OWNERSHIP, RISK AND TITLE TO SUE WITH RESPECT TO THE CARRIAGE OF GOODS BY SEA — THE PERSPECTIVE OF A SOUTH AFRICAN ATTORNEY ACTING ON BEHALF OF CARGO INTERESTS
By
PATRICK HOLLOWAY
Dissertation in fulfilment of the requirements of the Postgraduate Diploma in Law, University of Cape Town.
A. INTRODUCTION
History
The Bill of Lading as a Document of Title
The Bill of Lading as Evidence of the Contract with the Carrier
The Bill of Lading in the context of International TradeB. THE APPLICABLE LAW
Delictual Claims: The Contract of Carriage at Common Law
Summary
The South African Carriage of Goods by Sea Act No. 1 of 1986
The Law to be Applied
The Parties to a Contract of CarriageC. TITLE TO SUE
In Delict
In ContractD. OWNERSHIP, RISK AND THE TRANSFER OF RIGHTS AND LIABILITIES UNDER A BILL OF LADING IN SOUTH AFRICAN LAW
The Requirement of DeliveryE. THE PASSING OF OWNERSHIP AND RISK IN INTERNATIONAL COMMODITY CONTRACTS
CIF Contracts
FOB Contracts
Ex Warehouse ContractsF. OWNERSHIP, RISK AND THE TRANSFER OF RIGHTS AND LIABILITIES UNDER A BILL OF LADING IN ENGLISH LAW
Passing of the Property in the Goods
RiskG. CARRIAGE OF GOODS BY SEA ACT 1992
Part VII — Summary of Recommendations
Relevance of COGSA 1992 in South AfricaH. PROPOSED SOUTH AFRICAN SEA TRANSPORT DOCUMENTS AND TITLE TO SUE ACT
I. CONCLUSION
Cargo claimant attorneys are haunted by three recurring fears which may at times reach nightmare proportions. They are concerned that they will not take suit in time, that they will proceed against the wrong party, or that they will take suit in the name of a person who does not have a right to claim.[1]
This paper deals with the last fear from the perspective of a South African maritime attorney acting on behalf of parties who have an interest in goods carried by sea.
A. INTRODUCTION
History
In the early days of carriage of goods by sea, merchants plying their trade between seaboard ports sailed abroad in the carrying vessel with their merchandise. With the advent of market economies and the increase in production and trade it was no longer viable for merchants to travel. The necessity therefore arose for a mechanism whereby merchants could be assured that their merchandise would be delivered to the correct receiver and whereby the receiver could be assured that that which was received was that which had been forwarded by the merchant.
A document, later to become known as a bill of lading, came into usage. It is suggested that as "bills of loading" they existed from at least 1316 AD.[2]
The main functions of a bill of lading are:
The Bill of Lading as a Document of Title
As trade became more sophisticated, goods were not only carried for the shipper to be delivered to himself or his agent but also to the shipper’s order. The shipper could, by endorsing on the bill of lading that the goods were to be delivered to the purchaser or other named consignee, provide the purchaser or consignee with the right to receive the goods.
The next major step in the development of the bill of lading as a document of title was made when the purchaser or consignee was entitled to transfer, by endorsement of the bill of lading to successive purchasers, the right to delivery of the goods. The carrier attained the reciprocal right and obligation to deliver the goods to the consignee or his order. In effect, the transfer of a negotiable bill of lading passed constructive possession.
Transfer of the bill of lading from the shipper to the consignee did not necessarily mean, however, that ownership in the goods passed.[3] The importance of this aspect will be discussed more fully in due course.
The Bill of Lading as Evidence of the Contract with the Carrier
As between the shipper and the carrier the bill of lading is only evidence of the contract between the parties and does not constitute the contract itself. Third parties who acquire rights by way of endorsements in the bills, such as consignees or assignees, however, are entitled and required to assume that it contains all the terms of the contract.[4]
The Bill of Lading in the Context of International Trade
The contract of carriage is usually preceded by a contract of sale of the goods to be carried. The contract of carriage may be entered into by either the seller or purchaser of the goods ("the shipper") who contracts with either the shipowner or, if the vessel is on demise charter or time charter, with the charterer ("the carrier") for the carriage of the goods ("the cargo").
The modern trader is faced with the same problems which the old merchant traders faced. Whilst security for the cargo and receipt of payment may be the primary concerns of the seller, the purchaser on the other hand would be more concerned about receipt of the correct quantity of goods complying with the quality/specification contracted for in an undamaged state and will obviously be reluctant to pay for the goods should they be shortlanded or damaged or not received at all. The primary functions of the bill of lading play a crucial role in alleviating some of these problems.
Who may sue is dependant on a number of factors, including what law is applicable to the contract of carriage, and whether the action is in contract or delict.
B. THE APPLICABLE LAW
Admiralty jurisdiction, practice and procedure in South Africa are regulated by the Admiralty Jurisdiction Regulation Act of 1983, as amended with effect from 1 July 1992 (hereinafter referred to as the Admiralty Act).
Section 6 of the Admiralty Act determines the law to be applied in Admiralty matters. Whilst there are a number of inherent problems with this section it is not within the scope of this paper to canvass them. The effect of the section is clear from the difficulty it cases with respect to this particular topic.
Whilst Section 6 determines the law to be applied it is of course the right of contracting parties to choose the law which they wish to be applicable. It is not unusual, for example, in shipping matters to find two parties, who are neither resident in England nor English citizens, agreeing that English Law should apply and that any disputes be referred to arbitration in London.
However, where there is no specific choice of law then Section 6 applies. Furthermore if, for example, a contract determines that Japanese Law is to be applied but no proof of Japanese Law is led at trial, the court may then assume that Japanese Law is the same as South African Law, in which case referral would be had to Section 6.
Section 6 determines that:
6(1) Notwithstanding anything to the contrary in any law or the common law contained a court in the exercise of its admiralty jurisdiction shall —
- with regard to any matter in respect of which a court of admiralty of the Republic referred to in the Colonial Courts of Admiralty Act, 1890, of the United Kingdom, had jurisdiction immediately before the commencement of this Act, apply the law which the High Court of Justice of the United Kingdom in the exercise of its admiralty jurisdiction would have applied with regard to such a matter at such commencement, in so far as that law can be applied;
- with regard to any other matter, apply the Roman-Dutch law applicable in the Republic.
6(2) The provisions of subsection (1) shall not derogate from the provisions of any law of the Republic applicable to any of the matters contemplated in paragraph (a) or (b) of that subsection.
