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?
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.
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:
In trades where it is difficult or impossible for bills of lading to arrive at the discharge port in time the problem is met by including a contractual term requiring the master to deliver the cargo against a letter or indemnity or bank guarantee. That is common place and indeed there was a provision to that effect here. The simple rule [that in the absence of an express term of the contract the master must only deliver to the holder of the bill of lading] does require some exceptions because the bill of lading might have been lost or stolen. In order to cater for that problem it is no doubt necessary to imply a term that the master must deliver cargo without production of an original bill where it is proved to his reasonable satisfaction both that the person seeking delivery of the goods is entitled to possession and what has become of the bills of lading. The precise nature of the exceptions will no doubt require further consideration in the future.5
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:
In my judgment a true owner cannot in the absence of some special arrangement oblige a shipowner to deliver his goods to him without presenting his bill of lading: either he must have agreed in his contract with the shipowner that an indemnity will suffice, or he must persuade the shipowner to deliver against an indemnity, or he must seek the assistance of the Court. In practice, a suitable indemnity will be likely to satisfy the shipowner, all the more so where the goods owner has a reasonable explanation for the absence of his bills of lading.10 (Original emphasis.)
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:
In my judgment, the delivery of the goods to persons who present a forged bill of lading, or, what amounts and has to be treated as amounting to the same thing, the provision of a delivery order to persons who present a forged bill of lading, is an intentional act inconsistent with the true owner’s rights, albeit done in ignorance of them and without intending to challenge them; and is a conversion.13
5.10 Consequently, a carrier who delivers against a forged bill of lading is potentially liable both contractually and in tort.14
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) 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) Secondly, the bill might, as a matter of law, be deemed to give the holder a right to delivery.
- (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.
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:
If the plaintiffs had as assignees the same title to these goods that the [pledgees] had, they were owners of the goods and could sue, in trover or detinue at common law, quite apart from the Bills of Lading Act, anybody who wrongfully withheld these goods.31
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:
…once it is held that the effect of a transfer of a bill of lading depends on the presumed intention of the parties, then it makes sense only to recognize that the parties have used a bill of lading to pass constructive possession of the goods to the transferee if it was intended that following the transfer the transferee should have some property in or possessory right to the goods. This seems to me the reason why there is no reported case where the law has provided a remedy to a party who can establish no more than that he is the lawful holder34 of a bill of lading. It may therefore be impossible for a party who acquires no property in or possessory right to the goods to establish a title to sue the owners by virtue of an attornment35 arising simply from the transfer of the bill.36
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:
A particular form of attornment is the issue of a document of title giving legal control of the goods…. Suffice it to mention that to give control it must be issued by a bailee of goods, must thereby embody his undertaking to hold the goods for, and release them to, whoever presents the document and must be recognised by statute or mercantile usage as a document which enables control of the goods to pass by delivery of the document with any necessary indorsement. Such a document of title (and, as will be seen, not all documents of title do give control in this way) is in effect an attornment in advance. The undertaking to each transferee of the document is embodied in the document itself and does not have to be given separately after the transfer has taken place.38
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:
Endorsed bills of lading were recognised by the law merchant to be symbols of the goods by the delivery of which the goods covered by the bill of lading could likewise be delivered. This was an application of the principles of bailment and attornment…
The bill of lading acknowledges the receipt of the goods from the shipper for carriage to a destination and delivery there to the consignee. It therefore evidences a bailment with the carrier who has issued the bill of lading as the bailee and the consignee as bailor. This analysis was already recognized well before 1855 as is demonstrated by Bryans v Nix (1839) 4 M. & W. 775 and Evans v Nichols (1841) 3 M. & G. 614. But the consignee need not be named and the bill of lading may simply say “deliver to the bearer” or to “order” or “to order or assigns” or similar words. The contribution of the law merchant has been to recognize the attornment as transferable and therefore the indorsement and delivery of the bill of lading as capable of transferring the endorser’s right to possession of the goods to the endorsee…40
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:
The only bailment of the goods was one by the sellers to the shipowners. That bailment was certainly on the terms of a usual bill of lading incorporating the Hague Rules. But, so long as the sellers remained the bailors, those terms only had effect as between the sellers and the shipowners. If the shipowners as bailees had ever attorned to the buyers, so that they became the bailors in place of the sellers, the terms of the bailment would then have taken effect as between the shipowners and the buyers. Because of what happened, however, the bill of lading never was negotiated by the sellers to the buyer and no attornment by the shipowners ever took place. I would add that, if the argument for the buyers on terms of bailment were correct, there would never have been any need for the Bills of Lading Act, 1855 or for the decision in the Court of Appeal in Brandt v Liverpool, Brazil and River Plate Steam Navigation Co. Ltd.  1 K.B. 575…48
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:
If the representation is to be analysed in terms of an attornment, then an attornment can only arise because the owners have authorized the shippers of the goods and every party who may become the holder of the bill prior to the bank to give an undertaking (i.e. an attornment) in these terms to the bank on behalf of the owner.54
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:
I should add that while I have assumed for the purpose of this analysis that, if an attornment can be established, the transferee may sue the carrier for breach of the relationship of bailment, I see difficulties in the way of adopting this proposition. The twin concepts of bailment and attornment cannot sensibly be employed to bypass the conditions upon which, according to the Bills of Lading Act 1855 or other relevant legislation, a consignee or indorsee is entitled to sue on the contract contained in or evidenced by the bill. If the ‘attornment in advance’ theory were to be adopted, at any rate in its broad form, then any consignee or indorsee of the bill could, merely by proving he was the lawful holder of the bill, make a demand on the carrier for delivery up of the goods and, if the demand was not complied with at all or if there was a short delivery or a delivery of damaged goods, sue the carrier for breach of his duty as bailee to deliver the goods at the port of discharge in the same good order as when shipped. If this were held to be the law then, as was said in The Captain Gregos (No. 2)…(and has been said in other cases) there would have been no need for the 1855 Act.55
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.
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.
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:
The transaction between the buyers and [the shipper] has nothing to do with the shipowners. The latter were only concerned with the fulfilment of their Bill of Lading contract, and the [shippers] were entitled to rely upon this, that the ship would not give delivery of the goods until the Bill of Lading, with the [shipper’s] endorsement upon it, was presented to the Master.
I do not think it very much matters whether this is regarded as an action for conversion or an action for breach of contract. Whichever it is, the defendants, by delivering this coal without authority from the [shippers] broke their contract under the Bill of Lading and converted the coal.
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”:
…that the owners do not fulfil their contractual obligations if the cargo is delivered to a person who cannot produce a bill of lading.
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
It makes commercial sense to have a simple rule that in the absence of an express term of the contract the master must only deliver the cargo to the holder of the bill of lading who presents it to him. In that way both the shipowners and the persons in truth entitled to possession of the cargo are protected by the terms of the contract.
Where the master or shipowner delivers the cargo in breach of contract otherwise than in return for an original bill of lading the person entitled to possession [under the bill] will of course only be entitled to recover substantial damages if he proves that he has suffered loss and damage as a result. So for example if the cargo is delivered to the person entitled to possession he will not ordinarily be able to show that he has suffered a loss.61
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
In all cases and under all circumstances the liability of the company shall absolutely cease when the goods are free of the ship’s tackle, and thereupon the goods shall be at the risk for all purposes and in every respect of the shipper or consignee.64
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.