Parcels of oranges were carried on the Torni from Jaffa to Hull. The ship was owned by an Estonian company, Reval Shipping Co Ltd, but was on time charter to Messrs Stockwood, Rees & Co (Stockwood), shipbrokers of Swansea, Wales. The vessel was employed by them in a service called the Jaffa Union Line. This service was run by a Palestinian corporation, Jaffa Union Line Ltd, which was formed by parties in Palestine acting as agents for Stockwood. All the bills of lading in respect of the parcels of oranges were dated, signed, and issued in Jaffa by persons claiming to sign as directors of Jaffa Union Line Ltd.

Upon arrival at Hull the plaintiffs, who were the receivers of the oranges, complained of either short delivery, damaged goods, or both. The plaintiffs were divided into two classes. The first and smaller class, consisting of just two firms, sued as owners of the oranges by indorsements of the bills of lading passing the property to them. The second and much larger class of plaintiffs consisted of nine firms suing, not as owners or indorsees, but as parties who had presented the bills of lading and paid the freight. They claimed that there was an implied contract between themselves and the shipowners to deliver the oranges in good order and condition in accordance with the bills of lading.

Two preliminary points of law were presented to the Court:

1. Whether the law of Palestine or the law of England governed the interpretation of the carriage contracts; and 
2. Whether the bills of lading were or were not subject to the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading 1924 (the Hague Rules), under whichever law was found to apply.

Held: Judgment was given for both classes of plaintiffs.

The defendants pleaded several provisions contained in the bills of lading which protected them from liability. In rebuttal, the plaintiffs argued that the defences relied upon were null and void and of no effect by virtue of the Government of Palestine Carriage of Goods by Sea Ordinance, No 43 of 1926 (the Ordinance), which incorporated the Hague Rules into Palestinian law. Notably, Provision 4 of the Ordinance reads:

Every Bill of lading or similar document of title issued in Palestine which contains or is evidence of any contract to which the Rules apply shall contain an express statement that it is to have effect subject to the provisions of the said Rules as applied by this Ordinance, and shall be deemed to have effect subject thereto, notwithstanding the omission of such express statement.

The defendants contested that the bills of lading were subject to the Ordinance, or that it formed part of the contract between the parties. Alternatively, they relied on the latter part of cl 14 of the bills of lading which provides: 'This bill of lading wherever signed is to be construed in accordance with English law.' The defendants argued that the effect of the contract being governed by English law was that the Hague Rules would not apply to the contract, since the Rules only applied to outward shipments, and this case involved an English inward shipment. They further claimed that the second class of plaintiffs were not entitled to apply the Hague Rules to their claims because they had not based their claims on the bills of lading, but were rather relying on an implied contract arising from the payment of freight.

In determining the applicable law governing the contracts, the Court acknowledged two important points:

1. As a general rule it is accepted that the test as to what law applies to the construction of a contract is the intention of the parties at the time the contract was made; and
2. That in respect of the first class of indorsees, they would be in no different position from the original shipper of the goods.

The Court then considered what the parties to the original contract contained in the bills of lading intended as the applicable law. It noted that the real parties were Stockwood and the shippers in Palestine. In finding that the law of Palestine applied, the Court referred to the obiter dictum of Lord Halsbury in Re Missouri Steamship Co [1889] 42 Ch D (CA) where he held:

I put aside, as Sir Walter Philmore candidly put aside, questions in which the positive law of the country forbids contracts to be made.  Where a contract is void on the ground of immorality, or is contrary to such positive law as would prohibit the making of such contract at all, then the contract would be void all over the world, and no civilised country would be called on to enforce it.

The Court found that this case and in particular this passage, notwithstanding its obiter nature, was authority for the premise that the English courts would not refuse to uphold a provision in a contract merely because it would have been held to be void in its country of formation. However, it did not provide authority for the premise that English courts would enforce a provision in a contract which is prohibited by the positive law of the country of its formation (loci contractus), 'or which would be illegal according to that law'. The Court reasoned that Provision 4 not only made it extraordinarily clear that the Palestinian legislative authority intended to incorporate the Hague Rules into its positive law by requiring that every bill of lading expressly apply the Hague Rules. The provision took the extra step of stating that even in the absence of such an express statement, every bill of lading issued in Palestine shall be deemed to be subject to the Rules. Therefore, given the facts that the shippers were either natives or residents of Palestine and that the bills of lading were issued in Palestine, the Court expressed doubt on three points:

1. That the shippers would intend and agree to contract out of the benefits which the Ordinance so insistently bestowed on them;
2. That the shippers were even entitled to do so; and
3. That, in the face of the obiter dictum of Lord Halsbury, the Court had any right to enforce a stipulation such as cl 14 of the bills of lading, because it would be a clear infringement of Palestinian law 'if it were to be taken to exclude the Hague Rules, which ought to have been expressly included, and are to be deemed to be included even in the event of actual omission'.

The Court found that holding so would be contrary to law and common sense. It held that the words of the Ordinance were stronger than the parallel terms in the Harter Act 1893; and art 3.8 of the Hague Rules themselves. The Harter Act states that 'words or clauses contrary to its provisions are to be null and void and of no effect', whereas art 3.8 of the Hague Rules provides:

Any clause, covenant or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to or in connection with goods arising from negligence, fault or failure in the duties and obligations provided in this Article or lessening such liability otherwise than as provided in these Rules, shall be null and void and of no effect. A benefit of insurance or similar clause shall be deemed to be a clause relieving the carrier from liability.

The comparatively strong words of the Ordinance removed from the parties the right to evade the application of the Hague Rules from the bills of lading, and therefore they would not succeed in doing so even if they had possessed that intention at the inception of the contracts. The Court alternatively held that even if it was incorrect in this reasoning, on the facts, the parties must be taken to have intended to apply Palestine law.

Concerning the first class of plaintiffs, the Court held that, as they could be in no better position than the original shippers, they succeeded.

As to the second class of plaintiffs, whose claims were not based on the bills of lading but merely evidenced by them, the Court held that irrespective of whether the plaintiffs had assumed the position of agent or owner in relation to the bills of lading, if they now possessed the bills of lading, they were entitled to hold and present them, to choose to be bound by their terms, and to expect those terms to be no different from those originally agreed between the parties. The onus would then be on the shipowners to show that something occurred to alter that original contract in the hands of the new holder: for example, the creation of a new bargain between the shipowner and a person who was neither the consignee or the assignee of the original contract. In the absence of evidence indicating a change in circumstances that may lead to an alteration of the original terms of the bills of lading, the shipowner cannot claim that 'a contract which meant one thing in its inception meant something else when it has passed into the hands of a fresh holder'.