Accordingly, provided there is no South African statute dealing with the specific matter in question; and that the matter would have fallen within the jurisdiction of the old South African Admiralty Court which existed until the Admiralty Act came into effect on 1 November 1983, a South African court exercising its Admiralty Jurisdiction will apply the law which the High Court of Justice of the United Kingdom would have applied at the date when the Admiralty Act came into existence, that is, 1 November 1983.
The Law which the High Court of Justice would have applied was that set out in inter alia the Colonial Courts of Admiralty Act, 1890, which incorporated those heads of jurisdiction set out in the Admiralty Court Act, 1861. Section 6 of the Admiralty Court Act, 1861, is headed: "As to claims for damage to cargo imported" and reads as follows:
The High Court of Admiralty shall have jurisdiction over any claim by the owner or consignee or assignee of any bill of lading of any goods carried into any port in England or Wales in any ship, for damage done to the goods or part thereof by the negligence or misconduct of or for any breach of duty or breach of contract on the part of the owner, master, or crew of the ship, unless it is shown to the satisfaction of the court that at the time of the institution of the cause any owner or part owner of the ship is domiciled in England or Wales…
(Note: for application in South Africa, read "South Africa" for "England or Wales".)
The Colonial Courts of Admiralty Act, 1890, established the Colonial Courts of Admiralty which conferred a similar jurisdiction on the South African courts. When sitting as Colonial Courts of Admiralty, in relation to goods carried into ports within the area of jurisdiction of such courts and in terms of Section 2(2) these courts were given, subject to the provisions of the new act, jurisdiction over "like places, persons, matters, and things, as the Admiralty jurisdiction of the High Court in England …".
In other words, in terms of Section 6 of the Admiralty Act, the law which the High Court of Justice of the United Kingdom in the exercise of its admiralty jurisdiction would have applied to bills of lading at the commencement of the Act, i.e. as at 1983, applies "over any claim by the owner or consignee or assignee of any bill of lading of any goods carried into any port in South Africa". A South African court would therefore be obliged to apply the law which the High Court of Justice would have applied as it stood at 1 November 1983, in respect of goods carried into any port in South Africa in these specific circumstances.
Section 6(1) of the Admiralty Act "Notwithstanding anything to the contrary in the law or common law …" must be read with Section 6(2) "shall not derogate from the provisions of any law of the Republic applicable to any of the matters contemplated in paragraph (a) or (b) of that subsection."
The South African Carriage of Goods by Sea Act No. 1 of 1986 ("COGSA"), applies in respect of the Republic in relation to and in connection with —
COGSA gives effect to the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading signed at Brussels on 25 August 1924, as amended by the Protocol signed at Brussels on 23 February 1968 (The Hague-Visby Rules).
Article X of the Rules provides:
"The provisions of these Rules shall apply to every bill of lading relating to the carriage of goods between ports in two different States if:
- the bill of lading is issued in a contracting State, or
- the carriage is from a port in a contracting State, or
- the contract contained in or evidenced by the bill of lading provides that these Rules, or legislation in any State giving effect to them are to govern the contract,
whatever may be the nationality of the ship, the carrier, the consignee, or any other interested person."
COGSA does not apply to inbound ships, unless the contract falls within the ambit of Section 1(b). As discussed above, if Section 1(b) does not apply then the law which the High Court of Justice of the United Kingdom in the exercise of its admiralty jurisdiction would have applied immediately prior to 1 November 1983 will apply in the prescribed circumstances.
Section 3 of COGSA, which governs jurisdiction, determines that,
notwithstanding any purported ouster of jurisdiction, exclusive jurisdiction clause or agreement to refer any dispute to arbitration, and notwithstanding the provisions of the South African Arbitration Act, 1965, … and of … the Admiralty Act,
1. any person carrying on business in the Republic
2.1. and the consignee under, or
2.2. "holder"
of, any "bill of lading, waybill or like document for the carriage of goods"2.2.1. "to a destination in the Republic," or
2.2.2. "to any port in the Republic, whether for final discharge or for discharge for further carriage, may bring any action relating to the carriage of the said goods or any such bill of lading, waybill or document in a competent Court in the Republic."
The question is, does this provision override the application of the law which the High Court of Justice of the United Kingdom in the exercise of its admiralty jurisdiction would have applied, viz. Section 6 of the Admiralty Court Act, 1861? Section 6 provided jurisdiction over any claim "by the owner or consignee or assignee of any bill of lading of any goods carried into any port …".
Section 3(1) of COGSA does not include "the owner" but does include both the consignee and assignee and in fact goes further to include "any person carrying on business in the Republic" and the "holder" not only of the bill of lading but of a waybill or like document for the carriage of goods".
It is submitted that Section 3 does not override but extends South African jurisdiction to a wider group of persons and to persons who, due to exclusive jurisdiction or arbitration clauses in their contracts of carriage, would have been precluded from proceeding in South Africa.
The emphasis is on jurisdiction, not on the law to be applied, and it is accordingly further submitted that the law of the United Kingdom as it was applied by the High Court of Justice as at 1 November 1983 applies with respect to
any claim by the owner, consignee or assignee of any bill of lading of any goods carried into any port … for damage done to the goods or any part thereof by the negligence of or any breach of duty or breach of contract"
as described by Section 6 of the Admiralty Courts Act, 1861.
The Carriage of Goods by Sea Act 1986 makes no reference to the law to be applied, only to jurisdiction.
South Africa does not have an equivalent of the English Bills of Lading Act, but a draft proposal for an Act, referred to as the Sea Transport Documents and Title to Sue Act, has been prepared and the proposed changes will be discussed later in this paper.
Delictual Claims: The Contract of Carriage at Common Law
The contract of carriage at common law was modified in South Africa originally by chapter XIII of the South African Merchant Shipping Act 57 of 1951 and more recently by the Carriage of Goods by Sea Act. The common law applies in cases where a delictual claim for damages is instituted.
The source of the carrier’s liability for the safe carriage of goods is the praetor’s edict de nautis, cauponibus et stabulariis, which determines inter alia that:
When sailors, … have received property for safekeeping, I will grant an action against them if they do not restore it.[8]
The edict imposed an absolute liability on public carriers by sea, for all loss of or damage to goods while in their custody, unless the loss or damage fell within one of certain specified exceptions. In the absence of an exclusion clause, the carrier will be liable where it is proved that the goods were delivered to him and have been lost or damaged whilst in his care. It is sufficient for the shipper to show that the damage occurred whilst the goods were under the responsibility of the carrier. That responsibility extends to the loading, landing and discharging of the goods.[9]
A carrier may contract out of strict liability by the inclusion of an exclusion clause in the contract with the shipper. Carriage at "owners risk" is an example of such a clause. The carrier cannot, however, contract out of liability where the loss of or damage to the goods is caused by his own gross negligence or that of his servants.[10]
Summary
- the port of shipment is a port in South Africa;
- the bill of lading is issued in a state which applies the Hague-Visby Rules;
- the carriage is from a port in a contracting state;
- the contract contained in or evidenced by the bill of lading provides that the South African COGSA applies.
