Representations in the bill of lading

Chapter 4

Representations in the Bill of Lading

(A) Introduction

4.1 As discussed in Chapter 1, the bill of lading originated as a receipt for the goods actually shipped. It contained a statement by the carrier that he had received particular goods into his charge. In practical terms the bill of lading’s receipt function is still one of its most important aspects: transferees of bills are unlikely to read them in detail. They are particularly unlikely to read the detailed terms on the back of the bill. To the contrary, they can be expected to pay attention to the front of the bill, which contains the most important information, namely details of the date and nature of the shipment.

4.2 This chapter considers the legal consequences of statements made on the face of the bill as to, for example, the quantity and quality of goods shipped. It might be expected that, where a carrier makes a statement in a bill of lading, which a transferee interprets reasonably, the carrier should be bound to make good any loss suffered by the transferee as a result of the falsity of that statement. The true position is, however, considerably more complex.

(B) The carrier’s obligation to record quality and quantity

The common law

4.3 Where the English common law applies, the carrier is under no obligation to make statements as to the quality or quantity of goods shipped, and carriers frequently include clauses in their bills denying all knowledge of the truth of the statements of quality or quantity.

The Hague and Hague-Visby Rules

4.4 Article III rule 3 of both the Hague and the Hague-Visby Rules provide as follows:

4.5 The following points arise out of the introductory words of the Article:

1. (1) The obligation to issue a bill of lading only arises on the demand of the shipper¹ and, likewise, the obligation to record the information listed in sub-paragraphs (a) to (c) only arises if the shipper asks for it to be included in the bill.²
   
2. (2) The obligation³ only arises after the carrier has received the goods into his charge.⁴ This “fixes the time at which the shipowner would be in default if he failed to comply with the demand”.⁵ At this stage, however, the shipper can properly only demand a received for shipment bill. Only upon shipment can he demand a shipped bill: see Article III rule 7.
   
3. (3) On a literal reading, the Article imposes an obligation (at least where the Hague-Visby Rules have the force of law) on the carrier or the master or the carrier’s agent, depending from whom the shipper demands the bill. It is unclear whether, for example, the carrier’s agent was intended by the rules to come under a personal liability and it may be that the Article is better interpreted as imposing an obligation on the carrier, which he may fulfil personally or through the master or another agent of the carrier issuing the necessary bill. Even if carrier’s agent or the master is under a personal liability, the efficacy of claiming against either may be doubtful.⁶
   
4. (4) The Article imposes an obligation on the carrier to issue a bill of lading. That bill is required to contain, among other things, the information stated within Article III(3), (a), (b) and (c). Section 1(4) of the Carriage of Goods by Sea Act 1971 provides that the Hague-Visby Rules only apply to contracts of carriage of goods by sea which “expressly or by implication [provide] for the issue of a bill of lading or any similar document of title”. That sub-section is subject to sub-section (6) which extends the Rules’ application to bills of lading and to non-negotiable documents containing or evidencing a contract for the carriage of goods by sea which, in either case, expressly provides that the Rules are to govern the contract. The proviso to sub-section (6) states that, in the case of non-negotiable documents incorporating the Rules, the Rules apply with “any necessary modifications”. One such necessary modification must be that Article III rule 3 does not apply in such cases: it cannot have been intended that the carrier be under an obligation to issue a bill of lading in such circumstances.⁷

What is required to be recorded?

Leading marks

4.6 Care was taken in the drafting of the Hague Rules to specify precisely what it was that the carrier was obliged to record in the bill. Concern was expressed⁸ that if carriers were required to record details of marks upon the cargo and that if those marks were subsequently to be deemed to be prima facie or conclusive evidence against the carrier, then that which the carrier was bound to record should be limited. It was pointed out that:

In light of these considerations agreement was reached limiting the carrier’s obligation to record to “leading” marks.¹⁰

4.7 Furthermore, the carrier is only obliged to record the leading marks necessary for identification of the goods if the necessary information has been “furnished in writing by the shipper before the loading of such goods starts”¹¹ and if the marks are such as would, in the ordinary course, remain legible until the end of the voyage.

