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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Caresse Navigation Ltd v Zurich Assurances Maroc & Ors [2014] EWCA Civ 1366 (21 October 2014) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2014/1366.html Cite as: [2014] EWCA Civ 1366, [2015] 1 QB 366, [2014] WLR(D) 444, [2015] 1 Lloyd's Rep 256, [2015] 2 WLR 43, [2015] QB 366, [2014] 2 CLC 851

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE, QUEEN'S BENCH DIVISION
COMMERCIAL COURT
The Hon. Mr Justice Males
[2013] EWHC 3471 (Comm)

		Royal Courts of Justice Strand, London, WC2A 2LL
		21st October 2014

Lord Justice Beatson:

Introduction

1. This is an appeal against an interim anti-suit injunction made by Males J on 14 October 2013: see [2013] EWHC 3471 (Comm). The dispute concerns a claim under a bill of lading on the "Congenbill 1994" form of just over US$1 million for damage to a cargo of coal shipped on the vessel Channel Ranger from Rotterdam to Nador in Morocco in April 2011. Males J granted the injunction because he had previously decided^[1] that the bill of lading incorporated an English law and exclusive jurisdiction clause referred to in the charterparty.
2. The shipowner, and respondent to the appeal is Caresse Navigation Ltd ("Caresse"), a Marshall Islands company. The consignee and receiver of the cargo is the Office National de L'Electricite ("l'ONE"), a Moroccan state electricity generating company, and the appellants are its insurers and parties to whom rights of suit under the bill of lading appear to have passed under Moroccan law. I shall refer to the appellants as "the cargo interests". The injunction restrained the cargo interests from pursuing proceedings which they had commenced under the bill of lading in the Commercial Court in Casablanca, Morocco against the Master of the Vessel in his capacity as a representative of Caresse, the shipowner. At the conclusion of the hearing, my Lord the Master of the Rolls stated that the appeal would be dismissed. I now give my reasons for that decision. My reasons are substantially the same as those given by the judge in his admirably clear judgment.

The terms of the bill of lading and the charterparty

3. The bill of lading evidenced or contained a contract of carriage between Glencore International AG ("Glencore"), the shipper, and Caresse. Clause (1) of its printed conditions of carriage provides:

"All terms, and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration clause are herewith incorporated"

The fundamental question is whether, in the circumstances of this case, these words have the effect of incorporating an English law and exclusive jurisdiction clause referred to in the charterparty.

4. A box on the front page of the form of the bill of lading in this case (dated 6 April 2011) contains a typed clause using materially the same words as clause (1) of the printed conditions to express the scope of the incorporation. It stated:

"Freight payable as per Charter Party. All terms, conditions, liberties and exemptions including the law and arbitration clause, are herewith incorporated".

Another box on the front page of the bill of lading identified the charterparty as "dated 06.01.2011". Clause (2) of the printed terms is a General Paramount clause, providing for (in this case) the Hague-Visby Rules to apply to the bill of lading contract.

5. The charterparty in question was a voyage charter in the form of an email fixture recap dated 6 January 2011 which set out the main terms and concluded

"… otherwise as per proforma C/P Glencore/Eitzen latest C/P dated 14 January 2009 (see attached) logically amended as per main terms agreed".

The Glencore/Eitzen charterparty was on the Americanised Welsh Coal Charter ("AmWelsh") form 1979, clause 5 of which provided:

"This Charter Party shall be governed by English Law, and any dispute arising out of or in connection with this charter shall be submitted to the exclusive jurisdiction of the High Court of Justice of England and Wales."

