Title to Sue on Overseas Contracts of Caniage: the Need ... · Title to Sue on Overseas Contracts of Sea Caniage: ... Title to sue on overseas contracts of sea carriage 21 the goods

Title to Sue on Overseas Contracts of Sea Caniage:

the Need for Reform in Australia

Michael Thompson

For centuries traders have been permitted to conduct their affairs with minimal interference from the State. They have been free to develop differing varieties of practices and agreements. With great resourcefulness they have done just that.

The Common Law has striven for certainty in its application. A result of this aim can be a degree of inflexibility. The doctrine of privity of contract is a paradigm of a principle of law standing firm against attack from various quarters. Despite recent minor inroads in Australia, it remains much the same as it did 150 years ago. At that time the legislature saw the need to prevent the doctrine from frustrating the commercial expectations of traders. However, in drafting s.1 of the.Bills of Lading Act 1855 (UK) they were apparently unaware of the degree to which commercial men had developed, or would develop in the future, a wide variety of trading practices and agreements. A regime was legislated in the United Kingdom and mirrored (with minor variations) in each Australian State (I will refer to s.1 of the 1855 Act in this paper) which worked well for the classic export sale on CIF terms under an orthodox bill of lading. Where this was not the case the legislation was soon shown to held deficimcies and uncertainties, Despite attempts of the courts to get around these problems many of them

18 (1994) 10 MLAANZ Journal - Part 1

remain today. With reform of the law in the United Kingdom by the Carriage of Goods by Sea Act 1992 it is timely to consider the need for reform in Australia.

WHY %E 1855 ACT?

The need for s.1 of the Bills of Lading Act 1855 was simple. Where a seller sold goods to an overseas buyer one party, usually the seller, would need to contract with a sea carrier for the carriage of the goods to the buyer. As recognised in Lickbarrow v Mason (1794) 5 TR683, throughout Europe it had for many years been the practice and custom of merchants that title to goods carried by sea could pass by the indorsement and transfer of the bill of lading, invariably when the goods were at sea. In most cases risk in the goods would pass upon shipment and title would pass at some time prior to delivery. Thus the buyer who received goods damaged at sea would have to bear the loss as between himself and the seller and pursue remedies for recovery against the carrier. The buyer was, however, precluded from suing on the contract as he was not a party to it. Thompson v Dominy (1845) 14 M&W 403; 153 ER 532. Section 1 of the 1855 Act was brought in to overcome this problem.

SECTION 1 OF THE BILLS OF LADING ACT

Section 1 reads:

Every consignee of goods named in a bill of Lading, and every endorsee of a bill of lading, to whom the property in the goods therein mentioned shall pass upon 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.

THE PROBLEMS

An examination of the wording of s.1 and of various trading practices reveals its deficiencies in catering for the differing forms of sales and carriage contracts.

It is apposite to consider the major areas of difficulty.

Title to sue on overseas contracts of sea carriage 19

(a) Where property in the goods passes after consignment or endorsement.

In the vast majority of cases property in goods will pass no later than consignment or endorsement of the bill of lading. While property will pass at the time intended by the parties it would be rare for them to intend property to pass later than the transfer of shipping documents. Further, the legal presumptions as to the intended time of passing of property act so that under the usual terms of sale property will be presumed to pass not later than transfer. However, there willbe cases where property passes after endorsement. In the case of sales of a part of a bulk cargo property will not pass until the goods sold under the contract of sale become ascertained, this occurring on the separation of bulk following discharge. This is because in a contract for the sale of unascertained goods no property passes until the goods are ascertained. (s.21 of Goods Act Vic.) In The Arumis [I9891 1 L1 Rep. 213 it was argued that although the cargo, being part of a bulk cargo, only became ascertained at delivery and subsequent to the transfer of the bill, s.1 should nevertheless give the buyer a right to sue the camer for short delivery as it would be 'just and reasonable" for such a right to vest. This argument was rejected by the Court of Appeal as being inconsistent with the clear wording of s.1 and productive of uncertainty.

Although sales of part of a bulk cargo provide the classic example of property passing after transfer of shipping documents, other factual situations can also create this problem. Given that in sales of ascertained goods property passes in accordance with the intention of the parties, there is always scope for an agreement for property to pass subsequent to the transfer of shipping documents and even subsequent to delivery. Further, with the recognition of title retention clauses there now arises increased scope for findings of transfer of title subsequent to transfer of the bill.

