Societe De Distribution De Toutes Merchandises En Cote D'Ivoire (t/a "SDTM-CI") & Ors v Continental Lines N.V. & Anor

This action involves a cargo claim by various claimants in respect of two consignments of some 453,089 bags of rice carried on the vessel SEA MIROR (“the vessel”) from Karachi in Pakistan to Abidjan in the Ivory Coast pursuant to two bills of lading. The first defendant (to which I will refer as “the carrier”) was the carrier under those bills of lading. The claim against the second defendant has not been pursued. It is common ground that the bills of lading contained and/or evidenced contracts of carriage incorporating the Hague Rules and some of the terms of a Booking Note dated 15 March 2012 between the carrier and Louis Dreyfus Commodities limited which in turn incorporated the terms in so far as germane of a voyage charterparty on the Synacomex 90 Form dated 9 June 2011 for the vessel MOHAVE MAIDEN.

Cargo claims have arisen in respect of alleged moisture damage during the voyage and loss through (i) bags allegedly becoming torn during loading and/or carriage and/or discharge and (ii) alleged short delivery of the number of bags stated to have been shipped in the bills of lading. The principal issues between the parties on the pleadings concern whether the loss and damage was caused by inadequate or improper loading and/or stowage and/or discharge of the cargo and, if so, whether the carrier is responsible for that loss and damage under the terms of the contracts of carriage or is entitled to rely upon one or more of the defences under Article IV rule 2 of the Hague Rules.

By a consent Order at the Case Management Conference, the following preliminary issue was ordered to be tried:

“Whether on the proper construction of the contract of carriage contained in or evidenced by the bill of lading dated 7 April 2012 the First Defendant is liable for loss or damage to the cargo caused by improper loading, stowage or discharging of the cargo.”

This judgment is in respect of that preliminary issue.

The dispute raised by the preliminary issue concerns primarily clause 5 of the standard Synacomex 90 Form charterparty as incorporated in the contracts of carriage, which provides as follows:

“Cargo shall be loaded, spout trimmed and/or stowed at the expenses and risk of Shippers/Charterers at the average rate of 1,500 metric tons per weather working day … Cargo shall be discharged at the expenses and risk of Receivers/Charterers at the average rate of 1,500 metric tons per weather working day ……Stowage shall be under Master’s direction and responsibility…Charterers and Owners are allowed to work overtime, such expenses shall be for the account of the party ordering same. If ordered by Port Authorities, overtime shall be for Charterer’s account. Overtime services rendered by ship’s crew shall be in all cases for Owners’ account”.

Other terms of the charterparty incorporated in the contracts of carriage which were alleged by one party or the other to be relevant to the dispute I had to decide are as follows:

“Clause 2

…At Load Owners shall provide and install at their risk and expense and on their time all that is required for safe stowage of grain according to local and international regulations.

Clause 10

If ordered to be loaded or discharged at more than one berth and/or port, the vessel to be left in seaworthy trim to Master’s reasonable satisfaction for the passage between berths and/or ports at Owners’ expense at loading and at Charterers’/receivers’ expense at discharging ports, and time used for placing vessel in seaworthy trim shall count as laytime or time on demurrage.

Clause 31

Any stevedore damage during the discharge to be settled directly between the Owners and Stevedore. Time lost for repairing such damage not to count as laytime provided vessel’s class or seaworthiness is not affected by the damage. If necessary, Charterers will endeavour to assist Owners with the same.

Clause 32

Cargo to be properly protected against influence of engine and boilers.

Clause 43

Materials and dunnage to be for Owners’ account and time – Owners option to use those on board or craft paper if allowed by port authorities.

Clause 45

Owners to guarantee all holds / hatches, cranes workable simultaneously and to instruct master to have all holds / hatches worked all the time at each port.”

The vessel arrived at Abidjan on 15 May 2012 and completed discharge on 26 May 2012. The cargo claimants’ case is that on discharge loss and damage was ascertained consisting of (i) wet and mouldy bags; (ii) loss of cargo from torn bags and (iii) short delivery of bags. To the extent that any wetting or mould damage was caused by the way in which the bags were stowed, it is accepted by the carrier that, by virtue of the sentence in clause 5: “Stowage shall be under Master’s direction and responsibility”, it is responsible for such bad stowage. Equally, the issues raised by the alleged short delivery are factual issues with which the preliminary issue is not concerned and which are for another day. The question raised by the preliminary issue is in essence whether, if it is established that there were shortcomings in the loading or the discharge, that is the responsibility of the carrier or of the shippers/charterers/receivers (and thus the cargo interests) under clause 5 of the charterparty incorporated into the contracts of carriage.

