United Kingdom House of Lords Decisions

Parliamentary Archives,
HL/PO/JU/4/3/1088

HOUSE OF LORDS

SCRUTTONS LIMITED

v.

MIDLAND SILICONES LIMITED

6th December 1961

Viscount Simonds

Viscount Simonds
Lord Reid
Lord Keith of Avonholm
Lord Denning
Lord Morris of Borth-y-Gest




my lords,

The facts in this case are not in dispute. They are fully and accurately
stated in the judgment of the learned trial Judge, Mr. Justice Diplock, and
I do not think it necessary to restate them. I come at once to the question
of law which arises upon them.

The question is whether the Appellants, a well-known firm of stevedores,
who admittedly by their negligence caused damage to certain cargo consigned
to the Respondents under a bill of lading of the 26th March, 1957, can
take advantage of a provision for limitation of liability contained in that
document. In judgments, with which I entirely agree and to which, but
for the importance of the case, I should think it necessary to add nothing,
the learned Judge and the Court of Appeal have unanimously answered the
question in the negative.

The Appellants' claim to immunity (for so I will call it for short) was
put in a number of different ways, but I think that I do no injustice to the
able argument of their counsel if I say that he rested in the main on the
well known case of Elder, Dempster & Co. Ltd. v. Paterson, Zochonis & Co.
Ltd. [1924] A.C. 522, contending that that is an authority binding this House
to decide in his favour.

Let me then get rid shortly of some of the other arguments advanced on
behalf of the Appellants.

In the first place I see no reason for saying that the word " carrier " either
in the bill of lading or in the United States Carriage of Goods by Sea Act,
1936 (which the bill of lading incorporated) means or includes a stevedore.
This is a proposition which does not admit of any expansion. A stevedore
is not a carrier according to the ordinary use of language and, so far from
the context supplying an extended meaning to the latter word, the contrary
is indicated, as Lord Justice Hodson points out, by clause 17 of the bill of
lading which authorises the carrier or master to appoint stevedores.

Then, to avert the consequences which would appear to follow from the
fact that the stevedores were not a party to the contract conferring immunity
on the carriers, it was argued that the carriers contracted as agent for the
stevedores. They did not expressly do so: if then there was agency, it was
a case of an agent acting for an undisclosed principal. I am met at once
by the difficulty that there is no ground whatever for saying that the carriers
were contracting as agent either for this firm of stevedores or any other
stevedores they might employ. The relation of the stevedores in this case
to the carriers was that of independent contractors. Why should it be
assumed that the carriers entered into a contract of affreightment or into
any part of it as agents for them?

Next it was urged that there was an implied contract between the cargo
owners, the Respondents, and the stevedores that the latter should have the
benefit of the immunity clause in the bill of lading. This argument presents,
if possible, greater difficulties. When A & B have entered into a contract,
it is not uncommon to imply a term in order to give what is called " business
" efficacy " to it — a process, I may say, against the abuse of which the courts
must keep constant guard. But it is a very different matter to infer a con-
tractual relation between parties who have never entered into a contract at
all. In the present case the cargo owners had a contract with the carrier
which provided amongst other things for the unloading of their cargo. They
knew nothing of the relations between the carrier and the stevedores. It was



2

no business of theirs. They were concerned only to have the job done
which the carriers had contracted to do. There is no conceivable reason
why an implication should be made that they had entered into any con-
tractual relation with the stevedores.

But, my Lords, all these contentions were but a prelude to one which,
had your Lordships accepted it, would have been the foundation of a
dramatic decision of this House. It was argued, if I understood the argument,
that if A contracts with B to do something for the benefit of C, then C,
though not a party to the contract, can sue A to enforce it. This is indepen-
dent of whether C is A's undisclosed principal or a beneficiary under a
trust of which A is trustee. It is sufficient that C is an " interested person ".
My Lords, if this is the law of England, then, subject always to the question
of consideration, no doubt, if the carrier purports to contract for the benefit
of the stevedore, the latter can enforce the contract. Whether that premiss
is satisfied in this case is another matter, but since the argument is advanced
it is right that I should deal with it.

Learned Counsel for the Respondents met it, as they had successfully done
in the courts below, by asserting a principle which is, I suppose, as well
established as any in our law, a " fundamental " principle, as Lord Haldane
called it in Dunlop Pneumatic Tyre Co., Ltd. v. Self ridge & Co. Ltd. [1915]
A.C. 847, an " elementary " principle, as it has been called times without
number, that only a person who is a party to a contract can sue upon it.
" Our law ", said Lord Haldane, " knows nothing of a jus quaesitum tertio
" arising by way of contract ". Learned Counsel for the Respondents claimed
•that this was the orthodox view and asked your Lordships to reject any pro-
position that impinged upon it. To that invitation I readily respond. For
to me heterodoxy, or, as some might say, heresy, is not the more attractive
because it is dignified by the name of reform. Nor will I easily be led by
an undiscerning zeal for some abstract kind of justice to ignore our first
duty, which is to administer justice according to law, the law which is
established for us by Act of Parliament or the binding authority of precedent.
The law is developed by the application of old principles to new circum-
stances. Therein lies its genius. Its reform by the abrogation of those
principles is the task not of the courts of law but of Parliament. Therefore
I reject the argument for the Appellants under this head and invite your
Lordships to say that certain statements which appear to support it in recent
cases such as Smith & Snipes Hall Farm, Ltd. v. River Douglas Catchment
Board [1949] 2 K.B. 500, and White v. John Warwick & Co. Ltd. [1953]
1 W.L.R. 1285 must be rejected. If the principle of jus quaesitum tertio is to
b2 introduced into our law, it must be done by Parliament after a due con-
sideration of its merits and demerits. I should not be prepared to give it my
support without a greater knowledge than I at present possess of its operation
in other systems of law.

I come finally to the case which is said to require us to decide in favour
of the Appellants. The Elder Dempster case has been the subject of so
much analytical criticism and so many different conclusions that one may
well despair of finding out what was decided by which of the five noble
and learned Lords who took part in it. In the course of the discussion before
your Lordships my mind turned to what was said by Lord Dunedin (who was
himself a party to the Elder Dempster decision) some four years later in
Great Western Railway Co. v. Owners of s.s. Mostyn [1928] A.C. 57 at p. 73.
He said: " If from the opinions delivered it is clear—as is the case in most
" instances—what the ratio decidendi was which led to the judgment, then
" that ratio decidendi is also binding. But, if it is not clear, then I do not
" think it is part of the tribunal's duty to spell out with great difficulty a
" ratio decidendi in order to be bound by it. That is what the Court of
" Appeal has done here. With great hesitation they have added the opinion
" of Lord Hatherley to that of Lord Cairns and then, with still greater diffi-
" culty. that of Lord Blackburn, and so have secured what they think was a
" majority in favour of Lord Cairns's very clear view. I do not think that
" the respect which they hold and have expressed for the judgments of your



3

" Lordships' House compelled them to go through this difficult and most
" unsatisfactory performance."

My Lords, Lord Dunedin's was a dissenting speech and at a later date
this House was able to ascertain the principle which was decided by that
case and the case that he was discussing, River Wear Commissioners v.
A damson, 2 App. Cas. 743 (see Workington &c. Board v. Tower field [1951]
A.C. 112 at p. 157). But that does not, I think, detract from the value and
importance of his observations upon the ascertainment of the ratio decidendi
of a decision which is said to bind this House. I would cast no doubt upon
the doctrine of stare decisis, without which law is at hazard. But I do
reserve the right at least to say of any decision of this House that it does
not depart from a long established principle and particularly does not do
so without even mentioning it unless that is made abundantly clear by the
majority of the noble Lords who take part in it. When, therefore, it is
urged that the Elder Dempster case decided that, even if there is no general
exception to what I have called the fundamental rule that a person not a
party to a contract cannot sue to enforce it, there is at least a special
exception in the case of a contract for carriage of goods by sea, an exception
which is to be available to every person, servant or agent of the contracting
party or independent contractor, then I demand that that particular excep-
tion should be plainly deducible from the speeches that were delivered.
Nor should I forget the warning given by Lord Halsbury in Quinn v.
Leathern (1901) AC 495 in a passage quoted by Mr. Justice Diplock in
this case, which I need not repeat. For it is undeniable that the facts in
Elder Dempster which enabled the House to hold that both shipowners
and charterers could take advantage of a provision in a bill of lading are
remote from the facts of the present case. The question then is whether
there is to be extracted from Elder Dempster a decision that there is in a
contract for carriage of goods by sea a particular exception to the funda-
mental rule in favour of all persons including stevedores and presumably
other independent contractors. This question must clearly, in my opinion,
be answered in the negative.

