UNIVERSITY OF PETROLEUM & ENERGY STUDIES

COLLEGE OF LEGAL STUDIES

BA.,LL.B. (HONS.)

SEMESTER VI

ACADEMIC YEAR: 2017-18 SESSIONS: JAN-MAY

RESEARCH PAPER

FOR

Maritime Law

Under the Supervision of: Devyani Tewari

NAME: VARSHA BHAGYA SHRI

SAP NO: 500047908

ROLL NO : R450215121
 The case of the Damaged Reactor - The HAPPY
RANGER
Parsons Corporation and Six Others

v.

Scheepvartonderneming Happy Ranger (the "Happy Ranger") 9 February 2006

Decided By: English High Court, Commercial Division

Plaintiff’s Representatives: Richard Lord QC and Simon Salzedo, instructed by Barlow

Lyde & Gilbert

Defendant’s Representatives Nigel Jacobs and Christopher Smith, instructed by Winter

Scott

Summary
In this case the court held that the duty of the shipowner to exercise due diligence to make the
ship seaworthy under Article III Rule 1 of the Hague-Visby Rules does not attach prior to the
delivery of the ship, even where, as in this case, the shipowner had been much involved with
the ship prior to delivery. On the facts of the case, however, the judge found that there had
been a failure to exercise due diligence on the part of the shipowner and the Classification
Society – for whose faults the shipowner had to take responsibility – after delivery, as a result
of which loss was caused to the Claimant. Accordingly, the Claimant’s claim succeeded,

Introduction

Cases involving cargo carried on deck are often complex. Commonly, they involve
arguments over the applicable contract, the applicable law and the applicable weight or
package limitation (if any). Such arguments may in turn arise because it may not be clear
whether the cargo claim falls within the Hague or the Hague-Visby Rules and even whether it
falls within either set of Rules. Much depends on the precise wording of the contract, of
which the bill of lading is normally evidence.
The recent HAPPY RANGER is such a case. It was heard by the Commercial Court in
London in March and July 2001 and the appeal was heard earlier this year by the Court of
Appeal.

The Facts

The HAPPY RANGER was a purpose-built heavy lift ship. She was virtually brand new at
the time of the voyage, in early March 1998. The claimant cargo owners and defendant
shipowners entered into a written contract in October 1997 for the carriage of three large and
heavy reactors from Italy to Saudi Arabia. Italy is a state which has contracted to the Hague-
Visby Rules, but Saudi Arabia is not.

[ The Claimant was the owner of a cylindrical process vessel weighing in excess of 800
tonnes. The Defendant was a specialist heavy-lift ship operator, who had commissioned the
building of a heavy-lift vessel the "Happy Ranger". The vessel was delivered by her builders
to the Defendant on 16 February 1998. On 11 March 1998, prior to the vessel’s maiden
voyage, the loading of the process vessel aboard the Happy Ranger commenced in Italy,
pursuant to a contract of carriage concluded in October 1997 for its carriage from Italy to
Saudi Arabia. During the loading operation, one of the hooks on one of the vessel’s cranes
broke, causing the process vessel to fall to the quayside and suffer extensive damage.]

One of the reactors was in the process of being loaded by the vessel's cranes, operated by the
crew, when a hook on the crane parted. At that time, the reactor was only partly across the
ship's rail. It fell, hitting the side of the vessel and then the ground. Not surprisingly, this
large, heavy and valuable piece of cargo was badly damaged. The claim was in the region of
USD 2.4 million.

The Issues

The cargo owners maintained that the shipowners were liable for the accident and for the full
amount of their loss. The shipowners said that a particular term of the contract of carriage
excluded any liability on their part. Alternatively, they argued that, if they were liable, such
liability was limited to 100 pounds sterling, which, in their opinion, was the per package limit
stipulated by the contract.
 The Contractual Position

As mentioned above, in October 1997 the parties entered into a written contract for the
carriage of the reactors. The contract contained a deck cargo clause, which said that, if cargo
was shipped on deck, it was at the merchant's risk. The carrier was not to be liable for any
loss of or damage to the cargo howsoever arising, unless caused by the carrier's gross
negligence or wilful misconduct. The bills of lading were to be claused: "Shipped on deck
without liability for loss or damage howsoever caused". A further clause provided for English
law and jurisdiction.