It is common ground that, at common law, responsibility for loading, stowage and discharge is upon the carrier, but that responsibility for those functions can be transferred to the cargo interests: see per Lord Steyn at [11] of his opinion in Jindal Iron and Steel Co Ltd v Islamic Solidarity Shipping Co Jordan Inc (“The Jordan II”) [2004] UKHL 49; [2005] 1 WLR 1363. Both at common law and under Article III rule 2 of the Hague Rules, it is possible for the carrier and the cargo interests to enter an express agreement that the carrier will not be responsible for loading, stowage or discharge operations: see per Devlin J in his classic judgment in Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB 402 at 417-8, followed and applied by the majority of the House of Lords in Renton v Palmyra Trading Corporation [1957] AC 149 (per Lord Morton of Henryton at 169-170; Lord Cohen at 173 and Lord Somervell of Harrow at 174), which was in turn followed and applied by the House of Lords in The Jordan II.

However, it is also common ground that for a term in a contract of carriage to have the effect of transferring responsibility for the functions of loading, stowage or discharge to the charterers or the cargo interests, it must be in clear terms: see per Tuckey LJ in the Court of Appeal in The Jordan II [2003] EWCA Civ 144; [2003] 2 Lloyd’s Rep 87 at [14]:

“I have already referred to the position at common law and the need for clear words if the contract is to transfer the obligation to load, stow and discharge from owners to charterers. There are three facets of the cargo operation which have to be considered. Who is to pay for it; who is to carry it out; and who is liable for it not being done properly and carefully? The judge decided and I agree that there is no presumption that each of these responsibilities should fall on the same party. In other words, if the charterer has agreed to pay for the cargo operation, there is no presumption that he has also agreed to carry it out or be liable if it is done badly. ”

Both parties relied upon a passage in Cooke on Voyage Charters 4^th edition at [14.55] as a useful summary of the law and of the correct approach to construction of clauses concerned with responsibility for loading, stowage and discharge:

“In The Jordan II it was emphasised that each case would depend upon the terms of the charter in question and the context in which it has been made. Nevertheless, the following guides to construction may be deduced:

1.

Since the responsibility for loading and discharging operations within the ship, and for stowage, is normally that of the owner, clear words are necessary to transfer the responsibility for these operations to the charterer.

2.

A clause which confers upon the charterer the right to appoint stevedores does not, without more, transfer to him the responsibility for their acts or omissions.

3.

A clause which makes the charterer responsible for the expense of employing stevedores to perform loading, stowage or discharging does not, without more, transfer responsibility.

4.

A clause which provides that the charterer shall perform loading, stowage or discharging does transfer responsibility for those operations. It was said to have been rightly conceded in The Jordan II that if all cargo work had to be performed by the charterer, he would be liable if it was not properly and carefully carried out.”

The central dispute raised by the preliminary issue in the present case is whether clause 5 transferred responsibility for loading and stowage from the carrier to the charterers/cargo interests in clear terms.

Mr Robert Thomas QC for the cargo claimants submitted that clause 5 did not transfer responsibility for loading or discharge from the carrier to the charterers and thus to his clients, or at least did not do so in clear terms. The stages of his argument can be summarised as follows:

The submissions of Mr Timothy Young QC on behalf of the carrier in support of its case that “at the expense and risk of” were words which passed responsibility for the relevant cargo operations to the charterers/cargo interests can be summarised as follows:

Despite the attractive way in which Mr Thomas QC presented his submissions, I was not over-impressed with either of the constructions he put forward of the words: “at the expense and risk of” in clause 5. If, as he submitted as his primary submission, their only purpose was to indicate that the risk of a fortuitous loss was on the charterers and hence the cargo interests, the words add nothing to what the position would be in the law of bailment or under the regime of the Hague Rules. By virtue of Article IV rule 2(q), the carrier would not be liable for fortuitous loss not caused by its fault. As for the suggestion that somehow the words were intended to reverse the burden of proof, as Mr Young QC said, that is an odd suggestion since the burden is on the charterers/cargo interests to prove a relevant breach of the contract of carriage. To the extent that Mr Thomas QC was suggesting that the words reversed the burden of proving or rather disproving the application of an exception under Article IV rule 2, it seems to me that this construction would potentially fall foul of Article III rule 8 and the Court should endeavour to construe the contract in a way which does not involve part of it being struck down as void by virtue of Article III rule 8.

