Adamastos Shipping Co. Ltd. Appellants;
v.
Anglo-Saxon Petroleum Co. Ltd. Respondents.
House of Lords
HL
Viscount Simonds , Lord Morton of Henryton , Lord Reid , LordKeith of Avonholm and Lord Somervell of Harrow.
1958 Feb. 3, 4, 5, 6, 10; Mar. 6.
A tanker was chartered by an oil company, under a charter expressed to remain in force for as many consecutive voyages as the vessel could tender for loading within a period of 18 months, to carry cargoes of oil all over the world at specified rates of freight per ton per voyage or a return cargo of fresh water at a lump sum. Clause 1 of the charterparty provided that the vessel "being tight, staunch and strong and every way fitted for the voyage, and to be maintained in such condition during the voyage, perils of the sea excepted, shall with all convenient despatch sail and proceed to" a nominated port and there load a cargo of oil. The following clause was incorporated in the charterparty by a typed slip: "Paramount clause. This bill of lading shall have effect subject to the Carriage of Goods by Sea Act of the United States ... 1936 , which shall be deemed to be incorporated herein, and nothing herein contained shall be deemed a surrender by the carrier of any of its rights or immunities or an increase of any of its responsibilities or liabilities under said Act. If any term of this bill of lading be repugnant to said Act to any extent, such term shall be void to that extent, but no further. " The owners, exercising due diligence, selected and appointed an engineroom staff, but that staff proved incompetent, and by reason of their incompetence (amounting to unseaworthiness) the vessel broke down on the first voyage to her loading port, and other similar incidents followed, with the result that the charterers lost the services of the vessel during 106 days. Invoking the United States Act, the owners claimed that their obligations as to seaworthiness were limited to the exercise of due diligence, as therein provided:-
Held that, on the true construction of the charterparty, the United States Act affected the rights and liabilities of the parties under the contract, despite the use of the words "This bill of lading ..." on the typed slip, which words, in accordance with the common meaning and intention of the parties, should be read as if they were "This charterparty ..."; and that the words in section 5 of the Act "The provisions of the Act shall not be applicable to charterparties" must be rejected as being meaningless.
Held further (Lord Morton of Henryton and Lord Reid dissenting) that, notwithstanding the limitations to the applicability of the Act, its material provisions affected the rights and liabilities of the parties in connection with (a) non-cargo carrying voyages as well as cargo carrying voyages, and (b) voyages other than those to and from United States ports, as well as such voyages.
The words "loss or damage" in section 4 of the Act, relating
135to the immunity of the carrier, refer not only to physical loss or damage to goods but also covered the charterers' loss in only being able to complete fewer voyages than they would otherwise have done.
G. H. Renton & Co. Ltd. v. Palmyra Trading Corporation of Panama. The Caspiana [1957] A.C. 149; [1957] 2 W.L.R. 45; [1956] 3 All E.R. 957 ; Joseph Constantine Steamship Line Ltd. v. Imperial Smelting Corporation Ltd. [1942] A.C. 154; 57 T.L.R. 485; [1941] 2 All E.R. 165 , and Petrofina S.A. of Brussels v. Compagnia Italiana Trasporto Olii Minerali of Genoa (1937) 53 T.L.R. 650 considered.
Decision of the Court of Appeal [1957] 2 Q.B. 233; [1957] 2 W.L.R. 968; [1957] 2 All E.R. 311 reversed.
APPEAL from the Court of Appeal (Denning, Parker and Sellers L.JJ.).
This was an appeal from an order of the Court of Appeal dated April 16, 1957, dismissing an appeal by the appellants, Adamastos Shipping Co. Ltd., and allowing a crossappeal by the respondents, Anglo-Saxon Petroleum Co. Ltd., from an order of Devlin J. dated February 14, 1956. The matter came before Devlin J. on an interim award confined to the issue of liability for damages for breach of contract stated in the form of a special case under sections 14 and 21 (1) of the Arbitration Act, 1950 , by John Megaw Q.C., who had been appointed, by agreement between the parties, umpire under an arbitration clause in a charterparty, between the appellants as disponent owners and the respondents as time charterers, dated May 25, 1950. By his order Devlin J. upheld the interim award of the umpire in favour of the charterers and answered certain questions of law in favour of the owners and one question of law in favour of the charterers. The Court of Appeal similarly upheld the interim award of the umpire, but dealt with the questions of law arising thereunder differently from Devlin J. and, in particular, held that the Carriage of Goods by Sea Act, 1936, of the United States of America,1 had no application to the charterparty.
The facts, stated by Viscount Simonds, were as follows: By the charterparty the charterers agreed to charter the vessel, the Saxon Star (formerly the Delaware Sun), from the owners. The
document was headed "Tank Vessel Voyage Charterparty," and in its original printed form contemplated performance thereunder of a single voyage. By clause 1 it was provided that the vessel "being tight, staunch and strong, and every way fitted for the voyage, and to be maintained in such condition during the voyage, perils of the sea excepted," should, with all convenient dispatch, sail and proceed to one of a number of named ports to load a full and complete cargo of petroleum pro-ducts as therein provided and that, being so loaded, she should proceed to one of two discharging ran-ges. There were, however, attached to the document a number of typewritten clauses (clauses 24 to 52) which were expressed as "deemed incorpora-ted in this charterparty" and made specific provision for loading and discharge otherwise than as permitted by clause 1. By clause 43 it was provided that the charterparty was to remain in force for as many consecutive voyages as the vessel could tender for loading within a period of about 12 months from the date of her readiness to load on the first voyage. By an addendum of May 26, 1950, this period was extended for a further six months, making in all about 18 months. By clause 44 it was provided that the charterers were to have the option of performing any other voyage at their discretion within the limits of the Institute Warranties Clause of April 15, 1941. Thus the contract was of practically world-wide scope and covered a substantial period of time.
Clause 52 was as follows: "It is agreed that the Chamber of Shipping War Risks Clauses, dated April, 1937, New Jason Clause, Paramount Clause, and Both to Blame Collision Clause, as attached, are to be incorporated in this charterparty."
The paramount clause on a typed slip was, like the other clauses named, physically attached to the charterparty and was in these terms: "Paramount clause. This bill of lading shall have effect subject to the provisions of the Carriage of Goods by Sea Act of the United States , approved April 16, 1936, which shall be deemed to be incorporated herein, and nothing herein contained shall be deemed a surrender by the carrier of any of its rights or immunities or an increase of any of its responsibilities or liabilities under said Act. If any term of this bill of lading be repugnant to said Act to any extent, such term shall be void to that extent, but no further."
The facts as to the voyaand repair at Baltimore. Officers and crew to man her were engaged at New York by the owners, and on July 27, 1950, she sailed in ballast for Curacao, there to load her first cargo under the charterparty. This was the only "non-cargo carrying " voyage with which the House was concerned. While the vessel was on passage to Curacao her machinery was seriously damaged. She was taken in tow to San Juan, where repairs were carried out. She then resumed her voyage to Curacao. Having there loaded a cargo of oil for carriage to Buenos Aires, she sailed on August 19, 1950, but on her passage her boilers began to leak. She therefore put in to Recife (Brazil) for repairs, and on completion of the repairs (which remedied the defects then existing in her machinery) resumed her voyage to Buenos Aires, where she duly arrived and discharged her cargo. On October 5 she sailed from Buenos Aires, picked up a cargo of fresh water from the river as ordered by the charterers, and having bunkered at Monte Video, proceeded again to Curaçao. On her passage there, there was continuous trouble with her machinery, and on her arrival repairs were carried out to enable her to go to the United States for much more extensive repairs. On November 30 she left Curaçao, having loaded a further cargo of oil for discharge at Bayonne in New Jersey. Having discharged it she proceeded to Hoboken, also in New Jersey, where repairs were carried out and completed on February 9, 1951. On the next day she left Hoboken and in accordance with the charterers' orders proceeded to Aruba, where she again loaded. Nothing remained to be told of the remainder of the period covered by the charterparty. The findings of the umpire on the questions of the seaworthiness of the vessel at different times and the diligence exercised by the owners, comprising only one finding that they had not exercised due diligence, were as follows: "(1) On the vessel's departure from Baltimore on July 27, 1950, although she was seaworthy as re-gards her machinery, she was not seaworthy in that the engine-room staff were incompetent; but due diligence had been exercised by the owners in the selection and appointment of the engine-room staff. "(2) The damage to the machinery which was caused between Baltimore and San Juan was caused by the incompetence of the engine-room staff, which resulted in a series of negligent acts and omissions. "(3) On the vessel's departure from Curacao on August 19, 1950, the vessel was not seaworthy in respect of her machinery ge, found by the umpire, were these: During June and July, 1950, the vessel underwent special survey
and repair at Baltimore. Officers and crew to man her were engaged at New York by the owners, and on July 27, 1950, she sailed in ballast for Curacao, there to load her first cargo under the charterparty. This was the only "non-cargo carrying " voyage with which the House was concerned. While the vessel was on passage to Curacao her machinery was seriously damaged. She was taken in tow to San Juan, where repairs were carried out. She then resumed her voyage to Curacao. Having there loaded a cargo of oil for carriage to Buenos Aires, she sailed on August 19, 1950, but on her passage her boilers began to leak. She therefore put in to Recife (Brazil) for repairs, and on completion of the repairs (which remedied the defects then existing in her machinery) resumed her voyage to Buenos Aires, where she duly arrived and discharged her cargo. On October 5 she sailed from Buenos Aires, picked up a cargo of fresh water from the river as ordered by the charterers, and having bunkered at Monte Video, proceeded again to Curaçao. On her passage there, there was continuous trouble with her machinery, and on her arrival repairs were carried out to enable her to go to the United States for much more extensive repairs. On November 30 she left Curaçao, having loaded a further cargo of oil for discharge at Bayonne in New Jersey. Having discharged it she proceeded to Hoboken, also in New Jersey, where repairs were carried out and completed on February 9, 1951. On the next day she left Hoboken and in accordance with the charterers' orders proceeded to Aruba, where she again loaded. Nothing remained to be told of the remainder of the period covered by the charterparty.
The findings of the umpire on the questions of the seaworthiness of the vessel at different times and the diligence exercised by the owners, comprising only one finding that they had not exercised due diligence, were as follows:
"(1) On the vessel's departure from Baltimore on July 27, 1950, although she was seaworthy as regards her machinery, she was not seaworthy in that the engine-room staff were incompetent; but due diligence had been exercised by the owners in the selection and appointment of the engine-room staff.
"(2) The damage to the machinery which was caused between Baltimore and San Juan was caused by the incompetence of the engine-room staff, which resulted in a series of negligent acts and omissions.
"(3) On the vessel's departure from Curacao on August 19, 1950, the vessel was not seaworthy in respect of her machinery
and due diligence had not been exercised to make her seaworthy. The vessel, further, was not seaworthy in that the engine-room staff were incompetent; but due diligence had been exercised by the owners in that respect; and in that respect, though not in respect of her machinery, reasonable and proper steps had been taken to put the vessel in a seaworthy condition.
"(4) The damage to the machinery which was found at Recife was caused by the unseaworthiness of the vessel at the start of the voyage from Curaçao, which unseaworthiness was, in its turn, cau-sed as is set out in (2) above, the defects thus caused not having been fully repaired at San Juan.
"(5) On the vessel's departure from Buenos Aires on October 5, 1950, she was seaworthy in respect of her machinery; but she was not seaworthy in that the engine-room staff were incompetent; but due diligence had been exercised by the owners in that respect, and all reasonable and proper steps had been taken to put the vessel in a seaworthy condition both as regards machinery and engine-room staff.
"(6) The damage to the machinery which occurred between Buenos Aires and Curaçao was caused by the incompetence of the engine-room staff, which resulted in a series of negligent acts and omissions."
In paragraph 56 the umpire stated the question of law for the decision of the court in the following terms, save in so far as the opening words were subsequently varied by agreement, by inserting the words in italics: "The question of law for the decision of the court is: Whether upon the facts as found and upon the true construction of the char-terparty the owners are in breach of the charterparty and in so far as they are in breach are not protected from loss or damage of the kind claimed resulting therefrom: (1) In that the Saxon Star was not sea-worthy when she sailed from Baltimore on July 27, 1950; (2) In that the breakdown of the machinery of the vessel between Baltimore and San Juan was caused by the negligent acts or omissions of the engine-room staff; (3) In that the vessel was not maintained in seaworthy condition during the voy-age from Baltimore to Curaçao; (4) In that the vessel was not seaworthy when she sailed from Curaçao on August 19, 1950; (5) In that the vessel was not maintained in seaworthy condition during the voyage from Curaçao to Recife; (6) In that the breakdown of the machinery of the vessel between Curaçao and Recife was caused by the prior negli-gent acts or omissions of the engine-room staff; (7) In
140that the vessel was not seaworthy when she sailed from Buenos Aires on October 5, 1950; (8) In that the breakdowns of the machinery of the vessel between Buenos Aires and Curaçao (save only the breakdowns of the windlass) were caused by the negligent acts or omissions of the engine-room staff; (9) In that the vessel was not maintained in seaworthy condition during the voyage from Buenos Aires to Curaçao; (10) In that the owners failed to ensure that the vessel performed her service under the charterparty with all convenient despatch; or (11) On any other ground?"
Devlin J. declined to deal with these matters but answered the following questions of law subse-quently agreed by the parties and assented to by him: "(1) Whether the United States Carriage of Goods by Sea Act (hereinafter called 'the Act') affects the rights and liabilities of the parties under the charterparty. (2) If the answer to (1) is 'Yes,' whether under the charterparty any material provi-sions of the Act affect the rights and liabilities of the parties in connection with (a) non-carrying voyages, (b) cargo-carrying voyages other than those to or from ports in the United States of Ame-rica. (3) Do the words 'loss or damage' in section 4 (1) and/or section 4 (2) of the Act relate only to physical loss or damage to the goods?"
