Presentation of a Bill of Lading

Presentation of a Bill of Lading

The unique characteristic of the bill of lading is that delivery of the goods has to be made against surrender of the bill of lading. This rule has a two fold purpose:

1- it protects the holder of the bill in that it is a basic term of the contract of carriage that the carrier must only deliver the goods against presentation of the bill of lading.
2- such delivery serves to discharge the carrier from further obligations under the contract of carriage.

The only problem so far as the carrier is concerned is that, while he is aware of the identity of the shipper, he is not aware of the identity of the party entitled to delivery at the port of discharge in cases where the goods have been sold and resold in transit.

As the carrier is liable to substantial damages in the event of mis-delivery, he would obviously prefer a straight or non-negotiable bill under which his obligation is to deliver only to the named consignee. In the case of export sales, the use of such a non-negotiable bill is often not commercially practicable.

The carrier’s problems are compounded by the fact that bills of lading are traditionally issued in sets of from three to six originals and that delivery of the cargo can be required against the presentation of a single original from such a set.

This practice dates back to the sixteenth century and is designed to enable one original to be retained by the shipper, a second by the carrier as part of the ship’s papers, and the remainder dispatched to the consignee, often by different methods, for example, one by seamail and another by airmail.

In order to protect the carrier there is frequently a provision in the bill that ‘one being accomplished, the others to stand void’. The carrier is thus protected if he makes delivery against a single unendorsed original bill or alternatively against a single validly indorsed bill.

Liability here is, however, strict and the carrier will be liable if he makes delivery against a forged indorsement even though he is unlikely to be able to detect it. In such circumstances the opportunity for fraud is obvious and it is somewhat surprising to find so few recorded cases of the misuse of an original bill.

One such case was that of Glyn Mills v East & West India Dock Co in which a cargo of sugar was shipped in Jamaica and consigned to Cottam and Co, a firm of London merchants. A set of three bills of lading was issued by the master in which Cottam and Co were named as consignees and freight was made payable on delivery of the cargo in London. While the goods were in transit, Cottam indorsed one bill to Glyn Mills as security for a loan. On arrival of the goods in London they were deposited in a ware- house from which Cottam obtained delivery on paying the freight due and presenting the second unendorsed original bill.

In an action brought by Glyn Mills, the House of Lords held the warehouseman not liable for misdelivery as he had acted bona fide on the presentation of an unendorsed bill of lading and without notice of the bank’s claim.

In the opinion of Lord Selborne LC, ‘It would be a matter neither reasonable nor equitable nor in accordance with the terms of such a contract, that an assignment, of which the shipowner has no notice, should prevent a bona fide delivery under one of the bills of lading produced to him by the person named on the face of it as entitled to delivery, in the absence of assignment, from being a discharge to the shipowner.’

On the other hand, if the warehouseman had been aware of the claim from Glyn Mills before making delivery on the bill, he would have acted at his peril. In such circumstances the correct procedure would be to interplead. Should the carrier, or his agent, deliberately disregard the basic obligation to make delivery of the cargo only against presentation of the bill, he will be guilty of a fundamental breach of the contract of carriage and could lose the protection of all exceptions and limitation of liability clauses.

So in Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd the respondents shipped a consignment of bicycle parts under a bill which included a clause providing that ‘the responsibility of the carrier shall be deemed to cease absolutely after the goods are discharged from the ship’. On the vessel’s arrival at Singapore the goods were discharged and subsequently the carrier’s agents released them to the consignee without production of a bill of lading, after receiving a form of indemnity from the appellant bank. Although it was alleged that such procedure was common practice in Singapore, the Privy Council held that, by knowingly delivering goods without production of the bill, there had been a breach of a basic obligation of the contract which deprived the carrier of the protection of the cesser clause.

This judgment represents the traditional view of the effect of fundamental breach. Following the decision in Photo Production v Securicor, however, fundamental breach no longer operates as a rule of law but must be approached as a question of construction. The evidence suggests, however, that similar results may be achieved by the courts applying strict rules of interpretation to exception clauses in such circumstances. Thus, in a recent case in which the Court of Appeal refused to interpret an exception clause as covering delivery of cargo against a forged bill of lading, Stuart-Smith LJ expressed the view that ‘even if the language was apt to cover such a case, it is not a construction which should be adopted, involving as it does excuse from performing an obligation of such fundamental importance.

As a matter of construction the Courts lean against such a result if adequate content can be given to the clause.’ On the other hand, it is now possible, by an appropriately drafted clause, to exclude all liability for the consequences of ignoring the presentation rule. So in The Antwerpen, the New South Wales Court of Appeal held that a carrier was afforded complete protection by a clause providing that ‘the exemptions limitations terms and conditions in this bill of lading shall apply whether or not loss or damage is caused by the actions constituting fundamental breach of contract’. Paradoxically an effectively drafted clause of this type will destroy the entire purpose of the rule.