Practical workshop on issuing bills of lading By Russell Harling and Prof. Filippo Lorenzon, Campbell Johnston Clark

Transcription

1 Practical workshop on issuing bills of lading By Russell Harling and Prof. Filippo Lorenzon, Campbell Johnston Clark 1. The bill of lading as a receipt: filling the description box The bill of lading originated as a simple receipt issued to merchants by carriers to evidence receipt by carriers, in good condition, of cargoes shipped on board their vessels. With this in mind, imagine the following scenario. Put yourselves in the shoes of a trader. As a buyer of goods on shipment terms you want to have as much security as possible visa-vis your seller and indeed the carrier of the goods you bought. After shipment of the cargo, you need some sort of documentary evidence of physical performance, possibly issued by a third party (to the sale contract) with assets in your jurisdiction (at present or at a future date). If you are unhappy with such evidence you may well have the right of rejecting the bill and rather importantly avoid payment. If your bank is unhappy with the bill they will have no alternative but rejecting it and avoid payment. Once the vessel has arrived at its destination, you have taken delivery of the goods (or not taken delivery of the goods if they have been lost), the goods are damaged or short, you might also have established your position in law to sue the carrier under the contract of carriage you made or have inherited with him. It is highly likely that you will have paid the purchase price by now and hence you are suffering loss. It would be tempting to think that you are now home and dry, that you will succeed in your cargo-claim. Unfortunately, it is not this simple: a. You need to prove that you have actually suffered a loss; b. You need to prove that your loss was a direct result of a breach by the carrier of one of his legal duties, whether under the contract of carriage or under his general duty to take care of your goods. This seminar will focus on three closely related but rather different questions: 1. What kind of receipt does the seller have to tender under a CIF or C&F contract? 2. What receipt does the beneficiary have to tender under the LC? 3. Will such receipt actually help sellers, buyers and banks to bring successful claims against the carrier? Bills of lading are often prepared by sellers/shippers and where carriers fill them up, they must rely principally on information supplied by the sellers/shippers anyway. Carriers will often have little opportunity, in the course of loading, independently to confirm all 1

2 that is said by shippers as to the nature, condition and quality of their cargoes. Nonetheless, because the bill of lading is a receipt issued by the carrier, it is the carrier and not the shipper that will be liable to the receiver for any discrepancies between the quality and apparent order and condition of the cargo on shipment, as acknowledged in the bill, and of the cargo as delivered to the receiver. 2. What receipt does the seller have to tender under a CIF or C&F contract? a. The bill must relate to goods sold The bill of lading must describe only the goods which are the subject of the sale. The buyer requires the bill of lading in order to receive the goods and also to be in a position to make any claim against the carrier for loss of or damage to the cargo, or to transfer these rights to a sub-buyer. Re Keighley, Maxted & Co and Bryan, Durant & Co (No.2) (1894) 70 L.T 155. b. Bill of lading quantity must correspond to invoice quantity The bill of lading must evidence shipment of goods in the quantity specified under the invoice. A bill of lading issued for an unknown quantity of goods is a bad tender. So where the seller tendered a bill of lading which, having stated the quantity shipped, was claused with the words: part of the cargo lost during loading by rafting, the buyer was held to be entitled to reject tender. In the words of Macnaghten J.: Is such a document a bill of lading which the buyer under a c.i.f. contract is bound to accept? No authority precisely covering the point has been cited to me. I have come to the conclusion that it is not a proper bill of lading which a buyer under a c.i.f. contract is bound to accept as a sufficient bill of lading under the contract. It was pointed out... on behalf of the sellers that this bill of lading contains what I suppose almost all bills of lading contain, a statement that although there is an acknowledgment of the shipment of a specified quantity of goods there is a qualification by the master of the ship that he does not know the quantity or condition or quality of the goods in question. And if I followed [counsel for the sellers] aright every bill of lading is nothing more than an acknowledgment of the shipment of an unknown quantity of goods, the description of which may or may not be in accordance with the statement in the document. I think the argument [of counsel for the buyer] on that point is right. A bill of lading which the buyer is bound to accept must be a document acknowledging the shipment of a quantity of goods according with the quantity specified in the invoice and for which the seller demands payment. And if there is an invoice for a specified quantity and the bill of lading is for either an unknown quantity of goods or a quantity of goods substantially 2