The factual and procedural background

6. Caresse chartered the "Channel Ranger" to U-Sea Bulk A/S by a contract on an amended NYPE form dated 23 March 2011 in order for U-Sea Bulk A/S to perform a shipment which it had agreed to perform under a voyage charter with Glencore dated 6 January 2011. That voyage charter was made by an email fixture recap containing the clause referring to the Glencore/Eitzen charterparty set out in [5] above.
7. The shipment of the cargo of 39,001.503mt of "coal in bulk" was acknowledged by the bill of lading which described the cargo as "Charbon vapeur" and stated that it was "shipped in apparent good order and condition". As the cargo was consigned to the order of l'ONE, the bill was negotiable and took effect as a contract between the shipowner and Glencore. Page 1 of the "Congenbill 1994" form states "to be used with charterparties". I have referred (see [3] and [4] above) to clause (1) of the printed conditions of carriage and to the box stating that "freight is payable as per CHARTER-PARTY, dated 06.01.2011".
8. On arrival at Nador, it was discovered that the temperature of the cargo had increased. Due to the risk of flammable gas evolution, it was decided to douse a hotspot in the hold with water to preserve the safety of the vessel, the rest of the cargo, and those on board. After the cargo was discharged, l'ONE complained that it had been damaged by the self-heating and dousing and intimated its claim against Caresse under the bill of lading. As a result of that, on 8 June 2011, Caresse instituted these proceedings seeking a declaration of non-liability against l'ONE and the other cargo interests. Hamblen J granted Caresse permission to serve out of the jurisdiction. Service on the insurers in Morocco was only effected on 25 February 2013. Service on l'ONE was effected on 6 May 2013.
9. On 28 March 2013, l'ONE and the other cargo interests commenced the proceedings in Morocco to which I have referred. On 22 May 2013, l'ONE and the other cargo interests challenged the jurisdiction of the English court in these proceedings. It was the Moroccan proceedings which, in turn, led to Caresse applying on 13 August 2013 for an interim anti-suit injunction to restrain pursuit of the Moroccan proceedings on the ground that those proceedings were in breach of the exclusive jurisdiction clause in clause 5 of the Glencore/Eitzen charterparty incorporated into the bill of lading via the charterparty in the fixture recap dated 6 January 2011.
10. The cargo interests' challenge to English jurisdiction was rejected by Males J: see [2013] EWHC 3081 (Comm), reported at [2014] 1 Lloyd's Rep 337. He held that Caresse had a good arguable case that the bill of lading was governed by English law, and thus satisfied the jurisdictional gateway in CPR PD 6B para. 3.1(6)(c). He also held that the bill of lading incorporated an English law and exclusive jurisdiction clause referred to in the charterparty, thus going further than what would have been required to satisfy the jurisdictional gateway in CPR PD 6B para. 3.1(6)(d). It was on the basis of the latter decision that, after handing down his decision, he granted the anti-suit injunction. The cargo interests appeal, with his permission, against his decision to grant that injunction.
11. The judge did not give the cargo interests permission to appeal against his rejection of their challenge to English jurisdiction, and they did not renew that application after Aikens LJ refused permission on the papers. They have pursued their appeal against the injunction and continue to assert that the English Court does not have jurisdiction over them. Mr Byam-Cook's skeleton argument on behalf of Caresse contends that this amounts to seeking to have matters both ways and that is an abuse of process. That question was not, however, canvassed before us at the hearing.

The judge's decision

12. The judge decided that the voyage charter in the fixture recap incorporated clause 5 of the Glencore/Eitzen charterparty. He concluded that the effect of the bill of lading, and in particular printed clause (1) set out at [3] above and the typed clause set out at [4] above, was to incorporate the English proper law and exclusive English jurisdiction clause in clause 5 of the Glencore/Eitzen charterparty into the bill of lading. His reasoning was as follows:

(1) There is a particular need for clarity and certainty in the rules governing the incorporation of charterparty clauses into bills of lading because of the negotiable nature of bills of lading and the fact that they may come into the hands of parties who are not aware of the terms of the charterparty: see [38] and [42], citing Federal Bulk Carriers Inc v C Itoh and Co Ltd (The Federal Bulker) [1989] 1 Lloyd's Rep 103 and Siboti K/S v BP France SA (The Siboti) [2003] EWHC 1278 (Comm), reported at [2003] 2 Lloyd's Rep 364 at [24].

(2) General words of incorporation in a bill of lading (however wide) will not be effective to incorporate an arbitration or jurisdiction clause because such clauses are "ancillary" to the main contract to which they relate: see [38], citing The Siboti.

(3) A specific reference to an arbitration or jurisdiction clause in a bill of lading will be effective. In such a case, it does not matter that the wording of the clause in the charterparty may require some degree of manipulation to make it applicable to the bill of lading: see [38], citing The Delos [2001] 1 Lloyd's Rep 703.

