England and Wales Court of Appeal (Civil Division) Decisions

Parsons Corporation & Ors v C.V. Scheepvaartonderneming “the Happy Ranger” [2002] EWCA Civ 694 (17th May, 2002)

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN’S BENCH DIVISION
COMMERCIAL COURT
MrJustice Tomlinson

		Royal Courts of Justice Strand, London, WC2A 2LL
		17 May 2002

Lord Justice Tuckey:

1. The main questions on this appeal are whether the Hague-Visby Rules apply to the contract of carriage concerned and if they do not whether the carriers have successfully limited their liability to £100 per package. These questions arise on the claimants’ appeal from Tomlinson J who decided as one of several preliminary issues that the Hague-Visby Rules did not apply because the contract was “not covered by a bill of lading or any similar document of title”. His decision is reported at [2001] 2 Lloyd’s Rep. 530. The other question was not argued before the Judge.
2. The facts can be stated shortly. The contract of carriage was made on the 7^th October 1997 between the first defendants who were the owners of the vessel “Happy Ranger” and the third claimants. It was for the carriage by sea of three reactors from Porto Marghera in Italy to Jubail in Saudi Arabia. On the 11th March 1998 one of the reactors weighing approximately 833 mt. was being loaded aboard the vessel when one of the hooks on one of the vessel’s cranes broke, the reactor fell to the ground and was damaged. The claim is for about US$2.4 million.
3. The contract consists of 3 documents: the signed printed front page, a 6 page printed rider containing 18 clauses and an attached specimen form of bill of lading.
4. The printed front page is headed “Contract of Carriage”. For present purposes I only need refer to clause 5 which says:

“The Carrier’s regular form of Bill of Lading as per specimen attached, is applicable and shall form part of this Contract. In the event of a conflict between the Bill of Lading and this Contract, the terms, conditions and exceptions of this Contract shall prevail to the extent of such conflict.”

5. The rider clauses contain, as the judge noted, a number of provisions which one would ordinarily expect to find in a voyage charter party but not in a straight forward contract of carriage contained in or evidenced by a bill of lading. Clause 1 made the lump sum freight payable “on signing Bills of Lading”. Clause 11 says:

“The Master will deliver the cargo only upon presentation of duly endorsed original Bill(s) of Lading. In case of non-presentation of these documents all time lost in waiting to count as lay time or time for which damages for detention are due.”

Clause 15 provides that “Any dispute arising under this Contract of Carriage and Bill of Lading” is to be decided in London and “English law shall apply.”

6. The printed words on the front of the specimen bill of lading say:

“Shipped onboard the vessel mentioned ... the goods mentioned below ... to be carried subject to the terms, conditions and exceptions mentioned in this Bill of Lading, which constitutes the contract of carriage between the Merchant and the Owner of the vessel ... to the port of discharge ... and to be delivered at the aforesaid port, unto the Consignee or to his or their assigns ...”

“In witness whereof the Carrier or his agent has signed the number of original Bills of Lading stated below, all of this tenor and date. One Bill of Lading duly endorsed must be surrendered in exchange for the goods upon which the others shall stand void.”

The printed terms and conditions on the back of the bill define “Merchant” to include the shipper, the receiver, the consignee, the holder of the bill of lading and the owner of the cargo “who are jointly and severally liable”.

7. The front of the bill contains boxes for the shipper and consignee to be identified and a box saying:

“Issued pursuant to Contract of Carriage dated: ... between the Carrier and the Merchant mentioned therein.”

The first of the printed terms on the back of the bill says:

“1. PREAMBLE

This Bill of Lading has been issued pursuant to and in accordance with a Contract of Carriage dated as overleaf. All terms and conditions, liberties and exceptions of the Contract of Carriage dated as overleaf are herewith incorporated. In the event of a conflict between this Bill of Lading and the Contract of Carriage, the terms, conditions, liberties and exceptions of the Contract of Carriage shall prevail to the extent of such conflict.”

8. Clause 3 is as follows:

“3. GENERAL PARAMOUNT CLAUSE

The Hague Rules contained in the International Convention for the Unification of certain rules relating to Bills of Lading, dated Brussels 25 August 1924, as enacted in the country of shipment shall apply to this contract. When no such enactment is in force in the country of shipment, Articles 1 to VIII of the Hague Rules shall apply. In such case the liability of the Carrier shall be limited to £100.-sterling per package.

