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The Facts: The 'Demand':

    37. My Lords, I have earlier set out the facts covering what occurred during and before the vessel's visit to Stenungsund in early November 1993. Although Borealis had earlier disputed that what had occurred had amounted to the making of a demand for the delivery of the goods, the point did not arise before Waller J. Before the Court of Appeal, the case was argued differently. It was conceded that Borealis had made a demand for the delivery of the cargo to them at Stenungsund. The Court accordingly proceeded to decide the appeal on the basis that there had been a short period on 20th January 1994 when Borealis had been the holder of the bills of lading and had accordingly become a person who then had the rights under the contracts of carriage vested in him. That was why the critical issue in the Court of Appeal became whether the endorsement on to Dow Europe altered the application of s.3(1) to Borealis. In your Lordships' House the correctness of the concession was questioned and leave to withdraw it was sought. Counsel for Bergesen very fairly accepted that, if Borealis or Saudi Aramco had argued the point in the Court of Appeal, he could not have objected nor could he submit that his clients were prejudiced by its being argued in your Lordships' House. The primary facts are not in dispute. Your Lordships have allowed the concession to be withdrawn and have heard full argument upon the question whether it is right to say that Borealis demanded delivery of the cargo from Bergesen at Stenungsund.

    38. It will be apparent that in my judgment what occurred fell far short of amounting to the making of any demand for delivery on the part of Borealis. The vessel was under charter to Stargas. It was Stargas (or their agents) who gave orders to Bergesen. It was Stargas who offered and then gave the letter of indemnity to Bergesen against their agreement to deliver to Borealis without production of the bills of lading. The only thing done by Borealis appears to have been to direct the master to their import jetty and then, having allowed her to berth there, to take the routine samples from the cargo tanks before clearing the vessel for discharge into their terminal. These are exactly the type of cooperative acts, assisting the shipowners and charterers, to which I have referred earlier and which cannot on any view be treated as a demand by Borealis to deliver. Further, the trade in which these parties were involved necessitates the routine sampling of the cargo before it can be decided whether the vessel can be allowed to discharge its cargo into the terminal. It is elementary that in the ordinary course the nature and quality of the cargo must be established first. As the facts of the present case illustrate, it is always possible that the cargo may unexpectedly turn out to be contaminated or have some other characteristic which makes it unfit or unsafe for discharge into the terminal. What occurred did not get even as far as the stage of Borealis expressing their willingness to receive this cargo into their terminal. It fell a long way short of amounting to any demand or request that it should be. Once Borealis knew what the true characteristics of the cargo were, they refused to accept it from the ship.

    39. It follows that, as a matter of fact, Bergesen have failed on the agreed primary facts to make out even an arguable case that Borealis demanded the delivery of this cargo. If the facts had disclosed something more positive on the part of Borealis, it is difficult to visualise that it could have had an appropriately unequivocal character or could have amounted to a demand for the purposes of paragraph (c) of s.3(1). The considerations discussed in paragraphs 35 and 36 above would apply both as a matter of the proper use of language and as a matter of the interpretation of s.3(1) in its schematic context including the guidance given by a consideration of the Report.

The Secondary Question: Endorsement on and s.3(1)

    40. The answer which I have given to the question whether there was a demand is decisive of the appeals. If there was no demand by Borealis, there cannot be any liability of Borealis under s.3(1) whatever answer is given to the secondary question which was decisive in the Court of Appeal. The secondary question is easily formulated: When an endorsee of a bill of lading who has both had transferred to and vested in him all the rights of suit under the contract of carriage pursuant to s.2(1) and become subject to the liabilities under that contract pursuant to s.3(1), does he cease to be so liable when he endorses over the bill of lading to another so as to transfer his rights of suit to that other?

    41. The remarkable thing is that the Report does not refer to this question at all and the Act contains no express provision covering it even though there are express provisions dealing with similar matters such as s.2(5) (extinction of rights) and s.3(3) (preservation of liabilities). It clearly was not foreseen as being a live issue. One of the reasons, I believe, must have been that they did not visualise there being anything tentative about any of the triggering steps referred to in the three paragraphs of s.3(1). They were contemplating actions of the bill of lading holder or receiver which would take place after the completion of the voyage. They did not have in mind conduct which could be resiled from or circumstances which would leave open the possibility of doing so. They did not visualise that casualties and disputes might arise during the course of a voyage which could give rise to the possible operation of s.3(1) and yet, in the event, not put an end to the carriage or the subsequent onward transfer of the bills of lading. Three things follow from this. The first is that no special significance can be attached to the fact that there is no express provision which provides the answer one way or the other in the Act. The problem was not seen to be a problem and the question was not seen to require an answer. Secondly, it underlines that a relatively stringent approach should be adopted to the interpretation of s.3(1). The character of the conduct which attracts the liability imposed by s.3(1) is expected to have an element of relative finality; it is not conduct which is tentative or equivocal nor conduct which is equally consistent with the person leaving it to a later endorsee to exercise the rights transferred by s.2(1). Thirdly, the answer to the question must be found by seeking out from the drafting of the Act and the Report, pursuant to which the Act was drafted, what is the scheme of the statutory provisions and what principles they reflect.

