Whitesea Shipping and Trading Corporation & Anor v El Paso Rio Clara Ltd & Ors

The Claimants seek an anti-suit injunction against the Fifth, Ninth and Fourteenth Defendants in respect of proceedings commenced by those Defendants (to whom I will refer in this judgment simply as “the insurer Defendants”) against the Claimants and certain third parties in Brazil. They also seek a similar injunction against the proposed Nineteenth Defendant, another insurer which has commenced such proceedings in Brazil. So far as the application against the insurer Defendants is concerned, that was contested, at least in so far as the injunction sought would restrain the insurer Defendants from pursuing the third parties. All the current Defendants (apart from the Third Defendants, a Cayman Islands law firm named on one of the bills, against which the proceedings have been discontinued) were represented at the hearing on Friday 16 October 2009 by Mr Nigel Jacobs QC.

At the end of the hearing I indicated that I would grant the injunction sought against the insurer Defendants and give my reasons for doing so later. This judgment sets out those reasons. The proposed Nineteenth Defendant is another insurer which is yet to be served with the proceedings, so that the application against it was necessarily on a without notice basis. For the same reasons as set out in this judgment, the Claimants are entitled to an anti-suit injunction against it.

The Second Claimant is the registered owner of the vessel MARIELLE BOLTEN (“the vessel”) and the First Claimant is the demise charterer of the vessel from the Second Claimant. Together they can be regarded as the owners of the vessel, without any need for present purposes to distinguish between them. The Claimants were members, with other shipowners, of the so-called Fantasy Shipping Pool. That Pool was regulated by a Pool Agreement dated 27 October 1997. The Agreement provided that Clipper Agency AG were Pool Managers whose authority extended to concluding charterparties on behalf of members of the Pool, on terms which were based on the New York Produce Exchange form of time charter. The Agreement also provided that a company called Fantasy Shipping Pool Limited (a Bahamian company) should appear as owner in any charterparty. It is clear that that company was the vehicle through which pool vessels operated and that the company entered such charters as agent for the actual owners of the relevant vessel.

As contemplated by the Pool Agreement, a time charterparty of the vessel dated 2 September 2004 was entered into between Fantasy Shipping Pool Limited as owners and VOC Steel Services BV (“VOC”). That charter was for a period of 23/25 months in the charterers’ option. VOC sub-chartered the vessel to Bossclip BV for a time charter trip pursuant to a fixture note dated 21 November 2005 on essentially the same terms as the head charters.

Pursuant to orders given by the charterers/sub-charterers, the vessel proceeded to Rio de Janiero, Brazil and loaded cargoes in respect of which four bills of lading were issued, one dated 31 December 2005 (bill 001) for discharge at Puerto Plata in the Dominican Republic and three dated 8 January 2006 (bills 002, 004 and 005) for discharge at Houston, Texas. The bills were issued on behalf of the Master by Pennant Services Maritimos Ltda (who were in fact agents in Brazil for both the Claimants and VOC) as contemplated by clause 30 of the head charter. As a matter of English law, by which all the bills were expressly governed, the bills were thus clearly owners’ bills, not charterers’ bills, as indeed was not challenged by Mr Jacobs on behalf of the Defendants.

The current Defendants are all cargo interests under the three bills issued on 8 January 2006 or (in the case of the Fifth, Ninth and Fourteenth Defendants who are the insurer Defendants) the subrogated insurers of those cargo interests. Similarly, the proposed Seventeenth and Eighteenth Defendants are the cargo interests under bill 001, and the proposed Nineteenth Defendant is the subrogated insurer of those cargo interests. It is not entirely clear from the materials before the court, but it seems likely that the trip charter between VOC and Bossclip was entered in order to fulfil shipping commitments with the cargo interests.

As well as being expressly governed by English law, each of the bills contained an exclusive English jurisdiction clause. So far as relevant for the purposes of the present dispute, the bills also each contained the following clauses:

“1.

DEFINITIONS

f.

“Subcontractor” includes stevedores, longshoremen, lighters, terminal operators, warehousemen, truckers, agents, servants, any person, firm, corporation or other legal entity who performs services incidental to the goods and/or the carriage of the goods, including direct and indirect subcontractors and their servants and agents.

3.

SUBCONTRACTING

a.

The carrier shall be entitled to subcontract on any terms the whole or any part of the carriage, loading, unloading, storing, warehousing, handling and any and all duties whatsoever undertaken by the carrier in relation to the goods.

b.

[1] The merchant undertakes that no claims or allegations shall be made against any servant, agent, stevedore or subcontractor of the carrier which imposes or attempts to impose upon any of them or any vessel owned or chartered by any of them any liability whatsoever in connection with the goods, [2] and if such claim or allegation should nevertheless be made, to indemnify the carrier against all consequences thereof. [3] Without prejudice to the foregoing, every servant, agent, stevedore and subcontractor shall have the benefit of all provisions herein benefiting the carrier as if such provisions were expressly for their benefit, and all limitations of and exonerations from liability provided to the carrier by law and by the terms hereof shall be available to them, and in entering into this contract the carrier, to the extent of those provisions, does so not only on its own behalf, but also as agent and trustee for such servants, agents, stevedores and subcontractors.

c.

The defences and limits of liability provided for in this bill of lading shall apply in any action whether the action be founded in contract or in tort.”

I have retained the division of clause 3b into three numbered parts suggested by Mr Jacobs for the purposes of argument.

The bills also all contained a clause paramount, by virtue of which the Hague Rules applied in relation to bill 001 and the US Carriage of Goods by Sea Act 1936 (incorporating the Hague Rules) applied in relation to bills 002, 004 and 005, because the carriage was to the United States.