In the course of this opinion I have already borrowed freely, without
acknowledgment, from the judgment of the late Mr. Justice Fullagar in
Wilson v. Darling Island Stevedoring and Lighterage Co. Ltd. 95 C.L.R. 43
and I shall say something more about that judgment presently. In the mean-
time I will quote a passage from it which expresses my own view of Elder
Dempster. After referring to a passage in Carver 9th Eda. at p. 294, that
learned Judge said: " In my opinion, what the Elder Dempster case decided,
" and all that it decided, is that in such a case, the master having signed
" the bill of lading, the proper inference is 'that the shipowner, when he receives
" the goods into his possession, receives them on the terms of the bill of
" lading. The same inference might perhaps be drawn in some cases even
" if the charterer himself signed the bill of lading, but it is unnecessary to
" consider any such question." This appears to me to be the only possible
generalisation, or, if your Lordships think " rationalisation " an appropriate
word, the only possible rationalisation of Elder Dempster, and it is a far cry
from the circumstances to which it is sought to apply that decision in the
present case.

I shall not further discuss Elder Dempster except to say two things. The
first is that in so far as the case turned on a question of bailment (which I
think it largely did) it has no relevance to the present case. For I agree
with Mr. Justice Diplock in thinking that the Appellants were not bailees
" whether sub, bald, or simple ". Secondly, I must say a few words upon
a passage much relied on by the Appellants in the judgment of Lord Justice
Scrutton in Mersey Shipping & Transport Co. Ltd. v. Rea Ltd. 21 L.l.L.Rep.
375 at p. 378, where he pronounced that the effect of the Elder Dempster
decision was as follows: " Where there is a contract which contains an excep-
" tion clause, the servants or agents who act under that contract have the
" benefit of the exemption clause. They cannot be sued in tort as independent



4

" people, but they can claim the protection of the contract made with their
" employers on whose behalf they are acting." This observation was
admittedly obiter and Lord Justice Bankes, who sat with Lord Justice
Scrutton, clearly did not agree with it. Nor do I agree with it: that follows
from what I have already said. And with all deference to a very learned
judge I do not think that the use of the word " independent" is felicitous.
If the cargo owner sues a stevedore for negligence, he sues him not as a
dependent or independent tortfeasor but just as a tortfeasor. It may be that,
if he is a " dependent" tortfeasor in the sense that he is the servant or agent
of a master or principal, the latter may be made vicariously liable, but that
does not touch his personal liability. From that he can only escape if there
is a contractual relation between him and the cargo owner which provides
him with immunity for his tort or a principle of law which entitles him to
rely on a contract made by another. The first line of escape depends on the
facts of the particular case: the second is denied by the fundamental rule
which was reasserted in the Dunlop case. I will only add that in the passage
that I have cited the Lord Justice uses the word " agents ", and, whatever
else may be attributed to him, I should hesitate to say that he intended to
include independent contractors in that word.

It follows from what I have said that the case of Cosgrove v. Horsfall
62 T.L.R. 140 upon which doubt was cast by counsel for the Appellants was
rightly decided and that Mr. Justice Devlin's decision in Pyrene Co. Ltd.
v. Scindia Navigation Co. Ltd. [1954] 2 Q.B. 402 can be supported only upon
the facts of the case which may well have justified the implication of a
contract between the parties.

In the consideration of this case I have not yet mentioned a matter of real
importance. It is not surprising that the questions in issue in this case
should have arisen in other jurisdictions where the common law is adminis-
tered and where the Hague Rules have been embodied in the municipal law.
It is (to put it no higher) very desirable that the same conclusions should be
reached in whatever jurisdiction the question arises. It would be deplorable
if the nations should after protracted negotiations reach agreement as in the
matter of the Hague Rules and that their several courts should then disagree
as to the meaning of what they appeared to agree upon: see Riverstone
Meat Co. Pty. Ltd. v. Lancashire Shipping Co. Ltd. [1961] 2 W.L.R. 269, at
page 278 and cases there cited. It is therefore gratifying to find that the
Supreme Court of the United States in the recent case of Krawill Machinery
Corporation v. Robert C. Herd & Co. Inc. not only unanimously adopted the
meaning of the word " carrier" in the relevant Act, which I invite your
Lordships to adopt, but also expressed the view that the Elder Dempster
decision did not decide what is claimed for it by the Appellants.

Finally, I must refer again to the case of Wilson v. Darling Island Steve-
doring & Lighterage Co. Ltd. which is fortunately reported also in 1956
1 Ll.Rep. 346, fortunately, since the Commonwealth Law Reports are too
seldom to be found in counsel's chambers. In that case, in which the facts
are not in any material respect different from those in the present case,
the late Mr. Justice Fullagar delivered a judgment with which the Chief
Justice, Sir Owen Dixon, said that he entirely agreed. So do I—with every
line and every word of it, and, having read and reread it with growing
admiration, I cannot forbear from expressing my sense of the loss which
not only his colleagues in the High Court of Australia but all who anywhere
are concerned with the administration of the common law have suffered
by his premature death. I have already cited one passage from his judgment.
Perhaps I may refer also with respectful approbation to those passages in
which he asserts the view that the exceptions to the rule in Tweddle v.
Atkinson, 1 B. & S. 393, are apparent rather than real and explains the
so-called on-carrier cases, and in which he protests against a tendency by
some artifice to save negligent people from the normal consequence of their
fault.

I would dismiss this appeal with costs.

5

Lord Reid

my lords,

The case for the Respondents is simple. Goods which they had bought
were damaged by the negligence of stevedores, who are the Appellants. Before
the damage occurred the property in the goods had passed to the Respondents
and they sue in tort for the amount of the loss to them caused by that damage.
The Appellants seek to take advantage of provisions in the Bill of Lading
made between the sellers of the goods and the carrier. Those provisions in
the circumstances of this case would limit liability to $500. They are
expressed as being in favour of the carrier but the Appellants maintain on a
number of grounds that they can rely on these provisions with the result
that, though the damage to the Respondents' goods considerably exceeded
$500, the Respondents cannot recover more than the equivalent of that sum
from them as damages. We were informed that questions of this kind
frequently arise and that this action has been brought as a test case.

In considering the various arguments for the Appellants I think it is
necessary to have in mind certain established principles of the English Law
of Contract. Although I may regret it I find it impossible to deny the
existence of the general rule that a stranger to a contract cannot in a question
with either of the contracting parties take advantage of provisions of the
contract even where it is clear from the contract that some provision in it
was intended to benefit him. That rule appears to have been crystallised
a century ago in Tweddle v. Atkinson (1861) 1 B. & S. 393, and finally estab-
lished in this House in Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co.
Ltd. [1915] AC 847. There are it is true certain well-established exceptions
to that rule—though I am not sure that they are really exceptions and do not
arise from other principles. But none of these in any way touches the present
case.

