In a welcome decision on clauses paramount in bills of lading, the Court of Appeal yesterday sent a clear message that it preferred commercial common sense over clever but convoluted construction. In Yemgas FZCO & Ors v Superior Pescadores SA [2016] EWCA Civ 101 machinery was damaged to the tune of $3.6 million while being carried from Antwerp to Yemen under a Congenbill clone. The point in issue was the limit of liability. The bill of lading contained in effect the standard Congenbill clause paramount, like so:
“The Hague Rules contained in the International Convention for the Unification of certain rules relating to Bills of Lading, dated Brussels the 25th August 1924 as enacted in the country of shipment shall apply to this contract. When no such enactment is in force in the country of shipment, the corresponding legislation of the country of destination shall apply, but in respect of shipments to which no such enactments are compulsorily applicable, the terms of the said Convention shall apply.”
One might have thought it obvious, as the carriers’ P & I club did, that since Belgium was a party to Hague-Visby the Hague-Visby limitation applied by force of law. But cargo had a trick up its sleeve. Fastening on the reference to the “Hague Rules contained in the International Convention for the Unification of certain rules relating to Bills of Lading, dated Brussels the 25th August 1924 as enacted in the country of shipment”, it argued that this referred exclusively to the old Hague Rules, including the original £100 gold limitation, which yielded a much higher figure than Hague-Visby. The parties had therefore, it said, agreed – as they were entirely free to do – on a higher figure than that provided for in Hague-Visby.
Males J agreed that the reference to the Hague Rules was indeed a reference to the old rules. He nevertheless rejected cargo’s somewhat implausible argument, on the basis that the mere inclusion of a reference to the 1924 Hague Rules in a case otherwise governed compulsorily by Hague-Visby did not amount to an implicit rejection of the Hague-Visby limits.
The Court of Appeal dismissed cargo’s appeal, but on a wider ground. Longmore LJ found Males J’s holding on intention highly plausible. But he did not have to pronounce finally on it, since he thought, like the other members of the Court, that on a reasonable businessman’s reading the reference to the “Hague Rules contained in the International Convention for the Unification of certain rules relating to Bills of Lading, dated Brussels the 25th August 1924 as enacted in the country of shipment” was a reference to Hague or Hague-Visby, as the case might be according to legislation currently in force in the state of shipment.
With respect, this seems entirely right. With its robust reference to the understanding of people in the shipping market rather then minute exegesis, It will also (one suspects) avoid a great deal of pettifogging argument of the kind that can lead shippers and others to despair of the ability of English courts to reach commercially sensible results.
There is only one qualification. Some bespoke forms of bill of lading (and charters), having incorporated in the clause paramount the reference in question to the “Hague Rules contained in the International Convention for the Unification of certain rules relating to Bills of Lading, dated Brussels the 25th August 1924 as enacted in the country of shipment”, then explicitly go on to refer separately to trades where Hague-Visby is applicable as a matter of mandatory law. In such a case, Tomlinson LJ is presumably right to suggest that, in situations where Hague-Visby is not compulsorily applicable, the reference can only be to the old rules (as was held to be the case in The Happy Ranger [2003] 1 C.L.C. 122).