Devlin J. answered the questions as follows: (1) Yes. (2) (a) No. (2) (b) Yes. (3) No.
The Court of Appeal dismissed the appeal of the owners and allowed the cross-appeal of the charte-rers and answered each of the questions of law stated by the umpire in the affirmative. They held that the United States Act was inapplicable.
Ashton Roskill Q.C., T. G. Roche Q.C. and Basil Eckersley for the appellant company (the shipowners). The cardinal issue relates to the standard of the shipowners' responsibilities and immunities under the charterparty and the adden-dum. It is clear from the terms of the document itself that the charterparty contemplates a series of different voyages. It is admitted that the conse-quence of the application of section 3 (1) of the United States Act, including the words "at the beginning of the voyage," is that the shipowners were obliged to use due diligence to provide a seaworthy ship, not only at the start of the first voyage, but at the start of each voyage under the charterparty. Unless there is want of due diligence they are not responsible, nor are they responsible for the negligence of their servants in the ship's management. The rights, immunities
141and obligations contracted for are those imposed by the Hague Rules, whereas the respondent charterers contend that the appellants are under an absolute obligation to provide a seaworthy ship for each voyage under the charterparty and under a continuing obligation to maintain it at all times in a seaworthy condition. That turns on the meaning of the "paramount clause" which is expressly included in the charterparty. The appellants contend and the respondents deny that the Carriage of Goods by Sea Act, 1936, of the United States is incorporated in the charterparty.
The charterparty in its original printed form contemplates a single voyage, but the typed additions cover a wide variety of separate voyages within the limits of the Institute Warranties Clause. There were provisions for loading and discharge otherwi-se than as permitted by clause 1. The additional typed clauses (clauses 24 to 52) are specifically expressed to be incorporated in the charterparty. Clause 52 identifies the attached clauses and provides that they "are to be incorporated in this charter-party." The attached clauses and in particular the "paramount clause" are physically attached to the charterparty.
The United States Act applies the Hague Rules, which were the product of the Brussels Convention of 1923 , the scheme of which was that the various contracting States should apply the Rules by municipal legislation. Those States which have done so are enumerated in Scrutton on Charterparties, 16th ed., pp. 564-566. The Rules define the responsibilities of shipowners under bills of lading. It is a common practice to incorporate the Hague Rules into charterparties, so as to give them cnntractual as well as statutory force. One method of doing this has been to incorporate in the charterparty the United States "paramount clause." Not all "paramount clauses" are in precisely the same form. The House is not here concerned with statutory national limitations but with the provisions of this contract.
The parties intended (1) that the contract should have effect subject to the provisions of the Act which was to be deemed to be incorporated in the contract; (2) that nothing in the contract was to be deemed a surrender by the shipowners of any of their rights and immunities or an increase of their responsibilities or liabilities under the Act; (3) that in the event of any repugnancy between the terms of the contract and of the Act, the terms of the Act should prevail. What Devlin J. said2as to the attitude of the court to the intentions of the parties is right.
The following considerations are submitted: (1) It is a common business practice to introduce the Hague Rules contractually into a charterparty. (2) It is a common business practice to incorporate the United States "paramount clause" in a charterparty. (3) This practice was recognised in Scrutton on Charterparties, 16th ed., p. 464, and in the two previous editions and also in the present case by Devlin J.3 and by Denning L.J. in the Court of Appeal.4 (4) The "paramount clause" itself emphasises "rights," "immunities," "responsibilities" and "liabilities," the very words used in the introductions to sections 3 and 4 of the United States Act. This is a signpost to the intention of the parties. (5) The Oxford English Dictionary defines "paramount" as "superior to all others, in influence, power, position or importance; pre-eminent." The parties in their contract call this a "paramount clause." See also section 3 (8) and section 13 of the United States Act. (6) As to the steps which the parties took to incorporate this typed clause into the charterparty, note its physical attachment and see clause 52. See also Stafford Allen & Sons Ltd. v. Pacific Steam Navigation Co.5 (7) There is plenty of warning in the authorities against being astute to find fault with the way in which business men prepare their documents. There may be conflict between the mental approach of the lawyer and that of the busi-ness man: see Hillas & Co. Ltd. v. Arcos Ltd.,6 which indicates the well-recognised way of construing business documents. (8) The incorporation in one document of something out of another is a common way of composing business documents: see per Devlin J.7 Business documents often start life in a common form applicable to a wide variety of transactions, the general and absolute provisions of those docu-ments being thereafter cut down by special stipulations which the parties make for the purpose of their particular adventure. This was a form for a single voyage and it imposed absolute obligations in clause 1 which were cut down by the incorpora-tion of the paramount clause. The intention of the parties was ascertainable. Devlin J. was right and the Court of Appeal were wrong.
When Parker L.J. said8 that in all cases which have come before the courts the parties have identified the provisions of the Hague Rules which they intended to apply, he overlooked the
terms of the charterparty in Imperial Smelting Corporation Ltd. v. Joseph Constantine Steamship Line Ltd. 9 . The fact that the "paramount clause" refers to "this bill of lading" presents no difficulty. The parties used slapdash language but it was perhaps no worse than other business language which has come before the courts. The effect of the clause is that this document is to be subject to the Act; the provisions of the Act are to be incorporated in this document; the document is this charterparty. The words "this bill of lading" should be read as "this charterparty." Note the words "incorporated herein" in the paramount clause: see Cowen v. Truefitt Ltd.10 in connection with the doctrine of falsa demonstratio non nocet, which should be applied here because the intentions of the parties are sufficiently ascertainable. As to the incorporation of terms in a charterparty, see Hamilton & Co. v. Mackie & Sons,11 which was approved in T. W. Thomas & Co. Ltd. v. Portsea Steamship Co. Ltd.12 Here, admittedly, something must be left out. It should be what Devlin J. left out: see Golodetz v. Kersten, Hunik & Co.13 and Tudor Accumulator Co. Ltd. v. Oceanic Steam Navigation Co. Ltd.14 These two cases are not inconsistent because the clauses are different. The latter case does not conflict with the former, which materially assists the appellants. Serraino & Sons v. Campbell15 is useful, not for its facts, but for its approach. One necessarily reaches the conclusion that here the rights and obligations are governed by the pro-visions of the Act. The obligations arose at the start of each successive voyage under the charterparty. What must be struck out is the provision that it does not apply to charterparties ( section 5) and also the provision that it applies to contracts of carriage to or from United States ports ( section 13 ). See also the preamble to the Act. It is inconceivable that two commercial concerns should contract that the shipowners should be liable in damages to the extent of perhaps £100,000 (approximately the amount here claimed) in respect of the unseaworthiness of their ship, no matter how much care they took. The paramount clause is paramount; it is not an exception upon an exception.
Nelson Line (Liverpool) Ltd. v. James Nelson & Sons Ltd.16 is very different from the present case. [Petrofina S.A. of Brussels v. Compagnia Italiana Trasporto Olii Minerali of Genoa17 was referred to.]
Devlin J. correctly stated the provisions of the United States Act which must be disregarded.18
It follows that by reason of the terms of the clause paramount the absolute obligation of maintenance in clause 1 of the charterparty must go. It involved a continuing and absolute obligation to maintain the ship seaworthy at all times and involved depri-ving the shipowners of their rights and immunities under the Hague Rules and an assumption of liabi-lities beyond those Rules.
As to the decision of Devlin J. that the United States Act did not affect the rights and liabilities of the parties in connection with non-cargo carrying voyages, he was wrong in putting too limited a construction on the Hague Rules and made an erro-neous approach to the problem. Devlin J. appears to have been impressed by the fact that voyage charterparties often contain cesser clauses. This is true but, it is submitted, is irrelevant and affords no useful guide.
In the circumstances of this case the meaning of "loss or damage" in section 4 of the United States Act only arises indirectly. Devlin J. conside-red that the words had a wider meaning than physi-cal loss or damage, and the Court of Appeal did not decide otherwise. Accordingly, the onus in this House is on the respondents.
Sections 3 and 4 are perfectly clear and stand on their own legs.
The shipowners' obligation was to use due diligen-ce at the start of each voyage to make the ship seaworthy and man her properly. That they did, and so they are protected. Further, there is no justifica-tion for limiting the ambit of the Hague Rules, and the shipowners are protected against liability for the loss or damage which occurred here. They are under no obligation to maintain the ship seaworthy at all times.
Alternatively, the express obligation of clause 1 stands together with the incorporation of the Hague Rules so as to limit it in the ordinary meaning of the words to the physical condition of the ship. The obligation as to manning could be displaced by showing due diligence under the Hague Rules.
The shipowners' main proposition is that, despite the wording of the paramount clause, no part of the United States Act should be incorporated in the charterparty except sections 3 and 4, which are applicable to charterparties. These provisions should be read in their new contractual context without any regard to their limited extent in their original statutory context. Thus they apply to voyages besides those to or from the United States and also to voyages where no cargo is carried.
A. A. Mocatta Q.C. and S. O. Olson for the respondent company (the charterers). The right approach to this case is that expressed by Denning L.J. in the Court of Appeal19
To the extent that the United States Act does apply, it is no protection to the shipowners, in view of the umpire's findings of fact. The court will not, under the guise of construction, make a contract for the parties, and here the contract made means nothing at all. It is for the shipowners to bring themselves within the exception, and, if they do not, they are liable at common law. The principle that the court will not make a contract for the parties is exemplified in cases where the question is whether the words used make a contract at all or whether, the parties being ad idem, the words used make any sense: see Hillas & Co. Ltd. v. Arcos Ltd.20 and G. Scammell & Nephew Ltd. v. Ouston.21 Denning L.J. had that sort of thing in mind in what he said in the present case.22 These cases illustrate the principle to be applied when the question is: Was there a contract at all? As to the principle to be applied in the case of an exceptions clause, see Nicolene Ltd. v. Simmonds.23 If there are two or three or more possible meanings of a clause but one of them can on construction be said to be the right one, the clause is not meaningless or ambiguous. But if between two meanings the arguments are evenly balanced, the clause is void for uncertainty. The court will not struggle hard to give a meaning to a doubtfully expressed exceptions clause. Nelson Line (Liverpool) Ltd. v. James Nelson & Sons Ltd.24 illustrates this principle. It also shows that clear words are required to excuse shipowners from liability for a breach of warranty of seaworthiness or for negligence. In that case there was undoubted-ly a contract, but the words on which the shipow-ners sought to rely
were meaningless: see also Elderslie Steamship Co. Ltd. v. Borthwick,25 per the Earl of Halsbury L.C. and Lord Macnaghten.
Here the words of clause 1 of the charterparty are clear and the paramount clause does not provide the shipowners with a clear protection against their liability. The United States Act can only apply to the charterparty as a matter of contract if the terms of the charterparty lead to that conclusion. Otherwise the Act applies only to bills of lading and to voyages to or from the United States. Having regard to the purpose and design of the Act, it is hard to make it apply to charterparties. Thus the problem of maintenance is not provided for by the Act because it does not envisage a set of circumstances in which it arises.
The shipowners claim that the paramount clause is incorporated in the charterparty, but in order to do so they must invoke the doctrine falsa demonstratio non nocet to alter the language of the document. This is not permissible here. The paramount clause does not have the effect of making the charterparty subject to the United States Act. It does not say so, for it refers to a bill of lading, and the appellants, in order to succeed, must change the express language of the document. It would have been easy to make the charterparty subject to whatever it was that the parties wished it to be subject to. There is no reported case where the Hague Rules have been applied to a consecutive voyage charterparty or to a time charter, to which there are insuperable difficulties. As to the incorporation of the Hague Rules legislation in a charterparty, see Leeds Shipping Co. Ltd. v. Duncan Fox & Co. Ltd,26 Joseph Constantine Steamship Line Ltd. v. Imperial Smelting Corporation Ltd.27 and Minister of Food v. Reardon Smith Line Ltd.28 With these examples before it, the court should not go out of its way to amend the documents in the present case. There is nothing to show that it is a common and recognised practice to incorporate the Hague Rules in longterm consecutive voyage charterparties. In the forms of charter issued by the Chamber of Shipping there is only one at all comparable to this one. There is no common and recognised practice in incorporating the Hague Rules legislation. For the most part, specific clauses of it are picked out. The difference between a single voyage charter and a consecutive voyage charter is vital, since, if one seeks to apply the United States Act to the latter, one must decide whether the exercise
of due diligence must be an exercise once and for all or must be an exercise as many times as there are voyages. The Act makes no provision for the maintenance of the ship over a long period or for due dispatch in the performance of the contract. One may ask: if, after the completion of the second or the fourth cargo-carrying voyage, there is a sur-vey, what is the position under a consecutive voyage charter? The origin of the paramount clause is in section 13 of the United States Act, which is similar to section 3 of the English Act, the Carriage of Goods by Sea Act, 1924 . It may be that the intention of the parties in the present case was that any bills of lading under the charter were to incorporate the United States Act. One cannot be satisfied that their intention was that the clause should apply to the charterparty. If one assumes it, one gets into grave difficulties, since what is actually said is "this bill of lading." If those words are read as meaning "this charterparty," that involves incorporating into it the whole of the United States Act, since the paramount clause goes on to say that "nothing herein contained shall be deemed a surrender by the carrier of any of its rights or immunities or an increase of any of its responsibilities or liabilities under said Act." It does not refer to an amended or expurgated Act, but to the whole Act. But nothing in the Act affects the rights of anyone under a charterparty. One would have to alter the references to "the said Act." For the principles applicable, see Hamilton & Co. v. Mackie & Sons29 and Serraino & Sons v. Campbell.30 T. W. Thomas & Co. Ltd. v. Portsea Steamship Co. Ltd.31 does not differ from these principles. Golodetz v. Kersten, Hunik & Co.32 does not help, because it was a bill of lading case and the present difficulties did not arise there.
