J.H.S.S. v. Edward Nassar & Co., Ltd [1971] 1 GLR 205, Holding 1 @P. 207 C.A.

J.H.S.S. v. Edward Nassar & Co., Ltd [1971] 1 GLR 205 COURT OF APPEAL ARCHER J.A.
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The respondents, Edward Nassar & Co., Ltd., imported twenty cases of Handy Plast Strips from Hamburg for delivery at Takoradi. The appellants, John Holt Shipping Services, were the agents for the carriers, the Guinea Gulf Line Limited.  The goods were shipped from Hamburg on the boat Elizabeth Holt and arrived at Takoradi harbour on 24 March 1962. At the time of the arrival of the goods at Takoradi, the bill of lading, which constituted the legal title of the respondents to the goods, had not been received.  Later when the respondents were in possession of the bill of lading, they called for the delivery of the goods, but the goods could not be traced in the public warehouse at Takoradi harbour. There was a clear evidence that the goods were safely unloaded from the Elizabeth Holt into the public warehouse.  The police investigated the alleged loss and instituted criminal proceedings against certain persons for stealing the goods.  All of the accused were acquitted.

Thereupon, the respondents sued the appellants for failing to deliver the goods in accordance with the terms of the bill of lading and claimed £G1,050 damages being the market value of the goods.  The High Court, sitting at Sekondi, gave judgment for the respondents.  The appellants appealed against the judgment.  The following additional grounds of appeal were argued:

"(1) The learned judge was wrong in not holding that the tally clause was conclusive.

(2) The learned judge ought to have dismissed the action since at the material time the defendants were acting on behalf of the plaintiffs and not as agents for the Guinea Gulf Line Limited, the ship owners.

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(3) The learned judge erred in law in holding that the defendants were not covered by the protection and exemption clause in the bill of lading or in the Hague Rules.

(4)  The learned judge erred in law in holding that action was not time-barred.

(5) the learned judge found the defendants liable upon a cause of action not relied upon or pleaded by the plaintiffs.”

This is a straight forward appeal and no useful purpose will be served by considering each ground of appeal separately.  Instead, it is intended to pose one question, the answer to which will cover all the grounds of appeal argued.  Do the Hague rules apply to the respondents’ claim?  The answer is no.  Clause (1) of the bill of lading reads as follows:
“Application of Public Law - Where the port of shipment is in territory where legislation giving compulsory effect to the International Convention concerning Bills of Lading of 25th August 1924 is in force, this Bill of Lading shall have effect subject to such legislation and in all other cases this Bill of Lading shall have effect subject to the Rules (known as the Hague Rules) contained in the said Convention.  Nothing herein contained shall be deemed to be a surrender by the Carrier of any of his privileges, rights or immunities or an increase of any of his responsibilities or liabilities under the said legislation or Rules.
If and to the extent that any provision in this Bill of Lading is repugnant to such legislation or Rules or is ineffective for any other reason that provision shall be void but only to the extent of such repugnancy or ineffectiveness.”

The port of shipment was Hamburg in the Federal Republic of Germany.  Before the splitting of Germany into two territories after the second World War, Germany ratified the Hague Convention on 1 July 1939, and the ratification took effect on 1 January 1940.  Germany had earlier, on 10 August 1937, passed domestic legislation adopting the Hague Rules.  This law has since been incorporated in the German Commercial Code.  It follows that the law governing the carriage of the goods from Hamburg to Takoradi was that of Germany in accordance with clause (1) of  the bill of lading.  But to what activity, operation or transaction do the Hague Rules apply?  Article 1 (e) of the Hague Rules provides: “`Carriage of goods’ covers the period from the time when the goods are loaded on to the time when they are discharged from the ship.”  This article means that the Hague Rules apply to the goods from the time that they are loaded on to the ship, throughout the carriage of the goods by sea, that is, the voyage from the port of shipment to the port of discharge and until the goods have been discharged from the ship.  Throughout this period certain duties and obligations are imposed on the carrier.  Article III provides:

“1. The carrier shall be bound, before and at the beginning of the voyage, to exercise due diligence to—

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(a) Make the ship seaworthy:

(b) Properly man, equip, and supply the ship:

(c) Make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation.

  1. 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."

The above are some of the relevant duties and obligations of the carrier and the words "properly discharge" in Article III, r. 2 have been held to mean that the carrier shall deliver from the ship's tackle in the same apparent order and condition as on shipment unless the carrier can excuse himself under Article IV: see Gosse Millard, Ltd. v. Canadian Government Merchant Marine, Ltd. [1927] 2 K.B. 432 at p. 434 per Wright J. Article IV of the Hague Rules provides inter alia that:

"2. Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from –....
(q) Any other cause arising without the actual fault or privity of the carrier, or without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage."

