PARSONS CORPORATION AND OTHERS v. C.V. SCHEEPVAARTONDERNEMING “HAPPY RANGER” AND OTHERS (THE “HAPPY RANGER”) [2002] EWCA Civ 694

A contract of carriage is covered by a bill of lading for the purposes of the Hague-Visby Rules when the contract provides for, or contemplates, the issue of such a bill. The bill need not reproduce or independently evidence all the terms previously agreed by the contracting parties.

The words “in any event” in article IV rule 5(a) give the carrier the benefit of the package limitation even where the damage resulted from a failure to exercise due diligence to make the ship seaworthy. A limitation of liability differs from an exemption from liability, and therefore survives a breach of the overriding seaworthiness obligation.

The owners of the vessel Happy Ranger contracted to carry three heavy reactors from Italy to Saudi Arabia. One reactor was damaged when a hook on the vessel’s crane broke during loading. The claimants sought about US$2.4 million.

Tomlinson J held, on preliminary issues in the Commercial Court, that the Hague-Visby Rules did not apply because the contract was not covered by a bill of lading or similar document of title: [2001] 2 Lloyd's Rep. 530. The contract nevertheless incorporated a specimen bill of lading and contemplated the issue of bills.

The principal questions on appeal were whether the Rules applied compulsorily and, if so, whether article IV rule 5 limited liability notwithstanding an alleged breach of the obligation to exercise due diligence to make the vessel seaworthy.

1. Appeal allowed. Lord Justice Tuckey, with whom Lord Justice Aldous agreed, held that the Hague-Visby Rules applied compulsorily. A contract is “covered” by a bill of lading within article I(b), and “provides for its issue” within section 1(4) of the Carriage of Goods by Sea Act 1971, if a bill is issued or its issue is contemplated. The Rules do not require the contemplated bill to reproduce or independently evidence every term already agreed. The present contract expressly contemplated bills of lading and incorporated their specimen form.

2. The contract was a contract of carriage rather than a voyage charterparty. Its description, structure and provision for a part cargo supported that conclusion. The presence of terms commonly found in voyage charterparties was not decisive.

3. Lord Justice Tuckey rejected the claimants’ separate submission that the geographical “trade” alone caused the Hague-Visby Rules to be incorporated under the specimen bill’s paramount clause. The words requiring the Rules to “apply compulsorily” could not be deleted or manipulated. Lord Justice Rix disagreed on this issue. He considered that the clause incorporated the international regime fitting the geographical trade and that the approach in Adamastos Shipping should be applied. This disagreement did not affect the result.

4. The bills actually issued for the other shipments were not straight bills. Their printed terms required delivery to the named consignee “or assigns”, which had the effect of “or order”. The court left open whether a genuine straight bill is a bill of lading or similar document of title for the Rules, observing that textbook statements should not be assumed to be correct.

5. The package limitation in article IV rule 5(a) applied even if the damage resulted from a breach of the due-diligence obligation in article III rule 1. The expression “in any event” was unlimited. A limitation of liability is different in character from an article IV exemption, and rule 5(e) specifies the circumstances in which the limitation is lost. The claim was therefore subject to the article IV rule 5 limitation.

• Court of Appeal (Civil Division): Allowed the appeal, set aside the order below, held that the Hague-Visby Rules applied and that the claim was subject to article IV rule 5, and refused permission to appeal to the House of Lords: [2002] EWCA Civ 694.
• Commercial Court: Tomlinson J held on preliminary issues that the Rules did not apply because the contract was not covered by a bill of lading or similar document of title: [2001] 2 Lloyd's Rep. 530.