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Carriage of Goods by Sea

Mitsubishi Corporation -v- Eastwind Transport Limited and Others

December 2004

Mitsubishi Corporation were the holders of 19 bills of lading issued between October 2001 and January 2002 in connection with the carriage of 155,985 cartons of fresh frozen chicken parts from Brazil to Japan in the reefer vessel Irbenskij Proliv.

The terms and conditions of carriage were the subject of no less than 37 clauses set out on the reverse side of each of these bills. Clause 4, a lengthy and comprehensive provision described as the "carrier's exemption clause", stipulated that the carrier was not to be responsible for loss or damage to or in connection with the goods shipped of any kind whatsoever, "howsoever caused". The clause proceeded to make it clear that these words included loss or damage caused by unseaworthiness or unfitness of the vessel, or by "faults, errors or negligence, or otherwise, howsoever". Furthermore, part B of the clause went on to exclude the carrier from liability for loss or damage "of any kind whatsoever ... arising or resulting from" a large number of specific causes including, finally, "any other cause whatsoever, whether or not of a like kind to those above-mentioned and including negligence on the part of the carrier, his servants, agents or others".

It was common ground that, if effective, clause 4 would protect the defendant carriers from liability for the cargo damage claims made by Mitsubishi, which were based on allegations of the carriers' negligence and the unseaworthiness or uncargoworthiness of the Irbenskij Proliv. Thus, the preliminary issue before the Commercial Court was whether clause 4 was, indeed, effective to exempt the carriers from any such potential liability.

It was agreed that that question fell to be determined as a matter of common law. (The goods having been shipped from Brazil, the Hague/Hague-Visby rules did not apply.)

Ian Glick Q.C., sitting as a deputy judge, emphasised in his summary of the principles involved that the approach of the common law to the construction of contracts was not a literalist one. If the giving of "their full and complete meaning" to words in a contract would produce a result at odds with the contract's main object, then the court will give those words a restricted meaning. Indeed, the court may have to reject the words, or even whole provisions, if they are inconsistent with the main purpose of the contract. Wherever possible, however, the court will attribute to the words a meaning consistent with the main purpose of the contract.

The judge rejected Mitsubishi's submission that, properly construed, clause 4 meant that the carrier had no liability at all for any breach of contract, thereby reducing the contract to "a mere declaration of intent". He was satisfied that phrases like "howsoever caused", "or otherwise howsoever" and "arising or resulting from ... any other cause whatsoever" bore a restricted meaning and did not relieve the carriers of liability for any and every breach of contract. Such expressions did not, for example, cover loss or damage caused by the carriers' dishonesty; nor would they protect the carriers against an arbitrary refusal to carry goods to their destination. The fact that clause 4 shifted most risks that might result in transit loss or damage from the carrier to the bill of lading holder was not inconsistent with the purpose of a commercial contract of carriage if the bearer of those risks can insure them.

In his judgment there was therefore no reason to reject clause 4. Rather, it was effective to protect the carrier where loss or damage to goods resulted from causes enumerated in the clause. It followed that the defendant carriers were exempt from any potential liability for Mitsubishi's claims.

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