Even if the United States Act applies, its exempting provisions do not apply to non-cargo carrying voyages, and the whole of the loss or damage here claimed flowed from the initial unseaworthiness on such a voyage. Nor do they apply to voyages other than those to or from United States ports. The terms of the paramount clause state: "If any term of this bill of lading be repugnant to said Act to any extent, such term shall be void to that extent." On this point see what was said by Devlin J. at the trial.33 See also Scrutton on Charterparties, 16th ed., pp. 468, 492-493.
148The words of section 4 of the United States Act should be limited to physical loss or damage: see Joseph Constantine Steamship Line Ltd. v. Imperial Smelting Corporation Ltd.34
If the Act applies to this charterparty, then, contrary to the view of Devlin J.,35 there is no justification for striking out any part of the Act. This is dealt with in the Court of Appeal.36 The shipowners have not specified what words they want cut out. It is to be noted that many of the same functions are carried out under a charterparty as under a bill of lading.
There is here a finding in favour of the charterers that the shipowners' servants were negligent. If the shipowners are right in saying that section 4 (2) covers them, they are completely exempt, but if it does not apply, they have no protection at all. If it had not been for the events complained of, the charterers would have got in three more voyages. They must succeed to the extent that they can establish that they have suffered the damage alleged through negligence for which the shipowners are not excused by the Act.
As to the claim for damages, the pleadings in Joseph Constantine Steamship Line Ltd. v. Imperial Smelting Corporation Ltd.37 may be found in the printed record of the appeal to the House of Lords and indicate that the claim was almost identical with the one in the present case. See also G. H. Renton & Co. Ltd. v. Palmyra Trading Corporation of Panama38 and Goulandris Brothers Ltd. v. B. Goldman & Sons Ltd.39
If the facts establish that the admitted incompetence of the engine room staff was the cause of all that happened subsequently, the shipowners are not protected by the Act in respect of the time lost unless they can establish that the Act applied to the ballast voyage, even though it may have some application to the charterparty. The findings of fact are sufficient for the charterers: see The Christel Vinnen.40 If the dominant cause of the damage was as alleged, the subsequent exercise of due care does not protect the shipowners.
Ashton Roskill Q.C. in reply. If the shipowners are right, they are under no obligations as to maintenance.
The shipowners do not resile from their opening submissions
or add to the arguments in support of the submission that the words "bill of lading" in the paramount clause must be read as "charterparty." The charterers' argument that the intention was that the clause should apply to bills of lading issued under the charterparty is a lawyers' point divorced from what could have been the intention of the charterers. It is unreal from a commercial point of view in a commercial contract. The intention of the parties must have been (1) to incorporate in the contract the standard of rights and liabilities set out in the Act; (2) to provide that those rights and liabilities should be paramount; (3) that nothing in the contract was to be deemed a surrender of those rights or an increase of those liabilities, and (4) that any term in the contract repugnant to that standard should be void.
The charterers sought to suggest that there were insuperable difficulties in applying that intention to a consecutive voyage charterparty, but there is nothing esoteric about a consecutive voyage charterparty. As a business transaction one contract for 10 voyages is no different from 10 contracts, each for one voyage, but it is simpler to negotiate. Before the war it was not as frequent as since, but for many years consecutive voyage charterparties have been greatly favoured. One would expect the absolute liability to be qualified to one of due diligence because of the length of time of the contractual nexus. An absolute liability would be an intolerable burden throughout the period of a contract covering 10 or more voyages.
As to the provision in clause 1 for "all convenient dispatch," if the shipowners are prevented from performing the contract notwithstanding "due diligence" on their part, they are not liable (section 4 of the United States Act). The incorporation of some terms of the Act into charterparties is a recognised practice, as Devlin J. indicated.41 The contention for which the charterers contend produces an astounding result and should be rejected in construing a commercial contract. It is commercially unreasonable to suppose that the parties ever intended the paramount clause to apply only in the limited circumstances suggested by the charterers; and they suggest no commercial reason for it.
It is unreal and uncommercial to suggest that the obligations were meant to be confined to voyages to and from United States ports. It would be an absurd provision to incorporate in the charterparty: per Denning L.J. in the Court of Appeal.42
The whole of sections 3 and 4 of the United States Act must be incorporated in the charterparty, because what the parties intended to incorporate in the contract was the standard of obligations provided by the Act. Commercial men are often slapdash and the courts construe their contracts with an eye to the intention of the parties. The intention is deduced from the words used and from the surrounding circumstances. This contract can be read as wide enough tn cover any voyages, because section 13 of the United States Act does not say in terms that it is confined to voyages to and from the United States.
As to the charterers' point on non-cargo carrying voyages, the only one being the preliminary voyage, their contention produces capricious and unreal results. It would be odd if greater care were required when the shipowners were not bailees than when they were, and if they were under increased obligations when they were earning no freight at all. The precise ambit of the statutory operation of the Hague Rules is still open to debate. See Pyrene Co. Ltd. v. Scindia Navigation Co. Ltd.43 as to their application. As to the position where there is a charter "to proceed to a port and there load, " see Scrutton on Charterparties, 13th ed., pp. 123-124; 16th ed., pp. 124-125, Bruce v. Nicolopulo44 and Barker v. M'Andrew.45
As to Joseph Constantine Steamship Line Ltd. v. Imperial Smelting Corporation Ltd.,46 cited by the charterers, this case is made clearer by another report47 which gives the actual words of the charterparty.
As to the charterers' point that "loss or damage" in section 4 of the Act is confined to physical loss or damage, the short answer is that the words of the section do not say so Little help on this problem is derived from G. H. Renton & Co. Ltd. v. Palmyra Trading Corporation of Panama48 or Goulandris Brothers Ltd. v. B. Goldman & Sons Ltd.,49 which are neither for nor against either of the parties here and can therefore be dis-regarded.
The observations of Atkinson J. and Lord Maugham in Joseph Constantine Steamship Line Ltd. v. Imperial Smelting Corporation Ltd.50 were obiter dicta and were wrong. No reasons for
them were given. See Scrutton on Charterparties, 16th ed., p. 484, and what Devlin J. said in this case.51
This case is distinguishable from The Christel Vinnen.52
As to striking out words which produce a com-mercially capricious result, see G. H. Renton & Co. Ltd. v. Palmyra Trading Corporation of Panama 53 and Glynn v. Margetson & Co.,54 per Lord Halsbury.
Petrofina S.A. of Brussels v. Compagnia Italiana Trasporto Olii Minerali of Genoa55 and Nelson Line (Liverpool) Ltd. v. James Nelson & Sons Ltd.56 are different from the present case because here the owners accept the obligation of establishing that they exercised due care.
A. A. Mocatta Q.C. In Glynn v. Margetson & Co.57 the ratio decidendi was that the main object of the bill of lading was to carry oranges from Spain to England, and on construction it was held that this must not be interfered with by the liberty clause. But the main object of the contract here was to carry oil from one part of the world to another. There was a difference of approach between Lord Herschell58 and Lord Halsbury.
Their Lordships took time for consideration. March 6. VISCOUNT SIMONDS.
My Lords, the question in this appeal is whether and to what extent the appellants are, upon the facts found in an interim award stated in the form of a special case, in breach of a charterparty made on May 25, 1950, between the appellants as disponent owners and the respondents as charterers. I will refer to them in this opinion as "owners" and "charterers." The Court of Appeal has held them to be in breach in respect of all the matters raised in the special case, overruling the decision of Devlin J., who in effect held them to be in breach in respect of one matter only. The question would, I think, be stated more accurately by asking whether upon the true construction of the charterparty the owners are by reason of its provisions exempt from any liability in respect of their acts or omissions for which they might otherwise be liable.
[His Lordship read the relevant parts of the charterparty, including clause 52 and the paramount clause, and continued:]
This clause provides that the provisions of the Carriage of Goods by Sea Act of the United States "shall be deemed to be incorporated herein." "Herein" can only mean "in this contract." The contract must therefore be read as if the provisions of the Act were written out therein and thereby gained such contractual force as a proper construction of the document admits. Much of the Act is quite irrelevant, a fact which need not surprise us since it was passed to comply with the Brussels Convention . It dealt first and last with bills of lading, and by section 5 expressly enacted that its provisions should not be applicable to charterparties, but that if bills of lading were issued in the case of a ship under a charterparty they should comply with the terms of the Act.
I am reluctant to burden your Lordships with many of its provisions, but it has been strenuously urged that the persistent reference to bills of lading, carri-age of goods and so on limits the possibility of adapting the clauses to the contractual relation of owner and charterer under a charterparty. I will therefore set out some of the provisions, hoping that I omit nothing which is deemed of importance.
The Act enacts: "That every bill of lading, or similar document of title which is evidence of a contract for the carriage of goods by sea to or from ports of the United States in foreign trade, shall have effect subject to the provisions of this Act." Section 1 is a definition section, defining "carrier," "contract of carriage," "goods," "ship," and "carriage of goods."
Section 2 provides that (subject as therein mentioned) under every contract of carriage of goods by sea, the carrier in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the responsibilities and liabilities and entitled to the rights and immunities therein-after set forth.
Sections 3 and 4 (so far as material) are as follows:
"Responsibilities and Liabilities. Section 3 . (1) The carrier shall be bound, before and at the beginning of the voyage, to exercise due diligence to - (a) Make the ship seaworthy; (b) Properly man, equip, and supply the ship; (c) Make the holds, refrigerating and cooling chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage, and preservation." Rights and Immunities. Section 4 . (1) Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due
diligence on the part of the carrier to make the ship seaworthy, and to secure that the ship is properly manned, equipped, and supplied, and to 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 in accordance with the provisions of paragraph (1) of section 3 . Whenever loss or damage has resulted from unseaworthiness, the burden of proving the exercise of due diligence shall be on the carrier or other persons claiming exemption under this section. (2) Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from - (a) Act, neglect, or default of the master, mariner, pilot, or the ser-vants of the carrier in the navigation or in the ma-nagement of the ship; ..."
I can now conveniently state the questions of law which it fell to the learned judge to answer, not in the first place, indeed, as stated in the special case but as subsequently agreed by the parties and as-sented to by him. They were: (1) Whether the Uni-ted States Act (to which 1 have referred) affects the rights and liabilities of the parties under the char-terparty? (2) If the answer to (1) is Yes, whether under the charterparty any material provisions of the Act affect the rights and liabilities of the parties in connection with (a) non-cargo carrying voyages; (b) cargo carrying voyages other than those to or from ports in the U.S.A.? (3) Do the words "loss or damage" in section 4 (1) and/or section 4 (2) relate only to physical loss of or damage to the goods?
Upon the answers given to these questions depended the answers to the 10 questions set out in the special case. It will be clear to your Lordships, when I have briefly summarised the facts as found by the umpire, that the single issue is whether and how far the owners can escape liability to the char-terers by reason of findings in their favour that they exercised due diligence in respect of those acts or omissions which might otherwise have rendered them liable.
The relevant facts are briefly these. [His Lordship stated the facts and the umpire's findings and continued:] My Lords, I return to the questions of law which I have already set out.
Upon the first question a broadside attack was made upon the owners' claim to rely on the paramount clause. In the context of this charterparty, it was said, the clause is insensible and must be rejected. It opens with the words "This bill of lading," and it purports to incorporate the provisions of an Act of the United States which itself enacts that it shall not apply to charterparties.
It is therefore ex facie inapplicable to this charterparty. My Lords, I must confess that this is to me an attractive approach and I would willingly adopt it. For it is not agreeable to find a business transaction of some importance carried through in a manner which Devlin J., as I think, too indulgently described as "slapdash." But I do not think that I can do so. I can entertain no doubt that the parties, when they agreed by clause 52 of the charter that the "paramount clause ... as attached " should be incorporated in their agreement, and proceeded physically to attach the clause which I have set out, had a common meaning and intention which compels me to regard the opening words "This bill of lading," as a conspicuous example of the maxim "falsa demonstratio non nocet cum de corpore constat. " There can be no doubt what is the corpus. It is the charterparty to which the clause is attached. Nor, pursuing this main line of attack, can I be driven to a wholesale rejection of the clause because the Act, whose provisions are in turn deemed to be incorporated, itself enacts that its provisions shall not apply to charterparties. I cannot attribute to either party an intention to incorporate a provision which would nullify the total incorporation.
My Lords, I should have come to this conclusion without the aid of any external circumstance. But I am confirmed in it by the notorious fact, to which both the learned judge and the editors of the 16th edition of Scrutton on Charterparties refer, that the parties to a charterparty often wish to incorporate the Hague Rules in their agreement: and by that I do not mean, nor do they mean, that they wish to incorporate the ipsissima verba of those rules. They wish to import into the contractual relation between owners and charterers the same standard of obligation, liability, right and immunity as under the rules subsists between carrier and shipper: in other words, they agree to impose upon the owners, in regard, for instance, to the seaworthiness of the chartered vessel, an obligation to use due diligence in place of the absolute obligation which would otherwise lie upon them.
Here, then, my Lords, is the agreement that the parties have made, an original printed document with sundry erasures and typed additions, a complex of attached clauses and an Act of the United States of America whose provisions are deemed to be incorporated. How shall it be construed? The same sort of problem has arisen before, and I agree with Devlin J. that the procedure should be followed here which was laid down in
Hamilton & Co. v. Mackie & Sons,59 and approved in this House in T. W. Thomas & Co. Ltd. v. Portsea Steamship Co. Ltd. 60 The learned judge cited the material passage from the judgment of Lord Esher and I need not repeat it. It is obvious that there is much in the Act which in relation to this charterparty is insensible, or, as I would rather say, inapplicable, and must be disregarded. But in regard to the matters with which the questions now to be answered are concerned there has been acute controversy.
