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[HOUSE OF LORDS] |
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AND |
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THE ALBAZERO |
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1974 Jan. 14 |
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Shipping - Contracts of carriage - Who may sue - Time charterparty - Bill of lading providing that cargo deliverable to order of charterer - Total loss of cargo during voyage - Action for damages brought by charterer against shipowner - Title to property and right to possession passing before loss - Party entitled to recover substantial damages |
Sale of Goods - C.i.f. - When property passes - Bulk purchase of crude oil shipped f.o.b. and sold c.i.f. to associated company - Bills of lading stating that cargo deliverable to order of seller - Endorsed bills of lading dispatched by post to buyer by seller's agent during voyage - Total loss of cargo after bills of lading posted and before receipt by buyer - Whether property and right to possession of cargo passed to buyers before loss - Intention of parties - |
Ships' Names - Albacruz - Albazero |
By a time charterparty the plaintiffs chartered the Albacruz, owned by the defendants, and shipped on board her a cargo of crude oil to be carried from Venezuela to a discharging port subsequently designated as Antwerp. The carriage was covered by a bill of lading issued pursuant to the charterparty naming the plaintiffs as consignees, the goods being deliverable to their |
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order. In the course of the voyage the ship and cargo became a total loss. The day before the loss agents for the plaintiffs in Paris indorsed the bill of lading to a Belgian company in Antwerp and posted it to the company who received it the day after the loss. The plaintiffs brought an action against the defendants for damages for breach of the charter. They arrested the Albazero owned by the same shipowners. A preliminary issue was directed to be tried. For the purposes of the issue the loss was to be assumed to be attributable to breaches of the charterparty by the defendants. |
Brandon J. held that at the time of the loss the property in the cargo was no longer in the plaintiffs but in the indorsees of the bill of lading. He also held that the measure of damages to which the plaintiffs were entitled was the arrived value of the goods lost, although at the time of the loss they had no longer any property in the goods and suffered no loss themselves by reason of the non-delivery. The Court of Appeal, dismissing the appeal, affirmed his decision. |
On appeal by the defendants: - |
Held (1) that, in all the circumstances of the case the property in, and the right to the possession of, the cargo had at the time of the loss passed from the plaintiffs to the indorsees of the bill of lading (post, p. 840E-G). |
(2) That the rule in Dunlop v. Lambert (1839) 6 Cl. & F. 600 that the consignor of goods might recover substantial damages from the carrier if there was privity of contract between them for the carriage of goods, even though the property in the goods might be in the consignee, should not be extended beyond what was justified by the rationale of that case, and since the passing of the Bills of Lading Act 1855 the rationale should no longer apply in cases of carriage of goods by sea where the contract contemplated that the shipowner would also enter into separate bill of lading contracts with whoever might become the owners of the goods and the indorsees of the bills of lading (post, pp. 842B-C, 846 G-H, 847B-F, H - 848A). |
Dunlop v. Lambert (1839) 6 Cl. & F. 600, H.L.(Sc.) distinguished. |
Decision of the Court of Appeal, post, p. 803C; [1975] 3 W.L.R. 491; [1975] 3 All E.R. 21 reversed. |
The following cases are referred to in their Lordships' opinions in the House of Lords: |
Brandt v. Liverpool, Brazil and River Plate Steam Navigation Co. Ltd. [1924] 1 K.B. 575, C.A. |
Gardano and Giampieri v. Greek Petroleum George Mamidakis & Co. [1962] 1 W.L.R. 40; [1961] 3 All E.R. 919. |
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Waters v. Monarch Fire and Life Assurance Co. (1856) 5 El. & Bl. 870. |
The following additional cases were cited in argument in the House of Lords: |
Adamastos Shipping Co. Ltd. v. Anglo-Saxon Petroleum Co. Ltd. [1959] A.C. 133; [1958] 2 W.L.R. 688; [1958] 1 All E.R. 725, H.L.(E.). |
Bart v. British West Indian Airways Ltd. [1967] 1 Lloyd's Rep. 239. |
Biddell Brothers v. E. Clemens Horst Co. [1911] 1 K.B. 934, C.A.; [1912] A.C. 18, H.L.(E.). |
Coombs v. Bristol and Exeter Railway Co. (1858) 3 H. & N. 1; 3 H. & N. 510; 27 L.J.Ex. 401. |
Den of Airlie Steamship Co. Ltd. v. Mitsui and Co. Ltd. (1911) 105 L.T. 823; (1912) 106 L.T. 451; 17 Com.Cas. 116, C.A. |
Director of Public Prosecutions for Northern Ireland v. Lynch [1975] A.C. 653; [1975] 2 W.L.R. 641; [1975] 1 All E.R. 913, H.L.(N.I.). |
Ferris v. Canadian Northern Railway Co. (1905) 15 Man.L.R. 134. |
Fruit Market (B.C.) Ltd. v. National Fruit Co. (1921) 59 D.L.R. 87. |
Jackson v. Horizon Holidays Ltd. [1975] 1 W.L.R. 1468; [1975] 3 All E.R. 92, C.A. |
Johnson v. Taylor Bros. & Co. Ltd. [1920] A.C. 144, H.L.(E.). |
Margarine Union G.m.b.H. v. Cambay Prince Steamship Co. Ltd. [1969] 1 Q.B. 219; [1967] 3 W.L.R. 1569; [1967] 3 All E.R. 775. |
Miller, Gibb & Co. Ltd., In re [1957] 1 W.L.R. 703; [1957] 2 All E.R. 266. |
Nea Agrex S.A. v. Baltic Shipping Co. Ltd. [1976] Q.B. 933; [1976] 2 W.L.R. 925; [1976] 2 All E.R. 842, C.A. |
New Zealand Express Co. Ltd. v. Minahan (1916) 35 N.Z.L.R. 816. |
Oldendorff (E. L.) & Co. G.m.b.H. v. Tradax Export S.A. [1974] A.C. 479; [1973] 3 W.L.R. 382; [1973] 3 All E.R. 148, H.L. (E.). |
Parry v. Cleaver [1970] A.C. 1; [1969] 2 W.L.R. 821; [1969] 1 All E.R. 555, H.L.(E.). |
Paul (R. and W.) Ltd. v. National Steamship Co. Ltd. (1937) 43 Com.Cas. 68. |
President of India v. Metcalfe Shipping Co. Ltd. [1970] 1 Q.B. 289; [1969] 3 W.L.R. 1120; [1969] 3 All E.R. 1549, C.A. |
Riverstone Meat Co. Pty. Ltd. v. Lancashire Shipping Co. Ltd. [1961] A.C. 807; [1961] 2 W.L.R. 269; [1961] 1 All E.R. 495, H.L.(E.). |
Rodocanachi, Sons & Co. v. Milburn Brothers (1886) 18 Q.B.D. 67, C.A. |
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Sea and Land Securities Ltd. v. William Dickinson and Co. Ltd. [1942] 2 K.B. 65; [1942] 1 All E.R. 503. |
Shaw and Tulloch v. Cox's Shipping Agency Ltd. (1923) 16 Ll.L.REP. 216, C.A. |
Smyth (Ross T.) & Co. Ltd. v. T. D. Bailey, Son & Co. [1940] 3 All E.R. 60; 45 Com.Cas. 292, H.L.(E.). |
Tomlinson (A.) (Hauliers) Ltd. v. Hepburn [1966] A.C. 451; [1966] 2 W.L.R. 453; [1966] 1 All E.R. 418, H.L.(E.). |
Williams Brothers v. Ed. T. Agius Ltd. [1914] A.C. 510, H.L.(E.). |
The following cases are referred to in the judgments of the Court of Appeal: |
Badische Anilin und Soda Fabrik v. Basle Chemical Works, Bindschedler [1898] A.C. 200, H.L.(E.). |
Coombs v. Bristol and Exeter Railway Co. (1858) 3 H. & N. 510. |
Den of Airlie Steamship Co. Ltd. v. Mitsui and Co. Ltd. (1912) 17 Com. Cas. 116, Bray J. and C.A. |
Dunlop v. Lambert (1837) 15 S. 884; (1839) 6 Cl. & F. 600; M'L. & R. 663, H.L.(Sc.). |
Gardano and Giampieri v. Greek Petroleum George Mamidakis & Co. [1962] 1 W.L.R. 40; [1961] 3 All E.R. 919. |
Johnson v. Taylor Bros. & Co. Ltd. [1920] A.C. 144, H.L.(E.). |
Margarine Union G.m.b.H. v. Cambay Prince Steamship Co. Ltd. [1969] 1 Q.B. 219; [1967] 3 W.L.R. 1569; [1967] 3 All E.R. 775. |
Paul (R. and W.) Ltd. v. National Steamship Co. Ltd. (1937) 43 Com.Cas. 68. |
Sanders Brothers v. Maclean & Co. (1883) 11 Q.B.D. 327, C.A. |
Sea and Land Securities Ltd. v. William Dickinson and Co. Ltd. [1942] 2 K.B. 65; [1942] 1 All E.R. 503. |
Shaw and Tulloch v. Cox's Shipping Agency Ltd. (1923) 16 Ll.L.REP. 216, C.A. |
The following additional cases were cited in argument in the Court of Appeal: |
Adamastos Shipping Co. Ltd. v. Anglo-Saxon Petroleum Co. Ltd. [1959] A.C. 133; [1958] 2 W.L.R. 688; [1958] 1 All E.R. 725, H.L.(E.). |
Brandt v. Liverpool, Brazil and River Plate Steam Navigation Co. Ltd. [1924] 1 K.B. 575, C.A. |
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European and Australian Royal Mail Co. Ltd. v. Royal Mail Steam Packet Co. (1861) 30 L.J.C.P. 247. |
Ferris v. Canadian Northern Railway Co. (1905) 15 Man.L.R. 134. |
Great Western Railway Co. v. Bagge & Co. (1885) 15 Q.B.D. 625, D.C. |
Horst (E. Clemens) v. Biddell Brothers [1912] A.C. 18, H.L.(E.). |
Lickbarrow v. Mason (1787) 2 Term Rep. 63; (1790) 1 Hy.Bl. 357; (1793) 4 Bro.Parl.Cas. 57, H.L.(E.). |
Ministry of Food v. Australian Wheat Board [1952] 1 Lloyd's Rep. 297. |
Smyth (Ross T.) & Co. Ltd. v. T. D. Bailey, Son & Co. (1940) 45 Com. Cas. 292; [1940] 3 All E.R. 60, H.L.(E.). |
Tomlinson (A.) (Hauliers) Ltd. v. Hepburn [1966] A.C. 541; [1966] 2 W.L.R. 453; [1966] 1 All E.R. 418, H.L.(E.). |
The following cases are referred to in the judgment of Brandon J.: |
Badische Anilin und Soda Fabrik v. Basle Chemical Works, Bindschedler [1898] A.C. 200, H.L.(E.). |
Comptoir d'Achat et de Vente du Boerenbond Belge S/A v. Luis de Ridder Ltda. [1949] A.C. 293; [1949] 1 All E.R. 269, H.L.(E.). |
Den of Airlie Steamship Co. Ltd. v. Mitsui and Co. Ltd. (1911) 105 L.T. 823; (1912) 17 Com.Cas. 116, C.A. |
Dunlop v. Lambert (1837) 15 S. 884; (1839) 6 Cl. & F. 600, H.L.(Sc.). |
Gardano and Giampieri v. Greek Petroleum George Mamidakis & Co. [1962] 1 W.L.R. 40; [1961] 3 All E.R. 919. |
Johnson v. Taylor Bros. & Co. Ltd. [1920] A.C. 144, H.L.(E.). |
Margarine Union G.m.b.H. v. Cambay Prince Steamship Co. Ltd. [1969] 1 Q.B. 219; [1967] 3 W.L.R. 1569; [1967] 3 All E.R. 775. |
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Smyth (Ross T.) & Co. Ltd. v. T. D. Bailey, Son & Co. (1940) 45 Com. Cas. 292; [1940] 3 All E.R. 60, H.L.(E.). |
The following additional cases were cited in argument before Brandon J.: |
Calcutta and Burmah Steam Navigation Co. Ltd. v. De Mattos (1863) 32 L.J.Q.B. 322. |
Coombs v. Bristol and Exeter Railway Co. (1858) 3 H. & N. 510. |
Cork Distilleries Co. v. Great Southern and Western Railway Co. (Ireland) (1874) L.R. 7 H.L. 269, H.L.(I.). |
Federspiel (Carlos) & Co. S.A. v. Charles Twigg & Co. Ltd. [1957] 1 Lloyd's Rep. 240. |
Horst (E. Clemens) Co. v. Biddell Brothers [1912] A.C. 18, H.L.(E.). |
Shaw and Tulloch v. Cox's Shipping Agency Ltd. (1923) 16 Ll.L.REP. 216, C.A. |
PRELIMINARY ISSUE |
On December 15, 1970, the plaintiffs, Concord Petroleum Co., owners of cargo lately laden on board the vessel the Albacruz, issued a writ in rem claiming damages from the defendants, Gosford Marine Panama SA, at the material time the owners of the vessel the Albazero, for the loss of a cargo of crude oil shipped on board the Albacruz on January 2 and 3, 1970, under a time charterparty dated May 9, 1969, whereby the defendants agreed to let and the plaintiffs to hire the Albacruz for a period of five years from the time and date of delivery of the vessel. |
On October 2, 1973, Brandon J. ordered the following preliminary issue to be tried: Whether, on the assumption that the loss of the cargo had been caused by the defendants' breach of the charterparty, the plaintiffs were entitled to recover from the defendants substantial as distinct from nominal damages for such loss under the charterparty. |
The facts are stated in the judgment of Brandon J. |
John Hobhouse Q.C. and Andrew Longmore for the plaintiffs. |
Michael Mustill Q.C. and Jonathan Gilman for the defendants. |
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January 14, 1974. BRANDON J. read the following judgment. This is a preliminary issue in an action by plaintiff charterers against defendant shipowners for loss of cargo. The cargo concerned was crude oil in bulk which was being carried from La Salina, in Venezuela, to |
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Antwerp in the defendants' ship Albacruz. During the voyage, which was in January 1970, the ship sank and the cargo, valued at about £137,000, was lost. There is a dispute whether the loss was caused by the defendants' breach of charterparty. This does not, however, fall to be decided now, for the parties have agreed to have tried first the question whether, assuming that the loss was so caused, the plaintiffs are entitled to recover substantial, as distinct from merely nominal, damages in respect of it. |
The plaintiffs bought the cargo f.o.b. La Salina and resold it c.i.f. Antwerp. Questions arise as to when, in relation to the time of the loss, the property and risk in the cargo, and the right to possession of it, passed from the plaintiffs to their c.i.f. buyers. The plaintiffs say, first, that these questions are irrelevant, because the defendants agreed to carry the cargo for them and are therefore precluded from disputing their title to sue for substantial damages in respect of its loss. The plaintiffs say, secondly, that in any case the property in the cargo, or at least the right to possession of it, was still in them at the time of the loss, and that either of these matters entitles them to recover substantial damages. |
The defendants dispute each element of the plaintiffs' case. They say, first, that both the property in the cargo, and the right to possession of it, had passed from the plaintiffs to their c.i.f. buyers by the time of the loss; secondly, that, since the property and the right to possession had passed, the plaintiffs suffered no damage by reason of the loss and can only recover nominal damages for it; and thirdly, that, even if the right to possession (as distinct from the property) in the cargo was still in the plaintiffs, such right would not by itself entitle them to recover substantial damages. |
Before considering the questions so raised it is necessary to set out the primary facts in some detail. These appear from the agreed bundles of documents, supplemented by the written and oral evidence of one witness called for the plaintiffs, and are not for the most part in dispute. It will be convenient to consider the facts under eight headings as follows: first, the companies concerned and their relationship to each other; second, the f.o.b. contract of sale to the plaintiffs (which I shall call "the purchase contract"); third, the c.i.f. contract of re-sale by the plaintiffs (which I shall call "the sale contract"); fourth, the charterparty; fifth, the arrangements for the shipment of the cargo; sixth, the sale and shipping documents; seventh, the insurance of the cargo; and, eighth, the claim on cargo underwriters. |
First, as to the companies concerned and their relationship. The defendants are a Panamanian company, Gosford Marine Panama SA, who were at all material times the owners of the Liberian steam tanker Albacruz. The plaintiffs are Concord Petroleum Corporation, described in the charterparty as being of Nassau in the Bahamas, but apparently also having offices and carrying on business in Bermuda. They are a wholly owned subsidiary of Occidental Petroleum Corporation. That company has two other wholly owned subsidiaries in Europe: first, a French company, Courtage Occidental, centred in Paris; and, second, a Belgian company, Raffinerie Belge de Petroles SA, operating and having |
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a refinery in Antwerp. I shall refer to these three companies as "Occidental," "Courtage" and "R.B.P." respectively. |
Second, as to the purchase contract. The plaintiffs bought the cargo under a written contract with Esso International Inc. (which I shall call "Esso") dated May 27, 1968. This contract provided that Esso would sell and deliver, or cause to be sold and delivered, to the plaintiffs large quantities of Bachaquero crude oil in bulk f.o.b. La Salina in consecutive cargo lots over a period of a little over three years. |
Part I of the contract, after dealing with quantity, quality and f.o.b. prices, provided: |
"D. Payment. Payment of the price of each cargo shall be made to seller to a bank designated by seller in U.S. dollars... 90 days after the date of the bill of lading for such cargo... E. Delivery. Delivery shall be made in accordance with the following schedule: in cargo lots of substantially even quantities to be lifted at evenly spread intervals during the period of this agreement... G. Duration. This agreement shall be and remain in force for a term of three years plus 90 days commencing on January 1, 1969 and ending on March 31, 1972." |
Part II of the contract, as amended by clause H of Part I, provided: |
"Delivery. Section 5. 1. Delivery of oil hereunder shall be made in bulk to buyer free on board (f.o.b.) tank vessel to be provided by buyer at the place of delivery... Section 5. 3. Title to the oil delivered hereunder, and the risk of loss thereof, shall pass to buyer when the oil passes the flange connection between the delivery hose and the vessel's cargo intake... VESSEL NOMINATION. Section 6. 1. Buyer shall nominate each vessel by notice to seller given in writing at least 30 days in advance of its arrival at loading port... stating the following: (a) name and size of vessel to be loaded, (b) scheduled date of its arrival, (c) quantity of oil to be delivered to vessel, and (d) full instructions regarding vessel, the makeup and disposition of bills of lading and other documents - all of which shall be acceptable to seller and may only be changed with seller's consent at any time...." |
Third, as to the re-sale contract. The plaintiffs re-sold the cargo to R.B.P. under a written contract dated December 23, 1968. This contract provided that the plaintiffs would sell and deliver, or cause to be sold and delivered, to R.B.P. large quantities of asphaltic crude oil, including Bachaquero crude, by consecutive shipments during 1969. This particular cargo was shipped, and but for its loss would have arrived at destination, in January 1970, outside the contract period. The new contract for 1970 had not, however, by then been made, and it was agreed by counsel on either side that the shipment here concerned should be regarded as a belated shipment under the contract for 1969 referred to above. That contract, after dealing with the nature, quality and quantity of the oil to be supplied, provided as follows: |
