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Judgments - J I MacWilliam Company Inc (Respondents) v. Mediterranean Shipping Company S A (Appellants)

HOUSE OF LORDS SESSION 2004-05 [2005] UKHL 11 on appeal from: [2003] EWCA Civ 556




J I MacWilliam Company Inc (Respondents) v. Mediterranean Shipping Company SA (Appellants)

[2005] UKHL 11


My Lords,

    1.  In about January 1990 four containers of printing machinery were damaged in the course of their carriage by sea from Felixstowe to Boston, USA. The carrier was Mediterranean Shipping Company SA, the appellant, which I shall call "the carrier". The buyer was J I MacWilliam Company Inc of Boston ("the buyer"). The issue in this appeal is whether the contract for the carriage of those goods was covered by "a bill of lading or any similar document of title" within the meaning of section 1(4) of the Carriage of Goods by Sea Act 1971 and article I (b) of the Hague-Visby Rules, which were given the force of law in the United Kingdom by section 1(2) of that Act. If it was so covered, the buyer's claim is governed by the financial limits prescribed in article IV rule 5 of the Hague-Visby Rules. If it was not, the claim is governed by the limits laid down in section 4(5) of the United States Carriage of Goods by Sea Act 1936. The Hague-Visby Rules are significantly more generous to the claimant than those under US COGSA. Unsurprisingly, therefore, the buyer contends that the Hague-Visby regime applied and the carrier contends that US COGSA was applicable. The question of legal principle which divides the parties is whether a straight bill of lading, by which I mean a bill of lading providing for delivery of goods to a named consignee and not to order or assigns or bearer, and so not transferable by endorsement, is "a bill of lading or any similar document of title" within the provisions already mentioned. I shall hereafter use the expression "order bill" to embrace a bill to order or assigns or bearer without distinguishing between these.

    2.  For purposes of a preliminary issue referred to London maritime arbitrators, a number of matters were assumed or agreed, and some issues considered below are no longer live. It has been assumed that the buyer has title to sue and that the carrier is liable for any damage to the goods. As it was, no document was issued to record or evidence the contract for the carriage of these goods from Felixstowe to Boston. But this was the continuation of carriage which began in Durban, and the contract for the carriage from Durban to Felixstowe was covered by a straight bill of lading issued at Durban dated 18 December 1989. The good were trans-shipped and loaded on a different vessel at Felixstowe. It is agreed that the shipper (and seller) of the goods, Coniston International Machinery Limited of Liverpool, could have required the issue of a document to record or evidence the contract for the onward carriage of the goods from Felixstowe to Boston; that any document so issued would, for all purposes relevant to this appeal, have been in the same form as that issued for the first leg of the carriage; and that nothing turns on the lack of a document. It is convenient to speak as if a document had been issued in the form the document would have taken had it been issued. It is no longer necessary to review two questions (whether there was one contract of carriage or two, and whether Felixstowe was a port of shipment in the UK) which exercised the arbitrators and the lower courts.

    3.  The very experienced arbitrators (Messrs Mabbs, Hamsher and Moss) concluded, for very clear reasons which they gave, 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 opinion on this point was shared by the commercial judge (Langley J): [2002] EWHC 593 (Comm), [2002] 2 Lloyd's Rep 403, paras 17-27. But the Court of Appeal (Peter Gibson and Rix LJJ and Jacob J) reached a different conclusion on this issue, for reasons given in a comprehensive and erudite judgment of Rix LJ and for additional reasons given by Jacob J: [2003] EWCA Civ 556, [2004] QB 702, [2003] 2 Lloyd's Rep 113. 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. That enables me, since the arguments advanced to the House were essentially those summarised by Rix LJ in paras 31-33 of his judgment, to express my own conclusions relatively briefly.

