Delivery

Chapter 5

Delivery

(A) Introduction

5.1 Two aspects of the bill of lading are considered in this chapter: when and to whom is the carrier obliged to deliver the goods referred to in the bill of lading; and when and to whom is the carrier entitled to deliver the goods referred to in the bill? Put another way: who is entitled to demand delivery of the goods from the carrier and to whom may the carrier safely deliver the goods?

(B) The right to delivery of the goods onboard from the carrier

5.2 There is clearly a distinction between the carrier’s right to deliver to a particular person and his obligation to do so. This section addresses the latter issue.

A contractual right to delivery

5.3 A person who is a party to the contract of carriage contained in, or evidenced by, the bill of lading is contractually entitled to delivery of the goods on board on presentation of the bill of lading. Consequently, where a lawful holder of the bill is a transferee of rights of suit against the carrier pursuant to COGSA 1992, section 2(1),¹ and the bill provides, as it usually will, that the carrier will deliver to the presenter of the bill, the carrier is in breach of the contract contained in, or evidenced by, the bill of lading if he refuses to deliver the goods and has no contractual justification for doing so. As Rix J. said in Motis Export Ltd. v Dampskibsselkabet AF 1912 Aktiesekkab,² “it is of the essence of [a bill of lading] contract that a shipowner is both entitled and bound to deliver the goods against production of an original bill of lading, provided that he has no notice of any other claim or better title”.³

5.4 The scope of the contractual obligation, as between the carrier and cargo owner who is a party to the bill of lading contract, to deliver was discussed in some detail by Clarke J. in SA Sucre Export v Northern River Shipping Ltd. (The Sormovskiy 3068).⁴ In particular, he considered the circumstances in which a carrier was obliged to deliver the goods, even in the absence of a bill of lading. This required an analysis of the scope of the contractual obligation to deliver. He said:

5.5 So Clarke J. held that the express obligation to deliver to the holder of one original bill of lading was modified by an implied term requiring the carrier to deliver in certain other circumstances. He held that the term was implied, not automatically as a matter of law,⁶ but, rather, because it is necessary to give business efficacy to the contract contained in, or evidenced by, the bill of lading. As such it would be, to a degree, dependent upon the particular facts of any given case, and unnecessary if there was an express term to the contrary.⁷

5.6 Despite its attractions, Clarke J.’s reasoning was rejected by Rix J. in Motis Export Ltd. v Dampskibsselkabet AF 1912 Aktiesekkab.⁸ He held that such an implied term was inconsistent with dicta of the Court of Appeal in The Houda,⁹ stating that:

5.7 In essence, the difference in view between Clarke and Rix JJ. reduces itself to whether it is necessary to imply the term Clarke J. suggested to make the bill of lading work commercially: Clarke J. held that it was, but Rix J. held that it was not, largely because of the widespread use and acceptability of letters of indemnity.¹¹ Ironically, the widespread use of letters of indemnity grew up because they were necessary to make the bill of lading contract function commercially.

5.8 It is, however, suggested with respect, that Rix J.’s solution is to be preferred: the effect of obliging the shipowner to deliver only against either the bill of lading or a contractual indemnity puts the risk of misdelivery firmly on the person claiming the goods: if a person without possession of a bill of lading wishes to take delivery of the goods, he must indemnify the carrier against the consequences of his not requiring the surrender of the bill. It also eliminates what would otherwise be inevitable disputes as to whether a party claiming delivery of the goods had or had not produced sufficient evidence of his title and otherwise explained his inability to produce the bill of lading.

5.9 Rix J. went further in Motis Exports and considered whether the carrier was obliged (or entitled) to deliver against a forged bill of lading. Unsurprisingly, he held that he was not.¹² Not only was the delivery to a person presenting a forged bill of lading a breach of the contract contained in, or evidenced by the bill, but also their delivery to someone who was not the goods’ owner was also a conversion of them. It was irrelevant that the carrier did not intend to challenge or interfere with the property or possession of the true owner; it was sufficient that he intended to make deliver to the person who (unbeknown to him) was not entitled to it:

5.10 Consequently, a carrier who delivers against a forged bill of lading is potentially liable both contractually and in tort.¹⁴

No right to delivery by reason of mere possession of the bill of lading

5.11 It has been said that possession of a bill of lading, in and of itself, gives the transferee¹⁵ a right to delivery of the goods from the carrier.¹⁶ Arguably there are three possible ways in which possession of a bill of lading might, of itself, give rise to a right to delivery:

1. (1) First, if the possession of the bill gives the holder¹⁷ symbolic possession of the goods and if symbolic possession of the goods is sufficient standing for the purposes of an action in conversion, then possession of the bill might give the holder a right to demand delivery of the goods from the carrier and an action in conversion should delivery be refused.
   