(b) Where property in the goods passes before consignment or endorsement

The decision of the English Court of Appeal in The Delfini [I9901 1 L1 Rep 252 is of great importance to this whole subject and will later be dealt with in some depth. Its facts provide a good example of a case of property passing after endorsement and thus precluding a reliance upon s.1.

The facts were very complicated and highlight how in modemcomer- cia1 transactions, especially those involving sales of oil, there can be a large number of sales or dealings with goods in a short period of time and in


respect of which the dealings with the shipping documents cannot hope to keep up. The important facts were that Vanol, the purchaser of part of a cargo of oil from an Algerian seller, Sonatrach, on sold then to Enichem (who had contracts with related parties) under terms by which it had to pay on invoice against a letter of indemnity from Vanol if the bill of lading were not available. Under a voyage charterparty the defendant carrier was authorised to deliver the cargo against a letter of indemnity from Vanol. This occurred, with Fhichem receiving the bill of lading eleven days after delivery. (The bill was still with the shipper, Sonatrach, when delivery was made). Delivery was short and the carrier was sued. The plaintiffs (Vanol and Enichem) applied for leave to serve out of jurisdiction and attempted to establish rights to sue. Enichem was precluded from relying upon s.1 because title had passed on a date (uncertain) well prior to the transfer of the bill.

(c) Where property in the goods passes independently of consignment or endorsement.

A good example is Gardano 6 Giampieri v Greek Petroleum [I9611 Ll Rep 259. There a consignment of kerosene was sold on what McNair J found to be a hybrid of C & F terms. Because of the material differences (especially as to the taking of delivery) from the usual C & F terms it was held that title was not transferred on or by reason of the consignment made by the bill of lading.

(d) Where property in the goods never passes but risk does The classic factual cases in this regard arise where goods sold on CIF terms are lost at sea before a change in ownership, but other possibilities exist.

In 131eAliakmon [I9861 AC 785 the parties to a C&F sale varied its terms so that although risk still passed on shipment, title did not and the seller retained title and a right of disposal until such time as the plaintiff paid for the goods. The plaintiff was still to present the bill of lading and take delivery, but on the seller's behalf. The goods were delivered damaged by reason of the carrier's negligence. As the plaintiff could not sue under the 1855 Act (having never taken title) he was forced to sue (unsuccessfully) in tort. The plaintiff's counsel had argued that if his client could not sue in tort he would be an innocent victim of a lacuna in the law, given that he could not sue in contract. Lord Brandon's response was that if the plaintiff had

properly advised at the time of the variation he would have ensured that the seller was bound to sue on the contract of carriage for damage to


the goods or else that the buyer obtain an assignment of contractual rights. This sentiment was taken up by Mustill LJ in Tlte Delfini at page 274, where he stated that the problems faced by a buyer who takes under a contract which is neither classically CIF nor FOB, 'have been known for years, as have the problems faced by a buyer of an individual portion of a bulk cargo. So also have the precautions which the buyer may take to avoid them'. One wonders, however, whether the law should be justified by such expectations. Must a trader seek legal advice every time he contracts or should the law provide remedies reflecting the reasonable expectations of bona fide merchants acting without legal advice?

(e) Where a bill of lading is not used It is relevant to note that some Australian coastal operations and most trans Bass Strait contracts of carriage do not utilise bills of lading. Sea waybills and non negotiable receipts are common. Tasman Sea trade is often under- taken without a bill of lading. Further, use of paper bills of lading must surely over the next decade be somewhat replaced by the use of electronic data interchange and the law will have to try to keep up with this develop- ment.

(0 Where the holder of the bill of lading obtains an interest in the goods less than full property

An obvious situation commonly arising is that where a bank holds a bill of lading as pledgee. The House of Lords in SeweZl v Burdick (1884) 10 App Cas 74 held that an endorsee pledgee obtains an interest in goods being less than a complete proprietary one. Thus a pledgee merely holding an endorsed bill as security could not be liable for freight. In the recent decision of %Future Express [I9921 2 L1 Rep 79 Judge Diamond QC would not allow a pledgee bank caught by Sewel2 v Burdick to base a claim on an alleged attornment arising from the issuing and transferral of a bill of lading because of the knowledge and intention of the parties which was inconsistent with such an attornment. There, because delivery of the cargo had already been made, it could not have been the intention of the parties that the bank as a bailor could sue the carrier for wrongful delivery.