Trades where Hague-Visby Rules apply

In trades where the International Brussels Convention 1924 as amended by the Protocol signed at Brussels on 23 February 1968 – the Hague-Visby Rules – apply compulsorily, the provisions of the respective legislation shall be considered incorporated in this Bill of Lading. The Carrier takes all reservations possible under such applicable legislation, relating to the period before loading and after discharging and while the goods are in the charge of another Carrier, and to deck cargo and live animals.

Trades where U.S. COGSA applies

This Bill of Lading shall have effect subject to the provisions of the Carriage of Goods by Sea Act of the United States, approved 16 April 1936, which shall be deemed to be incorporated herein and nothing herein contained shall be deemed a surrender by the Carrier of any of its rights or immunities or an increase of any of its responsibilities or liabilities under said Act ...

Trades where the Canadian Water Carriage of Goods Act, 1936 applies

All the terms, provisions and conditions of the Canadian Water Carriage of Goods Act, 1936 and of the rules comprising the schedule thereto are, so far as applicable, to govern the contract contained in this Bill of Lading and the Shipowners are to be entitled to the benefit of all privileges, rights and immunities contained in such Act and in the schedule thereto as if the same were herein specifically set out ... ”

9. Clause 4 applied Dutch law “unless provided otherwise in this Bill”.
10. The bills relating to the shipment of the other 2 reactors the subject of the contract and the bill relating to the subsequent shipment of the damaged reactor are in the same form as the specimen bill. In each case they showed the shipper as Parsons International, the fourth claimant and the consignee as Saudi Arabia Parsons, the fifth claimant.
11. The Hague Rules are not enacted in Italy so the first sentence of the first paragraph of clause 3 of the bill is not applicable. The argument centres around the second paragraph of this clause. If, as the appellants contend, this paragraph applies the Hague-Visby Rules, it is accepted that there is no scope for the application of the default provision in the second and third sentences of the first paragraph of the clause. To understand the argument it is first necessary to set out some of the rules.
12. These Rules were given the force of law in the United Kingdom by the Carriage of Goods By Sea Act 1971. The Rules are scheduled to the Act.
13. Article II says:

“... under every contract of carriage of goods by sea the carrier, in relation to the loading, handling, stowage, carriage, custody and the care and discharge of such goods shall be subject to the responsibilities and liabilities and entitled to the rights and immunities hereinafter set forth.”

14. Article I (b) says that in the Rules:

“‘Contract of Carriage’ applies only to contracts of carriage covered by a bill of lading or any similar document of title, insofar as such document relates to the carriage of goods by sea, including any bill of lading or any similar document as aforesaid issued under or pursuant to a charter party from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same.

This provision is said to mirror s.1(4) of the 1971 Act which says:

‘ ... nothing in this section shall be taken as applying anything in the Rules to any contract for the carriage of goods by sea, unless the contract expressly or by implication provides for the issue of a bill of lading or any similar document of title.”

15. Article V adds:

“A carrier shall be at liberty to surrender in whole or in part all or any of his rights and immunities or to increase any of his responsibilities and obligations under these rules, provided such surrender or increase shall be embodied in the bill of lading issued to the shipper. The provisions of these rules shall not be applicable to charter parties, but if bills of lading are issued in the case of a ship under a charter party they shall comply with the terms of these rules.”

16. Article X says:

“The provisions of these Rules shall apply to every bill of lading relating to the carriage of goods between ports in two different States if: ...

(b) The carriage is from a port in a contracting State. ...

whatever may be the nationality of the ship the carrier, the shipper, the consignee or any other interested person.”

Italy is a contracting State.