I considered the suggestion that the words “at the expense and risk of” were concerned only with responsibility for delay in loading, stowage and discharge operations was even less promising than the cargo interests’ primary case, since such delay is expressly dealt with by the laytime and demurrage provisions in clause 8 and 9, so that there was no need to provide for the allocation of the risk of delay in clause 5 as well. Mr Thomas QC relied upon the principle confirmed by the House of Lords in The Miramar [1984] 2 Lloyd’s Rep 129, that clauses in a charterparty which dealt with matters such as demurrage and which were not directly germane to the shipment, carriage or delivery of the goods would not be incorporated by reference in a bill of lading. However, that principle cannot assist the cargo interests here, since clause 5 has to be construed in the context of the charterparty as a whole before any question of which clauses are incorporated in the bill of lading arises, and not on some restricted basis focusing only on those clauses in the charterparty which were germane to the shipment, carriage and delivery of the goods and hence incorporated in the bill of lading. Clearly, on the construction of the charterparty as a whole, responsibility for delay in loading and discharge was placed upon the charterers by clauses 8 and 9 and there was simply no need for clause 5 to allocate the risk of that delay to the charterers. The words of the clause cannot bear a different meaning when incorporated in the bill of lading to the meaning they bear when the charterparty is construed as a whole.

The case upon which Mr Thomas QC particularly relied in his written submissions was the decision of Sir Robert Phillimore in The Catharine Chalmers (1875) 32 LT (NS) 847. Under the charterparty in that case the vessel was to load a full and complete cargo of nuts in bags and/or Tarragona wine in Oporto shaped casks, which was: “to be stowed by charterers’ stevedore at risk and expense of the vessel”. The cargo was stowed in what was the usual way by placing the bags of nuts on top of the casks of wine. On the voyage the vessel met bad weather and strained very heavily. On arrival at London, many of the bags of nuts were found stained with wine. The evidence at the City of London Court was that severe straining of the vessel would cause Tarragona wine, which is shipped new, to leak from the bungs and seams of the casks and that this was what had happened in this case. The charterers claimed for the damage to the bags of nuts. The County Court Judge concluded that the loss was caused by perils of the sea and dismissed the claim. On appeal to the Court of Admiralty, Sir Robert Phillimore also concluded that the loss was caused by perils of the sea and that the cargo having been stowed in the ordinary way, had the bad weather not occurred and the straining taken place, the cargo would have arrived undamaged.

Sir Robert Phillimore went on to consider the question of law whether the wine and the nuts had been allowed to be placed in such improper proximity by the master as to render him liable for the damage which occurred. He rejected that argument, following the decision in Blakie v Stembridge (1860) 6 CB (NS) 894, and held:

“…the charterers put on board the wine and nuts… The stevedore, who is the agent of the charterer by the terms of the charterparty, had an empty ship and might have stowed the cargo as he thought fit, subject only to the master’s control in matters affecting the safety of the ship; yet with his knowledge on the subject, the stevedore deliberately places the wine and nuts in the way that has been proved. The contract may have been such that he could not stow them in any other way, but still it is a fact that he does stow them in a position from which damage ensues. I entertain no doubt in my own mind that, in point of fact and in point of law, the case has been rightly decided in the court below, and I reject the appeal with costs.”

In my judgment, it is impossible to distil any general proposition from that case, let alone one which assists the cargo interests in the present case. The Court decided the case on the basis that it was the stevedore who was responsible for stowage and was the agent of the charterer, although paid for by the owner, which was also the position in Blakie v Stembridge. However, as the editors of Cooke on Voyage Charters point out at [14.55], the decision in “The Catharine Chalmers”: “seems dubious, since it gives no effect to the word ‘risk’” i.e. in the provision: “to be stowed by charterer’s stevedore, at risk and expense of the vessel”. The provision in Blakie v Stembridge did not say that the operation was to be at owner’s risk, which is a critical distinction between the provisions in the two cases which does not seem to have been noted by Sir Robert Phillimore at all. I consider the decision is of no assistance in determining the question of construction I have to decide.

