The Court held that a carrier, which had provided a shipper’s agent with pin codes for an electronic cargo release system, had not fulfilled its obligations under a bill of lading pursuant to which the bill was to be exchanged either for the goods or for a delivery order.1

Background

MSC Mediterranean Shipping Co SA (MSC) carried three cargo containers from Fremantle to Antwerp under a bill of lading which named Glencore International AG (Glencore) as the shipper, and C Steinweg NV (Steinweg), Glencore’s agents, as a notify party. A few days before the vessel’s arrival at the discharge port, Steinweg lodged with MSC one of the bills of lading and soon after, MSC emailed to Steinweg a release note and pin codes for the electronic cargo release system (ERS) that MSC operated at that port.

After the vessel arrived at Antwerp, and the containers were discharged and stored at MSC’s terminal, Steinweg sought delivery of the cargo but it transpired that two of the containers had already been collected by unknown, unauthorised recipients. The shipper brought a claim for damages against MSC.

Decision

The bill of lading contained an express term that it had to be “surrendered by the Merchant to the Carrier … in exchange for the Goods or a Delivery Order”. The Court found that the pin codes did not constitute a “delivery order”, which was taken to refer to a “ship’s delivery order” as defined in s.1(4) of the Carriage of Goods by Sea Act 1992. Such an order contains an undertaking given by the carrier to deliver the goods to an identified person. It was held to be unlikely that a bill of lading holder would agree to surrender its rights without receiving either the goods or an undertaking in return.

MSC’s contention that the provision of a pin code constituted a “Delivery Order” relied on the pattern of previous dealings between the parties. However, the Court rejected this argument. Negotiable bills have to be understood by various people other than the original parties so that, in this case, the original parties were taken to have intended the bill to have the meaning conveyed by its wording, in light of the knowledge available to the range of people to whom it was addressed. In addition, the shipper (as opposed to its agent) was found not to have been aware, at the time it entered into the bill of lading contract, that MSC used the ERS in Antwerp. But even if it had been, it did not follow that forwarding the pin codes constituted delivery.

MSC also submitted that a term should be implied into the bill of lading to the effect that a pin code would be a valid substitute for a delivery order. MSC further maintained that Steinweg had agreed to vary the bill of lading so that it might be exchanged for ERS pin codes. However, the Court rejected this argument, stating that the proposed implied term sat awkwardly with the express provision in the bill that the goods, or a delivery order, were to be provided in exchange for it. In addition, it was held that Steinweg did not have authority to vary the bill of lading contract by accepting the terms of the release note sent by MSC. 

MSC also brought an estoppel argument, to the effect that, since the shipper gave the appearance that it was content for the ERS to be used for the 69 previous shipments, it was not open to it to complain that it was used for the three containers under the bill of lading. However, the shipper’s complaint was that MSC had wrongfully delivered the containers to an unauthorised recipient, not that it had released the containers on presentation of the pin codes. In order to be estopped, the shipper would have had to have represented clearly that it was content for goods to be delivered to anyone who presented the relevant pin code. It had made no such representation and its claim, therefore, succeeded. 

Comment

This case is a helpful reminder to carriers of the need to comply with their precise obligations under a negotiable bill of lading. In this case, nothing less than delivery of the goods or a ship’s delivery order, in exchange for an original bill of lading, was sufficient to discharge the carrier’s duty. Use of a discharge port’s ERS does not release carriers of their duty to surrender the goods only to the person entitled to take delivery of them. The decision also emphasises the potential risks involved with the electronic cargo release system.