"4. Price: The c.i.f. price will be the sum of the following components: (a) f.o.b. price:... - Bachaquero Crude Oil: The price |
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posted at La Salina on date of actual commencement of loading by Creole Petroleum Corporation... (b) Freight: From loading port to Antwerp on the gross bill of lading quantities at the U.S. dollar rate as published by Intascale... prior to November 18, 1967, less 35%... (c) Marine and War Risk Insurance: at cost. 5. Delivery: Delivery will be made c.i.f. Antwerp by tank vessels to be supplied by seller, evenly spread over 1969, in accordance with a delivery schedule to be mutually agreed. 6. Payment: In U.S. dollars, not later than 180 days after the date of invoice, by bank transfer to the Banque de Commerce SA... Antwerp... for credit to Concord Petroleum Corporation's U.S. dollars account, or to any other bank which may be designated by seller to buyer. 7. Insurance: Seller will provide for marine insurance subject to standard bulk oil clauses including war risks, issued by a reputable insurance company of Seller's choice... 9. Destination: The crude oil delivered under the present agreement will be processed in Buyer's refinery in Belgium... 11. General Terms and Conditions: Seller's general terms and conditions, attached hereto as Exhibit II, shall be applicable." |
The plaintiffs' general terms and conditions, incorporated into the contract by clause 11 above, provide so far as material: |
"9.... Where products are sold c.i.f., seller will only pay for putting on board, freight... and insurance against marine risks. For such c.i.f. sales, seller will provide and pay for marine insurance... for the full c.i.f. invoice value... In all cases, seller's responsibility will cease after the products have been put on board... 13. Whenever the provisions of the contract are not contrary to Incoterms 1953, the latter shall be applicable to the contract." |
Incoterms 1953 cover various types of contract, including c.i.f. contracts of sale. In relation to these they provide, among other things: |
"A. Seller must... 2. Contract on usual terms at his own expense for the carriage of the goods to the agreed port of destination by the usual route in a seagoing vessel... 4. Load the goods at his own expense on board the vessel at the port of shipment... and notify the buyer... that the goods have been loaded... 5. Procure, at his own cost and in a transferable form, a policy of marine insurance against the risks of the carriage involved in the contract... 6.... bear all risks of the goods until such time as they shall have effectively passed the ship's rail at the port of shipment. 7. At his own expense furnish to the buyer without delay a clean negotiable bill of lading for the agreed port of destination, as well as the invoice of the goods shipped and the insurance policy or... a certificate of insurance... The bill of lading must cover the contract goods... and provide by endorsement or otherwise for delivery to the order of the buyer... |
"B. Buyer must: 1. Accept the documents when tendered by the seller, if they are in conformity with the contract of sale, and pay the price as provided in the contract... 3. Bear all risks of the |
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goods from the time when they shall have effectively passed the ship's rail at the port of shipment." |
Fourth, as to the charterparty. The plaintiffs hired the Albacruzfrom the defendants under a time charterparty on the "Shelltime B" form made in Paris on May 9, 1969. Clause 2 imposed on the defendants obligations of due diligence with regard to the seaworthiness of the vessel at delivery and the maintenance of seaworthiness during service. It is on the alleged failure of the defendants to comply with these obligations that the plaintiffs' case on breach of charterparty is based. Clause 3 provided that the ship would be at the service of the charterers for a period of five years from the date of delivery for the carriage of all lawful merchandise in any part of the world subject to certain limits. Clauses 7 and 8 provided that the charterers should pay hire for the use of the ship monthly in advance, subject to certain deductions, at the rate of 2.25 U.S. dollars per ton on the ship's total dead-weight. Clause 13 provided that the master should be under the orders and directions of the plaintiffs as regards employment of the vessel, agency and other arrangements, and that bills of lading should be signed as the plaintiffs or their agents might direct without prejudice to the charter. Clause 39 provided that all bills of lading issued under the charterparty should contain a paramount clause incorporating the Hague Rules as enacted in the Carriage of Goods by Sea Act 1924 or similar legislation. Clause 40 provided that English law should govern. |
Fifth, as to the arrangements for the shipment of the cargo. The cargo which was lost constituted one of the consecutive shipments of oil supplied or caused to be supplied first by Esso to the plaintiffs under the purchase contract, and secondly by the plaintiffs to R.B.P. under the sale contract. It was the plaintiffs' duty under the purchase contract to nominate the ship into which the oil was to be loaded, and under the sale contract to supply the ship in which it was to be carried to Antwerp. The nomination and provision of the Albacruz for these purposes were dealt with on behalf of the plaintiffs by Courtage in Paris. Courtage was in communication about these matters during November and December 1969, mainly by telex, with both Esso (either direct or through Occidental in New York) and R.B.P. After various preliminary exchanges the matter was finalised in this way. First, by a telex dated December 22, 1969, as varied by a further telex dated about December 29, 1969, Courtage notified Esso through Occidental that the Albacruzwould arrive at La Salina on January 2, 1970, to load about 20,000 tons of Bachaquero crude. Secondly, by telex dated December 24, 1969, as modified by further telexes dated December 26 and 30, 1969, Courtage notified R.B.P. that the Albacruz would arrive at Antwerp at the latest on January 16/17, 1970, with about 19,000 tons of Bachaquero crude. |
These final notifications followed on orders given by Courtage on behalf of the plaintiffs as charterers to the master of the Albacruz, by telegram dated December 29, to load a full cargo of Bachaquero crude at La Salina for discharge at Antwerp. |
Esso did not themselves supply the cargo for the Albacruz but caused it to be supplied (as the purchase contract entitled them to do) by a |
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Venezuelan company operating at La Salina, Creole Petroleum Corporation (whom I shall call "Creole"). Creole were also, by a letter from Courtage dated December 23, 1969, appointed as charterers' agents for the Albacruz at La Salina. |
The Albacruz arrived at La Salina on January 2, 1970, and Creole there shipped on board her, as one of the shipments due under the purchase contract, a full cargo of 19,013 long tons (net) or 19,317 metric tons of Bachaquero crude. Loading was completed on January 3, 1970. |
A bill of lading was issued and signed by the master in respect of the cargo. It was on an Esso printed form and dated January 3, 1970. It contained the following particulars: |
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Later on January 3, 1970, the Albacruz sailed from La Salina bound, in accordance with Courtage's orders to the master, for Antwerp. Telegrams reporting the loading of the cargo and the sailing of the ship were sent on the same day by Creole to Esso and by the master to Courtage. Subsequently, on January 5, 1970, Courtage sent a further telex to R.B.P. stating that the Albacruz was expected to arrive at Antwerp with 19,013 long tons of Bachaquero crude on January 17, 1970. |
Sixth, as to the sale and shipping documents. So far as the purchase contract is concerned, Esso sent to the plaintiffs an invoice dated January 8, 1970, for 159,986.93 U.S. dollars, the f.o.b. price of the cargo, and this was paid by the plaintiffs by transfer through the Chase Manhattan Bank in London on April 3, 1970. |
So far as shipping documents under the sale contract are concerned, Creole airmailed to Courtage, under cover of a letter dated January 6, 1970, a large number of documents relating to the shipment of the cargo, including in particular two original bills of lading and two non-negotiable copies of them. These were received by Courtage on January 12, 1970. Courtage then endorsed the two original bills of lading generally, and posted them, under cover of a letter dated January 13, to R.B.P. On January 14 the Albacruz sank with her cargo, and on January 15, Courtage's letter, with the endorsed bills of lading enclosed, was received by R.B.P. in Antwerp. Payment for the cargo against invoice was later made by R.B.P. to the plaintiffs, but it will be convenient to deal with this under a later heading. |
Seventh, as to the insurance of the cargo. The evidence with regard to this was incomplete. It appears, however, that there was in existence an open ocean cargo policy issued in London which covered, for the benefit of companies in the Occidental group, including R.B.P., whatever cargoes might be declared under it from time to time, and that insurance |
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of the cargo here concerned was effected by a declaration made by Courtage under that policy. |
Eighth, as to the claim on cargo underwriters. Following the loss of the cargo discussions took place between Courtage and R.B.P. with regard to claiming on underwriters. In order to facilitate such claim two fresh documents, not in existence at the time of the loss, were brought into being. These were, first, a written contract of sale between the plaintiffs and R.B.P. relating specifically to this particular cargo, and, secondly, an invoice from the plaintiffs to R.B.P. in respect of it. |
The first document, the contract of sale, was dated retrospectively November 7, 1969. While relating to only one shipment of 20,000 long tons plus or minus 10 per cent. at buyer's option, it contained many terms the same as or similar to those of the sale contract for 1969 dated December 23, 1968. There was, however, a difference in the terms as to price and payment. The c.i.f. price was stated simply as 15.50 U.S. dollars per metric ton, and payment was required to be made not 180 days but only 30 days after date of invoice. |
The second document, the invoice, was dated, again retrospectively, January 3, 1970. It described the goods as 19,317 metric tons of Bachaquero crude oil at 15.50 U.S. dollars per metric ton c.i.f. Antwerp, and stated the total price as 299,413.50 U.S. dollars. Under the heading "terms" appeared the words "no later than February 2, 1970." |
One at least of the purposes of bringing these fresh documents into being after the loss, and of back-dating them in the way which I have described becomes apparent from a confidential letter from Courtage to R.B.P. dated January 20, 1970. It was to provide sale documents in support of a claim on underwriters which would not disclose the 180 days credit facilities accorded by the plaintiffs to R.B.P. under the sale contract for 1969 dated December 23, 1968, but would instead show an obligation on R.B.P. to pay the price of the goods by February 2, 1970. It seems to have been thought by Courtage that, unless this was done, underwriters might delay settlement of the claim until the expiry of the 180 day credit period. R.B.P. accepted these new documents as effective between the plaintiffs and themselves, and paid the amount of the invoice to the plaintiffs by two transfers to the Chase Manhattan Bank in London made on February 6 and 10, 1970 respectively. |
Following these transfers Courtage, as agents for R.B.P., notified the claim for loss of cargo by a letter to brokers dated February 16, 1970, and this claim was later settled by cargo underwriters. |
These being the primary facts, I shall examine first the question whether, assuming against the plaintiffs that the property and risk in the cargo, and the right to possession of it, had passed to R.B.P. before the loss occurred, the plaintiffs are nevertheless entitled to recover substantial damages from the defendants for such loss. |
On this I was referred to a large number of authorities going back many years, in which the question of title to sue a carrier for loss of or damage to goods arose. Most of these were cases relating to land carriers, or to carriers by sea before the passing of the Bills of Lading Act 1855. The earlier cases fall, as it seems to me, into three categories. |
The first category of cases comprise those in which it was held that |
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It is to be observed generally, with regard to all three categories of cases, that, while the distinction between substantial and nominal damages is not raised in terms (it could not have been in the actions on the case and does not seem to have been in the actions in assumpsit), nevertheless what is being discussed and decided in all the cases is the right to sue for, and to recover, substantial damages. |
It is on the third category of cases that the plaintiffs rely in support of their contentions on the question now under consideration, and I shall therefore examine those cases in detail in order to establish, so far as I can, the principle of law on which they are founded. |
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in the goods had passed from the consignor to the consignee on their delivery by the consignor to the carrier. The plaintiffs argued that the question of title to sue did not turn on the strict property in the goods. The carrier had nothing to do with the vesting of the property, and it did not lie in his mouth to say that the consignor was not the owner. He was the owner, with respect to the carrier; who had undertaken to him, and was paid by him. Lord Mansfield, with whom Willes and Ashhurst JJ. agreed, said at p. 2680: |
"... there was neither law nor conscience in the objection. The vesting of the property may differ according to the circumstances of cases: but it does not enter into the present question. This is an action upon the agreement between the plaintiffs and the carrier. The plaintiffs were to pay him. Therefore the action is properly brought by the persons who agreed with him and were to pay him." |
"on considering the question I find that I was mistaken in point of law; for that, whatever might be the contract between the vendor and the vendee, the agreement for the carriage was between the carrier and the vendor, the latter of whom was by law liable." |
The other two judges agreed with Buller J. and the non-suit was set aside. |
"I am of opinion that this action well lies. There is a privity of contract established between these parties by means of the bill of lading. That states that the goods were shipped by the plaintiffs, and that the freight for them was paid by the plaintiffs in London. |
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To the plaintiffs, therefore, from whom the consideration moves, and to whom the promise is made, the defendant is liable for the non-delivery of the goods. After such a bill of lading has been signed by his agent, he cannot say to the shippers they have no interest in the goods and are not damnified by his breach of contract. I think the plaintiffs are entitled to recover the value of the goods, and they will hold the sum recovered as trustees for the real owner." |
During the passage from Leith to Newcastle the ship ran into very severe weather, and, after nine of those on board had been washed overboard and lost, the remainder jettisoned part of the cargo, including the puncheon of whisky, in order to save the ship and themselves. This they succeeded in doing and the ship reached harbour at Shields on September 2. |
The ship having failed to deliver the puncheon of whisky, the appellants began an action against the respondents in the Court of Session to recover its value. At the trial the Lord President Hope directed the jury that, as it appeared that the appellants, at the time of supplying the puncheon of whisky, had sent an invoice to Robson, the buyer, in which the latter had been charged for the freight and insurance, the appellants were not entitled in law to recover the value of the goods from the respondents. The jury, acting on this direction, while finding for the appellants on other issues, found against them on the issue of title to sue, on the ground that they were not, at the time of the loss, the owners of the goods, their right in them having ceased on shipment. |
The appellants took an exception to the direction referred to, and their bill of exceptions was later heard by the First Division of the Court of Session, which by a majority disallowed it. The appellants then took an appeal to the House of Lords, which succeeded. |
Lord Cottenham L.C., after stating that there was no difference between the law of Scotland and the law of England on the subject, and referring to |
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the English authorities, including Davis and Jordan v. James, 5 Burr. 2680, Moore v. Wilson, 1 Term Rep. 659 and Joseph v. Knox, 3 Camp. 320, said at pp. 626-627: |
The Lord Chancellor went on to hold that the direction of the Lord President to the jury was wrong on two grounds. The first ground, which is not relevant to the matter immediately under discussion, was that the Lord President had not left to the jury the question whether the risk in the goods had in fact passed from the appellants to Robson. The second ground, which is directly relevant, was that the Lord President had not left to the jury the further question whether there was a special contract between the consignor and the consignee, which might have enabled the appellants to recover in the action. |
At the trial the jury found for the plaintiff on the facts. The defendants moved for a non-suit, and on their behalf it was argued that, since the contract of sale did not satisfy section 17 of the Statute of Frauds 1677, the property in the flour had not passed from Buckmaster to the plaintiff under it, but had remained in Buckmaster; and that, in these circumstances, the plaintiff could not sue the defendants for the loss. This argument was rejected. Bovill C.J. said at p. 735: |
