Note: the House of Lords, in a judgment given on 16 February 2005, has upheld the decision of the Court of Appeal to the effect that  a ‘straight consigned,’ or non-negotiable, bill of lading is both a ‘bill of lading’ and a ‘similar document of title’ for the purposes of the Hague/Hague-Visby Rules and the UK 1971 Carriage of Goods by Sea Act. For a note on the House of Lords decision, click here

Facts
In 1989 the claimants, J I MacWilliam Co Inc, of Boston, bought a quantity of printing machinery, cif Boston. The cargo, in four containers, was shipped at Durban. The terms of the contract of carriage were contained in a ‘straight consigned’ bill of lading issued to the shipper by the carrier, Mediterranean Shipping Co. (‘MSC’). The bill named MacWilliam as consignee, unqualified by the words "order of" which would have made it a transferable or "negotiable" bill of lading. Durban was the "port of loading", Felixstowe the "port of discharge", with Boston the "final destination (through transport)". MSC was to discharge the goods at Felixstowe for onward shipment, using either another carrier or one of its own vessels. Freight was payable at "destination".

The standard terms included a Clause Paramount, which excluded the Hague/Hague-Visby Rules in respect of goods carried to or from USA These were subject to the US Carriage of Goods by Sea Act (US COGSA) 1936, which imposes a limitation of US$500 per package.

Clause 3 of the bill provided that where, as here, the final destination was given, "the Carrier will, acting as shipper’s agent, only arrange transport of the cargo by other carriers from…. Port of Discharge to destination, and during such segments of Through Transport, handling and storage of the goods will be subject to the freight contracts and tariffs of the other carriers. It is expressly understood that the Carrier’s liability as "Carrier" applies only from the Port of Loading to the Port of Discharge under this B/L…..".

The bill of lading also contained an "attestation clause" which provided that where a number of bills of lading "all of this tenor and date has been signed, one of which being accomplished, the others to stand void. One of the Bills of Lading must be surrendered, duly endorsed, in exchange for the goods or delivery order."

The machinery was loaded on MSC’s vessel Rosemary, under the Durban bill of lading. As a ‘straight consigned’ bill, it would transfer the rights in the goods on delivery to MacWilliam as named consignee, and to no other party.

At Felixstowe the goods were transhipped to MSC’s Rafaela S. No new bill was issued. Had a second bill of lading been issued at Felixstowe, to cover the carriage from there to Boston, the parties agreed that it would also have been a straight bill. On delivery at Boston the goods were found to be damaged "beyond economic repair".

MacWilliam referred its claim to London arbitration. It submitted it was entitled to the Hague-Visby compensation regime, under the UK 1971 Act. It argued that the original contract of carriage terminated at Felixstowe, where a new bill of lading should have been issued for the remainder of the voyage. The "port of shipment" would thus have been Felixstowe, and the Rules would have applied compulsorily under UK COGSA 1971 s.1(3). This subsection applies the provisions of the Hague/Visby Rules, with the force of law, "in relation to and in connection with the carriage of goods by sea in ships where the port of shipment is a port in the United Kingdom….".

The Arbitrators found in the carrier’s favour. They held, firstly, that a ‘straight consigned’ (i.e. non-transferable) bill was not a ‘bill of lading’ or ‘document of title’ under the Hague/Hague-Visby Rules within s.1(4) of the 1971 UK Act. This subsection provides that the Hague/Visby Rules do not apply to any contract for the carriage of goods by sea, "unless the contract expressly or by implication, provides for the issue of a bill of lading or any similar document of title". Secondly, they held that the 1971 Act did not in any case apply, because the carriage from Durban to Boston was to be covered by the original "classic through transport" bill, with freight only payable at destination. As MSC had decided to use its own vessel from Felixstowe, no further bill was necessary.

In the Commercial Court, Langley J upheld the award in respect of the finding that the Durban bill was not a ‘document of title’. He differed on the second question (rendered academic by his answer to the first question), holding that the parties had clearly contemplated two shipments, with payment on delivery at Boston. MacWilliam appealed on the ‘document of title’ issue and MSC cross-appealed on the ‘one contract or two’ issue.

Judgment
Rix LJ, giving the leading judgment in the Court of Appeal, said the question whether, under the terms of the bill of lading, the Hague/Hague-Visby or the US COGSA 1936 package limitation applied, turned on whether the compulsory regime of the 1971 Act applied to the second leg of the voyage, where the damage occurred. That raised the question whether, on the proper construction of the Durban bill of lading, there was only one contract of carriage, or two.

Secondly - a question "of general significance with potentially far-reaching implications" - if there was a separate contract for the second leg (which, it was agreed, would have been a "straight bill" like the first) did it "expressly or by implication provide for the issue of a bill of lading or any similar document of title" within s.1(4) of the 1971 Act? Since that phrase originated in the Hague Rules, the second question was in effect asking whether a straight bill of lading is a bill of lading or similar document of title within the meaning of the Hague Rules.