3 different from that in the invoice, the bill of lading would not be a proper bill of lading which the buyer would be compelled to accept. 1 c. The bill must be clean The bill of lading tendered must be clean, i.e. should be free of any reservation as to the apparent good order and condition of the goods. Bills of lading invariably contain clauses intended to qualify statements as to the quantity of the goods shipped. Such clauses usually refer to the description of the goods in the bill of lading as being one provided by the shipper without any acknowledgement by the carrier and then further qualifying that the weight and quantity of the cargo are unknown. Is a bill of lading containing such clauses good tender under a c.i.f. sale? The issue arose in The Galatia 2, a sugar case where the buyers attempted to rely on a weight unknown clause to justify rejection of the bill. Allowing the appeal from the arbitration tribunal, Donaldson J. said: I do not think that this common printed clause contains any qualification of the acknowledgment contained in the bill of lading rendering it otherwise than clean. I am not unhappy to reach this conclusion since weight unknown provisions occur in most printed forms of bill of lading, but are not objected to. 3 The decision is said to be distinguishable when the unknown statements are not preceded by the qualification said to weigh where the earlier decision of Libeau Wood Co v H Smith & Sons Ltd 4 should be followed. d. Bill of lading dated within the shipment period The bill of lading must evidence physical shipment within the time agreed in the contract. In practice, this is often an express requirement of the confirmation note which will usually provide for payment against presentation of bills of lading dated... or the letter of credit. 3. Any difference if the Incoterms 2010 are incorporated? If the confirmation note incorporates the CIF term of the Incoterms 2010 Rules, the seller must tender to the buyer the usual transport document. Such a document must: (a) be for the agreed port of destination; 1 Libau Wood Co v H Smith & Sons Ltd (1930) 37 Ll. L. Rep. 296 at [1979] 2 Lloyd s Rep Ibid at (1930) 37 Ll. L. Rep

4 (b) cover the contract goods; (c) be dated within the shipment period; (d) enable the buyer to claim the goods from the carrier at the port of destination; (e) enable the buyer to sell the goods in transit by transfer of the document, or notification to the carrier. (f) be the full set if issued in negotiable form. The items in bold are those related to the receipt function and are almost identical to the corresponding Common law requirements. 4. What receipt does the beneficiary have to tender under the LC? If the confirmation note provides for payment to be made through a letter of credit, the UCP 600 invariably incorporated will add an extra layer of formal requirements which the commercial invoice, the policy of insurance, the transport document and any other document to be tendered will have to comply with. Sellers seeking payment under a letter of credit will need to read it very carefully as its acceptance, express or implied, has been held to modify the payment terms of the contract of sale itself. Ficom SA v Societad Cadex Ltda [1980] 2 Lloyd s Rep. 118 Glencore Grain Rotterdam BV v Lebanese Organisation for International Commerce [1997] 4 All E.R. 514 Panoutsos v Raymond Hadley Corp of New York [1917] 2 K.B. 473Enrico Furst & Co v WE Fischer Ltd [1960] 2 Lloyd s Rep. 340 WJ Alan & Co Ltd v El Nasr Export & Import Co [1972] 2 Q.B. 189 To be acceptable under a letter of credit incorporating the UCP 600, a transport document must further comply with its dedicated article of the UCP 600. Article 20 applies to bills of lading of any description, provided they do not incorporate terms and conditions from charterparties, in which case art.22 would apply instead. However, the most important provisions related to the receipt function of bills of lading are to be found elsewhere: Art. 20(a)(ii): The bill must further contain a clear notation that the goods have been shipped on board a named vessel; Art. 14(e): The description of the goods may be in general terms not conflicting with their description in the LC; Art. 14(d): Data in a document must not conflict with data in that document, any other stipulated document or the credit (!!!); Art. 26(b): Remarks such as shipper s load and count and said by shipper to contain are acceptable; Art. 27: The bill must be clean. 4