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"If the case depended on whether the property in the flour had passed to the consignee, a rule ought to be granted to have that point discussed. But the point does not arise; for here, under the circumstances, there was a contract for carriage between the plaintiff and the South Eastern Railway Company." |
Then after referring to the course of dealing between the parties, he continued: |
"There was therefore evidence for the jury of a special contract between the plaintiff and the defendants for the carriage of the goods, and on that ground the verdict must be sustained." |
Keating, Smith and Brett JJ. agreed. Brett J. said that it was unnecessary to go into the question. whether the property had passed or not, because there was evidence of a contract between the plaintiff and the defendants for the carriage of the goods on the defendants' line. He went on: "If so, it is not open to the defendants to say that they have not contracted with the plaintiff to carry for him." |
The judgment of the court was given by Bramwell L.J. and the actual decision is not in point. At the end of the judgment, however, Bramwell L.J. observed at pp. 185-186: |
"It is certain that if the charterers sued on the charter in respect of the complaint in this action there would be no defence, and it is certain that they ought to sue if necessary for the benefit of the plaintiffs." |
Den of Airlie Steamship Co. Ltd. v. Mitsui and Co. Ltd., 17 Com.Cas. 116 is a decision of Bray J. and the Court of Appeal on an application |
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made by plaintiff shipowners against defendant charterers for an injunction restraining the charterers from proceeding with an arbitration or alternatively for leave to the shipowners to revoke their submission to arbitration. The plaintiffs had chartered the ship Den of Mains from the first defendants to carry a cargo of beans from Vladivostok to the United Kingdom under a charterparty containing a London arbitration clause. In April 1911 the first defendants sold 6,000 tons of beans to the second defendants and in June 1911 these were shipped on board the Den of Mains at Vladivostok for carriage to Liverpool under two bills of lading signed by the master and providing for delivery to the first defendants or their assigns. Subsequently the first defendants declared to the second defendants that the beans had been shipped by the Den of Mains. On the arrival of the ship at Liverpool the first defendants transferred the bill of lading after endorsement to the second defendants against payment for the goods. On completion of discharge there was alleged to be a shortage of 171 bags. The second defendants paid only on the basis of the quantity delivered and the first defendants, in view of this, instructed the second defendants to deduct from the freight a sum of £103 1s. 6d., the value of the bags not delivered, and this was done. |
The plaintiffs disputed the short delivery and the first defendants claimed arbitration under the charterparty and gave notice of appointment of their arbitrator. The plaintiffs did not appoint their own arbitrator and the first defendants then appointed their arbitrator as sole arbitrator. Shortly afterwards the plaintiffs began an action in the Commercial Court claiming the balance of freight and other relief relating to the arbitration, and in that action made the application for an injunction or for leave to revoke their submission to which I referred earlier. |
On the hearing of the application before Bray J. three points were argued for the plaintiffs. The third of these was that the plaintiffs' obligation to deliver the beans under the charterparty had ceased. In relation to this point, which he described as the main point, Bray J. said at pp. 122-123: |
"Nor can I see any sufficient reason why the shipowner should ask that his liability should cease. He cannot in any event be liable for more than the value of the goods short delivered. If the charterer has parted with his interest in all the goods shipped, he can only recover, at most, nominal damages. If, as here, he has not parted with his interest in any goods that do not arrive, the holder of the bill of lading can at most recover nominal damages. I doubt if he would have any cause of action." |
Bray J. decided all three points against the plaintiffs and dismissed the application. The Court of Appeal upheld his decision but did so without dealing with the third point, which, unlike Bray J., they thought it was unnecessary to decide at that stage. |
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charterparty which contained a London arbitration clause. In March 1958 Russian exporters, as agents for the claimants, shipped on board the ship at Constanza a full cargo of kerosene for carriage to Piraeus, and a bill of lading was issued in which the Russian exporters were named as shippers and the Greek Government, to which the claimants had agreed to sell the kerosene, was named as consignee. On discharge at Piraeus there were allegations of shortage and contamination of the cargo, and the claimants accordingly witheld part of the charterparty freight against their claim for such shortage and contamination. The dispute went into arbitration and in the arbitration the respondents contended that the claimants had no right of suit under the charterparty on the ground that, pursuant to the contract of sale, the property in the cargo had passed from the claimants to the Greek Government on or by reason of the consignment by the bill of lading, and that accordingly, under section 1 of the Bills of Lading Act 1855 all rights of suit in respect of the cargo had been vested solely in the Greek Government. |
McNair J., after examining the terms of the contract of sale between the claimants and the Greek Government, was not satisfied that the property in the goods had passed to the Greek Government on or by reason of the consignment made by the bill of lading, and said that, on this ground alone, he would decide the case against the respondents. He went on, however, to consider the alternative argument put forward by counsel for the claimants that, even if the property had passed, the charterers were still entitled to recover. As to this he said at p. 53: |
I do not think that there can be any doubt that the earlier cases dated from 1770 to 1870 which I have examined establish a principle of law under which a consignor can, in certain circumstances, sue for and recover substantial damages from a carrier for loss of or damage to goods, whether the property or the risk in the goods was at the material time in him or not. The difficulty is to ascertain precisely what is the basis of the principle, and what are the precise circumstances which are necessary in order to bring it into operation. |
As regards the basis of the principle, I think it is clear that it is based on an estoppel, which has the effect, as between the consignor and the carrier, of precluding the carrier from disputing that the consignor has a sufficient interest in the goods to maintain an action for substantial damages for loss of or damage to them. That this is so appears, in my view, from the the authorities which I have examined, and in particular from the passages |
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As regards the circumstances which are necessary in order to bring the principle into operation, it is clear that the essential circumstance is the existence of a contract, described in the authorities as a "special contract," between the consignor as principal and the carrier for the carriage of the goods. The expression "special contract," as used in the authorities, does not appear to have meant a contract with special or unusual terms in it. It appears rather to have been used to distinguish the ordinary type of situation, where goods were delivered to a common carrier without anything being agreed as to the identity of the person for whom they were being carried and who would pay for the carriage, and the special type of situation, where there was an agreement that the goods were being carried for the consignor and that the cost of the carriage would be paid for by him. |
It is this agreement between the parties, that the goods are being carried for the consignor and that he is to pay for the carriage which is, as I understand the authorities, the essence of the matter. It is from that agreement that the estoppel to which I have referred arises, and the foundation of the estoppel is, I think, this, that a carrier who agrees to carry goods for a person as if that person had an interest in them, and who accepts payment or the promise of payment by that person for the carriage on that footing, cannot afterwards be heard to say, when he is sued for loss of or damage to the goods, that that person in fact had no interest in them. |
It was argued strongly for the defendants that, if the suggested principle of law existed, it would conflict with the general and wider rule that a party to a contract, who has suffered no loss by breach of it, can only recover nominal damages for such breach. This consideration it was said, tended to show that the suggested principle of law did not exist. |
I cannot accept this argument. It seems to me that the suggested principle, when properly viewed, involves no departure from the general and wider rule relied on by the defendants. This is because the principle depends as I have said on an estoppel, which has the effect of preventing the carrier from denying that the goods were the consignor's goods, and that he has therefore suffered loss by reason of loss of or damage to them. |
It is no doubt true that the result of the estoppel may be that a person who has no interest in goods can recover for loss of or damage to them as if he had. All estoppels, however, by their nature involve, potentially at least, a notional view of the facts instead of a real view, and because of this, when they operate, disputes may have to be decided by applying the law to the notional facts rather than to the real facts. The justification for such estoppels, and the consequences which flow from them, is that it is more just, as between the parties concerned in the particular circumstances of the case, to decide the dispute on the basis of the notional facts than it would be to decide it on the basis of the real facts. |
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On the footing that I have correctly stated the principle of law established by the earlier cases, it remains to consider whether it applies to the claim of the plaintiffs in the present case. This depends on whether there was a "special contract" between the plaintiffs and the defendants within the meaning of that expression as I have defined it: in other words, whether there was a contract under which the defendants agreed to carry the cargo for the plaintiffs and to look to the plaintiffs for the payment of the carriage. |
It was common ground that the charterparty was the only contract between the parties. This is on the basis that Creole took the bill of lading as agents for the plaintiffs, and that the document was therefore, as between the plaintiffs and the defendants, no more than a receipt for the goods. The earlier authorities, from which I have derived the principle of law under discussion, do not include any case of goods carried under a charterparty, and are not therefore of direct assistance on the question whether the principle is applicable to such a case. The three later cases to which I referred, however, are all charterparty cases, and I shall consider shortly what guidance can be got from them. |
I have already set out earlier the main terms of the charterparty. By clause 3 the ship was put at the service of the plaintiffs to carry lawful merchandise, including oil, during the period of the charterparty. By clauses 7 and 8 the plaintiffs were to pay hire for the use of the ship monthly in advance. By clause 13 the master was to be under the directions of the plaintiffs as regards the employment of the ship, and bills of lading were to be signed for the defendants as the plaintiffs might direct without prejudice to the charter. It was pursuant to their rights under clauses 3 and 13 that the plaintiffs on this occasion ordered the master to load at La Salina the cargo of Bachaquero crude which was subsequently lost, and that Creole as their agents asked for and were given a bill of lading naming them as shippers and providing for delivery of the cargo to the plaintiffs. It was further the obligation of the plaintiffs under clauses 7 and 8 to pay, by way of monthly hire in advance, for the use of the ship for the carriage of this cargo. |
In these circumstances, looking at the matter unaided by any authority on charterparty cases, I should have thought it clear that there was here a "special contract" for the carriage of the cargo within the meaning of the principle under discussion; that is to say, a contract under which the defendants agreed to carry the cargo as the plaintiffs' cargo and to be paid for the carriage by them. The defendants had a contractual obligation to carry the cargo, and, by issuing at Creole's request a bill of lading in the |
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form in which they did, which named Creole (for this purpose agents of the plaintiffs) as shippers and the plaintiffs as consignees, they acknowledged that they were to carry the cargo as the plaintiffs' cargo. Further the carriage was to be paid for by the plaintiffs by way of hire. |
It was argued for the defendants that it was not legitimate to combine the contract contained in the charterparty and the receipt contained in the bill of lading together in this way, and to spell out the two documents when so combined a "special contract" for the purposes of the rule. I do not, however, see the objection to this. The object is to ascertain the terms and basis on which the goods were carried by the defendants, and to achieve this it seems to me not only right but necessary to look both at the underlying contract, the charterparty, and at the receipt given for this particular cargo shipped pursuant to it, the bill of lading. |
For the reasons which I have given I decide the first question in favour of the plaintiffs. I hold that the plaintiffs are entitled to sue for and recover substantial damages for loss of the cargo by the defendants' breach of charterparty, even on the assumption that they no longer had any interest (whether property, risk or right to possession) in the cargo at the time of the loss. |
If I am right in the conclusion which I have reached in the first question, |
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it is not necessary for me to decide the other questions raised, namely, whether the plaintiffs still had the property in, or the right to possession of, the cargo at the time of the loss, and are entitled to sue for and recover substantial damages on one or other or both those grounds also. Since, however, I may be wrong in that conclusion, and as I have had the benefit of full argument by counsel on these other matters, I think it right that I should go on and deal with them. |
I consider first the question of the passing of the property. This depends on the application of the Sale of Goods Act 1893 to the facts of the case. The relevant provisions are in sections 16 to 19, and, in relation to the contract here concerned, which is a contract for the sale of unascertained or future goods by description, I can summarise the effect of those provisions in this way. First, the property cannot pass until the goods are ascertained (section 16). Second, the property passes when the parties intend it to pass, and their intention is to be ascertained from the terms of the contract, the conduct of the parties, and the circumstances of the case (section 17, which has been held to apply equally to contracts for the sale of unascertained goods). Third, unless a contrary intention appears, where goods of the contractual description in a deliverable condition are delivered to a carrier for transmission to the buyer, then, unless the seller reserved the right of disposal, he is deemed to have appropriated the goods unconditionally to the contract and the property passes to the buyer (section 18, rule 5 (1) and (2)). Fourth, where goods are appropriated to the contract, the seller may, by the terms of the appropriation, reserve the right of disposal until certain conditions are fulfilled, and, if he does so, the property in the goods does not pass to the buyer until such fulfilment occurs (section 19 (1)). Fifth, where the goods are shipped and the seller takes a bill of lading by which the goods are deliverable to his order, there is a presumption, which is rebuttable, that he has reserved the right of disposal (section 19 (2)). |
Applying these provisions to the present case the crucial question is whether the plaintiffs reserved the right of disposal of the goods, and, if so, until the fulfilment of what condition. |
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which the goods are deliverable to him or his order, and so arranging matters that the shipping documents, including the bill of lading, are only transferred to the buyer against payment of the price of the goods in cash or by the acceptance of a bill of exchange drawn on him. When this procedure is followed, it is well settled that there is no unconditional appropriation of the goods, and no passing of the property in them, unless and until the shipping documents are taken up and paid for by the buyer. |
"... the obligations imposed upon a seller under a c.i.f. contract are well known, and in the ordinary case include the tender of a bill of lading covering the goods contracted to be sold and no others, coupled with an insurance policy in the normal form and accompanied by an invoice which shows the price.... Against tender of these documents the purchaser must pay the price. In such a case the property may pass either on shipment or on tender, the risk generally passes on shipment or as from shipment, but possession does not pass until the documents which represent the goods are handed over in exchange for the price." |
