Shipping

Bill of lading demand for delivery cesser of liability on endorsement overBorealis AB v Stargas Ltd and others: HL (Lord Hoffmann, Lord Mackay of Clashfern, Lord Cooke of Thorndon, Lord Hope of Craighead and Lord Hobhouse of Woodborough): 22 March 2001The Swedish buyers bought a cargo of propane from the sellers, an express term of the contract being that it should not contain an excess of corrosive compounds.

The cargo was loaded by the shippers in Saudi Arabia and shipped under five bills of lading.

The buyers directed the vessel to their berth and took samples, which failed the corrosion test.

They rejected delivery and on-sold the propane to third party purchasers, subsequently forwarding the bills of lading to them.

They brought an action against the sellers for breach of contract, and the sellers issued a third party notice against the shipowners.

The shipowners, among other things, claimed that the buyers had demanded or requested delivery of the cargo within section 3 of the Carriage of Goods by Sea Act 1992 and were liable for corrosion damage to the vessel.

The buyers were given leave by Mr Justice Clarke to serve a concurrent claim form on the shippers claiming indemnity against any such liability, and the shippers application for Mr Justice Clarkes order to be set aside on the ground that they were not a necessary or proper party to the action was dismissed by Mr Justice Waller.

On appeal by the shippers, a concession was made that the buyers request for samples had been a demand for delivery within section 3(1)(c) of the 1992 Act.

The Court of Appeal [1999] QB 863 by a majority allowed the appeal.

On the shipowners appeal to the House of Lords, the concession was permitted to be withdrawn.Iain Milligan QC and Simon Kverndal (instructed by Middleton Potts) for the shipowners.

Jonathan Gaisman QC and Stephen Kenny (instructed by Richards Butler) for the shippers.

Andrew Popplewell QC (instructed by Waltons & Morse) for the buyers.Held, dismissing the appeal, that a demand for delivery within section 3(1) of the 1992 Act meant a formal demand asserting a contractual right as endorsee of the bill of lading to delivery of the goods, and making a claim meant a formal claim asserting the carriers legal liability to the holder of the bill; that co-operative acts such as allowing a vessel to berth and taking samples did not amount to a demand for delivery and the shipowners had failed to establish an arguable case that the buyers had demanded delivery; and that, in any event, a holder of a bill of lading ceased to be liable under the contract of carriage within section 3(1) when he endorsed the bill over to another so as to transfer his rights of suit under section 2(1).

(WLR)