(g) What is covered by the term 'bill of lading' A further problem arising from the wording of s.1 is as to the type of contrash of carriage to which it relates. By using the u n d e h d term 'bill of lading' s.1 raises the question as to what form of document falls within

(1994) 10 MLAANZ Journal - Part 1

that term. Obvious questions which arise are as to whether there is coverage for:

(i) through bills of lading; (ii) combined transport bills of lading; (iii) received for shipment bills of lading.

'Through' and 'combined transport' bills of lading were not common in 1855 and were not within the 'custom' found in Lickbarrow v Mason and recognised in the preamble to the 1855 Act. Whether such documents would now be recognised as transferable documents of title, and within s.1, is arguable.

In this regard, note conflicting expressions of opinion in The Marlbor- ough Hill [I9211 1 AC 444 (Privy Council) and Diamond Alkali v Bourgeois [I9211 3 Kl3 443 (McCardie J).

As t o received for shipment bills, tender of such bills may not be good tender under CIF or FOB contracts, Diamond Alkali v Bourgeois [I9211 3 KB 443. Again, there must be a doubt as to whether such bills are covered by the legislation. Whilst it can be argued that usage of such modem forms of bills of lading has given rise to a custom which should be recognised under s.1 the fact is that the courts may apply the wording of s.1 as it stands and without reference to custom, or at least to custom which has developed since the legislation was implemented. Clearly it is desirable in any arnend- ing legislation to define the term, 'bill of lading' or expressly include certain appropriate forms of contractual documents so that such uncertainties are minimised.

THE MAJOR OFFENDER - 'UPON OR BY REASON OF'

In respect of most of the difficulties discussed, the root problem is the use of the words 'to whom the property in the goods therein mentioned shall pass upon or by reason of such consignment or endorsement'. Put simply, s.1 does not speclfy the degree of causal'or temporal connection between the passing of title and the consignment or endorsement requisite for s.1 to come into play. Prior to 1952 it was generally accepted that such connection must be direct. This was the view traditionally expressed in the two leading texts, Scrutton C h a r t v r t i e s and Bills o f m i n g and Carver, Carriage o f Goods by Sea, However, in the 9th edition of Carver, appe&g in 1952, the text s u d d d y changed to read;


As Bramwell, B said in Sewell v Burdick "The truth is that the property does not pass by the endorsement, but by the contract in pursuance of which the endorsement is made, and the words are therefore used in the statute inaccurately. It appears then that the property need only pass from the shipper to the consignee or endorsee under a contract in pursuance of which the goods are consigned to him under the bill of l a d i i or in pursuance of which the bill of lading is endorsed in his favour. But the Act cannot apply where an agent merely endorses a bill of lading to his principal." Footnote 16 read, 'the actual time when the property passed would not therefore appear to be crucial, but for a different view see Scrutton . . .'

Desperate transferees previously falling outside the operation of s.1 latched upon this view in an attempt to bring themselves within it. What followed was almost 40 years of uncertainty as to the breadth of its application. It became suggested that s.1 could cover any situation where property in the goods passes by reason of the contract evidenced by the bill of lading which was endorsed in favour of the buyer. In The San Nicholas [I9761 1 L1 Rep 8, the issue was not decisively dealt with (because the appeal related to an interlocutory point) but members of the Court of Appeal showed sympathy for the wider view. Similarly' see obiter of Mustill J (as he then was) in The Elafi [I9811 2 L1 Rep. 679,687. In the Sevonia Team [I9831 2 L1 Rep 640,643, the same counsel who had urged the wider view in The Sun Nicholas again put his argument, based upon the wider interpretation of s.1. In obiter Lloyd J expressed support for that view.

THE DELFINI [1990] 1 L1 Rep 252 - CLARIFICATION AT LAST?

This decision of the Court of Appeal was published after the publishing of the initial Working Paper of The Law Commission, whose final paper 'Rights of Suit in Respect of Carriage of Goods by Sea' led to the 1992 Act. Prior to it there had been no English appellate decision clearly defining the application of s.1. The Court of Appeal could thus freely consider the varying views expressed as to its width of application and embark upon the task of their definition.

