J I MacWilliam Company Inc. v Mediterranean Shipping Company SA

JurisdictionEngland & Wales
CourtCourt of Appeal
JudgeLord Justice Rix:,Mr Justice Jacob,Lord Justice Peter Gibson
Judgment Date16 Apr 2003
Neutral Citation[2003] EWCA Civ 556
Docket NumberCase No: A3/2002/0909

[2003] EWCA Civ 556

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM COMMERCIAL COURT

AND

IN THE MATTER OF THE ARBITRATION ACTS 19501979

(Mr Justice Langley)

QUEEN'S BENCH DIVISION

Before :

lord Justice Peter Gibson

Lord Justice Rix And

Mr Justice Jacob

Case No: A3/2002/0909

Between:
J I Macwilliam Co Inc
Claimant/Appellant
and
Mediterranean Shipping Company S.a
and
"the Rafaela S"
Defendant/Respondent

Mr A Schaff QC (instructed by Messrs Clyde & Co) for the Appellant

Mr S Croall (instructed by Messrs Duval Vassiliades) for the Respondent

Lord Justice Rix:
1

In 1924 the international maritime community enacted a convention, the International Convention for the unification of certain rules of law relating to Bills of Lading signed at Brussels on 25 August 1924, intended to regulate the minimum terms by which international shipping contracts of carriage of goods by sea should be governed. That convention, although signed at Brussels, derived, with amendments, from a set of standard rules originally designed for incorporation into bills of lading as a matter of contract which were negotiated at The Hague in 1922. Thus the rules came to be known as the Hague Rules. By article I(b) those Rules applied only to contracts of carriage "covered by a bill of lading or any similar document of title". It is a matter of some surprise that nearly eighty years later the meaning of that phrase is still controversial. Indeed new forms of shipping documents appear to have caused in recent years an increasing number of cases to reach the courts raising the question whether a bill of lading consigned to a named consignee, a so-called "straight bill of lading", is a bill of lading within the meaning of the Rules. A straight bill of lading is to be contrasted with an "order" or bearer bill of lading, each of which permits the transferability of the bill to any number of transferees in succession, respectively by endorsement or delivery. This form of transferability has also traditionally, but idiosyncratically, been referred to as "negotiability". Scrutton on Charterparties and Bills of Lading, 20 th ed, 1996, at 185, explains the point well:

"Note 1. "Negotiable" as a term of art describes an instrument which can give to a transferee a better title than that possessed by the transferor. A bill of lading is not "negotiable" in this sense: the indorsee does not get a better title than his assignor. Indeed a bill of lading is "negotiable" only in a popular, and not in a technical, sense. For it is "negotiable" to the same extent as a cheque marked "not negotiable", i.e. it is "transferable"."

The effect of a negotiable bill of lading has been famously described by Bowen LJ in Sanders v. Maclean (1883) 11 QBD 327 at 341 in this passage:

"A cargo at sea while in the hands of the carrier is necessarily incapable of physical delivery. During this period of transit and voyage, the bill of lading by the law merchant is universally recognised as its symbol; and the indorsement and delivery of the bill of lading operates as a symbolical delivery of the cargo. Property in the goods passes by such indorsement and delivery of the bill of lading, whenever it is the intention of the parties that the property should pass, just as under similar circumstances the property would pass by an actual delivery of the goods…It 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."

A straight bill of lading, on the other hand, requires delivery of the goods to the named consignee and (subject to the shipper's ability to redirect the goods) to no other.

2

The present appeal concerns such a straight bill of lading, under which the shipper, Coniston International Machinery Ltd, of Liverpool ("Coniston"), consigned four containers of printing machinery to J I MacWilliam Company Inc, of Boston USA ("MacWilliam"). MacWilliam had purchased the machinery from Coniston under a sale contract cif Boston. The machinery was carried on two vessels each of which was owned by or demise chartered to Mediterranean Shipping Co SA, of Geneva ("MSC"). One vessel, The Rosemary, carried the machinery from Durban in South Africa to Felixstowe in England, where it was discharged and subsequently reshipped. The other vessel, The Rafaela S, carried the machinery from Felixstowe to its final destination at Boston. On the way, it was badly damaged. The parties to the appeal, which arises, via the commercial court, out of a London arbitration, are MacWilliam and MSC. The business issue between the parties is whether the contract of carriage contained in or evidenced by the bill of lading prescribed a package limitation under the Hague Rules, the Hague-Visby Rules, or the US Carriage of Goods by Sea Act 1936 ("USCOGSA"). The Hague-Visby Rules are an amended version of the Hague Rules, introduced by the Protocol signed at Brussels on 23 February 1968. It contains a more liberal package limitation. USCOGSA reflects the earlier limitation regime of the Hague Rules and would limit any recovery to US$500 per package.