5 5. The carriage point: cargo claims. By the shipper The shipper is usually best placed to know the condition of the cargo at the point where it is transferred into the possession of the carrier and, generally speaking, the carrier will be largely dependent on information provided to him by the shipper for the purpose of preparation of the bill. The problem with this is that where the shipper expects to be paid the price on tender of shipping documents to the buyer or to the confirming bank, he is unlikely to be too particular about the precise contents of the bill if this will delay the moment of issue of the bill. So, the one party with the right to make demands of the carrier with regard to the contents of the bill has little incentive to do so. And the party with the incentive (that is, the buyer of the goods) is not at the time a party to any contract. Against this background, we turn to consider two features of bills of lading that result in them being weak evidence of loss in circumstances where a cargo claim is brought by a shipper: (1) qualifications on the bill; (2) evidential rule of law to the effect that the bill is not conclusive evidence. (1) Qualifications on the bill Weight and quantity unknown clauses: As a matter of standard practice, the information set out on the face of the bill of lading is be expressed in qualified terms. Thus, if the carrier has stated that the goods were shipped in a certain quantity, but that the carrier does not really know whether that quantity was shipped, through weight and quantity unknown clauses, the bill provides no evidence at all that the goods were shipped in the stated quantity. The Atlas [1996] 1 Lloyd s Rep. 642 It is sometimes argued by cargo interests that unknown clauses are an illicit attempt to contract out of the Hague/Hague-Visby Rules and therefore fall foul of Article III.8. However at least in English law, this is not the case: The Mata K [1998] 2 Lloyd s Rep Nevertheless, although they are not (for the purpose of Article III.8, formally regarded as exclusion clauses, clauses attempting to negative representations are construed restrictively so that, for example, a weight unknown clause will not negative a statement in the bill as to the number of bags or packages received: The Tromp [1921] P. 337, 348 and A-G of Ceylon v Scindia Steam Navigation Co. Ltd. [1962] A.C. 60, 74. Cf however Hogarth Shipping Co. Ltd. v Blythe Greene Jourdain & Co. Ltd. [1917] 2 K.B Claused bills: The carrier may well have stated in the bill of lading that the goods were not shipped in apparent good order and condition, by clausing the bill. Clearly in this case the bill of lading provides no evidence at all that the goods were shipped in good order and condition. Indeed, the bill provides excellent evidence that they were not shipped in such condition. 5

6 (2) Evidential rule of law Even if the carrier did not qualify his statements about the goods in any way, as between shipper and carrier, the latter may later otherwise prove against the shipper that the statements on the bill were simply inaccurate. See Art. III.4 of the HVR: Such a bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described in accordance with paragraph 3 (a), (b) and (c). However, proof to the contrary shall not be admissible when the bill of lading has been transferred to a third party acting in good faith. 6. and by the receiver. The receiver is in a stronger position when it comes to relying on the bill of lading as evidence of his loss (i.e. the difference between what was shipped and what was discharged). The justification for this is that he has no say in what is inserted on the face of the bill as regards the shipped cargo; he has no contract with the carrier at that time. The Hague-Visby Rules, the Hamburg Rules and COGSA 1992 all state that when the bill of lading has been transferred to a third party acting in good faith, proof contradicting the bill of lading shall not be admissible. See: Art.III.4 of the HVR Art.16(3)(b) of the Hamburg Rules S.4 of COGSA Faced with a cargo-claim brought by, for example, a c.i.f. buyer, the carrier is bound to any statements he has made on the bill of lading, which therefore assists the receiver enormously in establishing his loss as the difference between what was discharged and what was shipped. The quid pro quo of this conclusive effect is an obligation on the shipper to indemnify the carrier for the consequences of inaccurate figures. See III.5 of the HVR: The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment of the marks, number, quantity and weight, as furnished by him, and the shipper shall indemnify the carrier against all loss, damages and expenses arising or resulting from inaccuracies in such particulars. The right of the carrier to such indemnity shall in no way limit his responsibility and liability under the contract of carriage to any person other than the shipper. Note, the indemnity extends only to statements as to leading marks and quantity, not to statements as to the apparent good order and condition. The carrier is assumed to act on his own responsibility regarding the latter, but is allowed to act on that of the shipper regarding the former. 6