4.8 “Leading marks” is not defined in the rules. It is clear, however, that the term is apt to cover more than simply the first markings or the most prominent. Wright J. held in Compania Importadora de Arroces Collette y Kamp S.A. v P. & O. Steam Navigation Co.¹² that the leading marks were those that were necessary to the “identity” of the goods and not merely their “identification”. Consequently, marks indicating quality were, he held, leading marks.

The number of packages etc.

4.9 The carrier is obliged to record either the number of packages or pieces, or the quantity or weight, as the case may be. Therefore, provided that the carrier records either the number of packages or pieces, or the quantity or weight, the carrier is entitled to qualify the second and it will not be prima facie evidence of that matter. Thus in Pendle & Rivett Ltd. v Ellerman Lines Ltd.¹³ the bill of lading stated that the goods were “two cases of wool and silk piece-goods, numbers 6854 and 6855, gross weight 7 cwt, 3 qrs. 12 lbs”; to this “weight unknown” was added. MacKinnon J. held that the carrier, having stated the number of packages had fulfilled his obligation under rule 3 and the statement of weight was voluntary and, being qualified, of no effect. In Attorney-General of Ceylon v Scindia Steam Navigation Co. Ltd. the bill was qualified by the words “Weight, contents and value when shipped unknown”. This did not operate as a disclaimer of a statement of the number of bags shipped.¹⁴ As in Pendle & Rivet the bill, containing a statement of the number of bags, complied with the requirements of sub-paragraph 3(b), despite the reservation regarding the weight etc. of the cargo.

4.10 The information recorded is that “furnished in writing by the shipper”. Unlike the leading marks, the information need not be supplied by the shipper before loading¹⁵ and will frequently be included in a bill of lading filled out by the shipper and presented to the carrier.

The apparent order and condition of the goods

4.11 The carrier is obliged to record the “apparent order and condition of the goods”.¹⁶ Unlike the other requirements of rule 3, the information included is not supplied by the shipper,¹⁷ but is a statement of the carrier’s assessment of the goods. The apparent order and condition is that which is observable on a reasonable examination of the goods.¹⁸

4.12 The obligation that Article III imposes¹⁹ on the carrier is to record the condition of the cargo honestly and reasonably, as Colman J. explained in The David Agmashenebeli:²⁰

Thus the test is a two-fold one of honesty and a standard of behaviour similar to the Bolam test applicable in professional negligence.²¹

4.13 As to particular words that the carrier may use to describe the goods (or to clause the bill), the master must use words that “reflect reasonably closely the actual apparent order and condition of the cargo and the extent of any defective condition which he, as a reasonably observant master, considers it to have”.²²

(C) The legal status of representations made in the bill

At common law

Representations: non-contractual

4.14 A statement by a carrier that he has received particular goods into his care may be interpreted in two distinct ways. First, it might be interpreted as a representation by the carrier to a transferee of the bill of lading that he has received particular goods and no more. Secondly, it might be interpreted as a representation that particular goods have been received and as embodying a promise to deliver those goods at the disport. English law has set itself firmly against the latter interpretation and representations of quality and quantity in bills of lading are interpreted as being non-contractual.²³ In Compania Naviera Vasconzada v Churchill & Sim,²⁴ Channell J., dealing with a submission that the contract was to deliver the goods stated in the bill, said:

4.15 This dictum was approved and followed by the Court of Appeal.²⁶ It follows that the contract in the bill of lading is interpreted as being one to deliver the goods actually shipped and not one to deliver the goods stated to have been shipped in the bill.

4.16 At first sight it might appear odd that, in a document that is intended to be a contract of carriage of goods, with an obligation to deliver the goods to a contracting party at the end of the carriage, statements as to the number or weight of goods shipped on board do not give rise to a contractual obligation to redeliver the same number of weight of goods. A number of historical reasons might be suggested to explain why the bill of lading contract has not been interpreted as one to deliver the goods in the same quantity and quality as recorded in the bill.