I agree with Mr Young QC that the fact that Mr Thomas QC was able to put forward one or more arguable constructions of clause 5 does not mean that the carrier’s construction of the clause is incapable of achieving the necessary degree of clarity to transfer responsibility for loading and discharge to the charterers in clear terms. A similar argument was roundly rejected by the judge at first instance in The Jordan II, Mr Nigel Teare QC sitting as a Deputy High Court Judge, at [11]-[12] of his judgment ([2003] 2 Lloyd’s Rep 87 at 89) and I gratefully adopt that reasoning:

“11.

The starting point for construing the charter-party is that at common law the obligation is upon the shipowner to load, stow and discharge the cargo and that if this responsibility for the proper performance of those obligations is to be transferred to the charterer clear words are required. This was common ground. It was submitted on behalf of the claimants that any such transfer must not only be clear but must also be unambiguous. This submission was based upon the Scottish case of Ballantyne v. Patton and Hendry, 1912 S.C. 246. That case concerned a charter-party which provided that "Cargo to be loaded, stowed and discharged free of expense to steamer, with use of steamer’s winch and winchmen if required." It was held that this clause was not effective to transfer responsibility for the cargo operations to the charterer. Its present relevance is that Lord Guthrie said that:

‘It seems to me that the respondents only need to suggest a reasonable interpretation of this clause which would be consistent with the common law duty, because if the common law is to be altered by the terms of the charter-party, that must be done by a clause which admits of no other reasonable interpretation.’

12.

It was submitted that this illustrated the need not only for clarity but also for unambiguity in any wording said to be effective to transfer responsibility from the owners to the charterers. However, Lord Guthrie did not say that unambiguity was an additional requirement to clarity. If a clause is truly ambiguous, rather than being merely difficult to construe, it will not be clear and so will not effect a transfer of responsibility. In my judgment the claimed need for unambiguity adds nothing to the need for clarity.”

The question remains whether the words: “at the expense and risk of” are sufficiently clear to transfer responsibility for loading and discharge to the charterers and hence the cargo interests, as Mr Young QC contends. Mr Thomas QC sought to make much of the fact that, in the cases upon which Mr Young QC particularly relied, such as The Alexandros P and The Fantasy, the Court was concerned with the starting point of clause 8 of the NYPE Form, under which the operations of loading, stowage and discharge were undertaken by the charterers, so that it was readily explicable that, in a case of an unamended clause 8, unless, through supervision and intervention, the Master caused bad loading, stowage or discharge to occur, the charterers were responsible for any shortcomings in those operations: see the decision of the House of Lords in Court Line v Canadian Transport [1940] AC 934.

Clause 5 of the present charterparty does not contain an express provision such as in clause 8 of the NYPE Form that the charterers are to load, stow and discharge the cargo. Whilst clause 4 of the charterparty does make it clear that the freight rate is on an FIOST (that is “Free In and Out Stowed and Trimmed”) basis and there is some suggestion, in [6] of Lord Steyn’s opinion in The Jordan II, that those words amount to an agreement that the charterers are to perform the various operations, the charterparty in that case contained at clause 17 an express provision that the charterers were to put the cargo on board, trim and discharge it. The better view is that FIOST terms do not, without more, transfer responsibility for performance of the operations, as opposed to payment for them, to the charterers. Accordingly, and given that there is a dispute on the pleadings as to whether the stevedores at the discharge port were the agents of the carriers or of the cargo interests, I will proceed on the basis that the charterparty in this case does not impose an express obligation to perform the cargo operations on the charterers.

In those circumstances, it is necessary to examine the authorities relied upon by the carrier in some detail, to see to what extent the reasoning that responsibility for bad loading, stowage and discharge rested on the charterers depends upon the charterers having undertaken the actual performance of the operations.

In The Alexandros P [1986] 1 Lloyd’s Rep 421, clause 8 of the NYPE Form had been amended by the addition of the words “and responsibility”, the effect of which is to transfer responsibility for shortcomings in the loading, stowage and discharge back to the owners, unless the relevant loss and damage was caused by the intervention of the charterers: see per Neill LJ in The Shinjitsu Maru No. 5 [1985] 1 Lloyd’s Rep 568 at 575 and Leggatt J in The Argonaut [1985] 2 Lloyd’s Rep 216. Those judgments were not cited to the arbitrators in The Alexandros P arbitration. The issue in that case was whether the charterers were liable for stevedore damage sustained by the vessel at two discharge ports. The arbitrators held that, under the amended clause 8, the charterers remained responsible for damage caused by stevedore negligence in the mechanical handling of the ship’s gear and the cargo because of their residual responsibility as the party employing the stevedores to carry out the discharge. The arbitrators concluded that the owners’ claim for damages succeeded in respect of the one port where stevedore negligence was established.