The facts of the case are set out earlier. At first instance Phillips J held that the contract of carriage had been completed, despite short delivery, and thus no rights were transferred on the eventual receipt of the bill.

24 (1994) 10 MLAANZ journal - Part 1

The Court of Appeal determined that as property in the cargo had passed on a date uncertain, but well before endorsement and receipt by Enichern of the bill, the facts did not fall within s.1.

In the Court of Appeal Purchas LJ proceeded upon an analysis of the need for the 1855 Act, including a consideration of commercial practices of the day and of the preamble. He noted,

I am not conscious of there being any evidence that at any time the custom of merchants embraced a process of transfer which in any way resembled the system which has since the passing of the enactment sprung up, ie of granting letters of indemnity in advance of the delivery of bills of lading and other formal shipping documents (259).

He also noted the conflict in expression of views as to the extent of application of s.1 between Carver (from the publishing of the 13th edition in 1952) and the narrower interpretation urged by Srrutton. He noted that the 'wider' interpretation had only appeared in Carver after Raoul Col- invaw became editor. He had adopted the obiter of Bramwell B in Sewell v Burdick that the terminology used in s.1 was misconceived and that therefore the words of s.1 need not be read literally. Purchas LJ 'with some regret' concluded that although modem commercial practice necessitated otherwise, the wide interpretation was not open. He was prepared, however, to interpret 'by reason of' so that endorsement need not be simulta- neous with the passing of title. It must, however, have a 'definite connection with' the passing of title. In this he relied upon Mustill J in The Elafi and noted the same approach by Mustill LJ in his draft judgment in The Delfini, which he had read.

Mustill LJ stressed that despite the wording of the 1855 Act and its preamble property passed by reason of the contract between the parties evidenced by the bill and not by the bill itself and, further, that the assumed intention of the parties in a CIF sale of transfer of title at endorsement was really a n assumption that title passed upon the securing of the price, against which t he shipping documents were transferred. It is this which makes appropriation unconditional. But where, as there, the price was paid some days after delivery there would need to be exceptional circumstances or an express term of sale similar to a Romalpa clause for title to pass subsequent to delivery.

Mustill LJ, (at 274), noted recent cases containing 'tentative expressions of spirironk to the divergent views in Carver and Scrutton as to the width of s.1, noting that authority on the subject was "thin'. He therefore consid-


ered the terminology for himself. He noted that the use of the word 'or' meant that under s.1 title could pass "upon' endorsement (ie at the same time) or 'by reason of it (ie at a different time). That option meant that so long as endorsement played an 'essential causal part' in the transfer of title then s.1 could be relied upon even if transfer of title and endorsement were no concurrent. While praising (in posterity) Raoul Colinvaux for having an 'originality of mind' Lord Mustill expressly rejected his wide interpretation of s.1, noting that the Act was unhappily worded. He stated:

[Ilts general intention is clear enough: namely to unite the title to the goods which Lickbawvw v Mason had shown was capable of passing upon transfer of the bill of lading, with the rights and liabilities under the contract which Thompson v Dominy had shown did not pass by simple delivery of the contract. If the aim of the legislature were to effect a statutory novation of the bill of lading contract, in any casewhere that title and the bill of lading were transferred under the same transaction, it would have taken quite a different form; so would the speeches in Sewell v Burdick.

Noting that The Law Commission was presently considering the 1855 Act (although at that time it was in fact not considering the wholesale changes which in fact eventuated and one could suggest the decision in The Delfinimay have been instrumental in its widening its examination) Mustill LJ clearly saw that it was for the legislature to remedy problems under the Act and not for the courts to do so by an artificial interpretation.

Woolf JJ concurred with the views of his brethren. While on the facts of The Delfini it was not crucial to determine the exact

time of transfer of title( because all possible dates preceded receipt of the bill) it is easy to think of factual situations where the determination of the date may be crucial. Obviously the inability of the Court of Appeal in The Delfni to determine the point of transfer of title highlights the problems which may occur in a buyer attempting to establish title to sue.

Further, while the interpretation that s.1 does not require contempora- neity of transfer of title and endorsement, if correct, would clearly overcome many of the problems posed by its wording it cannot be assumed that in interpreting s.1 an Australian court would necessarily follow the Court of Appeal. Further, and more importantly, such an interpretation, as discussed, would by no means overcome all of the section's problems.


