QLU Summer 2017: This decision reminds Carriers that when embracing new technology, care must be taken to ensure they continue to comply with their fundamental obligations in relation to cargo delivery

QLU Summer 2017: This decision reminds Carriers that when embracing new technology, care must be taken to ensure they continue to comply with their fundamental obligations in relation to cargo delivery

This important decision brings home to Carriers that when embracing new technology, care must be taken to ensure that they continue to comply with their fundamental obligations in relation to cargo delivery. 

MSC MEDITERRANEAN SHIPPING CO SA V GLENCORE INTERNATIONAL AG [2017] EWCA Civ 365

Facts

The Shipper brought a claim against the Carrier in relation to two containers of cobalt that were “misappropriated” at Antwerp Port.

The cargo was to be delivered via the Electronic Release System (ERS), which Antwerp Port had introduced at the start of 2011. Before the dispute arose, the Carrier had made 69 successful cargo deliveries to this particular Shipper using ERS.

In June 2012, the Shipper’s agents presented the bill of lading to the Carrier. The bill expressly stated that they were to be exchanged “for the Goods or a Delivery Order”. Nevertheless, under the ERS, carriers do not issue paper delivery orders or release notes against bills of lading. Instead, the Carrier would email to the Shipper’s agents a “release note” containing a computer-generated four digit PIN. In this instance, when the Shipper’s agents attempted to collect the cargo, it was discovered that two containers had already been collected by a third party who had somehow obtained the pin code. It was common ground that the two containers had been stolen.

The Shipper argued that, in accordance the express terms of the bills of lading, the Carrier should only have delivered the cargo on the presentation of either a bill of lading or a delivery order. The Shipper submitted that the Carrier had not done so (as the Carrier had delivered the goods against the PIN contained within the “release note”) and hence the Carrier was liable for Shipper’s loss.

The Carrier contended that the provision of a PIN code constituted a “Delivery Order” under the ERS system and the Carrier had therefore complied with the terms of the bill of lading. The Carrier relied on the pattern of previous dealings between the Shipper and the Carrier and submitted that it was an implied term of the bill of lading that a PIN code would substitute for a delivery order.

Judgment

The Court found in favour of the Shipper. The Carrier appealed, relying on five grounds: (1) the issuing of the PIN code amounted to constructive delivery; (2) the PIN code was a delivery order; (3) the release note was a delivery order; and (4) The Shipper was estopped by the delivery of the previous 69 cargoes from denying that PIN code delivery constituted contractual delivery. The Carrier also sought to amend its appeal to show that cyber security issues had given rise to a break in the chain of causation.

The Court of Appeal dismissed the appeal.

  1. Where the parties agreed that symbolic or constructive delivery would suffice, such delivery took place when the symbol was delivered. However, the bill of lading in the present case did not provide that provision of the PIN codes amounted to delivery.
  2. A delivery order was to be provided by the Carrier as an alternative to actual delivery in exchange for the bill of lading and in substitution for it. It was implicit that the parties intended that the delivery order should have an undertaking by the Carrier to deliver the goods to the person identified in it. The PIN code could not be a delivery order.
  3. The release note provided either no undertaking at all, or an undertaking to deliver to the first presenter of the correct codes. Either way it was not the delivery order called for by the bill of lading.
  4. The fact that the previous 69 cargoes had been delivered in the same way did not amount to a representation on the part of Shipper giving rise to an estoppel.
  5. Breaches of computer security causing the loss of the codes would not constitute a break in the chain of causation.

Comments

This judgment whilst logical is surprising and somewhat uncommercial in light of the fact that the Carrier was invited to use the ERS by the Port Authorities in Antwerp and had used the system successfully in their dealings with the Shipper and with others for over 1.5 years.

This case illustrates that a carrier has a fundamental obligation to deliver cargo to the holder of the bill of lading or to the party with a valid delivery order containing an undertaking as to delivery.

This case further illustrates that the law is trailing behind technology. If a carrier wishes to make use of the ERS, as opposed to the traditional paper-based system, it would be advisable to ensure that sufficient provision is made for the use of release notes and electronic PINs within the terms of its bills of lading.

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