- The law which has been chosen by the parties and as reflected on the bill of lading/contract of carriage will apply. Only where no specific choice of law is apparent will Section 6 of the Admiralty Jurisdiction Regulation Act apply.
- The Law of the United Kingdom as it was applied by the High Court of Justice as at 1 November 1983 applies in respect of claims by the owner or consignee or assignee of any bill of lading of any goods carried into any port of South Africa.
- The Roman-Dutch law applicable in the Republic applies to claims based on contracts for good
- carried from any port in South Africa
- by a party who is not the "owner, consignee or assignee of any bill of lading of any goods carried into any port". This would include for example a pledgee (such as a bank).
- South African common law applies to delictual claims.
The Parties to a Contract of Carriage
As discussed above, contracts of carriage are entered into between two parties, namely, the shipper and the carrier. The shipper may be either the consignor, the consignee or the time or voyage charterer, all of whom may be represented by an agent. On the other hand, the carrier may be either the owner, demise charterer or time charterer of the vessel, who may also be represented by an agent. On the basis of the underlying contract or carriage the carrier will issue bills of lading to the shipper.
Bills of lading are usually made up in sets of three originals, sometimes one copy is retained by the Master of the vessel and the other two given to the shipper who then sends one to the consignee, but generally three originals are given to the shipper.
C. TITLE TO SUE
Of crucial importance to a recovery action is the question of who the party is who has title or right to sue the carrier in the event of a breach of the contract of carriage or a breach of duty regarding the carriage. Reciprocally, who does the owner, demise charterer or time charterer of the vessel look to to enforce his rights under the contract?
In delict
When goods are delivered to a carrier to be carried without any special contract being made, the right to sue for a breach of duty on the carrier’s part is in the person to whom the goods belong at the time, or the party who bears the risk of the transit. If the actual sender is acting on the owner’s instructions, the latter is regarded as the contracting party, and he becomes entitled to sue for the goods and is liable to pay freight, and otherwise to perform the implied contract.[11] Accordingly, the party who has title to sue in delictual claims is that party who is the owner and/or the party in whom the risk in the goods lay at the time the loss or damage to the cargo occurred. One therefore has to study the underlying contract of sale of the goods. In order to assess who is the correct party to sue, one has to have an understanding of the principals of ownership and risk, and how the rights and obligations which derive therefrom are transferred. We will therefore consider the basic principles which relate specifically to ownership and risk, and their application to bills of lading.
In contract
However, when a contract is concluded between a shipper and a carrier, one needs to look at the choice of law of the contract of carriage as evidenced by the bill of lading to determine who the party is who has the right to sue. Where there is no choice of law, or "South African" law applies, then as pointed out above this may require an investigation of the principles not only of South African law per se, but also of the law which the High Court of Justice of the United Kingdom would have applied at the commencement of the South African Admiralty Jurisdiction Regulation Act at 1 November 1983, which in terms of Section 6 of the aforesaid Act forms part of South African Law. The rights and liabilities relating to a contract of carriage, including the title to sue, may be transferred by the transfer of the bills of lading made out to a named consignee or to bearer or to order. Only order bills require endorsement. The endorsement may be effected in one of two ways, namely by an endorsement in blank or by a special endorsement. An endorsement in blank is where the person to whose order the goods are made deliverable writes his name on the back of the bill of lading, effectively converting it to a bearer bill. On the other hand, a special endorsement is an endorsement to a named person.[12]
D. OWNERSHIP, RISK AND THE TRANSFER OF RIGHTS AND LIABILITIES UNDER A BILL OF LADING IN SOUTH AFRICAN LAW
Ownership does not, as in English law, pass on account of a mere agreement between the parties. Delivery of the goods is required. South African law adheres to the "abstract system" of passing ownership whereby the mere intention of the parties to transfer and accept ownership is sufficient, independent of the existence or non-existence of a valid underlying causa. Ownership will pass even if an underlying causa (like a contract of sale) is lacking, putative or invalid.[13]
Among the essential requirements for the passing of ownership, in which we are specifically interested, include:
Under a cash sale ownership normally passes once (in addition to delivery) the purchase price is paid; whereas in a credit sale the fact that credit has been granted by the seller to the purchaser is taken as a strong indication that ownership was intended to pass on delivery.[22] Where the seller has accepted security for the payment of the purchase price, ownership usually passes on delivery, probably because credit is regarded as having been given by implication.[23]
The requirement of delivery
Once it has been agreed that ownership in a thing is to be transferred, physical delivery or an act equivalent to delivery is necessary for ownership to pass. By the nature of our subject matter we are interested in the delivery of movables.
"South African Law", evolving in conformity with generally accepted mercantile law and custom, has recognised that a bill of lading, itself a product of the law merchant, may have special attributes in regard to symbolic delivery and the passing of ownership in goods sold and consigned by a bill of lading to the purchaser. This was recognised more than 100 years ago in the case of London and South African Bank v Donald Currie and Co., 1875 Buch 29, wherein De Villiers CJ emphasised the role of the bill of lading, taken to the order of a shipper, as a "symbol of property" which retained for the shipper the right of dealing with the goods put aboard the vessel. Referring to Roman-Dutch law and having said that the views expressed by him (which were based mainly on English decisions) were not inconsistent therewith, the learned Chief Justice proceeded (at p. 34):
That law clearly recognises the validity of a constructive delivery to pass the property in goods as opposed to an actual delivery. It is laid down, for instance, that the owner of goods may make a good delivery to another person by handing over to him the keys of the warehouse in which the goods are stored (Grotius, 2.5 12). The key is the symbol of the property in the goods placed in the warehouse, in the same way as the Bill of Lading is the symbol of the property in the goods shipped on board.[26]
Corbert JA, handing down the judgment in the Lendalease Finance case, examined the various principles concerning the passing of ownership under South African law from the seller (who is the owner) to the purchaser under the sale of a movable and confirmed that, in addition to the contract of sale, there must be at least a proper delivery to the purchaser of the contract goods. Whether the delivery alone, however, would suffice would depend upon the intention of the parties and in this connection important considerations are:
In the case of unconditional contracts, "under a cash sale ownership is normally taken to have been intended to pass once there has been, in addition to delivery, due payment of the purchase price; whereas in the case of a credit sale, the fact that credit has been granted by the seller to the purchaser is taken as a strong indication that ownership was intended to pass merely on delivery", as is the case where "the seller has taken security for the payment of the purchase price". Whereas in a cash sale, payment of the purchase price is required to be made against delivery of the goods, in a credit sale the time for payment is postponed for a substantial period after delivery. Whether a sale is to be cash or credit is determined by the contracting parties and in the absence of an express term in the contract, the presumption is that it is for cash.[28]
It is a basic requirement in Roman-Dutch law that in order to have title to sue a carrier, in delict, the claimant has to be either the owner of the goods and/or the party in whom the risk in the goods lay at the time the loss or damage occurred, as discussed above.
