Misdelivery under a bill of lading and modern technology: MSC Mediterranean Shipping Company SA (“MSC”) -and- Glencore International AG (“Glencore”) [2017] EWCA Civ 365

by Marie Didier

This case considers the meaning of a ship’s “delivery order”, and how the statutory definition of that term in English law should be understood in light of advances in technology.

Facts

The Port of Antwerp operates an electronic release system (“ERS”). Under this system, carriers provide, against bills of lading, a computer generated pin code to the receivers (who hold the bills of lading) or their agents and the port terminal. The receiver (or his agent) then presents the pin code to the terminal to take physical delivery of their goods.

Over a period of nearly 18 months, Glencore made 69 shipments of cobalt briquettes stowed in containers to Antwerp. The case concerns the 70th shipment, which was carried in three containers. The owner of the cargo and holder of the relevant bill of lading was Glencore. The carrier under the bill of lading was MSC. The bill of lading terms stated that the bill of lading was to be surrendered by Glencore in exchange for the goods or for a “delivery order”. There was no mention on the bill of lading of the use of a pin code to obtain delivery of the goods. Unfortunately, two of the containers were delivered to “unauthorised persons”, most likely someone (not being the holder of the bill of lading) who obtained the pin code illicitly and used it to collect two of the containers.

Glencore brought a claim against MSC claiming damages for breach of contract, bailment and conversion. Glencore’s claim succeeded at first instance. MSC (unsuccessfully) appealed Glencore’s claim on a number of grounds, as summarised below.

Ground 1 – pin codes as symbolic delivery

MSC firstly argued that there can be a symbolic or constructive delivery, of which the classic example is the delivery of a key to the warehouse where goods are stored. MSC argued that delivery of a pin code to Glencore amounted to symbolic delivery of the goods.

A bill of lading is a contract, and therefore the meaning of “delivery” depends on the context and terms of the contract. Delivery pursuant to a bill of lading contract is a bilateral act, involving receipt of the goods by the consignee and relinquishing of possession by the carrier. The Court of Appeal said that where parties contemplated actual delivery against either presentation of a bill of lading or in accordance with a delivery order, delivery of a pin code cannot constitute delivery. The Court noted that the cargo was discharged into an MSC-operated terminal and that MSC would be able to prevent delivery. Thus MSC had not surrendered possession. At best the pin code was some form of delivery order or means of access to the goods.

Ground 2 – release note and pin codes as a delivery order
Secondly, MSC argued that a “Release Note” sent by MSC to Glencore’s agents, and which contained the pin codes, amounted to a delivery order in the sense required by the bill of lading.

The Court of Appeal said that the reference to “delivery order” in the bill of lading should have the same meaning as a ship’s delivery order, as now defined in s.1(4) Carriage of Goods by Sea Act 1992 (“COGSA 1992”).

Therefore, any delivery order given by MSC should have the key attribute of a bill of lading, namely an undertaking by the carrier to deliver the goods to the person identified in it, in this case Glencore or their agent.

The Court said that the Release Note did no more than instruct the Terminal to deliver against the entry of pin codes provided by MSC to Glencore. The Release Note was therefore not a delivery order as that term is understood in English law.

Ground 3 – release note and pin code as a ship’s delivery order
MSC’s third argument was that the Release Note with the pin codes contained in it amounted to a ship’s delivery order within the meaning of s.1(4) COGSA 1992. To a certain extent, grounds 2 and 3 overlap because of the Court’s finding that “delivery order” in the context of a bill of lading has the same meaning a “ship’s delivery order” in COGSA 1992.

A ship’s delivery order must contain an undertaking to deliver goods to the person identified in it. The Court said that the Release Note either contained no undertaking at all, or merely an undertaking to deliver to the first presenter of the correct codes. In either case, it is not an undertaking to deliver to Glencore (or their agents). A promise to deliver to whoever first enters the right code is not the same as a promise to deliver to an identified person.

Ground 4 – estoppel

Finally, MSC argued that Glencore was estopped from contending that delivery of the cargo upon presentation of a pin code was a breach of contract on the part of MSC because (according to MSC) Glencore gave the appearance that it had been content for the ERS to be used for the 69 previous shipments.

The Court said that there was no estoppel on which MSC could rely. The Court noted that no question arose in the case of the first 69 shipments, where delivery was in fact made to Glencore or its agents, as to what the position would be if delivery was made to someone who had stolen the pin codes. There was no representation by Glencore that delivery to someone other than it would be acceptable provided that delivery was made to the first presenter of the pin codes. The fact that cargoes had been delivered to Glencore after presentation of pin codes on many occasions did not say anything about what the position would be if cargo was not so delivered.

Conclusion

The use of information technology is becoming increasingly prevalent in the shipping industry. However, it should be noted that these digital alternatives to their paper predecessors are not as fool-proof as may first appear. There are suggestions (but no finding) in the judgment that the pin-codes were stolen by hackers. Hacking is, of course, a risk that comes with use of any computer system.

The Court of Appeal noted that there may be benefits to using modern technology in place of paper. However, for this to be done successfully, either appropriate contractual provision or statute law is required to make clear the rights and obligations of the parties.

The UK government has the power to make statutory regulations for the use of information technology in international trade (see s.1(5) COGSA 1992), but to date has not done so. In the absence of any statutory regulation, parties who wish to adopt modern alternatives to traditional shipping documents must carefully draft their contractual documentation so as to achieve electronically what has previously been accomplished by presentation of hard copy documents, and hope that the courts interpret the relevant terms in the way intended.

If you require advice in relation to the contents of this article or to discuss it further, please contact Marie Didier, whose details appear below.

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About the contributor

  • Marie Didier Solicitor

    Marie is a solicitor in the shipping group of our London office. She has experience of both wet and dry shipping matters. She has been involved in casualty work, charterparty disputes, cargo claims and unsafe port cases.

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