The vessel grounded off Puerto Plata in the Dominican Republic. The Claimants contend that this was due either to perils of the sea, constituted by poor weather at the time, or to error in navigation by the Master of the vessel. Either way, the Claimants contend that they have a complete defence to any claim by cargo interests by virtue of Article IV rule 2 (c) or (a) respectively of the Hague Rules. Following the grounding, joint salvors were appointed under Lloyd’s Open Form and the vessel was refloated. The cargo under bill 001 was discharged at Manzanillo in the Dominican Republic and the vessel was then towed to Freeport in Grand Bahama, where she arrived on 22 February 2006. Discharge of the cargoes under bills of lading 002, 004 and 005 then commenced and was completed on 23 March 2006. Those cargoes were on-carried to the United States on other vessels in the same management as the vessel. There was no damage to any of the cargo carried under bills of lading 002, 004 and 005.

The Claimants had declared general average on 26 January 2006. Average Bonds were subsequently agreed with the various cargo interests and general average guarantees were provided by the cargo insurers. All those further contracts were governed by English law and were subject to the exclusive jurisdiction of the English courts. The general average adjustment took place in Hamburg and the average adjustment was issued on 30 June 2009.

The present proceedings were issued against the First to Sixteenth Defendants in May 2007, seeking general average and salvage charges and declarations in relation to liability against the Defendants, on the basis that as a matter of English law the Defendants have no defence to claims for general average or salvage if the cause of the incident was perils of the sea or the fault of the Master. As is accepted by the Claimants, the position would only be different if the vessel was unseaworthy and the Claimants had failed to exercise due diligence before and at the beginning of the voyage.

At the time that the present proceedings were issued, the current Defendants had commenced substantive proceedings against the Claimants in the Dominican Republic which the Claimants considered to be in breach of the exclusive jurisdiction clause in each of the bills of lading. Accordingly, in the Claim Form, they also sought injunctive and declaratory relief. However, after Waltons & Morse, solicitors for the current Defendants had acknowledged service on their behalf, it was no longer necessary for the Claimants to seek an anti-suit injunction at that stage, because, in February 2008, the parties agreed an all round stay of all proceedings both in England and the Dominican Republic. The stay was terminable immediately, should any steps be taken in substantive legal proceedings by any party anywhere in the world, other than steps necessary to maintain the stay. The agreement was embodied in a Consent Order of Aikens J dated 26 February 2008, which stayed the present proceedings on the terms agreed until further order, with liberty to apply for such an order.

The Claimants had also become aware that the proposed Seventeenth to Nineteenth Defendants had commenced proceedings in the Dominican Republic in relation to bill 001. The Claimants commenced preparation for an application for anti-suit relief, but in the event that proved unnecessary, since it was agreed with the solicitors for those parties, Clyde & Co, in June 2007 that the proceedings in the Dominican Republic would be withdrawn on terms.

Nothing further occurred so far as the Claimants are concerned until January 2009, when the Claimants discovered that the insurer Defendants and the proposed Nineteenth Defendant had both commenced proceedings against the Claimants and others in Brazil (which were broadly similar to the claims previously advanced in the Dominican Republic). It has subsequently emerged that the insurer Defendants commenced proceedings in Brazil by a writ filed on 6 March 2008, just over a week after the Consent Order of Aikens J. The proposed Nineteenth Defendant commenced proceedings in Brazil by a writ filed on 14 April 2008.

The claims in both sets of proceedings are made not only against the Claimants but also against the following third parties: (i) Aug Bolten Wm Miller’s Nachfolger (GmbH & Co) AG, the managers of the vessel; (ii) VOC; (iii) Bossclip; (iv) Gard, the P& I insurers of the Claimants.

The witness statement filed by Mr Biltoo of Waltons & Morse on behalf of the insurer Defendants states on instructions that the claims in Brazil against the third parties are only made in tort. However, an examination of the complaint in translation reveals very clearly that, whilst claims are made against all parties on the basis that they provided services and so are liable under Brazilian consumer legislation, which may be a claim in tort, all the defendants in Brazil, including all the third parties, are also sued on basis that they had failed to perform contractual obligations as maritime carriers to achieve a particular result, namely delivery of the cargoes without incident.

What is significant for present purposes is that, whether the claims are founded on the consumer legislation or on alleged breaches of contractual duties as carriers, the claims against all the defendants sued in Brazil all contend that the defendants are under a strict liability. No mention is made of the Hague Rules, let alone of the limitations of liability and defences available to a sea carrier under the Rules. I was told that the Hague Rules have no application in Brazil.

The witness statement of Mr Biltoo also states on instructions that the proceedings in Brazil are not substantive, but to protect relevant time limits. However, this is contrary to: (i) the terms of the complaint itself, which is clearly substantive in nature; (ii) the advice received by the Claimants from their Brazilian lawyers that the proceedings are substantive; and (iii) the avowed intention of the insurer Defendants as referred to in Mr Jacobs’ skeleton argument to pursue the Brazilian proceedings against the third parties, with a view to persuading the English court at a later stage to discharge the anti-suit injunction against the insurer Defendants in respect of claims in Brazil against the Claimants or to grant a stay of the English proceedings. I have no doubt that the Brazilian proceedings are substantive and not merely protective.

Against this background, the Claimants’ solicitors Ince & Co wrote to Waltons & Morse on 13 August 2009 to inform them that the stay agreement was terminated. On the same day, the Claimants applied by Application Notice for permission, pursuant to the Consent Order of Aikens J, to lift the stay and for permission to amend the Claim Form, inter alia to seek the injunctive relief currently sought against the insurer Defendants. At the hearing on 16 October 2009, I gave permission to lift the stay and to amend the Claim Form.