This article also means that unless the carrier can show that he was not negligent, he shall be liable for any loss or damage to the goods carried.  The loss or damage must have occurred while the duties and obligations of the carrier under the Hague Rules were subsisting, that is, from time of loading up to the time of discharge.  Article IV, r. 2 cannot apply while the duties and obligations of the carrier under the Hague Rules have ceased.  In the present case, there is uncontroverted evidence that the goods imported by the respondents were safely discharged from the ship's hold and deposited in a warehouse.  It seems therefore that the carriers completely executed their obligations under Article III, r. 2 by properly and carefully discharging the goods from the ship.  If that is conceded, then any loss arising while the goods were in the warehouse cannot be governed by the Hague Rules because the contract for the carriage of goods by sea had been fully discharged under the Hague Rules and the loss was no longer governed by the Hague Rules.

Why did the court below hold otherwise?  It is very clear from the judgment that the court below relied on the case of Heyn v. Ocean Steamship Co., Ltd. (1927) 137 L.T. 158.  The facts in that case were that the plaintiffs were the consignees of a number of cases of cloth shipped in the defendants' steamship Eumaeus in December 1925, for carriage from Liverpool to Shanghai.  When the ship arrived at Shanghai, the work of

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discharge was carried out by stevedores who were independent contractors.  During the night the ship was brilliantly lighted and a strict watch was kept.  But in the early hours of the morning, the quartermaster on watch noticed some men dragging cases of cotton across a barge at the side of the steamer towards a junk.  When an alarm was raised, it was discovered that six cases of cotton were missing from the ship's hold. Investigations revealed that the theft could only have been perpetrated by persons who were closely conversant with the interior structure of the steamer.  The thieves managed to get down to the hold of the ship by operating doors which could be opened only on both sides in the bunker.  The plaintiffs sued for damages for the goods lost and for those damaged by the thieves.  The defendants attempted to rely on Article IV, r. 2 of the Hague Rules and contended that they had taken all the necessary precautions to protect the goods and since the stevedores were independent contractors and not their servants or agents, the defendants were not liable.  MacKinnon J. held at p. 161 that:
“The discharging of the cargo out of the ship so as to be delivered to the consignees is part of the duty of the carrier at common law and part of the duty which is referred to in the earlier part of this schedule as the duty of the carrier, namely, sect. 2 of art. 111. ‘Subject to the provisions of art. IV., the carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.’  It is therefore , one of the duties of the carrier to discharge the goods on which this art. IV. imposes a limitation of his liability and if he employs an independent stevedore contractor to carry out that part of his duty, namely, the duty of discharging the cargo, I think the workmen of that independent stevedore contractor are the agents or servants of the carrier within the meaning of this provision.

The result is that I think the defendants have failed to discharge the onus of proving  that this damage occurred without the fault or neglect of their servants or agents in the sense that they have not proved that it did not occur without the fault or neglect of some or other of the stevedores.”

The decision is the Heyn case is very sound and unassailable but the case is clearly distinguishable from the one in the present appeal.  In the Heyn case, the goods were stolen from the ship’s hold when they had not been discharged.  The duties and obligations under Article III, r. 2 had not been fulfilled.  In the present appeal, the goods had left the ship’s hold and had been stored in a warehouse.  In other words, the carriage of the goods by sea had been fully completed and there were no outstanding duties or obligations under the Hague Rules.  The court below, therefore, should not have relied on the Heyn case because the facts are clearly distinguishable.

As the Hague Rules did not apply and could not have applied to the circumstances of this case, how could the appellants have been liable for the loss sustained by the respondents?  The law on the point is as stated in Halsbury’s Laws of England (3rd ed.), Vol. 35 at p.467, para. 658:

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"Apart from contract or special custom, the shipowner's liability does not at common law cease on the landing of the cargo; though he is no longer liable as a carrier, he incurs a new liability as a warehouseman, which is the liability of a bailee, not of a common carrier."

The passage is based on a dictum by Willes J. in Meyerstein v. Barber (1866) L.R. 2 C.P. 38.

As pointed out earlier, when the goods arrived at Takoradi, the bill of lading had not reached the respondents.  The court below also found as a fact that by the custom of the port of Takoradi, the goods would be ready for delivery after the appellants had handled them and conveyed them into sheds.  It is obvious therefore that at the time when the goods disappeared the respondents had not taken delivery of them and it is reasonable to hold that the goods were still in the custody of the appellants who were, until delivery had been completed, still the agents of their principals.  By paragraph (3) of their statement of defence, the appellants pleaded as follows:

"In regard to paragraph (3) of the statement of claim the defendants admit that they were to carry the goods referred to from Hamburg to Takoradi and aver that in accordance with practice the goods were delivered to a public warehouse in Takoradi.  Under the contract of carriage the liability of the defendants ceased from the time the goods were landed and the tally was made.  The goods have never been received from the public warehouse over which the defendants have no control and the defendants have issued a non-delivery certificate in respect thereof.  Except where it is consistent with the above, paragraph (3) of the statement of claim is denied."