(1) First, bills of lading were not originally traded in the same way as they are today and, therefore, the relationship between the carrier and shipper was one of “pure” bailment; the carrier undertook to carry and redeliver the goods to the shipper in the same condition in which they were received, subject to any excepted perils. The statements in the bill did not constitute any part of the contract; they merely recorded the quantity and condition of the goods.²⁷

(2) Secondly, when the bill did come to be traded, the transferee had, in the absence of an implied contract, no contractual cause of action against the carrier.²⁸ As a result, early actions against the carrier by consignees and transferees were pleaded in tort and so interpreting the contract in the bill as one to deliver the goods specified in the bill would not have assisted the transferee at all; an estoppel, however, did.

(3) Thirdly, the fact that the bill of lading was not negotiable as the bill of exchange was (i.e., so as to give the transferee greater rights against the carrier than the shipper had) led to the idea that the transferee stepped into the shipper’s shoes and, as the shipper’s contract with the carrier would have been for the carrier to redeliver the goods to him, so the transferee’s right could only be to have what had been originally shipped delivered to him.²⁹

4.17 These factors may go some way towards explaining why it has been held that the bill of lading contract constitutes a promise by the carrier to deliver the goods that he has received as opposed to an undertaking to deliver those stated in the bill of lading. That said, the rule is open to criticism.

4.18 First, whilst it is arguable that the shipper’s contract with the carrier is to deliver the goods shipped to the person entitled under the bill, it does not follow that the contract between the transferee and carrier, contained in the bill of lading, is in the same terms. The court should look, not towards determining what the contract with the shipper was, but to what, applying the ordinary principles of the objective interpretation, the contract contained in the bill promised. Theoretically, each bill should be considered individually, but, as the form and representations in bills tend to be similar, a suggestion as to the result can be made. By way of example, the B.P. Tank Ship Bill of Lading states that “This cargo shall be delivered in the like good order and condition at the port of…unto…or to his or their Assigns or Order, subject to the following terms and conditions.” The bill records that a particular quantity of goods have been received in a particular order and states that these goods will be delivered in a like condition in which they were received as stated in the bill.³⁰ A reasonable man reading such a bill could quite easily interpret it as a promise to deliver the cargo stated in the condition stated, subject to damage caused by circumstances for which the bill excludes liability, rather than as a contract to deliver what had actually been received.

4.19 When the present approach of the courts is considered, this interpretation becomes even more plausible. Presently, the courts’ enquiry is as to whether the transferee reasonably relied upon the truth of the statement. It also acknowledges that the bill contains a promise to deliver the goods actually shipped. If these two facts are combined, then it is arguable that the reasonable man in the position of the transferee would believe that the carrier was promising to deliver the goods on board and that goods of the quantity and quality recorded were actually on board. It is a very small step to concluding that the reasonable man would believe that the carrier was promising to deliver the goods recorded in the bill.

4.20 Adopting such an interpretation would simplify the law considerably. It is not, however, the present position.

(D) Representations in the bill of lading as between the shipper and carrier

Common law

4.21 Although the statements in the bill do not amount to contractual promises to deliver, they may nevertheless give rise to an estoppel by representation in the following way. A transferee suing a carrier for short or non-delivery in fact brings his action against the carrier for failing to deliver that which was shipped. That gives rise to a factual question as to what in fact was shipped. The bill of lading provides evidence of that. Furthermore, if the transferee is able to argue that he relied upon the representation as to what was shipped contained in the bill of lading, it may be that the carrier is estopped from denying the truth of his own representation.

