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Carriage of Goods by Sea

J I MacWilliam Co Inc -v- Mediterranean Shipping Company S.A.

The "Rafaela S"

February 2005

The Hague and Hague-Visby Rules apply, by reason of Article 1(b), only to contracts of carriage "covered by a bill of lading or any similar document of title". The question of legal principle that divided the parties in this case was whether a contract of carriage covered by a so-called "straight" bill of lading, that is to say a bill of lading that provides for delivery of goods to a named consignee and (unlike an "order" or bearer bill of lading) is not transferable, is a contract to which the rules apply.

The answer to that question would determine the level of compensation payable to the claimants ("MacWilliam") for the damage that their containerised printing machinery suffered while being carried from Felixstowe to Boston in the Rafaela S, a vessel operated by Mediterranean Shipping Company ("MSC"). MacWilliam was named as the consignee of the printing machinery in a document entitled "bill of lading", issued by MSC in December 1989 at Durban, which evidenced the terms of the contract for the carriage of the machinery to Felixstowe and on-carriage to Boston. MacWilliam claimed that the Hague-Visby regime ("the Rules") applied to that contract. If that were correct the package limits prescribed by Article IV rule 5 of the Rules would permit a recovery up to about US$150,000. On the other hand, if the Rules had no application the compensation payable by MSC would be determined by the United States Carriage of Goods by Sea Act 1936 and would amount to only US$2,000.

The dispute had first been referred to arbitrators who concluded that Article 1(b) of the Rules did not apply to the straight bill of lading issued by MSC. A Commercial Court judge had subsequently endorsed that opinion. However, as previously mentioned on this website, the Court of Appeal came to a different conclusion and held that the Rules did indeed apply to a non-transferable bill of lading such as MSC had issued. MSC appealed to the House of Lords.

The first question was whether the document issued by MSC was "a bill of lading". It described itself as such and, save for the fact that it could not be transferred by endorsement beyond the named consignee, the House was satisfied that the document possessed all the characteristics of a standard bill of lading. MSC had submitted, however, that the ability to transfer title to goods by endorsement was an essential feature of a bill of lading, properly so-called, and that the Bills of Lading Act 1855 did not therefore apply to straight bills. The House could not, however, accept that suggestion. Section 1 conferred the right to sue on "every consignee named in a bill of lading". If MSC's restrictive interpretation were adopted the named consignee in a straight bill of lading could neither sue nor be sued on it. Such an implausible interpretation had to be rejected.

It was apparent to the House that the practice of issuing straight bills of lading had existed since the 19th century and that such documents were treated by the mercantile community as bills of lading. Their Lordships doubted that their existence and use would have been overlooked by those who participated in the discussions that culminated in the final adoption of the Hague Rules. Their evident concern had been to prevent the circumvention of the rules, not to restrict their scope. There was no reason, therefore, why Article 1(b) should be given a special, narrow meaning restricting its application to transferable bills of lading only. On the contrary, an expansive interpretation was appropriate. There was no sensible commercial reason for giving the protection of the Rules to a consignee under an order bill but not to a named consignee under a straight bill. It was therefore reasonable to infer that the Rules were intended to apply to straight as well as transferable bills.

Having thus concluded that the Rules applied to the straight bill of lading on which MacWilliam had brought its claim against MSC, Lord Rodger thought it unnecessary to decide what was meant by the words "any similar document of title" in Article 1(b). He concluded, nonetheless, that if the MSC document was not a bill of lading it would be a "similar document of title". The French text of the Hague Rules suggested to him that the words "document of title" in the English version should be read along with the qualifying words "in so far as such document relates to the carriage of goods by sea" and should be understood as applying to any document that entitles the holder to have the goods carried by sea. The crucial characteristic of the "document of title", as referred to in Article 1(b), was that it regulated the relations between the carrier and the holder of the bill. Lord Steyn agreed. He pointed out that the French text made no reference to the English concept of a "document of title" at all; it focused instead on the right to possession of the goods vesting in the holder of the document. In agreeing that the MSC document was covered by the words of Article 1(b), Lord Bingham had no difficulty in regarding the straight bill as a document of title, given that on its express terms it had to be presented to obtain delivery of the goods.

MSC's appeal was therefore dismissed.

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