66. Balli Trading Ltd v Afalona Shipping Co. Ltd (“The Coral”) [1992] 2 Lloyd’s Rep 158; [1993] 1 Lloyd’s Rep 1

Incorporation – bill of lading – time charterparty – effect of incorporating charterer’s obligations to load and stow into bill of lading

The facts

Steel sheets were shipped from Durban to two ports in Turkey under bills of lading entered into between the shippers and the owners of the vessel.

All terms, conditions, liberties and exceptions of a charterparty were said to be incorporated into the bills of lading.

A surveyor’s report indicated that when the ship left Durban, the cargo was adequately stowed. A portion of the cargo was discharged at the first port, disturbing the integrity of the packing. The ship encountered heavy weather between first port and the second, and on arrival at the second, the cargo was found to be damaged.

The shippers claimed against the owners as bailees. Goods were delivered to the bailees in good order and the onus was on the bailees to show that they were excused from liability for damage. The owners argued that incorporation of the charterer’s obligation to load and stow contained in the charterparty transferred liability to the charterer.

The shippers applied for summary judgment under RSC 0.14.

Findings

Sheen J found that the charterer’s obligation to load and stow in terms of the charterparty remained an obligation of the charterers to the owners and did not create privity of contract between the shipper and the charterers, despite incorporation of the terms and conditions of the charterparty.

The Court of Appeal (per Beldam LJ, Nourse and Stocker LJJ concurring) referred to Pyrene Co Ltd v Scindia Steam Navigation Co. where the court had held that Article III rule 2 of the Hague Rules imposing liability on the carrier for loading and stowage did not preclude the parties from agreeing that some duties would be carried out by the shipper. This indicated a possibility that the true construction of the bills of lading might make the charterer liable.

The charterer’s liability was not clearly excluded so that the owners had a possible defence to the shipper’s claim.

 

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