RIX J: These proceedings concern a typical cargo claim arising out of
allegations of wetting damage to steel coils carried on a voyage from
Newport in Wales to Anzio and La Spezia in Italy on the vessel S. M.
in December, 1996. Four different consignees are the plaintiffs, the
defendants are the owners or demise charterers of the vessel, the cargo
concerned was carried under 13 separate bills of lading, and the alleged
damage amounts to some #62,000.
The plaintiff consignees are Italian, the defendant owners are Dutch.
The question before me is whether, for the purpose of the Brussels
Convention, 1968, the plaintiffs must sue the defendants in Holland,
where they are domiciled, or may obtain jurisdiction here in England on
the basis of art 5(1).
This question is part of a more complex series of jurisdictional issues
which have arisen out of the provision of security to the plaintiffs on
behalf of the owners, a subsequent arrest of the vessel in England in
October, 1998, and a further arrest here in April, 1999. The plaintiffs'
primary case is that they have successfully arrested the vessel not once,
but, in order to meet objections by the owners, twice, in an English
action in rem, and that they have therefore established jurisdiction
here under art 7 of the International Convention for the Unification
of Certain Rules Relating to the Arrest of Sea-going Ships, 1952 (the
"Arrest Convention"). It is common ground that if the English Court has
jurisdiction to determine the case on the merits within art 7 of the Arrest
Convention, then, by reason of art 57 of the Brussels Convention which
gives precedence to other Conventions on jurisdiction, the owners must
defend the case here. However, the owners contend that the plaintiffs
cannot bring themselves within art 7 of the Arrest Convention and must
therefore fail to sustain jurisdiction in England unless they can bring
themselves within art 5(1) of the Brussels Convention. This judgment is
exclusively concerned with art 5(1), for, without prejudice to the position
under the Arrest Convention (or otherwise, for the plaintiffs also rely on
arts 17 and 18 of the Brussels Convention), the parties have limited their
submissions in the first instance to art 5(1).
So far as Counsel have been able to determine, there is no authority
either in England or in the European Court of Justice which decides
how art 5(1) operates in the context of a bill of lading cargo claim. This
may well demonstrate that most such cases are brought within the
Arrest Convention. Potentially, however, this is a point of considerable
importance.
Article 5(1) provides as follows:
A person domiciled in a Contracting State may, in another Contracting
State, be sued:
(1) in matters relating to a contract, in the courts for the place of
performance of the obligation in question...
I will also have to refer to art 5(3), which continues:
(3) in matters relating to tort, delict or quasi-delict, in the courts for the
place where the harmful event occurred...
The basic rule of the Brussels Convention, of course, is that persons
domiciled in a Contracting State must be sued in the Courts of that
state (art 2). I remind myself, as Lord Goff of Chieveley put the matter
in Kleinwort Benson Ltd v Glasgow City Council, [1999] 1 AC 153 at p
167B, when considering the judgment of the European Court in Kalfelis v
Bankhaus Schroder Munchmeyer Hengst and Co, (Case 189/87), [1988]
ECR 556, that --
... the court stressed (see paragraph 19) that the "special jurisdictions"
in articles 5 and 6 must be interpreted restrictively; and further stressed
(see paragraph 20) that, while disadvantages may arise from different
aspects of the same dispute being adjudicated upon by different courts,
the plaintiff is always entitled to bring his action in its entirety before the
courts of the defendant's domicile.
