HL Deb 04 February 1992 vol 535 cc230-9

7.39 p.m.

Lord Goff of Chieveley

My Lords, I beg to move that the Bill be now read a second time. The Carriage of Goods by Sea Bill provides a long awaited opportunity to reform and update the law of this country in respect of rights to suit relating to contracts for the carriage of goods by sea. It gives me great personal satisfaction to propose this legislation as from my experience at the Bar and on the Bench of that most international of domestic courts, the Commercial Court in London, I am only too well aware of the need for reform.

A very large number of contracts for the carriage of goods by sea are expressly governed by English law even though the ships, the cargoes and the ports involved have no connection with this country. London's role in the making of these contracts and the settlement of disputes which may arise under them results in a significant contribution to our invisible earnings and helps to secure the status of London as the world's leading maritime centre and centre for the resolution of maritime disputes.

The basic problem is that, since the contract of carriage is made between the shipper and the carrier, at common law only those parties could sue and be sued under that contract; for example, for damage suffered by the cargo on the voyage, or for short delivery of the cargo at destination. Thus, although the goods subject to the contract may have been sold and even resold while afloat—and there can be long chains of contracts—at common law the buyer of the goods afloat was unable to sue on the contract of carriage. The Bills of Lading Act 1855 was passed to remedy this defect. However, as I will shortly explain, for some considerable time lawyers and commercial interests have considered that the statutory provisions in the 1855 Act relating to the right to sue the carrier have themselves become out of date, because the statute no longer reflects commercial practice and is unduly restrictive in the rights it grants. Recent decisions of the courts have reinforced these views, as has the development in other jurisdictions of statutory provisions which are considered to be better fitted to meet modern commercial expectations and requirements.

Although there has long been agreement on the need for reform, until the Law Commission and the Scottish Law Commission took the matter in hand, lawyers and commercial interests had found it difficult to agree upon the scope and form of change which was needed. We owe a particular debt of gratitude to Mr. Brian Davenport QC, then a distinguished Law Commissioner, whose initiative led to the Law Commissions' reports. These were published in March of last year, and the very widespread support which the proposals received reflects the quality of the work undertaken by the commissions and the appropriateness of the balance which they struck. The text of the Bill now before the House is the culmination of the commissions' work, and support for its early enactment has come not only from United Kingdom interests but also from other European interests which adopt, and wish to continue to adopt, English law as the basis for their contracts for the carriage of goods by sea.

Based on their consultations and their examination of the law in other jurisdictions, the Law Commissions concluded that the Bills of Lading Act 1855 no longer meets commercial requirements or accommodates commercial practice, for the following reasons. The Act enable, the receiver of goods shipped under a bill of lading to sue the carrier for non-delivery or defective delivery if the property in the goods has passed to him "upon or by reason of" the consignment or endorsement of the bill of lading. This requirement causes difficulty whenever property either has not passed at the relevant time or has passed independently of the transfer of the bill of lading with the result that the transfer of the bill of lading is in no way causative of the passing of property.

For example, a common problem under the 1855 Act concerns sales involving bulk cargoes. The Act does not enable a purchaser of part of a cargo shipped in bulk under a bill of lading to sue the carrier because the Sale of Goods Act prevents property passing in part of a bulk cargo before the goods constituting that part have been ascertained. This means that, for example, any of the purchasers of part of an oil tanker's cargo who purchase it during the course of the tanker's voyage cannot sue the carrier under the terms of the bill of lading. Again the 1855 Act does not reflect current commercial practice whereby goods are often carried under a document other than a bill of lading, notably a sea waybill. Finally, the 1855 Act does not allow for future developments in commercial practice in this field, and in particular the increasing use of electronic data interchange.

In summary, the Bill now before the House solves these problems, first, by simply providing that any lawful holder of a bill of lading has the right to sue the carrier and further by conferring the same right on a person who is identified in a ship's delivery order covering part of a cargo originally shipped in bulk. In addition, the Bill provides that a person entitled to take delivery of goods under a sea waybill which contains or evidences a contract for the carriage of goods by sea is likewise enabled to sue the carrier. In turn, any person thus entitled to make a claim is placed under the same liabilities towards the carrier as if he had been party to the original contract of carriage. The Secretary of State for Transport will be given authority under the Bill to make regulations governing electronic data interchange, though it is recognised that the timing of any such regulations will depend on the development and acceptance of electronic data interchange by the industry. Finally, the Bill does not seek to restrict other rights to sue, for example, under a charterparty or in tort, nor does it affect in any way the application or operation of the international Hague Visby Rules on liability and limitation in respect of cargoes carried under a bill of lading.