The actual words used by Lord Haldane in the Dunlop case were made
the basis of an argument that, although a stranger to a contract may not
be able to sue for any benefit under it, he can rely on the contract as a
defence if one of the parties to it sues him in breach of his contractual
obligation—that he can use the contract as a shield though not as a sword.
I can find no justification for that. If the other contracting party can prevent
the breach of contract well and good, but if he cannot I do not see how
the stranger can. As was said in Tweddle v. Atkinson the stranger cannot
" take advantage " from the contract.

It may be that in a roundabout way the stranger could be protected. If
A, wishing to protect X, gives to X an enforceable indemnity, and contracts
with B that B will not sue X, informing B of the indemnity, and then B does
sue X in breach of his contract with A, it may be that A can recover from B
as damages the sum which he has to pay X under the indemnity, X
having had to pay it to B. But there is nothing remotely resembling that
in the present case.

The Appellants in this case seek to get round this rule in three different
ways. In the first place they say that the decision in Elder, Dempster & Co.
Ltd. v. Paterson, Zochonis & Co. [1924] A.C. 522 establishes an exception to
the rule sufficiently wide to cover the present case. I shall later return to con-
sider this case. Secondly, they say that through the agency of the carrier they
(were brought into contractual relation with the shipper and that they can
now found on that against the consignees the Respondents. And thirdly, they
say that there should be inferred from the facts an implied contract, indepen-
dent of the Bill of Lading, between them and the Respondents. It was not
argued that they had not committed a tort in damaging the Respondents'
goods.

I can see a possibility of success of the agency argument if (first) the
Bill of Lading makes it clear that the stevedore is intended to be protected
by the provisions in it which limit liability, (secondly) the Bill of Lading
makes it clear that the carrier, in addition to contracting for these provisions
on his own behalf, is also contracting as agent for the stevedore that these
provisions should apply to the stevedore, (thirdly) the carrier has authority
from the stevedore to do that, or perhaps later ratification by the stevedore



6

would suffice, and (fourthly) that any difficulties about consideration
moving from the stevedore were overcome. And then to affect the consignee
it would be necessary to shew that the provisions of the Bills of Lading Act,
1855, apply.

But again there is nothing of that kind in the present case. I agree with
your Lordships that "carrier" in the Bill of Lading does not include
stevedore, and if that is so I can find nothing in the Bill of Lading which
states or even implies that the parties to it intended the limitation of liability
to extend to stevedores. Even if it could be said that reasonable men in the
.shoes of these parties would have agreed that the stevedore should have
this benefit that would not be enough to make this an implied term of the
contract. And even if one could spell out of the Bill of Lading an intention
to benefit the stevedore there is certainly nothing to indicate that the carrier
was contracting as agent for the stevedore in addition to contracting on his
own behalf. So it appears to me that the agency argument must fail.

And the implied contract argument seems to me to be equally unsound.
From the stevedores' angle, they are employed by the carrier to deal with
the goods in the ship. They can assume that the carrier is acting properly
in employing them and they need not know who the goods belong to
There was in their contract with the carrier a provision that they should be
protected, but that could not by itself bind the consignee. They might
assume that the carrier would obtain protection for them against the consignee
and feel aggrieved when they found that the carrier did not or could not
do that. But a provision in the contract between them and the carrier is
irrelevant in a question between them and the consignee. Then from the
consignees' angle they would know that stevedores would be employed to
handle their goods but if they read the Bill of Lading they would find
nothing to shew that the shippers had agreed to limit the liability of the
stevedores. There is nothing to shew that they ever thought about this
or that if they had they would have agreed or ought as reasonable men to
have agreed to this benefit to the stevedores. I can find no basis in this
for implying a contract between them and the stevedores. It cannot be said
that such a contract was in any way necessary for business efficiency.

So this case depends on the proper interpretation of the Elder Dempster
case. What was there decided is clear enough. The ship was under time
charter, the Bill of Lading made by the shippers and the charterers provided
for exemption from liability in the event which happened and this exemption
was held to ensure to the benefit of the shipowners who were not parties to
the Bill of Lading but whose servant the master caused damage to the
shippers' goods by his negligence. The decision is binding on us but I agree
that the decision by itself will not avail the present Appellants because the
facts of this case are very different from those in the Elder Dempster case.
For the appellants to succeed it would be necessary to find from the speeches
in this House a ratio decidendi which would cover this case and then to follow
that ratio decidendi.

Before dealing further with that case I think it necessary to make some
general observations about the binding character of rationes decidendi of
this House. Unlike most supreme tribunals this House holds itself bound
by its own previous decisions. That was the decision of this House in
The London Street Tramways Co. v. L.C.C. [1898] AC 375. It was founded
on immemorial practice, and the justification given by Lord Halsbury, L.C.,
with whom the other noble Lords concurred, was " the disastrous incon-
" venience of having each question subject to being reargued and the dealings
" of mankind rendered doubtful by reason of different decisions, so that
" in truth and in fact there would be no real final Court of Appeal." I
have on more than one occasion stated my view that this rule is too rigid
and that it does not in fact create certainty. In illustration of that I need
go no further than the series of decisions in this House on workmen's com-
pensation. But I am bound by the rule until it is altered.

But I can find no invariable practice with regard to rationes decidendi.
In the first place it must be noted that only three years later Lord Halsbury
said in Quinn v. Leathem [1901] AC 495 at p. 506: " There are two obser-
" vaitions of a general character which I wish to make, and one is to repeat



7

" what I have very often said before, that every judgment must be read as
" applicable to the particular facts proved, or assumed to be proved, since
" the generality of the expressions which may be found there are not intended
" to be expositions of the whole law, but governed and qualified by the
" particular facts of the case in which such expressions are to be found.
" The other is that a case is only an authority for what it actually decides.
" I entirely deny that it can be quoted for a proposition that may seem to
" follow logically from it." And, if one has to assume that every case has a
ratio decidendi to be extracted from the speeches in this House by the ordinary
methods of construction of written documents, I think that quite a number of
cases will be found of which the rationes decidendi have not in fact been
followed. I give only a few examples which I happen to have noted from
time to time. They may not be very modern, but, if there was no unbroken
practice, modern pronouncements (in themselves at best only rationes deci-
dendi) cannot have created a rule preventing your Lordships from exercising
the full traditional jurisdiction of this House. A fairly recent example is
Goodman v. Mayor of Saltash 7, App. Cas. 633, and with that I couple a note
by Mr. Macqueen at 1 Macq. 792 where, having dealt with the question of
previous decisions being binding, he says: " Notwithstanding all this it must
be owned that one or two well-known decisions of the House have been
tabooed by the profession ; not, however, by holding them to be wrong, but by
making out invariably that they have no application to other cases. I think,
however, it will be found that the House itself has never revoked what it has
once deliberately laid down on an appeal or Writ of Error." And very soon
after that was said Lord Chelmsford, L.C. said in Magistrates of Dundee v.
Morris, 3 Macq. 134 at p. 155: "Your Lordships will probably think that
" Ewen v. Provost of Montrose (4 Wilson & Shaw 346) can only be urged as
" an authority where the circumstances of the case to which it is sought to be
" applied are precisely similar to the circumstances of that case."

I would certainly not lightly disregard or depart from any ratio decidendi
of this House. But there are at least three classes of case where I think
we are entitled to question or limit it: first, where it is obscure, secondly,
where the decision itself is out of line with other authorities or established
principles, and thirdly, where it is much wider than was necessary for the
decision so that it becomes a question of how far it is proper to distinguish
the earlier decision. The first two of these grounds appear to me to apply to
the present case.