(4) The question whether, when referring to "arbitration", the parties clearly meant "jurisdiction", is "essentially one of construction rather than incorporation". Although the question "can be posed by asking whether the jurisdiction clause in the charterparty is incorporated into the bill of lading, the real question is what the parties should reasonably be understood to have meant by the words 'law and arbitration clause', which plainly contemplate the incorporation of at least one kind of ancillary clause. That is a question to be answered objectively, having regard to the background circumstances, which include the fact that the charterparty does not contain an arbitration clause, but does contain a law and jurisdiction clause": see [43].

(5) "[S]pecial rules to the effect that ancillary clauses will not be incorporated unless specific words are used are of comparatively little weight in deciding whether specific words which are accepted to be effective to incorporate at least one kind of ancillary clause (an arbitration clause) can properly be read as extending also to another kind of ancillary clause": see [43].

(6) The submission on behalf of the cargo interests that there was no reason to suppose that the parties had made a mistake in referring to "arbitration" rather than "jurisdiction" was rejected: see [40] and [43].

(7) The only clause in the charterparty to which the parties could have intended their words to refer is the law and jurisdiction clause. Accordingly, it is "a more natural construction of the bill of lading to read it as referring to that clause, rather than to read it as referring to an arbitration clause in the charterparty 'if any'". The judge saw no basis for adding the words "if any" into the bill of lading when the original parties to that contract (Glencore and Caresse) knew, or must be taken to have known, that the charterparty contained no arbitration clause, because that would render the specific incorporating words empty of content: see [44].

(8) It followed that the principle stated by Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, reported at [2009] 1 AC 1101 at [25] applies to this case. This is because it is (a) "clear that something has gone wrong with the language" and (b) it is clear "what a reasonable person would have understood the parties to have meant": see [45].

(9) Provided the clause in the charterparty was one which was usual in the trade and can be identified as the one which the parties to the bill of lading contract clearly had in mind when referring to the charterparty, this conclusion did not (see [47] – [48]), run counter to the particular need for clarity and certainty in this context (see (1) above) because:

(a) A consignee would be bound by whatever terms the original parties to the bill of lading had agreed by the reference to the charterparty arbitration clause although it would not know, for example, the seat of the arbitration and whether the tribunal was to be a sole arbitrator or a panel without reference to the charterparty; and

(b) The consignee would know from the specific words in the bill of lading that the incorporation extended to at least some ancillary clauses concerned with choice of law and dispute resolution and was not confined to terms which were "germane to the shipment, carriage and delivery of the goods".^[2]

(10) It followed from (9) that "the consignee is equally bound by a clause in the charterparty which can be identified as the clause which the parties to the bill of lading contract clearly had in mind when referring to the charterparty "law and arbitration clause", at any rate provided that (as here) the clause in question is one that was usual in the trade", and the judge so concluded: see [48].

13. After reaching his conclusion, the judge stated (at [49]) that he was reinforced in it by the decision of Gloster J in YM Mars Tankers Ltd v Shield Petroleum (Nigeria) Ltd [2012] EWHC 2652 (Comm). In that case the bill of lading was on the Congenbill form and used the standard wording incorporating the "law and arbitration clause" of the charterparty. The relevant clause in the charterparty provided that disputes involving sums less than US$50,000 were to go to arbitration in accordance with the LMAA small claims procedure, but disputes involving a sum in excess of that were to be subject to the jurisdiction of the English court. Gloster J rejected the submission that the bill of lading did not, on its true construction, provide for the jurisdiction of the English court over a claim for an amount in excess of US$50,000. She stated (at [30]) that "it would be un-commercial to suggest that, simply because the 'law and litigation clause' in the Head Charterparty provides that the arbitration should be limited to disputes below a certain level, that somehow meant that only the arbitration provision should be carved out for the purpose of the bill of lading." She also stated that it would be "absurd" to suggest that, once the claim threshold is exceeded, no jurisdictional provisions are incorporated.
14. The judge recognised that case is not on all fours with this case but (at [50]) considered that it "demonstrates that the question for decision is a question of construction of the bill of lading and that, at least in some circumstances, a reference to 'arbitration' in the bill of lading may properly be read as providing for court jurisdiction…".

