "demise" clause set out in paragraph 7 of the defence was to establish that the second defendants in issuing the Bill of Lading merely acted as agents so as not to incur personal liability thereunder. For the consideration of this narrow issue, I accepted the facts set out in the Statement of Claim as true. No reply had been filed.

4. Mr. Ching argued that Mr. Mills-Owens could not seek a benefit from Clause 17 unless his clients were a party to the contract of carriage. This is, I hold, a wrong approach. The plaintiffs seek to rely on the Bill of Lading to establish the liability of the second defendants who quite properly reply:

"You cannot do so. Clause 17 of the very document you propound prevents you."

5. By consent copies of the Bills of Lading were exhibited as was the chartered party in favour of the second defendants. The latter document was a Time Charter and Clause 8 of it provided that:

"The Captain (although appointed by the Owners), shall be under the orders and directions of the Charterers as regards employment and agency; and Charterers are to load, stow, trim the cargo at their expense under the supervision of the Captain, who is to sign Bills of Lading for cargo as presented, in conformity with Mate's or Tally Clerk's receipts or if requested by Charterers to authorize Charterers and/or their Agents to sign."

The Bills of Lading in question which are signed under the "chop" of Miller, Weedon & Carruthers (Pty.) Ltd. (who are general agents for the second defendants) "as agents for the Master" and headed "Gold Star Line, Ltd. (incorporated in Hong Kong)" stipulate that goods are to be delivered "subject to the terms and conditions set out on the face and back of this Bill of Lading". The goods in question were shipped at Durban for delivery at Yokohama.

6. The only clauses oh the back of the Bill of Lading (apart from Clause 17) which are relevant to my considerations are Clauses 2 and 3. These road as follows:

"	CLAUSE PARAMOUNT
	2. The Hague Rules contained in the International Convention for the Unification of certain rules relating to Bills of Lading dated Brussels the 25th August, 1924, as enacted in the country of shipment shall apply to this contract. Provided that unless the contrary is proved, the Rules as enacted in the country of shipment shall be deemed to be identical with the rules as enacted in the Colony of Hong Kong. When no such enactment is in force in the country of shipment, the Colony of Hong Kong Carriage of Goods by Sea Ordinance and the Rules contained in the Schedule thereto shall apply, as if the goods were being carried from a port in the Colony of Hong Kong to any port, whether in or outside the Colony of Hong Kong.
	3. This Bill of Lading, and all rights and liabilities thereunder, shall be governed by and interpreted and construed in accordance with the laws of the Colony of Hong Kong for the time being in force, and, insofar as these laws do not extend or apply, by the laws of England for the time being in force."

7. Since no reply was filed these clauses were not pleaded. Mr. Mills-Owens, if I understood him aright, would contend that the validity of Clause 17 cannot be questioned (its invalidity not having been pleaded) because of Order 18 rule 8 and that I should not consider Clauses 2 and 3 of the Bill of Lading because of the limited way in which the issue is framed in the consent order. With the second of these contentions I cannot agree. I must look at the whole document to ascertain the intention and meaning of any one clause. With the first contention I would agree not solely however on the narrow ground provided by Order 18 rule 8 but because Clause 17 is as much a part of the Bill of Lading as are Clauses 1 and 2. They are equally "valid" and the question for decision is their effect on one and other. The apparent effect of Clause 17 (which is usually "but most inaptly" described as "the demise clause" see Carver on Carriage of Goods by Sea 12th Edition at paragraph 418) is to divest the plaintiffs of their right of action against the second defendants as there was evidence before me that the ship was not owned by the second defendants nor chartered by demise to them. In Apex (Trinidad) Oilfields, Ltd. v. Lunham & Moore Shipping, Ltd.⁽¹⁾ the following passage occurs:

"The evidence is that the bill of lading after having been filled in by the shipper, and the cargo having been loaded on board the Wychwood, was presented to and signed by the master of the vessel on behalf of her owners. In the circumstances of this case, the defendant being neither the owner, nor the possessor of the vessel under demise charter, it must, in the opinion of the Court, be taken as settled that the master in signing the bill of lading acted for, and as the agent of, the owners of the Wychwood."

If Clause 17 stood alone therefore this passage could be adopted so as to read:

"The facts are that the Bill of Lading having been filled in was signed by the general agents of the second defendants as agent for the Master. The second defendants being neither the owner nor the possessor of the vessel under demise charter, it must be taken as settled that in doing so they acted for, and as the agent of, the owners of the 'Sun Flower'".

However, Mr. Ching's contention is that I must assume that the second defendants were "carriers" of the goods because I am not asked to adjudicate on whether or not they were a contracting party. He suggests that I must assume they were a contracting party. If the defendants were "carriers", he contends that the demise clause is void because it offends Article 3 of Rule 8 of the Hague Rules which corresponds to Article 3 of Rule 8 of Our Carriage by Sea under Bills of Lading Rules and reads as follows:

"8(1) 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."

By Section 2 of the Carriage of Goods by Sea Ordinance, the Carriage by Sea under Bills of Lading Rules have effect in relation to and in connection with the carriage of goods by sea in ships carrying goods "from any port in the Colony to any other port." The position in England is similar. The rules applying to Bills of Lading under which goods are carried:

"from any port in Great Britain or Northern Ireland to any other port whether in or outside the Great Britain or Northern Ireland".

