Title to sue – ownership in or possession of goods required – buyers / endorsees of bill of lading taking under condition that ownership remain vested in sellers.
The facts
Steel coils were shipped from Korea to England under bills of lading incorporating the Hague-Rules.
The buyers were steel traders in England. Because the price of steel dropped while the goods were en route, the buyers were unable to finance the purchase.
The buyers agreed with the sellers that ownership in the goods would remain vested in the sellers and that the goods would be sold under supervision of the sellers on arrival in England. The bills of lading were endorsed to the buyers with reservation of ownership of the goods in the sellers.
The goods suffered damage as a result of bad stowage and the buyers sued the shipowners as endorsees of the bills of lading ie. in contract. In the alternative the buyers sought to hold the shipowners liable in tort.
Findings
In finding for the buyers, the Court of First Instance (Staughton J) overlooked the fact that ownership had been reserved by sellers. This had the result that section 1 of the Bills of Lading Act, 1855 could not operate to provide the endorsees (the buyers) with the shipper’s rights against the shipowner. Section 1 of the Bills of Lading Act reads:
Every consignee of goods named in the Bill of Lading, and every endorsee of a bill of lading to whom the property and the goods therein mentioned shall pass, upon and or by reason of such consignment or endorsement, shall have transferred to and vested in him all rights of suit, and be subject to the same liabilities in respect of such goods as if the contract contained in the bill of lading had been made with himself.
Because the owners were held liable in contract, it was not necessary to decide the question of their liability in tort.
The Court of Appeal (Sir John Donaldson MR, Oliver and Robert Goff LJJ) was unanimous in finding that no action in contract lay because of the interpretation given to section 1 of the Bills of Lading Act.
Sir John Donaldson MR and Oliver LJ held that no action in tort lay because the endorsees had neither title to nor possession of the goods at the time when the goods were damaged. Their reasoning was that although harm to the endorsees was foreseeable, policy considerations, particularly, the inability on the part of the owners to rely on the Hague-Rules, precluded the extension of tortious liability in the circumstances. In so finding, the Court of Appeal affirmed the decision of Roskill LJ in Margarine Union GmbH v Cambay Prince Steamship Co. Ltd (the Wear Breeze), overruled the decision of Lloyd J in Shiffahrt-und Kohlen GmbH v Chelsea Maritime Ltd (the Irene’s Success) and disapproved of the judgment of Sheen J in the Nea Tyhi.
Robert Goff LJ was willing to extend liability in tort to the endorsees in the situation but non-suited them because he found that the damage was actually caused by the charterers and not the ship-owners.
The House of Lords (main speech by Lord Brandon of Oakbrook), affirmed the judgments of Sir John Donaldson MR and Oliver LJ in all respects.
Lord Brandon suggested that the endorsees could have obtained cession of action from the sellers.
Commentary
The refusal of the House of Lords and the majority of the Court of Appeal to extend tortious liability in the circumstances stems once again from a rigid adherence to precedent. In principle, there could be no objection to extending liability in these circumstances and allowing a cause of action where all the elements of tort were present.
Robert Goff LJ’s solution to the potential prejudice of the shipowners, in the policy consideration of the duty of care, was to extend the the Hague Rules to apply in tort. The Hague Rules would continue to protect shipowners in most situations and there was good reason to extend liability in the unusual circumstances of this case.
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