Analysis of the appellants' case

15. English law has long recognised the particular need for certainty that follows from the negotiable nature of a bill of lading, which may come into the hands of a person in another jurisdiction who has no ready means of ascertaining the terms of the charterparty. It has developed special rules for the incorporation of the terms of the charterparty into the bill of lading. These include the now well-established principle that general words of incorporation in the bill of lading only incorporate provisions from the charterparty which are directly "germane" or "relevant" to the shipment, carriage, discharge and delivery of the cargo and not charterparty terms such as arbitration and jurisdiction clauses which are ancillary. That principle and the authorities in this frequently litigated area are discussed by Sir Guenter Treitel in Carver on Bills of Lading (3^rd ed) § 3-021 – 3-023.
16. The appellants' case in this court was substantially the same as that put to the judge. Mr Whitehead relied on the ordinary and natural meaning of the words of the reference in the bill of lading to the "law and arbitration clause", which he submitted was plainly a reference to an agreement to arbitrate and not to one submitting disputes to the exclusive jurisdiction of a particular national court. He also relied on five other matters. The first was the principle that general words of incorporation in the bill of lading do not suffice to incorporate ancillary terms of the charterparty. He argued that in this context the interests of commercial certainty are paramount, particularly where what is at issue is the meaning of a standard term in a widely used form of bill of lading. The others were precedent, inconsistency of the jurisdiction clause in the charterparty and the express terms of the bill of lading, the presumption against surplusage in commercial contracts, and the decision of this court in The Merak [1965] P 223, which he submitted decided that the court is not able to correct a mistake in the bill of lading.
17. At various points in his submissions, Mr Whitehead contended that, because of the need for certainty and clarity, particularly in relation to the provisions of a standard form, the charterparty is not part of the admissible background to construing words in a bill of lading and that it should never be necessary to look beyond the words of the bill of lading to ascertain what clauses of the charterparty are incorporated. He, however, accepted that even this may not, in fact, achieve the certainty which he maintained was paramount because knowing from the words of the bill of lading that it was subject to an arbitration clause in the charterparty, although sufficient for the clause to be incorporated, would not identify the seat of the arbitration or the nature of the tribunal. He was unable to give a reason of principle justifying that departure from the certainty for which he contended, and relied simply on the fact that it was established by authorities binding on this court.
18. As to the distinction in the authorities between the insufficiency of the words "all the terms" in the bill of lading's incorporation clause to incorporate an arbitration clause^[3] and the fact that the words "all the … clauses" which (subject to a test of consistency) has been held to be sufficient to do so,^[4] Mr Whitehead's inability to give a reason of principle for this reflects the approach of Bingham LJ, in The Federal Bulker,^[5] and Hobhouse J and Oliver LJ, in The Varenna. ^[6] They appeared to justify the distinction simply on the ground that earlier decisions had so interpreted the use of the words "all the … clauses" in an incorporation clause in a bill of lading.
19. In The Varenna, Oliver LJ, describing himself as a tyro in the area, observed that it was "discouraging … to find what appears to be a simple construction point overlaid by a great weight of authority which it is claimed, compulsively restricts the inquiry to predestinate grooves".^[7] It is, however, not surprising in a commercial context, that where a settled construction has been given to a particular form of words, courts will recognise that other commercial parties are entitled to rely and act on it.^[8] If, however, a settled construction involves courts having to make fine distinctions between the particular form of words given the construction and very similar forms of words that cannot be explained by reference to differences in the ordinary meaning of the two forms of words or the objectively ascertained intention of the parties, the certainty achieved may come at a cost. That cost arises because any deviation from the form that has been sanctified by the construction may lead to a different result which can be explained only in formal terms and not on the basis of any substantial linguistic difference or principle. While the consequent complexity may not, in itself, be objectionable, ultimately such differences may not be healthy for the coherence of the law and perceptions as to its fairness.
20. Mr Whitehead's starting point was to seek to rely on the ordinary and natural meaning of the words "arbitration clause" in the bill of lading. The literal meaning of the words themselves is obvious. However, the modern approach^[9] is to construe a contract in its context, and the relevant question here is whether, as the judge found, in all the circumstances of this case the words had another meaning. I acknowledge, as the judge did, the particular need for certainty in this context: see the summary of the judge's views at [12(1)] above. But, as Mr Whitehead acknowledged (see [17] above), even the approach for which he contends will not provide full certainty.
21. The next question is the legitimacy of looking beyond the words of the bill of lading and considering the language of the charterparty. This may arise in two situations. The first is when considering the initial question of incorporation of charterparty terms into the bill. The second is whether language in the bill which prima facie suffices to incorporate a charterparty clause will not be effective because the language of the charterparty clause is inconsistent with it or because the words of the charterparty cannot be "verbally manipulated" to reflect their operation in the different context of a bill of lading contract. This case is concerned only with the first, the initial question of incorporation of charterparty terms into the bill, and I make no observations on the second situation.