Therefore the Carriage by Sea under Bills of Lading Rules are by the law of Hong Kong not the governing factor for the construction of the Bill of Lading in question. They are incorporated in it by its own terms. Clauses 2 and 3 of the Bills of Lading of themselves cannot render Clause 17 invalid since Clause 17 is as much a part of the Bill of Lading as are Clauses 2 and 3. They exist side by side. In saying this I do not ignore the fact that the words "Clause Paramount" precede Clause 2 for it is clear that the phrase "Clause Paramount" is invariably used as descriptive of clauses incorporating the "Hague Rules" just as the expression "demise clause" is used to describe clauses such as Clause 17. How far then is the operation or interpretation of Clause 17 cut down or affected by Clauses 2 and 3. In Varnish & Co. Ltd. v. Kheti (Owners)⁽²⁾ clear recognition is given through the distinction between a Bill of Lading which is governed by the Carriage of Goods by Sea Act and its schedule and a Bill of Sale rendered subject to the terms and conditions of that Act and schedule by contract only. In that particular case the "Onion Clause" a special clause to which exception was taken was super-imposed upon the Bill of Lading having been stamped thereon and much weight was given to the well-established doctrine that where a document such as a Bill of Lading contains clauses which are printed and clauses which are written or stamped on it and those clauses are mutually irreconcilable so that it is impossible to give effect to what is printed as well as to what is written or stamped effect will be given to the written or stamped portion rather than to such portion of the printed clause as is irreconcilable with the written or stamped clause. Nevertheless the principle established appears to me to be applicable here. One clause is a contract incorporating the Hague Rules cannot render void another clause in the same contract. Clause 17 must have some effect. This is recognised in the consent order giving rise to the proceedings before me for I am asked to decide the "point raised in paragraphs 7, 8, 9 and 10 of the defence of the second defendants namely whether the second defendants in issuing the said Bills of Lading acting merely as agents for the 1st defendants and were under no personal liability thereunder" and the validity of paragraph 7 depends on Clause 17. There is no reply contending that Clause 17 is meaningless. The rules being incorporated by contract not by legislation one term of the contract no matter how entitled cannot avoid another. It is true that a contrary view was taken in Canadian Klockner Ltd. v. D/S A/S Flint, Willy Kubon & Federal Commerce & Navigation Co. Ltd. a case heard in the trial division of the Federal Court of Canada reported at 1973 2 Lloyd's Law Reports 478. In that case the Bills of Lading (which by Clause 3 were made subject to the Hague Rules) were issued by the third defendant for and on behalf of the master, and provided inter alia:

"	2.	Parties to the Contract. 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 alone 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. If, despite the foregoing, it is adjudged that any other is the Carrier and/or bailee of the goods shipped hereunder, all limitations of, and exonerations from, liability provided for by law or by this Bill of Lading shall be available to such other.
		It is further understood and agreed that as the Company or Agents who has executed this Bill of Lading for and on behalf of the Master is not a principal in the transaction, said Company or Agents shall not be under any liability arising out of the contract of carriage, nor as Carrier nor as Bailee of the goods."

Heald J. observed:

"	That is to say, Clause 2 is a clause relieving the carrier from liability for loss of goods arising from a breach of duty as provided in Article 3 of the Hague Rules and by said Clause 8 of the said Rules, I have the view that clause 2 of the bill of lading is rendered null and void and of no effect.
	I was not referred by Counsel to any Canadian cases where the so-called demise clause was struck down under Article 3, rule 8 of the Hague Rules but I was referred to a decision of the United States District Court, wherein a demise clause, similar in all material respects of Clause 2 in this bill of lading, was declared null and void as being contrary to sect. 1 of the Harter Act which said sect. 1 is similar to said Article 3 rule 8 of the Hague Rules."

Heald J. goes on to conclude that "Clause 2 of subject bill of lading is invalid". It does not appear from his judgment that he has considered whether a distinction exists where the Hague Rules are applied by the contract itself, rather than by law. His reference to the Harter Act would suggest that he regarded them as legislation governing the contract rather than as part of it. The suggestion at paragraph 276 of Carver (12th Edition) on Carriage of Goods by Sea that:

"Where the rules are expressly incorporated in the bill of lading it is submitted that their effect is to cut down the provisions of an offending clause only in so far as it is repugnant to the Rules and that the clause, as so limited, is effective on the ground that it does not then infringe Article 3 rule 8"

appeals to me. Again, I am not unmindful of the warning in paragraph 276 of Carver that:

"Decisions in cases governed by the Harter Act or by Dominion legislation in similar form to that Act cannot be relied on in construing this rule."

Can Clauses 2 and 3 then co-insist with any meaning with Clause 17? I think they can. The words "and shall be under no personal liability whatsoever in respect thereon" in Clause 17 appear to me to be superfluous. They do not operate to "relieve" the carrier from liability in the sense of Article 3 rule 8 for the preceding words of the clause indicate that the contract of carriage is a contract with the owner or demise charterer as principal through the agency of the second defendants who act as agents only. This is perhaps a somewhat strained interpretation of Clause 17 but I am obliged both by the fact that the Hague Rules take effect as part of the contract and by my terms of reference as contained in the consent order to give effect to Clause 17. It appears to me that I can only reconcile it (and reconcile it I must) with the Hague Rules by regarding it as establishing the status of the second defendants as agents and not as creating relief from liability. For these reasons I have come to the conclusion that the point raised in paragraphs 7, 8, 9 and 10 of the defence of the second defendants namely whether the second defendants in issuing the said Bills of Lading merely acted as agents for the first defendants and were under no personal liability thereunder must be decided in favour of the second defendants.

8. That question having been so decided, Mr. Mills-Owens applied to me to dismiss the case as against the second defendants under Order 33 rule 7. The plaintiffs by paragraphs 13 and 14 rely on the contract of carriage as evidenced by the Bills of Lading in question to fix the second defendants with liability. My decision necessarily entails that they have failed so to do. It therefore renders the trial of the cause or matter between the plaintiffs and the second defendants unnecessary and disposes of it. I therefore dismissed the case as against the second defendants with costs.

	(P.F.X. Leonard)
	Puisne Judge