MacWilliam v. MSC

[ Home ] [ Up ]

Note: the English Court of Appeal, in a decision dated 16 April 2003, has overruled the judgment in this case at first instance, in holding that a straight bill of lading was a "bill of lading or similar document of title" for the purposes of the Hague-Visby Rules. For a  note on the Court of Appeal decision, click here. 

The decision of the Court of Appeal on this point was upheld by a decision of the House of Lords given on 16 February 2005. For a note on the House of Lords decision, click here

DMC/SandT/12/02
J T MacWilliam Co Inc v. Mediterranean Shipping Co. SA – the ‘Rafaela S’
English High Court, Commercial Division: Langley J.: April 2002
Mr. A Schaff QC, instructed by Clyde & Co, for MacWilliam
Mr S Croall, instructed by Duval Vassiliades, for Mediterranean Shipping Co
SHIPPING: CARRIAGE OF GOODS: THROUGH TRANSPORT BILL OF LADING: ONE VOYAGE OR TWO: TRANSHIPMENT IN UK: APPLICABILITY OF UK VERSION OF HAGUE-VISBY RULES (UKCOGSA 1971); APPLICATION OF USCOGSA: DOCUMENT OF TITLE: CHARACTERISTIC OF TRANSFERABILITY: STRAIGHT BILL OF LADING, NAMING CONSIGNEE: STRAIGHT BILLS NOT SUBJECT TO UK COGSA:
Summary
This case determined that a straight bill of lading, namely one in which the consignee is named, is not a bill of lading within the meaning of that term as used in the UK Carriage of Goods by Sea Act of 1971. The reason is that a straight bill of lading cannot be transferred by endorsement, or if a bearer bill, by delivery without endorsement. Transferability is the essential characteristic of a bill of lading under the Act.

Where cargo was carried under a bill of lading providing for through transport (namely that the carrier would tranship the cargo at a named port en route and then forward it to destination as agent for the cargo interests), the contract of carriage provided for two shipments, the first from port of loading to port of discharge/transhipment and the second from the port of transhipment to the port of destination. Such a contract was not simply for one shipment, from port of loading to port of destination, with an option to tranship en route.

DMC Rating Category: Confirmed

¬¬¬

Background
This was an appeal brought by cargo interests against an arbitration award on a preliminary issue, dated May 2001. That award had found in favour of Mediterranean Shipping Co. (‘MSC’), the carrier. The claim arose under a bill of lading issued by MSC for the carriage of four containers of printing machinery, loaded in the South African port of Durban, for delivery at Boston in the United States, with transhipment at Felixstowe in the UK. The cargo was damaged during the Felixstowe/Boston leg of the journey and, for the purposes of the arbitration, it was assumed that MSC were responsible for that damage. The issue was the extent to which MSC could limit their liability and, in particular, whether the bill of lading was subject to the Hague-Visby Rules - enacted in the UK by the Carriage of Goods by Sea Act of 1971 – the limitation provisions of which were more generous than those of the US Carriage of Goods by Sea Act of 1936, which it was agreed would otherwise apply.

The containers in question were loaded on an MSC ship, the ‘Rosemary’ in Durban in December 1989. MacWilliam, the buyers of the cargo, were named as consignees in the bill of lading. The consignee box (box 9) on the face of the bill contained the words ‘B/L not negotiable unless ‘order of’). The words ‘order of’ did not appear anywhere on the bill. Durban was described as the port of loading, Felixstowe as the port of discharge and Boston as the ‘Final Destination (through transport)’. Where the bill was a through bill, clause 3 applied. That clause read in part as follows:
"If boxes 5 and/or 9 are filled out, the carrier will, acting as the shipper’s agent, only arrange for transport of the cargo by other carriers from the place of origin to Port of Loading and/or from Port of Discharge to destination….It is expressly understood that the Carrier’s liability as ‘carrier’ applies only from the Port of Loading to Port of Discharge under this B/L…."

Under the paramount clause in the bill, the Hague Rules were to apply save where the bill of lading was subject to any compulsory applicable enactment, including the Hague-Visby Rules. If goods were to be shipped to or from the United States, the USCOGSA would apply.

On arrival of the cargo at Felixstowe, it was transhipped to another MSC vessel, the ‘Rafaela S’ and on-carried to Boston. No further bill of lading was issued at Felixstowe.

