The Mahkutai
Privy Council (Hong Kong)
Citations: [1996] AC 650; [1996] 3 WLR 1; [1996] 3 All ER 502; [1996] 2 Lloyd’s Rep 1; [1996] CLC 799; (1996) 146 NLJ 677.
Facts
Defendants were owners of a ship, the Mahkutai. They chartered their vessel to an Indonesian company (‘the carrier’). The carrier then sub-chartered the ship to a shipping company, who used it to ship goods from Jakarta to China. This included the claimants’ property. The relevant bill of lading contained a ‘Himalaya clause’. This stated that every servant, agent or subcontractor of the carrier would benefit from all provisions, exemptions, limitations, liberty and conditions applicable to the carrier. It also assigned jurisdiction to the Indonesian courts.
When the ship arrived, the claimants discovered that their property had been damaged by sea water. They sued the defendants in the Hong Kong courts. The defendants sought to rely on the exclusive jurisdiction clause. However, the claimant argued that they could not do this, because they were not parties to the original contract. The defendants contended that the Himalaya clause allowed them to rely on the jurisdiction clause.
Issue(s)
- Could the ship owners rely on the jurisdiction clause?
Decision
The Privy Council held in favour of the claimants. The exclusive jurisdiction clause was not an exemption, limitation, liberty or condition benefiting the carrier. Instead, it created mutual rights and obligations regarding the relevant jurisdiction for dispute resolution. ‘Provision’ meant those clauses which benefited and protected the carrier. Accordingly, the jurisdiction clause was not a provision either. As such, even if the ship owners could rely on the Himalaya clause, this did not permit them to rely on the exclusive jurisdiction clause.
Since it was not necessary to determine whether the ship owners counted as the carrier’s ‘sub-contractors’, the Council did not decide in principle whether they could rely on the Himalaya clause.
This Case is Authority For…
A Himalaya clause is a contract term expressly designed to provide employees, contractors and other agents of a party to a carriage contract the benefit of contractual defences. They were an exception to the common law rule of privity of contract. How and why they allowed third-parties to rely on contract terms was controversial.
Other
In the modern era, reliance on the common law rules surrounding Himalaya clauses is likely to be very rare. This is because third-parties can now usually sue under the Contracts (Rights of Third Parties) Act 1999.