Perhaps I may turn briefly to the individual clauses of the Bill. Clause 1 lists the shipping documents to which the Bill applies and allows the Secretary of State for Transport to make regulations, subject to negative resolution, to apply the provisions of the Bill to electronic data interchange. Clause 2 is the heart of the Bill and allows the lawful holder of a bill of lading, the consignee identified in a sea waybill, or the person entitled to take delivery under a ship's delivery order, to sue the carrier under the original contract of carriage even though he may not have been party to the original contract. The lawful holder of a bill of lading can sue a carrier even though the bill of lading is no longer a transferable document of title so long as he became holder of the bill of lading before it ceased to be such a document.

A person entitled to sue under a ship's delivery order will be able to do so on the terms of the undertaking contained in the order, such right being confined to the goods covered by the order. For example, if the order covered 1,000 tonnes of a 10,000 tonne cargo of grain shipped in bulk, his rights are confined to the 1,000 tonnes and do not extend to the whole 10,000 tonne cargo. Where a person who is given a right of suit has not himself suffered any or all of the loss in question, he is allowed to exercise the right of suit for the benefit of such persons who have suffered the loss.

Finally, the clause makes provision for the rights of suit of the original shipper and of intermediate parties entitled to sue by virtue of the provisions of the Bill.

One of the points of balance in the Bill to which I have referred is that those who gain contractual rights against the carrier will also be placed under contractual liabilities towards the carrier. Clause 3 therefore provides that a person who is entitled to sue under Clause 2 or who takes or demands delivery or otherwise makes a claim against the carrier becomes subject to the same contractual liabilities as if he had been an original party to the contract of carriage. Similarly, a person who takes or demands delivery before he has acquired any contractual rights will become liable when he subsequently has the rights conferred on him.

Clause 4 relates to bills of lading only and provides that a bill of lading representing goods to have been shipped or received for shipment is conclusive evidence against the carrier of such shipment or receipt so long as the bill of lading is in the hands of the bill of lading's lawful holder. This disposes of a widely criticised court ruling dating back to 1851 to the effect that a ship's master who signs the bills of lading could only bind his principal, the shipowner, in this way if the goods had actually been placed on board the ship.

Clause 5 covers interpretation and other matters. Clause 6 contains the short title and commencement and extends the Bill to Northern Ireland.

Since publication of the Law Commissions' reports and the Bill which I have just outlined, the matter has been studied and discussed in detail by the different commercial interests involved. I am pleased to say that the Bill has gained the support of all the commercial interests affected. Though cargo interests might have been expected to support it, I am glad to say that the Bill also has the support of shipowners and their insurers. The Law Commissions have struck their balance well and should be commended on their achievement.

It is some considerable time since the enactment of the Bills of Lading Act 1855. Much has been written on the 1855 Act, not all of it complimentary. However, there is now considerable evidence that commercial practice has moved on and that our law in this area needs to be amended and updated. Indeed, the common thread running through the discussions and correspondence which took place following publication of the Law Commissions' reports was that the proposed updating was badly needed and long overdue. Further delay could erode London's international position. With the enactment of the Bill now before your Lordships' House, Parliament will move our law in this area from the middle of the 19th century to well into the 21st. I commend the Bill to your Lordships.

Moved, That the Bill be now read a second time.—(Lord Goff of Chieveley.)

7.50 p.m.

Lord Byron

My Lords, I take the opportunity to thank the noble and learned Lord, Lord Goff of Chieveley, for introducing this important measure which will change significantly the basis upon which a shipowner can sue and be sued in respect of the carriage of goods from the position which has been maintained over the past 137 years. Perhaps I may say, first, what a pleasure it is to be able to welcome a new piece of legislation dealing with international trade which has its origin not in a convention named after a hitherto obscure European city but in the much more domestic confines of the Law Commission. However, that is not to say that the commission has been at all domestic or parochial in its outlook. It has consulted widely at home and has studied corresponding law in a large number of other countries before producing a Bill which, while in many ways radical, nevertheless builds upon existing statutory and common law principles.