22. I turn to the legitimacy of looking beyond the terms of the bill of lading when considering the initial question of incorporating charterparty terms into it. Gross J (as he then was) stated in The Siboti (at [26]) that the more recent decisions in The Varenna and The Federal Bulker provide Court of Appeal authority for the proposition that the inquiry not only begins but ends with the bill of lading, but that the authorities do not all speak with one voice. He, however, made it clear (at [29] and [33]) that he considered the more recent authorities to be correct. He did not have to resolve any differences between their approach and the approach in the earlier decisions in The Annefield [1971] P 168 and The Merak [1965] P 223. Nor, for the reasons I give at [26] – [29] below, does this court.
23. The next limb of Mr Whitehead's submissions is precedent. He maintained that the words "…and arbitration clause" in the Congenbill form have a settled meaning in the case law, which establishes that they incorporate the charterparty arbitration clause. He relied on The Delos [2001] 1 Lloyd's Rep 703 at [12] per Langley J, and on the earlier decisions, The Rena K [1979] QB 377 at 390 – 391 and The Nerano [1994] 2 Lloyd's Rep 50 at 55, [1996] 1 Lloyd's Rep 1 at 4, considered in that case. I do not consider that Mr Whitehead is assisted by those cases.
24. The Delos is distinguishable because the charterparty in that case contained separate clauses dealing with governing law and arbitration (clause 13) and venue and arbitration (clause 18). Langley J held that the reference in the Congen bills to "the law and arbitration clause" of the charterparty was sufficient only to incorporate clause 13. It was obvious that the reference to "the law and arbitration clause" incorporated the arbitration clause in the charterparty. Clause 13 was in fact a law and arbitration clause. The position in the charterparty in that case is different to that in this case. Although the reference in the bill of lading in that case was to a single clause in the charterparty, there were two separate clauses in the charterparty. The charterparty dealt with venue and arbitration in clause 18 but with law and arbitration in clause 13. It is not surprising a reference to "law and arbitration" was held only to incorporate clause 13 into the bill. The reference in the bill of lading in this case is also to a single clause of the charterparty. However, because clause 5 of the AmWelsh form of charterparty which was incorporated into the charterparty in this case is a single clause dealing with law and jurisdiction, there is only one charterparty clause with the potential to be incorporated.
25. The Rena K was principally concerned with the question of manipulation of words in a charterparty to give effect to it in a bill of lading contract, and not the question before this court. The Nerano was principally concerned with whether there was inconsistency with a provision on the face of the bill of lading in that case that "English law and jurisdiction applies" and clause 1 of the conditions of carriage on the back of the document, which provided inter alia "all terms and conditions liberties exceptions and arbitration clause of the charterparty, dated as overleaf, are herewith incorporated".
26. I turn to Mr Whitehead's reliance on the principle that general words of incorporation in a bill of lading, even if they are comparatively wide, are insufficient to incorporate provisions of the charterparty such as arbitration and jurisdiction clauses which are ancillary in the sense of not being directly relevant to the shipment, carriage, and delivery of the goods. It is important to remember that this principle about the effect of general words is an exception to the general approach of English law which in principle accepts incorporation of standard terms by the use of general words.^[10] Although in some cases the distinction between "general" words and "specific" words may not be as clear as it appears at first sight to be,^[11] that is not a problem in this case. Caresse do not seek to rely on some generic phrase referring to a group of charterparty terms as referring to the ancillary clause. The bill of lading specifically refers to and seeks to incorporate one kind of ancillary clause, an arbitration clause.
27. The issue in this case is thus not the effect of general words falling within the exception. It is as to the effect of a specific reference in the bill to one kind of charterparty ancillary provision and the construction of the words "law and arbitration clause" in the bill of lading, in particular the word "arbitration". Does the fact that the clause in the bill of lading is effective to incorporate one kind of ancillary clause mean that, in the context of the case, it can properly be read as meaning another kind of ancillary clause, a jurisdiction clause? For that reason and those given by the judge (see [43], summarised at [12(4) and (5)] above), Mr Whitehead's reliance on the principle about the insufficiency of general words is misplaced.
28. Once it is recognised that the question is one of construction, it is established that the rules that apply to the construction of contracts generally are applicable to the construction of the bill of lading. The words of the bill must be looked at as a whole in their context.^[12] In The Siboti Gross J stated (at [36]) "[i]n every case, the Court is seeking to ascertain the intention of the parties and, when construing the language, it is necessary to have regard to the individual context and commercial background".
