This case involved the carriage of a drilling machine from Liverpool, England, to Wellington, New Zealand, on the Eurymedon. The carriage was covered by a bill of lading. On 14 August 1964, the machine was damaged while being unloaded at the discharge port due to the negligence of the stevedores, New Zealand Shipping Co Ltd. In April 1967, the consignee, AM Satterthwaite & Co Ltd, who was the holder of the bill of lading and the owner of the machine when it was damaged, sued the stevedores in negligence.

The bill of lading incorporated the Hague Rules via a paramount clause in cl 1:

This Bill of Lading shall have effect (a) subject to the provisions of any legislation giving effect to the International Convention for the unification of certain rules relating to Bills of Lading dated Brussels, 25th August, 1924, or to similar effect which is compulsorily applicable to the contract of carriage evidenced hereby and (&) where no such legislation is applicable as if the Carriage of Goods by Sea Act 1924, of Great Britain and the Rules scheduled thereto applied hereto and were incorporated herein. Nothing herein contained shall be deemed to be a surrender by the Carrier of any of his rights or immunities or an increase of any of his responsibilities or liabilities under the provisions of the said legislation or Act and Rules (as the case may be) and the said provisions shall not (unless and to the extent that they are by law compulsorily applicable) apply to that portion of the contract evidenced by this Bill of Lading which relates to forwarding under Clause 4 hereof. If anything herein contained be inconsistent with or repugnant to the said provisions, it shall to the extent of such inconsistency or repugnance and no further be null and void.

Article 3.6 of the Hague Rules discharges the carrier from all liability for loss or damage unless suit is brought within one year. The bill of lading further stipulated that the same rights and immunities were extended to the carrier's servants or agents, including independent contractors. The stevedores were the parent company of the carrier and, in addition to stevedoring work, generally acted as the agent of the carrier in New Zealand. The stevedores pleaded the time bar.

The New Zealand Supreme Court upheld the stevedore's time-bar defence. The New Zealand Court of Appeal allowed the consignee's appeal on the ground that the shipper and the stevedores were not bound in contract at the time when the bill of lading was signed and delivered because, at that stage, no consideration had yet moved from the promisee, ie, the stevedores.

The stevedores appealed to the Judicial Committee of the Privy Council.

Held: Appeal allowed.

The main issue is whether the stevedores are entitled to the immunities of art 3.6 of the Hague Rules sought to be conferred by cl 1 of the bill of lading. The third para of cl 1 provides:

every exemption, limitation, condition and liberty herein contained and every right, exemption from liability, defence and immunity of whatsoever nature applicable to the carrier or to which the carrier is entitled hereunder shall also be available and shall extend to protect every such servant or agent of the carrier acting as aforesaid and for the purpose of all the foregoing provisions of this clause the carrier is or shall be deemed to be acting as agent or trustee on behalf of and for the benefit of all persons who are or might be his servants or agents from time to time (including independent contractors as aforesaid) and all such persons shall to this extend be or be deemed to be parties to the contract in or evidence by this bill of lading.

The Privy Council agreed that an appropriately drawn clause could protect the stevedore, and the majority held that cl 1 of the bill of lading was effective in protecting the stevedores.

Under English law, a contract between two parties cannot be sued on by a third person, such as the stevedores, even though the contract is expressed to be for their benefit. In this case, the stevedores were entitled to take the benefit of the time-bar provision because the carrier contracted not only on its own account but also as agent for the stevedore.

The bill of lading brought into existence a bargain, initially unilateral but capable of becoming mutual, between the shipper and the stevedores, made through the carrier as agent, which became a full contract when the stevedores performed their services by unloading the machine. The performance of those services for the benefit of the shipper was the consideration for the agreement by the shipper that the stevedores should have the benefit of the time-bar provision.

To give the stevedores the benefit of the exemptions and limitations contained in the bill of lading is to give effect to the clear intentions of a commercial document, and can be given within existing principles. There is no reason to strain the law or the facts in order to defeat these intentions. It should not be overlooked that the effect of denying validity to the clause would be to encourage actions against servants, agents, and independent contractors in order to get around exemptions (which are almost invariable and often compulsory) accepted by shippers against carriers, the existence, and presumed efficacy, of which is reflected in the rates of freight. There is no attraction in this consequence.