Introduction

Both Broadline Enterprises Ltd v Monterey Maritime Corporation and Pacers Multi-Dynamics Ltd v The MV Dancing Sister provide Supreme Court case law on the fact that, as regards carriage of goods by sea claims, concurrent rights to sue in tort as well as under the contract may coexist for a claimant's benefit. Put conversely, parties to a carriage by sea contract may be held liable for breaches of tortious duties in circumstances arising from the performance or non-performance of the contract's terms, regardless of their obvious contractual duties.

Monterey

In Monterey, the plaintiff – which had claimed against the defendants in both contract and tort – later applied to abandon its claim under the contract. The Supreme Court set aside the decisions of the trial court and the Court of Appeal and held that the plaintiff was legally entitled to undertake that approach. In its leading judgment, the court noted that:

"the liability of a bailee may rest on an express contract between him and the owner of the goods concerned. However, this notwithstanding, there is generally the collateral liability in tort for negligence which arises from the breach of a legal duty owed by the bailee to the owner of the goods. Both causes of action were specifically pleaded in the writ of summons filed in the present case and in the appellant's amended Statement of Claim. I entertain no doubt that the appellant was entitled to abandon its cause of action in contract and to prosecute its claim in tort."

Dancing Sister

In Dancing Sister, the appellant argued before the Supreme Court that as it was both the owner of the goods – the subject matter of the case – and the endorsee 'in the blank' of the relevant bills of lading, it was thus entitled to claim for damages resulting from losses arising from the negligent discharge of the goods from the ship, among other things. However, the court found that the appellant was not an endorsee of the bills of lading and that a charterparty relevant to the transaction had provided that "stevedores shall be considered as owner's servants and the charterers/shippers/receivers are not to be responsible for any negligence of whatever nature, default or error in judgment of the stevedores employed". The court thus dismissed the appeal with costs.

However, the court did not conclude its judgment in Dancing Sister without setting out various instances which could give rise to a cause of action flowing from carriage by sea transactions. Citing with approval the English Court of Appeal decision in In Mitsui & Co Ltd v Fiota Mercante Grancolombiana SA (1988 2 Lloyds Law Reports p 208), the court specified such circumstances as follows:

  • A shipper may sue in contract, assuming that it has not divested itself of its rights by endorsement of the bill of lading.
  • A consignee named in a bill of lading or an endorsee of a bill of lading can sue in contract under the bill of lading.
  • An implied contract can arise out of the circumstances in any particular case in which delivery of the part of discharge is taken.
  • The party which owned the goods when damage occurred can sue in tort.

The fourth point identified above again underscores the position that where a party entitled to sue in tort is additionally vested with a right of suit under a contract, both rights may coexist and be available to the claimant as alternatives. The position is a rebuttal to the privity of contract fallacy – the contention, popular in some civil law jurisdictions, that the existence of a contract circumscribes liabilities to the terms therein.

Crucial exception?

English cases admit to the concurrent liabilities position certain exceptions that the Supreme Court, which substantially referenced an English Court of Appeal decision in Dancing Sister, failed to point out.

In Henderson v Merrett Syndicates ([1994] 3 All ER 506, [1994] UKHL 5 and [1995] 2 AC 145), Lord Goff of Chieveley, citing Le Dain in the Canadian case of Central Trust Co v Rafuse ((1986) 31 DLR 4th 481), noted that while a plaintiff has the right to assert the most advantageous cause of action in respect of any particular legal consequence where concurrent liability in tort and contract exists, a concurrent or alternative liability in tort will not be admitted if its effect would permit the plaintiff to circumvent or escape a contractual exclusion or limitation of liability for the act or omission that would constitute the tort.

Comment

Circumstances of exclusion or limitation of liability in a contract arguably present the biggest temptation to claimants and their solicitors to seek alternatives in tort. Defendants are thus well advised to object to this approach where relevant. The Supreme Court will hopefully provide clarity on this exception soon.

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For further information on this topic please contact Victor Onyegbado at Akabogu & Associates by telephone (+23 41 790 5831) or email (victor@akabogulaw.com). The Akabogu & Associates website can be accessed at www.akabogulaw.com.