The inadequacies of the present Bills of Lading Act have been widely debated for many years. Cargo underwriters and those who advise have understandably been pressing for change. On the other hand, shipowners and P&I Clubs have perhaps been a little nervous at what form the new Bill might take. I believe it fair to say, as regards the Bill's present form, that such fears are largely, if wholly, groundless.

It would be presumptuous of me—indeed, it is unnecessary —to attempt a detailed analysis of the Bill. However, I should like to mention one or two points. By divorcing the rights of suit from the passing of property, there must be at least some risk of double jeopardy for the shipowner. The Law Commission addressed that point and concluded that the position was not materially worse for the shipowner than at present when a duplicity of claims is always possible, especially in the case of claims from both a charterer and a holder of a bill of lading.

I am not wholly convinced by that argument, especially as it is not always the ultimate payment of damages which may concern the carrier. It is often the requirement to secure potential claims. For understandable reasons, those involved—that is, cargo underwriters and others—are more anxious than ever to obtain security for their claims. The possibility of shipowners having to secure a number of different claimants, perhaps in different jurisdictions, is not, I think, wholly fanciful. Clearly, we shall have to see how that works in practice.

As was explained by the noble and learned Lord, a key concept in the Bill is that of the "lawful holder". I, for one, would be grateful if the noble and learned Lord could help a little further with that phrase. One can think of obvious examples where the holder might not be lawful, as in the case of theft or fraud by the holder himself. On the other hand, the commentary to the Bill and the Law Commission's report talks about being in possession of a bill in good faith. I am not certain that the concept of "lawful" is wholly synonymous with good faith. For example, it would be possible to hold in good faith a bill which was in origin an entirely fraudulent bill. I cannot say that I have researched the use of the word "lawful" in other statutes, but I should be most grateful if the noble and learned Lord could further assist us on the point.

Broadly speaking, I believe that the Bill achieves a fair balance between respected interests. Cargo underwriters will no longer find that their claim collapses because of the difficulty over title to sue. On the other hand, shipowners are probably less likely to find themselves facing claims in tort where they will be denied the benefit of their bill of lading contract. They have also acquired better rights to sue the receiver for claims such as those concerning the shipment of dangerous cargo, and so on.

There has been some criticism of a policy, which has its origins in the original 1855 Act, depriving the shipper of his right to sue after the endorsement and transfer of the bill of lading to a third party. I do not associate myself with that criticism; I think that it is misplaced.

As to the drafting of the Bill, I must confess that there are one or two areas where it seems to me that the language possibly lacks some clarity. Under Clause 2(2) (b), there is reference to, rejection to that person by another person of goods or documents delivered to the other person in pursuance of any such arrangements". I believe that the intention is entirely clear as to when documents or goods may be rejected up the line to the original seller. However, I am not entirely happy with the concept of rejection "to" a person. It does not seem a very happy use of the word "to" in that context.

In conclusion, I should like to make a very small point in relation to the naming of the Bill which, I believe it is fair to say, has not met with universal acclamation. I can understand why it was thought not possible to have the Bills of Lading Act 1992. It is because the measure does not deal solely with bills of lading; indeed, it has other important ramifications in relation to waybills, and so on. However, it is perhaps a pity that we already have a number of Carriage of Goods by Sea Acts.

I do not wish to appear to be carping. The Bill is very much to be welcomed. It will undoubtedly help to keep the Commercial Court in London as a major centre for the resolution of international trade and shipping disputes—something which recent European Community legislation has not always helped. Again, I should like to express my thanks to the noble and learned Lord, Lord Goff of Chieveley, for introducing the Bill. I wish it well.

7.56 p.m.

Lord Donaldson of Lymington

My Lords, it was in 1946 that I was called to the Bar and became a pupil of my noble and learned friend Lord Roskill, who I am happy to see is now in his place. Very shortly afterwards he started the long road of introducing me to the arcane mysteries of the Bills of Lading Act 1855.

Throughout my time as a practitioner at the Bar—and, indeed, as a judge of the Commercial Court in the Queen's Bench Division—I liked to regard myself as a shipping law specialist; and, possibly towards the end of the time, I actually was. When I went to the Court of Appeal I regret to say, in some ways, that I had to become a general practitioner. Therefore, I suppose that my proper description tonight is a "lapsed specialist". But in so far as a lapsed specialist has any right to address your Lordships' House, I should like to commend the Bill as meeting very long felt wants in shipping law.