17. The appellants’ first submission is that as a matter of construction of the contract of carriage, and in particular clause 3 of the bill incorporated into it, the Rules govern the contract in all trades where those Rules apply. Trades in this sense means (as a minimum) voyages or carriage of cargoes within the scope of article X including voyages from contracting States. As Italy is such a State the Rules apply.
18. This submission was not made to the judge but was developed before us by Mr Milligan QC for the appellants without objection from the respondents. He says that the overall scheme of clause 3 is to apply the Hague or Hague-Visby Rules applicable in the country of shipment. Thus the U.S. COGSA or the Canadian statute apply to carriage from the U.S. or Canada and the Rules govern carriage in trades where they apply. This is a trade to which the Hague-Visby Rules apply because it was a shipment from Italy. It was not necessary to consider whether the contract of carriage fell within article I(b) of the Rules because the parties had made their intention clear in clause 3. If necessary the Rules or the contract should be manipulated to reflect this intention as the House of Lords did in Adamastos Shipping v Anglo Saxon Petroleum [1959] AC 133. In that case a paramount clause incorporating U.S. COGSA opening with the words “This bill of lading” had been attached to a charter party. The Act did not apply to charter parties but the House held that the parties had intended that its terms should apply to their contract despite the mistaken reference to bill of lading. Finally Mr Milligan submitted that the parties could not have intended the wholly uncommercial result that only the default provisions of clause 3 applied to this contract where all three of Italy, (the country of shipment) England, (whose law was the proper law of the contract) and Holland (the proper law of the bill in the absence of another express choice) are all Convention countries.
19. I do not accept these submissions. To see what the parties intended one must look at the words they used. The heading of the second paragraph of clause 3 must be read with the body of the paragraph and that refers to “Trades where the ... Hague-Visby Rules ... apply compulsorily”. The Rules do not define or even refer to trades but I am prepared to accept that they include voyages or carriage of cargoes within the scope of article X. This article applies “to every bill of lading relating to the carriage of goods” so to this extent it is compulsory but whilst the issue of a bill of lading is a necessary condition of the application of the Rules, it is not in itself sufficient. The scope of article X must be subject to article I(b) so if this contract is not one which is covered by a bill of lading or similar document of title the Rules, including article X, do not apply. If they do not apply they are obviously not compulsory. I do not think it is permissible to manipulate the wording of clause 3 to delete the words “apply compulsorily”. It cannot be said that to do so would reflect the intention of the parties because those are the words which they used. If that is what they have agreed the fact that it is arguably uncommercial is of little consequence. This conclusion does of course mean that the second paragraph of clause 3 is surplusage because the Rules would apply compulsorily with or without it, but no real significance can be attached to this in a document of this kind.
20. So it follows from what I have said that the appellants’ first submission does not avoid the need to consider the article I(b) point because unless this is a contract of carriage which is covered by a bill of lading or similar document of title the Hague-Visby Rules are not applied compulsorily by the proper law of the contract as the second paragraph of clause 3 requires.
21. This was the point upon which the appellants lost before the judge. Based on what Devlin J said in Pyrene v Scindia [1954] 2 QB 402 the judge accepted that the fact that no bill of lading had been issued in respect of the goods in question was not conclusive. Use of the word “covered” reflected the fact that bills of lading were often not issued until after the ship had sailed. A bill of lading evidenced an earlier contract. Provided it was contemplated that a bill of lading would be issued which would contain the terms of the contract it was covered by a bill. But the judge continued:

“However the present is not in my judgment a case in which Parsons were entitled to demand, at or after shipment, a bill of lading setting forth the terms of the contract. ... The contract of carriage as between Parsons and the owners was always to be found in the contract of 7 October 1997. Those parties did not intend or expect that as between themselves any bill of lading issued would be of any contractual effect independent of the contract made on 7 October 1997 and in particular they did not intend that any bill of lading issued would evidence the terms of that contract. The terms of their contract were already adequately and completely evidenced by the contract and specimen form of bill of lading attached thereto. The parties envisaged that any bill of lading issued might in fact contain terms at variance with those which they had already agreed which latter were to prevail.”