4.22 The shipper, of course, is in a somewhat different position as he can hardly be said to have relied upon a statement³¹ in the bill if he knows that it is inaccurate.³² In the shipper’s³³ hands, the bill will, therefore, constitute only prima facieevidence of the quantity³⁴ and quality of goods shipped, throwing the burden of rebutting that presumption on to the carrier who must adduce either direct or indirect evidence to the contrary.³⁵ Furthermore, in order to be even prima facie evidence, the bill must purport to be a receipt. Where the bill records in one part that the goods were received in apparent good order and condition and in another that their “quality and condition” are unknown, it will not amount to even prima facie evidence.³⁶

4.23 A carrier presented with a bill of lading that contains statements inserted by the shipper with which he does not agree will have to consider “clausing” the bill.³⁷

Hague-Visby Rules

Bill is prima facie evidence

4.24 As between the shipper and carrier, under the Hague-Visby Rules the bill is prima facie evidence of the leading marks, quantity and apparent order and condition of the goods as therein described in accordance with paragraphs 3(a), (b) and (c).³⁸

(E) Representations in the bill of lading in the hands of a transferee

The common law – estoppel

4.25 When the Rules do not apply, or the shipper does not demand a bill of lading that complies with the Rules, the carrier is free to issue the bill in whatever form he pleases,³⁹ and the effect of the representations in it will be determined under the common law of estoppel. The assessing of the representation must, however, be approached with a degree of practicality:

The carrier’s representation “received in apparent good order and condition”

4.26 There is little doubt that the common phrase “received in apparent good order and condition” is sufficiently “unambiguous” for the purpose of establishing an estoppel, but that it not to say that its meaning is clear and it has been interpreted several ways. A few guidelines, distilled from the cases, can be suggested:

1. (1) Where the word “apparent” is used, the words following it will only relate to that which is directly observable.⁴¹
   
2. (2) The meaning of “condition” is dependent upon the nature of the goods;
   
   
   
   1. (a) where the goods in question are unpackaged and only their external appearance is observable, such as timber, “condition” refers to their external appearance, even if not qualified by the word “apparent”,⁴² but
      
   2. (b) where the goods shipped are in packages, “condition” relates to the observable characteristics of the goods inside the packages.⁴³ In such cases, “good order” has a different meaning from “condition” and refers to the appearance of the packages.⁴⁴

Qualifications in the bill

4.27 Qualifications of statements in bills of lading are the most common source of ambiguity in the representation. Two types of qualification must be distinguished: those that negative another representation in the bill and those that, whilst not negativing the other representation, make it ambiguous.

Qualifications negativing a representation

4.28 Negativing qualifications are those by which the carrier denies that the representation is his and thereby impliedly states that it is the shipper who has made the representation.

“Said to contain”⁴⁵ and “unknown”

4.29 If the carrier makes no representation, no estoppel can be raised against him. Consequently, where a bill states that the weight of goods is unknown, the carrier may adduce evidence to contradict the weight recorded in the bill.^46,47 The point was neatly put by Longmore J. in The Atlas when he said:

4.30 Similarly no representation is made by the carrier where the bill expressly records that the “particulars [were] furnished by shipper of goods” and “were not and could not be ascertained or checked by the Master…”⁴⁹

4.31 Negativing qualifications are not clauses or covenants relieving the carrier or the ship from liability etc. within the terms of Article III rule 8 of the Hague-Visby Rules.⁵⁰

4.32 Clauses attempting to negative representations are construed restrictively so that a “weight unknown” clause will not negative a statement in the bill as to the number of bags or packages received.⁵¹ Similarly, a statement that the condition is unknown will not negative a representation that the goods were received in good order, the former relating to the internal state of the goods and the latter to the packages,⁵² as discussed above, and a statement that the quality of the goods is unknown has been held not to negative a statement that they were received in good condition. The goods in question in the latter case were timber and therefore “condition” referred to their external appearance and “quality” to “something which is usually not apparent, at least not to an unskilled person”.⁵³