29. It is true that, in The Siboti Gross J held that the "governing law/dispute resolution" clause in the charterparty which provided that "all bills of lading under this Charter Party shall incorporate this exclusive jurisdiction clause" was not incorporated into the bill of lading. The cargo interests' submissions about the effect of that case, however, significantly underplay an important distinction between it and the present case. In that case the incorporation clause in the bill of lading did not supply the date of the charterparty, the names of the parties to it or contain an explicit reference to any dispute resolution clause in the charterparty. So all that it contained were "general words" of the sort that do not suffice. Gross J stated (at [48]) that the only bridge between the bill of lading and the charterparty relied on by the claimant in that case was the governing law/dispute resolution clause in the charterparty. But, what had to be construed to determine the initial question whether an ancillary term in the charterparty was incorporated into the bill, were the terms of the bill of lading, not those of the charterparty. The case was thus a classic example of the application of the proposition that general words of incorporation in a bill of lading are, even if they are comparatively wide, insufficient to incorporate ancillary provisions of the charterparty. In the present case, there are two bridges in the bill of lading. The first, ineffective in itself, is the date of the charterparty. The second bridge consists of the words "law and arbitration clause" in the bill of lading's incorporation clause.
30. Mr Whitehead also submitted that the clauses in the charterparty in this case are inconsistent with the provisions in the bill of lading. Accordingly, they cannot and will not be incorporated. This part of his argument overlapped with that based on the ordinary natural meaning of the words in the bill of lading. A reference to an arbitration clause, he maintained, is not a reference to a jurisdiction clause. Accordingly, incorporating a jurisdiction clause from the charterparty is inconsistent with the express provision in the bill of lading. I reject the submission that the reference to an arbitration clause is inconsistent with the incorporation of the jurisdiction clause in the circumstances of this case. As the judge stated (at [43], summarised at [12(5)] above), in this context the question is not one of incorporation but of construing the meaning of the word used in the bill of lading. It is only after a meaning is attributed to it that one can consider whether there is a problem of inconsistency. Moreover, the argument that the clauses are inconsistent has an element of circularity because it proceeds on the basis of an assumption about the meaning of the words of incorporation rather than determining that meaning by the usual means and then considering whether there is inconsistency.
31. I also reject the submission based on The Eurus [1998] 1 Lloyd's Rep 351 at 357 that because it is well-established that, in the interpretation of commercial contracts, the presumption against surplusage is of little value it followed that there is no need to strive to search for an alternative meaning to the term "arbitration clause" in the incorporation provisions in the bill of lading. Mr Whitehead's approach would denude the words of any meaning. The argument that the words meant "arbitration clause if any" is in my judgment wholly uncommercial because the original parties to the bill of lading (Glencore and Caresse) knew or must be taken to have known of the terms of the charterparty and thus that it did not contain an arbitration clause. This is particularly so since they chose to repeat the wording of clause (1) of the printed conditions of the Congenbill form in the typed clause on the front of the bill of lading.
32. Finally, I turn to The Merak [1965] P 223 and its effect. An important component of Mr Whitehead's submissions was the proposition that in The Merak this court held that it is not possible to read the words of a bill of lading in a way which seeks to correct what was said to be an obvious mistake in it. It followed, he argued, that there is no justification in principle or on the authorities, as a matter of construction, for reading a reference to the arbitration clause in the incorporation clause of the bill of lading in this case as a reference to a jurisdiction clause in the charterparty which he contended was wholly inept and irrelevant to the bill of lading. Before setting out the material terms of the bill of lading and charterparty in that case, and considering the judgments, I observe that it is a case that predates the modern contextual approach to construction and implication in cases such as Chartbrook Ltd. v Persimmon Homes Ltd. [2009] UKHL 38, reported at [2009] 1 AC 1101, and its precursors notably Mannai Investment Co. Ltd. v Eagle Star Life Assurance Co. Ltd. [1997] AC 749 at 774 (per Lord Hoffmann), and see also 767E-768D, 770F-771B, and 772H (per Lord Steyn), and Investors Compensation Scheme Ltd. v West Bromwich BS [1998] 1 WLR 896, at 912 -913 (per Lord Hoffmann).
33. The charterparty in The Merak, dated 21 April 1961, was on the Nubaltwood form. It provided that the bills of lading should be prepared in the form endorsed upon the charter "…and all terms, conditions, clauses (including clause 32 [the arbitration clause])…as per this charter". The bill of lading stated that the voyage was "as per charter dated April 21, 1961" and contained a clause incorporating "all the terms, conditions, clauses…including clause 30 contained in the said charterparty". The arbitration clause in the former version of the Nubaltwood form of charter was clause 30, but clause 30 of the form used in The Merak was concerned with the shipowner's right to substitute another vessel and had no relevance to the bill of lading contract.
34. The plaintiffs issued proceedings under the bill of lading against the shipowner in respect of damage to the cargo, contending that the arbitration clause was not incorporated into the bill of lading. The court rejected this contention, unanimously holding that the words "including clause 30" in the bill of lading's incorporation clause were mere surplusage and could be struck out and that the remaining words of the clause were adequate and effective to incorporate the arbitration clause in the charterparty.
35. In reaching that conclusion, although Davies and Russell LJJ (at 254G and 259D) stated that a bill of lading, as a negotiable instrument, must be construed according to its terms without reference to any extrinsic facts or documents, they in fact relied on the fact that the charterparty expressly provided in clause 32 that that clause applied to disputes arising out of the bills of lading. Davies LJ (at 254) stated that since the bill referred to the charter it was impossible to construe the bill without reference to the charter, and Russell LJ (at 259) relied on the fact that the charterparty arbitration clause expressly referred to disputes arising out of "any bill of lading issued hereunder". Sellers LJ stated (at 250)