It can hardly be denied that the ratio decidendi of the Elder Dempster
decision is very obscure. A number of eminent judges have tried to
discover it, hardly any two have reached the same result, and none of the
explanations hitherto given seems to me very convincing. If I had to try,
the result might depend on whether or not I was striving to obtain a narrow
ratio. So I turned to the decision itself. Two quite separate points were
involved in the case. The first was whether the damage to the cargo was
caused by bad stowage or by the ship being unseaworthy. This was very
fully considered and the decision was bad stowage. On the conditions in
the Bill of Lading this clearly freed the charterer of liability. The other
question was whether those conditions were also available as a defence to
the ship-owner. From the report of the case it would seem that this was not very
fully argued, and none of the three noble Lords who spoke devoted more than
a page of print to it. They cannot have thought that any important question
of law or any novel principle was involved. Lord Finlay said that a decision
against the ship-owner would be absurd and the other noble Lords probably
thought the same. They must all have thought that they were merely
applying an established principle to the facts of the particular case.

But when I look for such a principle I cannot find it, and the extensive
and able arguments of counsel in this case have failed to discover it. The
House sustained the dissenting judgment of Scrutton, L. J. in the Court of
Appeal [1923] 1 K.B. 420. The majority there did not have to consider this
question but Scrutton, L. J. did and he also devoted less than a page to its
consideration. His reasoning, though brief, is quite clear, but he gives no



8

reason or authority for the proposition on which he bases his judgment and
it is not derived from the argument as reported. He said: "The real
" answer to the claim is, in my view, that the shipowner is not in possession
" as a bailee, but as the agent of a person, the charterer, with whom the owner
" of the goods has made a contract defining his liability, and that the owner
" as servant or agent of the charterer can claim the same protection as the
" charterer. Were it otherwise there would be an easy way round the Bill
" of Lading in the case of every chartered ship: the owner of the goods would
• simply sue the owner of the ship and ignore the Bill of Lading exceptions,
" though he had contracted with the charterer for carriage on those terms and
" the owner had only received the goods as agent for the charterer." It is true
that an unreasonable proposition is seldom good law, and, perhaps for that
reason, it would seem that that great lawyer did not pause to consider how
great an exception he was making to the rule that a stranger to a contract
cannot take advantage from it. For he was saying in terms that servants
and " agents " can take advantage of contracts made by their master or
" principal ". I would not dissent from a proposition that something of that
kind ought to be the law if that was plainly the intention of the contract, and
it may well be that this matter is worthy of consideration by those whose
function it is to consider amending the law. But it seems to me much too
late to do that judicially.

That this House made an exception to the general principle seems to me
clear: the question we have now to consider is how wide an inroad did they
make. It is very far from clear that any of those who spoke in this House
intended to go all the way with Scrutton, L. J.: if they had intended to do so
it would have been easy to say so. And it is not clear just how far Scrutton,
L. J. himself intended to go. The use of the term " agent" is one difficulty:
he cannot have been using that word accurately in its legal sense. The
charterer or anyone else under obligation to do certain things employs
servants or independent contractors and instructs them to do those things.
But they do not act as agents; they have nothing to do with the party to
whom their master or employer is under contractual obligation; their duty
is to carry out the instructions of their master or employer under the contracts
which they have made with him. But in the course of carrying out that
duty they may by their own negligence do damage to the property of a third
party, the person who has made a contract with their master or employer.
On what ground are they to be better off than if they had damaged the
property of some other person? On that analysis it becomes still more
difficult to find a legal justification for what Scrutton, L. J. said. And was
there any implicit limitation to the rule which he enunciated? There seems
to be no logical reason why it should be confined to carriage of goods by
sea or indeed to carriage of any kind. If it is a good rule for bills of lading
it would seem to be an equally good rule for all cases where the master or
employer has some protection under a contract and employs someone else
to do the things which have to be done under that contract I must say
I have considerable doubt whether Scrutton, L. J. can really have intended
his rule to be so far-reaching.

In such circumstances I do not think that it is my duty to pursue the
unrewarding task of seeking to extract a ratio decidendi from what was
said in this House in Elder Dempster. Nor is it my duty to seek to rationalise
the decision by determining in any other way just how far the scope of the
decision should extend. I must treat the decision as an anomalous and
unexplained exception to the general principle that a stranger cannot rely
for his protection on provisions in a contract to which he is not a party.
The decision of this House is authoritative in cases of which the circumstances
are not reasonably distinguishable from those which gave rise to the
decision. The circumstances in the present case are clearly distinguishable
in several respects. Therefore I must decide this case on the established
principles of the law of England apart from that decision, and on that basis
I have no doubt that this appeal must be dismissed.

9

Lord Keith of Avonholm

my lords,

I agree with the opinions that have just been delivered by my noble and
learned friends Lord Simonds and Lord Reid and would only say a few
words about the Elder Dempster case in view of the importance that has
been attached to it in the argument for the Appellants.

There was a specialty in that case which did not go unobserved in the
course of its decision, in that the ship, " The Grelwen", had been hired
under a time charter to augment a line of vessels owned by the Elder Dempster
company, or its subsidiary shipping companies, engaged in the West African
Trade. It was in a sense a chance whether the cargo in question in that case
was loaded on " The Grelwen " or was carried by one of the other vessels
of the Elder Dempster line. To the shippers it was no doubt a matter of
indifference whether their cargoes were carried on one of the regular ships of
the line or on the chartered ship. In fact they were probably unaware that
" The Grelwen " was a chartered ship and the bills of lading signed for the
voyage in question followed the well-known form of bill of lading issued
for all the other of the Respondents' ships. (See Lord Sumner at page 564).
There could thus have resulted the anomaly, on one view of the case, of
the cargo-owners recovering damages from the owners of " The Grelwen ",
which they could not have recovered if their goods had been carried on the
other ships, whose owners would have been fully covered against damage
resulting from bad stowage. These considerations may have been in some
measure irrelevant and they were immaterial if the view of Rowlatt, J.
and the Court of Appeal (Scrutton, L.J. dissenting) that there was unsea-
worthiness at the start of the voyage had been upheld in this House. But
they may well have played their part in leading Rowlatt, J. to hold that
the contract of carriage under the bills of lading was, exceptionally, between
the shippers and the charterers, a finding which was acquiesced in at all later
stages of the case. As Fullagar, J. pointed out in Wilson v. Darling Island
Stevedoring and Lighterage Co. this might be thought to lead to the result
that the charterers alone were responsible for the bad stowage (though they
would, of course, have the benefit of the exemption clause), and that no
question of liability of the ship-owners could arise. I am not sure that this
was not also Lord Sumner's view in the Elder Dempster case, but he pre-
ferred to base his decision on bailment. I do not read him as subscribing
to the view that if the captain signed the bills of lading as agent for the
charterers, that secured immunity for the charterers' servants and agents.
Be that as it may, this House was able, on one view or another, to exempt
both charterers and owners from liability for bad stowage.

The present case on its facts is far removed from the Elder Dempster case
and it is doubtful whether any appeal would have been made to that case
but for the principle which Lord Justice Scrutton, in Mersey Shipping and
Transport Co. Ltd. v. Rea Ltd. 1925, 21 Lloyds List 375, found himself able
to extract from the judgment of this House. This principle does not, I think,
materially differ from what he himself enunciated though in somewhat more
limited terms in his dissenting judgment in the Court of Appeal in the Elder
Dempster case as his ground for exempting the ship-owners from liability
for bad stowage. I do not repeat the relevant passages from Lord Justice
Scrutton's judgments which have already been quoted. An agent or servant,
acting within the scope of his authority, may, of course, make a contract on
behalf of his principal which stipulates for immunity for negligence or tort
in the performance of the contract. That would be a contractual stipulation
on which the principal could rely. The converse proposition favoured by
Lord Justice Scrutton, that the servants or agents of a principal who is
entitled to some contractual immunity for negligence in performance of his
contract could claim the same immunity, does not appear to me to proceed
on any known principle in English law.

