MacWilliam v. MSC (HofL)

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J I MacWilliam Co Inc (Boston) v Mediterranean Shipping Co SA (the "Rafaela S")
English House of Lords: Lords Bingham, Nicholls, Steyn, Rodger and Brown: [2005] UKHL 11: 16 February 2005
Simon Rainey QC and Simon Croall, instructed by Stallard Solicitors, for the appellant shipping company, MSC
Alistair Schaff QC, Alexander MacDonald, instructed by Clyde & Co, for the respondent cargo interest, MacWilliam.
CARRIAGE OF GOODS BY SEA: Bills of lading: whether a ‘straight bill’ is a bill of lading or ‘similar document of title’: Hague/Hague-Visby Rules, Article I: application of UK COGSA 1971

In its judgment, the House of Lords decided the sole issue remaining in this case, namely that a "straight" bill of lading - namely a bill of lading made out to a named consignee and not containing the words "to order" - was a "bill of lading or similar document of title" under Article I of the Hague/Hague-Visby Rules, to which those Rules, as incorporated into English law by the Carriage of Goods by Sea Act, 1971 then applied.

DMC Category Rating: Developed

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 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, its package limitation provisions being more liberal than those under the US Carriage of Goods by Sea Act, 1936, which would otherwise have applied. The difference between the two provisions was considerable. Under the Hague-Visby Rules, the limitation amount was US$150,000; under US COGSA, it was US$2,000. MacWilliam 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.

Court of Appeal Judgment
Rix LJ, gave the leading judgment in the Court of Appeal, with which the other judges agreed. Rix LJ. said that 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. 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."

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.

After a lengthy and painstaking analysis of the background to the 1924 Hague Rules, of pre-existing US law, of the 1971 and 1992 Carriage of Goods by Sea Acts and 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. Among the reasons he gave for his decision are the following:
(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.

(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.

As regards the Attestation Clause, Rix LJ held it 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.

He further held that a straight bill, which has to be produced to obtain delivery, was a ‘document of title’. Whatever the history of the phrase in English common or statute law, there was, he said "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." He noted in this regard foreign jurisprudence which required a straight bill of lading to be produced – just like a classical transferable bill of lading – in order to obtain delivery of the goods and he found it undesirable to have a different rule for different kinds of bills of lading. He also added, although this was not necessary to his decision, that a straight bill of lading is still in principle a document of title, even in the absence of an express provision requiring its production to obtain delivery. From this point, it was only a short step to hold that a straight bill was a "similar document of title" to a bill of lading and accordingly subject to the Hague-Visby Rules.

It was against this ruling that the carrier interests appealed.

The House of Lords Judgment
All five law lords agreed that the appeal should be dismissed. Three of them gave reasoned judgments

For the purposes of the appeal, the issues between the parties had been distilled to this: whether a straight bill of lading (a bill providing for delivery of the goods to a named consignee and not to order, or assigns or bearer, and so not transferable by endorsement) is a "bill of lading or similar document of title" within the s.1(4) of the Carriage of Goods by Sea Act 1971 and Art.1(b) of the Hague-Visby Rules.

S.1(4) reads:
"…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 provides for the issue of a bill of lading or any similar document of title."

Art.1(b) reads:
""Contract of Carriage" applies only to contracts of carriage covered by a bill of lading or any similar document of title, in so far as such document relates to the carriage of goods by sea….." [Identical words appear in Art.1(b) of the Hague Rules, 1924]

The appeal was conducted on the ground that the seller could have required the issue of a document evidencing the contract for the onward carriage of the goods from Felixstowe to Boston, that any such document would have been subject to the Hague-Visby Rules as applied by the Carriage of Goods by Sea Act 1971, and that it would have been in the same form as the original bill of lading issued in Durban – in particular, that it would have been a straight bill. 

Lord Bingham
In determining whether the bill of lading issued in this case was a "bill of lading", Lord Bingham noted that the document called itself a bill of lading and that the wording of its provisions was inappropriate if the bill were to be considered a mere receipt or sea waybill. In particular, he could see good reason to give effect to the requirement that an original bill be surrendered in exchange for the goods. He referred to the commercial rationale that a shipper will not wish to part with an original bill to the consignee or buyer until that party has paid and that requiring production of the bill to obtain delivery was the most effective way to prevent a consignee or buyer who has not paid for the goods from obtaining delivery of them. As with an order bill of lading, the bill is "a key which, in the hands of the rightful owner, is intended to unlock the door of the warehouse, floating or fixed, in which the goods may chance to be". Had it been appropriate to do so, he would have accordingly considered the document under consideration "a bill of lading or similar document of title". But that, he said, would be a wrong approach.