It is true that Lord Simonds, at the end of his speech in the same case on p. 317, said that the salient characteristic of a c.i.f. contract was that the property in the goods not only may but must pass by delivery of the documents against which payment is made. I think, however, that, in the context of the facts of the case before him, he meant only that the property must at least pass then if it has not passed at some earlier time. |
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if the retrospective contract made after the loss is regarded, the sale was still on credit terms, the time for payment being 30 days from date of invoice instead of 180 days. |
Not only was it not necessary for the plaintiffs to reserve the right of disposal in order to secure payment, but it also seems clear from the circumstances of the case that there was never any desire or intention on the part of the plaintiffs to be able to raise money by a pledge of the shipping documents. Indeed there were no shipping documents in the ordinary sense, the bill of lading being forwarded by Courtage to R.B.P. without any accompanying policy or certificate of insurance, and without any invoice, which it seems it was intended should be sent later. |
There remain, however, two important facts with regard to the form of the bill of lading. The first fact is that Creole (as agents for the plaintiffs) are named as shippers and the plaintiffs as consignees. It was therefore a bill of lading by which the goods were deliverable to the order of the seller. The second fact is that the port of delivery is given not as Antwerp, but as Gibraltar for orders. Such a bill of lading did not, as it seems to me, comply with the sale contract. This is because by clause A.7 of the Incoterms 1953, which were incorporated into the sale contract, and the material parts of which I set out earlier, the seller had to furnish the buyer with a bill of lading for the agreed port of destination, which was Antwerp. Nevertheless that was the form in which the bill of lading was taken. |
The purchase contract, under the heading "Vessel Nomination" in Part II, required the plaintiffs to give instructions to Esso regarding the make-up of bills of lading, subject to their being acceptable to Esso. It seems right therefore to infer that the form of the bill of lading taken by Creole in this case was the result of instructions given by the plaintiffs. The question is what was the purpose of these instructions, and in particular whether it was to reserve the right of disposal of the goods until some, and if so what, condition was fulfilled. |
The only evidence bearing on these matters was that given by the plaintiffs' witness Mr. De Korver. He was the Shipping Co-ordinator of Courtage in Paris at the material time, and was responsible for the co-ordination of the marketing, supply and transportation of oil for various companies in the Occidental group, including the plaintiffs and R.B.P. As regards the bill of lading naming the plaintiffs as consignees he said, in effect, that it was and had been for a number of years standard practice for bills of lading relating to shipments by the plaintiffs to R.B.P. to be taken in this form. As regards the description of the port of delivery as Gibraltar for orders, he said that this was done for flexibility, so that, if it became necessary to change the port of discharge, the ship could be diverted without the necessity of new shipping documents being issued. Asked further about this in the witness box he said that Courtage wished to have the possibility of diverting a cargo to another customer at another port of discharge in certain circumstances, for instance, if there was a shut-down or change of refining requirements at R.B.P.'S Antwerp refinery, but that they would only do this at the request of R.B.P. themselves. |
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Since by the bill of lading the goods were deliverable to the order of the plaintiffs there is, as already indicated, a presumption, under section 19 (2) of the Act of 1893, that the plaintiffs reserved the right of disposal. That presumption, however, is rebuttable, and the question is whether there is material in this case sufficient to rebut it. |
For the reasons which I have given I think that there is ample material to rebut any presumption that the plaintiffs reserved the right of disposal in order to secure payment, or in order to be able to raise money on the shipping documents. There is material, however, which tends to suggest that they had another purpose for reserving the right of disposal, namely, the preservation, for reasons of commercial flexibility, of the ability to divert the cargo to another customer at another port of discharge without the need for the issue of fresh shipping documents. This material consists of the description of the port of discharge in the bill of lading as Gibraltar for orders, and the reasons given by Mr. De Korver in his written and oral evidence for the use of such description. |
Bearing in mind the presumption, and the material to which I have just referred, the inference which I draw is that the plaintiffs reserved the right of disposal until all possibility of diversion of the cargo to another customer at another port had disappeared, and that it was the intention of the parties that the property in the cargo should not pass until that situation had arisen. While there is no evidence that diversion of the cargo was ever contemplated in this case, it seems to me that all possibility of it disappeared when Courtage, having endorsed the bill of lading, posted it to R.B.P. on January 13, 1970. I therefore hold that the property was intended by the parties to pass, and did pass, at that time. |
If I am wrong about that, then I think that the alternative view is that the plaintiffs did not reserve the right of disposal at all, in which case, under section 18, rule 5 (1) and (2), the property passed on shipment. I certainly cannot see any material for inferring, as counsel for the plaintiffs invited me to do, that the property was not intended to pass until R.B.P. received the bill of lading in Antwerp. |
Both on the first view of the matter, which I prefer, and on the alternative view, which I would fall back on if the first view were held to be wrong, the property in the cargo passed to R.B.P. before the loss. It follows that I decide the second question, namely, whether the plaintiffs still had the property in the cargo at the time of its loss, and are entitled to sue for and recover substantial damages on that ground, against the plaintiffs. |
I consider finally the question of the right to possession. There are two points here. The first point is whether the right to possession of the cargo, if it was still in the plaintiffs at the time of the loss, would be sufficient of itself to enable them to sue for and recover substantial damages. The second point is whether, on the facts, the right to possession was still in them at the time of the loss. |
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No authority for any distinction between the two situations was cited to me, and I can see no logical ground for making any such distinction. |
I do not find either argument wholly convincing. As regards the argument for the plaintiffs, it seems to me that, once again, too much stress is being laid on the incidents of the ordinary c.i.f. contract, and too little regard being paid to the special features of the contract here concerned. It seems to me clear that, under the ordinary c.i.f. contract, where the shipping documents, including the bill of lading, are only delivered to the buyer against payment, and where tender of the documents has to be made at the place of business or residence of the buyer, that the delivery of the bill of lading, and the consequent transfer of the right to possession of the goods, will take place at the time when and the place where the documents are tendered and taken up. In that case, however, it would be unusual for the shipping documents to be posted direct to the buyer. They would normally be sent either to the seller's agent for presentation to the buyer, or delivered to a banker against a confirmed credit, leaving the banker to forward them to his agent at the place of payment for collection of the price. |
Under the contract here concerned, however, the bill of lading was not to be delivered to the buyer only against payment. On the contrary it was to be delivered irrespective of payment, which was not required until 180 days (or, if the retrospective contract is regarded, 30 days) after the |
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date of invoice. It is, therefore, in the light of that circumstance that the question, when and where delivery of the bill of lading took place, has to be considered. |
The question must in the end, I think, be solved by a consideration of the terms of, and the conduct of the parties under, this particular sale contract. By clause A.7 of the Incoterms 1953, to which I have already referred earlier, it was the obligation of the plaintiffs to furnish the bill of lading to the buyer without delay. It was further the evidence of Mr. De Korver that it was the practice of the plaintiffs, in order to speed up the transmission of the bills of lading, to have the shipping documents sent direct by Creole to Courtage, and to authorise Courtage to endorse two of the original bills of lading and forward them to R.B.P. |
I fully accept the proposition that, under the ordinary c.i.f. contract, where the delivery of the shipping documents is to be made only against payment, it is an implied term of the contract, in the absence of any express term relating to the matter, that the documents should be tendered at the place of business or residence of the buyer. I do not see, however, that there is any need to imply such a term in a contract like the present one, where the delivery of the bill of lading was entirely independent of payment. On the contrary I should have thought that, if it were necessary to imply any term on the subject at all, it would be a term that the bill of lading should be forwarded by any usual and commercially recognised method, including sending by post. |
I have already held, on the question of the passing of the property, that the property in the cargo passed when the endorsed bill of lading was posted by Courtage in Paris. It would, I think, be illogical and inconsistent to hold that, although the property itself passed then, the right to possession of the cargo only passed when the bill of lading reached R.B.P. in Antwerp. The bill of lading having been committed to the post in an envelope addressed to R.B.P., and neither the plaintiffs nor Courtage as their agents having or intending to have thereafter any control or possibility of control over it, I think that it would be artificial and unrealistic to hold that the plaintiffs still retained possession of the bill of lading and with it the right to the possession of the cargo. |
For the reasons which I have given, I have reached the conclusion that the right to possession of the cargo, like the property in it, had passed from the plaintiffs to R.B.P. before the loss. It follows that, in my view, while the right to possession would in principle entitle the plaintiffs to sue for substantial damages, they cannot rely on that ground of entitlement in this case. |
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I have now, I think, decided all the questions raised before me. I have decided the first question in the plaintiffs' favour and the second and third questions in the defendants' favour. The plaintiffs, however, only needed to succeed on one question, and the result is therefore that there must be a judgment for them on the preliminary issue in this case. I will hear counsel on the form which that judgment should take, and on costs. |
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Solicitors: Clyde & Co.; Ince & Co. |
E. M. W. |
The defendants appealed on the grounds, inter alia, that the judge erred in law in holding that if the loss of the cargo was caused by a breach of the charterparty the plaintiffs were entitled to recover substantial as distinct from nominal damages for such loss even though the plaintiffs suffered no loss or damage by reason of the loss of the cargo, and had no interest (whether property, risk or right to possession) in such cargo at the time of its loss; in failing to apply the principle that only nominal damages were recoverable for breach of contract where the plaintiff suffered no loss or damage in consequence of such breach; in holding it to be a principle of law that when a carrier agreed to carry goods for the plaintiff as his goods and to be paid for such carriage, that was sufficient to constitute a "special contract" entitling a plaintiff to recover substantial as distinct from nominal damages in the event of breach, even though he was not interested in such goods and they were not at his risk during the carriage; in holding that the principle (as he held it to be) that substantial damages might be recovered by virtue of a "special contract" was applicable notwithstanding the fact that a bill of lading capable of being transferred so as to vest the right of suit in an indorsee under the Bills of Lading Act 1855 was issued in respect of the cargo and (as he held) was so transferred; in holding that the bill of lading (which he rightly held to be and the plaintiffs conceded to be a mere receipt as between the plaintiffs and defendants) could be combined with the time charterparty in order to establish that a "special contract" existed between the parties; and that the judge's decision that there was a "special contract" between the parties was contrary to the weight of the evidence and was inconsistent with the terms of the time charterparty and bill of lading. |
By a respondent's notice, the plaintiffs contended that the judgment should be affirmed on the following additional grounds: (1) That the |
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property in the cargo shipped on board the Albacruz was at all material times vested in them. (2) That even if property in the cargo had passed from them to R.B.P. in Belgium, the right to possession of the cargo remained in the plaintiffs. (3) That neither the property in nor the right to possession of the cargo passed from them to R.B.P. until the documents relating to the contract of sale had been tendered to R.B.P. in Belgium. |
Michael Mustill Q.C. and Jonathan Gilman for the defendants. |
John Hobhouse Q.C. and Andrew Longmore for the plaintiffs. |
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May 14. The following judgments were read. |
CAIRNS L.J. This appeal involves a conflict between two legal principles - one of a broad and general character, the other of a special nature and of a comparatively narrow compass. The general principle is that in an action for damages for breach of contract the plaintiff can only recover such damages as he has actually suffered. The special rule is that a plaintiff who has made a contract with a shipowner under which goods are carried by sea can recover damages from the shipowner for the loss of or damage to the goods caused by the shipowner's breach of the contract, whether or not he has himself been damnified. |
The broad principle is so fundamental to our law that nobody in this case has thought it necessary to cite authority for it. Nevertheless it is a principle which cannot be applied literally in all circumstances; a trustee can certainly sue for damages for breach of a contract which he has made in the course of executing the trust notwithstanding that the real sufferer from the breach is his cestui que trust and not himself: and an agent who has contracted in his own name for an undisclosed principal can sue for damages for breach of contract although the actual loss fell upon his principal. In such cases as these the measure of damages will be the actual detriment to the cestui que trust or principal and the trustee or agent will hold any damages recovered on behalf of the cestui que trust or principal. |
No theoretical basis for this rule has ever been laid down in any case before the present one or in any of the textbooks to which we have been referred. In the present case Brandon J., ante, pp. 792H - 793A, considered |
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that it might be founded on estoppel: that the shipowner is estopped from denying the title of the person who has contracted with him for the carriage of the goods. I find difficulty in accepting this view: if the contract of carriage is made with the consignor it may well be that the shipowner is estopped from denying that the consignor was entitled to the goods (on his own behalf or on behalf of a principal) at the time of shipment but I cannot see why he should be estopped from setting up a change of ownership during transit. |
It was not, however, any part of the case presented by counsel for the plaintiffs, either in the court below or in this court, that the rule was grounded on an estoppel. He relied on the authorities as they stand without looking behind them for a basis in legal theory. He described the rule as a pragmatic one, by which I understand him to mean that it is a convenient rule, which ensures that where there is a breach of the contract under which goods are carried by sea there will always be an easily identifiable person who can sue for any resulting loss of or damage to the goods. It is recognised that there may be another person who can sue so that there is a theoretical risk of double recovery but there is no indication in the reports that this has ever happened and in these days when the interests of all concerned with cargoes are almost always covered by insurance the risk is negligible. |