7 Also see III.5(h), which excuses the carrier from liability in circumstances where there has been knowing misstatement on the part of the shipper: Neither the carrier nor the ship shall be responsible in any event for loss or damage to, or in connection with, goods if the nature or value thereof has been knowingly mis-stated by the shipper in the bill of lading. 7. Some technical complications. The position of the receiver therefore appears quite secure; all you have to prove is the goods you have ended up with; point to the difference between their quantity and apparent condition and that in which they are stated in the bill to have been shipped; and you have established your loss conclusively against the carrier. Moreover, the law stops the carrier from upsetting the statements on the bill. And finally, the carrier is given a safety-net indemnity against the shipper for details which were more clearly within his knowledge than the shipper s. However, in reality the position is far less straightforward than this. The reason for this is that the bill does not always say what it might at first appear to say. If the bill of lading makes statements about the goods which it then qualifies, then proof of shipment in a different apparent condition, or in a different quantity, far from contradicting the bill, would confirm it and is therefore admissible. (1) Qualifications as to apparent good order and condition clausing If the carrier wishes to qualify the usual statement that the cargo was shipped in apparent good order and condition, it must do so clearly. See: The Tromp [1921] P 337 The Skarp [1935] P 134 For example, consider a bill of lading which states that bagged grain to have been shipped in apparent good order and condition, but then states that some bags were noticed to be wet and torn. If the receiver were even to try to prove that the bags of grain were perfectly fine on shipment and that they must have been damaged while on board, the carrier is at liberty to prove the contrary. Such evidence brought by the carrier would, far from contradicting the bill, support it and can consequently be brought forward. (2) What clauses make a bill unclean? 7

8 It is clear that an annotation by the carrier expressly declaring a defective apparent condition of the goods makes the bill unclean. But what if the goods have been described as less than perfect by the shipper? Does that make the bill unclean? Generally speaking, a bill will be clean where it contains no positive notation of a defective condition or shortage either of the cargo covered or, where material, of its packaging. It should be noted that a bill can be clean although it contains no positive statement that the cargo covered was shipped clean. Although the sale contract or LOC may require the tender of a bill stamped clean, in which case a positive notation is required. It is clear that an annotation by the carrier expressly declaring a defective apparent condition of the goods makes the bill unclean; e.g. wet and torn bags packaging damages or stench noticed. Note also the RETLA clause. As a matter of English law, this clause is directed to the superficial appearance of the cargo; see The Saga Explorer [2013] 1 Lloyd s Rep. 401 (QB). Cf. Tokio Marine & Fire Insurance Co Ltd v Retla Steamship Co [1970] 2 Lloyd s Rep. 91 (US 9 th Circuit CA). (3) When should a Master clause the bill? The David Agmashenebeli [2003] 1 Lloyd s Rep. 92 (QB) the master should make up his mind whether in all the circumstances the cargo, in so far as he could see it in the course and circumstances of loading, appeared to satisfy the description of its apparent order and condition in the bills of lading tendered for signature. If in doubt, a master might well consider it appropriate to ask his owners to provide him with expert advice, but that was a matter for his judgment. In the normal case, he would be entitled to form his own opinion from his own observations, and the failure to ask for expert advice was unlikely to be a matter of criticism. The law did not cast upon the master the role of an expert surveyor. He need not possess any greater knowledge or experience of the cargo in question than any other reasonably careful master. What he was required to do was to exercise his own judgment on the appearance of the cargo being loaded. If he honestly took the view that it was not or not all in apparent good order and condition, and that was a view which could properly be held by a reasonably observant master, then, even if not all or even most such masters would necessarily agree with him, he was entitled to qualify to that effect the statement in the bill of lading 5 Likewise, the extent to which and the terms in which the master considers it appropriate to qualify the bills of lading statement as to the order and condition of the cargo is again a matter for his judgment. Reasonably careful masters might use different words to describe the reason why and the extent to which the cargo was not in their view in apparent good order and condition. In many cases they might only have a limited command of English and little knowledge of the nature of the cargo. The words used should have a range of meaning which reflected reasonably 5 [2003] 1 Lloyd s Rep. 92 (QB) at