Given that the words of Art.1(b) originally appeared in the Hague Rules 1924, he noted that they were part of an agreed international response to what were seen as common problems at that time. It was important to recognise this fact, as the court must, in interpreting the Hague/Hague-Visby Rules, seek to give effect to the international consensus expressed in the Rules and not to any divergent or inconsistent rules of domestic law. Furthermore, straight bills of lading, though much less common than order bills, were not ignored in the discussions that led up to the adoption of the Rules. Indeed, the Bills of Lading Act of 1855 referred in s.1 to rights and liabilities under bills of lading passing, not only to endorsees, but also to "every consignee of goods named in a bill of lading."

After a brief survey of the relevant jurisprudence, both in the UK and on the European continent, he concluded that straight bills of lading were a familiar mercantile phenomenon in the early 1920s; one would accordingly expect that the Rules were intended to apply to straight as well as to order bills, unless either there was a persuasive reason to exclude them or the text of the Rules suggested an intention to exclude them. 

As to the first, he concluded that the Rules were intended to cover the great majority of ordinary commercial shipments and that the concern of the draftsman was not to restrict the scope of the Rules but to prevent their circumvention. He accordingly gave "an expansive interpretation to the expression "bill of lading or any similar document of title" and found it apt to cover the document issued in this case. He added that he "had no difficulty in regarding it as a document of title, given that, on its express terms, it must be presented to obtain delivery of the goods. But like Rix LJ. I would, if it were necessary to do so, hold that production of the bill is a necessary pre-condition of requiring delivery, even where there is no express provision to that effect."

He referred to recent decisions in other jurisdictions in support of his conclusions, including the "Duke of Yare" (ARR-RechtB, Rotterdam, 10 April 1997), the Singaporean case of Voss v. APL Co Pte Limited [2002] 2 Lloyd’s Rep. 707 and the decision of the Court of Appeal in Rennes, France, in the case of the "MSC Magallane". He acknowledged, however, that under the Carriage of Good by Sea Act of 1992, a straight bill of lading is not a "bill of lading" for the purposes of that Act and that the Law Commission and the Scottish Law Commission – in their report "Rights of Suit in respect of Carriage of Goods by Sea", of March 1991 - did not consider a straight bill of lading to be a document of title at common law. But, he continued, a 1991 Report and a 1992 Statute cannot govern the meaning of Rules given statutory force in 1924 and 1971. The question before the House was "not whether a straight bill of lading is a document of title at common law but whether it is a "bill of lading or similar document of title" for the purposes of the Hague and Hague-Visby Rules. He noted also that, by s.5(5) of the 1992 COGSA, the provisions of the Act were to have effect without prejudice to the application, in any case, of the Hague-Visby Rules having the force of law under the 1971 COGSA.

Lord Steyn
In his judgment, Lord Steyn relied upon many of the points considered by Lord Bingham. He noted that – aside from the fact that the document in this case could not be transferred by endorsement beyond the consignee - its face was "in familiar and standard form as one would expect to find in any order bill of lading". Subject to the same constraint, the detailed provisions on the reverse of the document were "the usual terms regarding the matters relevant to the allocation of risks between the parties which are to be found in bills of lading".

As regards the 1855 Bills of Lading Act, he, too, was certain that, despite its preamble referring only to the custom of merchants by which bills of lading were transferable by endorsement, the substantive provisions of s.1 were wider and quite general and could not be read as applying only to a consignee named in an order bill. A named consignee was "within the mischief that the 1855 Act sought to correct"; before the Act was passed, property in the goods passed to the named consignee but he had no right to sue in contract in respect of cargo damage suffered during the voyage. If the more restrictive interpretation were to be accepted, there would have been a major gap in the 1855 Act, because a named consignee in a straight bill of lading on that basis could neither sue nor be sued on the contract evidenced by the bill of lading. "Such an implausible interpretation must be rejected", he said.

Before the adoption of the Hague Rules, the practice of issuing straight bills was known and such documents were described and treated as bills of lading – see C P Henderson v. Comptoir d’Escompte de Paris [1873] LR PC 253, a decision of the Privy Council. Although the travaux préparatoires of the Hague Rules were "plainly inconclusive", it was, he said, a fair inference that the framers of the Hague Rules were aware of the relatively widespread use of straight bills of lading at that time. Therefore, had it been intended to exclude such bills from the Rules, "special provision to that effect would surely have been made. But to the contrary, the words used in the Rules – "bills of lading or any similar document of title" – were words of expansion as opposed to restriction. "They postulate a wide rather than a narrow meaning". The attempt by the carrier in the present case to import a restrictive meaning to the term "similar document of title" involved a distortion of the plain language and a preoccupation with notions of domestic law regarding documents of title which ought not to govern the interpretation of an international maritime convention. The Rules should instead "be construed by reference to broad principles of general acceptation appropriate to the international mercantile subject matter."