First, the Act, being an Act of the United States, is geographically confined to its own jurisdictional limits. "... every bill of lading or similar document of title which is evidence of a contract for the carriage of goods by sea to or from ports of the United States, in foreign trade, shall contain a statement that it shall have effect subject to the provisions of this Act." Therefore, it is said, let it be granted that the incorporation of the Act is not altogether insensible, and that the statutory standard of obligation is contractually imported into the charterparty. Yet why should it extend beyond the limits prescribed by the Act itself? Why should it apply to any other voyages than those to or from ports of the United States? I do not think that there is a clearer answer to this question than that given by the learned judge. The contract between the parties is of worldwi-de scope: the area of State jurisdiction is necessari-ly limited, and, because it is limited, the Act is given a restricted operation. No reason has been suggested, nor, as far as I am aware, could be sug-gested, why a similar restriction should be impor-ted into the contract. On the contrary, to do so would from the commercial point of view make nonsense of it. I find it easy, therefore, as did the learned judge, to construe this contract as making the substituted standard of obligation coterminous with the enterprise.
The second and perhaps more difficult question relates to the non-cargo carrying voyages. The learned judge, though he felt the weight of the argument to the contrary, decided that to such voy-ages the express warranty of seaworthiness in clause 1 of the charterparty must apply. It is with great diffidence that I come to the opposite conclusion.
I do not want to anticipate what will presently be said about the nature of the loss or damage in respect of which obligations and annuities are created by the Act. I will merely assume that
it is not confined to loss or damage to goods but extends also to the loss suffered by the charterers owing to the delay caused by unseaworthiness, the loss in fact alleged to have been suffered by the charterers in the present case. It is in this context that the question must be considered to what voyages the new immunity extends.
My Lords, it is, I think, permissible in a considera-tion of this commercial transaction to ask what possible difference it makes to the charterers whether the delay, to which their loss is due, occurs when the ship is in ballast or is loaded with a cargo of oil or of water. It matters not for this purpose whether the charterparty was for a single voyage, as the original document seemed to contemplate, or for a number of consecutive voyages. The contractual subjectmatter was the whole period during which the vessel was under charter, and it is, in my opinion, to this whole period that the parties agreed that the statutory standard of obligation and immu-nity should relate. I think that the learned judge might have come to the same conclusion but for the fact that he thought that it might lead to an unreasonable and unnecessary burden being placed upon the owner. For it appeared to him that it would or might impose upon him an obligation under section 3 (1) (c) of the incorporated Act to exercise due diligence to "Make the holds, refrigerating and cooling chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage, and preservation" even at a time when the vessel was leaving in ballast for her port of loading. I do not feel myself qualified, in the absence of any evidence, to say how serious a burden this would be. But I would, with great respect, doubt whether the obligation under section 3 (1) (c) arises until the vessel arrives at the port of loading, though it may be convenient substantially to perform it at an earlier stage. I do not, in any case, find in this consideration a sufficient counterweight to the fact that from a commercial point of view it is unlikely that owner and charterer will adopt a shifting standard of obligation between cargo carrying and non-cargo carrying voyages. It does not appear to me that the fact that voyage charterparties often contain a cesser clause offers a useful analogy.
Upon this part of the case it was further argued that non-cargo carrying voyages could not be brought within the scope of the diminished obligation because the Act is an Act dealing with the carriage of goods by sea under bills of lading, and in almost every section deals with obligations, liabilities, rights and immunities
in respect of goods so carried. Therefore, it was said, the incorporated provisions could have no application to a voyage in which no goods were carried. But this seems to me merely to restate the problem in other words. The question remains what is the meaning and effect of a commercial agreement which contemplates voyages with or without cargo and introduces by reference to the United States Act a qualified standard of obligation. I have already stated my opinion and would only add that I find it difficult upon a broad consideration of the case to make any distinction between non-cargo carrying voyages and voyages to or from other than United States ports. A narrow interpretation would exclude, a generous one include, both of them in the substituted standard of obligation.
I conclude, therefore, this part of the case by saying that here also the owners are entitled to succeed in their appeal.
I come now to the question of loss or damage. Owing to the delay caused by the unseaworthiness of the vessel she was able to complete fewer voya-ges than she otherwise would have done within the period of the charter. The charterers, therefore, claimed damages in a very large sum, the claim being for the difference between the charter and market rates of freight on cargo carrying voyages which might have been performed within the 18 months if she had been continuously fit for service. I have stated the claim in the words of the learned judge. The question is whether the words "loss or damage" in section 4 (1) or section 4 (2) of the Act relate only to physical loss of, or damage to, goods.
This is a short point upon which I can only adopt the reasoning and conclusion of the learned judge. It is perhaps sufficient to say that there is nothing in section 4 (1) or section 4 (2) which expressly limits loss or damage to physical loss or damage to the goods, and that section 2 does not constrain me to put a narrower meaning on the words. There is no authority to the contrary which is binding on your Lordships, and, though I naturally give great weight to anything that falls from Lord Maugham, his observation in Joseph Constan-tine Steamship Line Ltd. v. Imperial Smelting Corporation Ltd.61 was obiter and doubtfully relevant to the point now under conside-ration.
My Lords, this has not been an easy case to decide. Of that the difference of opinion in the courts be-low of learned judges well versed in this branch of the law is proof enough. Lord Bramwell, in a phra-se which the learned editors of Scrutton on
Charterparties, 16th ed., at p. 186, have done well to preserve, described a certain class of case as "cases where no principle of law is involved, but only the meaning of careless and slovenly documents." This is such a case. No doubt there are rules or canons of construction applicable to careless and slovenly, as to other, documents. I have tried to apply them, resolute, on the one hand, to construe commercial agreements broadly and not to be astute to find defects in them or reject them as meaningless and, on the other, not to make a contract for the parties which they have not thought fit to make for themselves. Nor have I forgotten that it is only by sufficiently clear words that an exception to an obligation (whether arising at common law or under the contract itself) can be established: see Glynn v. Margetson & Co.,62 Nelson Line (Liverpool) Ltd. v. James Nelson & Sons Ltd.,63 Hillas & Co. Ltd. v. Arcos Ltd.,64 Petrofina S.A. of Brussels v. Compagnia Italiana Trasporto Olii Minerali of Genoa,65 and Golodetz v. Kersten, Hunik & Co.,66 the last-named case being a particularly interesting example of the way in which the court will strive to give a sensible effect to a commercial document. These, no doubt, are the familiar principles applied by the Court of Appeal from whose conclusions I reluctantly differ. I think that the point of difference lies in this, that, looking at the documents as a whole and bearing in mind what the learned judge described67 as "a general practice, well known to those sitting and practising in this court," I have no difficulty in seeing the broad purpose and intent of the parties. I must reject, if I can, the unattractive argument urged by the charterers through their counsel that the agreement to which they put their hands meant nothing at all. It is true that at a certain stage it was suggested that the paramount clause was intended to refer to bills of lading issued under the charterparty, but this suggestion has been rightly rejected for the conclusive reasons given by Parker L.J. If it did not mean that but did mean something, what did it mean? I think the parties intended, as I have already said, to introduce as a term governing their relationship as owners and charterers the limited measure of responsibility prescribed by the American Act. This seems to me so plain that I should properly be regarded as unduly astute if I turned my eye away from it. If this initial step is taken, it does not seem to me difficult to make commercial sense
of the agreement, though I would not dissent from Parker L.J.'s description of it as a "jumble of provisions."
For the reasons that I have given I would answer the supplementary questions of law put to the learned judge as follows: (1) Yes. (2) (a) Yes. (2) (b) Yes. (3) No.
It follows, I think, that the question of law stated by the umpire in paragraph 56 of the special case, the opening words of which have been by agreement varied so as to run as follows: "Whether upon the facts as found and upon the true construction of the charterparty the owners are in breach of the charterparty, and in so far as they are in breach are not protected from loss or damage of the kind claimed resulting therefrom," should be answered as follows: (1) to (3) No. (5) to (9) No. The fourth head of the question relates to the period following the vessel's departure from Curacao on August 19 when (as it was found) she was not seaworthy in respect of her machinery and due diligence had not been exercised to make her seaworthy. The answer to (4) should therefore be Yes. The tenth head covers the voyage from Curacao on August 19. An unqualified negative cannot, therefore, be given. It must be qualified by the extent to which the failure in convenient dispatch was due to the admitted breach to which I have referred. The answer to (11) is No.
LORD MORTON OF HENRYTON.
My Lords, I have reached the same conclusion as the Court of Appeal, although I have reached that conclusion by a different line of reasoning. I find it convenient to refer to the appellants as "the ow-ners" and to the respondents as "the charterers."
On May 25, 1950, the charterers chartered a tanker belonging to the owners, by a voyage charterparty to remain in force for as many consecutive voyages as the vessel could perform within a period of 18 months. The first voyage began on July 27, 1950, when the vessel left Baltimore in ballast to load her first cargo at Curaçao. On the way there her machinery broke down and she had to be taken in tow to San Juan, where certain repairs were effected. O-ther similar incidents occurred at different stages of her service, and the result was that she lost in all 106 days. The charterers claimed damages which they estimated at over £80,000, the claim being for the difference between the charter and market rates of freight on cargo carrying voyages which might have been performed within the 18 months if the vessel had been continuously fit for service.
The claim went to arbitration, and the umpire has made a series of findings to the effect that the breakdown of the vessel's machinery was due to the incompetence of the engine-room staff, and that the vessel was unseaworthy at various stages of her voyages owing to such incompetence. He found, however, that due diligence had been exercised by the owners in the selection and appointment of their staff.
No question as to the amount of damages arises on this appeal, but it is clear that the owners are liable in damages to the charterers unless they are protected by clause 52 of the charterparty and a "paramount clause" which is thereby incorporated in the charterparty. These clauses are in the following terms:
"52. It is agreed that the Chamber of Shipping War Risks Clauses dated April, 1937, New Jason Clause, Paramount Clause, and Both to Blame Collision Clause, as attached, are to be incorporated in this charterparty."
" Paramount Clause. This bill of lading shall have effect subject to the provisions of the Carriage of Goods by Sea Act of the United States approved April 16, 1936, which shall be deemed to be incorporated herein, and nothing herein contained shall be deemed a surrender by the carrier of any of its rights or immunities or an increase of any of its responsibilities or liabilities under said Act. If any term of this bill of lading be repugnant to said Act to any extent, such item shall be void to that extent but no further."
Four questions of construction arise upon these clauses, which were stated by Devlin J. as follows: "(1) Whether the United States Carriage of Goods by Sea Act (hereinafter called 'the Act') affects the rights and liabilities of the parties under the charterparty. (2) If the answer to (1) is 'Yes,' whether under the charterparty any material provisions of the Act affect the rights and liabilities of the parties in connection with (a) non-carrying voyages; (b) cargo-carrying voyages other than those to or from ports in the United States of America. (3) Do the words 'loss or damage' in section 4 (1) and/or section 4 (2) of the Act relate only to physical loss of or damage to goods?"The learned judge answered these questions as follows: (1) Yes. (2) (a) No. (2) (b) Yes. (3) No.
As the owners were claiming that the Act had the effect of exempting them from liability for the unseaworthiness of the ship, it is obvious that the answers to questions (1), (2) (b) and (3) were in favour of the owners, while the answer to (2) (a) was in favour of the charterers.
The Court of Appeal answered the first question in the negative, and accordingly the remaining questions did not arise. They held that the paramount clause could not sensibly be applied to this charterparty, since it was impossible to feel sure what provisions in the Act were to be treated as incorporated, and what was the effect of the incorporation.
My Lords, I must now approach the construction of the relevant documents and endeavour to answer the four questions already stated. In approaching this task I shall bear in mind, and strive to apply, three well-known principles of construction, to which reference was made in the course of the argument. The first principle is stated by Lord Wright in Hillas & Co. Ltd. v. Arcos Ltd.68 in words which have often been quoted: "Business men often record the most important agreements in crude and summary fashion; modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise. It is accordingly the duty of the court to construe such documents fairly and broadly, without being too astute or subtle in finding defect; but, on the contrary, the court should seek to apply the old maxim of English law, Verba ita sunt intelligenda ut res magis valeat quam pereat. " These observations were made in a case where the question was whether a contract had been made; but Mr. Roskill, for the owners, submitted that they were equally applicable to the construction of a concluded contract, and I agree.
Lord Wright then goes on to state the second well-known principle as follows69 : "That maxim, however, does not mean that the court is to make a contract for the parties, or to go outside the words they have used, except in so far as there are appropriate implications of law, as for instance, the implication of what is just and reasonable to be ascertained by the court as matter of machinery where the contractual intention is clear but the contract is silent on some detail."
The third principle was stated by Lord Loreburn in Nelson Line (Liverpool) Ltd. v. James Nelson & Sons Ltd.70 : "The law imposes on shipowners a duty to provide a seaworthy ship and to use reasonable care. They may contract themselves out of those duties, but unless they prove such a contract the duties remain; and such a contract is not proved by producing language which may mean that and may mean something
different"; and he added71 : "I am afraid it is useless to draw the attention of commer-cial men to the risks they run by using confused and perplexing language in their business documents. Courts of law have no duty except to construe them when a question arises; but it is often very difficult. and sometimes what the parties real-ly intended fails to be carried out because illconsidered expressions find their way into a contract."
Approaching the first of the four questions already stated with these principles in mind, I answer it in the affirmative. The paramount clause is clearly incorporated in the charterparty, and I agree with Devlin J. that the opening words of the paramount clause must be treated as corrected so as to read: "This charterparty shall have effect subject to," etc. The paramount clause has in fact become one of the clauses of the charterparty, by virtue of clause 52 thereof, and it does not make sense to begin a clause of a charterparty with the words "This bill of lading."
Turning to the provisions of the Act, I agree again with the learned judge that the words in section 5, "The provisions of the Act shall not be applicable to charterparties," must be rejected as being meaningless. The clause paramount says that the provisions of the Act shall be deemed to be incorporated in the charterparty, but it is meaningless to incorpo-rate in the charterparty a provision that the Act shall not apply to charterparties.
