574. J I MacWilliam Company Inc v. Mediterranean Shipping Company SA (the “Rafaela S”) [2005] UKHL

Straight bill of lading held to qualify as a bill of lading for the purposes of the Hague Visby Rules

The facts

Four containers of printing machinery were damaged in the course of their carriage by sea from Felixstowe to Boston, USA.

No document was issued to record the contract for the carriage of the goods from Felixstowe to Boston, the continuation of carriage which began in Durban.

The contract for the carriage from Durban to Felixstowe was covered by a straight bill of lading issued at Durban.

The good were trans-shipped and loaded on a different vessel at Felixstowe.

The shipper and seller of the goods  could have required the issue of a document to record the contract for the onward carriage of the goods from Felixstowe to Boston as per Article III 3.

The issue was whether the carriage was covered by a bill of lading or similar document of title for the purposes of the 1971 COGSA and the Hague Visby Rules within the meaning ascribed to “covered by” in the Happy Ranger.

If it was, a more generous package limitation would apply than the alternative regime, USA COGSA.

Findings

Messrs Mabbs, Hamsher and Moss concluded that a straight bill of lading did not fall within section 1(4) of the 1971 Act and article I (b) of the Rules.

Their award was confirmed by Langley J.

The Court of Appeal (Peter Gibson and Rix LJJ and Jacob J) held that a straight bill such as this, did qualify. The main judgment was delivered by Rix LJ.

The House of Lords (Bingham, Steyn, Rodger, Nicholls and Brown) agreed with the Court of Appeal.

Excerpts from Lord Bingham’s speech

I must acknowledge that the arguments advanced in the carrier’s written case and by Mr Simon Rainey QC in his very able oral submission, fortified by the reasons of the arbitrators and the judge and buttressed by weighty academic authority, have caused my mind, more than once, to waver. But I have on reflection concluded that the Court of Appeal reached the correct conclusion, for the reasons which they gave…

It is always the task of the court to determine the true nature and effect of a legal document, and in performing that task the court is not bound by the label which the parties have chosen to apply to it. Where, however, the court is considering a bona fide mercantile document, issued in the ordinary course of trade, it will ordinarily be slow to reject the description which the document bears, particularly where the document has been issued by the party seeking to reject the description…

This document called itself a bill of lading. It was not a bill transferable by endorsement, and so was not “negotiable” in the somewhat inaccurate sense in which that term is used in this context:  Kum and Another v Wah Tat Bank Limited…

But if this document was a mere receipt or sea waybill there was no purpose in following the traditional practice of issuing more than one original, and the time honoured language used in the attestation clause (see para 4 (6) above) was entirely meaningless…

The contract conditions clearly envisage that the consignee and bill of lading holder may become a party to the contract of carriage, and the conveyance of contractual rights by transfer of the bill of lading has been a, if not the, distinctive feature of a bill of lading, at any rate since the Bills of Lading Act 1855…

The conditions of this contract make no sense if the consignee, although holding the bill of lading, remains a stranger to the contract of carriage. They are unlike the standard terms of non-negotiable sea waybills of which examples are given in Gaskell, Bills of Lading: Law and Contracts (LLP, 2000), pp 727-733…

The requirement for production of the original bill against delivery does not lack a commercial rationale in the case of a straight bill: the shipper will not wish to part with an original bill to the consignee or buyer until that party has paid, and requiring production of the bill to obtain delivery is the most effective way of ensuring that a consignee or buyer who has not paid cannot obtain delivery. In this case, therefore, as in the case of an order bill, the bill is “a key which in the hands of a rightful owner is intended to unlock the door of the warehouse, floating or fixed, in which the goods may chance to be” (Sanders v Maclean,  per Bowen LJ).

Lord Bingham went on to consider the history of the bill of lading and referred to Proctor, The Legal Role of the Bill of Lading, Sea Waybill and Multimodal Transport Document (Pretoria, 1997), pp 25-26), and Lickbarrow v Mason (1794) 5 TR 683

As Rix LJ had done, he considered the travaux, local and foreign cases and the text books.

Commentary

The Hague Rules and the Hague Visby Rules being the product of an international conference are more susceptible to ambiguity than domestic legislation.

It was accepted by all the judges involved, among the most eminent of their time, that the Rules were primarily concerned with protecting third parties coming into possession of the bills.

The judges accepted that non- transferable sea waybills fell outside the Rules even where ordinary commercial shipments were involved.

Yet Article VI seems to suggest that the Rules were intended to extend to all shipments made in the ordinary course of trade.

Despite the focus in this case on 3rd party rights, the Rules were historically also geared to bolstering the bargaining position of shippers against ship owners as immediate parties. This is reflected in Article III 3 which entitles a shipper to demand a bill of lading.

It perhaps unfortunate that the “bill of lading” label was given such prominence in the Rules.

The reasoning in this case navigates a course between the objectives of the Rules and ship owners’ documents designed to circumvent them.

 

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