As noted at the outset of this judgment, the judgment is only concerned with the contested application for an anti-suit injunction against the insurer Defendants restraining them from pursuing the proceedings in Brazil against the third parties. At the hearing, the insurer Defendants accepted that an anti-suit injunction should be granted against them restraining them from proceeding against the Claimants in Brazil, subject to their entitlement to apply to discharge that injunction at a later stage.

The Claimants’ case against the insurer Defendants for present purposes is straightforward. They contend that each of the third parties being sued by the insurer Defendants in Brazil is either their servant or agent or a sub-contractor within the wide definition of “sub-contractor” in clause 1f. By virtue of the first part of clause 3b, all the insurer Defendants are bound in equity (as subrogated insurers) by a covenant to the Claimants that they will not sue those third parties and the proceedings in Brazil are vexatious. The Claimants are entitled to enforce that covenant by injunction, since they can show a sufficient practical interest in the enforcement of the covenant: see the decision of Ackner J as he then was in The Elbe Maru [1978] 1 Lloyd’s Rep 206 at 209-210.

Mr Jacobs contends that the Claimants cannot rely upon the first part of clause 3b, because it is equivalent to conferring on the third parties a blanket immunity from liability, which is contrary to Article III rule 8 of the Hague Rules. That provides as follows:

“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 the goods, arising from negligence, fault, or failure in the duties and obligations provided in this section, or lessening such liability otherwise than as provided in this chapter, shall be null and void and of no effect.”

The reasoning by which Mr Jacobs urges that conclusion runs thus:

This argument relies heavily on the decision of the House of Lords in The Starsin [2004] 1AC 715, which it will thus be necessary to look at in a little detail. That was a somewhat unusual case in the sense that it was the shipowners who had performed the actual carriage of the goods who were seeking to contend that they were under no liability. The vessel was on time charter to a charterer, CPS, which subsequently became insolvent. The cargo having suffered damage on the voyage, the cargo interests sued the owner and demise charterer of the vessel.

The judge at first instance, Colman J concluded that the bills of lading were charterers’ bills so that the relevant contract of carriage was with CPS. Rix LJ in the Court of Appeal agreed, but the other members of the Court of Appeal (Sir Andrew Morritt V-C and Chadwick LJ) concluded that they were owners’ bills so that the owners were parties to the contract of carriage. The House of Lords considered that the bills were charterers’ bills and the contract of carriage was with CPS.

The owners were contending that the clause in the bill of lading which corresponded with clause 3 in the bills of lading in the present case conferred a complete immunity from liability on them as independent contractors. The clause in that case was not in the same terms as clause 3b in the present case. It provided:

“(1)

It is hereby expressly agreed that no servant or agent of the carrier (including any person who performs work on behalf of the vessel on which the goods are carried or of any of the other vessels of the carrier, their cargo, their passengers or their baggage, including towage of and assistance and repairs to the vessels and including every independent contractor from time to time employed by the carrier) shall in any circumstances whatsoever be under any liability whatsoever to the shipper, for any loss, damage or delay of whatsoever kind arising or resulting directly or indirectly from any act neglect or default on his part while acting in the course of or in connection with his employment and,

(2)

without prejudice to the generality of the provisions in this Bill of Lading, every exemption limitation, condition and liberty herein contained and every right exemption from liability, defence and immunity of whatsoever nature applicable to the carrier or to which the carrier is entitled hereunder shall also be available to and shall extend to protect every such servant or agent of the carrier [ * ] is or shall be deemed to be acting on behalf of and for the benefit of all persons who are or might be his servants or agents (including any person who performs work on behalf of the vessel on which the goods are carried or of any of the other vessels of the carrier, their cargo, their passengers or their baggage, including towage of and assistance and repairs to the vessels and including every independent contractor from time to time employed by the carrier)

(3)

and all such persons shall to this extent be deemed to be parties to the contract contained in or evidenced by this Bill of Lading

(4)

The shipper shall indemnify the carrier against any claim by third parties against whom the carrier cannot rely on these conditions, in as far as the carrier's liability would be excepted if said parties over bound by these conditions."

The numbering within the clause was that adopted by their Lordships for ease of reference, as I have adopted in relation to the present clause. It will be immediately apparent that there are two principal distinctions between that clause and the present clause, that the first part of that clause does not in terms set out an undertaking or covenant not to sue and that the present clause does not contain a “deeming provision” such as is contained in the third part of the clause in that case.

The Court of Appeal in The Starsin [2001] 1 Lloyd’s Rep 437 had upheld Colman J’s conclusion at first instance that, despite the absence of express words to that effect, the first part of the clause was a covenant not to sue, which inured only to the benefit of the carrier under the bill of lading, not also to the benefit of third parties who fell within the Himalaya part of the clause. The fullest exposition of this conclusion is in the judgment of Rix LJ at paragraphs 115 to 117 of his judgment:

“115.

Mr Jacobs on behalf of the claimants, on the other hand, submits that part 1 of the clause applies only to the carrier, who alone is entitled to enforce by means of this provision a total prohibition on any collateral attack on him by means of any suit by the shipper against third parties; that it is only part 2 with its more limited exemption that applies to such third parties and that the introductory words are intended to signify the insulation of part 2 from part 1; that the words of part 3 look back ("to this extent") to the words of part 2 and not to the clause as a whole; and that, in accordance with the purpose of the clause as a whole, which is to extend to third parties the protection enjoyed by the carrier under the bill of lading, no less and no more, the Hague Rules paramount provision contained in article III, rule 8, incorporated with the rest of the Hague Rules, ensures that third parties, like the carrier itself, cannot enjoy a blanket exclusion of liability.

116.