Thirdly, whether or not there was one through contract for carriage from Durban to Boston, was Felixstowe a "port of shipment in the UK" within the 1971 Act s.1(3)?

One contract or two?
MSC argued for the arbitrators’ finding and their reasoning. MacWilliam contended that the wording of the bill, read as a whole, provided for two separate contracts. In support of his argument Counsel for MacWilliam cited the case of Stafford Allen v Pacific Steamship Navigation (1956) Ll. L Rep 105, where cargo damage on the second leg of a voyage was held to be covered by the second carrier’s standard bill of lading in the absence of a fresh bill.

Rix LJ accepted the relevance of Stafford Allen. In the present case, the Durban bill – in particular clause 3 above - could not be said to evidence a contract of carriage ("as distinct from a contract for carriage") beyond Felixstowe. The provision for freight to be paid "at destination" did not displace the parties’ choice of Felixstowe as "port of discharge". It must be taken to refer to Boston as the "final destination". For these reasons he concluded that "although MSC was contracted to arrange on-carriage to Boston, it was not contracted to carry the machinery to Boston until it had entered into a new arrangement…. That was a separate contract of carriage, which entitled the shipper to demand a bill of lading and therefore, subject to the straight bill of lading issue, meant that the contract was "covered by a bill of lading" for the purposes of Article 1 of the Hague/Hague-Visby Rules." See (The ‘Happy Ranger’ [2002] 2 Lloyd’s Rep 357). 

Port of Shipment
Rix LJ held that, if there were two contracts, it was "hard to see how Felixstowe is not to be regarded as the "port of shipment" for the purpose of the second contract."

Is a straight bill of lading a ‘document of title’?
Simon Croall, for MSC, submitted that transferability to third parties - the ability to transfer rights and liabilities under contract by endorsement or delivery - was the essence of a bill of lading, and was what made it a "document of title" in English law. The same principle was adopted in the Hague Rules themselves and their travaux préparatoires, and was supported by subsequent authority, and confirmed in the 1992 UK Carriage of Goods By Sea Act, he said, which treats a straight bill as a sea waybill rather than a bill of lading.

For MacWilliam, Alistair Schaff QC said though a straight bill cannot be "negotiated" down a series of transferees, it can be transferred at least once - to the named consignee (by the shipper to MacWilliam, in this case), and that for the purpose of that limited transfer it performs all the functions of a transferable bill of lading. This, together with the "attestation" clause in the contract which requires a bill of lading to be "surrendered duly endorsed" before the consignee can obtain possession of the goods, made it a document of title. As for the travaux préparatoires of the Hague Rules, they demonstrated that straight bills of lading were recognised in 1924 and that the Hague Rules were intended to embrace them. The Law Commission report (relied on by Simon Croall) and the 1992 Act came, he argued, too late to affect the issue and in any event proceeded on a view of English law which either reflected too narrow and domestic a view or may even have proceeded upon a mistake. In his submission, at least since the Bills of Lading Act of 1855, a straight bill of lading, despite its limited transferability, was treated in exactly the same way as a fully "negotiable" bill. The Hague Rules were not primarily concerned with transferability in itself, but with securing minimum international standards as to the content of a bill of lading contract for the protection of third parties who were not party to the negotiation of its original terms. Further, as an international instrument, they should not be narrowly construed according to English domestic concepts.

Langley J had agreed with MSC and the arbitrators that a document of title was general and not specific to one person. It could transfer goods by endorsement and delivery of the document itself - "the antithesis of a document which can evidence the title of only one person", such as a straight bill.

After a lengthy and painstaking analysis of the background to the 1924 Hague Rules, including their travaux préparatoires, of pre-existing US law, of the 1971 and 1992 Carriage of Goods by Sea Acts the relevant legal and academic authorities, Rix LJ concluded that a straight bill of lading, that is otherwise in the form of a classic (negotiable) bill of lading, is a bill of lading that is within the Hague/Hague-Visby Rules, even though it is non-negotiable. He gave six reasons for his decision, as follows:

(i) The Hague Rules are mainly concerned with the content of a contract of carriage where, as in a bill of lading, it may come to affect a third party into whose hands it comes. A named consignee (other than the shipper) "is as much a third party as a named consignee under a ‘classic’ bill." Therefore such a consignee should be regarded, as a matter of first impression, as being within the concern of the Rules.

(ii) In practice, it is used, like a classic bill, as a document against which payment is required, and whose transfer marks the intended transfer of property. Therefore, its nature is that , although it cannot be transferred more than once, for it is not negotiable, it can be transferred by delivery (just like a classic bill of lading) to the named consignee. "In these circumstances, the shipper and his bankers need the same protection as the shipper under a classic bill; and the consignee himself and his insurers in turn need to have rights against the carrier under the contract of carriage. I can see no reason why straight bills have not always been within the 1855 [Bills of Lading] Act. Those needs are in any event recognised under the 1992 Act."

