Ship Agents’ Liabilities “Himalaya” Clause or Standard Trading Conditions?

Ship agents, like other professionals in the transport industry, need to limit their liability to an amount which is commensurate with their remuneration. Carriers by sea, air and land set out their contractual obligations and limitations in either bills of lading, or airwaybills, CMR notes or standard trading conditions. One of the most important developments in connection with the question of an agent’s liability has been the general acceptance in a number of countries of the effect of the so-called “Himalaya clause” in a bill of lading.

The clause originates from a decision of the English House of Lords in the case of The Himalaya (1954) 2 Lloyd’s Rep. 267 where a passenger on a P&O liner sued the master in connection with an injury sustained while on board the ship. The passenger ticket contained a clause which protected the carrier from any action brought against the master. The House of Lords decided that, although the carrier was entitled to provide not only for himself but also for those engaged to carry out the contract, he had not done so. Since the ship’s servants or agents were not covered by the immunities on the ticket the master was found liable in tort for the passenger’s injuries.

Following this decision ocean carriers included a Himalaya clause in their bills of lading. The text of a typical Himalaya clause is as follows, although it is more likely to be found under the heading “sub-contractors” or “exemptions and immunities of servants, agents, etc.”

“No servant or agent (which expression shall include an independent contractor) acting solely on behalf of the carrier shall be under any personal liability whatsoever for any loss, damage or delay whatsoever whensoever and howsoever caused. Without prejudice to the generality of the foregoing, every term and exception herein upon which the carrier is or would be entitled to rely shall extend to protect every such servant or agent. For the purposes of this clause the carrier shall be deemed to be acting as agent on behalf of and trustee for the benefit of all persons who are or may be his servants or agents from time to time which persons shall to this extent be deemed parties hereto.”

If this clause is included in the bill of lading an agent can avoid liabilities for loss and/or damage to cargo in his possession provided the act which gave rise to the loss occurs during the contract of carriage and the bill of lading contains a Himalaya clause. These two requirements are found in the English High Court decision Raymond Burke Motors Limited v. The Mersey Docks and Harbour Co. (1986) 1 Lloyd’s Rep. 155. A container of motorcycles was stored in a container park, away from the quayside at Liverpool, awaiting the arrival of the carrying vessel, where a truck operated by an employee of the Mersey Docks & Harbour Co. struck and damaged it. The question which the court had to decide was whether the dock company could take advantage of the Himalaya clause in a bill of lading which had not been issued at the time of the damage. What was relevant was not whether a bill of lading had been issued, but whether the contract of carriage had already come into existence at the time the container was damaged. The court decided that the contract of carriage had not yet come into existence and therefore the defendants were not entitled to take advantage of the exception clause in the bill of lading. The court considered, on the information available, that a through bill of lading would not have been issued and that the contract of carriage would only commence once steps were taken to load the container onto the ship. This was deemed to be when a straddle carrier was despatched for the purpose of picking up the container.

Therefore, when a ship agent performs a duty on behalf of the carrier (whether shipowner, charterer or liner company) and in the performance of those duties causes damage or loss to the cargo owner, he would normally (although not in all cases) be entitled to the defences provided by the Himalaya clause in his principal’s bill of lading. The clause does not, of course, protect the carrier from claims by his customer or protect the agent from any claim by his principal for reimbursement. Why, if he has the protection of the carrier’s bill of lading, does a ship agent need his own standard trading conditions? The answer is that there will always be circumstances where the carrier’s bill of lading terms do not apply, which could leave the ship agent liable for the full value of any loss, unless he has the protection of his own standard trading conditions. For example, if the ship agent provides services to the cargo owner, such as collecting cargo from or delivering it to the merchant's premises or arranging customs clearance or consolidation of groupage cargoes, he is no longer representing the carrier. Instead he is providing a service to the cargo interests, either as an agent or as a principal. It is, therefore, recommended that ship agents have their own standard trading conditions.

The Association of Rotterdam Shipbrokers and Agents have had their own standard trading conditions for many years, as have the Danish Shipbrokers’ Association. Ship agent members of the Institute of Chartered Shipbrokers are also entitled to use their own standard trading conditions. It is not enough for the agent to have standard trading conditions; they must be notified to the customer before the contract is formed, otherwise they are not incorporated into the contract. Under the laws of many countries, it is sufficient to add a footnote to the bottom of booking forms, headed notepaper, faxes, telexes and invoices to the effect that “all business is transacted subject to the standard trading conditions of ......., a copy of which can be obtained on application.”

Another method of notifying customers is to print standard trading conditions on the reverse of documents and company notepaper. In some countries, however, this method of notifying customers is not sufficient and they would not be deemed to have been incorporated into the contract unless the clients had both received a copy of the conditions, and signed and returned them to the company wishing to rely on them. Members of ITIC in various countries should find out the legal requirements in their country in order to incorporate their standard trading conditions into their contracts.

It is important that the standard trading conditions are notified to the customer before the contract is finalised. If a guest registers at an hotel and there is a notice on the reception desk (where the guest can read it before he signs the register) to the effect that the hotel will not be responsible for the loss of the guest’s personal items from his hotel room, then this provision is incorporated into the guest’s contract with the hotel. If, however, the hotel has the same notice up in the guest’s room (rather than at the reception desk) then it is simply too late to change the terms of the contract which was formed at the reception desk. It is therefore not sufficient to place a footnote notifying the existence of standard trading conditions on the invoice, which does not reach the customer until after the contract has been performed. It is important that the footnote be placed on booking notes, telexes and other communications sent to the customer when the contract is formed. It is also advisable to send copies of standard trading conditions periodically to customers so that, if the agent has to limit or reject liability on the basis of the standard conditions, the customer does not receive an unwelcome shock.

“Standard trading conditions must be notified to the customer before the contract is formed”