Colman J preferred the submissions of the claimants to those of the owner (see at 99/100) and I agree. The essence of the matter is that part 1 of the clause does not give to the carrier a personal blanket exemption of liability, which is then extended to third parties within the clause, but is only concerned with granting to the carrier an exceptional right, not granted to any other party, to enforce, if necessary by injunction, a complete prohibition on any suit by holders of the bill against third parties within the clause: see Nippon Yusen Kaisha v. International Import & Export Co Ltd (The Elbe Maru) [1978] 1 Lloyd's Rep 206. I do not think I can put the various considerations better than Colman J has put them himself, but I would seek to refer to them briefly as follows.

(1)

There is no sign in the leading cases on the Himalaya clause, The Eurymedon, The New York Star, and The Makhutai, each of them in the Privy Council, of any reliance on part 1 of the clause or of finding there a complete exemption of liability for the benefit of third parties. Mr Berry submits that that is not surprising in that at any rate the first two of those cases relied on the bills' Hague Rules one year time bar – and that a time bar is as good as a blanket exemption, so that there was no need to raise an additional point under part 1 of the clause. That may be so, but it does not explain why the additional point was not taken, if there to be taken, nor why in The New York Star at 142E/F and again at 143E/F Lord Wilberforce explained the function of the Himalaya clause, which was present there in very similar (albeit not identical terms) to clause 5 here, as being, for instance, to extend "the benefit of defences and immunities conferred by the bill of lading upon the carrier to independent contractors employed by the carrier"; nor why in The Makhutai, where again the clause was similar but not identical, and where the issue was whether an exclusive jurisdiction clause was available for the benefit of the shipowner, the shipowner did not simply apply to strike out the claim as a whole. There it was this time Lord Goff of Chieveley who described the function of the Himalaya clause (at 666G) as –

"to prevent cargo owners from avoiding the contractual defences available to the carrier (typically the exceptions and limitations in the Hague-Visby Rules) by suing in tort persons who perform the contractual services on the carrier's behalf."

(2)

In The Elbe Maru, the clause read "The Merchant undertakes that no claim or allegation shall be made against any servant, agent or sub-contractor of the Carrier which imposes or attempts to impose…any liability whatsoever…and, if any such claim or allegation should nevertheless be made, to indemnify the Carrier against all consequences thereof." That may be a clause which states the obligation not to sue third parties more clearly than the wording of clause 5: but I am not concerned with the effectiveness of part 1 as a promise not to sue, and it will be seen that in essence parts 1 and 4 of clause 5 amount or are intended to amount to the same promise given to the carrier by the shipper not to impose any liability whatsoever on the carrier's servants or agents. Thus part 4 is a promise by the shipper to the carrier to indemnify the carrier against any claim by parties against whom the carrier cannot rely on "these conditions…". It will be seen moreover that part 1 of the clause taken by itself is not extended to benefit third parties, unlike part 2, and that this emphasises that the function of part 1 is to benefit the carrier itself rather than its servants or agents.

(3)

If part 1 had the effect contended for by Mr Berry, then part 2 would be redundant and unnecessary. The argument against surplusage may not be the strongest of weapons, but it is certainly an unsatisfactory and dangerous way of drafting for a blanket exception to go on in part 2 to provide third parties the merely inferior protection of the benefit of the carrier's own protection, if they had already been granted a complete exemption, beyond the carrier's own protection, under part 1 of the clause. Moreover the link words between part 1 and part 2 ("without prejudice" etc) do not say "without prejudice to the foregoing", which is how Mr Berry would wish to read them, but look forward rather than back.

(4)

While it is true that the word "right" appears among the other nouns in part 2, nothing in its surrounding context suggests that it looks backwards to the right of the carrier under part 1 to have its servants and agents exonerated of all liability whatsoever. Surrounded as it is by words of exemption, defence, immunity and so on, the word "right" must rather refer to rights which go to protect the carrier itself, such as a right for instance to commence a limitation action. Mr Berry concedes that "right" cannot be given its natural meaning to include all rights given to a carrier under its bill of lading contract, because it is accepted that the function of the Himalaya clause is not to transfer to third parties the carrier's rights, eg to freight or other payments, but only its defences.

(5)

The words in part 3 "to this extent" do not apply to the whole of the preceding clause, but naturally look back to the words in part 2 "shall extend to protect every such person".

(6)

Article III, rule 8 of the Hague Rules is incompatible with the idea that third parties to whom the benefit of the carrier's defences are extended, should have a blanket exemption from liability.

117.

For these reasons, I consider, in agreement with Colman J, that clause 5 only protects the owner to the same extent as the carrier is itself protected by the bill of lading provisions under its contract of carriage. Since the carrier would have no exemption for negligent stowage, it follows that its independent contractor, typically a stevedore but here the shipowner itself, can have no exemption either.”

Mr Ashcroft for the Claimants relied upon this part of the judgment of Rix LJ in support of his argument that the covenant not to sue in the first part of the present case only inured to the benefit of the Claimants as carriers under the bills of lading, and not to the benefit also of the various third parties being sued in Brazil, as Mr Jacobs contended.

The House of Lords decided that the provision in that case could not be regarded as a covenant not to sue. In doing so, however, they did not suggest that Rix LJ’s reasoning was wrong, to the effect that, if it was a covenant not to sue, it inured only to the benefit of the carrier under the bill of lading and not third parties. In my judgment, his reasoning as to why, if the first part of the clause is a covenant not to sue (as it undoubtedly is in the present case), it inures only to the benefit of the contractual carrier and not third parties, remains compelling. Accordingly, the first stage of Mr Jacobs’ argument is incorrect.