This pleading was very crucial in the trial.  Yet the court below held that the appellants did not plead this exception from liability after the goods had been landed.  The court below also held that such an exemption clause would be void by virtue of Article III, r. 8 of the Hague Rules which provides that:

"Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to or in connection with goods arising from negligence, fault or failure in the duties and obligations provided in this Article or lessening such liability otherwise than as provided in these Rules, shall be null and void and of no effect.

A benefit of insurance or similar clause shall be deemed to be a clause relieving the carrier from liability."

It is patent from the words of Article III, r. 8 that in order to render void a relieving or exempting clause, the relief or exemption must relate to the duties and obligations provided in the article.

What is the nature of the exemption clause in the bill of lading which was held by the court below to be void?  Two exemption clauses were selected for diagnosis in the judgment of the court below but it seems that

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only one of them appears to be relevant.  Clause (13) of the bill of lading provides that:

"Responsibility before loading and after discharge: Goods in the custody of the carrier or his sub-contractors or agents before loading on the ship and after discharge therefrom shall be deemed to be in such custody as agent or agents only for and at the entire risk of the shipper and/or consignee, and the carrier and his sub-contractors shall not be responsible for any act, neglect or omission on the part of his or their servants or agents in relation to the goods while in such custody."

Proper or safe custody of the goods before loading and after discharge is not one of the duties or obligations imposed on shipowners or carriers by Article II, r. 2 of the Hague Rules and since clause (13) does not purport to whittle down or negative any of the duties or obligations under Article III it cannot be said that the clause is void.  The Hague Rules do in fact acknowledge the right of shipowners to contract out in matters not connected with the duties and obligations imposed by the rules, Article VII of the Hague Rules provides:

"Nothing herein contained shall prevent a carrier or a shipper from entering into any agreement, stipulation, condition, reservation or exemption as to the responsibility and liability of the carrier or the ship for the loss or damage to or in connexion with the custody and care and handling of goods prior to the loading on and subsequent to the discharge from the ship on which the goods are carried by sea."

Carver in his classic work Carver on Carriage by Sea has expressed the view that Article VII of the Hague Rules appears unnecessary as the Hague Rules apply only from loading to discharge.  This view is correct but it was no doubt inserted ex abundanti cautela thereby reiterating the common law that a carrier can limit his liability by express agreement.  If therefore the appellants by clause (8) of the bill of lading have limited their liability, is the clause binding on the respondents?  This answer is yes.  Thus in Chartered Bank of India, Australia, and China v. British India Steam Navigation Co., Ltd. [1909] A.C. 369, P.C., the headnote states at p. 369 that goods were shipped to Penang to be delivered there to order or assigns under bills of lading which contained the condition that "in all cases and under all circumstances the liability of the company shall absolutely cease when the goods are free of the ship's tackle, and thereupon the goods shall be at the risk for all purposes and in every respect of the shipper or consignee."  The landing agents appointed by the defendants fraudulently delivered the goods to persons other than the consignees.  It was held that although there had been no delivery under the bill of lading, the above clause was operative and effectual to protect the shipowners.

In the present appeal, the exemption clause was a complete answer to the respondent's claim and the court below should have dismissed the respondents' claim.  Another point which was raised by the appellants' learned counsel was that the claim was statute-barred under Article III,

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  1. 6 of the Hague Rules. As already pointed out in this judgment, the Hague Rules did not apply to this case.  The limitation placed on actions by Article III, r. 6 can affect only claims governed by the Hague Rules. The court below held for other reasons that the claim was not statute-barred on the basis that the Hague Rules applied to the case.  But if it is conceded that the claim was not governed by the Hague Rules because the cause of action arose after discharge of the goods, then the limitation of one year imposed by Article III, r. 6 is inapplicable.

In brief, we hold:

(1) That the claim was not governed by the Hague Rules as the cause of action arose after the goods had been discharged from the ship.

(2) The exemption clause in the bill of lading is not void because it does not relieve or exempt the appellants from any of the duties or obligations imposed by the Hague Rules.

(3) The clause which exempts the appellants from liability for loss of the goods while in their custody after discharge is binding on the respondents and therefore the appellants are not liable to the respondents.

(4) The action was not barred by Article III, r. 6 of the Hague Rules because they did not apply to the claim.

(5) The appeal is therefore allowed.

Finally, we wish to express our sympathy with the learned trial judge in the court below in the predicament in which he found himself in his attempt to evaluate the provisions of the Hague Rules.  The Hague Rules have been adopted in this country and have been incorporated in the Bills of Lading Act, 1961 (Act 42).  Actions involving the application of the Hague Rules are very rare and cannot be found in our available law reports.  Indeed, a trial judge who is confronted with an isolated case with no local previous decisions to guide him is bound to find himself in a maze.

JUDGMENT OF APALOO J. A.      I concur.

JUDGMENT OF SOWAH J.A.         I also agree.

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