The submissions
MacWilliams submitted that the contract of carriage represented by the bill of lading issued in Durban terminated at Felixstowe, where a fresh bill of lading should have been issued in respect of the Felixstowe/Boston leg. Had a fresh bill been issued, it would have been issued in the UK and the Hague-Visby Rules would have applied compulsorily, in accordance with section 1(3) of the 1971 Act. MSC contended, on the other hand
(1) that the bill of lading was a ‘straight’ consigned bill of lading; such a bill is neither transferable nor negotiable. It is not, therefore, a bill of lading within the meaning of section 1(4) of the Act, which reads in part:
"….nothing in this section shall be taken as applying anything in the Rules to any contract for the carriage of goods by sea, unless the contract expressly or by implication provided for the issue of a bill of lading or any similar document of title." (Emphasis added).
(2) In addition, MSC maintained that the whole voyage from Durban to Boston was governed by one contract of carriage, namely that contained in or evidenced by the Durban bill. Accordingly, Durban, not Felixstowe, was the port of shipment.

The Arbitration Award
The arbitrators held that the form of the bill of lading used was designed for various circumstances, including when the bill was to be negotiable and when it was to be non- negotiable. The form of the bill had to be construed, therefore, in the light of the particular circumstances of each case and in some circumstances parts of the form would have to be read as if the words "if applicable" had been inserted. The bill of lading in this case was non-negotiable; it was not, therefore, a document of title in the accepted sense. As such, it was not a bill of lading to which the 1971 Act applied.

On the second issue, the arbitrators held that bill of lading issued at Durban covered the entire shipment from Durban to Boston and contained the contract between the shipper and carrier. The terms of the bill required MSC to carry the cargo themselves as far as Felixstowe and then gave them the option to use another carrier for the balance of the shipment. If they did not use another carrier and merely completed the carriage on another of their ships, no fresh contract or shipment arose.

¬¬¬

Judgment
Whilst the 1971 Act contained no definition of a ‘bill of lading’, the judge noted that Article 1(b) of the Rules (scheduled to the Act) plainly referred to a bill of lading as a document of title. [Article 1(b) reads: ‘Contract of Carriage applies only to contracts of carriage covered by a bill of lading or any similar document of title.] A bill of lading in this context is, he said, "one that is a negotiable or transferable document of title, in the sense that property in the goods can be transferred by endorsement and delivery of the bill itself. This is not the case with a straight consigned bill of lading, as the bill in this case was agreed to be."

Counsel for MacWilliam had argued that there was no decided case which conclusively determined that a straight consigned bill of lading was not within section 1(4) of the Act. Further he had maintained that the bill in this case was a document of title ‘in the hands of the named consignee’ and therefore fell within the sub-section. The judge rejected this approach, saying that a document of title in this context was ‘the antithesis of a document that can evidence the title of only one person. It is general, not specific to one person. It is a document by which goods can be transferred by endorsement and delivery of the document itself. A straight bill of lading is not such a document.’

 In reaching this conclusion, he relied on the ‘overwhelming burden of judicial and other legal sources’, including the textbooks, which include the characteristic of ‘transferability’ within the established definition of a bill of lading. He noted also the provisions of section 1(2)(b) of the UK Carriage of Goods by Sea Act of 1992, to the effect that references in the Act to a bill of lading "do not include references to a document which is incapable of transfer either by endorsement or, as a bearer bill, by delivery without endorsement". He also quoted with approval the judgment at first instance (overruled May 2002) in the case of Parsons & Others v. Owners of the Happy Ranger [2001] Lloyd’s Rep 530.

Whilst his decision on the first issue rendered it unnecessary to address the second issue, the judge did so, as his views on it differed from those of the arbitrators. In his view, the terms of the bill of lading plainly contemplated a shipment from Durban to Felixstowe as the port of discharge. Boston was the final destination and clause 3 entitled MSC to arrange further transport from Felixstowe to Boston, as agent for the cargo interests. He could not construe clause 3 as giving MSC an option to complete a single shipment from Durban to Boston, with a power to tranship en route. At the time the contract was made, the parties, in the view of the judge, plainly contemplated, and the contract provided for, two shipments under separate contracts. The fact that in the event MSC performed both shipments could not alter the construction of the contract. 

Judgment was accordingly given for MSC.

¬¬¬

Comment
Judgment in this case was delivered on April 17 2002. Exactly one month later, the English Court of Appeal delivered its judgment in the case of Parsons and Others v. Owners of the Happy Ranger. In that case, the Court of Appeal cast serious doubt on the accepted wisdom that a straight bill of lading is not a bill of lading within the meaning of the Hague/Hague-Visby Rules. Its comments in this regard were not, however, necessary for its decision, since it had already decided, contrary to the judge at first instance, that the bill of lading actually issued in the Happy Ranger case was not a straight bill of lading.

 

These Case Notes have been prepared with care, but neither the Editor nor the International and other Contributors can guarantee that they are free from error, nor that they contain every pertinent point. Reliance should not therefore be placed upon them without independent verification. The Editor and the International and other Contributors disclaim all liability for any loss of whatsoever nature and howsoever arising as a result of others acting or refraining from acting in reliance on the contents of this website and the information to which it gives access. The Editor claims copyright in the content of the website.