Leigh and Sillavan Ltd v Aliakmon Shipping Company Ltd (Aliakmon)

CourtHouse of Lords
JudgeLord Keith of Kinkel, Lord Brandon of Oakbrook, Lord Brightman, Lord Griffiths, Lord Ackner
Judgment Date24 Apr 1986
JurisdictionEngland & Wales

[1986] UKHL J0424-1

House of Lords

Lord Keith of Kinkel

Lord Brandon of Oakbrook

Lord Brightman

Lord Griffiths

Lord Ackner

Leigh and Sillavan Limited
(Appellants)
and
Aliakmon Shipping Company Limited
(Respondents)
Lord Keith of Kinkel

My Lords,

1

My noble and learned friend, Lord Brandon of Oakbrook, is to deliver a speech setting out the reasons for which in his view this appeal should be dismissed. I agree entirely with his reasoning and conclusions, and would dismiss the appeal accordingly.

Lord Brandon of Oakbrook

My Lords,

2

This appeal arises in an action in the Commercial Court in which the appellants, who were the c. and f. buyers of goods carried in the respondents' ship, the Aliakmon claim damages against the latter for damage done to such goods at a time when the risk, but not yet the legal property in them, had passed to the appellants. The main question to be determined is whether, in the circumstances just stated, the respondents owed a duty of care in tort to the appellants in respect of the carriage of such goods; and, if so, whether and to what extent such duty was qualified by the terms of the bill of lading under which the goods were carried.

3

The appellants' claim was put forward originally in both contract and tort. Staughton J. at first instance gave judgment for the plaintiffs on their claim in contract, so making it unnecessary for him to reach a decision on their further claim in tort. However, on appeal by the respondents to the Court of Appeal (Sir John Donaldson M.R. and Oliver and Goff L.JJ.), that court set aside the judgment of Staughton J. and dismissed the appellants' claims in both contract and tort. Sir John Donaldson M.R. and Oliver L.J. (as he then was) rejected the claim in tort on the ground that the respondents did not at the material time owe any duty of care to the appellants. Goff L.J. (as he then was) rejected the claim in tort on the ground that, although the respondents owed a duty of care to the appellants, they had not, on the facts, committed any breach of that duty. The judgment of Staughton J. is reported in [1983] 1 Lloyd's Rep. 203 and that of the Court of Appeal in [1985] 2 W.L.R. 289.

4

My Lords, the facts relating to what I have called the main question to be determined are unusual and need to be set out with some particularity. By a contract of sale made in July 1976 the appellants ("the buyers") agreed to buy from Kinsho-Mataichi Corporation ("the sellers") a quantity of steel coils ("the goods") to be shipped from Korea to Immingham on c. and f. terms, free out Immingham. The price of the goods was to be paid by a 180 day bill of exchange to be endorsed by the buyers' bank in return for a bill of lading relating to the goods. The buyers, who were traders in steel rather than users of it, intended to finance the transaction by making a contract for the re-sale of the goods to sub-buyers before the bill of lading was tendered by the sellers.

5

The goods were loaded on board the "Aliakmon" ("the ship") at Inchon in South Korea and a bill of lading dated 14 September 1976 was issued in respect of them. The bill of lading showed the carrying ship as the "Aliakmon"; the shippers as Iilsen Steel Co. Ltd; the port of shipment as Inchon; the port of discharge as Immingham; and the consignees as the buyers. It is to be inferred that Illsen Steel Co. Ltd., in shipping the goods, were acting as agents for the sellers. The bill of lading further expressly incorporated the Hague Rules.

6

The buyers later found themselves unable to make the contract for the re-sale of the goods which they had intended to make with the result that their bank declined to back the bill of exchange by which payment for the goods was to be made. In this situation representatives of the buyers and the sellers met on 7 October 1976 in an effort to find a solution to the problem. Following that meeting the sellers sent the bill of lading to the buyers under cover of a letter dated 11 October 1976, and receipt of these was acknowledged by the buyers by a letter dated 18 October 1976. The Court of Appeal has held, and the buyers now accept, that the effect of the letters so exchanged was to vary the original contract of sale in the following respects. First, the sellers, despite delivery of the bill of lading to the buyers, were to reserve the right of disposal of the goods represented by it. Secondly, while the buyers were to present the bill of lading to the ship at Immingham and take delivery of the goods there, they were to do so, not as principals on their own account, but solely as agents for the sellers. Thirdly, after the goods had been discharged, they were to be stored in a covered warehouse to the sole order of the sellers.

