'''England'''

Issue 2: Alternatively, were Owners' obligations as regards the carriage of the Cargo contained exclusively in the charterparty and/or the novation agreement of 6 April 2020?

The original charterers (BP) were the holders of the bill of lading at the time of delivery, but they had novated the charter to new charterers (Gulf). It is worth noting that such a novation is common in trading where parties often swap responsibility for the carriage of the cargo and hence respectively divest/take on responsibility under the charterparty with the owner. The question was whether those bills, which were not endorsed, became a contract of carriage such that, once in the Bank’s possession, they would allow the Bank to sue the vessel owners.

Moulder J stated the well-known rule of law that where a shipper is also the charterer of the vessel, the bill of lading is not the contract of carriage of goods but a mere receipt ("the mere receipt principle / rule"). She said it was clear on the authorities that, where a bill of lading is issued to a charterer and then endorsed to a third party, it attains contractual status upon endorsement on the basis that "a new contract appears to spring up between the ship and the consignee on the terms of the bill of lading" (Tate & Lyle Ltd. v Hain Steamship Co. (1936) 55 Ll. L. Rep. 159, 174).

However, in this case there was no endorsement of the bill of lading to a third party. Furthermore, BP, the original shipper, ceased to be the charterer and thus, from the date of the novation, the bill of lading was no longer in the hands of the charterer.

Moulder J reasoned therefore that the bill of lading did not contain the contract of carriage between the Owners and the lawful holder of the bill, BP, on or after 6 April 2020 (being the date of the Novation Agreement) and prior to the alleged misdelivery. Where there had been no endorsement - which was caused by the difficulty in getting documents signed owing to Covid, there was no contract for bill of lading holder to sue under.

The claim against the Owners therefore failed on the bill of lading issue, but Moulder J also found that if it had not failed on these grounds, it would still have failed on the basis that the Owners did not cause the Bank’s loss, as the Bank would have agreed to delivery against a LOI in any event. It was this second finding that ended up determining the Court of Appeal decision.

The Court of Appeal reversed the decision of Moulder J in the High Court on the bill of lading point.

Hence, the Bank’s case failed on causation.

Following the High Court case, the appropriate legal advice would have been to be careful, when a contract of carriage is novated, to make sure that the bills are endorsed because otherwise there would be no contract with the Owner and no contract to sue under. Now, there is recognition that even without endorsement, since the intention is that the bills form the contract with the Owner, that is enough.