It may be difficult to discover any common ratio decidendi in the speeches
of their Lordships who decided the Elder Dempster case in favour of the



10

owners of " The Grelwen ". But I take the preferred view of Lord Sumner,
which had the support of Lord Dunedin and Lord Carson, as meaning
that in the circumstances of that case, including the fact that the bills of
lading were signed by the master of the ship, the cargo was received by the
ship and its owners, with the assent of the shippers, on the same condition
as regards immunity in respect of stowage as had been obtained by the
charterers under their contract of carriage. There is nothing in the facts
covered by the present appeal that in any way corresponds to the facts of
that case and no principle to be derived from the case on which, in my
opinion, the Appellants can successfully rely. I agree the appeal should be
dismissed.

Lord Denning

MY LORDS,

There are three contracts which fall for consideration in this case :

1. The Bill of Lading. This evidenced a contract between the
   shipper and the carrier whereby the carrier agreed to carry a drum of
   silicone diffusion pump fluid by ship from New York to London and
   deliver it there to the consignee. In this contract the carrier stipulated
   that, in case of loss, damage, or delay the value was to be deemed
   to be $500 and he was not to be liable for more than $500 per
   package " unless the nature and value thereof was declared by the
   " shipper in writing before shipment and inserted in the Bill of
   " Lading ".

2. The Stevedoring Contract. This was a contract between the
   carrier and the stevedores whereby the stevedores agreed to discharge
   the vessels of the carrier in the Port of London. The stevedores agreed
   to be responsible for any damage to or loss of cargo while being handled
   or stowed, unshipped or delivered. But the stevedores stipulated that
   they should have " such protection as is afforded by the terms, conditions
   " and exceptions of the Bills of Lading ". By this stipulation the steve-
   dores clearly sought to be protected by the same conditions as the
   carrier was, so that they too would not be liable for more than $500
   a package on undeclared cargo. It is noteworthy that so far as declared
   cargo was concerned, the stevedores agreed " to effect an Insurance
   " Policy on Lloyds to cover any damage or loss on which a value in
   " excess of S500 per package has been declared ".

3. The Sale of the Goods. This was a contract between the shipper
   and the consignee under which the property in the goods passed to the
   consignee whilst the goods were on board the ship. Thereupon there
   was transferred to the consignee all rights of suit and he was subject
   to the same liabilities in respect of the goods as if the contract contained
   in the Bill of Lading had been made with the consignee himself.

The shipper did not declare the value of the drum to the carrier, and its
value was not inserted in the Bill of Lading. If a declaration of value had
been made, the drum would have been included in a list of special cargo for
the use of the carriers and the stevedores, and, in accordance with the usual
practice, it would have been given special stowage : and it would, no doubt,
have been covered by the Insurance Policy referred to in the stevedoring
contract. But as there was no declaration of value in this case, the drum
was dealt with as ordinary cargo, both by the carriers and the stevedores.

The drum was duly carried to London. The stevedores duly discharged
the ship and put the drum into a shed. The consignees sent a lorry to take
delivery of the drum. The stevedores were in the very act of lowering the
drum on to the lorry when they negligently dropped it and some of the
contents were lost. The drum was worth far more than $500 and the loss
was far more than $500. If the consignee had sued the carrier for the loss,
the consignee could not have recovered more than $500. If the carrier had
sued the stevedores for the loss, the carrier could not have recovered more



11

than $500. But it is said that the consignee can sue the stevedores in tort
for negligence and recover the full value (£593 12s. 0d.) from them, despite
the fact that the value was never declared as being in excess ol $500
(£179 Is. 0d).

Now there are two principal questions in this case which need separate
consideration: The first is whether the stevedores can rely on the limitation
clause in the Bill of Lading to which they were not parties: The second is
whether they can rely on the protection given by the stevedoring contract
to which they were parties.

So far as the first question is concerned the stevedores rely on the reasoning
Off this House in the Elder Dempster case [1924] A.C. 522, which was stated
by Scrutton, L.J. to be that " where there is a contract which contains an
" exemption clause, the servants or agents who act under that contract have
" the benefit of the exemption clause ", see Mersey Shipping & Transport Co.
Ltd. v. Rea Ltd. (1925) 21 L.l.L.R. at p. 377. By " servants or agents " there
the Lord Justice clearly means to comprehend all those who do the actual
work in performance of the contract; " servants " being those under the direct
control of the contracting party, and "agents" being those who are
employed as sub-contractors for the purpose. The books are full of the use
of the word " agent" in that sense: and I propose in this judgment to
continue to use it so. And I think that the Lord Justice had in mind only
exemption clauses in the carriage of goods. He knew as well as anyone that
the law of England has always drawn a broad distinction between the carriage
of goods and the carriage of passengers, see the classic judgment of the
Court of Exchequer Chamber in Readhead v. Midland Rly. Co. (1869)
L.R. 4 Q.B. 379 at p. 382.

My Lords, it is said that, in stating this proposition, for once Homer
nodded and that this great master of our commercial law—and the members
of this House too—overlooked the " fundamental principle " that no one
who is not a party to a contract can sue or be sued upon it or take advantage
of the stipulations or conditions that it contains. I protest they did nothing
of the kind. You cannot understand the Elder Dempster case without some
knowledge of the previous law and I would draw the attention of your
Lordships to it.

First of all let me remind your Lordships that this " fundamental prin-
" ciple " was a discovery of the 19th century. Lord Mansfield and Buller, J.
knew nothing of it. But in the 19th century it was carried to the most
extravagant lengths. It was held that, where a duty to use reasonable care
arose out of a contract, no one could sue or be sued for a breach of that
contract except a party to it, see Winterbottom v. Wright (1842) 10 M. & W.
109, Alton v. Midland Rly Co. (1865) 19 C.B., N.S. 213. In the 19th century
if a goods owner had sought to sue stevedores for negligence, as he has in
this case, he would have failed utterly. The reason being that the duty of the
stevedores to use reasonable care arose out of their contract with the
carrier; and no one could sue them for a breach of that duty except the other
party to the contract, namely, the carrier. If the goods were damaged, the
only remedy of the owner of the goods was against the carrier with whom he
contracted, and not against the stevedores with whom he had no contract
If proof were needed that the doctrine was carried so far, it is provided by the
many cases in the middle of the 19th century where the owner of goods
sent them by railway for " through transit" to a destination on another line.
The first carrier carried them safely over his line but they were damaged
by the negligence of the second carrier. It was repeatedly held that the
goods owner had no remedy against the second carrier: for the simple reason
that he had no contract with him. The owner's only remedy was against
the first carrier with whom he contracted, see Scothorn v. South Staffordshire
Coy. Ltd. (1853) 9 Ex. 341: and not against the second carrier with whom
he had no contract, see Mytton v. Midland Rly. Co. (1859) 4 H. & N. 615,
Coxon v. Great Western Railway Co. (1860) 5 H. & N. 274. If the first
carrier was exempted from liability by the conditions of the contract, the
goods owner had no remedy at all: none against the first carrier because
he was protected by the conditions: and none against the second carrier



12

because he was " not liable at all". It was so held by this House in Bristol
& Exeter Rly. Co. v. Collins (1859) 7 H.L.C. 194. See especially what Lord
Chelmsford said at page 233 with the entire agreement of Lord Brougham,
and what Lord Cranworth said at page 237.

What an irony is here! This " fundamental principle " which was invoked
100 years ago for the purpose of holding that the agents of the carrier were
" not liable at all" is now invoked for the purpose of holding that they
are inescapably liable, without the benefit of any of the conditions of
carriage. How has this come about?