3

The straight bill of lading issued by MSC to Coniston at Durban on 18 December 1989 (the date, now more than 13 years ago, may be noted) is the only contract document in evidence relating to the carriage. If it governed the complete voyage to Boston, then its terms relate directly to that second leg on which the machinery was damaged. If, however, the position is that it only governed the first leg to Felixstowe, then no second bill of lading to cover the on-carriage to Boston was ever issued. It is nevertheless common ground that, in such a case, the carriage on that second leg would be governed by a second contract in the same form as the Durban-Felixstowe bill of lading, mutatis mutandis, in other words by a straight bill of lading.

4

At this stage it is still a matter of mere assumption that MacWilliam has title to sue and that MSC is liable at all for the damaged machinery. However, the parties have decided to determine the package limitation regime as a preliminary issue in the arbitration. That issue ultimately turns on whether the compulsory regime of the English Carriage of Goods by Sea Act 1971 (the "1971 Act"), which gives to the Hague-Visby Rules the force of law "where the port of shipment is a port in the United Kingdom" (section 1(3)), applies to the second leg of the voyage, that from Felixstowe to Boston. MacWilliam submits that the 1971 Act's regime does apply, MSC submits that it does not. That difference in turn raises three questions of some refinement. The first of these is whether the relevant contract of carriage is a single contract from Durban to Boston, or whether the carriage as a whole was covered by two separate contracts, one governing the voyage from Durban to Boston and the other governing the on-voyage from Felixstowe to Boston. The second question, however, is whether the separate contract of carriage which would in that case govern the second leg from Felixstowe to Boston was a contract which "expressly or by implication provides for the issue of a bill of lading or any similar document of title" (section 1(4) of the 1971 Act). Seeing that it is common ground that such a contract would have been in the form of a straight bill of lading, the second question is simply whether a straight bill of lading is a "bill of lading or any similar document of title" within the meaning of the 1971 Act. Since that phrase goes back ultimately to the Hague Rules, the parties are agreed that the second question is asking whether a straight bill of lading is a bill of lading or similar document of title within the meaning of the Hague Rules. If it is not, it is again common ground that the more liberal package regime of the Hague-Visby Rules does not apply.

5

The third question only arises if, on the contrary, the second leg was governed by a contract within section 1(4) of the 1971 Act and asks whether, whatever the answer to the first question, and even if therefore there was a single contract for the whole carriage from Durban to Boston, there nevertheless was a "port of shipment…in the United Kingdom" within the meaning of section 1(3) of the Act, namely Felixstowe. MacWilliam submits that there was and that the answer to the first question is therefore ultimately irrelevant. This third question has tended to be obscured below, possibly because it was considered to be bound up with the first question, as I think MSC views it to be, but also perhaps because, in the light of both the arbitrators' and Langley J's decision on the straight bill of lading question, neither the first nor the third questions were decisive.

6

Thus it was that the arbitrators (Messrs Mabbs, Hamsher and Moss) defined only two issues in their award as follows:

"Was the shipment from Durban to Boston governed by one contract of carriage or two?"

and

"Was the [straight] bill of lading a "bill of lading" within [the 1971 Act]?"

7

The answers given by the arbitrators were "One" and "No" respectively. Therefore MacWilliam failed, on two separate grounds, to avoid the USCOGSA $500 per package regime. The arbitrators did not separately address MacWilliam's submission (see para 11 of their Reasons) that Felixstowe was in any event a "port of shipment".

8

Permission was given to appeal the award to the commercial court, where Langley J upheld the arbitrators' answer on the bill of lading issue, and therefore dismissed the appeal, but went on to express his views for differing from the arbitrators on the one contract or two issue. In his view there were...

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