REMEDIES OUTSIDE s.1 OF THE 1855 ACT

Before discussing the need for reform of s.1, consideration needs to be given as to whether the problems created by its wording can be overcome by a buyer suing the carrier other than by reliance upon s.1. Three alternatives are open to a buyer and should be considered.

1. Implied contract with the carrier

Maritime lawyers are familiar with the decision of Brandt v Liverpool Brazil and River Plate Steam Navigation Co. Ltd [I9241 1 KB 575. In that case the Plaintiff was precluded from relying upon s.1 of the 1855 Act because although it was an indorsee of the bill, it was a mere pledgee. The Court of Appeal held that in paying freight and taking delivery of the cargo on presentation of the bill a contract was formed under which the Plaintiff could sue. Although such implied contracts are regularly referred to in text books a s providing avenues of recovery to a buyer precluded from relying upon the 1855 Act, there must be considerable doubts as the preparedness of Courts to hold out this remedy to certain buyers. As Staughton J stated at first instance in The Aliakmon the doctrine is far more often pleaded than established by judicial decision.

A situation which may preclude reliance upon this doctrine will be the absence of facts allowing a finding of consideration furnished by the buyer. In Brandt v Liverpool the consideration was stated to be the payment of freight. In the absence of payment of freight or demurrage, however, it is difficult to argue the existence of consideration without relying upon largely artificial arguments. Further, where there is no delivery at all Brandt can provide no assistance.

In 1989 in The Aramis the Court of Appeal delivered a near fatal blow to the doctrine of implied contract. The essential facts were that two purchas- ers of parts of a bulk cargo presented separate bills of lading for delivery. Under one bill short delivery was made and under the other no delivery at all was made. One presenter had not had title passed to it and could therefore not sue under the 1855 Act. The other presenter was a CIF buyer but because the purchase was for part of an undivided bulk, the 1855 Act could not be relied upon. It was determined that no Brandt v Liverpool contracts could be implied. Although neither presenter paid freight or demunage, in finding the absence of an implied contract, the Court of Appeal relied more upon the absence of any intention of the parties to treat their dealings as creating a contract rather than upon a lack of consider-


ation. The decision highlights the risks, in relying upon this doctrine, of a court applying classic text book principles of contract law (ie offer, accep- tance, intention to create contractual relations and consideration) to cases of this type.

Following concerted academic criticism of the decision the Court of Appeal took an apparently less rigid approach to the doctrine in The Captain Gregos (No. 2) [I9901 2 Ll Rep. 395. There the buyer, BPI in taking delivery, did not pay freight, nor did it undertake to do so nor did it even present a bill of lading. It was held that in order to give 'business reality' to the transaction a Brandt v Liverpool contract should be found to exist. At page 403 Bingham LJ cast doubt on the decision of the Court of Appeal in The Aramis (where he had presided), noting the criticism which had ensued.

Despite this apparent about face by the Court of Appeal it is suggested that the probability of Australian courts recognising Brandt v Liverpool contracts in certain situations is no reason to refrain from reform of the legislation under review. First, as was shown in The Aramis, courts may be unwilling to apply what may be a largely artificial application of contractual principles. Secondly, especially where freight is prepaid, it may well be that even an obliging court will be precluded from finding any consideration supporting a contract. Thirdly, the principle can obviously not be relied upon where goods are lost and never delivered. Finally, it is suggested that because sea waybills are normally not surrendered it is unlikely that Brandt would apply to carriage on such a basis, although carriage with a ship's delivery order will apparently permit an implied contract (The Dona Man' [I9731 2 L1 Rep 366).

2. Assignment of the cause of action Another possible way around an inability to rely upon the 1855 Act is by the assignment by the seller to the buyer of his rights against the carrier. It is suggested that, again, this provides no satisfactory alternative. First, the buyer has to rely upon the goodwill of his seller to assign rights or, alternatively, require the same by a contractual term. In the absence of a contractual obligation it appears there is no obligation upon a seller to assign rights: The Albazero [I9771 AC 774,845, per Lord Diplock. Further, many sellers trade on standard trading terms and would be unlikely to vary such terms merely to assist the buyer.