The same principle applies as the basis for claims based on contract because it is an essential requirement to prove that the claimant has suffered damages.
Accordingly, whether a party who has had a bill of lading transferred to him is the charterer; the shipper, in one of his guises as either consignor or consignee; or is the holder of the bill in one form or another; if he was not the owner or the party in whom the risk lay he does not have the title to sue.
E. THE PASSING OF OWNERSHIP AND RISK IN INTERNATIONAL COMMODITY CONTRACTS
The issue of when ownership and risk passes in international commodity agreements is really of no significance, if at the end of the day the buyer receives delivery of the goods at the time and in the quantity and condition that he ordered them, and the seller receives his purchase price. However, where things go wrong these issues are of vital importance. An example of such an instance is where cargo carried at sea is damaged or lost and the cargo attorney has to establish who has the right to sue the carrier.
The importance of identifying the owner of the cargo and/or the party who bears the risk, at the time the damage or loss occurs to the cargo, has been explained above; namely, that inter alia only that party has title to sue in delict in terms of South African law. It is usual to sue in delict in the alternative to the contractual claim lest a claimant cannot rely on the contract. There are also those instances where the claimant cannot rely on the contract because there is no contractual link with the carrier, in which case the claimant has to sue in delict. Such is the case where the receiver is transferred a "house bill of lading" rather than an "ocean bill".
Secondly, the exact timing of the transfer of the bill of lading and the rights and liabilities related thereto, including title to sue, may be crucial. Delivery of the bill of lading, in a credit transaction, constitutes delivery of the goods in South African law and determines the time at which ownership in the goods passes to the buyer.
Furthermore, by delivery of the bill of lading the rights to sue in contract are assigned to the receiver of the bill of lading in qualified circumstances.
One should be careful to distinguish between the passing of risk and the passing of ownership, as these events may not occur simultaneously and may be of different significance depending on what law is applicable.
The basic rule is that the passing of title and risk from the seller to the buyer occurs at the time specified by the parties in the contract of sale. However, if no reference is made in the contract of sale to either the passing of title or the passing of risk, generally the following applies:
To enable the cargo attorney to identify the correct claimant, it is essential for him to be provided with the shipping documents, and in particular a copy of the contract of sale, the commercial invoice and the original bill of lading. The contract of sale may be a single document or may consist of an exchange of letters, telexes or telefaxes for example. Where cargo is damaged or lost, it is possible that the correct party to sue is the seller and not the buyer as may at first appear to be the case, as risk and/or title and/or the right to sue may not yet have passed to the buyer.
Should the cargo attorney not be in the position to identify the party in whom title and/or risk lay at the time the damage or loss occurred, or should he be in the position where it is not certain exactly when the damage or loss occurred or the bill of lading was received by the receiver or his agent, it is prudent to obtain security and institute proceedings in the names of and on behalf of both the seller and the buyer, even if this requires one of the parties subsequently ratifying the attorney’s actions.
Various forms of the contract of sale and hybrids thereof have come to be recognised internationally through practice. The most common are the following:
CIF contracts
The letters C I F stand for "cost, insurance and freight". The seller contracts to deliver the goods to the purchaser at a destination designated by the purchaser and to pay the insurance premium and the freight. The seller then delivers the shipping documents, comprising a commercial invoice showing the details of the cost, insurance and freight, the bill/s of lading, the insurance policy and the certificate of quality and origin, to the purchaser.
During the period of transit and voyage the bill of lading is, by the law merchant, recognised as the symbol of the goods described in it, and the delivery of the bill of lading operates as a symbolic delivery of the goods. … The holder of the bill of lading is entitled against the shipper to have the goods delivered to him to the exclusion of other persons. He is thus in the same commercial position as if the goods were in his physical possession.
It is the duty of the seller to make every reasonable effort to send forward and tender to the buyer or his agent the shipping documents, including the bill of lading, as soon as possible after shipment of the cargo. The contract is performed by the seller and the goods are constructively delivered to the buyer on the date when the shipping documents are delivered to the buyer or the buyer’s agent in terms of the contract.[29]
In the case of Lendalease Finance Ltd the Court looked at the commercial reason for the evolution of the CIF contract and, drawing on the authoritive English Law writer Halsbury, noted that the CIF contract is a product of English Mercantile Law, which our courts have been able to accommodate within the principles of South African law, and that the object and result of the CIF contract is to enable sellers and buyers to deal with the goods while afloat and to transfer them freely by giving constructive possession thereof. The principal document which has enabled this to be achieved is the bill of lading.[30] Citing Halsbury his Lordship Justice Corbett stated: "the contract is thus in a commercial sense an agreement for the sale of goods to be performed by the delivery of documents …"[31]
His Lordship continued:
The most significant of the shipping documents is the bill of lading. This constitutes an acknowledgement by the master of the ship, on behalf of the shipowner, that the goods have been delivered on board and evidences an undertaking to carry the goods to the stated place of destination. The person in whose name or to whose order the bill of lading is made out may by endorsement and delivery transfer his rights under the bill to another. The holder of the bill, i.e. the person in whose favour it was originally made out or the endorsee thereof, is entitled, to the exclusion of all others, to receive the goods from the ship at the place of destination. He is thus in the same commercial position as if he were in physical possession of the goods. The bill of lading is, accordingly, recognised as a symbol of the goods and the transfer of the bill is regarded as a form of symbolic delivery. It is usual under a CIF contract for the seller to take the bill of lading in his own name, or to his order, and for the bill, duly endorsed, to be tendered, together with the other shipping documents, against payment of the invoice price, either in cash or by the acceptance of a draft. Ownership in the goods normally passes to the purchaser upon transfer of the bill of lading and concurrent payment.[32]
FOB contracts
The letters F O B stand for "free on board. The seller’s obligations are to deliver the goods over the ship’s rail onto a vessel and at a port designated by the purchaser. The purchaser arranges the shipment and insurance and pays the freight and insurance premium and any other expenses which may arise whilst the goods are in transit. Once the goods are delivered over the ship’s rail, the risk passes to the purchaser, unless a contrary intention is indicated in the contract of sale.
