In the last century, several English courts were faced with the following scenario: a ship laden with cargo arrived at a discharge port but the true owner of the goods was not there with the documents of title and the bills of lading, ready to take the cargo.
Rather than wait around incurring costs, the shipowner discharged the cargo into the custody of a warehouseman or a port authority.
From there the cargo disappeared, perhaps given away or stolen, customarily by servants or agents of the warehouseman or port authority.
The true cargo owner then turned up with the bills of lading, found the cargo gone and sued the shipowner for misdelivery, either in contract or tort – or both.
Several defences were tried without much success and the shipowners then sought to defend themselves by means of a clause which purported to exclude liability for loss of the goods after discharge. In the last century, even into this one, the shipowner sometimes succeeded.
An example is Chartered Bank of India, Australia & China v British Steam Navigation Co [1909]. In this case, after discharge the cargo was taken away by third parties with the connivance of an employee of the landing agents.
It was held that the cargo had not been delivered by the shipowner and the shipowner's liability ceased on discharge. It is essential to the decision in this case that there had been no delivery (or misdelivery) and that the dishonest employee was not regarded as an agent of the shipowner.
But shipowners have not, so far as I can find, succeeded since 1909. Perhaps the tide turned with Compania Importadora de Arroges Collete y Kamp v P&O Steam Navigation [1927], in which it was held that these clauses did not apply to "simple cases of misdelivery".
The matter has become topical again because of a spate of cases through the 1990s involving the loss of cargo in mysterious circumstances. These cases arose largely from the breakup of the old Soviet Union and the opening up of China to foreign trade.
What usually happens is this: once the cargo is in the custody of the port authority or warehouseman it is given away by employees there without the bill of lading, usually due to the persuasive powers of important local interests, who are somehow never available to give evidence. Sometimes the intended receiver gets the cargo, albeit without the inconvenience of paying for the bill of lading which would enable him to get it legitimately. Sometimes it is unknown who gets the cargo.
In these cases the shipowners have tried repeatedly to rely on the modern version of the clause and have invariably failed. In The Sormovskiy 3068 [1994], the clause, a reasonably typical example, provided that "the carrier shall in no case be responsible for loss of or damage to cargo arisen prior to loading and after discharging".
The cargo of sugar was discharged at the Russian port of Vyborg by the port authority into railway wagons, which then carried the cargo inland, never to be seen again.
Mr Justice Clarke rejected defences based on the argument that, in Soviet days, ships had to allow the port authority to take the cargo without producing the bill of lading. He also rejected the defence based on the clause on the grounds that the cargo was lost immediately when it was put into the wagons, and was therefore not lost "after discharge".
A year later, when the point came back before Clarke in The Ines [1995], this answer was not available because the cargo of telephones had initially been stored by the Port Authority of St Petersburg in a warehouse and was only later released by the port authority without production of the bills of lading. This time Clarke held that what had happened was a "misdelivery" by the shipowner through the agency of the port authority without the bill of lading – and the clause did not apply to misdeliveries.
Similar cases are in the pipeline. The courts will have to reconsider the purpose of the clause and whether it is right to characterise these cases as 'misdeliveries' by shipowners (not covered by the clauses) as opposed to 'loss' after discharge (which is what the clauses purport to exclude). They will then have to interpret the clause as not applying to misdelivery.
After all, what is being considered is loss caused by third parties at the discharge port, in respect of which both the shipowner and the cargo owner are innocent.
It is therefore a question of allocating the risk of loss between two innocent parties. It does not, for example, seem obvious to characterise the unauthorised and dishonest acts of a local employee of a port authority or warehouse company as 'misdelivery'. Nor is it obvious that this should not be characterised as theft or loss of the goods. What does seem obvious, however, is that the last has not been heard of this point.
Steven Berry is a barrister at Essex Court Chambers.