28 (1994) 10 MLkANZ Journal - Part 1

3. Actions in tort Again, any ability of a buyer to sue a carrier in tort provides no proper alternative to a legislated ability to sue in contract. Quite apart from the difficulties facing a buyer in having to prove both the circumstances of damage to the goods and negligence in the carrier it probably must also have to prove ownership or possessory title to the goods at the time of damage. A purchaser of part of a bulk cargo would necessarily have an impossibility in establishing title to the goods at the time of damage given that the cargo will only be ascertained, and title pass, upon separation and delivery. An argument does, however, exist in Australia that a consignee not holding title to the cargo on the date of damage can sue in tort. Whilst The Aliulcmon makes it clear that in England this cannot be done, it has been argued that because of the preparedness of the Australian High Court to find a duty of care based merely upon 'proximity' principles and especially on the strength of Caltex Oil Australia Pty Ltd v Willemstad (1976) 136 CLR 529, The Aliakmon may not be followed in this regard in Australia. (See Davies and Lawson 'Limiting Shipowners' Liability for Economic Loss' 1988 ABLR (16) 271). In this regard I also note the recent decision of the Supreme Court of Canada in Canadian National Railway Co. v Norsk Pacific Steamship Co. Ltd (1992) 91 DLR (3d) 289 in which the majority was prepared to find a duty of care in a situation not dissimilar in principle to Caltex. At the present time it is impossible to conclude as to whether a consignee with a mere expectation of title could sue a carrier in tort in respect of a purely economic loss.

However, even if Australian courts will allow such tortious claims there would still remain problems. Even in respect of ascertained goods it is easy to think of factual situations where it would be virtually impossible to identify the time of damage to or deterioration of cargo (let alone causative negligence). It may also be difficult to identrfy the exact time of transfer of title, and this may be crucial.

REFORM - THE UK SOLUTION

The UK Law Commission considered three main approaches to reform of s,l sf the 1855 Act in the following manner,

Option 2


Option 1

The first option considered was the mere adopting of the 'wide view' of s.1 as advocated in Carver. That is, the lawful holder of a bill of lading could sue the carrier if at some stage property passed under a contract in pursuance of which the bill was transferred. Whilst such a solution would overcome most problems, including those involving sales of part of a bulk cargo, it was rejected as being too restrictive in not applying where a buyer never obtained a bill or never obtained property in the goods.

The second choice considered was a removal of all reference to property in s.1, with the permitting of the lawful holder of a bill to sue and be sued if he were on risk in respect of the loss.

Whilst such a reform would be easily expressed in legislation it was felt that problems would arise in the definition of the word 'risk'.

Further, under such a reform a pledgee would be unable to sue or be sued on the bill and would still have to try to establish a Brandt v Liverpool contract.

Option 3

The third, and successful, option was the allowing of a lawful holder of (or the person to whom delivery is to be made under a waybill or ship's delivery order) to sue the carrier in contract for loss or damage to the goods covered by the bill (or other contractual documents). The right to sue would arise irrespective of whether property in the goods passed upon or by reason of the consignment or endorsement.

It was deemed desirable for there no longer to be a necessary link between transfer of property and transfer of rights to sue. A plaintiff need merely establish that it was the lawful holder of a bill (see s.2(l)(a)). Such plaintiffs would include the holder of a bill transferred after delivery and after the bill continued to be a document of title. By s.3 contractual liabilities are only assumed by a party entitled under s.2 (1) if it takes or demands delivery (before or after transfer or title) or claims under the contract. By s.2(5) a shipper loses its rights to sue upon transfer of rights to the receiver.

The argummts put by the Law CCJ ion in favour of the accepted option were:

30 (1994) 10 MLAANZ Journal - Part 1 Title to sue on overseas contracts of sea carriage 31

1. The reform solves the major problems experienced under the 1855 Act and, in particular, the problems for the buyer of an unascertained part of a bulk cargo.

2. The reform does not attempt to radically replace the principles behind the 1855 Act but is seen to build upon and improve that legislation. Many principles of law which have been developed in respect of the 1855 Act will continue to be relevant. The reform reflects the practice of a carrier delivering cargo against a bill of lading without enquiring as to the title of the presenter to that cargo.

3. The reform is generally consistent with the law of many of the United Kingdom's 'European partners'.

The 1992 Act does not define the term 'bill of lading'. However, s.l(l) applies the Act expressly to sea waybills and ships' delivery orders. Further, by s.1(2), references to a bill of Lading do not include non-transferable documents but do include received for shipment bills. Section l(5) permits the application of the 1992 Act in the future to electronically transferable documents by the mere making of regulations rather than amending legislation. Finally, by s.4, the rule in Grant v Nonoay is abolished.