I now turn to question (2) (a). The only relevant voyage on which the vessel was not carrying cargo was the initial voyage from Baltimore to Curaçao, and the question is whether the material provisions of the Act apply to that voyage. My Lords, in agreement again with Devlin J., I would answer that question in the negative. The provisions upon which the owners particularly rely as exempting them from liability for the unseaworthiness of the vessel on that voyage are in section 4 (1) and (2) of the Act. This section is headed "Rights and Immunities." Section 4 (1) is as follows: "Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence on the part of the carrier to make the ship seaworthy, and to secure that the ship is properly manned, equipped, and supplied, and to make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried fit and safe for their recep-tion, carriage, and preservation in accordance with the provisions of paragraph (1) of section 3. Whenever
loss or damage has resulted from unseaworthiness, the burden of proving the exercise of due diligence shall be on the carrier or other persons claiming exemption under this section." The relevant part of subsection (2) is as follows: "Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from - (a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship; ..."
My Lords, it is clear that, on the facts as found, these words would exempt the owners from liability in the case of the initial voyage if they applied to that voyage; but, in my opinion, section 4 only applies to a case in which the ship is being used for the carriage of goods. In order to make good this statement, I must refer to the earlier por-tions of the Act, which impose certain "responsibilities and liabilities" set out in section 3 and grant the "rights and immunities" granted by section 4. Sections 1 and 2 are in the following terms:
Section 1: "When used in this Act - (a) The term 'carrier' includes the owner or the charterer who enters into a contract of carriage with a shipper. (b) The term 'contract of carriage' applies only to contracts of carriage covered by a bill of lading or any similar document of title, in so far as such document relates to the carriage of goods by sea, including any bill of lading or similar document as aforesaid issued under or pursuant to a charterparty from the moment at which such bill of lading or any similar document of title regulates the relations between a carrier and a holder of the same. (c) The term 'goods' includes goods, wares, merchandise, and articles of every kind whatsoever, except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried. (d) The term 'ship' means any vessel used for the carriage of goods by sea. (e) The term '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."
Section 2 (Risks.): "Subject to the provisions of section 6" (which are immaterial for the present purpose) "under every contract of carriage of goods by sea, the carrier in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the responsibilities and liabilities and entitled to the rights and immunities hereinafter set forth."
By the paramount clause, the provisions just quoted are deemed to be incorporated in the charterparty. It is only by
virtue of section 2 that the rights and immunities on which the owners rely can come into operation, since it is section 2 which confers these rights and immunities; and it is impossible to incorporate section 4 in the charterparty without also incorporating the section which provides that the "carrier" shall be entitled to the rights and immunities set forth in section 4.
Applying section 2 to the present charterparty, which is, of course, a contract for the carriage of goods by sea, the section only brings these rights and immunities into operation in regard to a period from the time when goods are loaded on to the time when they are discharged from the ship. That is the only period covered by the term "carriage of goods" - see section 1 (e) - and it is only under a contract of carriage of goods by sea, and in relation to the loading, handling, stowage, carriage, custody, care and discharge of such goods that the rights and immunities specified in clause 4 are conferred upon the owner by section 2. For these reasons, my Lords, in agreement with Devlin J. I would answer question (2) (a) in the negative, so that the owners are not protected in regard to the initial voyage from Baltimore to Curaçao. Mr. Roskill, for the owners, sought to rely upon the decision of a Divisional Court in Golodetz v. Kersten, Hunik & Co.,72 but that case is of no assistance to him for reasons which I shall state later. For the moment, I shall only point out that the words which I have quoted from sections 1 (e) and 2 are not "insensible" when applied to this charterparty, and they are not ambiguous words. They cannot be rewritten because they may appear to have a somewhat capricious result in limiting the protection of the owners to cargo carrying voyages.
Question (2) (b) gives rise to a more difficult question of construction, but, in my opinion, this question must also be answered against the owners. I turn to section 13 of the Act, the relevant portion whereof is as follows: "This Act shall apply to all contracts for carriage of goods by sea to or from ports of the United States in foreign trade. As used in this Act the term 'United States' includes its districts, territories, and possessions ... The term 'foreign trade' means the transportation of goods between the ports of the United States and ports of foreign countries. Nothing in this Act shall be held to apply to contracts for carriage of goods by sea between any port of the United States or its posses-sions, and any other port of the United States or its possessions." Then follow some provisos which need not be set out. It will be observed that I have
not referred to the preamble to the Act, either in considering question (2) (a) or in considering the present question. Mr. Mocatta, for the charterers, sought to gain assistance from the words of the preamble, which are as follows: "... every bill of lading or similar document of title which is evidence of a contract for the carriage of goods by sea from ports of the United States, in foreign trade, shall contain a statement that it shall have effect subject to the provisions of this Act." I do not, however, think it is legitimate to limit the scope of the provisions of the Act by the words just quoted, since it is the "provisions of the Act," and nothing but the provisions of the Act, which are incorporated in the charterparty now under consideration.
Turning again to section 13, it may be said, on behalf of the owners, that the opening sentence of the section does not expressly exclude contracts for carriage of goods by sea to and from ports outside the United States. That is so, but I think that the section, on its more natural construction, is in fact intended to limit the application of the Act to contracts for carriage of goods to and from ports of the United States. If it was not intended to have this effect, it is difficult to see why it should appear in the Act at all. It is to be noted that the parties have not chosen to incorporate the Hague Rules, as they might have done. They have chosen to incorporate, by the paramount clause, the provisions of a United States Act. They must take these provisions as they find them, unless they are "insensible" if incorporated in the charterparty. An example of insensibility is provided by the words in section 5 of the Act, already quoted: "The provisions of the Act shall not be applicable to charterparties." But the words now under consideration are not insensible when read in conjunction with the provisions of the charterparty. The case might be otherwise if the only voyages permitted under the charterparty were voyages between, for instance, England and Abadan. This is not, however, the position, for the vessel started from Baltimore, U.S.A., and clause 49 provides: "Charterers have the option of ordering the vessel to discharge at United States ports subject to owners securing United States Maritime Commission approval and owners undertake to do their utmost to secure this permission should charterers desire to exercise their option."
The present case is, therefore, entirely different from Golodetz v. Kersten, Hunik & Co.7324 Ll.L.Rep. 374 . [FN73] already mentioned. That case related
to a bill of lading for the carriage of goods from Rotterdam to London. The parties had incorporated "all the terms provisions and conditions of the Carriage of Goods by Sea Act, 1924 , and the Schedule thereto," but that Act was limited to voyages which did not include a voyage from Rotterdam to London. The court was thus faced with the same position as arose in the present case in regard to the words already quoted from section 5 of the Act, and all your Lordships are of opinion that these words must be rejected as insensible.
In answering question (2) (b) in the negative, as I do, I am differing, for the first time, from the conclusions of Devlin J. The learned judge points out that74[1957] 2 Q.B. 233 , 250. [FN74] : "There is a wide range of ports in the charterparty and if the immunity were to relate only to voyages to and from American ports, the effect of it would be considerably cut down." That is quite true, but if the words used in the Act, and incorporated in the charterparty, mean that the immunity covers only voyages to and from United States ports, it is impossible either to strike them out or alter them. To do so would be to make a new contract for the parties.
Mr. Roskill relied upon the case of Glynn v. Margetson & Co.,75 and especi-ally upon the words of Lord Halsbury: "Looking at the whole of the instrument, and seeing what one must regard, for a reason which I will give in a moment, as its main purpose, one must reject words, indeed whole provisions, if they are incon-sistent with what one assumes to be the main purpose of the contract. The main purpose of the contract was to take on board at one port and to deliver at another port a perishable cargo." Lord Herschell, who delivered the only other speech in that case, did not express himself in such wide terms, but even if Lord Halsbury's words are given their full effect, they do not assist the shipowners in the present case, for three reasons. First, the provi-sions now under consideration are not "inconsistent with the main purpose of the contract." They are only inconsistent with protection being given to the shipowner in the case of voyages to or from ports outside the United States. The main object of the contract is not to provide protection for the owners on any voyage or voyages; it is to provide for the carriage of goods by sea. Secondly, Lord Halsbury said, immediately after the passage which I have already quoted76 : "I do not think the learned counsel who argued this case on the part of the appellants gave sufficient effect in the argument
which he addressed to your Lordships to the difference between the ordinary and formal parts of the document which are to be found in print and the written parts." In the case of Glynn v. Margetson & Co.77 this House, in effect, rejected some of the words in a printed clause which were quite inconsistent with the main purpose of the contract. In the present case the words which are sought to be struck out were inserted into the contract by a special clause described as a "paramount clause." Thirdly, their Lordships were clearly influenced by the consideration that the goods to be carried were perishable.
What, then, is the result of my answering question (2) (a) and question (2) (b) in the negative? The only voyages under the charterparty which are relevant in the present case are (i) the voyage from Baltimore to Curaçao, which is not covered by the Act because it is not a cargo carrying voyage; and (ii) other voyages which are not covered by the Act because they are not voyages to or from United States ports. The result is that the paramount clause, incorporating the Act, gives the owners no protection in the circumstances of the present case, and it becomes irrelevant to consider question (3): whether "the words 'loss or damage' in section 4 (1) and/or section 4 (2) of the Act relate only to physical loss of or damage to goods."
I would add this in regard to questions (2) (a) and (2) (b). It may be that the parties intended to incorporate in the charterparty only sections 3 and 4 of the Act, and to incorporate them without the limitations imposed by sections 1 (e), 2 and 13, so that they would apply to all voyages within the scope of the charterparty. If this was the result which they wished to achieve, I can think of more than one simple way in which they could have achieved it; but, to my mind, they have failed to achieve it by the paramount clause, and your Lordships cannot help the owners to achieve it by redrafting the paramount clause and the Act so as to make a new contract for the parties.
Even if it is possible so to read the paramount clause and the Act as to apply sections 3 and 4 to all voyages, I would pray in aid the words of Lord Loreburn in Nelson Line (Liverpool) Ltd. v. James Nelson & Sons Ltd.78 already quoted, and of Lord Wright in the Petrofina case79 : "... if it is sought to effect a reduction of the overriding obligation to provide a seaworthy ship, whether that is express or implied for this purpose docs not matter, by other express terms of the charterparty or contract
of affreightment, that result can only be achieved if perfectly clear, effective, and precise words are used expressly stating that limitation." Can it be said, my Lords, that in the present case the paramount clause, incorporating the Act, limits the obligation to provide a seaworthy ship in words which are "perfectly clear"? Or have the parties used language which (as Lord Loreburn put it) "may mean that and may mean something different"? If so, the owners must be held liable, even if your Lordships do not accept my construction of the relevant words.
For the reason which I have stated, I would answer questions (1) to (9) in paragraph 56 of the special case in the affirmative, and would uphold the award of the umpire, in paragraph 57, that the owners are liable to the charterers. This is the conclu-sion at which the Court of Appeal arrived, for different reasons.LORD REID.
My Lords, clause 22 of the charterparty provides: "It is agreed that the Chamber of Shipping War Risks Clauses dated April, 1937, New Jason Clause, Paramount Clause, and Both to Blame Collision Clause, as attached, are to be incorporated in this charterparty." This case turns on the proper interpretation of the paramount clause which is thereby incorporated. The paramount clause begins: "This bill of lading shall have effect subject to ... ", and the first question is what is meant by "This bill of lading."
As it stands "This bill of lading" does not make sense, but no one suggests that the parties by mistake attached the wrong form of clause to the charterparty. They intended to attach this clause and they must have intended it to mean something. It was argued that it was meant to be a clause which the charterers were to be bound to include in any bill of lading, and that it was not meant to affect the charterparty itself. I can find no ground for this argument - particularly when I find that in both the New Jason Clause and the Both to Blame Collision Clause there are provisions introduced by the words: "The charterers shall procure that all bills of lading issued under this charterparty shall contain the following clause." To give effect to this argument it would be necessary to read in at the beginning of the paramount clause these or similar words. This could only be done if there was some clear indication elrewhere that it must be done, and there is nothing anywhere to show that this was the intention.
If the paramount clause is to have any meaning or effect at all "This bill of lading" must be held to be a misnomer for "This charterparty." I find nothing to raise any doubt that this was
169the intention, and the fact that clause 52 directs that the paramount clause is to be "incorporated" in the charterparty appears to me to be a clear pointer that its initial words must be so read. So reading them, the paramount clause provides: "This charterparty shall have effect subject to the provisions of the Carriage of Goods by Sea Act of the United States, approved April 16, 1936, which shall be deemed to be incorporated herein, and nothing herein contained shall be deemed a surrender by the carrier of any of its rights or immunities or an increase of any of its responsibilities or liabilities under said Act. If any term of this charterparty be repugnant to said Act to any extent such term shall be void to that extent, but no further." This is a plain and unequivocal direction to incorporate in the charterparty "the provisions" of the United States Act so that, if any other term of the charterparty is to any extent repugnant "to said Act," it shall be void to that extent but no further. I note that there must be repugnancy to the United States Act - not to some particular section of it.
The first difficulty arises from the provisions of section 5 of the United States Act: "The provisions of the Act shall not be applicable to charterparties; but if bills of lading are issued in the case of a ship under a charterparty, they shall comply with the terms of this Act." The Act only deals with bills of lading: it begins: "Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, that every bill of lading or similar document of title which is evidence of a contract for the carriage of goods by sea to or from ports of the United States, in foreign trade, shall have effect subject to the provisions of this Act."
This case appears to me to raise in an acute form the question how far a court is entitled to go in disregarding words in a contract in order to discover the intention of the parties. It is difficult to see how anyone who had given any thought to the provisions of the United States Act could have drafted this paramount clause for inclusion in a charterparty: it must have been drafted for inclusion in a bill of lading where it would be quite appropriate. But it appears that for a considerable time a clause in substantially this form has been included in a number of charterparties. We do not know how this practice originated, and we do not know and are not entitled to guess just what the parties had in mind when they agreed to incorporate the clause in this charterparty. The intention of the parties can only be inferred from the words which they have used. Undoubtedly the
170charterparty must be read as a whole, and any term in it must be read in light of the general nature of the contract, of the fact that the contracting parties were business men, and of all relevant facts known to the parties when it was made. But in the end we must take the words which the parties have used, and interpret them.