9 closely the actual apparent order and condition of the cargo and the extent of any defective condition which he, as a reasonable observant master, considered it to have. 6 The case was recently cited in Standard Chartered Bank v Dorchester LNG (2) Ltd [2014] EWCA Civ (4) Weight, quantity unknown etc. Consider, again, a bill of lading which states that 1000 tonnes of grain have been shipped, weight and quantity unknown. There is no statement here that 1000 tonnes of grain have been shipped. The bill states that a quantity of grain, rumoured to be 1000 tonnes, has been shipped. When the receiver claims a loss of 300 tonnes on discharge of 700 tonnes, the carrier is at liberty to present evidence that only 700 tonnes were shipped. Such evidence, far from contradicting the bill, will confirm the fact that at the time the statement was made, the carrier did not know precisely how much was shipped. It is much easier for the carrier to obtain such evidence than the receiver. See New Chinese Antimony Co Ltd v Ocean Steamship Co Ltd [1917] 2 K.B. 664 (CA) Att Gen of Ceylon v Scindia Steam Navigation Co Ltd [1962] AC 60 (PC) The Atlas [1996] 1 Lloyd s Rep. 642 (QB) The Mata K [1998] 2 Lloyd s Rep. 614 (QB) 2. The bill of lading as a contract of carriage As a trade and banking document, the bill of lading should also comply with the requirements of the sale contract and the letter of credit. Documentary requirements in the sale contract should be regarded as conditions in the absence of a term to the contrary. So that if the contract requires that the bill of lading should be for a particular destination a bill indicating a different one is bad tender and can be rejected by the buyer. SIAT di Dal Ferro v Tradax [1980] 1 Lloyd s Rep 53 (CA) Banks, on the other hand, are allowed by the UCP to ignore almost all contractual terms in the bill of lading. There are however a number of exceptions to this rule and it is not a coincidence that the questions raised for this seminar relate to those carriage terms in the bill of lading a bank would be required to check. We were asked the following questions: 6 Ibid. a. Destination and the inclusion of the wording: goods in transit to [X] b. Should requests to change the name of the shipper, consignee, notify party and place of issue be complied with? 9

10 c. Freight prepaid B/L how does this affect Owners rights and remedies? d. Can Owners insist on incorporation of their own (head) C/P? Discussion and notes 3. The bill of lading as a document of title at Common law Under English law, a seller must tender its buyer a document of title at common law, something which is quite different from its civil law equivalent titre de credit. So unless the parties agree otherwise, a shipping document which is not a document of title at common law (e.g. a mate s receipt, a seawaybill or even a straight bill of lading) is not good tender and may be rejected by the buyer. Banks are less fussy about this aspect and would only be interested in the ever less common event that the bill of lading is actually pledged to the bank as a collateral for opening the LC. It is important to note that the document of title function of the bill of lading can only be created by its issuer (normally the carrier) but it is designed to benefit the traders. As we have seen a seller must tender a bill of lading for the contract quantity and this is the reason why split or consolidation bills may become necessary. We were asked the following questions: a. Splitting and consolidation bills: any risks? b. Changing the name of the consignee further thoughts. Discussion and notes: 29 September