I

COMMENT UPON THE UK REFORM

In considering any Australian legislative reform based upon the UK model consideration should be given to a number of issues which may cause concern-

1. The basis of a right to sue in contract First, under the 1992 Act it will be possible for a person suffering no loss to sue on the bill. Examples would include a freight forwarder or a pledgee not realising security. There arises the possibility of dual actions by the holder of the bill and by the owner (in tort). The Law Commission dis- missed such arguments, stating that the plaintiff would have to hold the proceeds on account of the owner (in the way that a shipper would hold the proceeds if suing under Dunlop v Lambert. To overcome the restrictions imposed by The Albazero [1977] AC 774, that a party not holding title cannot obtain substantial damages, s.2(4) was drafted, pemiRing such a claim.

It will also be seen that under s.2(5) a shipper retains no right to sue on the bill after it has been transferred (although he remains liable under the contract: of carriage and may even remain on risk). This, of course, is the

case under the 1855 Act under which a shipper must protect himself by making appropriate arrangements.

The advantages of this principle are to reduce the risk of a multiplicity of claims, to place the shipper in a position similar to any other intermediate holder of a bill and to reflect the assumption of commercial operators that possession of a bill of lading is of the utmost significance in law as a transferable document of title.

On the other hand, it can be argued there is an injustice in a shipper remaining liable on the contract of carriage with reciprocal rights to sue under it. A shipper will need to take appropriate steps to protect his position, as urged by Lord Brandon in The Aliakmon. Although cases of prejudice to a shipper would be rare and confined to unorthodox commercial dealings, a real risk of prejudice in some cases remains. The issue is one of balancing the jurisprudential logic behind the 1992 Act with the possibility of injustice in exceptional circumstances. Further, in most cases the shipper would at least have rights in tort (requiring him, of course, to prove negligence).

2. What contractual documentation falls within the Act As noted, there is uncertainty as to whether certain forms of multimodal transport documents and other documents containing terms of carriage are covered by the 1855 Act. It is suggested in Benjamin, Sale of Goods (fourth edition, para 21-074) that 'through' bills of lading and combined transport bills of lading are now so commonly used, and accepted by banks, that they may support a custom by which such documents are ones of title. Scrutton (19th edition, Art. 181) suggests they are clearly documents of title whereas earlier commentators considered they were not. The Law Commission took the view that because of the many different types of multimodal documents dogmatic assertions as to their status cannot be made and they should not be expressly referred to in the legislation. However, by s.l(2)(b) received for shipment bills of lading are expressly stated to be included. As most multimodal bills are received for shipment bills there is, at least, a greater possibility for findings that such bills fall within the undefined term 'bill of lading'. Further, ship's delivery orders and sea waybills are also specifically included in s.l(l) as documents to which the Act applies. It should be noted that a straight consigned bill of lading will fall within the description of a sea waybill as defined in s.1(3).


3. Contractual liabilities Under the 1855 Act there is uncertainty as to whether liabilities transferred by s.1 include those arising prior to shipment or endorsement. The most relevant liability would be one for shipment of dangerous cargo. However, it can b e argued that no liabilities should be transferred under the legislation. If contractual rights and liabilities are no longer to be linked with the passing of property why link contractual rights and liabilities at all? A shipowner will still have contractual rights against the shipper or charterer, will usually have a possessory lien over the cargo and will normally be able to sue under a Brandt v Liverpool contract with the endorsee. Further, especially in the case of pre-shipment or pre-endorsement liabilities, it may be unfair to bind the transferee of the bill with the shipper's liabilities. On the other hand, the 1855 Act has worked reasonably well until recent times and is understood by lawyers and traders. Further, it would appear unfair to shipowners to extend the persons able to sue them without preserving their present rights to sue. If a shipper becomes insolvent, who is the shipowner to sue? Further, possessory liens are not recognised in all parts ' of the world. The Law Commission opted for what is submitted to be an appropriate middle ground whereby not every holder of a bill assumes all liabilities to the shipowner. Only if it enforces rights given to it under the contract of carriage by the legislation does it assume liabilities under the contract.