The basic principles relating to the invocation of the special jurisdiction in
art 5(1) are by now well established: see in general Kleinwort Benson v
Glasgow at pp 163-166. In particular, the "obligation in question" --
... cannot be interpreted as referring to any obligation whatsoever arising
under the contract in question, but is rather that which corresponds to the
contractual right on which the plaintiff's action is based.
see Custom Made Commercial Ltd v Stawa Metallbau GmbH, (Case
C-288/92), [1994] ECR I-2913, 2957 (par 23), reaffirming Ets A de Bloos
Sprl v Societe en commandite par actions Bouyer, (Case 14/76), [1976]
ECR 1497. Thus, in Shenavai v Kreischer, (Case 266/85), [1987] ECR
239 the European Court declined to apply generally a doctrine that had
been applied to contracts of employment, that it is the obligation which
characterizes the contract that is the obligation in question. Instead the
European Court returned to the reasoning in de Bloos and added:
Admittedly, the above rule does not afford a solution in the particular case
of a dispute concerned with a number of obligations arising under the
same contract and forming the basis of the proceedings commenced by
the plaintiff. However, in such a case the court before which the matter
is brought will, when determining whether it has jurisdiction, be guided
by the maxim accessorium sequitur principale; in other words, where
various obligations are at issue, it will be the principal obligation which will
determine its jurisdiction...
These principles were emphasized and applied in the House of Lords
in a case concerning a charter-party, Union Transport Plc v Continental
Lines SA [1992] 1 Lloyd's Rep 229; [1992] 1 WLR 15. The charter-party
there was not for a specific vessel but for a vessel to be nominated:
the ship-owner refused to nominate, and as a result no vessel ever
proceeded to the loading port. It was held that the obligation in question
was the obligation to nominate, which fell to be performed in London, not
the obligation to proceed to and present at the loading port in Florida.
The reason given was that nomination was an essential preliminary
to the identification of any particular vessel upon which the obligation
might then fall to proceed to the loading point. It mattered not that
the obligation to nominate preceded in time the accessory obligation
of sending that vessel for loading: the critical matter was that it was
"the more fundamental obligation". It was also the "principal ground of
complaint" or "real ground of complaint" (per Lord Goff at p 234, col 1;
p 22G and p 234, col 2; p 23B) and in no sense an allegation contrived
for the purpose of founding jurisdiction. The contrary argument, that
there was good sense in choosing the obligation to proceed to the loading
port as that would reflect the rationale of art 5(1) which was based on
the presumption that there would be a particularly close relationship
between the dispute and the Court given special jurisdiction, was rejected
on the ground that this was straying back to the test of the characteristic
obligation of the contract, which had been rejected by the European
Court. As Lord Goff concluded (at p 234, col 2; p 23E):
... For the defendants were, I felt, in reality seeking to persuade your
Lordships to look for the obligations which characterized the contract as
a contract for the carriage of goods by sea, rather than for the principal
obligation in question and the place where that obligation was performed.
It was common ground before me that art 5(1) could be properly invoked
in that the plaintiffs' claim was "in matters relating to a contract".
Although the traditional form of pleading a cargo claim in England,
followed in this case, embraces not only contract, but also bailment and
tort there was no attempt on the part of the owners to submit that a
different approach should be taken to the plaintiffs' various causes of
action: they were content to take their stand on the question of the
"obligation in question".
The bills of lading concerned are in the simple "Congenbill" form. Thus
the front of each bill states -- "FOR CONDITIONS OF CARRIAGE SEE
OVERLEAF". Overleaf, the first clause incorporates the conditions of any
charter-party "dated as overleaf", ie on the front of the bills, but no
charter-party was so dated. The second clause is a general paramount
clause which in this case, as is common ground, incorporated the Hague-
Visby Rules (the "rules"). The only other part of the bill referred to by
either party was the standard wording on the front of the bill to the effect
--
Shipped at the Port of Loading in apparent good order and condition
on board the Ocean Vessel for carriage to the Port of Discharge or so
near thereunto as she may safely get the goods specified above. Weight,
measure, quality, quantity, condition, contents and value unknown.
On behalf of the plaintiffs Mr David Bailey submitted that the principal
obligation in question was the obligation under art III, r 1 of the rules
that:
The carrier shall be bound before and at the beginning of the voyage
to exercise due diligence... to make the ship seaworthy and the holds
fit and safe for the cargo's reception, carriage and preservation. In
this case, he continued, that obligation fell to be performed at the port
of loading, Newport. There was therefore jurisdiction in the Courts of
England and Wales. In as much as there was also an obligation under art
III, r 2 of the rules to carry and care for and discharge the cargo, those
were ancillary obligations. If, however, any of those, eg the obligation to
discharge the cargo in good order and condition, was to be regarded as
a principal obligation too, then, the plaintiffs should have an option to
choose jurisdiction in the place where either principal obligation fell to be
performed.
