Category: Sea Carriage

The Sienna, Unicredit Bank AG v Euronav NV [2023] EWCA Civ 471 involved a claim by a financing bank against shipowners for delivery of cargo without production of a bill of lading. The cargo had been carried under a charter with BP who were the initial holder of the bill of lading as shipper. The charter was novated, and subsequently BP indorsed the bill of lading to the bank who received it after the cargo had been discharged against an indemnity in the charter, without production of the bill of lading.

Moulder J found that the bank could not sue the owners under the bill of lading because the bill of lading lost its potential contractual status when there was a novation of the charter with BP. She also found that if there had been a contract with the indorsee as the lawful holder of the bill of lading, there would have been no breach. The indorsement and transfer of the bill of lading to the Bank was being held up largely due to the effect of the first Covid lockdown in the UK in March 2020. She found that had the shipowner refused to deliver the cargo without production of the bill of lading it would have sought instructions from BP who would have referred to the Bank as the intended indorsee and the Bank would have agreed that the cargo be discharged without production of the bill of lading.

On appeal the Court of Appeal overturned the first basis of the decision, but upheld the second.

On the first ground, it was clear that where a shipper is also the charterer, the bill of lading is generally not a contract of carriage but a mere receipt, but when indorsed to a third party, it attains contractual status upon indorsement on the basis that “a new contract appears to spring up between the ship and the consignee on the terms of the bill of lading” (Tate & Lyle Ltd. v Hain Steamship Co. (1936) 55 Lloyd’s Rep 159, 174). However, Moulder J had found that this was not the case as regards the indorsee when the bill of lading had remained in the hands of the charterer after the charterer ceased to be a party to the charterparty. Popplewell LJ giving the judgment of the Court of Appeal, characterised the ‘mere receipt’ rule as follows. In issuing a bill of lading, the carrier usually contracts with the holder on those terms save only for so long as the holder is a charterer, and save to the extent thereafter (if at all) that the contractual relationship with the carrier for performance of the carriage remains governed by the charterparty (as it was for pre Novation Agreement conduct in the present case). The bill of lading will not otherwise be a mere receipt but will contain or evidence a contract of carriage. This reflects the presumed intention of the parties. Popplewell LJ found that the bill of lading was not a mere receipt in BP’s hands at the time of discharge as it had become a document containing or evidencing a contract with BP from the date of the Novation Agreement, and remained so at the date of discharge.

Furthermore, dealing with an argument not raised before Moulder J, he found that the indorsee is put in the same position as if he had been a party to a contract on the terms of the bill from the date of its issue: Monarch Steamship Co Ltd v A/B Karlshamns Oljefabriker [1949] AC 196, 218. The language of s. 2(1) makes clear that it operates retrospectively. The position is no different for an indorsee from a charterer from that which applies to an indorsee from a non-chartering shipper. The position would be the same where indorsement takes place after discharge than it is where indorsement takes place before provided the indorsee takes pursuant to pre-existing contractual arrangements,  as required by s2 (2) of COGSA 1992, which is what the Bank did in this case.

Turning to the second ground of Moulder J’s decision, although the indorsee would not be affected by any agreement between the owners and the charterer that the cargo could be delivered against a letter of indemnity in the absence of a bill of lading, the indorsee itself could consent to this. The bill of lading in this case was on its way to the bank and was held up due to administrative reasons largely connected with the initial COVID lockdown in the UK, rather than commercial ones. Had Owners initially complied with the obligation not to discharge without production of the Bill, they would have sought and obtained express consent to do so from both the holder and the bank as intended indorsee. Delivery without production of the bill of lading would no longer have been a breach of the contract and so the initial breach would have caused no loss.

Accordingly, the Court of Appeal upheld Moulder J’s findings on causation and owner’s appeal was dismissed.

Poralu Marine Australia Pty Ltd v MV Dijksgracht – [2022] FCA 1038 is an interesting case from the Federal Court of Australia on identifying what constitutes the contract of carriage of goods by sea,and what terms are applicable to that contract. It will not necessarily be the transport document that is issued on loading, in this case a sea waybill.

Between 6 and 11 December 2019, 23 pontoons and 11 pallets were loaded on board the motor vessel Dijksgracht at the port of Cork, Ireland, as breakbulk cargo. The cargo  of 23 pontoons and 11 pallets was loaded at Cork on The Dijksgracht and was consigned to Poralu Marine Australia Pty Ltd, for installation at the Royal Geelong Yacht Club. The cargo was discharged on or about 13 February 2020 at Geelong and it was alleged that three pontoons were discharged damaged having been loaded in sound condition. Poralu brought actions in bailment and negligence against the shipowner, RT, in rem and against ST as carrier, in personam

The carriage agreement began with a series of emails between Poralu and ST, between 7 and 9 November 2019, culminating in an unsigned booking note issued by ST which Poralu accepted on 20 November 2019.  The booking note, which provided that it was to “prevail over any previous arrangements”, was accepted by Poralu on 20 November 2019. After loading ST issued a sea waybill was issued acknowledging receipt of the cargo in good order and condition. The sea waybill contained a “Himalaya Clause” under which RD as owner was entitled to the benefit of:

Poralu alleged that the cargo was loaded on board the vessel in sound condition and that three pontoons were found to have been damaged when the cargo was discharged. Poralu commenced two actions for damages arising from the alleged damage to the cargo, both in bailment and the tort of negligence. The first action was in rem against the vessel and its owner, said to be Dijksgracht CV (DCV), a Netherlands company. The second was an action in personam against Spliethoff Transport (ST) as carrier and Rederij Dijksgracht (RD), said to be the shipowner.