I have had the advantage of reading in draft the judgment about to be delivered by Roskill L.J. He has analysed the authorities and commercial considerations in a manner which I could not hope to emulate. I agree with his reasoning and with his conclusion that it is still the law that a consignor can recover from a shipowner the value of goods lost by reason of a breach of the contract between the consignor and the shipowner notwithstanding that the consignor had at the time of the loss neither the property in nor the right of possession of the goods and that the rule applies when the contract under which the goods are carried is a time charter. |
If, contrary to my view, it were necessary for the plaintiffs to establish that at the time of the loss they were entitled to the property in the cargo or the right to possession of it then, for the reasons given by Roskill L.J., I should hold that they were not so entitled. |
In the result I consider that Brandon J. was right in his conclusions and that the appeal must be dismissed. |
ROSKILL L.J. This appeal by the defendant shipowners from a judgment of Brandon J. dated January 14, 1974, ante, p. 779H, raises an important and difficult question relating to the liability of shipowners for the loss of or damage to goods carried in their vessels. The plaintiffs, Concord Petroleum Corporation, were the time charterers from the defendants of a vessel named the Albacruz under a five-year time charter in the Shell Time B (1963) form as modified, dated May 9, 1969. The defendants were the owners of two tank vessels, the Albacruz (the time chartered vessel) and the Albazero. The latter vessel was thus the sister ship of the former and was arrested by the plaintiffs in respect of their claim against the defendants arising out of the total loss of the Albacruz |
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together with her cargo of crude oil in the North Atlantic on January 14, 1970, whilst trading under that time charter. |
For ease of reference in this judgment I shall refer to the time charterers as the plaintiffs, the shipowners as the defendants and the Albacruz as the vessel. The plaintiffs sued the defendants claiming the full value of the cargo so totally lost. Their writ in rem was issued on December 15, 1970, less than 12 months after that loss. As between the plaintiffs and the defendants no question of any time limit for the commencement of proceedings arises. |
Stated briefly, the plaintiffs' contention was that the defendants were in breach of that time charter, that that breach caused the total loss of the cargo, that it was irrelevant whether or not the plaintiffs were at the time of the loss the owners of the cargo or the persons immediately entitled to its possession or whether or not at that time title to or right to possession of or risk had passed to another and that accordingly the plaintiffs were entitled to recover the full value of that cargo from the defendants. Alternatively the plaintiffs contended that if, contrary to their main contention, it was relevant that they should be the owners of the cargo or the persons immediately entitled to its possession at the time of loss, neither the legal title nor the right to possession had passed from them at the date of loss. |
Stated equally briefly, the defendants' contention was that, assuming (but only for the purposes of the present argument) that there had been a relevant breach of the time charter which caused the loss, the plaintiffs could not recover the full value of the cargo from the defendants, because they were not the owners of that cargo nor were they the persons immediately entitled to possession at the date of loss nor was the cargo then at their risk, but were entitled to nominal damages only. |
Thus the crucial issue arises: where there is an express contract (in this case the time charter) between a plaintiff and a carrier of goods by sea, whereunder the carrier has agreed with the plaintiff to carry goods and the carrier in breach of that express contract causes loss of or damage to those goods, can that plaintiff recover the full value of the goods so lost or damaged notwithstanding that the property, the immediate right to possession and also the risk is with another? It was not disputed in argument before us that if the property or the right to possession were in the plaintiff in such circumstances, the plaintiff could recover the full value of the cargo. |
The judge ordered preliminary issues to be tried. Pleadings were duly delivered in those preliminary issues in order to define them. In a most careful and lucid judgment, the judge held that neither the property nor the immediate right to possession was in the plaintiffs at the time of loss but notwithstanding that fact, the plaintiffs were as a matter of law entitled to recover the full value of the cargo from the defendants. It is from that decision that the defendants appeal to this court. The plaintiffs, by a respondents' notice, challenged the judge's conclusion that neither the property nor the immediate right to possession was vested in them at the time of loss. |
In his judgment the judge so fully related the relevant facts and cited |
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the relevant extracts from the contractual documents which bear upon the problem for decision that it is unnecessary to repeat the details which will be found set out in that judgment. A summary will suffice for the purpose of this judgment. (1) The plaintiffs bought the cargo from Esso International Inc. ("Esso") under a bulk purchase contract which provided for the supply of crude oil f.o.b. La Salina, in Venezuela, over a period of about three years. (2) The plaintiffs resold the cargo to a Belgian company, Raffinerie Belge de Petroles SA ("R.B.P.") under a bulk sale contract c.i.f. Antwerp, payment being not later than 180 days after invoice. (3) The plaintiffs and R.B.P. are both wholly owned subsidiaries of Occidental Petroleum Corporation. A third such subsidiary company is a French company, Courtage Occidental of Paris ("Courtage"). (4) Esso did not themselves supply the cargo but caused it to be supplied by a Venezuelan company which we were told was a subsidiary of Esso, called Creole Petroleum Corporation ("Creole"). (5) The vessel completed loading the cargo (just over 15,000 long tons of crude oil) at La Salina on January 3, 1970. (6) Two original bills of lading (I shall refer to them as "the bill of lading") on an Esso printed form and including the following particulars were signed by the master of the vessel on January 3, 1970: Shippers Creole, consignees Concord Petroleum Corporation or order: port of delivery "Gibraltar for orders." No provision was made for any payment of bill of lading freight nor did the bills of lading incorporate any exceptions. (7) Creole sent the bill of lading and other shipping documents by airmail to Courtage in Paris on January 6, 1970. They were received there on January 12, 1970. (8) Courtage then endorsed the bill of lading generally in the plaintiffs' name in accordance with Courtage's authority so to do. (9) On January 13, 1970, Courtage posted the bill of lading to R.B.P. in Antwerp. (10) On January 14, 1970, the vessel together with her cargo was totally lost. (11) On January 15, 1970, R.B.P. in Antwerp received the endorsed bill of lading. (12) R.B.P. later paid the plaintiffs for the cargo. (13) The position regarding the insurance of the cargo was not investigated in detail at the trial and we were not shown any relevant insurance documents. We were however told, as was the judge (ante, pp. 784H - 785A) that the cargo was insured under an open cargo policy issued in London for the benefit of the Occidental group of companies, including R.B.P. and that Courtage had made the requisite declaration of this cargo under that policy. (14) Cargo underwriters later paid a total loss. In support of the insurance claim, certain documents were brought into existence, including an invoice (ante, pp. 784H - 785B). Nothing turns on this. No bill of lading freight was paid as such. |
Upon the assumption of breach of contract by the defendants which was made for the purpose of the preliminary issues, it is difficult to see what, if any, defence on the merits the defendants could have to a claim brought against them by R.B.P. upon the bill of lading, assuming for this purpose that the bill of lading is to be treated as having incorporated the Hague Rules. The reason for making that assumption arises because clause 48 of the time charter not only incorporated the paramount clause (clause 39) into the time charter but provided, as did clause 39, that all bills of lading signed under the charterparty, as was the bill of lading |
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already referred to, should or should be deemed to include the clause paramount. If therefore R.B.P. had asserted a claim under the bill of lading on any wider basis of liability than that contained in the Hague Rules, the defendants would have had, both under clauses 13 and 48 and at common law a claim for indemnity against the plaintiffs as a result of the bill of lading signed by the master at the plaintiffs' behest exposing the defendants to a greater liability than the liability permitted under the time charter. But R.B.P. did not start proceedings or seek to be joined in the present action within the 12 months time limit prescribed by the Hague Rules. It was accepted in argument before us that any claim by R.B.P. under the bill of lading against the defendants was now time barred. |
Thus the defendants seek to escape liability for (on the assumptions made) breach of the time charter upon the technical ground that the wrong company in a group of companies has been named as plaintiffs and that it is now too late to join what, on the defendants' case regarding passing of property and the right to possession, would be the right company in the group to join as the proper plaintiffs in an action upon the bill of lading. Since it is common ground that the present claim is brought for the benefit of cargo underwriters who were at risk under the open policy once declaration was made, irrespective of the technical question of title or right to possession as between the different companies in the group, it might be thought harsh that success or failure of the exercise of cargo underwriters' right of subrogation should depend upon such technical considerations. But such defences are able to be advanced because of two fundamental principles of English law long established and now unchallengeable by judicial decision, at least in this court, first, that an underwriter who pays a claim to an assured must exercise his rights of subrogation in the name of his assured, having no greater rights than his assured possessed, and cannot exercise those rights in his own name, and secondly, that each company in a group of companies (a relatively modern concept) is a separate legal entity possessed of separate legal rights and liabilities so that the rights of one company in a group cannot be exercised by another company in that group even though the ultimate benefit of the exercise of those rights would enure beneficially to the same person or corporate body irrespective of the person or body in whom those rights were vested in law. It is perhaps permissible under modern commercial conditions to regret the existence of these principles. But it is impossible to deny, ignore or disobey them. |
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Yet another matter to be borne in mind is that the time charter was, it seems, unknown until the second half of the last century when the development of the steamship made the duration of voyages accurately predictable and accordingly merchants and others were prepared to charter ships upon a time and not only upon a voyage basis. |
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which applied to contracts properly comparable with those with which the present case is concerned. |
The judge dealt first in his judgment with the main issue to which this appeal gives rise. He decided that issue in favour of the plaintiffs. He only dealt with the issue regarding passing of property and the immediate right to possession at the end of his judgment. He resolved that second issue in favour of the defendants, holding that the property and the immediate right to possession had passed from the plaintiffs to R.B.P. before the total loss on January 14, 1970. Since this is the shorter of the two issues, it will I think be easier to dispose of it first, especially as I find myself in complete agreement with the judge's conclusion though I do not accept that part of Mr. Mustill's submission for the defendants on this branch of the case which asserted that the property passed to R.B.P. from the plaintiffs on shipment. It is enough for his purpose to hold, as the judge held, as I think rightly, that the property and immediate right to possession passed upon the posting on January 13, 1970, of the bill of lading to R.B.P. in Antwerp by Courtage in Paris before the total loss on the following day and not upon the receipt of those documents by R.B.P. in Antwerp on January 15 the day after the total loss. |
"It" (i.e. the passing of property) "is entirely a question of intention and no general rule can be laid down as to when property passes under a c.i.f. contract. The intention has to be gathered from the terms of the contract, the conduct of the parties and the circumstances of the case." |
The author then refers to sections 16, 17, 18 and 19 of the Sale of Goods Act 1893 to which it is not necessary to refer in detail since the terms of those sections are set out in the judge's judgment (ante, p. 796B-E). |
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It is not necessary to discuss the other authorities to which Mr. Hobhouse referred in connection with this part of his submission. The basic principles are clear enough. The question is, what the intention of the plaintiffs and R.B.P. must be taken to be in the present case having regard to the terms of the contract between them, their conduct in relation to the carrying out of this contract and all the circumstances of the case. |
I start from the fact that the bill of lading was taken by Creole as shippers and, as I think, as agents for Esso and as agents or perhaps sub-agents for the plaintiffs (since Creole although they shipped the cargo, paid no freight, there being therefore no consideration moving from Creole) with the plaintiffs' name in the bill of lading as the named consignees. In the hands of the plaintiffs this was an order bill of lading in the form in which it was taken, though it operated only as a receipt until it was negotiated, since the plaintiffs and the defendants were already in direct contractual relationship with each other under the time charter. The form of the bill of lading seems to me to show clearly that the plaintiff intended to retain the property in the cargo in themselves at least until they through Courtage negotiated the bill of lading. I say through Courtage, since the plaintiffs never physically held the bill of lading at any time. The bill of lading went straight from Creole to Courtage. This fact negatives Mr. Mustill's submission that the property passed to R.B.P. on shipment. But that conclusion, as already pointed out, is not enough to enable Mr. Hobhouse to succeed. When one reads the evidence given by Mr. de Korver, Shipping Co-ordinator of Courtage, it seems to me clear what the business reasons for the plaintiffs' action were. The contents of the bill of lading regarding port of discharge ("Gibraltar for orders") did not, as the judge observed in his judgment, comply with the plaintiffs' obligations to R.B.P. to procure a bill of lading requiring the ship to carry the cargo to Antwerp. But Courtage were the agents for the plaintiffs and they received and held the bill of lading for the plaintiffs and endorsed it with the plaintiffs' name as the plaintiffs' agents. This was to preserve flexibility of distribution until the moment when it was finally decided that the cargo was to go to R.B.P. at Antwerp. Mr. de Korver's answers to the judge at the end of |
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Mr. Hobhouse, consistently with the rest of his argument on this branch of the case, insisted that where a bill of lading was "the symbol" by means of which property under a c.i.f. contract was to be transferred to the c.i.f. buyer, that transfer could not be effected without "the symbol" reaching the transferee. I agree that in many cases this is so. But this submission is merely to restate the problem in different words. I think the course of dealing between the parties under the contract of sale together with the provisions of the contract itself indicates that the intention was that the property should pass when Courtage as agents for the plaintiffs released the plaintiffs' interest in the cargo to the refining and receiving company, which release was effected on January 13, 1970, by Courtage posting the bill of lading to R.B.P. in Antwerp in furtherance of the final arrangement that the cargo was to be allocated and delivered to that company in Antwerp and not when that company received the documents on January 15, 1970. |
I also think that it was at that moment that the right to immediate possession of the cargo, hitherto possessed by the plaintiffs ceased and was transferred to R.B.P. There are of course cases in which title to property and the immediate right to possession may vest in different people, as, for example, where the shipping documents are pledged to a bank as security for an advance. But here I think the two rights passed together. There was never any question in the present case of the documents being retained by any party as security for any advance. Though the two questions were argued separately before the judge and before us on this appeal, I think on the facts of this case the same considerations apply to the solution of both questions. Though the judge was prepared in the alternative to hold that the property passed to R.B.P. on shipment, I think, with respect, there are difficulties in accepting this view though it is not necessary to discuss them further. Nor do I consider it necessary to consider Mr. Mustill's alternative argument that even if the plaintiffs retained the immediate right to possession though not the property, that retention was not enough to |