22. Mr Milligan submits that the judge’s approach was wrong. The question was not whether the bill of lading to be issued would contain the terms of the contract of carriage but simply whether one was to be issued. The language of section 1(4) of the 1971 Act makes it clear that article I(b) simply requires that the contract should provide for the issue of a bill of lading. Here the contract did so provide so the Rules apply. The issue of a bill of lading rarely creates a contract. Normally it evidences a contract which pre-exists its issue. Whether it pre-exists it in oral or written form is irrelevant.
23. Mr Teare QC, for the respondents, supported the judge’s reasoning. He accepted that the contract did contemplate the issue of a bill of lading but argued that as this would not contain the terms of the contract it would not be a bill to which the Rules would apply. He relied by analogy, as did the judge, on President of India v Metcalfe Shipping Co. [1970] 1 QB 289. In that case the dispute was between voyage charterers and owners as to whether a claim for short delivery was subject to the jurisdiction clause in the charter party or in the bills of lading. This Court held that as the charter party authorised the master to sign the bill of lading “without prejudice to the charter party”, it operated as a mere receipt for the goods or as a document of title and, whilst forming part of the narrative, had no impact on the charter party. Mr. Teare’s alternative submission is that the contract in this case was a voyage charter party and he relies on article V of the Rules.
24. On this issue I accept Mr Milligan’s submissions. It does not seem to me that the Rules are concerned with whether the bill of lading contains terms which have been previously agreed or not. It is the fact that it is issued or that its issue is contemplated which matters. As it was put in one of the cases “the bill of lading is the bedrock on which the mandatory code is founded”. If a bill of lading is or is to be issued the contract is “covered” by it or “provides for its issue” within the definitions of article I(b) and section 1(4) of the 1971 Act. The Rules make special provision for charter parties and bills issued under them. I do not think the President of India helps. That case was only concerned with a conflict between the terms of the charter party and the terms of the bill of lading. It was not concerned with the application of the Rules. As to Mr Teare’s alternative submission I do not think it is possible to characterise the contract in this case as a voyage charter party. It was obviously a carefully drawn document and although it does contain terms which are to be found in voyage charter parties, it emphatically calls itself a contract of carriage and that is what I think it is. The fact that the goods to be carried were a part cargo supports this conclusion, although I accept that this factor is not conclusive.
25. It follows that I think the Rules applied compulsorily to the contract of carriage and that the judge’s conclusion on this issue was wrong. This makes it unnecessary to decide the third issue argued before us which arises out of the judge’s conclusion that if the bill of lading which the parties contemplated would be issued was in the same form as those actually issued for the other reactors and the repaired reactor the Rules would not apply because they were “straight” bills. As we heard a good deal of argument on this issue I think I should express a view about some at least of the points which arise.
26. This issue pre-supposes that one can look at what subsequently happened at all to determine what the parties contemplated at the time they made the contract of carriage to which the specimen bill was attached and if so whether a similar bill of lading would in fact have been issued. The appellants say that one cannot make either assumption, but the argument proceeded on the basis that one could. Mr Milligan says that even if the bills had been in the form subsequently issued the Rules would still have applied. They did not make this submission to the judge, who concluded that as such bills were not negotiable and did not transfer title they were not bills of lading within section 1(4) of the 1971 Act or article I(b) of the Rules and so this provided an additional reason for his conclusion on the other issue he had to decide.
27. A “straight” bill has no English law definition, but the term derives, it appears, from earlier U.S. legislation referring to a “straight” bill as one in which the goods are consigned to a specific person as opposed to an “order” bill where the goods are consigned to the order of anyone named in the bill or bearer. Bills to “order” or “bearer” are transferable by endorsement and delivery and entitle the holder to possession of the goods upon production of the bill. They will not necessarily transfer title to the goods and are not negotiable in the strict sense of that word either although colloquially such bills are described as documents of title which are negotiable.
28. The first question is whether the bills issued in this case were “straight” bills so called. Mr Teare submits that they were. They named the fifth claimant as the consignee and could not therefore be transferred. The other printed words on the front of the bill showed that it could be used either as a “straight” or a transferable bill but by showing a named consignee without the words “or order” appearing the former use had been chosen. Mr Teare supported this submission by reference to a decision of David Steel J in The Chitral [2000] 1 Lloyds Rep 529 where the printed words on the front of the bill were similar to those in this case but the box in which the consignee was named said “If order state notify party” and no such notify party was stated. The judge construed the bill as one which enabled the form to be used both as a “straight” consigned bill and as a negotiable bill with delivery to the consignee or his assigns “if applicable” and so (as I understand the judgment) because no notify party had been stated it had been shown that the printed words were not applicable. A similar conclusion was reached by Langley J in The Rafaela S unreported 17 April 2002) of a bill where the consignee box said “Consignee (B/L not negotiable unless ‘order of’)” and only the consignee’s name was inserted in the box.
29. I do not accept Mr Teare’s submissions. In this case the printed words on the front of the bill refer to delivery of the goods to the “consignee or to his or their assigns”. It is accepted that the latter words mean “or order”. Those words do not appear in the consignee box but there is nothing in that box or anywhere else in the bill to show that it was not intended that they should have that effect. One cannot spell out such an intention from the mere fact that only a named consignee appears in the consignee box. As a matter of construction the two have to be read together. There is no difficulty in doing this. On this analysis The Chitral and The Rafaela S do not assist the respondents’ arguments.
30. Mr Milligan submits that even if the parties contemplated the issue of a “straight” bill, such a bill would be a bill of lading or similar document of title within the meaning of the Rules. In making this submission he defies the unanimous views of text book writers. There is no case which decides this point; some of the text books are written by the same authors and others rely on one another. Henderson v The Comptoir D’Escompte (1873) LR 5 PC 253 is only authority for the proposition that a bill naming a consignee which does not contain the words “or order or assigns” is not negotiable (transferable). Mr Milligan says that nevertheless a consignee is within the class which the Rules are designed to protect and because (as in this case) the bill is his only key to possession of the goods, it must be regarded at least as a document of title in the sense contemplated by the Rules if it is not a bill of lading within the meaning of those Rules. The arguments about this need also to take into account the provisions of COGSA 1992 which now define “straight” bills not as bills of lading at all but as seaway bills.
31. Because I have decided that the bills actually issued in this case were not “straight” bills, it is not and will not be necessary to decide this point in this case. And nor do I think that we should do so. It should be decided in a case where it arises and initially at first instance rather than on appeal. I hope I have said enough to indicate that it is not an easy point. All I need add is that I think it would be unwise to assume that the statements in the text books are correct.
32. This leaves the free-standing point about limitation of liability. The 5th of the preliminary issues which the judge was to decide was:

“Can the defendants limit their liability by reference to article IV rule 5 of the Hague/Hague-Visby Rules?”

But in the event the appellants conceded that they could and so the judge did not have to decide this issue. The appellants have withdrawn this concession without objection from the respondents. The point is still of importance if the Hague-Visby Rules apply since the claim would still be limited to about US$2 million by article IV Rule 5.

33. Article IV rule 5(a) says:

“Unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading, neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the goods in an amount exceeding ... ”

The other provisions of the Rule elaborate how the limitation is to be determined, but (e) provides that the limitation will not apply if damage has been caused deliberately or recklessly.

34. Article IV has to be read with article III which by rule 1 requires the carrier to exercise due diligence to make the ship seaworthy before and at the beginning of the voyage (which could include the state of the crane hook which failed in this case) and rule 2 which says:

“Subject to the provisions of Article IV, the carrier shall properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried.”

Article III rule 6 contains time-bar provisions. Rule 2 of article IV lists a number of things for which the carrier is not responsible. Rule 6 exempts the carrier from liability for dangerous cargo of which he is unaware.

35. In Maxine Footwear v Canadian Government Merchant Marine [1959] AC 589 the Privy Council held that the article IV rule 2 exceptions did not apply where a cause of the loss was a breach of the article III rule 1 obligation to make the ship seaworthy. At page 602 Lord Somervell said:

“Article III Rule 1 is an overriding obligation. If it is not fulfilled and the non-fulfilment causes the damage the immunities of Article IV cannot be relied on. This is the natural construction apart from the opening words of Article III Rule 2. The fact that that Rule is made subject to the provisions of Article IV and Rule 1 is not so conditioned makes the point clear beyond argument.”

The same conclusion has been reached in respect of article IV rule 6 (The Kapitan Sakharov [2000] 2 Lloyds Rep 255, 269-270).