In allowing the charterers’ appeal, Steyn J held at 424:

“The arbitrators did not, of course, have the advantage of considering the two decisions which I have mentioned. I should, however, make clear that the words "and responsibility" in cl. 8 and the transfer of risk comprehended by it, relates to the entire operation of loading, stowing, trimming and discharging the cargo.

Specifically, it covers not only the mechanical process of handling the ship's gear and cargo but also matters of stevedores' negligence in strategic planning of loading and discharge of the cargo. The distinction sought to be drawn by the arbitrators is, in my judgment, in conflict with the decisions in The Shinjitsu Maru No. 5 and The Argonaut and not supported by the language of cl. 8 as amended. 

The effect of the addition of the words "and responsibility" in cl. 8 is therefore to effect a prima facie transfer of liability for damage caused to the vessel or cargo by stevedore negligence in the discharge of the cargo. Of course, if the charterers' intervention in such discharging operations caused the loss, the charterers will be liable. However, on the arbitrators' findings that did not happen. The arbitrators held the charterers liable merely because the damage was caused by the negligence of the stevedores. That was a risk which was contractually assumed by the owners under cl. 8 of the charter-party.”

That case seems to me to provide considerable support for Mr Young QC’s argument in the present case. The learned judge considered that the addition of the words: “and responsibility” to clause 8 of the NYPE Form effected a transfer of risk to the owners which entailed their being responsible for the entirety of the operations, so he was clearly equating assuming the “risk” for cargo operations with having responsibility for them, even though under the terms of clause 8 of the charterparty, it was the charterers not the owners who undertook the physical performance of those cargo operations.

In The Fantasy [1991] 2 Lloyd’s Rep 391, clause 8 of the NYPE Form was not amended by the addition of the words “and responsibility”, but both clauses 42 and 50 were held by Evans J to have the same effect, as they contained a provision that the Master was to be responsible for and to supervise the loading, stowage and discharge operations. That case concerned containers loaded on deck which shifted in bad weather, one being lost overboard. The Court was asked to determine responsibility as between owners and charterers for that loss and damage on a series of alternative assumptions as to whether the cause was negligent stowage and lashing or default of the crew in tending the lashing during the voyage or a combination of the two.

The charterparty contained an express provision dealing with deck cargo at clause 63:

“63 Deck Cargo: Charterers entitled to load deck cargo provided regulations permit. Deck cargo, if any, to be checked and protected by crew up to twice a day during sea passages, if required by charterers and/or circumstances deemed it appropriate. Same to be tightened up or replaced or additional lashing to be added appropriate to circumstances; such cargo to be carried at charterers’ risk.”

Evans J held that, on the true construction of the charterparty and on the assumption that the stowage was carried out by stevedores, the charterers were responsible for the consequences of bad stowage of the deck cargo prior to the voyage, but that the owners were responsible for the consequences of crew negligence during the voyage. It is only the first part of that decision (that charterers were responsible for the consequences of bad stowage of the deck cargo) which is relevant for present purposes. Having decided (following the decision of Wright J in Svenssons v Cliffe Steamship [1932] 1 KB 490) that the words in clause 63: “at charterers’ risk” were not of themselves sufficient to confer an exemption from liability for crew negligence (see 395) the learned judge went on at 395 rhc-396 lhc to consider whether owners were liable for pre-loading negligence in stowing the containers:

“Reading cll. 8, 42 and 50 on the one hand with cl. 63 on the other hand, as in my judgment must be done when liabilities for deck cargo are concerned, the owners’ acceptance of the responsibility for negligent stowage must be reconciled with agreement that the deck cargo is carried at charterers’ risk. One possibility, which I have already dismissed, is that the risk referred to is limited to the consequences of the crew’s failure to perform the express undertaking in cl. 63 itself. There seem to be two other possibilities, assuming that effect must be given to the words in both clauses, if this can be done.

