The law module… session 2! Susan Hawker

The “shipping picture” overview A case study The Nicholas H [1996] AC 211… enables us to consider two main points: (a) an overview of the shipping “picture” (b) how maritime claims may be brought.

Finding the full law report Marc Rich & Co v Bishop Rock Marine Co… this case is available through the British and Irish Legal Information Institute (“BAILII”). Google “BAILII” and then select “UK” from the date bases and then go to “cases” and then scroll down for the court you want (for this case “UK House of Lords”. Although the site does not have all HL cases until from November 1996, some, including happily The Nicholas H, are. The Court of Appeal has all significant cases on BAILII since August 1999, and all substantive cases since 2003.

Our interest in the court hierarchy We are especially in interested in House of Lords/Supreme Court decisions as only a few cases go this far on appeal. An appeal may only be heard by this final court “with leave”, from either the H/L (or SC) or the CA. This will only be given where there is a serious/difficult issue of law and/or public policy to be determined. We are, then, also especially interested in Court of Appeal judgments, as this is where most cases will finish, and thus is where most law is developed.

Starting the picture (A) The owner and the time charterer. The owner (either the actual owner or a demise charterer)… i.e. the person who bears the liabilities for the adventures of the vessel. The time charterer (“TC”). O is likely to have chartered his vessel out to TC, who pays hire in return for the use of the vessel (complete with crew) for the period of the charter.

The next part… (B) The shipper and his disponent owner/carrier TC may sub-charter/fix out the vessel. In The Nicholas H, TC fixed the vessel for carriage to: The claimant (“C”) In this new contract, C is the shipper and TC becomes: The disponent owner/carrier… he “stands in the shoes” of the owner for the carriage liabilities.

Further aspects (C) Carriers, shippers and consignees. The carrier… is the person who contracts to carry the goods. The shipper… is the person who contracts to have the goods carried. The consignee… is the person who is to receive the goods. (This may be the shipper, as in our case.)

Our case: who does what? O and TC have a time charter (contract 1): O provides the vessel, TC pays hire. TC fixes with (as subcharters? I will refer to this issue…) our claimant (“C”) for the carriage of goods from South America to Northern Italy (contract 2)... In contract 2: TC is both disponent owner and carrier. C is both shipper (he may be or may not be a chartering shipper) and consignee.

The loading of the goods Questions to ask: How does the shipper know that the goods have been loaded? How does the carrier prove that he loaded the goods in the condition received?

Bills of lading The most common receipt, and the type issued in The Nicholas H, is a bill of lading. The functions of a bill of lading: - Receipt for the goods shipped. - Document of title for the goods (i.e. it “stands in the shoes of the goods”). - May be evidence of the shipper’s contract and will be a contract of carriage in a subsequent consignee’s hands (not, then C’s hands in The Nicholas H, as C was both the shipper and the consignee, and he may be a voyage charterer). - Is a negotiable document: as a contract of carriage it can be on-sold to subsequent consignees (endorsees).

The matrix of contracts The international sale contract and the role of the bill of lading: The shipper (e.g. our shipper) sells the goods to a buyer in another jurisdiction. That buyer pays for the goods (the cost), the sea carriage (the freight) and insurance for the voyage. The shipper is a cost, insurance and freight (“c.i.f.) seller. The c.i.f. buyer is the consignee. The goods are deemed as delivered to the buyer when they cross the ship’s rails. The seller must deliver conforming goods to the buyer (right quantity and quality: SGA 1979). A “clean” bill of lading represents conforming goods. The bill is transferred to the buyer. He must accept and pay against it. The risk of loss and damage usually passes to the buyer when the goods are delivered, i.e. when the goods are shipped. The seller, then, falls out of the picture if he delivered conforming goods. The buyer is the named consignee, who takes the bill as a carriage contract.

What went wrong? This is a House of Lords case… cases do not go up to the House of Lords (today renamed as the Supreme Court under the Constitutional Reform Act 2005) unless: There is a serious issue of law and/or public policy to address

The facts The vessel developed cracks in the hull mid voyage. She anchored off San Juan, Puerto Rico, where further cracks appeared. A representative of the vessel’s class society (NKK), recommended permanent repairs, but later changed his mind (why??!) and signed off temporary repairs as being adequate for the vessel to complete her voyage. The repairs were not adequate, and the vessel sank. The class society’s representative had been careless in his survey and report.

Who does C sue for lost goods? TC… for breach of the carriage contract. TC is either in breach of his common law liability to provide a seaworthy vessel at each of the four stages of the carrying voyage, or he is in breach of recognised mandatory/ express carriage regime terms, that he should exercise due diligence to provide a seaworthy vessel before and at the beginning of the voyage. This is a non-delegable duty, and so if the common law applies the class society’s carelessness is O’s liability which is TC’s liability. TC can limit his liability under the contract. O… in bailment, which is based on due diligence, and in respect of providing a seaworthy vessel the obligation is non-delegable. Our shipper has an owners’ bill, which causes O to be the bailee of the goods for the named consignee, the bailor, i.e., here, our shipper. O can limit his liability, either under the bill of lading or under the London Limitation Convention 1976, incorporated into English law under the Merchant Shipping Act 1995.

The carriage regimes The international carriage regimes apply on a mandatory basis (i.e. by law) to bill of lading type contracts, but are usually expressly incorporated into charters (why??!): The Hague Rules The Hague-Visby Rules The Hamburg Rules… these have not been adopted by many jurisdictions. A third regime may come into force: The Rotterdam Rules.

C’s claim against Class C brought a claim in the tort of negligence against the class society. There are three elements to this cause of action: A duty of care… this is a judicially recognised link/nexus/thread between the defendant and the claimant. C must show that the class society owed him a duty of care. Breach of duty (the carelessness). Resulting damage.

The contentious issue Did the defendant class society owe C a duty of care? No… majority of their Lordships found against the claimant (so a dissenting speech, per Lord Lloyd). The class society could not limit their liability against the cargo interest, C. To allow the claim would, per Lord Steyn, disturb the balance of trade and its insurance regimes (policy). The claimants lost their case.