4.33 In exceptional cases a negativing statement can be overborne by other statements in the bill. Ultimately the question which must be asked is whether, taken as a whole, the bill of lading does or does not contain a representation by the carrier that the goods described have been received by him. Hobhouse J. explained this in The Herroe and Askoe. There, one of the bills of lading in question (referred to as “bill of lading 1 for the 1983 voyage”) contained a clause which provided “Weight, Measure, Quality, Quantity, Condition, Contents, Value unknown”. The master had added to the bill a signature and stamp against the number of bags said to have been shipped, 43,430. Hobhouse J. said:

4.34 Where the qualifying clause does negative the statement in the bill, there is no representation by the carrier upon which the transferee can be said to have relied. It is irrelevant whether or not the qualification is true.

4.35 Even where the representation is of quantity and, therefore, covered by COGSA, 1992, section 4, negativing qualifications will be effective as they will prevent the bill from being one that “represents goods to have been shipped”. Clarke J. held in Agrosin Property Ltd. v Highway Shipping Co. Ltd. (The Mata K) that a bill of lading in which the weight, measure, quantity, etc. of goods shipped was said to be unknown did not represent that the goods stated had been shipped so as to be conclusive evidence against the carriers under section 4. His lordship also went on to hold that “it is likely that s. 4 of the Carriage of Goods by Sea Act, 1992 was intended to lead to the same result as art. III, r. 4 of the Hague-Visby Rules”.⁵⁵ As a result, a bill is unlikely to held to be a bill “showing” any of the matters referred to in rule 3, if it is not also held to represent those matters, and vice versa. Such a course makes obvious sense.

Contradictory statements in the bill

4.36 Not all clauses seek to negative the statements in the bill. It is possible that the bill contains a statement of the quantity or quality that is in part contradicted by a later statement.

4.37 English law in this area, being dependent upon the transferee being able to raise an estoppel against the carrier, requires, in theory at least, that the representation in the bill be “clear and unambiguous”. In Woodhouse A.C. Israel Cocoa Ltd. v Nigerian Produce Marketing Co. Ltd.⁵⁶ the House of Lords re-examined this requirement and held that it was not enough for a representee to show that he placed a reasonable interpretation upon the alleged representation and then relied upon it. The representation must be clear and unambiguous, although that is not to say that it must be absolutely incapable of bearing any other possible meaning.⁵⁷

4.38 As a result, even if a transferee puts a reasonable interpretation upon a bill that contains an ambiguous representation, he will not be able to prevent the carrier from denying the truth of those representations as reasonably interpreted. Thus, it has been held that where the bill records the goods as received in apparent good order and condition, but notes that it was “signed under guarantee to produce ship’s clean receipt”, the representation is ambiguous and the transferee, therefore, is not able to rely upon it.⁵⁸

4.39 The carrier who allows a bill that is ambiguous to be put into circulation should bear the risk that a reasonable interpretation might not accord with the true quantity and quality of the shipment. The better approach is that taken in The Skarp.⁵⁹ The bill of lading recorded that the goods were “shipped in good order and condition”, but also stated that their “condition was unknown”.⁶⁰ Langton J. regarded it as creating an ambiguity, but, instead of rejecting the claimant’s plea of estoppel on that ground, he applied a different test, asking himself “what was the most probable effect on the mind of anybody who read the bill of lading so phrased”.⁶¹ This reasoning as to the interpretation to be put on the clause owes more to contract than to estoppel. The test he applied was to consider how a reasonable man reading the bill would have interpreted it, and this is surely a more realistic approach. Later, when considering the representations of quantity, he expressed his approach more clearly saying that the test was “the natural and ordinary reading when the document is presented to a merchant in the course of business”.

4.40 In some cases, a representation in a bill of lading is qualified by a later definition as to the meaning of the representation. For example, the words “shipped in apparent good order and condition” are sometimes qualified by a so-called Retla⁶² clause, which can be used in connection with shipments of metal or timber products. In The Saga Explorer⁶³ the bill of lading contained the following variant of the Retla clause: