The Starsin Case

Bankers Revisit the Legal Case that Affected Them Most

TO ME, "THE STARSIN" MOST STARTLING

By Jia Hao

The Starsin case is deeply routed in my mind,
being interesting and uncommon maritime case
(The case affects the banker's mind
but not the banking practice as it does affect the UCP
that governs the LC banking practice - Editor)

Factual Summary

After a shipment of timber and plywood carried on board the vessel "Starsin" was damaged in transit from Malaysia to Antwerp and Avonmouth, the owners of the cargo who held transferable bills of lading brought an action against the shipowners for damage to the cargo.

Seventeen bills of lading were issued covering shipments on the vessel STARSIN from three different loading ports in Malaysia (Kuching, Port Klang and Balau) to Antwerp and Avonmouth. The trial judge divided the bills of lading into three groups according to different notify party on the bills of lading: "the Makros Hout bills"; "the Homburg Hout bills"; and "the Hunter bills". The bills of lading were all on the Continental Pacific Shipping form. The vessel was at all material times on time charter to Continental Pacific Shipping Ltd. The signature boxes on the face of the bills are completed in three different ways. The Makros Hout bills have the name of the signing company -- United Pansar Sdn Bhd -- and the two signatures prefaced by the words "As agents for Continental Pacific Shipping" ("The Carrier"). The Homburg Hout bills have the stamp of the signing company, PT Katana Line, and its signature followed by the words "As agents for the carrier Continental Pacific Shipping". The Hunter and Fetim bills have in the signature box the stamp of Multiport Sdn Bhd, then the signature, then "As Agents for Continental Pacific Shipping as Carrier". Continental Pacific Shipping is actually the charterer of the vessel “starsin”.

The reverse of the bill, however, identified the owner of the vessel as the carrier by demise clause and identity of carrier clause.

The demise clause is worded as “If the ocean vessel is not owned by or chartered by demise to the Company or Line by whom this Bill of Lading is issued (as may be the case notwithstanding anything that appears to the contrary) this Bill of Lading shall take effect only as a contract of carriage with the Owners or Demise Charterer as the case may be as Principal made through the Agency of the said Company or Line who act solely as Agents and shall be under no personal liability whatsoever in respect thereof.”

The identity of carrier clause is worded as “The Contract evidenced by this Bill of Lading is between the Merchant and the Owner of the vessel named herein……”

Were these shipowner`s bills of lading or charterer’s bills? That is, should the charterer or shipowner be considered as the carrier?

Court Judgments

• The commercial court ruled: the charterer should be considered as the carrier, and the cargo owners should seek claim against the charterer.
   
• The court of appeal with a majority ruling reversed: the contract of carriage was with the shipowners and that they were liable in contract as claimed.
   
• The House of Lords re-reversed: the charterer was liable as carrier and could be liable for negligence to the owners of the cargo.

Comments

1. Demise Clause.

There seems to be no problem in the courts of U.K. in recognizing the validity of the demise clause as fully valid contractual terms. The Berkshire (1974 1 Lloyd’s Rep. 185), The Antares (1987 1 Lloyd’s Rep. 424), The Vikfrost (1980 1 Lloyd’s Rep. 560), The Jalamohan (1988 1 Lloyd’s Rep. 443) and The Ines (1995 2 Lloyd’s Rep. 144) are examples. But U.K.’s such position has not been generally accepted by the courts of USA, continental and civilian European countries, which have rightly viewed such demise clause with suspicion as illegal attempts by charterers to avoid their liability and evade the mandatory application of the international conventions (the Hague/Visby Rules). However, fortunately, the UCP 500’s clear and compulsory stipulation that the carrier must be explicitly identified by name on the face of the bills of lading compromises such incongruity and invalidate the demise clause to some extent. We may see such positive role of clearly identifying the carrier on the face of bills of lading in the judgments of Rix J in The Hector [1998] 2 Lloyd's Rep 287 as well as of Colman J and Rix LJ in the present case. Those judges held that it was good commercial sense to give greater strength to the clear statement on the face than to the barely legible printed clauses on the back. And conversely thinking, what if there is no clear identification of the carrier on the face of the bills but still bearing a demise clause on the reverse of the bills? I am afraid it will be still hard to shake off the ghost shadow of the demise clause in the courts of the U.K.

