June 2003
(Sea Venture Volume 21)
Even though there was no direct authority on the point, it was long assumed by those in the shipping industry that a straight bill of lading (that is a bill which names the consignee, and is not negotiable) was in effect the same as a sea waybill. That assumption has been turned on its head by the Singapore Court of Appeal in the case APL Co. Pte Ltd v Peer Voss in October 20021, and which was approved by the English Court of Appeal decision in "The Rafaela S" in April 2003.
Briefly the facts of the Singapore case were as follows:
Peer Voss, the shipper, sold a convertible Mercedes Benz to a Korean company, Seohwan Trading Co Ltd.
Soehwan paid a deposit, following which Mr Voss arranged the shipment of the car from Hamburg to Busan with APL.
A set of three original bills of lading was issued, naming Seohwan as the consignee, but without the words "to order".
However the bill also stated:
"A set of three originals of this bill of lading is hereby issued by the carrier. Upon surrender to the carrier of any one negotiable bill of lading, properly endorsed, all others shall stand void."
The full set of originals were at all times held by Mr Voss, apparently as security for payment of the balance of the purchase price.
Shortly after the car had been discharged at Busan, APL allowed the car to be released to Seohwan without any of the original bills being presented. However, Seohwan did present a copy of the invoice issued by Mr Voss for the balance payable and a copy of an outgoing cable report form the Korea Exchange Bank paying a sum which purported to be the balance.
However, four months later Mr Voss claimed not to have been paid, and brought a claim against APL.
Unsurprisingly, APL rejected the claim on the basis that they had not committed any breach by allowing Seohwan to take delivery as it was a straight bill which should be equated to a sea waybill.
The Decision
The court accepted that as the consignee was named, the carrier could not have delivered the car to anyone else and that the bill was not negotiable. However, notwithstanding its non-negotiable character, the court still regarded the straight bill as being in many respects the same as a negotiable bill in that it stated that the carrier was still under an obligation to deliver only upon presentation of and under the terms of the bill itself. If the cargo was delivered without the original bill being presented, the carrier would be "held answerable for the tort of conversion".
The court found that ordinarily a bill of lading had two principle characteristics: (1) it is negotiable and (2) it is a document of title. However, loss of one characteristic did not necessarily result in the loss of the other. The court found that if a straight bill was to be treated as a sea waybill, the parties should reflect their intention clearly in the wording of the bill.
The court was clearly impressed by the fact that other than the naming of the consignee, the bills issued retained in format many of the features found in a negotiable bill, and the fact that a set of originals had been issued.
Somewhat ironically (given the potential impact of the decision on standard industry practices), the court felt that the requirement that an original bill had to be presented was a good thing for the industry as it would "prevent confusion and avoid shipowners and/or their agents having to decide whether a bill is a straight bill or an order bill". It also considered that APL's argument would allow there to be two categories of documents available to shippers: negotiable bills which would have to be presented; and, non-negotiable documents such as straight bills or sea waybills which did not have to be presented. Ignoring the fact that this was what the industry practise already was, the court considered that that approach was overly restrictive to an unpaid seller, and would (in some way) deprive the seller of both security and the ability to obtain financing.
The court's firm conclusion was that shipowners should only deliver the cargo against presentation of an original bill.
The English Court of Appeal in the "The Happy Ranger"2 decision had already hinted that it may not be sensible to rely on the textbooks which have stated that an original straight bill need not be produced in order to obtain delivery. This was a factor noted by the Singaporean Court of Appeal in its judgement, which suggested that it was dangerous to assume that the Voss decision would apply only in Singapore. That has proved correct following "The Rafaela S"3 decision in which Lord Justice Rix 's leading judgement whole-heartedly approved the Voss decision and found that a straight bill was a document of title and should be produced to obtain delivery.
That being the case, the shipping industry should now reconsider its redelivery procedures and any carrier which does not now require that an original straight bill be presented before the consignee is allowed to take delivery, does so at great risk.
With thanks to Susan Macnaughton of Stephenson Harwood & Lo, Hong Kong, for preparing this article.
1.[2002] 2 Lloyd's Rep. 707
2.[2002] 2 Lloyd's Rep. 357. This case is discussed in another article in this volume of "Sea Venture".
3.It should be noted that leave to appeal to the House of Lords has been given in this case.
