A consignment of timber was shipped on the Caspiana at Vancouver and Nanaimo in British Columbia for delivery at ports in London and Hull. However, dock strikes in London and Hull forced the shipowner, Palmyra Trading Corp (Palmyra), to discharge the consignment in Hamburg. Palmyra did not make arrangements to forward the cargo to destinations in London and Hull or pay storage and forwarding costs.

The consignment was shipped under four bills of lading. The bills incorporated the Hague Rules as contained in the Canadian Water Carriage of Goods Act, 1936. The Hague Rules applied to three of the bills, but not to the fourth, which covered goods carried on deck (art 1.c).

GH Renton & Co Ltd (Renton), the holder of the bills of lading, paid the original freight charges for each bill of lading and expenses for storage in Hamburg and forwarding the goods to London and Hull without prejudice, and claimed compensation from Palmyra.

Palmyra and Renton disagreed on the validity and effectiveness of cll 14(c) and 14(f) in the bills of lading. The arguments were based on different interpretations of arts 3.2, 3.8, and 4.4 of the Hague Rules and contractual terms.

Clause 14 of the bills of lading provided:

14. Government Directions, War, Epidemics, Ice, Strikes, etc …

(c) If circumstances such as epidemics, quarantine, ice, labour troubles, labour obstructions, strikes, lockouts, or any other difficulties on board or on shore would prevent the vessel from leaving the port of loading, reaching or entering the port of discharge, or discharging the cargo in the usual manner and leaving again safely and without delay, the master may discharge the cargo at the port of loading or any other safe and convenient port. …

(f) Discharging the cargo under this clause is considered fulfilment of the contract. If any extra expenses are incurred in connection with exercising this liberty, the merchant must pay for them in addition to the freight, together with return freight (if any), and reasonable compensation for any extra services rendered to the goods.

Palmyra argued that the discharge in Hamburg constituted a due delivery. In the event of labour obstructions, strikes, or lockouts, it could divert the ship and unload the cargo at any other safe and convenient port, such as Hamburg.

Renton argued that Palmyra did not discharge the goods at a proper port (art 3.2), and so breached its duties. Clause 14(c) also allowed Palmyra to discharge the goods at the port of loading, relieving it from its obligation to carry the goods (art 3.2). Hence, the clauses were null and void (art 3.8) and must be ignored.

Regardless of the Hague Rules, Palmyra's decision to discharge the goods at Hamburg would still amount to a contractual breach. It is inconsistent with the express promise to deliver at London or Hull, and would defeat the main object and intent of the contract (see Leduc & Co v Ward (1888) 20 QBD 475, 480-481 (Lord Esher MR); Glynn v Margetson & Co [1892] 1 QB 337, 344 (Fry LJ); Glynn v Margetson & Co [1893] AC 351, 357 (Lord Halsbury LC)).

Palmyra's counterargument was that the bills of lading permitted it to discharge the goods at an alternative port in certain circumstances, like strikes. Such a construction was not prohibited by any common law principle. Moreover, art 3.2 did not concern the place of discharge. The phrase 'loss or damage to or in connection with goods' in art 3.8 only covered physical damage. Since the goods were undamaged and only located in the wrong place, art 3.8 did not void the clauses.

The trial Judge held that Palmyra was liable to Renton for not providing alternative discharge ports. The main object and intent of the contract was to carry cargo to London or Hull, and cl 14(f) was inconsistent and repugnant to such an object and intent. Further, by discharging the goods at Hamburg, Palmyra did not perform the contract of carriage properly. The phrase 'properly ... discharge the goods carried' in art 3.2 referred to discharging the goods at the correct port, either London or Hull. Although cl 14(c) released Palmyra from its obligation under art 3.2, this clause was voided by art 3.8.

Palmyra appealed. The Court of Appeal reversed the decision of the trial Judge. The Court held that:

1. Clause 14(c) was not a deviation from the contract of carriage but an alternative for performing the contract in specific circumstances. Palmyra acted within the terms of the contract by directing the Caspiana to proceed to Hamburg, a convenient port, and fulfilled the contract (cl 14(f)).
2. Article 3.2 did not create a duty to unload at the agreed-upon destination. The Hague Rules did not impose any specific requirements for the endpoints of a given voyage. Hence, the clauses were valid and effective.
3. Palmyra did not breach art 4.4. The contract of carriage provided for a substituted port of discharge under the circumstances envisioned by cl 14(c). Hence, the Caspiana did not deviate by proceeding to Hamburg.

Renton appealed to the House of Lords.

Held: Appeal dismissed.

Viscount Kilmuir LC: The issue was whether Palmyra could avoid liability by relying on the clauses.

