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Incorporation – USA COGSA incorporated into a consecutive voyage charterparty – held that Hague rules liability regime effectively incorporated.

The facts
The vessel, a tanker, was let on a consecutive voyage charter over a period of 18 months. The first voyage was in ballast from Baltimore to load at Curaçao.
Over the 18 month period the vessel lost 106 days’ service due to breakdowns resulting from incompetence of engine room staff.
Charterer’s claimed damages being the difference between the charter and market rates of freight on cargo carrying voyages which might have been performed in the time lost.

The umpire, Megaw QC, found that due diligence had been exercised by the owners in the selection and appointment of the engine room staff, but in one instance, he found that the vessel was unseaworthy in respect of her machinery and that due diligence had not been exercised by the owners.

The main issues to be decided by the Commercial Court, Devlin J, were:

1 Whether the USA COGSA was effectively incorporated into the charterparty.
2 Whether the USA COGSA applied to non-cargo carrying voyages.
3 Whether USA COGSA applied only to cargo carrying voyages to and from USA ports as per the provisions of USA COGSA, and
4 Whether “loss or damage” referred to in the USA COGSA could relate also to the type of damage suffered in this case i.e. not physical loss or damage to the cargo.

The difficulties in the way of applying the USA COGSA were:

1 The incorporating clause itself described the contract into which the USA COGSA was to be incorporated as a “bill of lading” instead of a “charterparty”.
2 The specific provision in the USA COGSA that it does not apply to charterparties.
3 The charterparty itself contained a provision allowing charterers to operate the vessel worldwide; and
4 The charterparty itself envisaged both voyages in ballast and laden voyages.
The significance of incorporating the USA COGSA was that in terms of the charterparty on its own the owners’ liability for unseaworthiness was not limited by the due diligence obligation contained in The Hague Rules as incorporated in the USA COGSA.
Devlin J held that the USA COGSA applied but only to laden voyages albeit worldwide.
He also held that loss or damage was not confined to physical loss or damage.
The Court of Appeal (Denning, Parker and Sellers LJJ) upheld an appeal against Devlin J’s findings on the basis that the incorporation of the USA COGSA into the charterparty resulted in an incoherent “jumble” of provisions (per Parker LJ).
The House of Lords by majority of 3 – 2 upheld Devlin J’s decision, adding a further finding in the charterers’ favour that the USA COGSA applied to non-cargo carrying voyages also. The majority consisted of Viscount Simonds, Lord Keith of Avonholm and Lord Somervell of Harrow. The minority consisted of Lords Morton of Henryton and Reid.
The competing principles were that the court should be astute to give effect to commercial bargains but that the court could not, on the other hand, make a contract for the parties where there was incurable contradiction.
The pragmatic view that the parties intended to incorporate the liability regime in The Hague rules prevailed. Having regard, however, to the stark contradictions between the charterparty provisions and those in USA COGSA, this case represents a high watermark for the courts’ tolerance of contradictory provisions.
Ashton Roskill and Mocatta appeared.

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