An issue arose as to the applicable limitation figure in respect of the three damaged pontoons. Poralu asserted that the contract of carriage was concluded in the recap in the emails, so that there was a binding arrangement in advance of the acceptance of the booking note. On that basis the contract was subject to and incorporated the Australian Hague Rules and that it was a term of the contract of carriage that a bill of lading would be issued to Poralu in respect of the cargo either immediately or on request. Under the Australian Hague Rules the limitation figure would be that in the 1979 SDR Protocol to the Hague-Visby Rules.

The two defendants denied negligence and claimed that the contract of carriage was subject to the terms and conditions of ST’s booking note which applied the law of the Netherlands and incorporated the terms of Articles I-VIII of the Hague Rules 1924 and therefore excluded the operation of the Australian Hague Rules under  the Carriage of Goods by Sea Amendment Act 1997 (Cth) and the Carriage of Goods by Sea Regulations 1998 (Cth). The booking note stated specifically that liability was limited to £100 lawful money of the UK per package or unit. ST and RD argued that the Hague Rules had been incorporated and that such incorporation excluded the application of the Australian Hague Rules.

 Stewart J held that the liability of ST was limited to £100 UK money per package, and that applied to the claims in bailment and negligence. The court’s starting point was that the Australian conflict of laws rule for determining the question whether a contract was concluded is the law of the forum (in contrast to the English conflict rule which applies the law of the putative contract). A binding contract had not been concluded at the end of the initial email exchanges but came into being with the acceptance of ST’s booking note which contained all of the terms previously agreed in the recap and filled in the gaps, so that it constituted an offer capable of acceptance, and it was immaterial that it was unsigned. The booking note anticipated the issue of a bill of lading or a sea waybill, and provided that the booking note would prevail over the terms of such a document. The sea waybill that was issued made no change in the contractual relationship. The sea waybill was not a contractual document at all but a receipt only, as was the case with the bill of lading received by the fob charterer in The Dunelmia. The overriding clause in the booking note meant that the terms of the booking note prevailed over the sea waybill. Further, the booking note, which had been found by the court to be a contractual document, preceded the shipment of the cargo, whereas the sea waybill was only agreed and issued long after the cargo had been shipped

Applying Dutch law, to which the booking note was subject, the Hague-Visby Rules were not applicable. The Dutch law experts disagreed regarding the application of the Hague-Visby Rules where the carrier and the shipowner did not agree, when concluding the contract, whether or not a bill of lading or sea waybill will eventually be issued. They disagreed about whether the mere existence of the unexercised right of the shipper to demand a bill of lading (pursuant to Art 3(3) of the Rules or Art 8:399 of the DCC) was sufficient for the material application of the Rules or whether the shipper had actually to exercise its right to demand a bill of lading. The experts agreed that that question was undecided by the Dutch courts. However, assuming that the shipper’s right to demand a bill triggered the issue of the Hague-Visby Rules, the Hague-Visby Rules could not operate on the facts of this case. Ireland was not a contracting state so such a possible bill of lading would not have been issued in a contracting state nor would there be carriage was from a contracting state. As regards Article X(c) whereby the Rules apply to a bill of lading relating to the carriage of goods between ports in two different states if “the contract contained in or evidenced by the bill of lading provides that the rules of this Convention or legislation of any State giving effect to them are to govern the contract” Poralu relied on the standard bill of lading terms that ST would have used had a bill of lading been issued. That would have contained the following clause paramount:

1    Except in case of US Trade, the Hague Rules contained in the International Convention for the Unification of certain rules relating to Bills of Lading, dated Brussels, 25th August 1924, as enacted in the country of shipment, shall apply to this Bill of Lading.

2    If no such enactment is in force in the country of shipment, the articles I-VIII inclusive of the said Convention shall apply.

3    In trades where the International Brussels Convention 1924 as amended by the Protocols signed at Brussels on 23 February 1968 and 21 December 1979 (the Hague-Visby Rules) apply compulsorily, the provisions of the Hague-Visby Rules shall be considered incorporated in this Bill of Lading.

….

5    If the Hague Rules are applicable otherwise than by national law, in determining the liability of the Carrier, the liability shall in no event exceed £100 (GBP) sterling lawful money of the United Kingdom per package or unit.

