Article

Note: After a shipment of timber and plywood carried on board the vessel "Starsin" was damaged en route from Malaysia to Antwerp and Avonmouth, the owners of the cargo who held a transferrable charter bill of lading brought an action against the shipowners for damage to the cargo.

On its face, the bill of lading in question contained boxes in which the shipper, consignee, notify address, and vessel were identified. In a box with the printed heading "Signature" at the bottom right-hand corner of the B/L, there was typed "As Agent for Continental Pacific Shipping (The Carrier)", below which was a rubber stamp, "United Pansar Sdn Bhd", a company which acted as port agent for Continental Pacific Shipping at the port of loading under the bill.

The reverse side of the bill of lading contained the heading "Company's Standard Conditions" below which 35 conditions were set out, including a definitions clause, identity of carrier clause, and demise clause. Language contained in these conditions contradicted that contained on the B/L's face which gave rise to the question of whether this B/L was the shipowner's or the charterer's.

The Commercial Court ([2000] 1Lloyd's Rep. 85), Colman, J., found the B/L to be the charterer's and that the cargo owners could seek claim against the charterer. The Court of Appeal ([2001] 1Lloyd's Rep. 437), in a divided opinion, Chadwick, LJ, Sir Andrew Morritt, V-C, and Rix LJ (dissenting) reversed, ruling that the contract of carriage was with the shipowners and that they were liable in contract as claimed. On appeal, the final appellate court, the House of Lords, held that the charterer was liable as carrier and could be liable for negligence to the owners of the cargo.

In rendering their judgments, Lord Bingham of Cornhill, Lord Steyn, Lord Hoffmann, Lord Hobhouse of Woodborough, and Lord Millett each gave particular effect to UCP500.

Lord Bingham of Cornhill stated:

"It is plain ... that the bill was drafted to express or evidence a contract between the shipper (and any transferee of the bill) and the owner of the vessel. Conditions 33 and 35 so state. The provision for signature by the master of the vessel so indicates. But a very cursory glance at the face of the bill is enough to show that the master has not signed the bill. It has instead been signed by agents for CPS which is described as "The Carrier". I question whether anyone engaged in maritime trade could doubt the meaning of "carrier", a term of old and familiar meaning, but any such doubt would be quickly resolved by resort to the first condition overleaf in which the term is defined to mean the party on whose behalf the bill of lading has been signed, that is, the party contracting to carry the goods."

"I can well understand that a shipper or transferee of a bill of lading would recognise the need to consult the detailed conditions on the reverse of the bill in any one of numerous contingencies which might arise and for which those conditions make provision. He would appreciate that the rights and obligations of the parties under the contract are regulated by those detailed conditions. But I have great difficulty in accepting that a shipper or transferee of a bill of lading would expect to have to resort to the detailed conditions on the reverse of the bill (and to persevere in trying to read the conditions until reaching conditions 33 and 35) in order to discover who he was contracting with. And I have even greater difficulty in accepting that he would expect to do so when the bill of lading contains, on its face, an apparently clear and unambiguous statement of who the carrier is."

Lord Bingham of Cornhill further added that he is "fortified in taking this view of market practice by noting its adoption (since 1994) in the ICC Uniform Customs and Practice for Documentary Credits" and UCP500 Article 23(a).

Lord Bingham of Cornhill continued: "Article 23(v) makes plain that banks will not examine terms and conditions on the back of the bill of lading. The ICC's Position Paper No 4 reiterates that the name of the carrier must appear as such on the front of the bill and that banks will not examine the contents of the terms and conditions of carriage. ... It is of course true ... that these provisions govern relations between issuing bank and beneficiary, not shipper or consignee and carrier. But it would be very surprising, and also (in my opinion) very unsatisfactory, if a practice accepted in one field were not accepted in another so closely related."

Lord Steyn stated:

"In [UCP500 Article 23(a)v] it is expressly stated that banks will not examine the contents of terms and conditions on the back of the bill: see further Position Paper No. 4: UCP 500- Transport documents articles. At the very least this material suggests that, faced with the need for prompt decisions in international trade, this is how parties involved in such a transaction would view the bill of lading. It demonstrates how far removed from the real world of commerce the technical approach advocated by the cargo owners in this case is. Moreover, insofar as there is a choice between two competing interpretations, this material strongly suggests that the best interpretation is to give predominant effect to the face of the bill."

"It follows that in my judgment the ruling of the [Court of Appeal] majority on the identity of the carrier point cannot stand."

Lord Hoffmann stated:

"To whom is a bill of lading addressed? It evidences a contract of carriage but it is also a document of title, drafted with a view to being transferred to third parties either absolutely or by way of security for advances to finance the underlying transaction. It is common general knowledge that such advances are frequently made by letter of credit and that the bill of lading is ordinarily one of the documents which must be presented to the bank before payment can be obtained. The reasonable reader of the bill of lading will therefore know that it is addressed not only to the shipper and consignee named on the bill but to a potentially wide class of third parties including banks which have issued letters of credit."

"Since a bill of lading is a legal document, the merchant or banker to whom it is addressed will know that on some questions of interpretation he will need to consult a lawyer. But he will also expect to be able to find out certain essential things for himself. These will include the identity of the carrier. The normal bill of lading recognises this distinction by having some of its terms written or printed on the front, where the businessman or banker can readily find them without a lawyer at his elbow, and the mass of other clauses printed at the back. Of course there will be cases in which the information provided on the front will be too obscure to provide the businessman or banker with the information he expects. In such a case, he may have to ask his lawyer to see whether the question can be elucidated by plunging into the small print at the back, or, if he is a banker offered the bill of lading pursuant to a letter of credit, he may simply reject it on the ground that he cannot be expected to puzzle out the answer by reference to other parts of the document. On the other hand, if the information is clearly stated on the front, the reasonable merchant or banker would go no further. The banker, for example, will accept the bill of lading when tendered against a letter of credit as having been issued by the named carrier without examining the terms on the back."