However, Mr Jacobs submits that such a conclusion is not fatal to his argument. Even if the first part of the clause only inures to the benefit of the Claimants as carriers under the bills of lading, he still contends that any attempt to enforce the covenant, by way of injunction or otherwise, amounts to the conferring of a blanket immunity on the third parties who performed “carriage” obligations, and thus falls foul of Article III rule 8 of the Hague Rules. He relies upon the conclusion of the majority of the House of Lords, that the provision in that case did purport to confer blanket immunity on the owners and that, as such, the provision was contrary to Article III rule 8.

In the present context, the argument that clause 3b is contrary to Article III rule 8 is dependent upon the conclusion that the Himalaya contract, to which the relevant third parties (such as the charterers and sub-charterers, VOC and Bossclip) became parties when they allegedly performed the relevant “carriage” obligations, was a “contract of carriage” within the meaning of the Hague Rules. Mr Jacobs contended that this conclusion flows from the decision of the majority of the House of Lords in The Starsin. In these circumstances, it is important to ascertain the ratio of the decision of the majority of their Lordships in that case.

The fullest analysis of the construction and effect of the clause in that case is contained in the judgment of Lord Hobhouse of Woodborough. He set out the history of how the common law in England and the Commonwealth had developed the Himalaya clause to provide protection for servants, agents and independent contractors of the contractual carrier, from being sued outside the regime of the Hague Rules, culminating in the decisions of the Privy Council in New Zealand Shipping v Satterthwaite (The Eurymedon) [1975] AC 154 and Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd (The New York Star) [1981] 1 WLR 138.

Mr Jacobs relied on Lord Hobhouse’s judgment at paragraphs 153-6 in support of the proposition that, whenever the third party under the Himalaya contract performs carriage functions, the Himalaya contract is a “contract of carriage” within the meaning of the Hague Rules. Certainly paragraph 153 is stated in general terms, which might be thought to support that proposition, but on closer analysis, it seems to me to be clear that the reason why Lord Hobhouse concluded that clause 5 (the Himalaya clause in that case) constituted a contract of carriage was because of the presence of the “deeming” provision in the third part of the clause.

This emerges from the last two sentences of paragraph 154 and from paragraph 155, where his Lordship said this:

The shipowners have escaped from being the original contracting carriers by relying upon the doctrine of privity of contract and the way in which the bills of lading were signed. They have brought themselves back in as a contracting carrier by relying upon clause 5 in the bills of lading and the privity of contract which it expressly creates.

155.

It is argued that the 'Himalaya' clause contract is "collateral" to the bill of lading contract and therefore is not to be affected by such considerations as the Hague Rules. Why the use of the epithet "collateral" should have this effect is not clear. It does not address or affect the essential question: what is the 'Barwick' contract? In so far as a 'Himalaya' clause may include additional stipulations as between the person issuing the bill of lading and the shipper such as jurisdiction clauses or covenants not to sue, it may well be correct to use the word "collateral". But even then the substance may have to be looked at not just the form: The Hollandia [1983] 1 AC 565. But, as regards the persons referred to in the clause, clause 5 says that it is, for the purposes of all the provisions of the clause, made on behalf of such persons and to that extent all such persons shall "be deemed to be parties to the contract contained in or evidenced by this bill of lading". As between those persons and the shipper the resultant contract is not 'collateral'; it is the contract. The purpose of the additional use of these express words is to procure that transferees of the bill of lading shall be bound as well as the shipper: see the final sentence of the quotes from Lord Reid (sup) and Lord Wilberforce (sup). Clause 5 deliberately makes the contract between such persons and the shipper part of the bill of lading contract so as to obtain the benefit of it against other persons besides the shipper. Were it not for the inclusion of these words in the clause the shipowners would not have been able to rely upon it as against any of the claimants in this litigation. (my emphasis)

The passages I have underlined demonstrate that it was only because those deeming words made the relevant third party (there the actual shipowner who had carried the goods) a party to the bill of lading contract, that it could be said to be party to a contract of carriage. On the basis of that conclusion, Lord Hobhouse went on to conclude that since that contract of carriage was subject to the Hague Rules, reliance on the first part of the clause by the shipowner was an attempt by it to obtain a blanket immunity from liability, which was contrary to Article III rule 8.

The judgments of Lord Hoffmann and Lord Millett reached the same result by a similar process of reasoning. Lord Hoffmann said at paragraphs 113 and 114:

“113.

That brings me to the fourth argument, which is that the complete exemption conferred by part (1) is cut down by Article III.8 of the Hague Rules, which provides that any clause in a contract of carriage relieving "the carrier or the ship" from liability for negligence shall be null and void. I confess that on this point my opinions have fluctuated but in the end I have been persuaded that the reasoning of Lord Hobhouse of Woodborough is correct and that Article III.8 does have this effect.

114.

Putting the argument in my own words, it seems to me to run as follows. I do not think that the collateral contract between shipper and independent contractor is a "contract of carriage" so as to attract the application of the Hague Rules. But part (3) says that the independent contractor "shall to this extent be deemed to be parties to the contract contained in or evidenced by this Bill of Lading". That means, as I said earlier, that he is a party only for the purpose of taking the benefit of the exemption clause against the shipper and any transferee of the bill of lading. But, for that purpose only, the provisions of the bill of lading, insofar as they are relevant, apply to him. The only provision which has been suggested as relevant in the present case is Article III.8, which applies by virtue of the paramountcy provision in part (2). That does apply to exemption clauses and restricts their effect.”

Lord Millett at paragraphs 205 and 207 of his judgment analysed the Himalaya contract as follows:

207.

Accordingly, I am satisfied that the Himalaya Clause is not itself a contract of carriage of goods by sea, and that merely by taking the benefit of such a Clause the owner or demise charterer of the ship does not become a party to a contract of carriage and so a carrier within the meaning of Article I(a) of the Hague Rules.”