7

On arrival of the ship at Immingham the buyers duly carried out the terms of the contract of sale as varied in the manner described above. On discharge of the goods they proved to be in a damaged condition. Staughton J. found, and his finding has not been challenged, that a substantial part of this damage, but not all, has been caused by improper stowage of the goods in two respects: first, the stowage of steel and timber in the same compartment, resulting in condensation from the timber causing rusting of the steel; and, secondly, overstowage of the goods in such a way as to cause crushing of them. He further assessed the amount of damage at £83,006.07, a figure which is likewise not in dispute.

8

The buyers subsequently paid the price of the goods to the sellers, after certain claims for alleged defects in them had been settled. The result of this was that the legal ownership of the goods, which had until then remained in the sellers by reason of their reservation of the right of disposal of them, finally passed to the buyers.

9

My Lords, under the usual kind of c.i.f. or c. and f. contract of sale, the risk in the goods passes from the seller to the buyer on shipment, as is exemplified by the obligation of the buyer to take up and pay for the shipping documents even though the goods may already have suffered damage or loss during their carriage by sea. The property in the goods, however, does not pass until the buyer takes up and pays for the shipping documents. Those include a bill of lading relating to the goods which has been endorsed by the seller in favour of the buyer. By acquiring the bill of lading so endorsed the buyer becomes a person to whom the property in the goods has passed upon or by reason of such endorsement, and so, by virtue of section 1 of the Bills of Lading Act 1855, has vested in him all the rights of suit, and is subject to the same liabilities in respect of the goods, as if the contract contained in the bill of lading had been made with him.

10

In terms of the present case this means that, if the buyers had completed the c. and f. contract in the manner intended, they would have been entitled to sue the shipowners for the damage to the goods in contract under the bill of lading, and no question of any separate duty of care in tort would have arisen. In the events which occurred, however, what had originally been a usual kind of c. and f. contract of sale had been varied so as to become, in effect, a contract of sale ex-warehouse at Immingham. The contract as so varied was, however, unusual in an important respect. Under an ordinary contract of sale ex-warehouse both the risk and the property in the goods would pass from the seller to the buyer at the same time, that time being determined by the intention of the parties. Under this varied contract, however, the risk had already passed to the buyers on shipment because of the original c. and f. terms, and there was nothing in the new terms which caused it to revert to the sellers. The buyers, however, did not acquire any rights of suit under the bill of lading by virtue of section 1 of the Bills of Lading Act 1855. This was because, owing to the sellers' reservation of the right of disposal of the goods, the property in the goods did not pass to the buyers upon or by reason of the endorsement of the bill of lading, but only upon payment of the purchase price by the buyers to the sellers after the goods had been discharged and warehoused at Immingham. Hence the attempt of the buyers to establish a separate claim against the shipowners founded in the tort of negligence.

11

My Lords, there is a long line of authority for a principle of law that, in order to enable a person to claim in negligence for loss caused to him by reason of loss of or damage to property, he must have had either the legal ownership of or a possessory title to the property concerned at the time when the loss or damage occurred, and it is not enough for him to have only had contractual rights in relation to such property which have been adversely affected by the loss of or damage to it. The line of authority to which I have referred includes the following cases: Cattle v. Stockton Waterworks Co. (1875) L.R. 10 Q.B. 453 (contractor doing work on another's land unable to recover from a waterworks company loss suffered by him by reason of that company's want of care in causing or permitting water to leak from a water pipe laid and owned by it on the land concerned); Simpson & Co. v. Thomson (1877) 3 App. Case 279 (insurers of two ships A and B, both owned by C, unable to recover from C loss caused to them by want of care in the navigation of ship A in consequence of which she collided with and damaged ship J); Societe Anonyme de Remorquage a Helice v. Bennetts [1911] 1 K.B. 243 (tug owners engaged to tow ship A unable to recover from owners of ship B loss of towage remuneration caused to them by want of care in the navigation of ship B in consequence of which she collided with and sank ship A); Chargeurs Reunis Compagnie Francaise de Navigation a Vapeur v. English & American Steamship Co. (1921) 9 LI.L. R. 464 (time...

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