Renton's expenses in transhipping the goods from Hamburg and storing them at that port qualified as 'loss or damage to or in connection with goods' under art 3.8. Otherwise, it would disregard the phrase 'or in connection with', rendering it meaningless.

The natural and ordinary meaning of 'properly' in contrast to 'carefully' in the phrase 'properly and carefully load, handle, stow, carry, keep, care for and discharge' is that it conforms to a sound system. The word 'properly' does not have a geographical significance.

Lord Morton: The clauses are valid and effective. The contract of carriage required Palmyra to transport the goods to London or Hull. However, the clauses introduced an alternative way to fulfil the contract. Taken together, the clauses provided a substituted method for performing the contract and earning the freight based on those events specified in the War Risks Clauses. They enabled the discharge of goods at Hamburg to fulfill Palmyra's contractual obligation.

The effect of the clauses was that Palmyra's contractual obligation became conditional. A contractual obligation that was initially unqualified in its terms and subsequently qualified by a proviso that modified or altered the obligation are not in conflict. Both the original obligation and its qualification formed part of the parties' intention, and neither part contradicted the other.

It was impossible to limit the words in question as it would read the words as if they were 'loss of or damage to goods', and to give no consideration to the phrase 'or in connection with'. The phrase covered four events:

1. loss to goods;
2. damage to goods;
3. loss in connection with goods; and
4. damage in connection with goods.

The words 'or in connection with' were inserted to give a wider scope to the clause and were broad enough to cover the cost of transhipping the goods from Hamburg and storing them at that port, which caused Renton to sustain loss or damage.

The phrase 'shall properly and carefully … carry … and discharge the goods carried' in art 3.2 means that the carrier must perform the duties of carriage and discharge imposed by the contract in a proper and careful manner (affirming Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB 402, 417-418; [1954] 1 Lloyd's Rep 321, 328-329 (Devlin J) (CMI2100)). This interpretation is more consistent with the object of the Hague Rules.

The clauses do not seek to relieve the carrier from any liability arising from failure to fulfil the duties and obligations imposed by art 3.2, and merely substitutes London with 'any other safe and convenient port' in specified events.

A contract stating that the carrier did not need to carry the goods in a certain event would not conflict with art 3.2. Article 3.2 did not place any obligation on Palmyra to transport the goods at all, unless the contract specified that it was to transport them. A ship 'carries' goods within the meaning of art 3.2 from the moment they are loaded on board (art 1.e).

The clauses did not permit deviations. They provided alternative ways of performing the contract in certain circumstances. Masters are not deviating if they perform the contract in any of these ways (Atkins Kroll & Co v Silver Line Ltd [1954] AMC 177; Hirsch Lumber Company v Weyerhaeuser Steamship Co [1956] AMC 1294).

Article 4.4 did not shed light on the interpretation of art 3.2.

Lord Tucker: The clauses were not invalidated by arts 3.2 and 3.8. These clauses were not so inconsistent with the primary and unqualified promise to deliver at London or Hull that they must be rejected (see GH Renton & Co Ltd v Palmyra Trading Corp [1955] 2 Lloyd's Rep 722, 742 (Jenkins LJ)).

Carriage begins at the moment the goods are loaded, even before the ship has moved (art 1.e).

Parties should be allowed to determine what will happen in the event of a strike without waiting for the loss to occur or for the contract to become frustrated. Such an approach would be in the interests of both the carrier and the holder of a bill of lading. Moreover, art 4.2.j explicitly exempts the carrier and ship from liability for loss or damage resulting from strikes.

The words 'loss or damage to or in connection with goods' in art 3.8 are not limited to physical damage.

Lord Somervell: Article 3.2 did not invalidate cl 14(c). GH Renton & Co Ltd's loss or damage was indeed 'to or in connection with goods' (art 3.2).

The Hague Rules applied to the voyage to and discharge at Hamburg, as they would have to the voyage to and discharge at London if there had been no strike. In the circumstances, the Hague Rules did not prohibit Hamburg from being a destination.

When deciding what constitutes a convenient port, cl 14 required the master to act reasonably, taking into account both the consignee's and the ship's convenience.

Article 3.2 is only directed to the manner in which the obligations undertaken by the shipowner are to be carried out. Subject to art 4, art 3.2 prohibits a shipowner from contracting out of liability in discharging its responsibilities properly and with care (affirming the reasoning in Pyrene).

In the circumstances, the voyage to Hamburg was not a deviation, but a contractual voyage. The wording in art 4.4 might suggest that deviation would or could be considered a breach of the Hague Rules. However, a deviation was actually a breach of a shipowner's implied obligation to proceed along a usual and reasonable route. It was a failure to properly and carefully carry out the service in accordance with the terms on which the contracted voyage was supposed to be performed.