2. The terms and conditions of carriage and the “reverse” of bills of lading .

As we all know that bankers will not examine the contents of the terms and conditions of carriage which always appear in fine print form on the reverse of bills of lading, so even if the demise clause causes conflict to the identification statement on the front of the bills of lading, it does not constitute discrepancy. Thus, it seems to be naturally concluded that bankers should check the front and not check the back which is the place of the terms and conditions of carriage. We may refer to ICC R279 in which ICC concluded “Within the context of bills of lading, "appears on its' face" is the term given to the page which does not include the terms and conditions of carriage, i.e. it is the one which includes the information to satisfy the terms of the credit and the relevant articles of UCP 500.” But what if the terms and condition moves to the front, e.g., demise clause actually names the ship owner and appears on the front of the bills of lading? How can bankers judge whether it is the carriage term/condition or an ordinary clause, as substitution clause which seems to be checked as per ICC R283, R349? We may also refer to ICC Document 470/520rev. in which ICC analyzed and confessed that “The sub-Article(note: article 23(a)(v)) makes no distinction as to whether the terms and conditions (or reference thereto) are to appear on the front or reverse side of the document. …The issue may become more clouded should the terms and conditions appear on the face of the bill of lading. …it may be difficult to distinguish letter of credit criteria from terms and conditions, unless this is clearly indicated within the layout of the text….” This will also invoke my memory of the Maersk’s bills of lading bearing fine print offensive clauses which actually destroy the essential function of bills of lading as document of title. Can we treat such clauses as terms and conditions of carriage and disregard them? ICC seemed to have thought so; nonetheless, it then withdrew the relative statements and felt awkward and hesitant to settle the problem completely. Furthermore, if such clauses are clear, common and easy to be identified by bankers, may bankers still reasonably stay under the “hat of excuse” of the non-examination of terms and conditions of carriage? Therefore, we have to ask, as Lakshman Wickremeratne observed in his article “Can one ignore terms and conditions on the bill of lading?” (DCInsight Vol. 9 No.2 April-June 2003) that “Can it be said that banks will not examine the contents of such terms and conditions, wherever they are to be found.” In my view, it is hard and somewhat bold to say yes, when we examine the substitute clause, Maersk’s clause and the like on the face of bills of lading in practice. Let us start with digging the underlying intention of why bankers need not examine terms and conditions of carriage. As bank document examiners can not possibly have sufficient expertise of maritime law and practice like specialized lawyers and judges to be competent enough to scrutinize the complicated terms and conditions of carriage. So to keep the chief advantages of the letter of credit, namely, its certainty, efficiency, celerity and low cost, simplifying documentary examination by discharging examiners’ obligation of checking terms and conditions of carriage is advisable and welcomed in the letter of credit community. Thus, if we assume some clauses appearing on the front of bills of lading are easily found to be offensive or discrepant and bankers may check them up at first sight without affecting letter of credit mechanism’s efficiency and celerity, it seems to me reasonable to examine them accordingly. As a matter of fact, in nearly all sorts of bills of ladings in practice , the terms, conditions or clauses on the front are far less and simpler than those on the reverse are. As such, what about allowing the bankers to check only the front of bills of lading regardless of whether it contains terms and conditions of carriage or not? Nevertheless, it is only a immature suggestion.

3 Two carriers

Professor William Tetley proposed an alternative that the shipowner and the charterer should be held jointly and severally responsible for the carriage, the former as a contracting carrier and the latter as an actual carrier, just like a joint venture. So in his view, even naming the charterer only as the carrier, the bills did not reflect the true identity of the carrier, as article 23(a)(i) undoubtedly requires. However, in letter of credit practice, bankers are dealing with only documents on their face to see the apparent compliance with the credit and UCP. And UCP500 Article 15 clearly discharges banks liability for the general and/or particular conditions stipulated in the document(s) or superimposed. Therefore, bankers will never care whether the named and identified carrier is the real carrier under international convention or local maritime law.