He went on to say that the matter did not rest there, because the “deeming” provision in the third part of the clause deemed the third party to be a party to the contract of carriage contained in or evidenced by the bill of lading. He concluded, not without some considerable doubt, that the shipowner could not rely on the first part of the clause, because it fell foul of Article III rule 8.

Lord Bingham put the matter on a more general basis in his judgment, concluding at paragraph 34 that on the facts of that case (in contradistinction to the stevedore cases in which the Himalaya clause is usually invoked), because the shipowners were actually carrying the goods, the Himalaya contract was a contract of carriage to which the Hague Rules applied:

“The present case however is factually different, because the act performed to bring any contract into existence between the shipowner and the cargo owners is the carrying of the goods. The question is whether that factual difference gives rise to a legal difference, whether (in short) the resulting contract is properly to be regarded for Hague Rules purposes as a contract of carriage and the shipowner as entering into it with a shipper. I have not found these to be easy questions, but I conclude that to answer them negatively would be to elevate form over substance and to invest what is essentially a legal device with a wholly disproportionate legal significance. If the act performance of which brings a contract into existence between the shipowner and the cargo owners is the carrying of the cargo owners' goods it would seem to me anomalous to give the shipowner the benefit of clause 5 but take no account of article III rule 8 of the Hague Rules which were incorporated into the contract by clause 2 (where they were described as the "BASIS OF CONTRACT"). Thus the shipowner is not protected by an exemption provision invalidated by article III rule 8.”

Lord Steyn dissented on the issue whether the Himalaya contract could be regarded as a contract of carriage within the meaning of the Hague Rules, concluding that it could not, even with the deeming provision in the third part of the clause (see paragraphs 59 to 63 of his judgment).

I accept Mr Ashcroft’s submission that the ratio of the decision of the House of Lords on the Article III rule 8 issue was that the Himalaya contract was to be regarded as a “contract of carriage” within the meaning of the Hague Rules, not because the relevant third party had performed “carriage functions” as Mr Jacobs put it, but because of the “deeming” provision in the third part of the clause. Of the majority, only Lord Bingham put the matter on the wider basis which would support Mr Jacobs’ argument, but, as I have demonstrated, on this point he was in a minority of one. Accordingly, in my judgment, The Starsin is not an authority for the wide proposition for which Mr Jacobs contends, that merely because the third party performs what might be regarded as “carriage functions”, it is to be regarded as a party to a contract of carriage governed by the Hague Rules.

Mr Jacobs nonetheless relied upon a number of other arguments in support of his proposition. He contended that even if only the Claimants as carriers under the bills of lading could rely upon the covenant not to sue in the first part of clause 3b, this would have an effect, albeit indirect, of circumventing the Hague Rules, which would still be contrary to Article III rule 8 (see The Hollandia [1983] 1 AC 565). I have already stated my conclusion that the decision of the House of Lords in The Starsin does not support this broad proposition. In so far as the matter has been considered in earlier decisions or in the textbooks, there is little to assist one way or the other.

I was referred for the sake of completeness to three decisions of the courts of New South Wales which antedate the decision of the House of Lords in The Starsin, the decisions of Yeldham J in Broken Hill Pty Ltd v Hapag Lloyd [1980] 2 NSWLR 572 and Sidney Cooke Ltd v Hapag Lloyd [1980] 2 NSWLR 587 and the decision of Emmett J in Chapman Marine Pty Ltd v Wilhelmsen Lines A/S [1999] FCA 178. Although those cases are concerned with enforcement by contractual carriers of covenants not to sue in Himalaya clauses and similar provisions, and the conclusion was reached (at least in the latter two cases) that such enforcement to prevent the pursuit of claims against third party sub-contractors was not contrary to Article III rule 8, in none of them was the third party performing the carriage of the goods itself. Accordingly, they are of limited assistance in the present context: see Lord Hobhouse’s discussion of the latter two cases at paragraphs 169 and 170 of his judgment in The Starsin.

Viewed in isolation, the passage at paragraph 116(6) of the judgment of Rix LJ in the Court of Appeal in The Starsin which I quoted above, that “Article III, rule 8 of the Hague Rules is incompatible with the idea that third parties to whom the benefit of the carrier's defences are extended, should have a blanket exemption from liability” might be thought to support Mr Jacobs’ proposition. However, as Mr Jacobs himself submitted, the particular point did not arise and was not argued in the Court of Appeal, no doubt because the majority concluded that the bills of lading were owners’ bills.

In any event, if anything can be gleaned from Rix LJ’s judgment on this point, it seems to me that it is to be inferred from the whole of paragraph 116 that he did not consider that the enforcement by the contractual carrier of a covenant not to sue sub-contractors, which covenant was only in favour of the contractual carrier, would be contrary to Article III rule 8. However, I accept that, since the point was not expressly addressed, it would be dangerous to seek to draw too much from that judgment.

As for the leading textbooks, the new edition of Scrutton on Charterparties does not address this area of law at all. Professors Treitel and Reynolds in Carver on Bills of Lading, 2^nd edition, are evidently of the view that the contractual carrier can enforce a covenant not to sue, at least when the third party has been sued. However, they regard such a provision as not operating on substantive rights, but procedurally, so that it is not affected by Article III rule 8: see paragraph 9-198. However, I am not sure that analysis can be correct. Commenting on it, the editors of Cooke on Voyage Charters 3^rd edition at paragraph 85.226 say: “This may well be so in some cases but each case should be considered as to the substantive effect of a particular clause in a particular contract and the decision in The Starsin might suggest there is no universal answer”. This somewhat tentative statement does not seem to me really to be of any great assistance.

