UK: Identity Of Carrier Conundrum Finally Resolved

Last Updated: 5 August 2003

Article by Miranda Karali and Charles Smith

The House of Lords in Homburg Houtimport -v- Agrosin Private Limited & Ors "The Starsin" [2003] 2 WLR 711 overruled the Court of Appeal decision and in so doing, finally resolved a confused area of law relating to the situation where the wording in the signature box on the front of the bill of lading conflicts with standard identity of carrier and demise clauses on the back.

It is now common for demise clauses and identification of carrier clauses to be tucked away on the back of bills of lading in barely legible tiny print. This would not matter if they merely confirmed the details of the carrier indicated in the signature box or set out elsewhere on the front of the bill, but when there is conflicting information on the back of the bill, the identity of the carrier is far from certain.

CONFLICTING DECISIONS

In Fetim B.V. -v- Oceanspeed Shipping ("The Flecha") [1999] 1 LLR 612 Moore-Bick J held that the owners were the contracting carrier in a bill of lading contract as the demise and identity of carrier clause on the back of the bill clearly indicated that result, even though another company was described as the carrier on the front of the bill.

In Sunrise Maritime -v- Uvisco ("The Hector") [1998] 2 LLR 287 Rix J held that the typed stipulation of the charterer, USEL, as carrier on the face of the bill must be regarded as superseding the standard form identity of carrier clause on the back. The "Hector" was time chartered to USEL on terms that the master was to authorise the charterers to sign bills of lading on their behalf in accordance with mates’ receipts. Rix J considered that the bill of lading should be read in light of all its terms and also by reference to the surrounding circumstances. He concluded that the owners were not a party to the bill of lading as it was clearly intended that the bills would be issued and signed on the charterers’ behalf. This decision left this area of law in a state of limbo as Rix J’s judgment made no reference to the prior decision of Moore-Bick J in The Flecha. It would surely be difficult to argue that these two cases are distinguishable on the facts. They are in fact irreconcilable.

This is where we come to The Starsin which came before Colman J at first instance. In this case, the shipowners time chartered the vessel "Starsin" to Continental Pacific Shipping Limited ("CPS") in October 1995 for one trip from the Far East to ports in Western Europe. The vessel carried a number of consignments of timber and plywood which had been shipped under separate bills of lading. When the ship reached its destination it was found that the consignments had been seriously damaged by fresh water because they had been negligently stowed on loading prior to the voyage. Although CPS had authority, by virtue of an identity of carrier and demise clause on the back of the bills of lading, to cause a contract of carriage to be created between the shipowners and the shippers, the bills were issued by CPS and signed by port agents "as agent for CPS (the carrier)," those words being typed on the signature box on the front of the bills. However, the shippers proceeded to sue the owners and demise charterers of the vessel for breach of the contracts of carriage evidenced by the bills of lading.

Colman J adopted the reasoning of Rix J in The Hector and treated the signature for CPS as "carrier" as superseding the effect of the printed demise and identity of carrier clause. He considered that the correct approach in this situation was to ask the question "in what sense could the shipper to whom the bill was originally issued be expected to have understood the words used?" He said that greater weight should be given to written or typed provisions, such as the words which appear above the signature, rather than standard form printed conditions.

The Court of Appeal reversed that decision by a majority, Rix L.J. dissenting. Morritt V-C and Chadwick LJ said that the bill of lading should be construed as a whole. The demise clause clearly stipulated that the charterer had the authority of the shipowner to issue the bill on the shipowner’s behalf and that clause was a term of the contract to which the merchant agreed. They reasoned that in trying to give effect to all the terms of the contract the description of the charterer as "carrier" in the signature box must yield to the identity of carrier clause.

THE HOUSE OF LORDS DECISION

The shipowners appealed to the House of Lords and their appeal was allowed in the House of Lords judgment published in March 2003. The House of Lords held that a shipper would understand from the face of the bills that they had not been signed by the master but by agents for CPS "as carrier" and therefore the bills were charterers’ bills and CPS was the contractual carrier. Lords Hoffmann and Steyn said that the decision in The Flecha was wrong.

Lord Steyn considered that the problem "must be approached objectively in the way in which a reasonable person, versed in the shipping trade, would read the bill". As Rix L.J. had done in the Court of Appeal, he gave predominant effect to terms on the face of the bill. He said that "given the speed at which international trade is transacted, there is little time for examining the impact of barely legible printed conditions at the time of the issue of the bill of lading".

Lord Hoffmann pointed out that a "reasonable reader of the bill of lading" will know that it is "addressed not only to the shipper and consignee named on the bill but to a potentially wide class of third parties including banks which have issued letters of credit". He noted that standard terms for letters of credit, the Uniform Customs and Practice for Documentary Credits ("UCP") were in force when these bills of lading were issued. By virtue of article 23(a)(v) of UCP, banks are required to state in letters of credit that they do not read the small print at the back of the bill. Lord Hoffmann considered that the reasonable reader "will know that a bank, one of the potential addressees which anyone issuing a bill of lading must have in mind, would accept it as meaning that the person named on the front as the carrier was indeed the carrier". Furthermore, "the reasonable reader of a bill of lading does not construe it as a whole. For some things he goes no further than what it says on the front. If the words there are reasonably sufficient to communicate the information in question, he does not trouble with the back. It is only if the information on the front is insufficient, or the questions which concern the reader relate to matters which do not ordinarily appear on the front, that he turns to the back and then calls in his lawyers to construe the document as a whole."

IMPLICATIONS FOR SHIPPING AND BEYOND

The House of Lords decision in The Starsin should be welcomed as giving due consideration to the commercial reality of bill of lading contracts. It is now clear that wording on the front of a bill will be conclusive on the identity of carrier and it is only if these words are not sufficiently clear that any identity of carrier and/or demise clause on the back of the bill will be given consideration. Shipowners and charterers should stand up and take note. If a clause on the back of the bill is meant to be determinative of the identity of carrier, corresponding words must appear prominently and clearly on the face of the bill.

There may also be wide ranging implications of this decision, beyond shipping law, on other standard form contracts. Indeed, does this decision warrant a departure from the traditional construction approach that English law has always adopted in trying to construe a contract as a whole, trying to give effect, if at all possible, to every clause in it? Does it perhaps, whilst clarifying the law on identity of carrier clauses, open the way to challenges on other standard contract terms? Time will tell but it is certain that the implications of this judgment are far reaching and not yet fully worked out.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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