"IlIus any person demanding delivery of goods under the bill or otherwise claiming against the carrier in respect of the goods assumes liabilities. This leaves, of course, the position of the shipper. His liability to pay freight was expressly preserved under s.2 of the 1855 Act. There is an argument that other liabilities were extinguished on a transfer of rights. This uncertainty is clarified by s.3(3) of the 1992 Act by which the shipper's contractual liabilities remain.


REFORM IN AUSTRALIA -WHICH WAY TO GO?

In Australia there is the choice of leaving the law as it presently stands, adopting legislation mirroring the 1992 Act or adopting that Act with appropriate variations.

A proponent of retaining the status quo could argue that a study of Australian maritime case law evidences little difficulty with title to sue issues. However, it is submitted that such an analysis would be too simpb-

tic and superficial. There is no reason in principle why the problems arising in the cases discussed in this paper could not arise in Australian cases and indeed uncertainty is regularly felt by claimants in cargo disputes as to whether they can prove title to sue. For lawyers acting for cargo interests title to sue is certainly one of the three 'recurring fears which may at times reach nightmare proportions' as noted by Tetley, Marine Cargo Claims (3rd edition 177). It should also be noted that it is only in the last 20 years that this issue has regularly arisen in leading English maritime decisions. It is suggested that this trend has largely developed because of changing trading practices which must, to some extent at least, be adopted in Australian related commercial dealings. While transactions involving a chain of sales within a very short period of time are less prevalent in Australia (if for no other reason than its distance from its trading partners) as shown, such &aimactions form only one area of practice in which problems of title to sue may arise.

In his paper 'UK Carriage of Goods by Sea Act - Goodbye to Title to Sue Problems - Or is it?' presented by Dr Charles Debattista at the 1992 conference of this Association he queried whether the lack of relevant case law in Australia may be because of three possible factors. First, a wider interpretation by the courts of the term, 'upon or by reason of', secondly, a possible relaxing of the doctrine of privity of contract, and, thirdly, the possibility that in Australia aggrieved cargo claimants may be are able to sue in tort for pure economic loss. It is submitted that there is no evidence that s.1 would be more widely interpreted in Australia and further, despite certain inroads such as in Trident General Insurance Co. Ltd v McNiece Bros Pty Lfd (1988) 165 CLR 107, the doctrine of privity of contract here remains a rigidly enforced principle of contract law.

As noted, on the strength of Caltex Oil v Willemstad, there is certainly reason to argue that The Al iahon and like cases may be decided in the plaintiff's favour in Australia. However, given the stressing by the High Court that duties of care should be extended incrementally it can by no means be assumed that the 'proximity' basis of a duty of care would necessarily provide an avenue of redress for a cargo claimant unable to sue on the contract of carriage. It may well be years before the High Court determines appropriate cases on this point. Even then the applicability of one decision to another cargo claimant aggrieved for different factual reasons would not necessarily be direct.

Further, even if an Australian cargo claimant could sue in tort for economic loss there still, of course, rem the handicaps of such an action, The plaintiff, bearing the burden of proof to establish causal negligence,

(1994) 10 MLAANZ Journal - Part 1

may well have great difficulty in establishing the time and circumstances of loss, negligence, or causation. Further, if the plaintiff had not contracted to buy at the time of the loss, or even if its identity was not then known to the carrier, it is surely unlikely that an actionable proximity could be established?

Although this should not be an argument for reform in its own right, it is hard t o see any good reason for not adopting the thrust of the 1992 Act in Australia. The question then arises as to whether it should be adopted without variation. As a lawyer, I would urge that it be so adopted. Given the limited opportunity within Australia for the building up of a body of case law in this area it is necessary to look overseas, principally to England, to determine the law in this field. A body of case law, texts and academic commentary on provisions identical to those in Australia would be of great assistance in achieving certainty in the law here. This can only be in the interests of the whole industry.

It may well be, however, that representatives of industry are able to point to particular Australian needs arising from local commercial and transport operations such that variations to the legislation are warranted. It is submitted that all due enquiry in this regard should be made in considering the reform of Australian legislation.

An adopting of the 1992 Act in Australia would largely eliminate one of Professor Tetley's identified nightmares for cargo claimants and, whilst others will remain, the chances of more frequent restful nights will at least be assured.

Documents

Title to Sue on Overseas Contracts of Caniage: the Need ... · Title to Sue on Overseas Contracts of Sea Caniage: ... Title to sue on overseas contracts of sea carriage 21 the goods