    4.  It is unnecessary to repeat the very detailed description given by Rix LJ in paras 11-17 of his judgment of the bill of lading with which this appeal is concerned. A visual representation of the front of the bill, differing of course in its typewritten entries but subject only to minor and (for present purposes) immaterial differences in its appearance and printed text, was annexed by the Federal Court of Australia to its judgments in El Greco (Australia) Pty Limited v Mediterranean Shipping Co SA [2004] FCAFC 202, [2004] 2 Lloyd's Rep 537, 593. Perusal of the form issued by the carrier in the present case prompts a number of observations:

    (1)  It is prominently entitled "Original BILL OF LADING" and has an assigned bill of lading number.

    (2)  In box (2) are the printed words "Consignee: (B/L not negotiable unless 'ORDER OF')". In this box the buyer's name and address were inserted. The words "order of" or their equivalent were not added. It was this omission which made this a straight bill.

    (3)  In box (11) the number of original bills of lading was specified as three. This followed what Bowen LJ in Sanders Brothers v Maclean & Co (1883) 11 QBD 327, 341, described as the "inveterate practice among most of the commercial nations of Europe" of shipowners drawing bills of lading in sets of three or more.

    (4)  The form contained all the particulars of the goods and the carriage ordinarily found in a bill of lading.

    (5)  The form provided, on its face, that

    "IN ACCEPTING this Bill of Lading, the Merchant agrees to be bound by all the terms and exceptions and limitations whether printed, stamped or written hereon and on the reverse side ….."

    (6)  The form also provided, on its face, that

    IN WITNESS whereof the number of Original Bills of Lading stated above all of this tenor and date, has been signed, one of which being accomplished, the others to stand void. One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order."

The first of these two sentences followed what Lord Phillimore in The Ship "Marlborough Hill" v Alex Cowan and Sons Limited [1921] 1 AC 444, 453, in the context of an order bill, called "the time honoured form".

(7)  The conditions on the reverse of the form were prefaced by a clause which began:

"This contract is between the Merchant and the Master, acting on behalf of the Carrier. Wherever the term 'Merchant' occurs in this Bill of Lading, (hereinafter 'B/L') it shall be deemed to include the Shipper, the Consignee, the holder of the B/L, the receiver and the owner of the goods."

(8)  The conditions included a clause paramount, quoted by Rix LJ in para 17 of his judgment, subjecting the contract to the Hague-Visby Rules where they were compulsorily applicable.

(9)  The conditions made repeated references to "this B/L".

(10)  The conditions were of the kind routinely found in a bill of lading.

    5.  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 [1971] 1 Lloyd's Rep 439, 446. 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.

    6.  The carrier responds to this argument by pointing out that the form may be used in the case of either an order bill or a straight bill, and that if it is used for the latter purpose some of the stated conditions (such as the attestation clause quoted in para 4 (6) above) are inapposite. The first of these points is plainly correct: if "order of" or words to that effect are added in box (2) the bill becomes an order bill, and if they are not it is a straight bill. It is also true that it is necessary in some cases (as in Homburg Houtimport BV v Agrosin Private Limited [2003] UKHL 12, [2004] 1 AC 715) to reject some printed conditions of a contract as inconsistent with other provisions. Here the requirement that one of the bills must be surrendered "duly endorsed" in exchange for the goods could not in all cases be given effect, since even in the case of an order bill the named consignee might require delivery as holder of the bill, and in that case there could be no endorsement. It would, however, be extraordinary to treat the detailed terms of this contract as inapplicable to a named consignee holding a straight bill. In particular, I can see no reason not to give effect to the requirement that an original bill be surrendered in exchange for the goods. This provision is of course even more efficacious in the case of an order bill, since until such a bill is presented the carrier will not know the identity of the party entitled to delivery, and it has long been the "undoubted practice" to deliver "without inquiry" to the holder of such a bill of lading: Glyn Mills Currie & Co v The East and West India Dock Company (1880) 6 QBD 475, 492; (1882) 7 App Cas 591, 603. But the requirement 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, above, p 341, per Bowen LJ).