Mr Jacobs relied upon a passage in Tetley: Marine Cargo Claims 4^th edition at page 1893, considering what Professor Tetley describes as the “circular indemnity clause” (i.e. the covenant not to sue) where, having cited the Australian cases where the clause had been upheld, to which I have referred, he considers that a claim under the clause would be contrary to Article III rule 8 of the Hague Rules, if the claim related to the period when the Hague Rules applied. However, he cites no authority for the proposition he puts forward and does not elucidate further whether he means that even the contractual carrier could not invoke the clause in such a situation. Ultimately I did not find the passage of much assistance.

In my judgment it is important to test Mr Jacobs’ proposition by reference to the functions which the relevant third parties were actually performing. The time charterers VOC and/or the sub-time charterers, Bossclip, were responsible through their agents for the preparation and issue of bills of lading on behalf of the Master, pursuant to clause 30 of the respective charterparties. The managers of the vessel were just that, agents of the Claimants, but not responsible as principals for the actual carriage of the goods. Gard likewise as P&I insurers insured the owners against, inter alia, liability to cargo interests. All these third parties may thus be said to have performed services incidental to the goods or to the carriage of the goods (a matter to which I return below). However, by no stretch of the imagination can any of them be said to have undertaken the actual carriage of the goods. The actual carriage was undertaken by the Claimants alone, pursuant to bills of lading which were owners’ bills.

That conclusion cannot be affected by the fact that, for their own tactical purposes in the Brazilian proceedings, the insurer Defendants have alleged that all these third parties, in common with the Claimants, provided services as maritime carriers of the goods. The court is entitled to look at the substance, not the form, the real facts as they appear from the evidence before this court, as opposed to the way in which the insurer Defendants have chosen to categorise their claim in Brazil.

Mr Jacobs urged on the court that his construction of the covenant not to sue in clause 3b as null and void and of no effect under Article III rule 8 gave the Hague Rules a purposive and not a literalistic construction and would give effect to the purpose for which the Rules were enacted, to prevent cargo interests from avoiding the effect of contractual defences. In my judgment, to accede to his proposition would have completely the opposite effect. It is clear that Mr Jacobs’ clients are pursuing claims against the third parties in Brazil not on the basis that, as parties to a contract of carriage constituted by clause 3b they are entitled to rely on the defences under Article IV rule 2 of the Hague Rules, but on the basis that, in common with the Claimants as the actual contractual carriers, they are liable under some theory of strict liability under Brazilian law. There is no question of his clients being prepared to limit their claim in Brazil to a contractual one, subject to the Hague Rules and the defences under them. As already noted above, the Rules have no application in Brazil. The insurer Defendants are avowedly seeking to take advantage of that by pursuing claims in Brazil.

Once it is seen that none of the third parties undertook the sea carriage or was in fact the carrier within the meaning of the Hague Rules (unlike the owners in The Starsin), the conclusion that the enforcement of the covenant not to sue is not contrary to Article III rule 8 is clearly correct.

Nothing daunted, Mr Jacobs advanced two further arguments as to why, in the present case, the Claimants could not rely upon the covenant not to sue in the first part of clause 3b. The first was that, apart from the managers, none of the third parties constituted a servant, agent or sub-contractor of the Claimants. Mr Ashcroft relied in this context upon the wide definition of sub-contractor in clause 1f. He submitted, in my view correctly, that in preparing and signing the bills of lading through their agents, the time charterers and sub-time charterers, VOC and Bossclip, were performing “services incidental to the goods and/or the carriage of the goods” within the meaning of that definition clause. Similarly, in providing P&I insurance against potential liability to cargo interests, Gard were also performing such services.

Mr Jacobs sought to challenge the conclusion that the Claimants could therefore enforce the covenant not to sue in the first part of clause 3b, in respect of the proceedings against the third parties, by contending that the wording of the first part of the clause referred to “subcontractor of the carrier”. He contended that neither VOC, whose charterparty was with Fantasy Shipping Pool Limited, nor, by definition, Bossclip whose charterparty was with VOC, was in a contractual relationship with the Claimants. However, in my judgment, that overlooks two matters.

First, it is clear from the Pool Agreement that Fantasy Shipping Pool Limited was the vehicle through which a member’s vessel would be chartered to a time charterer and, as such, Fantasy Shipping Pool Limited must have been acting as agent for the owner in question, here the Claimants. Second, the definition of “subcontractor” in clause 1f is clearly intended to be the definition of subcontractor of the carrier; that is the only type of subcontractor with which the contract is concerned. That definition includes “indirect subcontractors”. On any view VOC and Bossclip fall within that wide definition, irrespective of the actual contractual chain. Accordingly, I reject this argument of Mr Jacobs.

The second argument which Mr Jacobs advanced was that the Claimants could not show a sufficient interest in enforcing the covenant not to sue to entitle them to the injunction they seek. As I have already indicated, the relevant test as to what constitutes a sufficient interest is set out in the judgment of Ackner J in The Elbe Maru [1978] 1 Lloyd’s Rep 206 at 209-210:

Mr. Pollock relies of course upon the very existence of the express undertaking in cl. 4(2) and he says "here is a contractual obligation not to make the claim which is being made by the respondents". Accordingly it should follow that the relief which he seeks, namely, the stay of those proceedings, should be granted. I do not think it follows that merely by establishing the contract he ipso facto obtains his relief because the matter is one for the discretion of the Court, but I accept that his ability to point to a clear right being infringed should prima facie entitle him to the relief he claims.