The reason is because in the 19th century negligence was not an indepen-
dent tort. If you wished to sue a man for negligence, you had to show some
special circumstances which put him under a duty of care towards you. You
might do it by reason of a contract, by a bailment, by his inviting you on
to his premises on business, by his leaving about a thing which was dangerous
in itself, and in other ways. But apart from some such special circumstances,
there was no general duty to use care. Lord Esher made a valiant attempt
in Heaven v. Pender (1883) 11 Q.B. 503 to enunciate such a general duty but
he had failed. Suppose in those days that you tried to show that the defendant
was under a duty of care, then if you could only show it by reason of
contract, your remedy lay only in contract and not in tort. But if you could
show it, not only by reason of contract, but also for some other reason, as
for instance by reason of his inviting you to his premises, you could sue
either in contract or in tort. It was by a development of this principle that,
in the " through transit " cases, the courts eventually found a way of making
the second carrier liable. It was held that if, on through transit, the second
carrier accepted a person as a passenger, the second carrier was under a
duty, irrespective of contract, to carry him with reasonable care, see Foulkes
v. Metropolitan District Railway Company (1880) 5 C.P.D. 157. Likewise if
a second carrier accepted goods for carriage, so that they were lawfully on his
premises, he was under a duty to the owner to use reasonable care, although
there was no contract between them, see Hooper v. London & North Western
Railway Company (1880) 50 L.J. Q.B. 103 (overruling Mytton v. Midland
Railway Company, supra); and Meux v. Great Eastern Railway Company
[1895] 2 QB 387. But when the courts found this way of making the
second carrier liable, they did not thereby open a way by which the injured
person could escape the conditions of carriage. If he had agreed that the
carriage was to be " at owner's risk " for the whole journey, he was held
to his agreement, even when he sued the second carrier in tort, see Hall v.
North Eastern Railway Company (1875) L.R. 10 Q.B. 437, Barratt v. Great
Northern Railway Company (1904) 20 T.L.R. 175. It has been suggested that
in such cases the contract is made with one company for one part of the
journey and with the other company for the other part of the journey, see
Wilson v. Darling (1956) 95 C.L.R. at page 67 by Fullagar, J.: but this
explanation cannot stand with the decision of this House in Bristol & Exeter
Railway Company v. Collins (1859) 7 H.L.C. 194, when it was clearly held
that there was only one contract by the goods owner, namely, his contract
with the first carrier, and none by him with the second earner. This being
so, the only acceptable explanation of the " through transit" cases, to my
mind, is that the second carrier falls within Scrutton, L.J.'s proposition, being
an " agent", Chat is, a subcontractor employed to carry out the contract of
the first carrier, and so entitled to the benefit of the conditions.

This brings me to the Elder Dempster case itself. It is important to notice
that the contract of carriage there was between the shippers and the
charterers. The ship-owners were not parties to it. The word " shipowners "
in the Bill of Lading designated only the charterers. (That appears from
the Judgment of Rowlatt, J. in the appendix to the printed book, p. 17, and
The Okehampton 1913 P. at p. 180 which Lord Sumner clearly had in mind.)
The charterers performed their contract of carriage by means of a hired ship
which they hired from the shipowners. They broke their contract because
the master stowed the goods badly and they were damaged. The goods owner
sued the charterers but failed against them because the Bill of Lading con-
tained an exception of bad stowage. He then sought to recover against the

Shipowners. Now at that time negligence was nor an independent tort: and it

13

was not at all easy for the goods owner to say why the shipowners were
liable to him. His proper remedy would seem to be against the charterers
with whom he contracted and not against the shipowners with whom he had
no contract. To overcome this difficulty he said that the shipowners were
bailees liable for negligence (see [1923] 1 K.B. 420 at pages 427, 441; [1924]
A.C. 522 at p. 564) or were liable in tort because the goods were lawfully 01
their ship (see [1923] 1 K.B. 420 at p. 427 ; [1924] A.C. 522 at pages 526, 564),
He relied on seven cases. Especially on the observations of the Court of
Appeal in Hayn v. Culliford (1879) 4 C.P.D. 182 but Lord Sumner dismissed
them as obiter. The speeches in this House make it clear that, in
order to make the shipowners liable, the goods owner would have Lo show " an
" independent tort unconnected with the performance of the contract" (per
Viscount Finlay at page 548) or a " tortious handling entirely independent of
" contract" (per Lord Sumner at p. 564). For instance, if the shipowner
owned another ship which negligently ran into this one, that would be an
independent tort for which the shipowner would be liable ; and the exceptions
would not avail him. But here the negligence was in the very course of the
performance of the contract—" in the course of rendering the very services
" provided for in the bill of lading "—and the shipowners were not liable.
Two reasons were given for this decision :

The first reason, which I give in the words of Viscount Cave, at p. 534:
The shipowners "were not directly parties to the contract: but they took
" possession of the goods (as Scrutton, L.J. says) on behalf of and as the
" agents of the charterers, and so can claim the same protection as their
" principals ". I feel no difficulty about the word " agents " in this context.
It is clearly used to denote people employed as sub-contractors to do the
work. Such people are entitled to the same protection as their principals.
This was the proposition stated by Scrutton, L.J. It was clearly approved
not only by Viscount Cave but also by Viscount Finlay (p. 548) with the
concurrence of Lord Carson (p. 565). It was treated, too, as a correct
proposition by Lord Sumner, with whom Lord Dunedin agreed, for he
accepted that " the charterers and their agents " were not liable, see page
564 line 3 from the top, and line 5 from the bottom. Lord Sumner's only
hesitation seems to have been whether in this case the shipowners took
possession of the goods as " agents ". They had a possessory lien for hire
and might have been in possession on their own account. He put forward,
therefore, another reason which he regarded as preferable.

The second reason. The shipowners were bailees and liable as such for
negligence quasi ex contractu: but they were protected because the bailment
to them was not a " bald bailment with unrestricted liability " but a " bail-
" ment upon terms which include the exceptions and limitations stipulated
in the known and contemplated form of bill of lading ". (p. 564).

These two reasons were complementary and not alternative as is shown by
the fact that Lord Carson agreed with both (p. 565).

My Lords, I am not unduly attached to the strict doctrine of precedent
but I should have thought there was good ground here to hold yourselves
bound by the first reason in the Elder Dempster case. Just as your Lord-
ships held yourselves bound by a ratio decidendi of three out of five in
Fairman's case, see Jacobs v. London County Council [1950] A.C. 361 at
pages 368-371: and by a ratio decidendi of four out of five in Nicholls v.
Austin, see Close v. Steel Company of Wales [1961] 3 W.L.R. 319 at pages 330,
334, 347. So should you be bound by the reasoning in the Elder Dempster
case. I confess that I should do my best to distinguish it in some way if I
was quite satisfied that it was wrong, but I am not in the least satisfied
of this.

It is said that the decision is anomalous and contrary to principle but that
is only because you are looking at it through the spectacles of 1961 and
not those of 1924. Since the decision of Donoghue v. Stevenson in 1932 we
have had negligence established as an independent tort in itself. Small
wonder, then, that nowadays it is said that the tortfeasor cannot rely for his
protection on provisions in a contract to which he was not a party. But the
very point in the Elder Dempster case was that the negligence there was not



14

an independent tort in itself. It was negligence in the very course of per-
forming the contract—done it is true by the sub-contractor and not by the
principal—but if you permit the owner of the goods to sue the sub-contractor
in tort for what is in truth a breach of the contract of carriage, then at least
you should give him the protection of the contract. Were it otherwise there
would be an easy way round the conditions of the contract of carriage.
That is how the Judges in the Elder Dempster case looked at it and I am
not prepared to say they were wrong. I am sure that the profession looked
at it, too, at that time in the same way. If the draftsmen of the Hague Rules
had thought in those days that the goods owner could get round the excep-
tions by suing the stevedores or the master in tort, they would surely have
inserted provisions in those Rules to protect them. They did not do so
because they did not envisage their being made liable at all.