36. So, Mr Milligan submits, the same should apply to article IV rule 5. This Rule is in the nature of an exemption in that it exempts the carrier from liability in excess of the amount stated. The words, “in any event” refer to the exempting events set out in article IV and not to other causes. Those words are also used in the time-bar provisions but it is significant that they are contained in article III and not article IV all of which should be read as being subject to the pre-condition of compliance with article III rule 1.
37. I disagree. There is no English case on the point. In Falconbridge Nickel Mines Limited v Chimo Shipping [1969] 2 Lloyds Rep 277, 298 Kerr J in the Canadian Exchequeur Court said:

“The situation, then, if the Rules applied to the tractor and generating set until they were lost, appears to me to be this: if the loss resulted from unseaworthiness of the barge caused by want of due diligence on the part of the carrier to make the barge seaworthy, the exceptions from immunity in Article IV Rule 2 are of no avail to the carrier but the limitation to liability in Rule 5, where the words ‘in any event’ are used applies ...”

However it does not appear from the report that the contrary was argued. The only reference to this point in a current text book is in a footnote to Halsbury’s Laws (Volume 43(2) at para. 1841 footnote 4) which refers to a case decided by the U.S. Second Circuit, The John Weyerhaeuser [1975] 2 Lloyds Rep 439 where it was held that the carrier was entitled to limit his liability to the stated sum per package or unit even if he had failed to exercise due diligence to make the ship seaworthy. Again however it does not appear that the contrary was argued.

38. However, I think the words “in any event” mean what they say. They are unlimited in scope and I can see no reason for giving them anything other than their natural meaning. A limitation of liability is different in character from an exception. The words “in any event” do not appear in any of the other article IV exemptions including rule 6 and as a matter of construction I do not think they were intended to refer only to those events which give rise to the article IV exemptions. I do not attach significance to the fact that the only other place where they appear is in article III where it is accepted that the time-bar provisions apply both to article III rule 1 and 2 claims. If rule 5(a) had the meaning contended for by Mr Milligan rule 5(e) would be unnecessary.
39. For the reasons I have given I would allow this appeal and hold that the Hague-Visby Rules apply to the contract of carriage but the appellants’ claim is subject to the limitation of liability imposed by article IV rule 5.

Lord Justice Rix:

40. I have read the judgment of Lord Justice Tuckey and gratefully adopt his setting out of the facts and the contractual provisions governing the relations of the parties. I agree with all he says, save in respect of the first issue, which raises the effect of the incorporation in the contract of carriage of clause 3 of the specimen form of bill of lading. Since that issue does not affect the outcome of this appeal, I will seek to give my views on that issue briefly.
41. It may not be easy to identify the forensic function of this first issue, since the contract of carriage itself contemplates the issue of a bill of lading and provides in advance for its form and the provisions to be contained in it. Therefore, for the reasons set out by my Lord in regard to the second issue (para 20 above) it is hard to see why the question regarding the effect of the incorporation of clause 3 should provide an answer otherwise than in favour of the compulsory application of the Hague-Visby Rules (the “Rules”). Nevertheless, the premise of the first issue, I suppose, is to assume that for any of the reasons advanced by the respondent shipowners the bill of lading contemplated by the contract of carriage would not be a “bill of lading or any similar document of title” (article I(b)) within the meaning of the Rules, including therefore article X itself. Thus, let it be assumed, for example, that the contract of carriage was in truth a charter party and that therefore the “provisions of these rules shall not be applicable…” (article V). The question would still arise what effect the incorporation of clause 3 in that contract would have.
42. The meaning that the shipowners would give to clause 3 as incorporated is to the effect that if the Rules compulsorily apply, then they apply. That, however, would prima facie be an odd construction, certainly redundant, and ill fitting with the rest of the clause. The other paragraphs of clause 3 do not operate by applying regimes which apply themselves, but on the contrary incorporate certain regimes on the clause’s own terms. Thus the first paragraph of the clause incorporates the Hague Rules if they are “enacted in the country of shipment”. The third paragraph of the clause simply incorporates U.S. COGSA: “shall be deemed to be incorporated”. That paragraph is headed “Trades where U.S. COGSA applies”, which appears to be an obvious reference to the fact that U.S. COGSA itself limits its application to (bills of lading or similar documents of title evidencing contracts of carriage in) foreign trade to or from the ports of the United States. The same may be said about the fourth paragraph, headed “Trades where the Canadian Water Carriage of Goods Act, 1936 applies”.
43. The critical second paragraph is headed “Trades where Hague-Visby Rules apply” and continues “In trades where…the Hague-Visby Rules…apply compulsorily, the provisions of the respective legislation shall be considered incorporated in this Bill of Lading”. Thus the clause assumes (and it may be said, Why not?, given that the clause comes from a specimen form of bill of lading) that a bill of lading is to be issued, and concentrates on the question of the “Trades” involved. That word is nowhere defined, either in the contract or in the Rules, but the concept of international shipments out of or into ports of certain countries is common to the three codes referred to in the three paragraphs of the clause headed “Trades…” In the case of the Rules the reference is to article X’s “between ports in two different states if…(b) The carriage is from a port in a contracting State”. In this case the “trade” was carriage from Italy to Saudi Arabia, and Italy is a contracting state.
44. Do the Rules “apply compulsorily” to such a trade? In one sense, as the shipowners submitted, they do not unless the other requirements for the applicability of the Rules are also met, viz the opening words of article X itself – “The provisions of these Rules shall apply to every bill of lading relating to the carriage of goods between ports…”, which takes one back to article I(b). If that is correct, then the same submission could be made in relation to the third paragraph of the clause about the effect of the opening words of U.S. COGSA (“Every bill of lading or similar document of title which is evidence of a contract for the carriage of goods…”). Even the first paragraph of the clause would ex hypothesi become subject to the same attack, for even where the Hague Rules were “enacted in the country of shipment”, it could be said that they did not apply because the contract of carriage did not come within the leading definition of article I(b) of those rules, viz “‘Contract of carriage’ applies only to contracts of carriage covered by a bill of lading or any similar document of title…” Indeed, and this is, it seems to me, the reductio ad absurdum of the submission under consideration, even what has been regarded as the default provision contained in the second sentence of the first paragraph of the clause (“When no such enactment is in force in the country of shipment, Articles I to VIII of the Hague Rules shall apply”) would become inoperable, again because of the limitation in article I(b) just cited. The shipowners relied in the present case on the applicability of that default provision to impose a limitation under article IV, rule 5 of £100 per package (emphasised in the last sentence of that first paragraph). Yet their submission would destroy that protection and leave both shipowners and their contracting party without any regime relating to the carriage.
45. On any view, therefore, the incorporation of clause 3 in the contract of carriage and through clause 3 the incorporation of some regime by reference to the Hague (the first, third and fourth paragraphs of the clause) or Hague-Visby Rules (the second paragraph of the clause) requires some manipulation of the language and effect of those Rules in their incorporated state. They need to be made to apply to the contract of carriage even though they are drafted as applying to bills of lading or contracts of carriage covered by bills of lading. That is very close to the classic point at issue in Adamastos Shipping Co Ltd v. Anglo-Saxon Petroleum Co Ltd [1959] AC 133, save only that in that case the contract of carriage was a charter party, and in this case I have merely assumed, for the sake of one branch of the shipowners’ argument, that it is. Viscount Simonds said (at 152/3):

“Upon the first question a broadside attack was made upon the owners’ claim to rely on the paramount clause. In the context of this charterparty, it was said, the clause is insensible and must be rejected. It opens with the words “This bill of lading,” and it purports to incorporate the provisions of an Act of the United States which itself enacts that it shall not apply to charterparties. It is therefore ex facie inapplicable to this charterparty. My Lords, I must confess that this is to me an attractive approach and I would willingly adopt it. For it is not agreeable to find a business transaction of some importance carried through in a manner which Devlin J., as I think, too indulgently described as “slapdash”. But I do not think that I can do so. I can entertain no doubt that the parties, when they agreed by clause 52 of the charter that the “paramount clause…as attached” should be incorporated in their agreement, and proceeded physically to attach the clause that I have set out, had a common meaning and intention which compels me to regard the opening words “This bill of lading” as a conspicuous example of the maxim “falsa demonstratio non nocet cum de corpore constat.” There can be no doubt what is the corpus. It is the charterparty to which the clause is attached. Nor, pursuing this main line of attack, can I be driven to a wholesale rejection of the clause because the Act, whose provisions are in turn deemed to be incorporated, itself enacts that its provisions shall not apply to charterparties. I cannot attribute to either party an intention to incorporate a provision which would nullify the total incorporation.”