First, the risk may be limited to that of accidental loss, not caused by negligence on the part of the stevedores or crew. There is a need to exclude liability for such loss in the case of carriage by sea, but the exclusion is habitually achieved by the exception clauses in common form including, e.g., perils of the sea - here, cl. 15 together with cl. 51 which provides for cargo claims to be settled according to the NYPE Inter-Club agreement of May, 1984, the express incorporation of the Hague Rules by cl. 24 being deleted. If this is the sole effect of the charterers’ risk provision in cl. 63, applying to deck cargo only, then it is strictly unnecessary and the same qualification applies to under-deck cargo without express provision in any event. It is highly unlikely that the words were intended to have no greater effect than this.

There remains the construction for which the owners contend and which in my judgment is correct so far as stevedores’ negligence is concerned. Clause 8 contains charterers’ undertaking “to load, stow [and] trim and discharge” the cargo, operations which would otherwise be the responsibility of and performed by the owners. This -

. . . has the effect of shifting from the owners to the charterers the primary responsibility for loading [etc.] the cargo. [Wilford (3rd ed.) at p. 245] 

When words such as “Master’s responsibility” are added, this effects a prima facie transfer from the charterers back to the owners of liability for the entire operation [unless charterers have intervened]. (Wilford (3rd ed.) p. 248) Among the cases cited is the judgment of Mr. Justice Steyn, in the Alexandros P., [1986] Lloyd’s Rep. 421 where he used language which rightly, in my view, equated the transfer of responsibility with the acceptance of risk:

. . . the words “and responsibility” in cl. 8 and the transfer of risk comprehended by it . . . That was a risk which was contractually assumed by the owners under cl. 8 of the charterparty.

Clause 8 therefore transfers risk to the owners under the guise of responsibility. Clause 63 provides that the charterers remain at risk as regards deck cargo. If this is the correct construction of the words of the charter-party, what was the parties’ inferred intention when they agreed cl. 63? Charterers sought the liberty to load deck cargo in the form of containers which would be carried on the hatch covers. Owners would not normally accept liability for such cargo (witness the definition of “cargo” in the Hague Rules) but they were prepared to undertake that the crew would attend to it during the voyage. On that basis, charterers could load the cargo at their own risk, subject to negligence of the master in supervising its loading and stowage, for which owners would be liable without any transfer of responsibility under cll. 8, 42 and 50. The two parts of cl. 63 therefore represent an easily understood compromise; in return for the owner’s undertaking that the crew would check and protect deck cargo during the voyage, such cargo was to be carried at charterers’ risk, meaning that owners did not otherwise accept responsibility for it.”

It is noteworthy that the first possible construction of “at charterers’ risk” to which Evans J refers is the same point as Mr Thomas QC’s principal construction of clause 5 in the present case, that the risk in question is that of accidental loss not caused by negligence of the stevedores or the crew. Evans J rejects that construction for essentially the same reason as I have given in [13] above, that exclusion of liability for accidental or fortuitous loss is achieved by other provisions of the charterparty. The construction put forward by the owners in that case, which Evans J considered was correct, was one which, as in The Alexandros P, equated risk with responsibility.

In the Court of Appeal, that decision was upheld. Lloyd LJ summarised the learned judge’s conclusion and his agreement with it in these terms at [1992] 1 Lloyd’s Rep 235 at 237 rhc:

“The learned Judge has held that on the true construction of these clauses and on the assumption that the stowage was carried out by stevedores the charterers are responsible for the consequences of bad stowage of the deck cargo prior to the voyage, but that owners are responsible for the consequences of crew negligence during the voyage (see [1991] 2 Lloyd’s Rep. 391). In my opinion, the Judge was right.”

Lloyd LJ went on to deal in more detail with the arguments advanced. He recorded the argument for the charterers that the amended clause 8 imposed responsibility for bad loading, stowage and discharge on the owners and that nothing in the general words in clause 63: “such cargo to be carried at charterers’ risk” shifted responsibility for stowage of deck cargo back to the charterers. He then set out the owners’ contrary argument that the combined effect of clauses 8 and 63 was that the charterers were (a) entitled to load deck cargo they would not otherwise be entitled to load and (b) obliged to load, stow and discharge the deck cargo. He continued at 238 rhc:

“It is then for the charterers to show that the owners have assumed responsibility for the deck cargo under cll. 42 and 50. Although the words “at Charterers’ risk” are not normally apt to exclude owners’ liability for crew negligence, as the Judge held, nevertheless in the context of cl. 63 their meaning is clear enough. They negative any assumption of liability by the owners in respect of the deck cargo, save only for the specific obligations imposed by cl. 63. Reading cll. 8, 42, 50, and 63 together, as we must, the transfer of responsibility under cll. 42 and 50 is thus limited to underdeck cargo. 