4. Named and Identified carrier

UCP500 Article 23(a)(i) stipulates a bill of lading covering a port-to-port shipment must appear on its face to indicate the name of the carrier, and later in the Position Paper No.4, ICC further explains that “the name of the carrier must appear as such on the front of the document. The expression 'the front of the document' means the side showing the details of the goods, vessel and voyage, and the expression 'the back of the document' means the side showing the details of the contract of carriage.” But in ICC R563, the query argued that regards with the sentence “the name of the carrier must appear as such on the front of the document”, there was no express requirement for the use of the word “carrier”. And if requiring only “identified the carrier”, it will be done without mention of the name of the carrier, such as the demise and identity of carrier clauses which only identify the carrier as ship owner but not name the ship owner. Since this query, ICC realized that a watertight wording “name the carrier and be identified as such” be used. As a result, the UCP Revision is accordingly worded as “indicate the name of the carrier, identified as carrier”. It seems simple but subtle somehow. However, considering once again, the requirement for indicating the name of the carrier has actually implied a requirement for identifying the capacity of the company name. Because if only the carrier’s name is indicated but not identified as carrier, even though the company is indeed the carrier, bankers who examine documents on their face can not judge the name indicated is the carrier’s. The compliance with the requirement for indication of carrier’s name is not established. We may see another example. The credit requires an inspection certificate singed by an inspector approved by applicant. The inspection certificate presented is singed by company A and identified as inspector, but not identified as approved by applicant. So even if company A is the inspector approved by applicant in fact, it is still not acceptable, as bankers can not establish compliance on the face of the document that the company is approved one. ICC R403 also referred to and supported this position.

Bibliography
 

1. HOMBURG HOUTIMPORT B.V. V. AGROSIN PRIVATE LTD. AND OTHERS (THE “STARSIN”) ([2000]1 Lloyd's Rep. 85)

2. HOMBURG HOUTIMPORT B.V. V. AGROSIN PRIVATE LTD. AND OTHERS (THE “STARSIN”) [2001] EWCA CIV 56 ([2001]1 Lloyd's Rep. 437)

3. HOMBURG HOUTIMPORT B.V. V. AGROSIN PRIVATE LTD. AND OTHERS (“THE STARSIN”) [2003] UKHL 12 ([2003] 1 Lloyd's Rep. 571)

4. Hombourg Houtimport BV v. Agrosin Private Ltd. ("The Starsin")

IIBLP L/C Annual Survey of Letter of Credit Law & Practice 2003 LC CASE SUMMARIES

5. Case Comment: The House of Lords decision in The Starsin by Prof. William Tetley （available on William Tetley’s free website: http://www.mcgill.ca/maritimelaw/articles/）

6. The Demise of the Demise Clause ? by Prof. William Tetley（available on William Tetley’s free website: http://www.mcgill.ca/maritimelaw/articles/ ）

7. Demise clause by Philip Yang, Philip Yang on Shipping Practice(1st Edition), Editor Y.M.Lin, Dalian Maritime University Press 1995

8. The Berkshire (1974 1 Lloyd’s Rep. 185)

9. KENYA RAILWAYS V. ANTARES CO. PTE LTD. (THE “ANTARES”) (NOS. 1 AND 2) (1987 1 Lloyd’s Rep. 424)

10. W. & R. FLETCHER (NEW ZEALAND) LTD. AND OTHERS V. SIGURD HAAVIK AKSJESELSKAP AND OTHERS (THE "VIKFROST") (1980 1 Lloyd’s Rep. 560)

11. NGO CHEW HONG EDIBLE OIL PTE. LTD. V. SCINDIA STEAM NAVIGATION CO. LTD. (THE “JALAMOHAN”) (1988 1 Lloyd’s Rep. 443)

12. M.B. PYRAMID SOUND N.V. V. BRIESE SCHIFFAHRTS G.M.B.H. AND CO. K.G. M.S. “SINA” AND LATVIAN SHIPPING ASSOCIATION LTD. (THE “INES”) (1995 2 Lloyd’s Rep. 144)

13. SUNRISE MARITIME INC. V. UVISCO LTD. (THE “HECTOR”) ([1998] 2 Lloyd's Rep 287)

14. ICC Publication No.632 R279, R283, R349, R403

15. ICC Publication No.660 R563

16. Can one ignore terms and conditions on the bill of lading? by Lakshman Wickremeratne (DCInsight Vol. 9 No.2 April-June 2003)