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Misdelivery(under Bill of Lading)

Law and Sea.
Bill of Lading

When goods have been loaded on board of the vessel and signed bill of lading handed by the master to the shipper, such bill of lading begins its existence in a role of master’s receipt for shipper’s goods. The master’s signature on the bill confirms conformity of the quantity and quality of the cargo loaded with that description represented in bill of lading.

Last updated: 06-Oct-2015

Atkin J in Lancashire and Yorkshire Railway v MacNicholl (1919) 88 LJKB 601 defined conversion as:

… dealing with goods in a manner inconsistent with the rights of the true owner … provided … there is an intention on the part of the defendant in so doing to deny the owner’s right or to assert a right which is inconsistent with the owner’s right.

Per Lord Nicholls in Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19 at paras 38-41:

38. … Denial of title is not of itself conversion: see section 11(3) of the Torts (Interference with Goods) Act 1977. To constitute conversion there must be a concomitant deprivation of use and possession. In support of this submission Mr Donaldson fastened upon a statement in Clerk & Lindsell on Torts, 17th ed (1995), p 636, paragraph 13-12:

… conversion is an act of deliberate dealing with a chattel in a manner inconsistent with another's right whereby that other is deprived of the use and possession of it.

39. … Conversion of goods can occur in so many different circumstances that framing a precise definition of universal application is well nigh impossible. In general, the basic features of the tort are threefold. First, the defendant’s conduct was inconsistent with the rights of the owner (or other person entitled to possession). Second, the conduct was deliberate, not accidental. Third, the conduct was so extensive an encroachment on the rights of the owner as to exclude him from use and possession of the goods. The contrast is with lesser acts of interference. If these cause damage they may give rise to claims for trespass or in negligence, but they do not constitute conversion.

40. The judicially approved description of the tort in Clerk and Lindsell encapsulates, in different language, these basic ingredients. The flaw in IAC’s argument lies in its failure to appreciate what is meant in this context by ’depriving‘ the owner of possession. This is not to be understood as meaning that the wrongdoer must himself actually take the goods from the possession of the owner. This will often be the case, but not always. It is not so in a case of successive conversions. For the purposes of this tort an owner is equally deprived of possession when he is excluded from possession, or possession is withheld from him by the wrongdoer.

41. Whether the owner is excluded from possession may sometimes depend upon whether the wrongdoer exercised dominion over the goods. Then the intention with which acts were done may be material. The ferryman who turned the plaintiff's horses off the Birkenhead to Liverpool ferry was guilty of conversion if he intended to exercise dominion over them, but not otherwise: see Fouldes v Willoughby (1841) 8 M & W 540.

Per Smith J in Glencore International AG v MSC Mediterranean Shipping Company SA & Anor [2015] EWHC 1989 (Comm) at paras 17-18:

17. …I shall say something about what would constitute delivery of goods in order to set the scene for the parties’ submissions on what is in issue. In the context of the sale of goods, Sale of Goods Act, 1979 s.61(1) provides a general definition of "delivery" as "voluntary transfer of possession from one person to another". In Barclays v Customs & Excise, [1962] 1 Lloyd’s Rep 81,89, Diplock J observed that a bill of lading contract is "not discharged by performance until the shipowner has actually surrendered possession (that is, has divested himself of all powers to control any physical dealing in the goods) to the person entitled under the terms of the contract to obtain possession of them". Thus, as it is put in Cooke on Voyage Charters (4th Ed, 2014) at para 10.4, delivery is "a bilateral act, involving the receipt of the goods by the consignee or his agent as well as the relinquishing of possession by the carrier, and so it cannot be effected merely by discharging the goods over the ship’s side at the port of delivery. Equally delivery cannot, in the absence of special terms, be effected merely by putting the goods into the custody of a person who is not the agent of the consignee".

18. Mere discharge of cargo therefore does not constitute delivery as a general rule.

Sang Stone Hamoon Jonoub Co Ltd v Baoyue Shipping Co Ltd (The Bao Yue) [2015] EWHC 2288 (Comm) per Males J at para 44:

The judicially approved description in Clerk & Lindsell on Torts, 17th ed (1995), p 636, paragraph 13-12 … now contained in the 20th Edition at paragraph 17-07, is that "conversion is an act of deliberate dealing with a chattel in a manner inconsistent with another's right whereby that other is deprived of the use and possession of it". Paragraph 17-08 lists the principal ways in which a conversion may take place as follows:

It is not possible to categorise exhaustively all modes of conversion for while some acts are necessarily an absolute abrogation of the claimant’s rights and deprive him of the whole value of his interest in the goods, there may be others where the courts retain a degree of discretion in deciding whether those acts amount to a sufficient deprivation. Nevertheless the principal ways in which a conversion may take place can be set out under the following headings, dealt with more fully below:
(a) when property is wrongfully taken or received by someone not entitled to do so;
(b) when it is wrongfully parted with;
(c) when it is lost by a bailee in breach of his duty to the bailor;
(d) when it is wrongfully sold, even without delivery, so as to pass good title to the buyer;
(e) when it is wrongfully retained;
(f) when it is wrongfully misused or destroyed; and
(g) when the defendant, without physically interfering with it, wrongfully denies access to it to the claimant.

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