"[T]he incorporating clause is clear and wide, and to be understood requires a reference to the charterparty. In order to discover what the terms of the bill of lading are, that is to construe or interpret it, the holder has to refer to the charterparty and select therefrom the clauses which apply".

It is possible that the language used means that insufficient attention was paid to the differences between the two situations to which I refer at [21] about the question of considering the language of the charterparty. This part of the decision may, in the light of the subsequent decisions in The Varenna and The Federal Bulker, only be justifiable because of the use of the word "clauses" in the bill of lading's reference to the charterparty: see The Siboti at [46(ii) and (iii)] and see my observations at [20] – [21] above. This is because the court's reliance on the provisions of the charterparty in construing the incorporation clause in the bill of lading may not reflect the more modern approach: see The Siboti at [26] – [29].

36. What Mr Whitehead relied on was the basis on which a majority of the court, Sellers LJ dissenting, rejected another argument advanced for holding that the arbitration clause was incorporated. Davies and Russell LJJ stated that there was no justification, as a matter of construction, for reading the incorporation clause in the bill of lading as if the reference to clause 30 was a reference to the arbitration clause, clause 32, because this would be contrary to all the canons of construction. Mr Whitehead submitted that The Merak is therefore binding authority for the proposition that there is no power to correct a mistaken reference in a bill of lading in the way the judge did when acceding to Caresse's submissions. He relied in particular on the words of Russell LJ at 259 that:

"it is true that clause 30 is wholly irrelevant to the bill of lading and must have been inserted in error. But there is no room for the application of the maxim falsa demonstratio non nocet cum decorpore constat for there is no corpus evident, as there would have been had the bill said 'including clause 30 (arbitration)'."

He also relied on the statements of Davies and Russell LJJ at 254G and 259D to which I refer at [35] above.