But if you look at the Elder Dempster case with the spectacles of 1961.
then there is a way in which it can be supported. It is this: Even though
negligence is an independent tort, nevertheless it is an accepted principle
of the law of tort that no man can complain of an injury if he has volun-
tarily consented to take the risk of it on himself. This consent need not be
embodied in a contract. Nor does it need consideration to support it
Suffice it that he consented to take the risk of injury on himself. So in the
case of through transit, when the shipper of goods consigns them " at owner's
" risk " for the whole journey, his consent to take the risk avails the second
carrier as well as the first, even though there is no contract between the
goods owner and the second carrier. Likewise in the Elder Dempster case
the shipper, by exempting the charterers from bad stowage, may be taken
to have consented to exempt the ship-owners also. But I am afraid that
this reasoning would not avail the stevedores in the present case: for the
simple reason that the Bill of Lading is not expressed so as to protect the
stevedores but only the " carrier ". The shipper has therefore not consented to
take on himself the risk of the negligence of the stevedores and is not to be
defeated on that ground. But if the Bill of Lading were expressed in terms by
which the owner of the goods consented to take on himself the risk of loss
in excess of $500, whether due to the negligence of the carrier or the steve-
dores, I know of no good reason why his consent, if freely given, should not
be binding on him. The case of Cosgrove v. Horsfall (1945) 62 T.L.R. 140
appears to suggest the contrary, but that was a contract for the carriage
of passengers and not for the carriage of goods: and as I said in Adler v.
Dickson [1955] 1 QB 158 at p. 184 it is not so easy to find an assent by a
passenger to take the risk of personal injury on himself. The mere issue of
a ticket or pass will not suffice.

I suppose, however, that I must be wrong about all this: because your
Lordships, I believe, take a different view. But it means that I must go on
to consider the second question, namely, whether the stevedores can avail
themselves of the protection clause in their own " stevedoring contract".
Here your Lordships are untrammelled by authority. The cases in the High
Court of Australia and in the United States Supreme Court do not touch
the point. The stevedores in those two cases, for aught that appears, had
agreed to do their work on a " bald " stevedoring contract " with unrestricted
" liability ": whereas here they stipulated that they should " have such pro-
" tection as is afforded by the terms, conditions and exceptions of the Bill of
" Lading ".

It is said here again that the owners of the goods cannot be affected by the
" stevedoring contract" to which they were not parties: but it seems to me
that we are now in a different branch of the law. When considering the
contract between the carrier and the stevedores, it is important to remember
that the carrier of goods, like a hirer, is a bailee: and the law of bailment
is governed by somewhat different principles from those of contract or of tort:
for " bailment", as Sir Percy Winfield said " is more fittingly regarded as
" a distinct branch of the Law of Property, under the title ' Possession',
" than as appropriate to either the law of contract or the law of tort ", see
The Province of the Law of Tort, p. 100. One special feature of the law
of bailment is that the bailee can make a contract in regard to the goods
which will bind the owner, although the owner is no party to the contract
15

and cannot sue or be sued upon it. The contract must, no doubt, be of a
category which the owner impliedly authorised the bailee to make, such as a
contract for repair, storage, loading, unloading or removal: but provided it is
impliedly authorised, the true owner is bound by it. Thus if a bailee stores
goods in a warehouse on his own account, and the warehouseman stipulates
for a general lien on the terms usual in the trade, the owner of the
goods is bound by it. He cannot claim the goods in defiance of the lien.
Again, if the hirer of goods hands them to a furniture remover to be carried
to his new home, and the remover stipulates, in the usual way of the trade, for
exemption from liability for fire, the remover is entitled to the benefit of the
exemption, not only as against the hirer, but also as against the owner. The
reason for this may be seen by considering what would be the position if
there were no exemption from liability. The bailee would then be able to
recover the full value of the goods from the negligent wrongdoer, but he would
have to account to the true owner for the proceeds, see The Winkfield [1902]
P.42. If the bailee is to be treated as the owner of the goods for the purpose
thus of imposing full liability on the negligent wrongdoer, he is also to be
treated as the owner for the purpose of exempting him from liability, at any
rate where the true owner has impliedly authorised it. And just as the original
owner cannot sue in defiance of the exemption, nor can anyone who buys
the goods from him: for the purchaser takes the goods subject to the subsisting
bailment and the rights of anyone validly claiming under it, see Jowitt & Sons
v. Union Cold Storage [1913] 3 KB 1.

A good illustration of these principles is The Kite [1933] P.154. The
lightermen were bailees in possession of the goods. They employed the
tug-owners on the usual terms which included exemption from negligence.
This contract was made with the implied authority of the owners of the
goods. They were therefore bound by the exemption, although they were
not parties to the contract and could not sue or be sued on it. Likewise
Pyrene Co. Ltd. v. Scindia Navigation Co. Ltd. [1954] 2 Q.B. 402. It was not
strictly a bailment case, but it is covered by the same principles. The buyers
employed the shipowners to carry the goods subject to the limitation of
liability under the Hague Rules. This contract was on the terms usual in
the trade and it was made with the implied authority of the seller of the!
goods. He was not a party to the contract. He could not sue or be sued
upon it. But nevertheless he was bound by the limitation contained in it.

Applying this principle, the question is: Did the owners of the goods
impliedly authorise the carrier to employ the stevedores on the terms that
their liability should be limited to $500? I think they did. Put in simple
language, the shipper said to the carrier: " Please carry these goods to
" London and deliver them to the consignee. You may take it that they are
" not worth more than $500 so your liability is limited to $500. If they were
" worth more, we would declare it to you." The carrier carries them to
London and says to the stevedores: " Please deliver these goods to the
" consignee. They have not been declared as being in excess of $500 so
" you need not insure them for more. You are to have the same protection
" as I have, namely, your liability is limited to $500." It is quite plain
that the consignee cannot sue the carrier for more than $500, and the carrier
cannot sue the stevedores for more than $500. But can the consignee turn
round and say to the stevedores: " Although the goods were not declared
" as being worth more than $500, yet they were worth in fact $1500 and I
" can make you liable for it." I do not think our law permits him to do
this. The carrier simply passed on the self-same limitation as he himself had
and this must have been within his implied authority. It seems to me that
when the owner of goods allows the person in possession of them to make a
contract in regard to them, then he cannot go back on the terms of the
contract, if they are such as he expressly or impliedly authorised to be made,
even though he was no party to the contract and could not sue or be sued
upon it. It is just the same as if he stood by and watched it being made.
And his successor in title is in no better position.

My Lords, I have dealt with this case at some length because it is the first
case ever recorded in our English books where the owner of goods has sued



16

a stevedore for negligence. If the owner can, by so doing, escape the excep-
tions in the contract of carriage and the limitations in the Hague Rules,
it will expose a serious gap in our commercial law. It has great potentialities
too. If you can sue the stevedore for his negligence in unloading, why should
you not sue the master and officers of the ship for their negligence in the
navigation or management of the ship? No longer need you worry about
the limitation to £100 or £200 a package. You can recover the value of the
most precious package without disclosing its nature or value beforehand.
No longer need you worry about bringing an action within one year. You
can bring it within six years. Nor are the potentialities limited to carriage
by sea. They can be profitably extended to carriage by air and by road and
rail. You have only to sue the servants of the carrier for negligence and you
can get round all the exceptions and limitations that have hitherto been
devised. No doubt the carrying company will stand behind its servants.
It will foot the bill, as any good employer would, for the sake of good
relations. But when you find that the carrying company has, in the long
run. to pay for the damage, you see at once that you have turned the flank
of the Hague Rules (for carriage by sea) and the Warsaw Convention (for
carriage by air). The exemptions and limitations which are there so clearly
given to the " carrier " do not avail his servants and agents when they are
sued. By suing them, the goods owner will be able completely to upset
the balance of risks as hitherto covered by insurance. No wonder that
Parliament has already found it necessary to step in. It has done so in sections
2 and 3 of the Merchant Shipping (Liabilities of Shipowners and Others)
Act, 1958: and sections 1, 5 and 10 and the First Schedule Article 25A of
the Carriage by Air Act, 1961, which is not yet in force nor likely to be for
some time. But these are only piecemeal efforts of very limited scope. Much
more is needed if the law is such as your Lordships today declare it to be.
For myself, however, I would not allow this gap to be driven in our commer-
cial law. I would not give the " fundamental principle " of the 19th century
a free rein. It should not have unbridled scope to defeat the intentions of
business men. I would stand by the proposition stated by Scrutton, L.J. and
affirmed, as I believe, by this House 37 years ago.