    7.  If it were appropriate to resolve the question whether the document I have just considered was "a bill of lading or any similar document of title" by reference to the document alone, I would conclude that it was. But that would be a wrong approach. For article I (b) of the Hague-Visby Rules scheduled to the 1971 Act reproduces the language of article I(b) of the Hague Rules scheduled to the Carriage of Goods by Sea Act 1924, and the Hague Rules were the outcome of a series of international conferences, which were themselves a response to developments in a number of national jurisdictions. The Hague Rules thus represented an agreed international response to what were seen as common problems. Recognition of this important fact must govern the court's approach to interpretation of the Hague Rules and the Hague-Visby Rules, since effect must be given so far as possible to the international consensus expressed in the Rules and not to any divergent or inconsistent rules of domestic law: Stag Line Limited v Foscolo, Mango and Company Limited [1932] AC 328, 350, per Lord Macmillan; Fothergill v Monarch Airlines Limited [1981] AC 251, 272, 285, 290-291, 293, 299.

    8.  It is not necessary to attempt to summarise the history of events leading up to the adoption of the Hague Rules, the enactment of US COGSA and the adoption of the Hague-Visby Rules, which is recounted in some detail in Sturley, The Legislative History of the Carriage of Goods by Sea Act and the Travaux Préparatoires of the Hague Rules (Colorado, 1990), vol 1, pp 1-23, and the judgment of Allsop J in El Greco (Australia) Pty Limited and Another v Mediterranean Shipping Co SA, above, paras 155-225; and more briefly in Scrutton on Charterparties and Bills of Lading, 12th ed (1925), pp 486-487, 20th ed (1996), pp 404-405. From this history, and from the travaux préparatoires reproduced by Sturley, two points clearly emerge, neither of them, I think, in any way controversial. First, the genesis of the Hague Rules lay in a view, widely shared among cargo interests, that carriers, in issuing bills of lading containing or evidencing the terms of carriage contracts, had routinely included conditions exonerating themselves from liability to an extent which was unacceptably prejudicial to the other parties to such contracts. Steps to address this problem had already been taken by the United States in the Harter Act 1893, by New Zealand in the Shipping and Seamen Act 1903, by Australia in the Sea-Carriage of Goods Act 1904 and by Canada in the Water Carriage of Goods Act 1910. But there was felt to be a need for greater uniformity internationally. Secondly, the focus of discussion preceding final adoption of the Hague Rules was on order bills. This is readily understandable, since such bills were very much more common than straight bills and downstream endorsees were even further removed from the contract of carriage than named consignees. But it is plain that straight bills were not ignored in the course of discussion. Was it intended that these should fall outside the scope of the Rules? To answer this question it is helpful to look briefly at the law in certain leading maritime jurisdictions.

    9.  One might have supposed that, historically, straight bills would have been developed first, with the sophisticated refinement of transferability by endorsement coming later. It does not, however, seem that this is what happened (see Proctor, The Legal Role of the Bill of Lading, Sea Waybill and Multimodal Transport Document (Pretoria, 1997), pp 25-26), and the custom found in the leading case of Lickbarrow v Mason (1794) 5 TR 683 related to the negotiability and transferability of an order bill. This was the custom referred to in the preamble to the 1855 Act. But under section 1 of that Act the rights and liabilities passed not only to endorsees but also to "Every consignee of goods named in a bill of lading ….. to whom the property in the goods therein mentioned shall pass upon or by reason of such consignment". This was capable of applying to the holders of straight bills.

    10.  In C P Henderson & Co v The Comptoir d'Escompte de Paris (1873) LR 5 PC 253 the Privy Council considered a straight bill. The decision was that a bill not drawn to order or assigns was not a negotiable instrument. But it is noteworthy that Sir Richard Baggallay QC in his argument, while submitting that the bill differed from an ordinary bill, did not contend that it was not a bill of lading at all, and Sir Robert Collier in giving the judgment of the Board consistently described it as such. The document considered in The Marlborough Hill, above, was, if a bill of lading, an order bill, and the question was whether the document was a bill at all. Lord Phillimore, giving the judgment of the Privy Council, observed at p 452 that "If this document is a bill of lading, it is a negotiable instrument", perhaps suggesting that negotiability was in his opinion a necessary feature of a bill of lading. But he went on to point out (pp 452-453) that the parties had agreed to call the document a bill of lading, that the parties had acquired rights and incurred obligations proper to a bill of lading, that the detailed provisions properly belonged to a bill of lading, that it repeatedly described itself as a bill of lading, that it was expressly subject to the Harter Act and that it contained the time-honoured attestation clause. All these features led him to conclude that it was a bill of lading. I agree with Rix LJ in para 43 of his judgment that Lord Phillimore was not holding negotiability to be essential to the existence of a bill of lading or even its defining aspect but was, instead, emphasising that the document before the Board would work as merchants would expect a bill of lading to work.