As the parties have chosen to incorporate in a charterparty provisions which are designed to apply, and only to apply, to bills of lading, one must, I think, infer that they intended these provisions to be incorporated mutatis mutandis; and in order to see what this involves I would begin by trying to read references to bills of lading in the Act as if they were references to charterparties. That necessarily involves the rejection as insensible of the provisions of section 5 of the Act that its provisions shall not be applicable to charterparties, and I find little difficulty in taking that step.
Then there are a number of provisions in the Act which, from their very nature, can only apply to bills of lading, and which become meaningless if one tries to make them apply to a charterparty. It probably does not matter much whether or not one regards them as incorporated in the charterparty. Some of them might throw some light on other provisions which must be incorporated, but I am content to take the case on the footing that they are not incorporated. There are also sections of the Act which permit parties to agree to vary statutory rights and liabilities in certain cases, and permit the Government of the United States to modify the terms of the Act in certain circumstances. These, too, are meaningless if incorporated in this charterparty and I disregard them.
That leaves to be incorporated those parts of the Act which enact the rights and liabilities of carrier and shipper, and which are capable of being applied to a charterparty if one reads owner and charterer for carrier and shipper. That appears to me to be quite consistent with the second part of the paramount clause, which must mean that nothing in the charterparty shall be deemed a surrender by the carrier (the owner) of any of his rights or immunities or an increase of any of his responsibilities or liabilities under the Act. The question is what are the carrier's rights, immunities, responsibilities or liabilities under the Act which can apply to an owner vis-à-vis a charterer. The purpose of the paramount clause is to preserve them - not to extend them.
The first part of the Act which I have already quoted shows, as one might expect, that the Act only applies where there is
171carriage of goods to or from a port of the United States: and this is confirmed by section 13 which provides: "This Act shall apply to all contracts for carriage of goods by sea to or from ports of the United States in foreign trade." Accordingly, a carrier can have no rights or liabilities under the Act except in relation to a voyage to or from the United States, and, if this paramount clause had been incorporated in a bill of lading, a term in the bill of lading repugnant to the Hague Rules as embodied in the Act would not be repugnant to the Act if the goods were not being carried to or from the United States. One of the difficult questions in this case is whether a term of this charterparty, which is repugnant to a part of the Act capable of being applied to a charterparty, can be regarded as "repugnant to said Act" within the meaning of the paramount clause as regards a voyage which is neither to nor from a United States port. It must be borne in mind that the paramount clause expressly provides that if any term of the charterparty is repugnant to the Act to any extent it shall be void to that extent but no further. It was therefore expressly contemplated that a term in the charterparty might be invalidated to some extent but yet remain valid when the circumstances were not within the scope of the paramount clause. There are terms in the charterparty which would admittedly prevent the appellant from succeeding unless they are excluded by the paramount clause in the circumstances of this case.
Then section 2 of the Act provides, subject to an immaterial exception, "... under every contract of carriage of goods by sea, the carrier in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the responsibilities and liabilities and entitled to the rights and immunities hereinafter set forth"; and section 7 provides: "Nothing contained in this Act 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 connection 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." So it is plain that under the Act a carrier can have no rights or liabilities except in relation to a cargo carrying voyage. A second difficult question in this case is whether a term of this charterparty, which is repugnant to a part of the Act capable of being applied to a charterparty, can be regarded as "repugnant to said Act," within the meaning
of the paramount clause as regards a voyage when no cargo is carried.
Sections 3 and 4 of the Act set out respectively the responsibilities and liabilities, and the rights and immunities of the carrier. Section 3 (1) provides: "The carrier shall be bound, before and at the beginning of the voyage, to exercise due diligence to - (a) Make the ship seaworthy; (b) Properly man, equip, and supply the ship; (c) Make the holds, refrigerating and cooling chambers and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage, and preservation." The other provisions of the sections are either from their nature incapable of application to a charterparty or difficult to apply to a charterparty without considerable modification. The appellant admits that "at the beginning of the voyage" in section 3 (1) must mean at the beginning of each voyage under this charterparty and not the begin-ning of the first voyage under it. Head (c) of section 3 (1) causes some difficulty for the appellant because, if this subsection is to apply to voyage when no cargo is carried, it would seem unreasonable that head (c) should apply to such voyages: on the other hand, it would apply when cargo was to be carried.
Section 4 provides: "(1) Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence on the part of the carrier to make the ship seaworthy, and to secure that the ship is properly manned, equipped, and supplied, and to 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 in accordance with the provisions of paragraph (1) of section 3. Whenever loss or damage has resulted from unseaworthiness, the burden of proving the exercise of due diligence shall be on the carrier or other persons claiming exemption under this section. (2) Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from - (a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the ma-nagement of the ship ..." and a number of other matters most of which are readily applicable to a charterparty.
I do not think that I misrepresent the case for the appellant in saying that it is that, in spite of the wording of the paramount clause, no part of the United States Act should be incorporated in this charterparty except those parts of sections 3 and 4 of the
Act which are readily applicable to a charterparty, and that then the provisions so incorporated should be read in their new context without paying regard to the limited extent of the rights which they confer in their original context in the Act. In that way these provisions can be made to apply to voyages which are neither to nor from a United States port, and to voyages when no cargo is carried - voyages to which, in their original setting in the Act, these provisions could never have any possible application. The respondent, on the other hand, in addition to supporting the reasoning of the Court of Appeal, maintains that, if any part of the Act is to be incorporated, the paramount clause requires that every part of the Act which is capable of application to a charterparty must be incorporated so that the provisions on which the appellant relies will still be qualified by the other provisions of the Act to which I have referred and will, therefore, retain their original limited scope and not apply either to voyages which do not touch the United States or to voyages on which no cargo is carried.
The strength of the appellant's case lies in the fact that the method of construction which I have sought to follow produces a result which is commercially unreasonable. It is not credible that, if the parties had really applied their minds to the matter, they would have agreed that the owners should have one standard of duty for cargo carrying voyages to or from the United States and another for all other voyages. Indeed, I am prepared to assume that, if the defects of the paramount clause had been pointed out to the parties, they, or at least any reasonable business men in their position, would have agreed that the relevant provisions of the Hague Rules, as embodied in the United States Act, should apply to all voyages under this charterparty. But it is one thing to say that the parties would have agreed to this and another thing to say that they did agree to it.
We cannot tell what the parties had in mind and we may not inquire as to what was said in the course of negotiation. The parties may have intended - indeed they may have said - that the Hague Rules were to apply to all voyages under the charterparty: they may have chosen this ill-designed clause simply because it had been used before. But they may have been very vague in what they intended or what they said. In any case we are not concerned with what they may have intended or said. We are only concerned with interpreting the words which they chose to use in their contract. I do not think that we are entitled to assume that they must have had a clear intention and that it must have been a reasonable intention, then to find that the
only reasonable intention would have been to apply the Hague Rules to all voyages, and to hold that, even if the words which they have used will not bear that construction, that intention must prevail. A court is often entitled to add to a written contract by implying a term if it is satisfied that any reasonable men in the position of the parties would have agreed to it if their attention had been directed to the point and that the term should be implied. But that is supplementing the words which the parties have used - not contradicting them. It might be the law that a court should be entitled to amend the parties' contract if satisfied that no reasonable men could have meant what it says and also satisfied as to what they must have intended to do if, being reasonable men, they had directed their atten-tion to the point. Perhaps that should be the law. But, so far as I am aware, there is no authority for a court having that power. Here the parties made an express provision which is, in my view, incapable of bearing the construction for which the appellant contends, and therefore to give effect to that contention would involve contradicting what the parties have said in their contract and making a new contract for them.
There are many cases where a court must disregard words, including whole terms, which the parties have put in their contract. But those are cases where there is something in the contract itself which makes that course necessary. For example, the words may be inconsistent with the main object of the contract. In Glynn v. Margetson & Co.80 a printed clause would have allowed the ship to proceed to and stay at any port within a very wide range in carrying oranges from Malaga to Liverpool. A deviation by the ship caused damage to this perishable cargo and the owners were held liable. Lord Halsbury said81 : "One must reject words, indeed whole provisions, if they are inconsistent with what one assumes to be the main purpose of the contract." and Lord Herschell L.C. said82 : "Where general words are used in a printed form which are obviously intended to apply, so far as they are applicable, to the circumstances of a particular contract, which particular contract is to be embodied in or introduced into that printed form, I think you are justified in looking at the main object and intent of the contract and in limiting the general words used, having in view that object and intent." I do not think that this principle so applied helps either party. The object of
the contract in Glynn's case83 was obvious from the contract itself, but here, if a limited application is given to the Hague Rules, I can see no conflict with either the general object of the charterparty or any express term in it. The conflict is only with what one might have expected reasonable people to do. I should perhaps note that an explanation of Glynn's case84 was given by Jenkins L.J. and approved in this House in G. H. Renton & Co. Ltd. v. Palmyra Trading Corporation of Panama.85
Then there are numerous cases where two parts of a contract appear to contradict each other. I shall only cite two cases which seem to me to be rele-vant here. In Elderslie Steamship Co. Ltd. v. Borthwick86 Lord Macnaghten said: "The clause which has been called the large print clause seems to me to be perfectly clear. The small print clause is equally clear. For my part I am u-nable to reconcile the two clauses. In such a case as this an ambiguous document is no protection. It is a wholesome rule that a shipowner who wishes to escape the liability which might attach to him for sending an unseaworthy vessel to sea must say so in plain words." and in Nelson Line (Liverpool) Ltd. v. James Nelson & Sons Ltd.87 Lord Loreburn L.C. said: "I think the clause, taken as a whole, so in thought out and expressed that it is not possible to feel sure what the parties intended to stipulate. The law imposes on shipowners a duty to provide a seaworthy ship and to use reasonable care. They may contract themselves out of those duties, but unless they prove such a contract the duties remain; and such a contract is not proved by producing language which may mean that and may mean something different. As Lord Macnaghten said in Elderslie Steamship Co. Ltd. v. Borthwick88 'an ambiguous document is no protection.'"
A third class of case is where a term is mea-ningless or so vague as to be insensible. In G. Scammell & Nephew Ltd. v. Ouston.89 Lord Wright said: "The object of the court is to do justice between the parties, and the court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance and not mere form. It will not be deterred by mere
difficulties of interpretation. Difficulty is not synonymous with ambiguity so long as any definite meaning can be extracted. But the test of intention is to be found in the words used. If these words, considered however broadly and untechnically and with due regard to all the just implications, fail to evince any definite meaning on which the court can safely act, the court has no choice but to say that there is no contract." In Nicolene Ltd. v. Simmonds90 that principle was applied so as to strike out of a contract a term so vague or ambiguous that no ascertainable meaning could be given to it, and to leave the rest of the contract valid.
The Court of Appeal have followed the last class of case and have held that no effect at all should be given to the paramount clause. Denning L.J. (as he then was) said91 : "If we reject the obvious contradictions and inconsistencies, and seek to apply the rest of the Hague Rules in their ordinary meaning, we are left with such incongruous results that no one can suppose that the parties ever intended to produce them. If we reject the contradictions, inconsistencies and incongruities, and put something in their stead, we shall be making for the parties a contract which we may think is reasonable but to which they have never subscribed, because it would bear no relation to the written words. and I have good reason for thinking that we might differ from the judge, and between ourselves, as to what would be reasonable. This all leads me to the conclusion that this paramount clause cannot sensibly be applied to this charterparty. It must be rejected as insensible in this setting." Parker L.J. said92 : "What provisions are to be treated as incorporated? This charter is, as I have said, for successive charterparty voyages and worldwide in its scope. It is clearly not possible to select those provisions which the court thinks reasonable to apply in all the circumstances. That would be to make a new contract between the parties. The only safe method of exclusion would be to reject only those provisions or parts of provisions which would be insensible. But, if this is done, one is left with such a jumble of provisions that it is, in my judgment, quite impossible to feel sure what the parties intended. Accordingly, I feel constrained to reject the whole of the paramount clause as insensible." Sellers L.J. said93 : "On the other hand, to give the clause effect as the shipowners
submit requires even more imagination and a drastic elimination or substitution of all words which offend against the applicability of the clause to a charterparty. It seems to me that this would be doing what the parties did not do themselves, and would be giving to provisions a certainty and a clarity which they do not possess. Where the court can be certain of the contractual intention, then matters which conflict with the intention may be disregarded as insensible, but if very little seems to fit in with the accepted provisions of a contract and a position of uncertainty and doubt arises - as I think it does here - it would be passing out of the realm of construction if one proceeded to cull or create contractual terms out of the muddled material."
I have sympathy with their view, particularly in view of the principle restated by Lord Wright M.R. in the Petrofina case94 : "If it is sought to effect a reduction of the overriding obligation to provide a seaworthy ship, whether that is express or implied for this purpose does not matter, by other express terms of the charterparty or contract of affreightment, that result can only be achieved if perfectly clear, effective, and precise words are used expressly stating that limitation." But I am unable to go all the way with them because I think that, whatever be the position with regard to voyages not within the scope of the United States Act, the paramount clause has at least applied the Hague Rules with sufficient clarity to cargo carrying voyages to or from the United States. There might well have been such voyages under this charterparty and the charterers' claims might have arisen solely in respect of such voyages. If they had, I do not think that a court could have refused to the owners the protection of this clause on the ground that in other circumstances which had not arisen the clause might be insensible. But it so happens that no claim arises in this case in respect of a cargo carrying voyage to or from the United States, and therefore I reach the same result as the Court of Appeal but in a different way.