On behalf of the owners, on the other hand, Mr Timothy Hill submitted
that the obligation or principal obligation in question was the duty to
deliver the goods carried under the bills of lading in the like good order
and condition as when shipped. That was, he said, the fundamental
obligation of these, as of any, contracts of carriage by sea, as was
demonstrated by the language of the "Shipped... in apparent good order"
clause on the face of the bills. It was also the obligation mentioned
first and foremost in the plaintiffs' statement of claim. Thirdly, it made
good sense to have a single, clear, simple, rule which could be applied
in every case of a bill of lading contract, that a special jurisdiction could
be founded at the Courts for the port of discharge. That would tend to
enable consignees to sue in their own jurisdiction, which would make
good sense as an alternative to the jurisdiction of the domicile of the
shipowner mandated by art 2.
Mr Hill sought to support his third submission by reference to the recent
case of Reunion Europeenne SA v Spliethoff's Bevrachtings Kantoor
BV, [1999] CLC 282. In that case a consignment of pears was shipped
from Australia to Rotterdam, with on-carriage by road to France, where
it was delivered to the consignee (Brambi). On arrival in France, the
pears were found to be damaged. The bill of lading was issued by an
Australian company, RCC. The sea carriage was in fact performed by
Dutch shipowners, Spliethoff's. The consignee's insurers sued both RCC
and the Dutch shipowners in France. The tribunal de commerce allowed
jurisdiction against RCC, but declined it against Spliethoff's on the ground
that art 5(1) permitted suit in Rotterdam, not France. The Paris Cour
d'Appel confirmed that judgment. The Court de Cassation referred the
matter to the European Court. The European Court, however, held that
there was no contract freely entered into between the consignee and the
actual sea carrier, and therefore that the matter did not come within art
5(1) at all. It did not discuss in any way what might have been its view
of the matter if it had found a suitable contractual relationship to exist.
Mr Hill accepted that for present purposes the judgment of the European
Court was neutral, but nevertheless relied on the decisions of the French
Courts at the level of the tribunal de commerce and the Cour d'Appel.
However, apart from the fact that the relevant obligation was there
viewed as one to be performed at Rotterdam, he was not able to say what
the reasoning of the French Courts was. There may have been common
ground that the relevant place of performance was at destination, and
dispute only as to whether that destination should be regarded as the
ultimate destination of the whole carriage in France or merely that at the
end of the sea carriage in Rotterdam. I can therefore derive no assistance
from that case.
Mr Hill's support for a single, simple rule in favour of the discharge port as
being the place of performance of the obligation in question seems to me
to be an attempt to find the place of performance of an obligation which
is characteristic of the contract, and therefore to suffer from the same
error as that referred to by Lord Goff in Union Transport v Continental
Lines. In other words, Mr Hill's rule ignores the requirement of the cases
in the European Court that the obligation in question must reflect "the
contractual right on which the plaintiff's action is based". In any event,
it is in my judgment an error to characterize a damage to cargo claim
under a bill of lading incorporating the Hague-Visby (or Hague) Rules as
one based on an obligation to discharge goods in the same good order
and condition as when loaded. That is to reflect the language of bailment.
The fundamental obligation under a Hague or Hague Visby Rules contract
of carriage, however, is not the obligation to keep and return (subject
to proof that any loss or damage has occurred without fault), but the
obligation to exercise due diligence.