2. (2) Secondly, the bill might, as a matter of law, be deemed to give the holder a right to delivery.
   
3. (3) Thirdly, possession of the bill might create a bailment relationship between the carrier and the holder.

5.12 In fact, none of these three possible analyses are part of English law and it is safe to conclude that, although the transferee of a bill might have an independent contractual or possessory right to the delivery of the goods, the bill of lading itself does not give him such a right.

Symbolic possession/conversion

5.13 At common law the bill of lading is capable of giving its holder symbolic possession of the goods.¹⁸ If the symbolic possession of the goods were itself capable of giving the possessor standing for an action in conversion, it might be argued that the bill, therefore, gave its holder a right to delivery of the goods as against the carrier. This is not, however, the case. First, the transfer of the bill does not always transfer symbolic possession of the goods, the latter being dependent upon the intention of the parties.¹⁹ Secondly, and more fundamentally, symbolic possession alone will not give the possessor standing for an action in conversion²⁰ and the mere holder of the bill is not entitled to bring a claim for non-delivery/conversion against the carrier.²¹

Right to delivery as a matter of law

5.14 If it were the case that possession of the bill of lading gave the holder a right to delivery of the goods by operation of law, then even those holders of bills without a contractual right of action against the carrier or an immediate right to the possession of the goods would have a cause of action against the carrier for non-delivery. Coxe v Harden²² illustrates that this is not the case. There, sellers of goods, whose buyers had not accepted the bill of exchange for the price drawn upon them, indorsed the bill of lading to their agents, the plaintiffs, in order that they could take delivery of the goods. The carrier nevertheless delivered the goods to the buyer without receiving a correctly indorsed bill. The plaintiff agents sued the carrier in trover. The ratio of the case was that, the property having passed to the buyers and the goods having been delivered to them, the seller’s right of stoppage was at an end.²³ Lord Ellenborough also said that “…no consideration having been paid by the plaintiffs in this case for [the transfer of the bill of lading], they took the bill of lading merely as agents for [the sellers], and without any property in the goods themselves”.²⁴ Some proprietary interest was essential to an action in trover²⁵ by the plaintiffs, and they would, accordingly, have failed anyway. His Lordship, therefore, did not regard the plaintiff’s possession of the bill as sufficient to maintain an action for non-delivery, either on the bill itself or in trover. Lord Ellenborough was of the same view five years later in Waring v Cox,²⁶ and, in Howard v Shepherd,²⁷ the plaintiff indorsee of the bill also failed in an action in trover against the carrier as he could not show property in the goods.²⁸

5.15 Furthermore, it is because a bill of lading does not itself give its holder a right to delivery that the same test, whether the transferee had property in the goods, has been applied consistently throughout the cases.²⁹ Where a carrier was sued by the transferee for delivering the goods to a third party who did not produce the bill of lading, Bray J. determined the question of the transferee’s standing by deciding whether or not he had property in the goods.³⁰ Where the plaintiffs were indorsees of pledgees, their right of action, once again, was dependent upon whether they had a special property in the goods, not whether they held the bill of lading. Lindley L.J. said:

5.16 Additionally, the court was occupied with a consideration of whether it was essential, for an action in conversion, that the property had passed to the plaintiff before the converting act or not and not with whether or not the bill of lading had to have been transferred prior to the conversion or not.³²

5.17 In light of these cases, and those following Coxe v Harden, it can be asserted with some confidence that the bill of lading itself does not give the transferee³³ a right to delivery.

5.18 The position was summed up in The Future Express:

Bailment/attornment “in advance”³⁷

5.19 The third possible explanation for the view that the bill gives the transferee a right to delivery is based upon Professor Goode’s theory of attornment in advance:

5.20 In short, the contention is that the bill of lading, by mercantile usage, enables control of the goods to pass by delivery with any necessary indorsements and contains the carrier’s “attornment in advance”. If so, the transferee would have the same right to delivery of the goods as any third party to whom the carrier had attorned.

5.21 A similar thesis explaining the bill of lading’s ability to transfer symbolic possession of the goods was set out by Lord Hobhouse, obiter, in The Berge Sisar.³⁹ His Lordship stated:

5.22 This passage advances two propositions: first, it suggests that delivery of the goods to the carrier creates a bailment relationship between the carrier and the consignee named in the bill. Secondly, it suggests that the bill’s ability to transfer symbolic possession of the goods to its holder is the result of a “transferable” attornment, recognised by the law merchant: that is, the document itself contains an agreement by the carrier to attorn to the transferee so as to become the transferee’s bailor as if the carrier had on the transfer for the bill actually attorned to the transferee by undertaking henceforward to hold the goods as the transferee’s bailee rather than the transferor’s. Both of Lord Hobhouse’s propositions require careful analysis.