(iii) In practice, a straight bill, unlike a sea waybill, "is written on the form of an otherwise classic bill. and requires production on delivery and therefore transfer to a consignee to enable him to obtain delivery of the goods."

(iv) In "principle, function and form", a straight bill of lading is much closer to a classic bill than to a non-negotiable receipt.

(v) The Hague Rules travaux préparatoires are consistent with this view and "go far to support it".

(vi) The terms of the 1971 and 1992 Acts "may reflect a developing English view about how to categorise bills of lading and non-negotiable receipts and sea waybills, but….they are ultimately dealing with different purposes. In any event, I do not see how they can control the meaning of the Hague Rules, which are not only much earlier, but also of international, and not merely domestic, scope."

What is the effect of the Attestation Clause in the present case?
Rix LJ held the attestation clause to be applicable to the use of the bill of lading both in its negotiable form and in its straight form. (The Happy Ranger [2002] 2 Lloyd’s Rep 357, distinguishing The Chitral [2000] 1 Lloyd’s Rep 529).

Is a straight bill, which has to be produced to obtain delivery, a ‘document of title’?
The authorities and textbooks before the court supported the view that it was. Whatever the history of the phrase in English common or statute law, there was "no reason why a document which has to be produced to obtain the goods should not be regarded, in an international convention, as a document of title.

The recent "proliferation" of cases suggested that the "bill of lading"/"document of title" question depended on whether, as with a classic bill, a ship’s obligation was to deliver only against the surrender of the bill. In addition to the English cases of The Sormovskiy 3068 [1994] 2 Lloyd’s Rep. 266 and The Motis [1999] 1 Lloyd’s Rep 837, [2000] 1 Lloyd’s Rep 211, Rix LJ cited three foreign decisions which supported the view that a straight bill of lading is necessary for the delivery of the goods. In The Duke of Yare (ARR-RechtB Rotterdam, 10 April 1997, a Dutch court said a straight bill was a bill of lading within the meaning of the Rules, and surrender was necessary to obtain delivery. Last year the Singapore Court of Appeal held, in the case of Peer Voss v APL [2002] 2 Lloyd’s Rep 707, that the fact a straight bill had similarities to a sea waybill did not mean it was the same. It was a document of title, which protected the interests of the parties concerned. The Court of Appeal of Rennes, France, reached a similar conclusion The MSC Magellanes, 16 May 2002.

Is a straight bill a ‘similar document of title’ (to a bill of lading)?
On this point, Rix LJ. simply said: "If I am right to consider that negotiability is not a necessary requirement of a "bill of lading" within the Rules, then plainly it is."

Is a straight bill of lading still in principle a document of title, even in the absence of an express provision requiring its production to obtain delivery?’
Although acknowledging that it was unnecessary to decide the point, Rix LJ. believed that it was, saying that it was undesirable to have a different rule for different kinds of bills of lading. He cited in support the Singapore case of Peer Voss v. APL Co Pte Ltd referred to above, and the 1991 Report of the Law Commission – No.196 – Rights of Suit in respect of Carriage of Goods by Sea – which had preceded the 1992 Act.

At the end of his judgment, Rix LJ. said that he was "not unhappy to come to these conclusions". In his view, the use of hybrid forms of bills of lading was an "unfortunate development" which had spawned unnecessary litigation. If carriers wanted to agree sea waybill type contracts, they should not use bill of lading forms. These "invite error and litigation, which is best avoided by a simple rule."

Jacob J and Peter Gibson LJ, concurring, added brief though important glosses of their own. Jacob J described as "illogical" the arbitrators’ view, upheld by Langley J, that the requirements of the attestation clause could be disregarded. There was no reason, said Jacob J, why the carrier under this bill would be permitted to deliver to the named consignee without surrender of an original bill. So it followed that the bill was not "a mere receipt", and must be a document of title. Why should the original consignee under an order bill be protected against onerous contractual terms, but not the consignee under a straight bill?

Counsel for MSC had claimed his case was supported by the Law Commission Report No 196, referred to above. However Peter Gibson LJ, a signatory to the report, made the interesting statement that, "as was apparent from my agreement with Rix LJ’s judgment", he now took a different view of the some of the relevant statements in the report. "I do not recall much, if any discussion on this topic, [namely, whether a straight bill of lading was a bill of lading for the purposes of the Hague/Hague-Visby Rules]" he said. The textbook authorities at that time had appeared to be consistent and clear, but "in the light of the material now put before us as analysed by Rix LJ, and for the reasons given by him I too would allow this appeal."

Comment
This will be a controversial judgment on this much-debated issue, and may well go to the House of Lords. It follows the courts’ recent trend towards favouring clarity and consistency in the regulation of international trade, interpreting international conventions according to market custom and practice rather than the strict application of domestic law.