It may appear to some to be "legalistic" to hold that a contract means something which no reasonable business man could have intended. But, if a court is precluded from remaking a contract and is only entitled to construe the words which the parties have used, and the parties choose to use such an illdesigned clause as this, a court may have to tell them that they have produced a very unreaso-nable result. I would dismiss this appeal.
LORD KEITH OF AVONHOLM.
My Lords, it has been accepted, I think rightly, by all the learned judges who have considered this case, as also by your Lordships, that the words "this bill of lading" in the paramount clause must be read as "this charterparty." It would seem to follow that the United States Carriage of Goods by Sea Act must be read for the purposes of this charterparty as if the words in section 5, "The provisions of the Act shall not be applicable to charterparties" were deleted. The parties have incorporated the Act contractually into their contract of charterparty, and to say that the provisions of the Act shall not apply to their charterparty would render the incorporation nugatory and make no sense of what was intended to be a "paramount clause" in their contract. It is, of course, possible to read a clause in a contract as senseless and read it out of the contract altogether, but in commercial contracts that is a course that the court should be slow to adopt. As stated by Lord Wright in Hillas & Co. Ltd. v. Arcos Ltd.,95 it is "the duty of the court to construe such documents fairly and broadly, without being too astute or subtle in finding defects; but, on the contrary, the court should seek to apply the old maxim of English law, Verba ita sunt intelligenda ut res magis valeat quam pereat."
Turning to the document incorporated by the paramount clause, namely, the United States Act, one finds, as was to be expected, that it applies only to contracts of carriage of goods by sea covered by a bill of lading or similar document of title, and the outlook of the various sections of the Act is necessarily on such contracts. To give any effect to the contractually incorporated document it must be construed, so far as possible, with reference to a charterparty and not a bill of lading. This is necessarily involved in the step that has already been taken of regarding as inapplicable the words, "The provisions of the Act shall not be applicable to charterparties." The next step, in my opinion, is to read "contract of carriage" as meaning a contract between a carrier and a charterer and not one between a carrier and a shipper. A charterparty is one form of contract for the carriage of goods by sea. The proper approach in a case of this kind in construing an incorporated document has been laid down by this House in T. W. Thomas & Co. Ltd. v. Portsea Steamship Co. Ltd.,96 and in Hamilton & Co. v. Mackie & Sons,97 approved in the former case. There may be slight differences in
the approach adopted by Lord Esher in Hamilton & Co. v. Mackie & Sons98 and that adopted by Lord Gorell and Lord Robson in T. W. Thomas & Co. Ltd. v. Portsea Steamship Co. Ltd.,99 but they come, I think, very much to the same thing and achieve the same result. Lord Esher would read in the whole terms of the incorporated document and then treat any term which was inconsistent with the incorporating document as insensible and to be disregarded. Lord Gorell and Lord Robson approach the matter, I think, from the standpoint of reading in so much of the incorporated document as is not inconsistent with the subject-matter of the incorporating document. Lord Robson states the rule100 "that the terms of the charterparty when incorporated or written into the bill of lading shall not be insensible or inapplicable to the document in which they are inserted." In that case it was held that an arbitration clause in a charterparty was not apt to be introduced into a bill of lading and, in spite of an incorporating clause in the bill of lading, should be rejected as inconsistent with the bill of lading. The same difference in approach will be found between Lord Esher M.R. and Lopes L.J. in Serraino & Sons v. Campbell101 respectively. Here we have the converse case of deciding how much, or what, should be written in to a charterparty of terms that were intended for a bill of lading.
Taking section 3 (1) and section 4 (1) and (2) (a) by themselves, no difficulty would arise in giving them a literal and effective interpretation as between owner and charterer. Two points, however, are taken, that these provisions do not apply to a ballast, or non-cargo carrying, voyage, and apply only to a voyage to or from a United States port. On the first point, of course, the Act as drawn applied only to cargo voyages because it dealt wholly with contracts of carriage under bills of lading. But ex hypothesi that limitation has gone. The Act is now being applied to a charterparty. A charterparty is a contract for the purpose of the carriage of goods by sea, and I see no difficulty in saying that a voyage in ballast is all part and parcel of and incidental to that purpose. If a chartered ship proceeds to its port of loading, it is, in my opinion, engaged in a voyage relating to the carriage of goods though it is not actually carrying goods at the time. To exclude the carrier in such a case from the obligations and immunities of sections 3 and 4 is merely to assert that the Act applies to contracts for the carriage of goods by sea underbills of lading which are confined to the actual carriage of goods. Reference was made to section 2, but that does not, in my opinion, advance the argument for exclusion of ballast voyages any further. Indeed, it might be said that a voyage under a charterparty in ballast is a voyage under the contract "in relation to" the loading, handling, sto-wage, carriage, etc., of goods. True, it does not cover the period from the time when the goods are loaded to the time when they are discharged as mentioned in section 1 (e) of the Act, but that clause has no meaning in a charterparty, which covers a much greater scope of time, and may be rejected as inconsistent with the purpose of the charterparty. In this matter I am reluctant to differ from the learned judge. He seems to attach considerable weight to subsection (1) (c) of section 3 , which imposes the duty to make the holds, refrigerating and cooling chambers and all other parts of the ship in which goods are carried fit and safe for their reception, carriage and preservation. That is no doubt directed to the carriage of goods, but so is a charterparty. and if a ship has not made this provision before she sails for her port of loading, she will have to do so before she takes on a cargo at the port of loading and on each voyage thereafter under the charterparty on which she carries goods. I am not prepared to hold that because section 3 (1) (c) is inapplicable to a ship on a ballast voyage, if that be so, the shipowner is therefore placed under greater liabilities than those imposed in other respects under section 3.
The point that a claim to immunity is confined to voyages to or from United States ports is founded on the words in the enacting part of the statute that every bill of lading or similar document of title which is evidence of a contract for the carriage of goods by sea to or from ports of the United States in foreign trade shall have effect subject to the provisions of this Act, and on the words in section 13 that this Act shall apply to all contracts for carriage of goods by sea to or from ports of the United States in foreign trade. But again these words seem to me to have no relevance to the charterparty in this case. Very good reasons can be seen for the United States legislature limiting its Act to goods carried under a bill of lading to or from United States ports. They seem quite inapposite when the Act is introduced contractually into a charterparty covering a very wide range of ports outside the United States. Unless the charterers exercised their option under clause 49 of the charterparty, and in that event the owners secured the approval of the United States Maritime Commission, the ship might never have touched at a United States
port after leaving Baltimore on her first voyage. On this point Devlin J. arrived, I think, at the right conclusion.
As to the nature of the loss or damage for which immunity may be claimed, I see no reason for limiting this to physical loss of or damage to goods. Here, again, the force of the argument for such a limitation stems from the fact that the United States Act applied only to goods carried under bills of lading. Even in such a case it does not follow that loss or damage is limited to physical loss of or damage to goods. Section 3 (8) shows that the loss or damage contemplated is "loss or damage to or in connection with the goods," and it has been held in this House that such loss or damage is not limited to physical loss or damage: G. H. Renton & Co. Ltd. v. Palmyra Trading Corporation of Panama.102 I proceed, however, on the view that the subject-matter of the contract here was voyages, and loss of voyages naturally falls under the words "loss or damage."
On the view I have taken the point as regards causation of the damage does not arise.
In the result, I would allow the appeal. I agree that the question of law should be answered in the manner proposed by my noble and learned friend on the Woolsack.
LORD SOMERVELL OF HARROW.
My Lords, this is an appeal from the order of the Court of Appeal allowing an appeal and dismissing a cross-appeal from an order of Devlin J. on an interim award stated in the form of a special case under sections 14 and 21 (1) (b) of the Arbitration Act, 1950 .
The respondents were charterers of a tanker, the Saxon Star, formerly the Delaware Sun, owned by the appellants. The charter was dated May 25, 1950. The charter was for as many consecutive voyages as the vessel could perform within 18 months. The charterers alleged in effect that owing to the owners' breaches of contract the ship was delayed by having to be repaired. As a result of the time lost, she was able to perform fewer voyages than would have been performed but for the delay caused by the breaches alleged. "The charterers," I am quoting from Devlin J.,103 "claimed damages which they put at over £80,000, the claim being for the difference between the charter and the market rates of freight on cargocarrying voyages which might have been performed within the 18 months if she had been continuously fit for service."
The umpire, who was dealing only with liability, found that delay was caused by incompetence of the engine-room staff which amounted to unseaworthiness. Delay was also caused on one occasion, at Curaçao, by unseaworthiness in respect of machinery. The umpire found that the owners exercised due diligence in the selection and appointment of the engine-room staff. The owners maintain that was the extent of their liability and therefore they are not liable in respect of delay due to that cause. The umpire found that due diligence had not been exercised in respect of the faulty machinery on the one occasion referred to, and the owners admit their liability in respect of delay due to that cause. The learned umpire set out the questions of law in 11 questions as follows:
[His Lordship set out the questions propounded by the umpire and also the questions agreed by the parties before Devlin J., and continued:] On the last question your Lordships were asked to consider whether the words "loss or damage" covered the damages as claimed in this case.
The charterparty starts with a printed form headed "Tank Vessel Voyage Charterparty," with, of course, typewritten insertions. Typewritten clauses 24 and 52 are attached. Clause 52 is as follows: "It is agreed that the Chamber of Shipping War Risks Clauses dated April, 1937, New Jason Clause, Paramount Clause, and Both to Blame Collision Clause, as attached, are to be incorporated in this Charterparty."
The clause headed "Paramount Clause" is as follows: " Paramount Clause. This bill of lading shall have effect subject to the provisions of the Carriage of Goods by Sea Act of the United States, approved April 16, 1936, which shall be deemed to be incorporated herein, and nothing herein contained shall be deemed a surrender by the carrier of any of its rights or immunities or an increase of any of its responsibilities or liabilities under said Act. If any term of this bill of lading be repugnant to said Act to any extent, such term shall be void to that extent, but no further."
It is, I think, relevant to set out quite shortly the history of the provisions embodied in this and other similar Acts.
The object of the Brussels Convention, which led to the Hague Rules, which led to the Act, was to produce standard provisions of liability as between shipowner or carrier and shipper. The desirability of standard terms for bills of lading which pass from hand to hand like negotiable instruments had long been felt. The provisions in relation to English law relieved the shipowner of his
absolute obligation to provide a seaworthy ship. This was replaced by a duty to exercise due diligence to provide a seaworthy ship. The shipowner was placed under a duty to exercise due diligence in other matters connected with the carriage. He was allowed maximum exceptions to his liability which he could not increase.
The Rules did not apply to charterparties. Charterparties do not pass from hand to hand, and parties were therefore left free to contract on what terms they chose. It was thought at one time that the Rules might be left to be embodied by agreement, as was done with the York-Antwerp Rules on General Average of 1890 (Scrutton on Charterparties, 16th ed., p. 454). Later it was decided that countries should, if so minded, legislate. Our own Carriage of Goods by Sea Act was passed in 1924 and the United States Act in 1936. The United States had led the way in this field by the Harter Act of 1893 .
Legislation embodying the Rules with or without modification did not, of course, cover charterparties and could not go beyond shipments which were or came within the jurisdiction of the legislating country. The United Kingdom Act applies to ships carrying goods from any port in Great Britain or Northern Ireland. The United States Act applies (subject to exceptions which are not relevant here) to contracts for carriage of goods to or from ports of the United States.
This short summary is, I hope, useful in emphasising how natural it was that parties concerned in the carriage of goods by sea should wish to embody this code of obligations, the product of much thought and experience, in contracts to which it would not be applicable by legislation. This would apply to all charterparties and to bills of lading which were not within the geographical limits of any country's legislation.
One might have expected that in such cases the parties would embody the "Rules." The practice clearly grew up at an early date of referring to one or other of the Acts as incorporated. On the issue which comes before your Lordships I have been greatly influenced by the decision in Golodetz v. Kersten, Hunik & Co.104 and the fact that that decision has stood unchallenged for 30 years. The shipper in that case sued on a bill of lading for goods to be carried from Rotterdam to London. The clause to be construed was as follows: "All the terms, provisions and conditions of the Carriage of Goods by Sea Act, 1924, and the schedule
thereto are to apply to the contract contained in this bill of lading, and the carriers are to be entitled to the benefits of all the privileges, rights and immunities contained in such Act, and the schedule thereto, as if the same were herein specifically set out ..." If the words "all the terms," etc., are given their literal meaning, the Act did not apply at all, as the voyage was not one from a United Kingdom port. The provision would have been wholly ineffective. Stopping there in the clause, Bankes L.J. was doubtful but said105 : "I am inclined to think that what they really intended was that, although this is an inward bill of lading, it should be treated as an outward bill of lading, and that the clauses so far as they ale applicable " (my italics) "should be read into the contract." He was fully satisfied, as was the other member of the court, Warrington L.J., that this was the effect of the clause by the words which followed: "If, or to the extent that, any term of this bill of lading is repugnant to or inconsistent with anything in the schedule it shall be void." Similar words occur in the present clause.
I have no doubt that that decision gave effect to the intention of the parties as shown by the words used. It would have been better if they had referred to the Rules scheduled to the Act rather than to the Act. Since that date the incorporation of one or other "Acts" has unfortunately continued. Devlin J. referred to it as very common.
The first point taken by the charterer is based on the opening words of the paramount clause: "This bill of lading ..." I agree with the learned judge that the answer to this point is an application of the principle falsa demonstratio non nocet. I have nothing I wish to add to his conclusion on this point. The opening words of the paramount clause are to be read as if they were: "This charterparty."