If it was to be established, however, that it was basically an academic exercise, that the breach of the agreement not to sue would involve his clients in no form of possible prejudice, then I think a Court would be reluctant to exercise its discretion and allow such applicants to interfere with a pending action. Mr. Pollock does not however say that this is purely a matter of academic interest, that because his clients have got this undertaking they wish to enforce it just for the joy of seeing their contractual rights are acknowledged, approved and enforced. What he says quite simply is this, that the respondents in this case have sought to sue the haulage company because this is a method, they think, of circumventing the limitation on their remedies to be found in the R.H.A. conditions of haulage. They have not sued the applicants because they would be met as in the past by the applicants setting up the limitation of liability and if they sought to sue the applicants now, the applicants would be able to set up successfully a time bar to those proceedings. Accordingly, the respondents are suing the hauliers. The effect upon the applicants is likely to be that the hauliers will seek under the R.H.A. terms an indemnity from Van Ommeren and that Van Ommeren, having acted throughout as the agents of the applicants, will then seek to be indemnified by the applicants for the consequences of their so acting. In other words, there will be passed up the chain from the hauliers to Van Ommeren and ultimately to the applicants the claim which is now being made.

I think Mr. Pollock is right in his assertion that he can show an interest in the enforcement of the clause of a practical kind because he has established to my satisfaction a real possibility, if the claim is allowed to proceed, of the applicants suffering financial loss. He accordingly can point to a breach of contract which gives him, in my judgment, following the judgment of Lord Justice Salmon in the case of Gore v. Van der Lann [1967] 2W.L.R. 358 , the right to apply. By establishing the real possibility of his clients being prejudiced in the manner I have indicated, he has provided a situation where I think discretion ought to be exercised in his favour.

In their evidence in support of their application, the Claimants contended that they had a sufficient practical as opposed to academic interest in enforcing the covenant not to sue VOC and Bossclip, because if the Defendants were able to proceed against those third parties and obtain judgment against them in Brazil, the Claimants might well face a claim for an indemnity from one or other third party.

It is difficult to see that there is any real risk of VOC successfully making such a claim or passing on such a claim by Bossclip. The short answer to any such claim by time charterers against owners is that any liability they face to cargo interests in Brazil has not occurred as a consequence of anything for which the owners are liable to indemnify them under the charterparty, but as a consequence of their own decision to order the vessel to load cargo in Brazil, for which they and not the Claimants as owners must bear responsibility.

I was similarly unimpressed by the suggestion in Mr Ashcroft’s skeleton argument that the Claimants might face a liability to VOC/Bossclip under the Inter-Club Agreement. That cannot be a realistic possibility since (a) there is no cargo claim as such and (b) more importantly, the condition precedent to the operation of the Agreement that the relevant contract of carriage be on terms no more onerous than the Hague or Hague-Visby Rules could not, on this hypothesis, be fulfilled.

If the alleged risk of a claim over against the Claimants by VOC and/or Bossclip was the only possible prejudice which the Claimants would suffer if the proceedings continued against the third parties in Brazil, I might have had some doubt as to whether the Claimants were entitled to the injunction they seek. Nonetheless, ultimately I suspect I would have granted an injunction, because the Claimants had demonstrated some prejudice, however speculative, and more than an academic interest in enforcing the covenant not to sue. As Mr Ashcroft rightly points out, The Elbe Maru does not set a particularly high threshold and all the Claimants have to do is show an interest in obtaining an injunction restraining the proceedings against the third parties which is more than merely academic.

However, in my judgment, Mr Ashcroft’s alternative arguments as to why his clients had a sufficient interest in obtaining an injunction were compelling and demonstrated sufficient potential prejudice if an injunction were not granted to justify such an injunction. The primary alternative argument was that it is clear that, unless restrained, the Defendants intend to continue against the third parties in Brazil, with a view to seeking at a later stage to persuade the English court to stay the proceedings in England or not continue the anti-suit injunction in respect of claims in Brazil against the Claimants on the basis that it is more convenient for the proceedings against all potential defendants to continue in Brazil.

Indeed, Mr Jacobs’ skeleton argument made it clear that the Defendants’ agreement to an anti-suit injunction in respect of the claims in Brazil against the Claimants was expressly without prejudice to the Defendants’ entitlement to argue for the discharge of the injunction or for a stay of the English proceedings at a future hearing. In my judgment, the Claimants have a sufficient interest in enforcing the covenant not to sue the third parties by preventing the Defendants from seeking to use their own breach of the covenant to their own tactical advantage before the English court at a later date, to entitle them to an injunction.

Furthermore, the other alternative argument would justify the grant of an injunction. This is that the restraint of proceedings in Brazil, which on their face ignore completely the application to the contract of carriage to which all the defendants in Brazil are said to be parties of the Hague Rules, will avoid the need for the Claimants to seek to expedite the present proceedings so as to obtain an English judgment before any judgment in Brazil.

For all the above reasons, individually and cumulatively, I consider that the Claimants have shown a sufficient practical interest, which is more than merely academic, in obtaining an injunction to restrain the insurer Defendants from breaching the covenant not to sue.

Furthermore, so far as the managers are concerned, if they are held liable in Brazil, since they are the Claimants’ agents, they would in all probability be entitled to an indemnity from the Claimants. So far as Gard are concerned, if they were held liable to the Defendants on a strict liability basis in Brazil, that might affect adversely the relationship which the Claimants have with them, both as regards coverage and future calls or premium. Those matters also give the Claimants sufficient interest in enforcing the covenant not to sue, to entitle them to an injunction.

In all the circumstances, I consider that the Claimants are entitled to an anti-suit injunction restraining the insurer Defendants from continuing with the proceedings in Brazil against all the parties being sued in Brazil. By parity of reasoning, the Claimants are entitled to such an injunction against the proposed Nineteenth Defendant, although since it has yet to be served, that will be on a without notice basis, with liberty to that proposed Defendant to apply to set aside the injunction.