The appellants were the CIF buyers of steel coils carried on the respondents' ship, the Aliakmon. The goods were to be shipped from Korea to Immingham. However, they were improperly stowed, resulting in damage totalling GBP 83,006.07. The appellants claimed for the damage that had occurred at a time when the risk, but not the legal property, in the goods had already passed to them. The main question before the House was whether the respondents owed the appellants a duty of care in tort regarding the carriage of the steel coils. If so, the House also had to consider whether and to what extent that duty was qualified by the terms of the bill of lading under which the goods were transported.

Held: Appeal dismissed.

In addressing this question, the House examined the case of Anns v Merton London Borough Council [1978] AC 728, upon which the appellants relied. In that case, Lord Wilberforce stated that determining the existence of a duty of care requires asking two questions:

1) Is there a sufficient relationship of proximity or neighborhood between the alleged wrongdoer and the person who suffered damage, such that carelessness on the part of the former could reasonably be expected to cause damage to the latter? If so, a prima facie duty of care arises; and

2) If there is a prima facie duty of care, are there any considerations that should negate, reduce, or limit the scope of the duty, the class of persons to whom it is owed, or the damages that may result from its breach?

The House noted that Lord Wilberforce did not intend for this test to be universally applicable in determining the existence and scope of a duty of care in the law of negligence. Furthermore, this test was not meant to establish a duty of care in a factual scenario where a duty of care has consistently been found not to exist. The House also explained that policy reasons justified the exclusion of a duty of care in certain cases, as indicated by the second question above. This was to prevent the potential unlimited liability of a person guilty of negligence towards an indefinite number of other individuals whose contractual rights were adversely affected by that negligence.

Consequently, the appellants argued that the House should find that the respondents owed a duty of care in this case, but subject to the terms of the bill of lading. They submitted that recognising such a duty of care for a CIF buyer, to whom the risk but not the property in the goods had passed, would not lead to the opening of floodgates. However, the House rejected this argument and agreed with the respondents, who contended that a duty of care in tort towards a buyer could not be equated with the contractual duty of care owed to a shipper. The most common form of contract for carriage by sea is governed by the Hague Rules. These Rules are an intricate blend of responsibilities and liabilities (art 3), rights and immunities (art 4), limitations in the amount of damages recoverable (art 4.5), time bars (art 3.6), evidential provisions (arts 3.4 and 3.6), indemnities (arts 3.5 and 4.6) and liberties (arts 4.4 and 6). These Rules cannot be synthesised into a tortious standard of care.

Finally, the appellants argued that, through their CIF contract with the sellers, they had, implicitly consented to the sellers bailing the goods to the shipowners on the terms of the bills of lading, which included a paramount clause incorporating the Hague Rules. This argument was used as a legal basis for qualifying the duty of care. However, the House held that this theory was not sound. While a bailment existed on the terms of the bill of lading incorporating the Hague Rules, it only existed between the sellers and the shipowners. If the shipowners had attorned the bailment to the appellants, the terms of the bailment would have applied to the shipowners and the appellants. As the bill of lading had not been negotiated to the appellant buyers, no such attornment had occurred.