A cargo of timber and plywood which was shipped on board the Starsin was found to have deteriorated during the voyage because of negligent stowage. The stow was too tight and there was inadequate dunnage as well as insufficient ventilation.

The plaintiffs were buyers of the cargo who had become holders of the bills of lading. They sued the defendant shipowner for breach of contract and tort. The face of the bills of lading bore the name of the charterer, Continental Pacific Shipping, instead of the owner's name. The claim in tort was relied upon in case the bills of lading were held to be charterers' bills of lading instead of owners' bills.

There were two main issues to be decided on appeal: (1) whether the bills of lading were owners' bills of lading or charterers' bills of lading; and (2) if the claim against the owner was made in tort, could the owner rely on the Himalaya clause, and would art 3.8 of the Hague-Visby Rules nullify the exemption of liability contained in the Himalaya clause?

Held: Issue (1) was resolved in favour of the defendant shipowner who was not liable to the plaintiffs in contract. For issue (2) in relation to the Hague-Visby Rules, the majority of the House of Lords (with Lord Steyn dissenting) held that the exemption in the Himalaya clause fell foul of art 3.8 of the Hague-Visby Rules.

The bills of lading were charterers' bills because the charterer's name, Continental Pacific Shipping, was printed on the front. It was held that greater weight should attach to the front of the bill which contained a clear and unambiguous statement of the carrier’s identity as well as terms to which the parties had chosen to include in the contract as opposed to pre-printed standard terms devised to cover situations which parties had never addressed in their minds. It was also difficult to accept that the plaintiffs as transferees of the bills would consult pre-printed terms in determining who they were contracting with as the carrier. This was the market practice and was reinforced by the ICC Uniform Customs and Practice for Documentary Credits which made plain that banks would not examine the terms and conditions set out in the reverse side of bills of lading. The bills were therefore charterers’ bills and the defendant shipowner was not liable to the plaintiffs in contract.

The majority of the House of Lords held that the defendant could not rely on the Himalaya clause to exempt liability because such a clause would fall foul of art 3.8 of the Hague-Visby Rules. In particular, the majority found that the defendant is a party to the contract contained in or evidenced by the bill of lading only for the purpose of taking the benefit of the exemption clause in the Himalaya clause and for that purpose, the provisions of the contract as contained in or evidenced by the bills of lading are relevant. In this regard, the only relevant provision which could alter liability is art 3.8 of the Hague-Visby Rules, which applies to exemption clauses. The majority further found that it would be anomalous to give the defendant shipowner the benefit of incorporating the Hague-Visby Rules but to take no account of art 3.8. The defendant shipowner therefore could not rely on the exemption in the Himalaya clause.

Lord Steyn, dissenting, was of the view that the exemption in the Himalaya clause did not fall foul of art 3.8 of the Hague-Visby Rules because such an exemption was not found in a contract of carriage. Art 3.8 only nullifies clauses, covenants or agreements (which lessen liabilities otherwise as provided for in the Hague-Visby Rules) found in a contract of carriage. A contract of carriage under the Hague-Visby Rules is an agreement to carry cargo. It is not an agreement simply for an exemption, albeit that the consideration for the promise involves performance by a vessel. If the exemption is held to be contained in a contract of carriage that must hold good for all the provisions of the Hague-Visby Rules, including the carrier's obligations under arts 3.1 and 3.2. That would be a curious and implausible result flowing from a contract for an exemption clause. It would mean that the cargo owners of damaged parcels on the Starsin would in principle have had contractual remedies not on the bill of lading but on the Himalaya contract. That could not be right.

Although the defendant shipowner could be sued in tort, the majority of the plaintiffs were unable to do so. To sue in tort, a claimant must have legal ownership or a possessory title to the property concerned at the time when the loss or damage occurred. In the current case, all except one of the buyers had not obtained title when the cargo was damaged.