    11.  Thrige v United Shipping Company Limited (1923) 16 Lloyd's Rep 198 and (1924) 18 Lloyd's Rep 6 is of interest because its progress through the English courts coincided with the last stages of the Hague Rules negotiations and because, in the Court of Appeal, it came before a bench which included Scrutton LJ. Save that the case concerned a straight bill, the facts are not significant. Scrutton LJ, with his immense authority and experience, expressed doubt whether a carrier was in breach if he delivered goods without production of the bill where the bill was made out to a named consignee and property in the goods passed on shipment. But he did not express any doubt that a bill drawn in that form was properly to be regarded as a bill, and he left open the question whether such a bill was a negotiable instrument.

    12.  By section 1 of the Harter Act 1893, the restriction on stipulations relieving from liability for negligence was applied to any bill of lading or shipping document. The Pomerene Bills of Lading Act 1916 applied to carriage by land as well as by sea. It distinguished between straight bills (section 2) and order bills (section 3). The former were to have placed plainly, upon their face, by the carrier issuing them, the words "nonnegotiable" or "not negotiable" (section 6), but carriers were to be justified in delivering to the consignee named in a straight bill without production of the bill (sections 8-9).

    13.  From evidence given to Butt J in The Stettin (1889) 14 PD 142 it is plain that German law had by that date distinguished between an order bill (orderkonnossement) and a straight bill (namenskonnossement). The judge concluded that, at least in the case of an order bill, delivery could only be obtained by producing the bill, and there was evidence that that rule applied in either case. This is, as I understand, the current law in Germany: Tiberg, "Legal Qualities of Transport Documents" (1998) 23 Mar. Law. 1, 32. Goren and Forrester, The German Commercial Code (Colorado, 1979), articles 445(1)4, 447(1), 448, 450.

    14.  The French Commercial Code provided in article 281, as early as 1808, that a bill of lading might be to order, or to bearer, or to a person named therein ("à personne dénommée").

    15.  In Scandinavia the same distinction has been recognised between running (or order) bills and straight (or recta) bills: see Tiberg, above, p 8. It appears (ibid, p 10) that "because the recta bill should also serve as security for the seller's possible payment claims, it is not possible to dispense with the need for the consignee's or other title holder's presentation of the document". A bill of lading is presumed to be an order document unless it is stated, by a recta clause, that the bill is not to order (ibid, p 13). As in Germany, the requirement of presentation applies equally to both types of bills (ibid, p 32). Professor Tiberg concludes (ibid, pp 43-44) that there are three distinctive types of documents: the order (or running) bill, the straight (or recta) bill and the sea waybill.

    16.  This brief survey shows that straight bills (however described) were a familiar mercantile phenomenon in the early 1920s and, as already observed, they were not ignored in the Hague Rules negotiations. Thus one would incline to infer that the Rules were intended to apply to straight as well as order bills unless either (a) there was any persuasive reason why they should be excluded or (b) the text of the Rules, broadly interpreted, suggests an intention to exclude them.

    17.  I cannot for my part see any reason why it should have been intended to exclude straight bills from the scope of the Rules. It may be accepted that the need for regulation was greater in the case of those becoming party to the contract by virtue of endorsement, partly because, order bills being standard in the commodity trades, they were more numerous. But where, as perhaps in the present case, the goods consigned were for the use of the named consignee, that party would not ordinarily be involved in negotiating the terms of the contract of carriage and would, like an endorsee, be liable to suffer loss if he became a party to the contract and found his rights attenuated by restrictive conditions imposed by the carrier.