Since the Hague Rules were not enacted in Ireland, the first sentence of the paramount clause had no application, and the second sentence applied. Since the paramount clause in the present case here referred separately and deliberately to the Hague Rules and the Hague-Visby Rules, the conclusion in The Superior Pescadores was inapplicable

Neither did the Hague-Visby Rules apply by virtue of the Australian legislation under which the booking note would be regarded as a charterparty (in this case a “space” or “slot” charter) over which the Rules would apply only where a sea carriage document was issued for the carriage. The booking note here was a charterparty, but the sea waybill was not a sea carriage document in that it was a mere receipt and was not negotiable. Accordingly the parties’ agreement on limitation remained applicable. Stewart J rejected Poralu’s argument that as they had a contractual right to demand a bill of lading then the contract of carriage was a contract covered by, relevantly, “a sea carriage document”. It was doubtful whether a contract of carriage is “covered by” a sea carriage document when the document in question, whether actually issued or merely the subject of a right of demand to be issued, did not or would not contain or evidence the contract.

Finally, RD were entitled to rely on the £100 package limitation in the booking note by virtue of its Himalaya clause. The clause satisfied all four of Lord Reid’s conditions set out in Midland Silicones v Scruttons  and Stewart J rejected Poralu’s argument that the clause did not satisfy the third element, in that the carrier had not had authority from the third party to contract as agent. The evidence showed that RD and ST were parties to a pooling agreement under which ST had to use all reasonable endeavours to protect and promote the interests of pool members. The pooling agreement conferred the necessary authority.

In The Alhani [2018] 2 Lloyd’s Rep 563 the Hague Rules one year time limit was held to apply to a misdelivery claim, where delivery was made on discharge within the ‘tackle to tackle period’. This left an open question as to whether the one year time limit would apply when delivery was made after discharge from the vessel. This question has now been answered by Sir William Blair (Sitting as a High Court Judge) in FIMBank PLC v KCH Shipping Co., Ltd [2022] EWHC 2400 (Comm). The case arose out of a misdelivery after discharge under a bill of lading on Congenbill form. The Tribunal, comprising three leading maritime arbitrators,  Julia Dias QC, Sir Bernard Eder and Timothy Young QC, found that: (i) the Hague-Visby Rules time bar can in principle apply to claims relating to misdelivery occurring after discharge; and (ii) Clause 2(c) of the Congenbill form did not disapply the Hague-Visby Rules time bar to the period after discharge. On a s.69 appeal, two questions were posed.

i) Whether Art.III, r.6 of the Hague-Visby Rules applies to claims for misdelivery of cargo after discharge (the “first question”);

ii) Whether clause 2(c) of the Congenbill form disapplies the Hague-Visby Rules to the period after discharge (the “second question”).

The clause reads. “The Carrier shall in no case be responsible for loss and damage to the cargo, howsoever arising prior to loading into and after discharge from the Vessel of [which must mean “or”] while the cargo is the charge of another Carrier, nor in respect of deck cargo or live animals.”

Sir William Blair upheld the finding of the tribunal, giving a positive answer to the first question, and a negative answer to the second.

On the question of the applicability of the timebar to claims for misdelivery of cargo after discharge, he found the tribunal had correctly decided that on its true construction Art.III, r.6 of the Hague-Visby Rules, which includes the time bar but is concerned with delivery in a broader context, applies to claims for misdelivery of cargo after discharge.  This conclusion avoids the necessity for fine distinctions as to the point at which discharge ends. It is also consistent with the authoritative statement of the objective of the article by Bingham LJ in The Captain Gregos ([1990] 1 Lloyd’s Rep. 310 at p.315 (col 2)) that it is, “like any time bar, intended to achieve finality and, in this case, enable the ship owner to clear his books”. In addition there no consensus to be shown among the courts of other jurisdictions, nor in the commentary.

Additionally, the application of the time limit to a misdelivery after discharge could be supported by the implication of a term as argued by Carver on Bills of Lading, Sir Guenter Treitel and Professor Francis Reynolds, 4th ed (2017) at [9-130] which states that the Rules may appear on their face to cease operation on discharge, but that consignees will normally collect them after some period of storage. The carriage contract arguably continues, and that under English law the carrier still holds the goods under the contract of carriage and under the Rules, unless it alters its responsibility for this stage by a term in the contract of carriage.

On the second question, the effect of cl.2(c) of the CONGENBILL, Sir William Blair upheld the tribunal’s conclusion that the clause did not disapply the Hague-Visby Rules to the period after discharge. The clause made no reference to any Hague-Visby Rules period. By contrast, the clause in The MSC Amsterdam [2007] EWCA Civ 794, [2007] 2 Lloyd’s Rep 622 was materially different in that its reference to loss “after the end of the Hague Rules period” showed that there was to be a period when the Hague Rules did not apply but would be be a time when the Owners may still have the obligations of a bailee in respect of the goods, and can agree that the terms of that bailment are not to be those of the Hague Rules.