45. Larrinaga Steamship Company Ltd v The Crown (The “Ramon de Larrinaga”) [1943] VOL 75 Ll.l. Rep 64

Charterparty – employment and agency clause – losses caused by perils of the sea and charterers’ orders distinguished

The facts

The vessel was chartered by the British Crown during the Second World War under a charterparty containing a standard employment and agency clause reading as follows:-

“The Master shall prosecute his voyages with the utmost dispatch … and although appointed by the owners he shall be under the orders and direction of the charterer as regards employment, agency, or other arrangements; and the charterer hereby agrees to indemnify the owners for all consequences or liabilities that may arise from the Master or officers signing bills of lading or other documents or complying with such orders …”

Having received orders to proceed from a port in France and to make its way to the Bristol Channel, the first officer of the vessel (acting on behalf of the Master who was ill) received a specific instruction from the dock officer to leave the French port in a storm. The vessel’s bottom was damaged in heavy weather and the shipowners sought to hold the British Crown liable under the employment and agency clause.

Findings

Atkinson J viewed the dock officer as an agent of the charterers, the British Crown. He found that the proximate cause of the damage was the order to leave port in heavy weather. Charterers were liable.

The Court of Appeal (Greene MR, Mackinnon and Du Parcq LJJ) interpreted the employment and agency clause to refer to the employment of third parties. The indemnification in the employment and agency clause was therefore held not to apply and the decision of the court of first instance was overturned.

The House of Lords (Viscount Simon LC and Lords Thankerton, Wright, Porter and Goddard) gave the employment and agency clause its usual meaning. The House of Lords considered that the dock officer was not acting as a servant of the charterers. The loss was caused by a naval order for which charterers were not liable.

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