The purchaser will, once he receives the bill of lading, be in possession of the shipping documents and, as in CIF contracts, be in a position to on-sell if he so wishes.
In the case of Pyrene Co. v Scindia Navigation Co[33] Devlin J noted that the FOB contract had become a flexible instrument and there are various ways in which the seller FOB may be a party to the contract of carriage with the carrier.
His Lordship found that there were three types of FOB contract:
The Appellate Division in the leading case of Lendalease Finance Ltd. looked at the situation where a contract, although FOB, provided for the bill of lading to be taken to the order of the seller. The Court noted that a comparison with English decisions could not be undertaken without recognition of the important differences which exist between English and South African law. Foremost is the English law principle that in the sale of goods the property, or ownership, may pass without possession of the goods having been delivered by the seller to the buyer.[34]
The Court then went on to state the position in English law under FOB contracts as set out by Halsbury as follows:
When property passes. Prima facie the property passes to the buyer upon shipment but as in a CIF contract the inference may be rebutted and the moment of the passing of the property postponed, as for instance where the seller deals with the bill of lading in such a manner as to show that he did not intend to appropriate the goods to the contract, or that he has reserved a right of disposal until performance of the contract terms of payment, whether they are for payment in cash or by acceptance of a bill of exchange.[35]
The Court then concluded that the English decisions, insofar as they may be relevant, confirmed the view that according to the principles of our law, no ownership would pass upon shipment, despite the fact that the contract may be FOB. Furthermore, the English law principle indicated that the passing of ownership under a FOB contract may be postponed by the seller taking the bill of lading to his own order.[36]
Ex warehouse contracts
The goods are purchased on the basis that the purchaser will be responsible for removing them from the warehouse in which they are at the time the sale is concluded and make all necessary arrangements for their shipment to their destination. He will also be responsible for all the costs thereof including insurance.
F. OWNERSHIP RISK AND THE TRANSFER OF RIGHTS AND LIABILITIES UNDER A BILL OF LADING IN ENGLISH LAW
"At English Common Law contracts were not assignable. Hence the transfer of a bill of lading with the intention of passing the property in the goods did not transfer the rights and liabilities under the contract of carriage; it merely passed the property in the goods".[37]
Therefore normally only the parties to a contract of carriage could sue, leaving any third party with an interest in the goods to sue in tort.
This position was however, changed by the English Bills of Lading Act of 1855, which is still applicable in South Africa as it forms part of that body of law which the High Court of Justice of the United Kingdom would have applied as at 1 November 1983.[38] Whilst the law in the United Kingdom has changed dramatically as a result of the Carriage of Goods by Sea Act of 1992 it is necessary for us to assess the position as it existed prior to 1992 due to Section 6 of the Admiralty Act.
Section 1 of the Bills of Lading Act provides that:
Every consignee of goods named in a bill of lading, and every endorsee of a bill of lading, to whom the property in the goods therein mentioned shall pass upon or by reason of such consignment or endorsement, shall have transferred to and vested in him all rights of suit, and be subject to the same liabilities in respect of such goods as if the contract contained in the bill of lading had been made with himself.
It was necessary in England to enact this provision as English law did not have an equivalent of the Roman-Dutch Law stipulatio alteri. Accordingly, prior to the 1855 Act coming in to effect, a consignee or endorsee of a bill of lading was not entitled to sue on the contract of carriage as he was not a party to it and the consignment or endorsement did not transfer the right to sue. The 1855 Act gave receivers the right to claim a breach of contract but only where the property in the goods had passed to them "upon or by reason of such consignment or endorsement".
The contract transferred is that embodied in the bill of lading, including such terms as are implied by law in all contracts of carriage by sea. If the bill of lading does not contain some term of the original agreement, that term will not be binding as between shipowner/charterer and assignee of the bill of lading.
Where goods are shipped under a bill of lading and the charterer of the vessel is named as consignee, the charterer, if he endorses the bill of lading to a third party, has no claim for substantial damages against the shipowners in respect of the loss of the goods for he has no proprietary interest in them.[39] In the case of The Albazero, crude oil was shipped on board a vessel at La Salina, Venezuela, for carriage to Antwerp under a bill of lading naming the charterers of the vessel as consignees. The bill of lading was subsequently endorsed by them to a third party.
Later the vessel and her cargo were lost. The charterers claimed substantial damages from the shipowners, contending that the shipowners were in breach of the terms of the charterparty and that the loss had been caused thereby. The House of Lords,[40] after approving the rule in Dunlop v Lambert[41] (that the shipper, who sues the carrier for breach of contract without having had title to the goods at the time of the loss, can recover the value of the goods lost but must hold the proceeds of his action in trust for the person who does have title), Lord Diplock held that such a shipper can only take suit and rely on this rule when the person who does have title is unable to sue the carrier in contract himself, as for example when the Bills of Lading Act 1855 does not apply. Accordingly, the action failed because the charterers had no proprietary interest in the goods at the time of the loss, and had suffered no loss.
This position will only apply in South Africa to claims by "the owner, consignee or assignee of any bill of lading of any goods carried into any port of South Africa". Ironically this situation will no longer apply in England as the problem of title to the goods not passing "upon or by reason of such consignment or endorsement" as specified by the 1855 Act was removed by the Carriage of Goods By Sea Act 1992.
Passing of the Property in the Goods
"Indorsement and delivery of a bill of lading during transit gives to the endorsee such property in the goods as it is the intention of the parties to transfer. However, in order that property in the goods may pass by assignment of the bill of lading, the following conditions must be complied with:
- The Bill of Lading must be transferable on the face of it.
- The goods must be in transit.
They need not be at sea, but they must have been handed over to the ship owner or forwarding agent for carriage and not yet delivered to any person having a right to claim them under a bill of lading.- The bill of lading must have been put in circulation by one who had a good title to the goods.
- There must have been an intention to transfer the property. The endorsement and delivery of a bill of lading passes only such property in the goods as the parties intended to pass. Hence it may:
- Pass no property at all, e.g. when an unpaid seller reserves the right of disposing of the goods by taking the bills of lading in his own or his agent’s name as consignees. The bill is sent to the agent in order to prevent the buyer obtaining delivery of the goods before payment of the price. Clearly no property in the goods is intended to pass to the agent in such a case. Other instances of no property passing are where the endorser has no property to pass, or where the goods have already been delivered properly by the shipowner to a third party; or
- Pass the property subject to a condition. The unpaid seller may ensure payment the bill of lading. This may be effected of the bills of lading together with a bill goods; or
- Merely effect a mortgage or pledge of the goods as security for money lent.