However, more to the point is the fact that for some years now I have been president of an organisation, known as the British Maritime Law Association which is the British chapter of a much wider and worldwide organisation called the Comité Maritime Internationale. The BMLA is not an organisation of academic lawyers; indeed, very far from it. It is highly representative of all the various commercial interests which are concerned with the shipping industry. My reason for saying that it is rather more to the point tonight is that I have been specifically asked by the executive committee of the association to assure your Lordships, in confirmation of what my noble and learned friend Lord Goff of Chieveley said, that the proposals in the Bill have universal support throughout the industry.

It used to be said in years gone by that trade followed the flag. However, I believe that it would be much truer to say today that trade follows the law and that the law, in its turn, follows trade. If we do not modernise British commercial law as and when the need arises, commercial interests—which in this field operate on a worldwide scale—will undoubtedly start adopting other laws. Noble Lords would be making a great mistake if they thought that that would be a loss solely for the lawyers. Indeed, in that respect our hearts need not bleed for the lawyers. But once English law is abandoned as virtually the international basis of shipping contracts (which includes the associated insurance, brokering and chartering contracts) those who are concerned will start consulting other nationalities and other commercial centres because it will be natural to do so —if your contract is governed by Dutch law then for goodness sake go to Amsterdam where they understand Dutch law and use the Rotterdam shipping market, and so on.

There is a real economic interest in the Bill being passed. I trust that the need for Members of another place to get themselves re-elected (of which I read in the papers) will not interfere in any way with the passage of the Bill and that in due course I may see it as a 1992 Act, perhaps with a different Short Title.

8 p.m.

Lord Roskill

My Lords, perhaps I may begin by echoing every word that my noble and learned friend Lord Goff of Chieveley and my noble and learned friend (and former pupil) the Master of the Rolls has said. Since the war everybody who has practised in the Commercial Court or been a judge in that court has been alive to the point I raise.

I ought to declare a particular interest. In 1968 I was sitting as a judge in that court and it fell to me to decide the question whether the buyer of a part cargo or parcel of wheat or grain of some sort could sue the ship in tort when he had not been the owner of the goods at the time they were damaged. Unless he could, the shipowner could escape a claim for negligence. Most reluctantly, I was constrained by a long line of authorities going back over a century to hold that there was no cause of action in those circumstances. I earnestly hoped that the Court of Appeal would find a way out, but nobody tried to do so.

About six or seven years ago that point came up again. It went to the Court of Appeal of which my noble and learned friend Lord Goff (then a Lord Justice) was a member. In a dissenting judgment he vigorously disagreed with me and thought he had found a way out. The case came to your Lordships' House. I am happy to say—but only moderately so—that in the end I was said to be right and, almost incredibly, my noble and learned friend was said to be wrong. It takes this Bill to establish that I was wrong and he was right. I think that is a means of achieving immortality.

Everyone hopes that this Bill will go onto the statute book quickly. Perhaps I may echo what my noble and learned friend Lord Goff said by way of tribute to Mr. Davenport and Mr. Beatson of the Law Commission whose energy and ingenuity has found a way around the problem with which we have lived.

My noble and learned friend Lord Goff also referred to Clause 4. That has got rid of the most monstrous rule called the rule in Grant v. Norway on which all of us were brought up. It is an enormous relief to see that that has gone and shipowners cannot escape liability when goods have been lost by saying that they are not bound by the acknowledgement in the bill of lading.

I should like to say one word about the Short Title and make a particular plea to the draftsman. My noble and learned friend said, absolutely rightly, that the Bill did not affect the Hague-Visby Rules. Those rules are now enshrined in the Carriage of Goods by Sea Act 1971. That in turn repealed the famous Carriage of Goods by Sea Act 1924 which first introduced the Hague Rules into this country. To have another Act called the Carriage of Goods by Sea Act 1992 is, with great respect to the draftsman, a complete misnomer. This Bill is about documents of title and documents which are not of title but which by statute are given very much the same effect. I appreciate that a purist may see a possible difficulty in calling it the Bills of Lading Act 1992 because it does not deal only with bills of lading. But why should it not be called the Carriage of Goods by Sea (Documents) Act or given a name which limits its effect to documents of the class with which it deals? The reform is necessary, but to give it the same title as the 1971 Act, when quite rightly it does not even suggest that it has to be construed together with the 1971 Act, is a route to confusion hereafter. I hope that that suggestion, which others have also made, will not he met by the rather obdurate approach, "This is the way we like to do it". I strongly support the Bill.