In addition, the contract incorporated the carrier's regular form of bill of lading. The specimen
form of this bill contained a general paramount clause. This clause is not quoted in full, but it
contained the following terms:

"The Hague Rules as enacted in the country of shipment shall apply to this contract. When no
such enactment is in force in the country of shipment, Articles I to VIII of the Hague Rules shall
apply. In such case the liability of the carrier shall be limited to £100 sterling per package."
"Trades where Hague-Visby Rules apply:
In trades where the Hague-Visby Rules apply compulsorily, the provisions of the respective
legislation shall be incorporated in this bill of lading."

The general paramount clause also referred to trades where the US COGSA or the Canadian
Water Carriage of Goods Act applied, but because the voyage did not involve either a US or a
Canadian port, this part of the clause was not relevant.

A trial of the following preliminary issues had been ordered:

 Did the contract of carriage incorporate the terms of the carrier's regular form of bill
of lading?
 Did the Hague or the Hague-Visby Rules apply to the contract of carriage and, if so,
which version applied?
 Did the Hague Rules apply to the loading of the reactor?
 Did clause 7 of the contract (the deck cargo clause mentioned above) apply so as to
exclude any liability on the part of the carrier?
  Could the carrier limit his liability (if any) by reference to Article IV, Rule 5 of either
the Hague Rules or Hague-Visby Rules?

During the hearing at the High Court there was a considerable amount of detailed and
complex legal argument on the above points. Essentially, the cargo owners argued that a bill
of lading would have been issued (and that they were entitled to demand that a bill be issued),
that the bill would have been subject to the Hague-Visby Rules, as enacted either in England
or Italy and that, under either version of the Hague-Visby Rules, the carrier's limit of liability,
based on the weight of the reactor, was around USD 2 million.

Needless to say, the shipowners argued to the contrary. Their main arguments were that the
(October) contract of carriage did not contemplate the issue of a bill of lading, that that
contract was the governing contract, that the contract was in the form of (effectively) a
voyage charterparty and that the contract was, therefore, not in a form to which the English
Carriage of Goods by Sea Act (COGSA) 1971 applied.

The Decision

The judge decided that the October contract and the specimen bill of lading mentioned
therein were adequate and complete evidence of the contract of carriage. The judge came to
the view that the parties did not intend that any bill of lading that might have been issued
would have contractual effect or would evidence the terms of the contract. He decided that
the Hague-Visby Rules did not apply, either as enacted in England or Italy. Instead, he
concluded that, in accordance with the general paramount clause in the specimen bill of
lading, Articles I-VIII of the Hague Rules applied, with the result that any liability on the
carrier was limited to 100 pounds sterling per package.

So far as liability itself was concerned, the judge decided that the deck cargo clause, which
the shipowners argued relieved them from any and all liability, did not apply, because the
reactor, which, it will be recalled, had been damaged during loading, had not been "shipped
on deck". The judge said: "This cargo never was shipped on deck because it never reached
the deck". Therefore, this clause did not operate so as to protect the carrier from any and all
liability.
 The Appeal

Perhaps not surprisingly, the cargo owners appealed and the Court of Appeal gave judgment
in June 2002. The Court overturned the decision of the High Court.

The appellant cargo interests argued that the judge at first instance was wrong in finding that
the parties did not intend to issue a bill of lading. In their view, the material question was not
whether a bill of lading would contain the terms of the contract of carriage, but simply
whether a bill was to be issued. The Court of Appeal agreed. The judge giving the leading
decision concluded that if a bill was to be issued, the contract of which it is evidence is
covered by the UK COGSA 1971. This Act incorporates into English law the Hague-Visby
Rules of 1968. These provide for a limit of liability based on either:
- the package or unit, or
- the weight of the package or unit, whichever is the greater.

Conclusion

The effect of this was to increase the potential liability of the shipowners from 100 pounds
sterling, to approximately USD 2 million. The latter figure was calculated on the basis of the
weight of the reactor. From the point of view of the cargo interests, the appeal was justified.
From the shipowners' point of view, it can perhaps be said that, for every reactor, there is a
(re)action. The lesson to be learned is that, if the contractual position had been fully discussed
and agreed at the time the shipment was first proposed, the no doubt considerable expenditure
of time and legal costs could perhaps have been avoided.

It should be mentioned that what many would see as the central issue - whether the carrier is
liable for the damage - has not yet been decided. Another round of court action is, therefore,
likely.