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support the present claim for full damages since without the property there was no injury to the plaintiffs' assumed immediate right to possession. There was, he sought to argue, only an injury to the immediate right to possession if there were also an injury to the plaintiffs' property right which assumedly was not vested in the plaintiffs at the material time. This difficult question does not in my view arise. |
For these reasons on the second question determined by the judge and for what I think are substantially the same reasons as his, I hold that the plaintiffs had neither the property in the cargo nor the immediate right to possession at the time of its total loss on January 14, 1970. I should add that it was not argued that the risk was borne by the plaintiffs on that date. |
I now turn to consider the principal issue which the judge resolved in favour of the plaintiffs. In his judgment he helpfully divided the early relevant authorities into three categories: see ante, pp. 785H - 786E. He founded his decision in favour of the plaintiffs on what he called the third category, which, as he said, decided that a consignor was entitled to sue whether the property or risk was in him at any material time or not. He said the ground of the decision was that since the consignor had made a special contract with the carrier he could not thereafter dispute the consignor's title to sue. Later in his judgment (ante, pp. 792H - 793A) he said that he regarded it as clear that those decisions were based upon estoppel, the estoppel being that the carrier, who agreed to carry goods for a person as if that person had an interest in them and was paid or promised payment for so doing, could not be heard to say thereafter that that person had no interest in the goods which were the subject matter of the agreement. In argument before this court Mr. Hobhouse did not seek to support this part of the judge's reasoning, preferring (understandably, as I think, in the light of some of the decisions) to rest his submissions upon what he claimed was a basic principle of the law of contract relating to the carriage of goods whether by sea or by land and not dependent upon the principle of estoppel. It must however be pointed out that the validity of the judge's judgment does not in any way depend upon his view that those cases were founded upon estoppel. Rather that conclusion resulted from a valiant attempt by the judge to explain and reconcile a line of decisions which are not easily explicable or reconcilable. Further there is language used in some of the judgments which has the flavour of estoppel though I respectfully question whether the judges there concerned were really founding upon such a principle. |
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to recall the undeveloped state of the law at the time the decisions were given. |
I think the cases which the judge placed in his first two categories are properly placed there and are explicable on the basis which he states in his judgment. The first group consists of cases where the consignees successfully sued either on the case or in assumpsit. They do not assist in the solution of the present problem. The second group are cases where the consignor sued as a principal, the property and risk having remained with him at the material time. Again they do not assist. |
The appellant pursuers sued the respondent shipowners for the value of a puncheon of whisky which had been shipped on board the shipowners' ship at Leith for carriage to Newcastle and delivery there to one Robson. In bad weather between Leith and Newcastle, the puncheon was jettisoned and made the subject of a general average sacrifice. It had, in fact, improperly as was ultimately held, been shipped on deck. The shipowners not only denied liability upon the facts relating to the loss but they also denied the pursuers' title to sue for the value of the puncheon, for it was said that the risk had passed to Robson on shipment and he alone could sue for the value - see 15 S. 884, 887. The pursuers had drawn on Robson not only for the price but also for the freight and insurance which the pursuers, instead of effecting with underwriters, chose to carry themselves. The Lord President, at p. 888, directed the jury that whether or not the loss was due to the fault of the shipowners, the pursuers could not recover because the puncheon was the property of and at the risk of Robson after shipment and the transmission of the bill of lading to him. "In these circumstances," he said at p. 889, "I think the pursuers have no title to recover the value of the puncheon." The jury acting upon that direction found for the shipowners (see 15 S. 884, 890), though otherwise they would on the rest of their findings have found in favour of the pursuers. At that time of course Robson could not have sued the shipowners upon the bill of lading. It was that direction which the House of Lords held to have been wrong and a new trial was ordered. The only speech in the House of Lords was delivered by Lord Cottenham L.C. The Lord Chancellor, in the report in 6 Cl. & Fin. 600, 620, after stating that the relevant law of England and Scotland was the same, went on, |
"We have now to determine whether, in a question between a carrier and the person to whom the carrier is responsible in the event of the property being lost, the sending an invoice to the consignee, by which it appeared that the property had been insured and the freight paid by |
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the consignor, and the amount of such freight and insurance charged by the consignor to the consignee, deprived the consignor of the power of suing, and of an interest or right to recover the value of the property. It is no doubt true as a general rule, that the delivery by the consignor to the carrier is a delivery to the consignee, and that the risk is after such delivery the risk of the consignee.... But though the authorities all establish the general inference I have stated, yet that general inference is capable of being varied by the circumstances of any special arrangement between the parties, or of any particular mode of dealing between them. If a particular contract be proved between the consignor and the consignee, - ... as where the party undertaking to consign, undertakes to deliver at a particular place, the property, till it reaches that place and is delivered according to the terms of the contract, is at the risk of the consignor. And again, though in general following the directions of the consignee, and delivering the goods to a particular carrier, will relieve the consignor from the risk, he may make such a special contract, that, though delivering the goods to the carrier specially intimated by the consignee, the risk may remain with him; and the consignor may, by a contract with the carrier, make the carrier liable to himself. In an infinite variety of circumstances, the ordinary rule may turn out not to be that which regulates the liabilities of the parties." |
Not surprisingly Mr. Hobhouse relied strongly upon the penultimate sentence. It was, he said, clear that the House of Lords had decided that, where there was a special contract, that special contract superseded the |
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The difficulty in the way of this argument, attractively as it was advanced, is that it finds no shadow of support from the language used in the decided cases. Like the judge's suggestion of estoppel, which, as already stated, Mr. Hobhouse did not seek to support, Mr. Mustill's argument is really an ex post facto rationalisation of a group of cases which appear to suggest that a plaintiff can recover full damages for breach of contract of carriage of goods by sea when he has not suffered such damage since the goods lost were neither his property nor at his risk. |
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"This was an action for misuser of goods. The plaintiff may sue for that either in respect of his right of property in the goods, or in respect of a contract with the defendants in regard to them." |
In none of the judgments does one find any suggestion that a plaintiff could only sue for substantial damages on the contract to which he was privy, if he also possessed the property in the goods at the material time. |
"It is certain that if the charterers sued on the charter in respect of the complaint in this action there would be no defence, and it is certain that they ought to sue if necessary for the benefit of the plaintiffs." |
Much argument took place before us as to the significance of this last sentence in the judgment. Mr. Mustill contended that it only meant that if the charterers were sued on the bill of lading as being a contract to which they and not the shipowners were a party, they could get an indemnity in respect of that liability from the shipowners by whose fault the loss arose. Mr. Hobhouse contended that the passage contemplated that the charterers could in any event sue upon the voyage charter between them and the shipowners irrespective of the absence of title to the cargo in them and that in that event they would hold the proceeds as trustees for the plaintiffs. |
Brandon J. in his argument in the present case, ante, p. 795D-E, thought |
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The defendants, as such voyage charterers, then let space in the ship to the plaintiffs for the carriage of onions on terms which provided for any bills of lading to be substantially on the same terms as those which had been prescribed in the voyage charterparty. The plaintiffs shipped onions under a bill of lading which had been signed by the master upon its presentation to him by the defendant charterers. That bill of lading contained a much wider exceptions clause, namely, the "onions clause," which gave the ship different and greater protection from claims by the bill of lading holder than the form specified both in clause 17 of the voyage charterparty and in the |
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freight engagement notice. The defendant charterers then issued sub-bills of lading which also contained the "onions clause," in so doing purporting to sign for the master. The onions arrived damaged. The plaintiffs claimed both against the shipowners (the third parties) and the charterers (the defendants). The third parties relied upon the "onions clause" contained in the bill of lading. The plaintiffs having sued both the defendants and the third parties discontinued their action against the latter. Their claim against the defendants was continued and succeeded on the ground that the defendants had given the plaintiffs a bill of lading in different terms from that prescribed in the freight engagement note in that the "onions clause" protected the ship from claims for which the ship would have been liable had the bill of lading been in the form agreed. The defendants, having been held liable to the plaintiffs, then claimed damages and indemnity from the third parties and their claim for damages succeeded before Bailhache J. From that decision the third parties appealed. It was, as Lord Sterndale M.R. pointed out, hopeless for the defendants to argue that they were entitled to indemnity in what Lord Sterndale called "ordinary third party proceedings." This was because the liability of the defendants to the plaintiffs arose not from anything that the ship had done but from the defendants' own breach in giving the plaintiffs a less favourable bill of lading than that to which the plaintiffs were entitled under the freight engagement note. Lord Sterndale M.R. further held that the only claim by the defendants against the third parties was a claim for damages for breach of the charterparty in that the third parties had failed to carry the onions safely. To such a claim he held there was no defence on liability but the defendants as charterers could not recover the full value of the onions because they were not the bailees of the onions and they had no immediate right to possession of them, the bill of lading having been endorsed over to the plaintiffs. Lord Sterndale M.R. said, at p. 220: |
"The cause of action is breach of contract to carry the onions safely. The charterers cannot recover full damages by any possession as bailees, or anything resting on possession, as they never had possession nor the immediate right to possession." |
Warrington L.J. held that only nominal damages were recoverable. He said, at p. 220: |
"Cox's Agency had no property in the goods nor any proprietary interest of any sort; that is beyond dispute. It is said that they had a possessory interest: that they were in legal terms bailees having an actual possession or having a right to possession. In my opinion they had neither possession nor had they a right to possession." |
Scrutton L.J. said at p. 220 that the defendants never had "the possession which would give them any lien." Mr. Mustill argued that here was a clear authority that where a shipowner breaks his contract with his charterer by failing to carry the goods safely, the charterer cannot recover damages for loss sustained after having endorsed the bill of lading to the consignee, because the charterer was never the owner, the bailee or the person entitled to immediate possession of the goods lost or damaged. |
It seems plain, if I may respectfully say so, that the actual decision was right because there was no causal connection between the failure to |
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I do not pretend in this review of the authorities to have referred to every |
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decision and every textbook to which our attention was drawn nor to have considered every submission made by counsel. In the ultimate analysis the rival submissions can be summarised thus. The plaintiffs say that once there is a contract for the carriage of goods by sea, or for that matter by land, between a carrier and some other party, that other party can always sue upon that contract for failure to carry safely, subject of course to all relevant exceptions, whether or not at the time of loss or damage that other party owned the goods or was the bailee of the goods or was entitled to immediate possession of the goods or whether those goods were or were not at his risk. |
The defendants on the other hand say that in such a case the law also requires an investigation where the property, possession, the right to possession or the risk lay and that unless that other contracting party had such property, possession, or the right to possession or the risk at the time of loss he cannot sue for more than nominal damages. |
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also seem to flow, that every c.i.f. seller who by delivery of documents has parted with the whole of his interest in the goods afloat to his c.i.f. buyer can nonetheless still sue as well as his c.i.f. buyer for the loss of or damage to the goods, sustained after he has parted with the whole of his interest. I confess I find this consequence difficult to reconcile with the basic concept of a c.i.f. contract, that the transfer of documents transfers to the buyer "full ownership of the goods" and "all rights created by the contract of carriage between the shipper and the shipowner" as well as with the language of section 1 of the Bills of Lading Act 1855, especially the words "all rights of suit." It must however be said that there is no express language in the Act divesting the shipper of his previous rights. Further, acceptance of the plaintiffs' arguments must increase the risk of double recovery from the shipowner. Mr. Mustill did not however found greatly upon this consideration. I do not think that the risk of double recovery will always be avoided by the fact that in many cases the plaintiffs will or may hold the proceeds of the recovery as trustee for the person who has really suffered the loss. The example was given in argument of a time charterer who sued the shipowners successfully and was paid but became insolvent before accounting to his cestui que trust. Questions of time limit apart, it is difficult to see what answer the shipowner would have to a second claim upon the bills of lading brought by the cestui que trust. |
These considerations support the defendants' contentions. Yet there are powerful considerations which must be brought into the scale on the other side. Modern commerce is hampered and not helped by too rigid an adherence to the basic principle already mentioned that all companies within a group are separate legal entities. Where the group is in truth the party interested and injured, the law should not be too astute not to recognise the realities of the position, especially where, as here, the benefit of the claim would enure solely to underwriters who insured the cargoes of the group as a whole rather than the cargoes of any individual company as such. It may be thought unjust that the value of underwriters' subrogation rights should turn upon whether the action is brought in the name of one company in the group rather than another, especially when, as in the present case, the reason for the controversy which has arisen is that the plaintiffs' claim is not statute barred but a claim by R.B.P. under the bill of lading is. No possible commercial injustice can follow from upholding the plaintiffs' right to recover full damages and in a case such as the present where the time charter was being used by the plaintiffs for the carriage of their own cargo it may said to be legalistic in the extreme to deprive them and their underwriters of their rights, merely because it |
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was decided to transfer title to the cargo to another company in the group rather than to allow that title to remain vested in the plaintiffs. |
It only remains to thank all counsel in this case for the preparation and presentation of their elaborate and admirable arguments. |
In the result I have reached the same conclusion as did Brandon J. and I would dismiss this appeal. |