Nor did the carrier interests advance any reason why the framers of the Hague Rules should have wanted to distinguish a named consignee who receives an order bill of lading from a named consignee who receives a straight bill of lading. "There is simply no sensible commercial reason," he said, "why the draftsmen would have wished to deny the CIF buyer named in a straight bill of lading the minimum standard of protection afforded to the CIF buyer named in an order bill of lading."

He went on to reject the carrier’s argument that the reference in the attestation clause to the surrender of a bill ‘duly endorsed’ in exchange for the goods was inapplicable to a straight bill of lading. The words ‘duly endorsed’ meant merely that the bill must be endorsed "if appropriate or as may be necessary to perform the right of the presenting party to claim delivery". In any event, the provision for the issue of a set of three bills of lading ‘one of which being accomplished, the others to stand void’ necessarily implied that delivery would be made only against presentation of the bill of lading. In his view, the decision of the Singapore Court of Appeal in the case of Voss v. APL Co Pte Ltd (see above) was correct.

The carrier’s attempt to equate the function of a straight bill of lading with that of a sea waybill was plainly unrealistic. In the hands of the named consignee, the straight bill of lading is his document of title. "No trader, insurer or banker would assimilate the two… Except for the fact that a straight bill of lading is only transferable to a named consignee and not generally, a straight bill of lading shares all the principal characteristics of a bill of lading…"

He regarded the academic response to the Court of Appeal decision in this case as important, noting that both Professor Sir Guenter Treitel and Professor Charles Debattista had welcomed the decision.

As for the 1992 Act, it was common ground that it treats straight bills of lading as sea waybills, but that Act was enacted three years after the contract of carriage in this case came into existence and by s.5(5), it specifically provides that it will not affect the Hague Rules. On this basis, "the terms of the 1992 Act cannot alter the proper construction of Art.1(b) of the Rules."

In summary, Lord Steyn said that he found the analysis of Lord Justice Rix in the Court of Appeal in this case "entirely convincing" and he accordingly affirmed it.

Lord Rodger
He, like Lords Bingham and Steyn, had no doubt that the document issued by the carrier was a bill of lading. "While appearances cannot of course, be determinative," he said, "everything about this form suggest that the parties issuing or receiving it, whether or not the words ‘or order’ were added, would regard the document as a bill of lading." Once it could be seen that a bill of lading for delivery to a named consignee was a bill of lading, it followed that the contract of carriage in this case was ‘covered by a bill of lading’ within the terms of Art.1(b) of the Hague Rules.

Although that determination was enough of itself to dispose of the appeal, Lord Rodger went on to consider some of the other arguments presented in the appeal. On the issue of the 1855 Bills of Lading Act, he agreed with Lords Bingham and Steyn that it was "essential for the Act to apply to consignees [in addition to endorsees] if it was to achieve its purpose." Similarly he could see no "rational reason for giving the protection of the Hague Rules to a consignee under a transferable bill but not to a consignee under a straight bill." For that reason it made sense to him that the Rules had been worded in a way that did not exclude – and so included – contracts of carriage covered by a bill of lading that was not transferable.

Although his approach made it unnecessary to decide what was meant by the words ‘or any similar document of title’, he did venture some "tentative observations" on this aspect of the construction of Art.1(b). The French text of the Hague Rules, which was the sole authoritative text, referred to "tout document similaire formant titre pour le transport des merchandises par mer" – namely a document that simply entitled the holder to have the goods carried by sea and delivered to the appropriate person at the end of the voyage. There was no reference to the document having any effect in relation to the title to the goods in a property sense. The French text would therefore suggest that the words ‘document of title’ in the English version of the Rules should be read along with the qualifying words ‘in so far as such document relates to the carriage of goods by sea’ and should be understood as applying to any document that entitles the holder to have the goods carried by sea – a broad interpretation, as he recognised. If Art.1(b) were to be interpreted along these lines, the contract of carriage in this case, if not a bill of lading, would be ‘a similar document of title’ and therefore subject to the Hague/Hague-Visby Rules.


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