    18.  From articles I (b) and V of the Hague and Hague-Visby Rules, which do not differ in any way material for present purposes, it is plain that the Rules do not apply to charterparties at all and that they apply to bills of lading issued under charterparties only "from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same". This is explained by the intention of the Rules to afford protection not to the immediate parties to the contract of carriage but to third parties. Subject to that exclusion, the scope of the Hague Rules and, relevantly to this case, the Hague-Visby Rules, is generously expressed. Thus section 1(6) of the 1971 Act provides:

    "(6)  Without prejudice to Article X(c) of the Rules, the Rules shall have the force of law in relation to—

    (a)  any bill of lading if the contract contained in or evidenced by it expressly provides that the Rules shall govern the contract, and

    (b)  any receipt which is a non-negotiable document marked as such if the contract contained in or evidenced by it is a contract for the carriage of goods by sea which expressly provides that the Rules are to govern the contract as if the receipt were a bill of lading ….."

This provision is supplemented by article VI, reproducing the text of article VI of the Hague Rules (although in 1924 the United Kingdom, by section 4 of the 1924 Act, qualified its acceptance of the article in relation to the goods referred to and in relation to the territorial application of the proviso):

    "Notwithstanding the provisions of the preceding Articles, a carrier, master or agent of the carrier and a shipper shall in regard to any particular goods be at liberty to enter into any agreement in any terms as to the responsibility and liability of the carrier for such goods, and as to the rights and immunities of the carrier in respect of such goods, or his obligation as to seaworthiness, so far as this stipulation is not contrary to public policy, or the care or diligence of his servants or agents in regard to the loading, handling, stowage, carriage, custody, care and discharge of the goods carried by sea, provided that in this case no bill of lading has been or shall be issued and that the terms agreed shall be embodied in a receipt which shall be a non-negotiable document and shall be marked as such.

    Any agreement so entered into shall have full legal effect.

    Provided that this Article shall not apply to ordinary commercial shipments made in the ordinary course of trade, but only to other shipments where the character or condition of the property to be carried or the circumstances, terms and conditions under which the carriage is to be performed are such as reasonably to justify a special agreement."

Thus a carrier and shipper can in effect contract out of the Rules but only if (a) no bill of lading has been or is to be issued, (b) the agreed terms are embodied in a receipt, (c) the receipt is a non-negotiable document marked as such, (d) the shipments in question are not ordinary commercial shipments made in the ordinary course of trade, and (e) the character or condition of the property to be carried or the circumstances, terms and conditions under which the carriage is to be performed are such as reasonably to justify a special agreement. It is evident that the contracting-out conditions laid down in article VI are very restrictive and hard to satisfy. Reading section 1(6) and article VI together, I infer that the Hague and Hague-Visby Rules were intended, subject to the charterparty exclusion already mentioned, to govern the great majority of ordinary commercial shipments. It seems plain that the concern of those negotiating the Hague Rules was not to restrict the scope of the Rules but to prevent their circumvention, as Rix LJ explained in paras 66 and 68 of his judgment.

    19.  In paras 56-75 of his judgment Rix LJ reviewed the travaux préparatoires of the Hague Rules, assessing in a judicious and even-handed way the extracts on which the parties had respectively relied. He concluded (para 75):

    "At the end of the day, I do not think that there is anything in the travaux préparatoires which I have seen which unequivocally states that such a case [ie. an ordinary, commercial, contract providing for delivery to a third party, with title remaining in the shipper until transfer of documents] is outside the scope of the Rules, and there is much in that material which points in the opposite direction".

I would not disagree. It must be remembered that in a protracted negotiation such as culminated in adoption of the Hague Rules there are many participants, with differing and often competing objects, interests and concerns. It is potentially misleading to attach weight to points made in the course of discussion, even if they appear at the time to be accepted. In the present case, I do not think that either party can point to such a clear, pertinent and consensual resolution of the issue before the House as would provide a sure ground of decision.