Third party liability and exemption clauses in the contract of carriage by sea

Sea carriers in the past, have extended liability to their servants, agents and sub-contractors through Himalaya clauses in the bills of lading. However, there has been a complicated legal debate over third party liability and exemption clauses in the contract of carriage by sea. Complicated issues have made it difficult to determine who bears responsibility for the goods from carriage to delivery. This will affect the introduction of adequate insurance rates, which will in turn, apply to efficient rates of carriage. Some of the difficulties had been overcome by an established principle of vicarious liability. However, this principle was short lived, as it was severely restricted and later, well defunct. The Privy Council decision of A. M. Satterthwaite and Co. Ltd. v New Zealand Shipping Co. Ltd., did successfully transfer indemnity to a third party. However, the High Court decision of Port Jackson Stevedoring Pty. Ltd. v Salmond and Spraggon (Australia) Pty. Ltd. failed to apply the Eurymedon doctrine. Therefore, although the Enrymedon was not over ruled, there was still opposition to third party indemnity under bills of lading. The High Court initiated a search for fine distinctions involving the capacity issue, construction of the agreement, consideration, agency and fundamental breach. The New York Star was appealed to the Privy Council, which reversed the decision of the High Court. The status of third party liability was still somewhat unsettled until the matter was again tested and upheld in Broken Hill Proprietary Co. Ltd. v Hapag-Lloyd Aktiengesellschaf and others, and Sidney Cooke Ltd. v Hapag-Lloyd Aktiengesellschaf and Another, decisions. The principles in the House of Lord's decision in the New York Star, which allowed the exclusion of stevedores under a bill of lading, were transferred to the road haulage industry in Celthene Pty. Ltd. v W.K.J. Hauliers Pty. Ltd. and Another, and upheld in Life Savers (Australasia) Ltd. v Frigmobile Pty. Ltd. and Another. It is apparent from these recent decisions, that a properly worded limitation or exclusion clause, can operate to exempt the carrier's servants, agents and independent contractors, from liability for damage or loss of goods. Such an understanding makes it easier for cargo owners to ascertain the risk they undertake when shipping their freight, and to arrange for appropriate insurance coverage. The carrier, knowing that his servants, agents and independent contractors employed from time to time, are exempted from liability, can set competitive rates of carriage, and discard high insurance costs.