In my opinion, Mr Crookenden’s [counsel for the owners] argument is correct.”

Lloyd LJ then goes on to deal with a separate argument for the charterers that under clause 63, the cargo was only at the charterers’ risk after the vessel set sail which he rejects, concluding:

“It is for the whole of the carriage, including the loading and stowage, that the deck cargo is to be at charterers’ risk.”

Mr Thomas QC relied upon the subsequent decision of Phillips J (as he then was) in The Alara (23 October 1992, unreported) as in some way casting doubt upon the correctness or the scope of the decision in The Fantasy. In my judgment, it does nothing of the kind. The Alara was a case where clause 8 of the NYPE Form was amended to provide that the cargo operations were under the supervision and responsibility of the captain, but at clause 31 there was a provision that deck cargo was to be at charterers’ risk and expense, including lashing and securing. The deck cargo shifted during the voyage and the question was whether the owners were entitled to recover from the charterers the loss and expense incurred in consequence. The charterers’ submissions were that the words: “At X’s risk” were insufficiently clear to act as an exemption clause, let alone a provision which transferred liability from one party to the other, relying upon the decision in Svenssons v Cliffe. Phillips J said of these submissions:

“I might well have accepted these submissions but for the recent decision of Evans J, upheld by the Court of Appeal, in The Fantasy…”

Having set out the facts of that case and the decisions of Evans J and the Court of Appeal, Phillips J then recorded that counsel for the charterers in his case was seeking to distinguish The Fantasy and to persuade Phillips J not to follow it on the basis that in The Fantasy clause 8 of the NYPE Form was unamended and the provision in clause 63 merely negatived in relation to deck cargo the transfer of responsibility to owners which would otherwise have been effected by clauses 42 and 50. Phillips J rejected that submission and held there was no significant distinction between the two cases. If anything, clauses 8, 42 and 50 in The Fantasy, had they stood alone, would have provided more clearly and positively than the amended clause 8 in The Alara that stowage of all cargo was owners’ responsibility. However, as he then held:

“Evans J and the Court of Appeal held that the effect of clause 63 was to negative the transfer of responsibility made by clauses 42 and 50 insofar as deck cargo was concerned. If this reasoning is sound, it applies in my judgment with equal force in the present case. Clause 31 negatives, insofar as deck cargo is concerned, the transfer of responsibility from charterers to owners that would otherwise be effected by the addition of the words ‘and responsibility’ to clause 8. It may be that strictly I am not bound to follow the reasoning of Evans J and the Court of Appeal in The Fantasy but it would be contrary to that consistency that our doctrine of precedent aims to achieve were I to decline to do so. I propose to follow The Fantasy…”

Contrary to Mr Thomas QC’s submissions I do not detect any reluctance on the part of Phillips J to follow The Fantasy or any sense that he thought it was wrongly decided. Had he done so, he would surely have distinguished that case. The Alara was considered and applied by Mance J (as he then was) in The Darya Tara [1997] I Lloyd’s Rep 42 at 46-47 without any suggestion that in following and applying The Fantasy he was doing so reluctantly.

Mr Thomas QC submitted that the assistance to be derived from these deck cargo cases was limited, both because carriage of goods on deck has always been in a special category (falling as it does outside the regime of the Hague Rules) and because these were cases where under clause 8 of the NYPE Form, the operations of loading, stowage and discharge were to be performed physically by the charterers (so that absent an amendment to the clause they would be responsible for those operations), whereas in the present case it remains in dispute who employed the stevedores and there is no provision in the charterparty making the charterers responsible for the physical performance of the cargo operations. It seems to me that, whilst that submission might have some force in the case of an unamended clause 8, where clause 8 has been amended (or similar provisions agreed such as clauses 42 and 50 in The Fantasy), then before one even gets to the deck cargo provision, the charterparty makes it clear that, irrespective of the fact that it may be for the charterers to undertake the physical performance of the cargo operations, responsibility for bad loading, stowage or discharge rests squarely on the owners, in other words the addition to clause 8 of “and responsibility” or insertion of a provision to similar effect restores what would be the position at common law. Notwithstanding that, both The Fantasy and The Alara held that the words: “at charterers’ risk” transferred responsibility for bad stowage of deck cargo to the charterers. In my judgment the reasoning in those cases, which like that of Steyn J in The Alexandros P equates risk with responsibility, also provides strong support for Mr Young QC’s submissions as to the correct construction of clause 5 in the present case.