An instance of this is where a shipper lodges an endorsed bill of lading with a banker, who discounts for him the draft attached thereto with a view to providing fresh trading capital at once."[42]
The law relating to sale of goods was first set out in the Sale of Goods Act of 1893, which was subsequently amended a number of times and was consequently consolidated in the Sale of Goods Act 1979 which sets out the rules concerning when the parties may have intended title to pass. Subsequent to the 1979 Act there have been further amendments.
The 1979 Sale of Goods Act makes a fundamental distinction between "specific goods" and "unascertained goods". Specific goods are goods which are identified at the time the contract is concluded whilst unascertained goods include goods which are identified by generic description and goods which form part of a larger bulk but which have not yet been segregated. These goods are likely, at a later stage, to become identified as the particular goods which are to be sold and at that stage they would then become ascertained goods. When originally promulgated, Section 16 of the Act determined that ownership of unascertained goods could never pass to the buyer "unless and until the goods were ascertained". This rule caused considerable problems because of the insolvency implications where the seller went into liquidation before the vessel arrived but after the buyer had already paid for the goods, and are of concern to us in this paper because of the difficulties which face the buyer who wishes to sue the carrier for loss or damage to the goods.[43]
In July 1993 the Law Commission published its report number 215 which examined the law in this regard.
One cannot contract out of the terms of Section 16, which are mandatory. Whilst the Carriage Of Goods By Sea Act of 1992 largely resolved the problem of the endorsee or consignee of a bill of lading covering only part of a bulk consignment as regards that parties’ title to sue the carrier, it did not do away with the problem completely. Therefore the Law Commissioners proposed new legislation that will provide that where there is a contract for the sale of a specified quantity of unascertained goods, which form part of an identified bulk, a pre-paying buyer should be able (subject to the terms of the contract) to acquire an undivided proprietary share in the bulk even before his share becomes ascertained. The Law Commission’s recommendations have, however, not as yet led to the amendment of the 1979 Act.[44]
The Law Commission’s proposal does not cover generic goods, the source of which is wholly unidentified; however, once the source becomes identified, e.g. on shipment, then the proposal should be capable of coming into operation.[45]
Subject to Section 16, ownership passes from the seller to the buyer when the parties intended it to pass where there is a contract of the sale of specific or ascertained goods.[46]
Section 17(2) determines "for the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case".
In the absence of a specific provision it becomes necessary to identify when the parties intended ownership to pass and Sections 18 and 19 of the Act set out a number of guidelines for determining that intention.
Section 18
Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer.
- when he signifies his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of that time, and, if no time has been fixed, on the expiration of a reasonable time.
Rule 5
- Where there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods then passes to the buyer; and the assent may be express or implied, and maybe given either before or after the appropriation is made.
- Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee or custodier (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is to be taken to have unconditionally appropriated the goods to the contract.
Section 19
- Where there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled; and in such a case notwithstanding the delivery of the goods to the buyer, or to a carrier or other bailee or custodier for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled.
- Where goods are shipped, and by the bill of lading the goods are deliverable to the order of the seller or his agent, the seller is prima facie to be taken to reserve the right of disposal.
- Where the seller of goods draws on the buyer for the price, and transmits the bill of exchange and bill of lading to the buyer together to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honour the bill of exchange, and if he wrongfully retains the bill of lading the property in the goods does not pass to him.
Risk
As discussed earlier the passing of ownership must be distinguished from the allocation of risk as between seller and buyer, although it is of course possible for the two to be transferred simultaneously. The passing of risk means the transfer from seller to buyer for the responsibility for loss, deterioration or damage to the goods occurring without the fault of either party. For example, if risk passes on shipment and the goods are contaminated or lost during the voyage, the seller may be able to tender the documents and receive the price, leaving the buyer with his remedies against the cargo insurers or the ship. If risk passes at the discharge port, and the goods are contaminated during the voyage, the seller will be tendering goods which do not conform to the contract and the buyer may be entitled to reject them.
Section 20 of the English Sale of Goods Act 1979 provides that, unless otherwise agreed, risk will usually pass with property; but this is frequently not the case in international contracts. In particular, unlike ownership in English Law, risk can pass before the goods have been ascertained, at any rate where the goods form part of a larger, but identified bulk. In most CIF and FOB contracts risk will pass on shipment, regardless of whether the property passes at that stage; and this is so even when goods have been shipped in unsegregated parcels.
There are, however, three situations requiring special mention:
G. THE CARRIAGE OF GOODS BY SEA ACT 1992
The Carriage of Goods by Sea Act 1992 (COGSA) came into force on the 16th September 1992. The Act was introduced to remedy difficulties experienced in English and Scottish law over the passing of rights and liabilities under bills of lading and other shipping documents. In particular the difficulties which cargo receivers to whom bills of lading had been endorsed had experienced as a result of a number of cases decided in England including The Captain Gregos (No. 2),[48] The Delfini,[49] The Aramis[50] and The Aliakmon.[51]
As a result of the aforesaid cases the issue of title to sue had become more difficult to prove as it had narrowed down the scope of title to sue by cargo receivers against carriers. In all the cases the receivers had not acquired title to the goods under the bill of lading and they were neither the endorsees nor the holders of the bill of lading. The Act was of major importance to all those involved in the carriage of goods by sea and the transactions related thereto and obviously was of great importance to attorneys acting both for cargo interests and for carriers.
The Act is based upon the recommendations of the English and Scottish Law Commissions set out in their report published in March 1991. The Law Commissioners had carried out extensive enquiries and had consulted all spheres of the commercial and legal communities in order to ensure that all interests were represented and their views taken into consideration.
Of particular importance were the changes to the Bills of Lading Act of 1855, which had come about as a result of the restrictions imposed by the English legal concept of privity of contract. The Bills of Lading Act of 1855 had allowed a consignee or endorsee of a bill of lading to sue for loss of or damage to the goods under the terms of the contract of carriage and also allowed the carrier to sue the consignee or endorsee in certain circumstances for liabilities such as freight and demurrage. The rights of the consignee or endorsee referred to above were, however, restricted in that such rights and liabilities were only acquired if property in the goods passed "upon or by reason of" the "consignment or endorsement" of the bill of lading as discussed earlier. The Commission’s recommendations were as follows:
Part VII -- Summary Of Recommendations
- The lawful holder of a bill of lading should be entitled to assert contractual rights against the carrier, irrespective of the passing of property and regardless of whether he has suffered loss himself, if necessary being able to recover substantial damages for the benefit of the person who has suffered the loss.
[Paragraphs 2.22 and 2.27; clauses 2(1) and 2(4)].- The shipper and any intermediate holder of a bill of lading should not be entitled to rights of suit after someone else has become the lawful holder of the bill of lading.