I also agree with the learned judge on the second point based on the provision in section 5 of the Act that the Act shall not be applicable to charterparties. He said106 : "Since the clause paramount says that this charterparty shall be subject to the Act, it is insensible to incorporate into the clause paramount a condition which says that the Act shall not apply to charterparties." The provisions of the Act are, therefore, to be incorporated as terms of the contract as far as applicable. This is to apply the principle laid down in Golodetz v. Kersten, Hunik & Co.107
185The contract is one for shipment to or from a very wide range of ports. Although the vessel started from Baltimore it might never again be ordered to a United States port. Further, once one has come to the conclusion that the "Act" is being incorporated in a contract to which it does not as an Act apply, one prima facie rejects the limitations which are imposed in these various Acts necessitated by the limits of the legislative jurisdiction of the country concerned. One takes the geographical limits from the contract. I have, therefore, little difficulty in holding that the paramount clause is not to be restricted to the first voyage - though this is also subject to the next point - and the off-chance of the ship being ordered to a United States port later.
The learned judge decided that the paramount clause had no application to ballast voyages. This would exclude the first voyage from Baltimore to the first port of loading. There is, of course, no difficulty in applying to a ballast voyage the "liabilities or immunities" of the carrier under what I may call the substantive provisions of the Act. It is, however, said, and with force, that the Act is dealing with cargo. On the other hand, its provisions, so far as applicable, have been incorporated into a charterparty where the contractual relations cover a period of voyages the first of which was, and several of which might be, ballast voyages. The paramount clause not only diminishes the shipowners' responsibility at common law but also the responsibility which he would have under the document to which the clause being considered is paramount. It would be a foolish consequence if the shipowner was under a greater liability when the ship was in ballast than when it was carrying cargo. It is natural, as I have said, that shipowners and cargo owners should intend to incorporate the code of obligations and immunities over the whole of the contractual period. The learned judge was, in the main, I think, influenced by the provision in section 3 (1) (c) of the Act putting an obligation on the shipowner to use due diligence to make the holds, etc., fit for the reception of cargo. "If," he says,108 "this obligation attaches at the time when the ship leaves in ballast for the port of loading it would in many cases, probably in most, impose an unreasonable and unnecessary burden on the owner." Section 3 has now to be applied as embodied in a contract under which there will be cargo carrying and non-cargo carrying voyages. One has, therefore, to read
"voyage" in section 3 (1) in the plural, and so doing it is, I think, natural to read section 3 (1) (c) as applicable to the cargo carrying voyages but not to the others. I have therefore come to the conclusion that the provisions of the Act as to the shipowners' obligations apply under the clause paramount to all voyages.
I agree with the learned judge that "loss or damage" in the Act is not limited to physical damage to the goods. I also agree that the loss or damage must arise in relation to the "loading, handling, stowage, carriage, custody, care and discharge of such goods." The form of the claim here depends, of course, on the fact that the provisions of the Act have been incorporated into a charterparty for successive voyages. Under a contract with a particular shipper later to be evidenced by a bill of lading issued to him or under a "received for shipment" bill of lading the shipper or prospective shipper might have a similar kind of claim; if, for example, the shipowner failed to ship the goods and freights had risen. The claim is, in my opinion, in relation to loading and carriage of goods and this point, therefore, also fails.
The last point was stated in these words in the respondents' reasons. "If the Act did not apply to the non-cargo carrying voyage from Baltimore to Curaçao the owners are liable to the charterers because, on the findings in the award, all the damage flowed from the initial unseaworthiness at Baltimore consisting in an incompetent engine-room staff." As I have held that the "Act" did apply to the voyage from Baltimore I need not elaborate my reasons for thinking that the submission, in my view, failed on the facts as found by the learned umpire.
We were referred to a number of authorities. They lay down familiar principles which I have endeavoured to apply. On the one hand, as Lord Wright said in Hillas & Co. Ltd. v. Arcos Ltd.,109 it is the duty of the court to construe commercial contracts broadly, without being too astute or subtle in finding defects. On the other hand, as Lord Wright stated in words which immediately follow, the court is not to make a contract for the parties. There is further the principle stated by Lord Wright in Petrofina S.A. of Brussels v. Compagnia Italiana Trasporto Olii Minerali of Genoa110 that exceptions to obligations must be in clear words. These principles, as I have said are familiar, the difficulty arises in their application. In the present case I think the difficulty arises at the initial stage. Is the effect
of the clause to incorporate in this charterparty the provisions as to the carrier's liability which are contained in the Act? This is a question of construction. Once this has been decided the answers to the other questions follow with, I think, reasonable clearness.
The Court of Appeal took the view that the problems raised were such that the whole clause fell under the principle that the court will disregard contradictory or obscure provisions: Nelson Line (Liverpool) Ltd. v. James Nelson & Sons Ltd.111 It might have advanced clarity if the practice of incorporating an "Act" when the parties meant the provisions of the Rules as applicable to the contract between the parties had been strangled at birth. As it has been recogni-sed in our own courts and in textbooks, the prob-lems that arise in this case do not seem to me to bring the case within the principle laid down in the case cited.
I agree that the questions of law should be answered as proposed by my noble and learned friend on the Woolsack.
I would therefore allow the appeal.
Representation
Solicitors:Constant & Constant; Waltons & Co.
Appeal allowed. (F. C. )
1(United States) Carriage of Goods by Sea Act [ Public - No. 521 - 74th Congress ] : "Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That every bill of lading or similar document of title which is evidence of a contract for the carriage of goods by sea to or from ports of the United States, in foreign trade, shall have effect subject to the provisions of this Act." S. 1 : "When used in this Act - (a) The term 'carrier' includes the owner or the charterer who enters into a contract of carriage with a shipper. (b) The term 'contract of carriage' applies only to contracts of carriage covered by a bill of lading or any similar document of title, in so far as such document relates to the carriage of goods by sea, including any bill of lading or any similar document as aforesaid issued under or pursuant to a charterparty from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same. (c) The term 'goods' includes goods, wares, merchandise, and articles of every kind whatsoever, except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried. (d) The term 'ship' means any vessel used for the carriage of goods by sea. (e) The term ' carriage of goods by sea' covers the period from the time when the goods are loaded on to the time when they are discharged from the ship." Risks. S. 2 : "Subject to the provisions of section 6 , under every contract of carriage of goods by sea, the carrier in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the responsibilities and liabilities and entitled to the rights and immunities hereinafter set forth." Responsibilities and Liabilities. S. 3 : "(1) The carrier shall be bound, before and at the beginning of the voyage, to exercise due diligence to - (a) Make the ship seaworthy; (b) Properly man, equip, and supply the ship; (c) Make the holds, refrigerating and cooling chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation. ... (8) Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to or in connection with the goods, arising from negligence, fault, or failure in the duties and obligations provided in this section, or lessening such liability otherwise than as provided in this Act, shall be null and void and of no effect. ..." Rights and Immunities. S. 4 : "(1) Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence on the part of the carrier to make the ship seaworthy, and to secure that the ship is properly manned, equipped, and supplied, and to 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 in accordance with the provisions of paragraph (1) of section 3 . Whenever loss or damage has resulted from unseaworthiness, the burden of proving the exercise of due diligence shall be on the carrier or other persons claiming exemption under this section. (2) Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from - (a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship. ..." Surrender of Rights and Immunities and Increase of Responsibilities and Liabilities. S. 5 : "... The provisions of this Act shall not be applicable to charterparties; but if bills of lading are issued in the case of a ship under a charterparty, they shall comply with the terms of this Act. ..." S. 13 : "This Act shall apply to all contracts for carriage of goods by sea to or from ports of the United States in foreign trade. As used in this Act the term 'United States' includes its districts, territories, and possessions. ... The term 'foreign trade' means the transportation of goods between the ports of the United States and ports of foreign countries. Nothing in this Act shall be held to apply to contracts for carriage of goods by sea between any port of the United States or its possessions, and any other port of the United States or its possessions. ..."
2[1957] 2 Q.B. 233, 249; [1957] 2 W.L.R. 508; [1957] 1 All E.R. 673
3[1957] 2 Q.B. 233 , 247-249.
4[1957] 2 Q.B. 233, 267; [1957] 2 W.L.R. 968; [1957] 2 All E.R. 311.
5[1956] 1 W.L.R. 629, 634; [1956] 2 All E.R. 716 .
6(1932) 147 L.T. 503 , 514.
7[1957] 2 Q.B. 233 , 249-250. (9)
8[1957] 2 Q.B. 233, 271.
9[1940] 1 K.B. 812, 816; 56 T.L.R. 461 ; [1940] 2 All E.R. 46; (C.A. ) [1940] 2 K.B. 430; 56 T.L.R. 882 ; [1940] 3 All E.R. 211; (H.L. ) [1942] A.C. 154; 57 T.L.R. 485; [1941] 2 All E.R. 165
10[1899] 2 Ch. 309, 314.
11(1889) 5 T.L.R. 677.
12[1912] A.C. 1, 2, 6, 6-7, 9, 10.
13(1936) 24 Ll.L.Rep. 374.
14(1924) 41 T.L.R. 81; 20 Ll.L. Rep. 106.
15[1891] 1 Q.B. 283, 289, 301; 7 T.L.R. 174.
16[1907] 1 K.B. 769; 23 T.L.R. 302; (H.L. ) [1908] A.C. 16, 17, 18-19; 24 T.L.R. 114 .
17(1937) 58 T.L.R. 650 , 653.
18(1937) 58 T.L.R. 650 , 653.
19[1957] 2 Q.B. 233 , 265.
20147 L.T. 503 , 514.
21[1941] A.C. 251, 260, 268, 272-273; 57 T.L.R. 280; [1941] 1 All E.R. 14.
22[1957] 2 Q.B. 233 , 269.
23[1953] 1 Q.B. 543, 549; [1953] 2 W.L.R. 717; [1953] 1 All E.R. 822.
24[1908] A.C. 16.
25[1905] A.C. 93 , 95, 96.
26(1932) 37 Com.Cas. 213.
27[1940] 1 K.B. 812, 816; (H.L. ) [1942] A.C. 154.
28[1951] 2 T.L.R. 1158.
295 T.L.R. 677.
30[1891] 1 Q.B. 283 , 289-290.
31[1912] A.C. 1 , 5.
3224 Ll.L.Rep. 374.
33[1957] 2 Q.B. 233 , 251-252.
34[1940] 1 K.B. 812, 839; (H.L.) [1942] A.C. 154, 175.
35[1957] 2 Q.B. 233, 250, 251.
36Ibid. 268, 271-272.
37[1940] 1 K.B. 812, 839-840; (H.L.) [1942] A.C. 154, 175.
38[1957] A.C. 149, 166, 169, 173; [1957] 2 W.L.R. 45; [1956] 3 All E.R. 957.
39[1958] 1 Q.B. 74; [1957] 3 W.L.R. 596; [1957] 3 All E.R. 100.
40[1924] P. 208; 40 T.L.R. 845.
41[1957] 2 Q.B. 233, 248.
42Ibid. 268.
43[1954] 2 Q.B. 402; [1954] 2 W.L.R. 1005; [1954] 2 All E.R. 158.
44(1855) 11 Exch. 129.
45(1865) 18 C.B.N.S. 759.
46[1940] 1 K.B. 812; (H.L. ) [1942] A.C. 154.
4766 Ll.L.Rep. 147.
48[1957] A.C. 149.
49[1958] 1 Q.B. 74.
50[1940] 1 Q.B. 812, 839; (H.L.) [1942] A.C. 154 , 175.
51[1957] 2 Q.B. 233 , 255.
52[1924] P. 208 .
53 [1957] A.C. 149.
54[1893] A.C. 351, 357 et seq.; 9 T.L.R. 437.
5553 T.L.R. 650 .
56[1908] A.C. 16 .
57[1893] A.C. 351.
58Ibid. 354.
59(1889) 5 T.L.R. 677.
60[1912] A.C. 1.
61[1942] A.C. 154, 175; 57 T.L.R. 485; [1941] 2 All E.R. 165.
62[1893] A.C. 351; 9 T.L.R. 437.
63[1908] A.C. 16; 24 T.L.R. 114.
64(1932) 147 L.T. 503.
65(1937) 53 T.L.R. 650.
66(1926) 24 Ll.L.Rep. 374.
67[1957] 2 Q.B. 233, 248; [1957] 2 W.L.R. 509; [1957] 1 All E.R. 673.
68147 L.T. 503 , 514.
69147 L.T. 503 , 514.
70[1908] A.C. 16 , 19-20.
71[1908] A.C. 16 , 20.
7224 Ll.L.Rep. 374.
75[1893] A.C. 351 , 357.
76[1893] A.C. 351, 357.
77[1893] A.C. 351.
78[1908] A.C. 16 , 19-20.
7953 T.L.R. 650 , 653.
80[1893] A.C. 351.
81Ibid. 357.
82Ibid. 355.
83[1893] A.C. 351.
84[1893] A.C. 351.
85[1957] A.C. 149; [1957] 2 W.L.R. 45; [1956] 3 All E.R. 957.
86[1905] A.C. 93, 96; 21 T.L.R. 277 .
87[1908] A.C. 16 , 19-20.
88[1905] A.C. 93 , 96.
89[1941] A.C. 251, 268; 57 T.L.R. 280; [1941] 1 All E.R. 14.
90[1953] 1 Q.B. 543; [1953] 2 W.L.R. 717; [1953] 1 All E.R. 822.
91[1957] 2 Q.B. 233 , 269.
92Ibid. 269, 271-272.
93Ibid. 275.
9453 T.L.R. 650 , 653.
95147 L.T. 503 , 514.
96[1912] A.C. 1.
975 T.L.R. 677.
985 T.L.R. 677.
99[1912] A.C. 1.
100Ibid. 10.
101[1891] 1 Q.B. 283, 289, 301; 7 T.L.R. 174.
102[1957] A.C. 149.
103[1957] 2 Q.B. 233 , 246.
10424 Ll.L.Rep. 374.
10524 Ll.L.Rep. 374 , 375.
106[1957] 2 Q.B. 233 , 250.
10724 Ll.L.Rep. 374 .
108[1957] 2 Q.B. 233 , 252.
109147 L.T. 503, 514.
11053 T.L.R. 650.
111[1908] A.C. 16.