8.5 p.m.

Lord Underhill

My Lords, when the Bill first appeared on the Order Paper in my innocence I thought it was a straightforward transport Bill. For that reason my name was added to the list of speakers. I am grateful to the noble and learned Lord, Lord Goff, for explaining the Bill. At least I know a little more about it. The noble and learned Lord must he gratified by the powerful support of other noble and learned Lords. I pondered whether or not I should leave my name on the list. I decided to leave it for one reason only. When I realised that the Bill was to replace the 1855 Act, of which I knew nothing, I decided the best thing to do was not to seek a brief about which I would know nothing and would simply have to read out, but to listen carefully to the debate to be satisfied that the 1855 Act needed to be replaced and that it was being replaced with legislation that was wanted and deserved. From what I have heard tonight, I am satisfied that that is the case. Any minor points can be dealt with at the next stage of the Bill. Therefore, in my innocence of the law I wish the Bill success at its next stage.

8.6 p.m.

The Minister of State, Department of Transport (Lord Brabazon of Tara)

My Lords, like other noble Lords, I should like to thank the noble and learned Lord, Lord Goff of Chieveley, for his very able introduction of the Bill. The Government wholeheartedly welcome and support it and hope for its early enactment.

This Bill, as the noble and learned Lord indicated, represents the fruits of several years' work by the English and Scottish Law Commissions. One of the most impressive features of that work was the consultation exercise undertaken by the two Law Commissions. They canvassed and obtained the views of all interested parties, including commodity and other traders, shipowners, underwriters, arbitrators and bankers. They also received invaluable advice from many distinguished commercial lawyers with expertise in marine cargo disputes, including practitioners, academics and members of the judiciary. Indeed, the commitment of the commercial Bench and Bar has continued today as the noble and learned Lord, Lord Goff, is himself no stranger to the workings and concerns of the Commercial Court.

The result of the two law commissions' extensive consultations has been the production of a commendable piece of law reform which seeks to preserve the position of London as a major financial and commercial centre, with all that that implies for our invisible earnings.

I single out four features which I think call for particular comment. First, the Bill would overcome the restrictions on the right to sue currently faced by holders of bills of lading. Secondly, the Bill looks to the future by anticipating certain problems which are increasingly likely to cause difficulties unless legislative action is taken soon. I am thinking in particular of the provisions made for sea waybills and electronic data interchange. Thirdly, the Bill would bring our law on right to sue in marine cargo cases much more into line with the law of our European partners and that of other leading maritime jurisdictions. Fourthly, the Bill is non-controversial. The policy and balance contained in it has obtained the support of all the commercial parties. Indeed, the Law commission has succeeded admirably in achieving a result which offers something for everybody, or at least everybody engaged in the world of carriage of goods by sea.

Clause 1 empowers my right honourable friend the Secretary of State for Transport to make regulations regarding the application of the provisions of the Bill to electronic data interchange. Though considerable work is being done in this field it may be some time before it will be appropriate to make those regulations. As electronic transmissions could transfer rights and liabilities under contract law appropriate safeguards will have to be in place and there will have to be international agreement between commercial interests on what those safeguards should be.

I commend the work of the two Law Commissions which has resulted in the Bill now before us. I also thank the noble and learned Lord, Lord Goff, for taking it forward. The noble and learned Lord referred to the need for early enactment. I trust that with your Lordships' agreement we will be able to speed this Bill on its way onto the statute book.

8.10 p.m.

Lord Goff of Chieveley

My Lords, I am most grateful to your Lordships for what you have said about the Bill. I am especially grateful to the Minister for expressing the Government's support for the Bill. In view of the general support which I understand the Bill has received, I do not believe that there is much to which I need refer. On the two short points that have been taken, the first by the noble Lord, Lord Byron, about the meaning of the words "lawful holder of a Bill of lading" I should merely like to say that I imagine that that was included to exclude the unlawful bill of lading—one who had come by the bill unlawfully. I shall gladly communicate with the noble Lord elsewhere if it would be of assistance to him.

With regard to the Bill's Short Title, I take the criticism. The Long Title makes it plain what the Bill is all about. I do not believe that I need add anything more. I commend the Bill to your Lordships' House.

On Question, Bill read a second time, and committed to a Committee of the Whole House.