STRAIGHT BILLS OF LADING FOLLOWING THE RAFAELA S
Tim Eyre
In recent years the law surrounding straight bills of lading has been the subject of considerable uncertainty and debate. However, in the Rafaela S [2003] 2 Lloyds 113 the English Court of Appeal has gone a considerable way towards clarifying some of the key issues.
Issues
The Rafaela S dealt with two points. The first was whether or not a straight bill is "a bill of lading or similar document of title" for the purposes of the compulsory application of the Hague Visby Rules.
Prior to the Rafaela S, this was an issue which had never been satisfactorily resolved. This is surprising not least because the Hague/Hague Visby regime has been in existence since 1924. But the issue is of fundamental importance as the Rules are the principal international code governing the rights and obligations of carriers and cargo interests under bills of lading.
The second issue in the Rafaela S concerned the presentation rule. As a matter of common law, it is long settled that under a classic negotiable bill of lading a carrier may only deliver cargo on presentation of the original bill (see for example Sze Hai Tong Bank v Rambler Cycle Co. [1959] AC 576). Pre-Rafaela S, however, it was unclear whether this general rule applied to straight bills.
The traditional view under English law was that under a straight bill, a carrier was entitled and bound to deliver goods to the named consignee regardless of the whereabouts of the original bill (see, for example, the Judgment of Langley J. in the Rafaela S at first instance [2002] 2 Lloyds 403). The position in Hong Kong was similar (the Brij [2001] 1 Lloyds 431). Against this, the approach of the Singapore Courts was that the presentation rule did apply to straight bills (Voss v APL [2002] 2 Lloyds 707). The leading English law textbook writers were divided as to which approach was correct.
This situation was most unsatisfactory. It is obviously essential for carriers and cargo alike that each party's obligations on delivery are clear and straight forward - yet there was confusion and disagreement as to whether presentation was necessary in straight bill situations.
Facts
In the Rafaela S, four containers of printing machinery were damaged during carriage from Felixstowe to Boston, USA. Cargo interests claimed against the carriers. The central issue was whether the carriers could limit their liability to US$500 per package (the US COGSA limit) in accordance with their bill of lading terms, alternatively whether the more generous Hague Visby package limits applied. The Court of Appeal held that the carriage was governed by a straight bill. The Court then went on to deal with the two issues identified above.
Hague Visby Rules
It was held that where a straight bill expressly requires presentation to enable the named consignee to take delivery of the cargo, the straight bill is a "bill of lading or similar document of title" for the purposes of the Hague Visby Rules.
In the Rafaela S, the bill included an attestation clause containing the words "One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order". The Court held that these words entitled and obliged the carrier only to deliver the cargo on presentation of the original bill. The Court therefore concluded that the bill must be a "bill of lading or similar document of title" and accordingly the Hague Visby Rules applied compulsorily. This meant that Hague Visby package limitation applied and the carriers were not entitled to rely on the lower US COGSA limits contained in the bill of lading terms.
The Court also considered what the position would have been had the bill not expressly required delivery of cargo against presentation of the bill. Rix LJ (who delivered the leading judgment) said that the bill would still be a "bill of lading or similar document of title" and therefore the Hague Visby Rules would still apply. Technically this part of the decision is obiter as it was not strictly necessary to decide the point in this case. However subject to further appeal this is now probably the definitive legal position.
In reaching this conclusion, Rix LJ was influenced by the underlying purpose of the Rules - namely to provide an international regime prescribing minimum standards as to the substance of the bill of lading contract. Rix LJ considered that although a straight bill could not be transferred more than once (unlike a classic negotiable bill which can be transferred repeatedly), a named consignee under a straight bill was still a third party who required the protection of the Rules.
Rix LJ also reviewed in some detail the travaux preparatoires from the conference which led to the Hague Rules in 1924. He accepted that at the heart of the conference's concern was the classic negotiable bill which was repeatedly transferable. However, he could not see anything in the travaux preparatoires which clearly stated that straight bills were to fall outside the scope of the Rules and, in fact, there was much material in the travaux preparatoires which suggested that straight bills should fall within the Rules.
Rix LJ was also satisfied that his conclusion could be reconciled with the Carriage of Goods by Sea Act 1992. He held that Carriage of Goods by Sea Act 1971 which gave effect to the Hague Visby Rules and COGSA 1992 which dealt with the transfer of rights and liabilities under contracts of carriage, were ultimately dealing with different purposes. Although COGSA 1992 treated straight bills differently to classic negotiable bills, that did not support an argument that straight bills were not "bills of lading or similar documents of title" for the purposes of the Hague Visby Rules or COGSA 1971.
Presentation Rule
It almost goes without saying that where a straight bill contains an express provision requiring presentation of the original on delivery, the original must indeed be presented. I say "almost" because some judges, academics and lawyers have found such clauses difficult to interpret.
What the Court did say in the Rafaela S, however, was that even if the bill did not contain such a clause, it was still necessary for the named consignee to produce an original of the straight bill on delivery of cargo. Once more, this part of the decision was obiter (it was not strictly necessary to decide the point) but again (subject to appeal) this is now almost certainly the definitive legal position.
As authority for this conclusion, Rix LJ relied on the English first instance decision in the Stettin [1889] 14 PD 142 and the Singapore Court of Appeal decision in Voss v. APL (above). Rix LJ also found support for his conclusions in the report of the Law Commission (Report no. 196 Rights of Suit) which preceded COGSA 1992.
Sensibly, Rix LJ also placed weight on the practical issues perhaps the key one being that a carrier needs to have the bill produced so that he can police the question as to who is entitled to delivery. In this way, the carrier can be assured that he is not delivering to a person without title. Moreover, the shipper can be confident that the goods will not be delivered unless he has been content to transfer the bill, normally following payment. A requirement that the named consignee must present the bill also assists the consignee in proving his identity to the carrier.
Ultimately Rix LJ considered that the best way to avoid error and litigation was by having a simple rule and it was sensible for that to be the same as the well established rule which applies to classic negotiable bills.
The rule may be seen as inconvenient especially where carriage is short. However, carriers and cargo interests can easily avoid this inconvenience by using a sea waybill in such case. There is no dispute that sea waybills are immune from the compulsory application of the Hague Visby Rules nor is it necessary for these to be presented at the time of delivery.
Hong Kong
In the Rafaela S, Rix LJ distinguished the leading Hong Kong decision of the Brij (referred to above). It is submitted that if the issue comes back before the Hong Kong Courts then the Rafaela S would be followed.
Appeal
Leave has apparently been given for the Rafaela S to be appealed to the House of Lords. It is understood that the hearing will take place in January 2005.
15th March 2004 Tim Eyre
Partner, Richards Butler Hong Kong
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