[Paragraphs 2.34–2.41; clause 2(5)].- A bill of lading should be capable of indorsement so as to pass contractual rights even after delivery of the goods has been made, providing that the indorsement is effected in pursuance of arrangements made before the delivery of the goods.
[Paragraphs 2.42-2.44; clause 2(2)].- Where the holder of a bill of lading, or any other person entitled to sue under our recommendations, takes or demands delivery of the goods, or otherwise makes a claim under the contract of carriage against the carrier, he should become subject to any contractual liabilities as if he had been a party to the contract of carriage, without prejudice to the liabilities under the contract of carriage of the original shipper.
[Paragraphs 3.19 and 5.22; clause 3].- The rule in Grant v Norway should be abolished. A bill of lading, representing goods to have been shipped or received for shipment and in the hands of the lawful holder, should be conclusive evidence against the carrier of such shipment or receipt.
[Paragraph 4.7; clause 4].- The consignee named in a sea waybill, or such other person to whom the carrier is duly instructed to deliver under the terms of the sea waybill, should be able to sue on the contract of carriage, without prejudice to the rights of the original shipper.
[Paragraphs 5.13 and 5.23; clause 2(1) and 2(5)].- The person entitled to delivery in accordance with an undertaking contained in a ship's delivery order should be able to assert contractual rights against the carrier on the terms of the undertaking.
[Paragraph 5.30; clause 2(1)].- The Secretary of State should be empowered to make provision by regulations for information given by means other than in writing to be of equivalent force and effect as if it had been given in writing."
[Paragraph 6.3; clauses 1(5)–1(6)] [52]
These recommendations were to overcome the problems which had arisen in modern trading practice which had inter alia resulted in cargo receivers and their underwriters having difficulty in suing under contracts of carriage for loss of or damage to goods. On the other hand shipowners had difficulty enforcing claims for freight and demurrage and were exposed to claims in delict without the benefit of the limits and exemptions they would have had under a contract of carriage. Banks, which take bills of lading as security, did not acquire rights or liabilities because they did not have ownership of the goods despite being exposed to risk.
COGSA '92 applies to any bill of lading, ship's delivery order and sea waybill. The Act amended the law on bills of lading by abolishing the requirement of the link between the passing of ownership and the passing of rights and liabilities so that, subject to certain restrictions, the rights and liabilities under the contract of carriage are transferred to the "lawful holder" of the bill of lading. Furthermore, these rights and liabilities are now extended to sea waybills and ship's delivery orders. Provision is also made for the rights and liabilities to be extended to electronic data interchange (EDI) systems. The aforesaid changes are set out in Section 1 of the Act.
The extension of the Act to cover sea waybills brings the law relating to sea carriage and title to sue into line with the Warsaw, CMR and CIM Conventions covering international air, road and rail carriage respectively.
The inclusion of delivery orders in the Act (together with Section 5(4), which provides that the Act will still operate in relation to documents covering goods which cannot be identified, for example because they are an unascertained part of a bulk cargo) tackles the problem of title to sue when a bulk cargo subject to a single bill of lading is divided into smaller parcels.
Section 2(1) provides that the "lawful holder" of a bill of lading shall by virtue of becoming the holder have transferred to him all rights of suit under the contract of carriage as if he had been a party to that contract. The "lawful holder" is defined in detail in Section 5(2) but in essence is a holder of a bill in good faith This overcomes all of the difficulties that had arisen under the Bills of Lading Act of 1855 concerning transfer of title to sue to the ultimate consignee or endorsee. It is no longer necessary for the holder to show that he was on risk at the time of the loss or damage.
Section 2(2) covers the situation where a consignee or endorsee becomes a lawful holder of the bill of lading only after the goods have been discharged. The consignee or endorsee does not acquire rights unless he became the holder of the bill pursuant to a contract or other arrangement entered into before the time of discharge. This section goes on to deal with the reacquisition of rights by a seller in the event that the goods or documents are rejected by the buyer. Under the 1855 Act the endorsement or consignment did not have the effect of transferring title to sue and therefore the receiver was unable to sue the carrier under the contract evidenced by the Bill of Lading.
Section 2(4) makes provision for the position where someone other than the lawful holder suffers the loss. The lawful holder of the bill of lading is entitled to sue for damages on behalf of the person who has suffered the loss. Once the holder of a bill of lading consigns or endorses the bill to another lawful holder, the first holder loses his rights under the contract of carriage, even if he was an original party to that contract [Section 2(5)].
The Act also provides that a person who was not a party to the original contract is vested with title to sue under the contract of carriage if he receives the goods under a sea waybill or delivery order as if he had been a party to the original contract.
Section 3 provides that where a lawful holder of a bill of lading is the receiver of the goods and calls for delivery or claims against the carrier under the contract of carriage that person assumes the same liability under the contract of carriage as if he had been an original party to the contract. The liabilities may include freight, demurrage and breach of warranty for shipping dangerous goods. This provision was specifically included to protect banks holding bills of lading as pledgees. A bank therefore, will not have any liabilities under the contract unless and until such time as it exercises its security by taking delivery of the goods or making a claim against the carrier. This situation would arise where the receiver defaults on payment or, for example, becomes insolvent, in which case the bank would want to sell the goods.
Section 3 also ensures the rights of the carrier against the original shipper by making provision in Section 2(5) that even if the original shipper has consigned or endorsed the bill of lading to another lawful holder, that shipper remains liable under the original contract of carriage.
Section 4 is the enactment of recommendation 5 of the Law Commission that the rule in Grant v Norway[53] be abolished. The rule held that a ship’s master had no authority to sign bills of lading for goods not put on board. The 1855 Act and the Hague-Visby Rules tried to address this problem but Section 4 has now overcome them by providing that the bill of lading, which represents goods to have been shipped on board, and is signed by the master or some other person with authority to sign bills of lading on behalf of the carrier, shall be conclusive evidence of the shipment of the goods in favour of the person who has become the lawful holder of the bill of lading.
Relevance of COGSA 1992 in South Africa
Under English law COGSA 1992 only applies to bills of lading, sea waybills and ships’ delivery orders issued after the 16th September 1992. As it did not apply at 1 November 1983 it does not apply in South Africa and the 1855 Act remains relevant.
The benefits of COGSA 1992 are quite clear. Under English law prior to the Act one had to be quite clear both as to when ownership passed under the contract of sale and when the transfer of the bills of lading took place, whereas under COGSA 1992 one simply needs to discover when the transfer of the original bills of lading occurred. In order to proceed with the claim, the attorney acting for cargo interests simply needs to know who the current holder of the original bill of lading is, when he/she came into possession of the bill and in what circumstances it was obtained. Provided the party is a "lawful holder" one can simply accept that that is the person who is entitled to sue and in whose name the action should be brought, even if that party was not the party who actually suffered the loss.