"As it is common general knowledge that a bill of lading is addressed to merchants and bankers as well as lawyers, the meaning which it would be given by such persons will usually also determine the meaning it would be given by any other reasonable person, including the court. The reasonable reader would not think that the bill of lading could have been intended to mean one thing to the merchant or banker and something different to the lawyer or judge."

"The proposition that bankers do not examine the contractual terms on the back of a bill of lading has long been common general knowledge and for many years the courts have said that they were not expected to do so ... . In more recent times, bankers have issued public statements to this effect in the form of the ICC Uniform Customs and Practice for Documentary Credits."

Lord Hoffmann continued: "[Counsel] who appeared for the cargo owners, said that Article 23 of UCP 500 was irrelevant because it only specified the conditions upon which a bank would accept a bill of lading as conforming to the terms of a letter of credit. That had nothing to do with the interpretation of the bill of lading as between the parties (or alleged parties) to the contract of carriage. I do not agree. It is true that the purpose of Article 23, when UCP 500 has been incorporated into the terms of a letter of credit, is to specify what will count as a conforming bill of lading. But what it also shows is that, if the conditions for identifying the carrier have been satisfied, the bank will treat the document as having identified that party as the carrier. In other words, Article 23 and the Position Paper show that if a document bears upon its face the words 'ABC Co Ltd as agent for XYZ Shipping, carrier [signature]' the bank will treat it as meaning that XYZ Shipping is the carrier. Since it is common general knowledge that banks almost invariable issue letters of credit on the terms of UCP 500, those terms will be part of the background available to the reasonable reader seeking to ascertain the meaning of the bill of lading. He will know that a bank, one of the potential addressees which anyone issuing a bill of lading must have in mind, would accept it as meaning that the person named on the front as the carrier was indeed the carrier. And the reasonable reader will not think that the bill of lading could have been intended to have one meaning to a bank and another to a consignee or assignee."

"For this purpose it does not matter whether port agents in Malaysia are likely to have heard of UCP 500. Their knowledge and views on these matters are irrelevant because, unlike UCP 500, they are not reasonably available to everyone in the class of persons to whom the document was addressed. Nor does it matter that, as appears to have been the case here, the same port agents issued other bills in different and non-conforming form: this too is not something which the reasonable addressee of these bills could be expected to know and therefore not admissible background. The construction given to the bill of lading must be objective and uniform and, in the case of the identity of the carrier, determined by an unequivocal statement on the face of the document."

"Thus it seems to me that in the present case the reasons for treating the words on the front of the bill of lading as determinative and overriding the identity of carrier and demise clauses go well beyond the general common sense rules of construction which give 'preponderant importance' to the terms of the signature over the body of the document ... or to written additions over boilerplate print ... ."

Lord Hobhouse of Woodborough stated:

"[Counsel for the shipowners] sought to develop his argument in a number of ways. He referred to the Uniform Custom and Practice for Documentary Credits and the ICC position papers which amplify them. The Uniform Custom is essentially a bankers' code of practice prepared for the purpose of clarifying how documentary letters of credit should be drafted, how the purchaser's stipulations should be given effect to and what are the respective rights and liabilities of the opening bank, the confirming bank and the notifying bank. It is as a matter of the standard practice of banks contractually incorporated into documentary letters of credit. He rightly pointed out that the current version of the code (UCP500) has made significant changes to the previous versions and among other things, requires that the actual identity of the carrier should be disclosed and particularised by naming it or him on the face of the bill of lading. Thus, if it is a master's bill of lading, the actual name of the master must appear on the face of the bill of lading; or if it is the shipowner or a charterer a specific identification of the relevant legal entity must be made. All this is a worthy aspiration and it remains to be seen how deep the new banking practices will penetrate into the former habits of port agents in places such as the East Indies. In the present case they did not. None of the bills of lading issued in respect of any of the cargo carried from Malaysia to Europe were fully compliant. The bills of lading the subject of these actions failed to identify which Continental Pacific entity was being referred to. There was no evidence to suggest that the different signatures to the bills of lading the subject of this action derived from any attempt to comply with the code. The value of drawing attention to the code is that one should now be prepared to look for the identity of the carrier on the face of the bill rather than in the clauses on the reverse. Bills of lading are transferable documents and can be expected, as often as not, to form part of the documentation to be tendered under a documentary letter of credit."

Lord Millett stated:

"I need no persuasion that businessmen expect the identity of the carrier, together with other variables which describe the object of the particular voyage, such as the vessel, the goods, and the ports of loading and discharge, to be found on the face of the bill of lading and not tucked away among the standard terms and conditions printed on the back. Since 1994 the practice of the market has been adopted by the ICC Uniform Customs and Practice for Documentary Credits, Article 23 of which indicates that banks do not in practice examine the contents of the terms and conditions of carriage on the reverse of a bill of lading. That of course is a matter between the bank and its customer, not between the shipper or consignee and the carrier; but against such a commercial background it would create an unacceptable trap to allow the detailed conditions on the back of a bill of lading to prevail over an unequivocal statement of the identity of the carrier on the face of the bill."

[CSB]

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