It follows, as it seems to me, that everything will depend on the nature
of the bill of lading holder's claim. If the shipowner has misdelivered the
goods at destination, then the place of performance of the obligation in
question may well be at the port of discharge. If the ship is seaworthy,
but the alleged failure of due diligence is some lack of care during
the voyage, eg a failure to tighten the lashing as needed, or to
maintain reefer temperatures at the appropriate level, then the place of
performance of the obligation in question, viz the obligation to carry and
care for the goods with due diligence, may well have occurred on the high
seas, in which case there will be no special jurisdiction within art 5(1) and
the matter must rest with art 2. If, however, the fundamental matter of
complaint is that the shipowner never provided a seaworthy vessel, then
the place of performance of the obligation of question would seem to me
to be at the port of loading.
Mr Hill submits that there may be breach of the obligation under art III, r
1, to exercise due diligence to make the ship seaworthy, but no damage:
the failure of due diligence only becomes relevant at discharge if damage
has occurred. This seems to me to mistake the issues of breach and
damage. There must be many situations where the contractual breach
is of an obligation which falls to be performed at one place, whereas the
damage consequential on that breach takes place at another place -- or,
with luck, never takes place at all.
Mr Hill's point about the plaintiffs' statement of claim also proceeds, to my
mind, from the same confusion between the position under a contract of
carriage incorporating the Hague or Hague-Visby Rules and the classical
form of an English pleading which wraps up bailment, tort and contract in
one plea. Thus under par 5 of that pleading the plaintiffs allege that the
shipowners were --
... under a duty... as carriers by sea for reward and/or as bailees... and/
or under the contracts of carriage... to take reasonable care of the said
cargoes and to deliver the same in the same order and condition as they
were in when shipped.
Even in that paragraph, however, the pleader states the first duty
as being "to take reasonable care of the said cargoes" and only then
proceeds to the obligation of delivery. Moreover, when the pleader turns
specifically to the allegation in contract and pleads the Hague-Visby
Rules, although he chooses to begin with art III, r 2, it is plain that
the gravamen of the complaint, having recited the damage found at
discharge, is that contained in particular (3) under par 8, namely that --
... the hatch covers to the holds in which the Anzio cargo and/or Spezia
cargo were carried were not watertight and/or were not properly battened
down during or at the commencement of the voyage to Anzio and/or
Spezia thereby allowing seawater to enter the holds.
That leads naturally to the complaint under art III, r 1 that the
shipowners failed to exercise due diligence to provide a seaworthy ship or
holds fit for the cargo.
If, therefore, looking at the pleadings, I had to say what the "principal
or substantial failure" or "principal" or "real ground of complaint" was
(to pick up the language used in Union Transport v Continental Lines),
or, in the language of art 5(1) itself, what the "obligation in question"
upon which the plaintiffs' claim was based was, I should say it was the
failure to use due diligence to provide a seaworthy ship. Everything else is
subordinate or accessory.
Mr Bailey submitted, if necessary, that there could be two principal
obligations in question. In this connection he referred me to what
Lord Justice Lloyd said in the Court of Appeal in Union Transport Plc v
Continental Lines SA, [1991] 2 Lloyd's Rep 48 in an obiter passage at
pp 51-52. The question there was left open, and the House of Lords
did not comment on it. I see no need in this case to take the matter
further. I would merely comment that Lord Justice Lloyd there seems to
have thought that where different principal obligations point to different
jurisdictions, the litigation may become fragmented. Mr Bailey submitted
that that would not be necessary, if the claimant could choose the
Courts of the place of performance of either principal obligation. In this
connection he pointed to the option which the claimant has in connection
with art 5(3) of the Brussels Convention, to proceed either in the Courts
for the place where the damage occurred or in the Courts for the place
of the event which gave rise to the damage: Handelswekerij GJ Bier BV v
Mines de Potasse d'Alsace SA (Case 21/76), [1976] ECR 1735. This is an
interesting submission, but its consideration should in my judgment await
another day.
In conclusion, therefore, I am satisfied that the obligation in question
in this case was the obligation to exercise due diligence to provide
a seaworthy ship at the commencement of the voyage, and that the
plaintiffs were entitled on that ground, failing any other ground based
on art 7 of the Arrest Convention or otherwise, to found jurisdiction in
England.