Bills of lading and third parties

1992 Act has resolved most of the difficulties associated with the doctrine of privity of contract in so far as they affect the relationship between the holder of a bill of lading and the contractual carrier, a number of residual problems still remain. For example, to what extent may the holder of a bill of lading sue persons other than the contractual carrier for loss or damage to the goods caused by their acts or omissions, and to what extent may such individuals, when sued, rely for protection on the terms of a contract of carriage to which they were not parties? The following is a review of the strategies adopted by the common law in an attempt to find a solution for the various problems arising from a strict application of the privity doctrine. Liability in tort:  Where a claim for loss or damage is based on the negligence of the carrier or his servants, an alternative to the contractual remedy might be to sue the party responsible for the loss in tort. There would be little advantage to a bill of lading holder in pursuing such an action against the contractual carrier, but there are a number of other situations where a tortious action might provide an effective remedy. Thus, in appropriate circumstances, it might be advantageous to sue an agent or servant of the carrier who was personally responsible for the loss. Again, many bill of lading contracts include an express provision entitling the contractual carrier to sub-contract the whole or part of the carriage. In the event of such delegation of performance, where the goods are damaged or lost while in the possession of the sub-contractor, the bill of lading holder may, for a variety of reasons, prefer to sue such sub-contractor in tort rather than to rely on his remedies against the contractual carrier. On the one hand, the latter may not be financially sound; on the other, the bill of lading holder may be attracted by a right of recovery in tort free from the exceptions and limitation of liability provisions contained in the bill of lading. In the majority of the above cases there will be no contractual relationship between the claimant and the actual tortfeasor with the result that the doctrine of privity would normally prevent the latter from invoking any of the defences available under the contract of carriage. There is, however, one serious qualification to the availability of this right of action in tort. Roskill J held in the case of Margarine Union v Cambay Prince that an action in negligence would not succeed unless the claimant was, at the time of the commission of the tort, the owner of the goods in question or the person entitled to immediate possession of them. The facts of the case were that a cargo of copra, shipped in bulk, had been seriously damaged by giant cockroaches as the result of the negligence of the shipowner in failing to have the holds of his ship fumigated before the commencement of the voyage. The claimant was the holder of a delivery order for part of the cargo issued by the seller under a c.i.f. contract. As the claimant did not become owner of the goods in question until they had been ascertained on discharge, Roskill J held that an action in negligence would not lie. The decision met with considerable criticism and attempts were made to circumvent it;
one judge in 1981 going so far as to express the view that if Margarine Union v Cambay Prince ‘were being decided today, it would be decided differently’. This more liberal approach was firmly rejected a few years later by a unanimous House of Lords in The Aliakmon who restored the full vigour of the principle laid down in Margarine Union v Cambay Prince. In this case a cargo of steel suffered damage in transit due inter alia to negligent stowage at a time when the risk but not the property in the goods had passed to a c. and f. buyer. In denying the buyer any remedy in the tort of negligence on the ground that he was not the owner of the steel at the time the damage was inflicted, Lord Brandon asserted that the decision in the Margarine Union case ‘was good law at the time it was decided and remains good law today’. In their Lordships’ view there was no lacuna in the law relating to carrier liability which required to be filled by extending the range of duty of care in negligence. If for some reason the indorsee of a bill of lading could not sue, because the property in the goods remained with the indorser after indorsement of the bill, this merely meant that the indorser rather than the indorsee retained the right to sue the carrier for negligent damage to the goods. In such circumstances buyers under a c.i.f. or c. and f. sale could gain adequate protection by ensuring that the contract of sale contained provision that ‘the sellers should either exercise this right for their [the buyers’] account . . . or assign such right to them to exercise for themselves’. There can be little doubt that this decision was to a great extent influenced by policy considerations. On the one hand, the courts have a long-standing reluctance to extend the right of recovery in negligence for what amounts to pure economic loss. On the other, there is evident concern that by allowing the indorsee to sue in negligence – free from any constraints imposed by the contract of carriage – there is the danger that the carrier would lose the protection afforded by the terms of that contract and the relevant provisions of the Hague/ Visby Rules.