Mr Young QC also relied upon two decisions of LMAA arbitrators reported anonymously in the Lloyd’s Maritime Law Newsletter, cases 4/87 and 8/93. Only the latter concerned clause 5 of the Synacomex charter. The arbitrators rejected the charterers’ argument that the risk element in the clause related only to the cargo itself, holding that the natural meaning of the first sentence was that the whole of the operations of loading and discharge were at the risk of the shippers/receivers/charterers. However, as Mr Thomas QC pointed out, there was an express finding by the arbitrators that the charterers had engaged the stevedores, so that they took the risk of operations carried out by the charterers. Accordingly, it is difficult to derive much assistance from the decision.

Despite the limited assistance to be derived from those arbitration awards, as I have already indicated, I consider that, on the basis of the decisions in The Alexandros P and The Fantasy, and construing this charterparty as a whole, the words: “at the expenses and risk of Shippers/Charterers” (in the case of loading) and “at the expenses and risk of Receivers/Charterers”(in the case of discharge) in clause 5 are sufficiently clear to transfer responsibility for loading and discharge and for any shortcomings in those operations to the charterers and the cargo interests. Given the equation in those authorities between risk and responsibility, it is nothing to the point that, in the first sentence, responsibility is imposed on the charterers/cargo interests for loading and discharge by making those operations at their “expense and risk”, whereas in the later sentence, responsibility for stowage is imposed on the carrier by a specific provision that stowage is the responsibility of the Master.

Mr Thomas QC sought to resist the construction of clause 5 put forward by the carrier on the basis that it involves an irreconcilable inconsistency within clause 5 because of the later words: “Stowage shall be under Master’s direction and responsibility”. He submitted that, if the opening words of the clause: “Cargo shall be loaded, spout trimmed and/or stowed at the expenses and risk of Shippers/Charterers” meant that responsibility for the cargo operations, including stowage was transferred to the charterers, the provisions were irreconcilable. It seems to me that, whichever party’s construction of the clause is correct, there is an internal tension within the clause and an element of surplusage. However, on balance I consider that it is the cargo interests’ construction which is the more difficult to reconcile with the later sentence.

If the cargo interests are correct that the words: “Cargo shall be loaded, spout trimmed and/or stowed at the expenses and risk of Shippers/Charterers” do not transfer responsibility for cargo operations to the charterers, but that responsibility rests with the carrier, then the later sentence: “Stowage shall be under Master’s direction and responsibility” is completely pointless and otiose, because stowage, like loading and discharge, would be the carrier’s responsibility anyway at common law. On the other hand, whilst the carrier’s construction does create an inconsistency, the fact that the opening words of the clause transfer responsibility for the cargo operations to the charterers does at least make sense of the sentence: “Stowage shall be under Master’s direction and responsibility”, namely that it is making it clear that responsibility for stowage remains with the carrier. Absent that sentence, that responsibility would be with the charterers/cargo interests.

Despite Mr Thomas QC’s submissions to the contrary, it does not seem to me that any of the other provisions of the charterparty militates against the carriers’ construction of clause 5. In particular, clauses 32 and 43 are both concerned with elements of stowage, which is owners’ responsibility under clause 5 in any event. I agree with Mr Young QC that clause 45 is simply concerned with making the vessel’s cranes available and working at all hatches and holds and says nothing about who is responsible for cargo operations.

Mr Thomas QC also relied upon clause 31 but I agree with Mr Young QC that, if anything, a provision in a charterparty that the owner is to settle stevedore damage during discharge directly with the stevedores points to their being employed by the charterers, since if they were employed by the owners themselves, there would be little point in the clause. In any event, the clause does not tell one anything about the allocation of risk and responsibility for cargo operations.

Construing the contracts of carriage as a whole and applying the various authorities relied on by Mr Young QC on behalf of the carrier, I am firmly of the view that the effect of the first sentence of clause 5 of the charterparty incorporated in the bills of lading is to impose responsibility on the charterers/cargo interests for bad loading and discharge of the cargo. It follows that, to the extent that it is established that damage to the bags of rice was caused by bad loading and/or discharge (as opposed to bad stowage) that damage is the responsibility of the cargo interests who cannot recover in respect of such damage from the carrier.