5.23 As to the first proposition, that delivery of the goods to the carrier creates a bailment relationship between the carrier and the consignee, it is submitted, with respect, that there is no such general proposition. Although that might have been true on the facts in The Berge Sisar, each case must depend upon its own facts. It is suggested that such a relationship will only rarely be created directly between the carrier and the consignee. As Mance L.J., as he then was, explained in East West Corpn v DK.B.S AF 1912 A/S⁴¹ Lord Hobhouse’s comment was made “in a context where the named consignees were f.o.b. buyers…In such a context, a shipper may readily, indeed normally, be regarded as acting as agent for a named consignee in making the relevant bill of lading contract.”⁴² In each case, whether or not the true bailor of the goods is the shipper or consignee will be a question of fact, albeit that various situations might give rise to different presumptions. As Mance L.J., said, “whether a consignor has contracted with the carrier on behalf of a named consignee or on his own behalf…depends upon an analysis of the terms, e.g. of any contract for sale agreed between the consignor and consignee”.⁴³ Where the shipper is an f.o.b. seller, there would appear to be a rebuttable presumption that he delivers the goods as agent of the named consignee. In other cases, where it is clear that the shipper is at all times acting on his own behalf, he will be the carrier’s bailor. This was the position in The Aliakmon and was found by Mance L.J. to have been the position in East West:⁴⁴ “The Claimants were at all times acting for themselves and the Chilean banks [named as consignees in the bills] were merely their agents. There is no basis for treating the claimants as shipping the goods or taking the bills on behalf of Chilean banks. The right analysis is that the claimants were the original bailors of the goods to the [carrier] under the bills.”⁴⁵ In each case the true identity of the bailor will be a question of fact.

5.24 The second proposition advanced by Lord Hobhouse in The Berge Sisar, that the endorsement and the transfer of the bill of lading transfers the endorser’s right to possession of the goods by reason of there being a transferable attornment, is more difficult. In particular, it appears to be inconsistent with the earlier decision of the House of Lords in The Aliakmon.⁴⁶ In that case c.i.f. buyers of goods were unable to perform their contract. They and their sellers varied the contract so that the buyers took the bill of lading (which named them as consignees) as agents for the sellers. The goods were discharged in a damaged condition, and the buyers sued the carrier for negligence. Ultimately the House of Lords held that the buyers, having no property in the goods and no “possessory title”, had no standing to bring an action in negligence in respect of alleged damage to the cargo. Counsel for the plaintiffs asserted that the buyers were owed a duty of care by the carrier even if they had no possessory title, but that this would not open the “floodgates” as that duty would be subject to the terms of the bill of lading.⁴⁷ In support of this, he argued that in their sale contract the buyers had impliedly consented to the bailment of the goods on the terms of a usual bill of lading and this limited the scope of the carrier’s duty of care. Lord Brandon said:

5.25 The important statement, for present purposes, is: “the bill of lading never was negotiated by the sellers to the buyers and no attornment by the shipowners ever took place”. It is suggested that Lord Brandon is making two separate statements of fact. By the words “never negotiated” Lord Brandon probably meant that, although the bill was transferred, it was not “negotiated” as no property passed to the buyers because of the sellers’ reservation of the right of disposal.⁴⁹ The real point of interest is the sense of the statement, where Lord Brandon said “and no attornment by the shipowners ever took place”. Did he mean that there was never an actual attornment by the shipowners to the buyers; or did he mean that, because the bill of lading was never negotiated, there was never an attornment by the shipowners but, had it been negotiated, it would have been effective as an attornment? Although the latter view would be consistent with Lord Hobhouse’s dictum in The Berge Sisar, we suggest that the former view is to be preferred for two reasons. First, Lord Brandon is apparently dealing with an action by the shipowners, viz. a recognition of the buyer’s rights as bailors. Secondly, only this view is consistent with the concluding sentence of the quotation.

5.26 It is also important to note that Lord Brandon’s analysis was made in the context of the buyer’s argument that a right of action in tort would not circumvent the bill of lading’s terms, as they would apply by reason of there being a bailment on terms between the carrier and the buyers. Lord Brandon’s response was that there was no such bailment on terms. Furthermore, if such a possibility had been available, then there would have been no necessity for statutory intervention in the form of section 1 of the Bills of Lading Act 1855. Implicitly, therefore, Lord Brandon rejects the idea that a bill of lading operates as an attornment “in advance” or, what amounts to the same thing, a transferable attornment.⁵⁰