ORMROD L.J. I agree with the judgments which have just been delivered and will only add a few words of my own out of respect for the very able, interesting, and, to me, instructive arguments which have been addressed to us by counsel on both sides. |
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The precise proposition which these decisions established is one which is, in fact, self-evident to a modern lawyer. All three were concerned with attempts by defendants to non-suit plaintiffs on the ground that, not having the property in the goods at the relevant time, they could not sue on the contract of carriage for damage to the goods in the course of the carriage. This submission was rejected in each case, on the ground that the plaintiff had entered into the contract personally and had either paid, or was personally liable for, the freight. The consideration had moved from him; therefore there was privity of contract between plaintiff and carrier and, accordingly, the plaintiff had a right of action and could not be non-suited. So far, this is in line with the general rule that a party to a contract which has been broken by the other party can always bring an action for breach of contract. Normally, however, the plaintiff in such an action will recover nominal damages only unless he can prove that he has suffered loss or damage in accordance with established principles. |
In the present case no question of non-suit arises; it is to be assumed for the purposes of the preliminary issue that the contract of carriage contained in the charterparty has been breached and the issue to be decided is not whether the plaintiffs, Concord, can sue but whether they can recover more than nominal damages. The real issue with which we are concerned therefore is one of measure of damage and not of liability or right to sue, although the phrase "right to sue for substantial damages" has been used from time to time in the argument as if the proceedings were in the nature of a demurrer or an application to strike out on the ground that the plaintiffs have no cause of action. |
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House of Lords, is binding upon us unless there are other authorities to the contrary. |
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Solicitors: Clyde & Co.; Ince & Co. |
E. M. W. |
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The shipowners appealed to the House of Lords. |
Michael Mustill Q.C. and Jonathan Gilman for the appellants. The cause of action is for breach of a charterparty and the question is whether the charterers are entitled to recover for loss of the cargo. There are two questions of law: (1) Was the cargo the property of or at the risk of the plaintiffs, Concord Petroleum Corporation, at the time of the loss? This is the sale of goods question. (2) Did Concord have the possession of, or the right to possession of, the cargo at the time of the loss, and. if they did, was this in itself sufficient to give them a right to substantial damages? If Concord had neither the property, risk, possession nor right to possession, at the time of the loss, are they nevertheless entitled to recover substantial damages simply by virtue of being parties to the time charter? |
It is common ground that the goods were never at Concord's risk during the voyage. The property passed from Concord on shipment so that they did not, during the voyage, have the property either. |
This was a time charter contemplating the carriage of other people's cargo It provided that all bills of lading should incorporate the Hague Rules. |
Originally a plaintiff did not have available to him an action in negligence. The document in which the contract of carriage was expressed was not a document of title, i.e., the indorsement and transfer of the document did not transfer the property in the goods. The document was not a transferable contract. It did not make the transferee a party to the contract of carriage. The c.i.f. contract in the modern sense was unknown. |
There were two categories of contract: (1) "shipped" contracts under which it was the seller's obligation to deliver the goods to the carrier for delivery to their destination and (2) "delivered" contracts under which it was the obligation of the seller to deliver the goods at their destination at the end of the transit. |
Under the former the property and risk passed to the buyer on shipment. He was a party to the contract, becoming so either by expressly making the contract himself or by implication if the seller had made the shipping arrangements on his behalf. He was then an undisclosed principal. |
Under the latter contract the property and risk remained in the seller throughout the transit and the seller made the contract of carriage in his own name and for his own account as principal. |
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The next step was to establish that delivery of the goods by the seller to the carrier should be regarded as delivery to the buyer, the carrier being regarded as his agent. This meant that the property passed on shipment and the buyer was a party to the contract of carriage. |
During this period there was established the principle that the agent for a foreign principal could be sued on the contract. The rule came into existence because it was sensible to regard a creditor as giving credit to the local man on the spot whom he could sue rather than a foreigner abroad whom he could not sue. With improved communications and procedures that pragmatic reason has disappeared. |
It is against this background that one must view the cases relied on by the courts below, which (in the main) date from the first half of the nineteenth century. Thereafter, the period from 1855 saw three important changes in the law of carriage of goods by sea. |
It is submitted: (1) The decisions in the earlier cases are explicable on the grounds that (i) the goods were at the risk of the consignor during the voyage; or (ii) the consignor had entered into the contract of carriage as agent for the buyer, and was enforcing the contract on his behalf. Neither of these considerations applies in the present case. |
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(2) The older cases were concerned with title to sue, not with quantum of damages. |
(3) If the older cases are founded on an estoppel, whereby the carrier is precluded from denying that the consignor was the owner of the cargo throughout the transit, (i) the conclusion of a time charter implies no representation as to the ownership of the goods ultimately shipped on board the vessel; (ii) the bill of lading created no (or no material) estoppel since, (a) by its nature it contemplated that the property would be transferred away from the consignor during the voyage; (b) it named Creole Petroleum Corporation, not Concord, as consignor. |
(4) The concept of res inter alios acta is material where a plaintiff who has suffered loss is compensated for that loss by a third party. It does not apply to a case such as the present, where the plaintiff has suffered no loss. |
(5) In the older cases (i) the conclusion of the contract of carriage and the shipment of the cargo thereunder were an integral part of the performance of the sale contract and (ii) the contract recorded the shipment of identified cargo by the ostensible party to the contract for carriage on a specific voyage for delivery to a named person or order. The nature and context of the present time charter were entirely different. |
(6) If there was a pragmatic justification for the principle, it arose from the risk that there might be no party in whom the cause of action and the loss were united. The need to impute a fictional loss to the consignor has now disappeared, since the injured party has now several ways in which he can recover his loss. Accordingly, the principle should no longer be applied. |
(7) The principle has never previously been applied to a time charter, and there is no reason (pragmatic or otherwise) for doing so. Except in the usual case where the cargo is the property of the charterer throughout (in which case the principle is not needed) there will always be another contract of carriage on which the injured party can sue. |
(8) Changes in the law have not only removed the pragmatic justification for the principle, but have made it a source of inconvenience and injustice. In particular (i) it creates a risk of multiple recovery; (ii) it enables the cargo interests to avoid the time bar, package limitation and other protective provisions of the bill of lading. |
(9) The risk of multiple recovery cannot be avoided by (i) regarding payment to one plaintiff as a discharge of the claims of all other potential plaintiffs or (ii) regarding the plaintiff as trustee of the causes of action or of the proceeds for the injured party. |
(10) The exceptions, real or apparent, to the general principle that he who wishes to recover substantial damage must prove that he has suffered substantial loss provide no analogy to the present case. |
A bailee cannot dispute the title of his bailor. No relevant estoppel could arise on the facts of the present case. |
For the old forms of action against carriers for breach of duty, see Bullen & Leake's Precedents of Pleadings, 3rd ed. (1868), pp. 120-122. The plea could be either in assumpsit or on the custom of the realm, both resting on breach of duty. It was not till the 1960s that one could sue a carrier, though one had no contract with him. |
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An injuria or wrong entitles a plaintiff to recover judgment, even without damage or loss but when there is no loss judgment is for nominal damages only: McGregor on Damages, 13th ed. (1972), pp. 213-214, para. 294. The early cases do not look like decisions on damages. |
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contract which he had made for the owner of the goods. It is an agency case like Joseph v. Knox, 3 Camp. 320, and so has nothing to do with the present case. |
As to the right of an agent to sue in his own name on contracts made by him, see Bowstead on Agency, 13th ed. (1968), pp. 418-421. The agent is only suing on behalf of his principal. When he sues on his principal's contract they have an identical interest. No agency can be alleged here. |
The problem lies in the situation where a person other than the contracting party sustains a loss. Where a loss has in fact occurred the problem is to link that loss to a cause of action. In the case of carriage of goods the contract may be express or implied. The carriage is often associated with a change in the ownership of the goods. There may be cases where different interests in the goods are separated from each other or the contracting party is not the person interested. One may not know where or when the loss occurred, e.g. in the case of goods in a container travelling over a long distance. The loss may occur over a period of time. |
There are three types of answers to the problem: (1) The contracting party, whether or not fully interested at the time of the loss, if that is known, can sue for the benefit of, or as trustee for, the person ultimately interested; or (2) each person who has suffered a financial loss can sue on the contract for his own loss, whether or not he was a party to the contract. Here one disregards the question of privity of contract; or (3) one can apply the rules of identification of cause of action and financial loss strictly, insisting on a strict coincidence between the cause of action in contract and the incurring of the financial loss. |
The first is the solution adopted by English law, United States law and law in the Commonwealth countries. It is the basis of modern international |
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It is submitted: (1) The plaintiffs had a contract with the defendants who thereby undertook (inter alia) to carry goods in accordance with the plaintiffs' instructions, to carry them carefully and to provide a seaworthy ship. |
(2) Pursuant to this contract the plaintiffs gave the defendants instructions (inter alia) (i) to proceed to the loading port, (ii) to load there a cargo of crude oil, (iii) to issue in respect thereof a bill of lading, naming the plaintiffs as consignees, requiring the defendants to deliver the cargo to the plaintiffs' order, (iv) to carry the cargo to Antwerp. |
(3) The plaintiffs were the f.o.b. buyers of the cargo, to whom the property therein passed on shipment. |
(4) The cargo was shipped by Creole as agents for the plaintiffs. |
(5) The bills of lading show that the defendants received the cargo as the plaintiffs' bailees. |
(6) The plaintiffs were the persons who were liable to, and did, pay to the defendants the consideration for the carriage and the contractual obligations which the defendants had assumed. |
(7) The defendants had in breach of their contractual obligations to the plaintiffs failed to deliver the cargo at Antwerp in accordance with the plaintiffs' instructions. |
(8) The plaintiffs had a c.i.f. contract for the sale of this cargo but the passing of the property or risk under that contract is irrelevant to the plaintiffs' right to recover from the defendants damages for breach of contract assessed by reference to the market value of the cargo at Antwerp. |
A time charter is in principle a contract of carriage of goods in accordance with the instructions of the charterer: Sea and Land Securities Ltd. v. William Dickinson & Co. Ltd. [1942] 2 K.B. 65, 69. |
Creole, by whom the cargo was shipped. were acting as agents and Concord were the principals, the bill of lading taking effect merely as a receipt. It constituted a bailment but it was not itself a contract of carriage. Creole could never have sued in the present case, since they held the bill of lading as a receipt for the goods. |
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The normal course is that delivery to the carrier is delivery to the purchaser, and the seller makes no contract with the shipowner, acting merely as agent for the purchaser in putting the goods on the ship. The property passes on shipment. Basically the tenor of a c.i.f. contract is that the vendor must make a contract in his own name with the carrier. The risk passes on shipment. |
(B) (1) In contract there may sue for damages, assessed by reference to the value or the diminished value of the goods, only a person who is a party to the contract which has been broken. (2) Who is a party to the contract? (a) If the contract is specific it is (i) the person who himself gave the consideration for the contract, and (ii) the principal (if any) of that person for whom the person was acting in giving the consideration. (b) If the contract has to be inferred, it is the person in whose interest the goods were delivered to the carrier. The answer in (a) (i) is independent of any question of property or risk. The answers in (a) (ii) and (b) usually involve an inquiry as to property and "risk" at the time of the making of the contract or the delivery to the carrier. (3) The right to sue on the contract gives the right to sue for damages. The damages recovered are held by the plaintiff as a trustee for the person who has suffered the financial loss. |
As to damages, the position in the 19th century was that if you had a cause of action you could sue for substantial damages. Risk went with the property in almost every case. |
Estoppel is simply that the defendant is precluded from denying that |
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the plaintiff is the person with whom he contracted, and that he is the person entitled to substantial damages. |
Rights in tort follow the property: rights in contract follow the contracting party. |
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The contract of carriage of goods is a contract of bailment. A contract of that character comes within the relevant principle. If it does not have that character it does not come within Lord Cottenham's formulation. |
If the respondents at the end of the day recover a sum. they will be liable to account for it to the Raffinerie Belge and the underwriters. The liability to account for the proceeds fits into their analysis. The damages are recovered, not as a windfall, but for the account of the relevant parties. There is no reason why a carrier should be given an immunity for which he has not stipulated in the charterparty. In this case the Hague Rules are incorporated as a matter of contract in the charterparty. |
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which indicates that the incidence of the risk is not the decisive factor. The plaintiff may be held liable to account or to hold the proceeds recovered on trust. |
If the plaintiff has made a specific contract with the defendant whereby the defendant has agreed with him to carry the goods for him, the plaintiff can maintain the action for the damage to or loss of the goods and recover damages assessed by reference to the value or diminished value of the goods. |
In the present case the goods were delivered to the carriers on instructions under a bill of lading which made the goods delivered to the defendants goods bailed to them by the plaintiffs. A contract of carriage is a species of contract of bailment. The shipowners were contractually hound to carry in accordance with the instructions of the plaintiffs. |
The only circumstances in which substantial damages could not be obtained would be if the claim of the owner of the goods exhausted the claim. That would depend on the proceedings taken by the holder of the bill of lading. If his claim were strictly confined to the bill of lading, it would not exhaust the claim in respect of the goods, since he has no legal rights under the charterparty at all. If he is suing under the only contract he has, the bill of lading, he will have got all he is entitled to. |
The Tomlinson case [1966] A.C. 451, 466, 481-482, was not decided on the basis of agency. Reliance is placed on the analogy between what Lord Pearce said there and the present case. |
The argument for the appellants on agency breaks down because he says that the contract must be shown to have been made on behalf of the true owner, so that the consideration is given on behalf of the true owner. |