One further point which needs to be considered however, is whether the lawful holder of the bill of lading is the charterer, in which case the charterparty would determine the charterer's rights and liabilities rather than the bill of lading. Should the charterer then assign or endorse the original bills of lading to a new lawful holder, however, the new holder's rights and liabilities will be determined according to the terms of the bills of lading.
Section 5 contains various definitions. In particular it defines "the contact of carriage" in relation to a bill of lading as the contract contained in or evidenced by that bill. It also defines "lawful holder" as discussed under Section 2 above.
H. PROPOSED SOUGH AFRICAN SEA TRANSPORT DOCUMENTS AND TITLE TO SUE ACT
A draft proposal for an Act which may be referred to as The Sea Transport Documents and Title to Sue Act is currently [at the time of writing] being circulated in South Africa.
The proposal will have the effect of bringing South African law more in line with the position in the United Kingdom subsequent to the enactment of the Carriage of Goods By Sea Act 1992 and will overcome many of the problems encountered by legal practitioners and underwriters who have been haunted by Professor Tetley's nightmares of proceeding against the wrong party and taking suit in the name of a person who does not have a right to claim.
The proposal goes beyond the scope of this paper in applying not only to bills of lading but also to "any document relating to the carriage of goods if portion of the carriage is to be performed by sea".
Section 2 of the definition section goes on to define a sea transport document as including any of the following, whether or not transferable or negotiable:
Furthermore and in line with Section 1 of the English COGSA 1992 provision is made for a
… record or document produced by a telecommunication system or electronic or other information technology system and effecting transactions such as those effected by any of the documents referred to in sub-section (1) (the documents referred to above being a–e) shall be deemed to be a document referred to in the relevant part of the said sub-section.
Chapter One determines that the chapter only applies to transferable or negotiable documents and is headed "Transfer and Negotiation". The provisions of Chapter One allow for a sea transport document to be transferred by the holder thereof. The section then determines who shall be holders and these include:
Section 3 deals with how transfer shall be effected and determines that delivery of the sea transport document endorsed as may be necessary or in accordance with any telecommunication technology system shall constitute transfer.
Section 4 covers the transfer of rights and obligations and Section 5 the saving of rights or obligations under the contract of carriage. These sections are quite clear and determine that the holder of a sea transport document
… shall be subject to the same obligations to, and entitled to the same rights against, the person by whom or on whose behalf the sea transport document was issued, or who is responsible for the performance of the contract of carriage evidenced by or contained in the sea transport document, as if the holder were a party to the contract with the said person on the terms of the sea transport document and shall be deemed to be the cessionary of all rights of action for loss of or damage to the goods referred to therein whether arising from contract or the ownership of the goods or otherwise.
Sub-section 4(2) determines that
… a holder who has transferred a sea transport document shall be deemed to have delegated his obligations and to have ceded his rights to the new holder save insofar as the said rights or obligations are such as arise from a delectus personae relating to the holder.
Section 5 determines
… any rights or obligations under the contract of carriage evidenced by or contained in the sea transport document or any liability of the consignee or holder by reason or in consequence of his being such consignee or holder or of his receipt of the goods by reason or in consequence of such consignment or the transfer to him of the sea transport document shall be of full force and effect save for the extent to which they are affected or varied by this Act.
The proposed Act is accordingly in line with the recommendations of the English and Scottish Law Commission’s recommendation for the Carriage of Goods By Sea Act 1992 in that the lawful holder of a sea transport document (bill of lading) should be entitled to contractual rights against the carrier, irrespective of the passing of ownership and regardless of whether he has suffered the loss himself. Furthermore, the shipper and any intermediate holder of a bill of lading should not be entitled to rights of suit after someone else has become the holder of the sea transport document (recommendation 2).
Provision is made for the passing of contractual rights by endorsement. While it is a specific requirement of COGSA ’92 that the consignee or endorsee does not acquire rights unless he became the holder of the bill pursuant to a contract or other arrangement entered into before the time of discharge, this is apparently not a requirement of the proposed South African Act.
The provisions are on all fours with Section 2(5) of COGSA ’92 in that the first holder loses his rights under the contract of carriage, even if he was not the original party to the contract. Likewise a person who was not a party to the original contract is vested with title to sue under the contract of carriage if he received the goods under a waybill or basically any other document relating to the carriage of goods, including a record of documents produced by telecommunication system or electronic or any other information technology system.
Section 6 is the equivalent of Section 4 of COGSA ’92, which abolished the rule in Grant v Norway and provides that:
A sea transport document which:
- represents goods to have been shipped on board a vessel or to have been received for shipment aboard a vessel; and
- has been signed by the master of the vessel or by a person who was not the master but who had the express, implied or ostensible authority of the carrier to sign such a document;
shall, in favour of the holder of the sea transport document, as against the carrier:
- be prima facie evidence in favour of the shipper or other person to whom it was issued
- be conclusive evidence in favour of a subsequent holder
of the shipment of the goods or, as the case may be, of the receipt or shipment.
An innovative section, which is of great importance, is Section 10 of the proposed Act and relates to the position of insurers. At present cargo attorneys face the problem that if they are instructed by underwriters. and the underwriters have not made payment or admitted liability under a policy, they effectively do not have the authority to institute proceedings in the name of the insured. Generally the insured is obliged in terms of an insurance policy to assist underwriters in whatever way possible in limiting and in recovering the loss from the party responsible. It is therefore possible for underwriters to obtain the authority of the insured to institute proceedings in the name of the insured, but for practical purposes this is not always possible.
Section 10(1) proposes that notwithstanding that payment has not been made or liability admitted under the policy,
the insurer or any person who has issued a policy insuring cargo or any interest in or liability relating to any cargo may do any act, including the institution of any action or other proceedings for the purpose of reserving, asserting or exercising any rights and remedies of the assured in respect of the subject matter insured or set forth in the policy.
Accordingly the threat of the claim becoming time-barred after the one-year period set down in Article 3.6 of the Hague-Visby Rules is overcome if underwriters require more time to assess a claim.
Section 10 goes on to set out in detail the basis on which such actions or proceeding may be instituted.
I. CONCLUSION
The draft proposals go a long way to limiting the "cargo claimant attorney’s" fears and nightmares in reducing the scope for proceeding against the wrong party or taking "suit in the name of a person who does not have a right to claim." All that is needed is a built in alarm-clock to ensure we "take suit in time".
BIBLIOGRAPHY
Placed on website: 24 February, 1999