5.27 The idea of an attornment “in advance” was also considered by both H.H.J. Diamond and the Court of Appeal in The Future Express.⁵¹ The plaintiff bank, which the bill of lading named as consignees, claimed to have become bailors of the goods as soon as the bill of lading was delivered to them under a letter of credit that they had opened. The bank relied on the bill of lading constituting an attornment in advance.⁵² At first instance, H.H.J. Diamond pointed out that “the concept of attornment plays no part in the discussion to be found in the classic authorities⁵³ on the status in English law of a bill of lading as a document of title to the goods”. He went on:

5.28 On the facts, H.H.J. Diamond found that there was no intention on the part of the shipper of the goods to attorn to the bank on behalf of the carriers. With regard to the possibility of an attornment in advance he said:

5.29 H.H.J. Diamond’s views were approved by the Court of Appeal.⁵⁶ In light of the reasoning in The Aliakmon and The Future Express, it is respectfully suggested that Lord Hobhouse’s obiter dicta in The Berge Sisar are inconsistent both with authority and principle and should not be followed.

Conclusion

5.30 Mere possession of the bill in English law does not give the transferee of it a right to delivery of the goods, whether by its giving the holder symbolic possession of the goods, by operation of law, or by creating a bailment and attornment in advance/transferable attornment. The same rule applies, a fortiori, to non-negotiable bills.

(C) The carrier’s right to deliver

Delivery without production of a bill

5.31 It is clear that the carrier who delivers goods covered by a negotiable bill of lading without requiring the production and surrender of one of the original bills of lading does so at his own risk. In doing so he breaches his contract and is potentially liable in conversion. Hill J. said in Evans & Reid v “Cournouaille”⁵⁷ that the carrier was not concerned with the details of the dealings between the shipper and his buyer; he was concerned solely to perform the bill of lading contract:

5.32 Lord Denning summed up the position in Sze Hai Tong Bank Ltd. v Rambler Cycle Co. Ltd.⁵⁸: “It is perfectly clear law that a shipowner who delivers without production of the bill of lading does so at his peril.” More recently, in The Houda, the Court of Appeal considered whether and in what circumstances time charterers could require the shipowner⁵⁹ to deliver a cargo without the bills of lading being produced. In doing so, Neill L.J. restated the “general rule”:

5.33 This remains the position even where the carrier delivers the goods to one who is entitled to possession of them. Clarke J. explained the position in SA Sucre Export v Northern River Shipping Ltd. (The Sormovskiy 3068):⁶⁰

The carrier’s obligation is, therefore, to deliver to the holder of the bill.⁶²

Contractual exclusion of liability for misdelivery

5.34 Theoretically, it is possible for the carrier, by sufficiently clear words, to exclude or limit its liability for misdelivery or delivery without the production of the bill of lading and the efficacy of such a clause was recognised in Chartered Bank of India, Australia and China v British India Steam Navigation Co., Ltd.⁶³ The goods in question were delivered to landing agents appointed by the carrier who, fraudulently, delivered them to consignees who had dishonoured a bill of exchange drawn upon them and who had therefore been unable to produce the bills of lading. The holder of the bills of lading unsuccessfully claimed against the carrier for misdelivery. The Privy Council refused the claim on the basis of an exclusion clause, which provided that

The Judicial Committee regarded the words as sufficiently clear to exclude liability for misdelivery.

5.35 More recent cases have shown a distinct reluctance to interpret clauses as excluding liability for intentional delivery of the goods without production of the bill of lading. In Sze Hai Tong⁶⁵ the carriers relied on a similarly wide clause, which provided that its responsibility was “deemed…to cease absolutely after the goods are discharged” from the ship. While acknowledging the breadth of the clause on its face, Lord Denning refused to apply it on two bases. First he observed if it was indeed as wide in its application as the carrier contended then “they would have been absolved if they had given the goods away to some passer-by or had burnt them or thrown them into the sea”. The parties could not be taken to have intended that result and there was therefore an implied limitation (implied on the officious bystander test): that limitation was at least to the effect that it would not apply “to permit the shipping company deliberately to disregard its obligations as to delivery”. The second mechanism that Lord Denning employed to avoid giving effect to the words of the clause was to apply the now abandoned doctrine of fundamental breach and to hold that the clause could not be relied upon to excuse a breach by wilful misdelivery because it would defeat the main object and intent of the contract. Whilst the doctrine has been abandoned, the same result would no doubt be reached either by construction⁶⁶ or implication.⁶⁷

5.36 Lord Denning also distinguished Chartered Bank of India on the ground that the misdelivery in that case was not the deliberate act of the carrier (the agent’s fraudulent conduct not being imputed to the carrier⁶⁸). Thus, even if the clause in Chartered Bank of India were limited by construction or implication so as not to excuse deliberate disregard by the carrier of its delivery obligations, it would still have applied to excuse the carrier’s particular breach because it had not been deliberate.

5.37