    42. Valuable discussions of the various countervailing arguments for one view or the other are to be found in the judgments of the Court of Appeal, particularly the dissenting judgment, at [1999] QB 378-381, of Sir Brian Neill who was able to draw upon his particular experience in this field of law. Similarly your Lordships have had the assistance of citation from the judgment of Thomas J in The Aegean Sea [1998] 2 Lloyd's 39 which dealt with a number of other points besides this one. Your Lordships were also referred to a short article by Francis Reynolds QC in [1999] LMCLQ 161 which draws attention to the importance of the factual context in which any such question arises and notes the importance of the concession which was made in the present case in the Court of Appeal and the artificiality of the situation which resulted with liability being said to arise from a momentary passage of the bills of lading two months later through the hands of Borealis.

    43. I agree with the sentiment of Professor Reynolds that it is likely that the particular facts will be of importance in any subsequent case concerning the inter-relation of sections 2 and 3 of the Act. It is possible that the conduct of one or other party may give rise to estoppels as where one party has been led to exercise forbearance in reliance upon some conduct of the other. In most cases there will be other documents or agreements to take into account besides the bill of lading such as charter parties, letters of indemnity, non-separation agreements, or ad hoc agreements. With these caveats, I will shortly state my conclusion on the secondary question itself as a matter of the construction of the 1992 Act unqualified by any special factors.

    44. I consider that there are two principles which are stated in the Report and reflected in the drafting of the Act which show an intention on the part of the draftsman to preserve the decision in Smurthwaite v Wilkins. The first is the intention to preserve the well tried and familiar structure of the 1855 Act having removed its dependance upon concepts of the passing of property. In the Report, this approach surfaces in most of the relevant discussion and recommendations: see paragraph 27 above and §§2.22, 2.34, 2.40-1 and 3.9-24 of the Report. In the Act s.2(1) and s.3(1) adopt the crucial wording of the 1855 Act which formed the basis of Smurthwaite v Wilkins and similar cases: "shall have transferred to and vested in him all rights of suit under the contract of carriage as if ...." - "shall become subject to the same liabilities under that contract as if ....". Those words having been previously construed as having a certain effect, their repetition in the 1992 Act implies that the draftsman expected them to continue to be construed in the same way. Smurthwaite v Wilkins is referred to in the Report and is adopted rather than criticised. There is no provision in the Act which contradicts the intention that that decision should still have force.

    45. The second principle is that of mutuality (or, if preferred, reciprocity or fairness). I have already quoted passages from the Report demonstrating that this was the guiding principle in arriving at the recommendations which have led to s.3(1). S.3(1) is drafted following this principle because it makes it fundamental that, for a person to be caught by s.3(1), he must be the person in whom the rights of suit under the contract of carriage are vested pursuant to s.2(1). The liability is dependant upon the possession of the rights. It follows that, as there is no provision to the contrary, the Act should be construed as providing that, if the person should cease to have the rights vested in him, he should no longer be subject to the liabilities. The mutuality which is the rationale for imposing the liability has gone. There is no longer the link between benefits and burdens. I have already commented upon the fact that the Report refers to Smurthwaite v Wilkins and adopts it without criticism. It was in that case that Erle CJ said at p.848:

"The contention is that the consignee or assignee shall always remain liable like the consignor although he has parted with all interest and property in the goods by assigning the bill of lading to a third party before the arrival of the goods. The consequences which this would lead to are so monstrous so manifestly unjust that I should pause before I consented to adopt this construction of the act of parliament."

I recognise, and emphasise yet again, that it is likely that individual cases will be more complicated than that here visualised by Erle CJ and other factors are likely to come into play which, maybe decisively, will affect the respective rights and liabilities of the relevant parties. But as a matter of the construction of the Act per se, what he says remains apt and reflects the same principle as that adopted by the Report and is supported, not contradicted, by the Act.

Conclusion:

    46. It follows that I consider, my Lords, that the appeal of Bergesen should be dismissed together with the dependent appeal involving Saudi Aramco. The result is that the order of the Court of Appeal should be upheld. The claim of Bergesen against Borealis under the contract of carriage should be struck out. The leave to join Saudi Aramco should be set aside. The costs of both of the appeals to your Lordships' House should be paid by Bergesen.