37. In my view, Mr Whitehead is not assisted by The Merak. In concluding that the court is not entitled to remedy an obvious mistake Davies and Russell LJJ took what to modern eyes is a very old-fashioned and outdated approach to interpretation. The case was described as "an unusual case" by Bingham LJ in The Federal Bulker.^[13] In The Merak Davies LJ (at 254), but not the other two members of the court, considered that it was important that the plaintiffs, who it happened were both the charterer and the shipper, were themselves parties to the charter. Sir Guenter Treitel's explanation of the case is inconsistent with Mr Whitehead's submission based on it. Sir Guenter stated^[14] that the unusual feature in the case was that the parties "had plainly intended to incorporate the charterparty arbitration clause and would have succeeded in doing so but for their 'slip of drafting', and that, "in these special circumstances, the Court of Appeal took account of the fact that there had been such a slip and gave effect to the evident intention of the original parties to the bill, even though the court was not able to correct the error by rectifying the bill".
38. As my Lord, Sir Robin Jacob, observed during the hearing, had The Merak been decided today, in the light of Chartbrook and other decisions of the House of Lords and the Supreme Court on the construction of contracts, it is very likely that the approach of Sellers LJ in his dissenting judgment would have prevailed. Sellers LJ recognised the negotiable nature of the bill of lading and the fact that it may be acquired by a party with no knowledge of the charterparty. Despite this, he stated (at 250) that:

"…[T]he bill of lading clause can properly be read by substituting '32' for '30'…on two grounds. Anyone reading the charterparty, as the bill of lading holder would have to do, would know that the arbitration clause was intended, and I cannot see why the court should shut its eyes to the obvious on some technical ground of construction. A practical, not an abstract, construction is called for."

39. I also accept Mr Byam-Cook's submissions that The Merak is not authority for Mr Whitehead's proposition that the words of incorporation in the bill of lading must be construed and interpreted in isolation from, and without regard to, the charterparty. The majority judgments do not purport to lay down a proposition to this effect but represent a decision on the specific facts of that case. This is seen from the statements about the charterparty to which I refer at [35] above. It is seen particularly clearly from the judgment of Russell LJ who, in the passage set out at [36] above, gave an example of circumstances in which it would have been possible to correct a mistake. He considered that it would have been possible to do this had the bill of lading included the words "including clause 30 (arbitration)". It also appears that the majority may have accepted the submission of Mr Willmer on behalf of the charterers (see 241) that, notwithstanding the mistake, in that case the words in the bill of lading could not be read differently.
40. Finally, I observe that the decision of this court was anticipated by Aikens LJ when refusing the cargo interests' application for permission to appeal against the judge's dismissal of their challenge to the Court's jurisdiction. He stated "… the reasoning of the judge leading to the conclusion that the jurisdiction clause was incorporated is compelling…". I respectfully agree. It is for these reasons that I concluded at the end of the hearing that the appeal was to be dismissed.

Sir Robin Jacob:

41. I agree.

The Master of the Rolls:

42. I also agree.

Note 1    [2013] EWHC 3081 (Comm) reported at [2014] 1 Lloyd’s Rep 337    [Back]

Note 2    The phrase used in the authorities since at least TW Thomas & Co. Ltd. v Portsea Shipping Co. Ltd. [1912] AC 1, and see [15] below.     [Back]

Note 3    E.g. The Federal Bulker [1989] 1 Lloyd’s Rep 103.    [Back]

Note 4    E.g. The Merak [1965] P 223 (discussed at [32] ff below) and The Annefield [1971] P 168.    [Back]

Note 5    [1989] 1 Lloyd’s Rep 103 at 107 – 108    [Back]

Note 6    [1984] QB 599 at 608 and 621 – 622    [Back]

Note 7    Ibid., at 618.    [Back]

Note 8    See Sir Guenter Treitel in Carver on Bills of Lading (3rd ed) §§ 3-014 and 3-034    [Back]

Note 9    See the cases cited at [32] below.    [Back]

Note 10    See e.g. The Athena [2006] EWHC 2530 (Comm) at [65] per Langley J.    [Back]

Note 11    See Sir Guenter Treitel in Carver on Bills of Lading (3rd ed) § 3-016.    [Back]

Note 12    See e.g. The Nerano [1996] 1 Lloyd’s Rep 1, at 3.    [Back]

Note 13    [1989] 1 Lloyd’s Rep. 103 at 108    [Back]

Note 14    Carver on Bills of Lading (3rd ed) § 3-034    [Back]