I would allow this appeal.

Lord Morris of Borth-y-Gest

my lords,

The drum which, on the 3rd May, 1957, the stevedores (the Defendants)
negligently damaged then belonged to the Plaintiffs. It had been shipped
by consignors in America upon a ship owned by United States Lines Incor-
porated for carriage to London. It was consigned to the order of the
Plaintiffs upon the terms of a bill of lading signed on behalf of the ship-
owners and forwarded by the consignors to the Plaintiffs, who received it on
the 1st April, 1957. The bill of lading contained certain clauses limiting
the measure of liability.

To the claim made against them based upon their admittedly negligent
act the only defence which the stevedores sought to advance was that their
liability was limited. They sought to say that they were in direct contractual
relationship with the Plaintiffs (either by a contract made expressly or by a
contract made impliedly) and that as a result there was a contractual
provision, sustained by good consideration, by which their liability was
limited. That contention raises issues which depend for their determination
upon the facts of this particular case. Their main contention, however, was
one which raised far-reaching issues of principle for they asserted that they
could claim the benefit of the limitations of liability contained in the contract
of carriage to which they were not parties. If, they said, a cargo-owner
makes a contract with a named carrier which contains a provision which
excludes or limits liability such provision extends to the relief of anyone
whom the carrier engages—either as a servant or otherwise—to perform any
of his (the carrier's) obligations. The bill of lading, they said, contemplated



17

that there would be vicarious performance of some of the United States
Lines obligations and expressly of impliedly provided that those by whom
the obligations of United States Lines would be performed should be entitled
to the benefit of the same provisions regarding limitation of liability as
United States Lines themselves. Accordingly, they said, the stevedores, on
the 3rd May, 1957, when the bill of lading was admittedly still in force,
were in the course of performing one part of the carrier's obligations (i.e. the
obligation to deliver the drum to the plaintiffs) and could avail themselves
of the limiting provisions which were contained in the bill of lading.

The United States Lines (the owners of the ship and the carriers of the
drum), had some years previously (in 1952) made a stevedoring contract
with the stevedores: it was upon the terms of this contract that the steve-
dores were acting on the 3rd May, 1957, and at such other times as they
were performing services for the ship-owners. There was a term in the
contract which provided that the stevedores were to have such protection
as was afforded by the terms of bills of lading. The existence of that term
can have no effect in regard to the issues raised in this appeal. The Plaintiffs
had no knowledge of the. existence of or of the terms of the stevedoring
contract. All that the Plaintiffs knew or may be taken to have known was
that United States Lines were at liberty to engage stevedores. The extent
to which or the terms upon which United States Lines availed themselves of
such liberty was never the plaintiffs' concern.

The broad proposition contended for by the stevedores calls for
examination. My Lords, there is a clear pronouncement of your Lordships'
House that only a person who is a party to a contract can sue on it (Dunlop v.
Selfridge [1915] AC 847). If then A (for good consideration) promises B
that he will make a gift to C, no claim for the gift can be made by C against
A. There will be no difference in principle if A promises B that he will
not claim from C that which C ought to pay to him (A). On a claim against
him by A, C could not set up the promise which A had made to B. I
exclude for present purposes contracts relating to land and any questions of
agency or assignment or trust or any statutory provisions. So if A contracts
(for good consideration) with B that he (A) will not sue C if C is negligent
and if C by negligence causes damage to A, C cannot defend himself by
asserting a contract to which he is a stranger. This will be so whether
C is or is not a servant of B. It will be an a fortiori case if A (for good
consideration) promises B that he (A) will not sue B if damage is caused to A
by the negligence of C. If A had occasion to sue C the latter could not
set up the promise of A to B and even if he could, the promise would not
avail for it would only have been a promise not to sue B.

My Lords, the speeches in the case of Elder, Dempster & Co. Ltd, v.
Paterson, Zochonis & Co. Ltd. [1924] A.C. 522 have often been the subject
of close judicial examination. In that case the ship-owners received goods
from the shippers. In the present case there were no dealings which could
properly be said to be dealings between the plaintiffs and the stevedores.
Whether or not the view of the facts in the Elder Dempster case which was
expressed by Lord Sumner in his speech (at p. 548), a speech which com-
manded the agreement of Lord Dunedin and of Lord Carson, can be
regarded as a satisfactory explanation of the case, the speeches do not contain
any statements which are expressed as qualifications of or which suggest any
modifications of the basic rule which, with the binding force of a pro-
nouncement in your Lordships' House, had been, a few years before, clearly
stated in Dunlop v. Selfridge. For better or for worse that rule was then
firmly built into the structure of English law. The stevedores' main
contention is, in my view, not tenable.

When the Plaintiffs became holders of the bill of lading (which incor-
porated section 4 (5) of the United States Carriage of Goods by Sea Act,
1936), their rights were limited by the provision that the " carrier " would
not (unless a certain condition was satisfied) be liable to a greater amount
than $500 per package or customary freight unit. So far as it incorporated
the provisions of the United States Carriage of Goods by Sea Act, 1936,
the bill of lading did not limit the liability of stevedores but limited that



18

of the ship and of the " carrier " and I would respectfully adopt the views
expressed in the judgment of the Supreme Court of the United States in
Krawill Machinery Corporation v. Robert C. Herd & Co. Inc. (1959)
1 Lloyd's Rep. 305 to the effect that in the United States Carriage of Goods
by Sea Act the word " carrier " should not be read as including stevedores
engaged by the carrier.

Reliance was also placed upon the limiting provision contained in
Condition 24 of the United States Lines' long form of bill of lading the
terms of which were incorporated in the bill of lading. When Condition 24
is being regarded consideration must also be given to Condition 3 which
provided that in the bill of lading the word " carrier " was to include the
ship, her owner, operator and demise charterer " and also any time
" charterer or person to the extent bound by this bill of lading, whether
" acting as carrier or bailee ". These conditions do not avail the stevedores,
firstly, because they are not comprehended within the words that I have
quoted and, secondly, because in any event they were not parties to the
contract.

If United States Lines had been wishing to make or intending to make
some contract as agents on behalf of the stevedores, there was no reason
why that could not have been so stated in the contract. It is clear that the
contract did not state that it was made by United States Lines on behalf
of the stevedores (Scruttons Ltd.). They are not mentioned in the contract.
It seems to me to be wholly unreal to suggest, in spite of this, that United
States Lines did as to some matters contract as agents for the stevedores.
They did not purport to contract as such agents. Even apart from this
the process of selecting which particular terms of the bill of lading might
or could form the substance of the suggested contract would be speculative
and there could be no certainty in defining what would be the obligations
contractually undertaken by the stevedores towards the Plaintiffs.

Furthermore, I see no rational basis for implying some contract between
the Plaintiffs and the stevedores. When the Plaintiffs were ready to take
delivery of the drum and when a landing order in respect of it had been
issued, the arrangements made by United States Lines for effecting delivery
did not in any way involve the Plaintiffs. There were no circumstances
out of which it could be implied that the Plaintiffs made some contract with
the stevedores. Nor does any different result follow from the use of the
word " participation" or by asserting that the stevedores were
" participating" in the contractual obligations owed by the United States
Lines to the Plaintiffs. What the stevedores were doing was to perform
their own obligations under the contract which they had made with United
States Lines. United States Lines had engaged them to do something which
they (United States Lines) by the terms of the bill of lading were under
obligation to do. The stevedores were not " participating " in anyone else's
contract: they were setting out to do only what they, by their own contract
with the United States Lines, had undertaken to do.

I would dismiss the appeal.

(31900) Wt 8118—81 35 1/62 StS