Case Brief Wiki
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Facts[]

Ajax Machine Tool Co. Ltd. manufactured and consigned a drill to A.M. Satterthwaite & Co. Ltd. A bill of lading was issued by agents for the Federal Steam Navigation Co. Ltd. which contained a clause stating:

  1. no liability for the carrier or servants/agents to the consignee,
  2. all claims must be within one year (Carriage of Goods by Sea Act), and
  3. not accountable for damages in excess of £100 unless the goods were insured for that values.

The stevedores were New Zealand Shipping (of which the Federal Steam Navigation Co.) was a subsidiary and they unloaded the drill and in the course of unloading damaged the drill due to negligence. Satterthwaite brought action three years after the damage and NZ Shipping claimed they were not liable as they were covered by the clause in the bill of lading.

Issue[]

  1. Does the limited liability clause in the bill of lading apply to the stevedores?

Decision[]

Appeal allowed with costs to the appellant, liability clause applies.

Reasons[]

Wilberforce, writing for the majority, lays out a test for agency:

  1. if the party is meant to be covered by provisions;
  2. if the promissor is clearly acting as agent for the party; and
  3. if the promissor has authority to do this;

then consideration moves from party through agent to promissee. Applying this to the case it is clear that the subsidiary relationship between the parties answers yes to each of these questions.

Satterthwaite agreed to exempt carrier and agents from liability in the bill of lading and commercial realities must mean that this covers the whole carriage from loading to discharge. This is essentially a "unilateral" contract which becomes bilateral with the specific performance of loading the goods. These acts constituted consideration for an agreement between Satterthwaite and NZ Shipping and therefore NZ Shipping would be subject to the exemption conditions of the bill of lading. Wilberforce makes it clear that this decision is in the interest of ensuring an efficient global market; the owners should have been insured since they knew the true value of the goods.

Ratio[]

Test for agency - if:

  1. party is meant to be covered by provisions;
  2. promissor is clearly acting as agent for the party; and
  3. promissor has authority to do this;then consideration moves from party through agent to promisee.
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