There is a constructive trust of the proceeds of the action. |
As to risk, it is not the basis of the English law of tort nor of the law of contract. It is a wholly unreliable criterion of the right to recover damages. |
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of Goods by Rail 1964 (Cmnd. 2187); section 14 of the Carriage of Goods by Road Act 1965 and Halsbury's Laws of England, 4th ed., vol. 5, p. 222, para. 428 as to carriers' liability generally. |
In summary: (1) The principle contended for by the respondents reflects the principle of mutuality in that they are liable to be sued under the contract and should be entitled to sue for the loss. |
(3) When properly understood, the principle is not anomalous; the question is whether the plaintiff can recover for the benefit of another, not whether he can recover damages for himself when he has suffered no loss. |
(4) The law of tort does not provide a substitute for the contractual rights, (a) because tortious liabilities do not cover the whole ambit of contractual liabilities, e.g., a delivery to London instead of Rotterdam would cause expense and inconvenience but would not be a tort; (b) because the law of tort is organised on the basis of a proprietary or possessory interest at the time of the loss and if there are changes in the proprietary or possessory interest and the tort is being committed over a period of time it may be either impracticable or impossible to identify the relevant plaintiff in tort. The joinder of many parties would be productive of inconvenience. The law of tort does not provide the answer to the principle. |
(7) The rule contended for is convenient, providing an easily identifiable party in whose name the action can be brought: Cairns L.J. in the Court of Appeal, ante, p. 804B-D. |
(8) The increased use of insurance of goods has made Dunlop v. Lambert, 6 Cl. & F. 600, more useful rather than less. Marine insurance is |
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now more comprehensive than in the 19th century. The result in practice is that one is always concerned with an underwriter on the one side and the carrier and his underwriter on the other. It would be complicated if litigation were in the name of a multitude of plaintiffs. |
(9) There is no evidence that this rule has ever given rise to difficulty or injustice in practice. |
(11) The appellants have not shown that this principle is out of line with other common law systems. To abandon Dunlop v. Lambert, 6 Cl. & F. 600, would put England out of line with them. |
(12) In the present case justice is done by upholding the principle. |
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Mustill Q.C. in reply. Four questions arise: (1) Do the cases relied on by the respondents establish any general principle and, if so, what is it? (2) What, if anything, is the theoretical basis of the general principle? (3) Does the principle any longer serve any useful purpose? (4) Does any subsisting principle entitle the respondents to recover substantial damages on the facts of the present case? |
This is the case of a time charter which is in a different class from cases of bills of lading in that it contemplates that there will be two contracts in existence at the same time, each generating causes of action. |
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As to the suggestion that the cause of action would be held in trust for the person who suffered the loss, a trust of a chose in action is different from a trust of money and the respondents did not distinguish between the two. Courtage's letter of January 14, 1970, did not constitute a trust and R.B.P. were not trustees of the charterparty. The respondents are asserting that anyone who ships goods can recover substantial damages for their loss and hold the proceeds in trust for the true owner. That does not derive from any reported cases. The bailment trust arises from the relationship of bailor and bailee. All the cases are cases of a relationship between a supposed trustee and a cestui que trust. Those cases, whatever they established do not bear on the present situation which is a new factual situation. One cannot apply old cases to a new situation. |
Even if this doctrine, which has been gathering dust for over a century, is not to be abrogated, it should not be extended to the case of a time charter to which it has never previously applied and in respect of which none of the suggested rationalisation holds good. |
A bill of lading does not confer a right to possession. It gives only a right to take possession at the destination, so no relevant right exists until the destination is reached. R.B.P. had not even got the documents at the time of the sinking. They had been posted to it. They have lost nothing and there is no reason why they should recover. |
Hobhouse Q.C. replying on the new authorities cited. A bill of lading is a document, possession of which gives possession of the goods. It resembles the Roman law concept of the key of the warehouse. The respondents had constructive possession at the material time. |
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carrier can rely on the relationship between himself and the true owner. The case was one of misdelivery and the defendant alleged that he had delivered to the true owner. |
Their Lordships took time for consideration. |
July 28. LORD DIPLOCK. My Lords, this appeal comes before this House upon a preliminary issue to decide a question of law that is of great practical importance to cargo underwriters and P. and I. insurers, i.e. insurers of shipowners' liability to third parties. The detailed facts which give rise to the point of law are complicated in the instant case; they are set out in the judgments in the courts below. I do not propose to repeat them here since, for the purpose of dealing with the question of law upon which cargo and P. and I. insurers who stand behind the nominal parties in the instance case desire your Lordships' ruling, it is sufficient to mention that (1) the Albacruz was chartered by the Concord Petroleum Corporation ("the charterers") from Gosford Marine Panama S.A. ("the ship-owners") under a five year time charter substantially in the Shelltime form. (2) At La Salina in Venezuela there was shipped on board the Albacruza cargo of crude oil for carriage to a discharging port, which was later designated as Antwerp. The carriage was covered by a bill of lading issued pursuant to the charterparty naming the charterers as consignees. (3) In the course of the voyage the Albacruz and her cargo became a total loss owing to breaches by the shipowners of the charterparty - or so we must assume for the purposes of the preliminary issue. (4) At the time of the loss the property in the cargo was no longer vested in the charterers but in the indorsees of the bill of lading, Raffinerie Belge de Petroles S.A. ("the cargo-owners"). |
The statement that I have numbered (4) is a conclusion of law as to the passing of the property in the cargo which Brandon J. and the Court of Appeal concurred in drawing from the facts in evidence. The charterers have questioned the correctness of this decision in the argument that has been advanced on their behalf before this House. I think that for the reasons that they gave the courts below were clearly right in drawing that conclusion. The facts on which the conclusion of law was based were peculiar to the instant case; they raise no question of general interest and no useful purpose would be served by providing an additional paraphrase of the lucid ratiocination that can be found in the reported judgments of Brandon J. and Roskill L.J. |
The charterers brought an action against the shipowners for breach of the time charter. The cargo-owners, a company in the same group as the charterers, were not parties to the action; they had lost their right to claim under the bill of lading owing to expiry of the one year prescription period provided for by article III, rule 6, of the Hague Rules. In the action the charterers claim that the measure of the damages which they are entitled to recover is the arrived value of the goods lost, notwithstanding |
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that at the time the goods were lost they (the charterers) had no longer any property in the goods and suffered no loss themselves by reason of their non-delivery at their destination. |
The question of law of general importance to cargo and P. and I. insurers to which your Lordships' answer is sought in this appeal can be stated thus: Where goods which have been shipped on a chartered vessel under a bill of lading issued by the shipowner are lost or damaged as a result of conduct which constitutes a breach of the charterparty by the ship-owner, can the charterer recover in an action against the shipowner as damages for breach of the charterparty the full value of goods lost or the full amount of the diminution in value of goods damaged, notwithstanding that the charterer had no proprietary interest in the goods at the time when they were lost or damaged and had himself sustained no loss or damage as a consequence of the breach? |
The general rule in English law today as to the measure of damages recoverable for the invasion of a legal right, whether by breach of a contract or by commission of a tort, is that damages are compensatory. Their function is to put the person whose right has been invaded in the same position as if it had been respected so far as the award of a sum of money can do so. Such an award can readily do so in the case of mercantile contracts, since the purpose of the parties in entering into them is to make a money profit. So where the wrong for which suit is brought is the breach of a mercantile contract the measure of damages for the breach is generally the financial loss that the plaintiff has sustained by reason of the defendant's failure to perform the contract according to its terms. |
The general rule, however, was slow in its historical development and in the case of contracts for the carriage of goods it seems to have been assumed at any rate until the first quarter of the nineteenth century that if the plaintiff was entitled to bring an action in assumpsit against the carrier for non-delivery of the goods or damage to them he was entitled to recover the full value of the goods or the full amount of the damage even though the goods were not his own and he sustained no loss himself as a result of the defendant's breach of contract. So right of suit appears at this period to have been regarded as carrying with it the right to recover substantial damages. The researches of counsel have not disclosed authority earlier than 1825 in which the distinction has been drawn between the right of a party to a contract to recover only nominal damages for breach of contract where he has himself sustained no loss and his right to recover substantial damages for his actual loss if he has sustained one. |
The reason why in the early cases right of suit and the right to recover substantial damages for loss of the goods were treated as always vested in the same person may have been because the contract for the carriage of goods involves a bailment. The person on whose behalf the goods are delivered to the carrier is the bailor and the carrier is the bailee. If sued before the Common Law Procedure Act 1852, whether in case upon the common custom of the realm or in assumpsit, the carrier was estopped from denying his bailor's title to the goods at the time when possession was delivered to him. The question who stood in relation of bailor to carrier and so was entitled to sue him for the full value of the goods lost or the full amount of the damage could only arise where the consignor and consignee |
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Assumpsit against a carrier for loss or damage to goods could be based either upon an implied promise to perform the duties imposed by law upon a common carrier by the custom of the realm or upon an express promise varying those duties which in the contemporary cases is referred to as a "special" contract with the carrier. A special contract between the consignor and the carrier was one which he had entered into on his own behalf and not as agent for the consignee; but since the question generally arose where the goods carried were the subject of a contract of sale between the consignor and the consignee the question whether the seller was contracting with the carrier on his own behalf or on behalf of the buyer/consignee was often a matter of inference from the terms of the contract of sale. It was well established by the end of the eighteenth century that the ordinary implication in a contract for the sale of goods was that the place of delivery of the goods to the buyer was the seller's place of business and that if the seller made a contract with a carrier for onward delivery he did so on the buyer's behalf. This implication could, however, be rebutted by the express terms of the contract of sale. Since this too was referred to as a "special contract," though in this case between consignor and consignee, it has led to some confusion in the cases dealing with the right of the consignor to sue the carrier which sometimes is said to depend upon a special contract between consignor and carrier and sometimes upon a special contract between consignor and consignee. |
My Lords, a careful analysis of all the most important of the cases which were cited in argument before your Lordships is to be found in either the judgment of Brandon J. or that of Roskill L.J. or in both. I do not propose to duplicate it. Most of the early cases on the right of suit in assumpsit against the carrier were directed to the question whether a consignor who |
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had entered into a contract with the carrier had done so on his own behalf or, as normally to be inferred, as agent on behalf of the named consignee. |
There is, however, a penultimate paragraph in the speech immediately preceding the direction as to the order to be made. This appears to bear little relation to any of the reasoning that goes before or to the direction that comes after unless "consignee" in the second part of the direction is a mistake for "carrier." It reads as follows, at pp. 626-627: |
"These authorities, therefore, establish in my mind the propositions which are necessary to be adopted, in order to overrule this direction |
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My Lords, the rule does not fit easily into the law of trusts as it had been developed by the courts of equity. It has never been suggested that the consignor's right of action against the carrier for breach of contract constitutes trust property or that he could be compelled by a court of equity to exercise his right of action for the benefit of those persons who had in fact suffered |
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The rationale of the rule is in my view also incapable of justifying its extension to contracts for carriage of goods which contemplate that the |
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carrier will also enter into separate contracts of carriage with whoever may become the owner of goods carried pursuant to the original contract. |
A charterparty which provides for the issue of bills of lading covering the carriage of particular goods shipped on the chartered vessel is such a contract, whether it be a voyage or a time charter. While it is generally the case with a voyage charter that the terms of the charterparty are incorporated in the bills of lading required or authorised to be issued under it by the shipowner, even if the contractual rights of the parties under the charter were identical with those of the parties under the bill of lading, there would be no sensible business reason for inferring that the shipowner in entering into the charterparty intended to accept concurrent liabilities to be sued for the same loss or damage by the charterer and by the consignee or indorsee of the bill of lading. |
A fortiori there can be no sensible business reason for extending the rule to cases where the contractual rights of the charterer under the charterparty are not identical with those of the bill of lading holder whose goods are lost or damaged; and this must always be the case as respects holders for valuable consideration because of the statutory estoppel to which I have referred. But there may be, and in time charters there often are, considerable other differences between the contractual rights of the charterer under the charterparty and those of the bill of lading holder under the bill of lading. In the absence of a clause paramount in the charterparty, the limit upon the amount recoverable per package under the Hague Rules would not be applicable to claims under the charterparty, nor would the one year prescription period, the exceptions from liability under the charterparty might be different and either more or less extensive than those under the bill of lading, the standard of care required of the shipowner and his vicarious liability for its observance would generally be governed by different norms, and the arbitration clause might be different in the two contracts or present in one and absent in the other. |
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For the reasons that I have given I think that this part of McNair J.'s ratio decidendi was wrong. |
VISCOUNT DILHORNE. My Lords, I have had the advantage of reading the speech of my noble and learned friend, Lord Diplock, in draft. I agree with it entirely, and would also allow the appeal. |
LORD SIMON OF GLAISDALE. My Lords, I have had the advantage of reading in draft the speech delivered by my noble and learned friend on the Woolsack. I agree with it, and I would therefore allow the appeal. |
LORD FRASER OF TULLYBELTON. My Lords, I have had the advantage of reading in draft the speech by my noble and learned friend, Lord Diplock. I am in complete agreement with it and I would therefore allow the appeal. |
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Solicitors: Ince & Co.; Clyde & Co. |
F. C. |