46. Viscount Simonds was there making two points, each of which applies to the present case. First, where the incorporated clause itself refers to “This bill of lading”, just as clause 3 in its second paragraph refers to the incorporation of the Rules “in this Bill of Lading”, that expression must make way for the correct description of the incorporating contract, here “this Contract of Carriage”. Secondly, where the regime itself incorporated by the incorporated clause paramount (as here inter alia the Rules are themselves incorporated by the incorporated clause 3 which is described as “General Clause Paramount”) is drafted in terms which purport to disapply itself, it is necessary further to manipulate that regime to give effect to the intention of the parties. It is a standard rule governing the process of contractual incorporation that provisions which make no sense in the incorporated contract should be disregarded: see Viscount Simonds at 154H/157B. Thus in Adamastos itself their Lordships were prepared to jettison the geographical limitation of U.S. COGSA as being inapplicable to a contract of world-wide scope, and were also prepared to apply the incorporated regime to non cargo-carrying voyages. In a further passage which comes close to dealing with the essential thrust of the shipowners’ submission in this case, Viscount Simonds said this (at 156H/157C):

“Upon this part of the case it was further argued that non-cargo carrying voyages could not be brought within the scope of the diminished obligation because the Act is an Act dealing with the carriage of goods by sea under bills of lading, and in almost every section deals with obligations, rights and immunities in respect of goods so carried. Therefore, it was said, the incorporated provisions could have no application to a voyage in which no goods were carried. But this seems to me merely to restate the problem in other words. The question remains what is the meaning and effect of a commercial agreement which contemplates voyages with or without cargo and introduces by reference to the United States Act a qualified standard of obligation. I have already stated my opinion and would only add that I find it difficult upon a broad consideration of the case to make any distinction between non-cargo carrying voyages and voyages to or from other than United States ports. A narrow interpretation would exclude, a generous one include, both of them in the substituted standard of obligation.”

47. So in this case, a narrow or over-literal view of clause 3 would either destroy its value altogether, if I am right in my reductio ad absurdum view of the effect of the shipowners’ argument, or at very least would limit its effect (subject to the subsequent issues in the appeal) to fine distinctions arising out of the commercial background to the use to which the contractor put his contract of carriage, matters said to bear on the significance of a “straight” bill of lading (eg whether the goods shipped were sold to third parties or transferred to associate companies, and so forth), which in themselves would be of no real interest to the shipowners. To the contrary, however, in my judgment clause 3 is concerned to incorporate into the contract of carriage that international regime which best fits the “trade” involved. It is plain from the three paragraphs of the clause which deal with “trades” that that expression is looking to the geographical nature of the carriage. It is that which is determinative of the regime, and in the case of the Hague-Visby Rules is the key to whether they apply (and thus apply compulsorily) or not. In essence the shipowners’ submission is that the Rules are only incorporated in contracts of carriage to which the Rules apply compulsorily. But the relevant contract of carriage to be considered is that contained in the document called “Contract of Carriage” dated 7 October 1997, and that contract provides for a shipment from Italy to Saudi Arabia. Moreover the clause is worded in terms of “trades” not contracts of carriage. The reason why the language of compulsory application is used in the case of the Hague-Visby Rules in the second paragraph of the clause is that, unlike the Hague Rules, they contain in article X their own code for their application: see The Hollandia [1983] 1 AC 565 at 577E/G per Lord Diplock. Article X(b) is that part of that article which deals with the compulsory application of the Rules to “trades”.
48. For my part, therefore, I would have been prepared to allow the appeal on this ground as well.
49. In conclusion, I would merely underline Lord Justice Tuckey’s comment that it would be unwise to assume that all of the statements in the text books regarding “straight” bills are correct (see paras 30/31 above).

Lord Justice Aldous:

50. I agree with the judgment of Lord Justice Tuckey.
Order: Appeal allowed; order by the judge below set aside; order made with the answers that are agreed; permission to appeal to the House of Lords refused; the respondent to pay 70% of the appellant’s costs here and below; £50,000 interim payment on account of costs to be paid within 21 days; detailed assessment of costs if not agreed. (Order does not form part of the approved judgment)