Transferring Rights of Suit Under Bills of Lading: The Conflict of Laws Implications

• Author: Nicholas William Dovell Francis
• Position: Solicitor, Chapman Tripp, Auckland. This article is based on my LLB (Hons) dissertation, The University of Auckland, 2004. I would like to thank and acknowledge Paul Myburgh and Elsabe Schoeman from the University of Auckland for their invaluable guidance, feedback and support throughout the process of writing my dissertation
• Pages: 25-51

TRANSFERRING RIGHTS OF SUIT UNDER BILLS OF LADING: THE CONFLICT OF

LAWS IMPLICATIONS

Nic k Fra nc is∗

1. Introduction

In the context of international trade, the bill of lading is an extremely important document. It is primarily important

in relation to a contract for carriage of goods by sea; but can also be relevant to the contract for the international sale

of goods, the international financing of trade and transport insurance. While the issue of substantive rights under

bills of lading has been the focus of much legislative, judicial and academic consideration over time, the issue of the

transfer of rights of suit under a bill of lading has come into particular focus more recently in the New Zealand and

the rest of the Commonwealth. This follows the substantial changes made to the way rights of suit were transferred

by the Carriage of Goods by Sea Act 1992 (COGSA 92) in England. In New Zealand this lead directly to the

enactment of the Mercantile Law Amendment Act 1994 (NZ) (MLAA 94), adopting a virtually identical approach to

that in England.

There has been, however, relatively little attention focussed upon what should be considered a very important part of

this legislation, that being the implications under conflict of laws theory of addressing the problem at a national level

rather than at an international level. An example of this in New Zealand is the decision of the High Court at

Auckland in Starlink Navigation Ltd v The Ship “Seven Pioneer”.1 The issue before the court, in that case, was

whether the plaintiff could bring a claim in (either tort or contract) against the carrier of goods that were damaged

whilst being transported. This would seem to be archetypal example of a situation where the court would need to

apply conflict of laws theory to determine whether the transfer was governed by the New Zealand system for

transferring right of suit or by another legal system. Unfortunately this approach was not taken, and the case was

resolved without any discussion at all of the New Zealand system of transferring rights or whether these should have

applied, thereby losing a valuable chance for judicial consideration of the issue.

This article will attempt to address this lack of consideration by examining the conflict of laws implications of the

transfer of rights of suit under bills of lading. It will consider first the development of the bill of lading, including an

examination of the reasons why transferability is so important to the bill as a commercial instrument, the source of

the problems that inhibit its transfer and finally the old and new methods used to overcome these problems. This

article will continue by considering the application of conflict of laws theory to the transfer of rights under a bill of

lading, assessing whether the MLAA 94 should be considered a mandatory statute and then examining the possible

ways of characterising the issue and the implications that each of these would have. In the final section I will draw

on the observations from the previous sections to offer some arguments in favour of an internationally unified

approach toward the transfer of rights under a bill of lading.

∗ Solicitor, Chapman Tripp, Auckland. This article is based on my LLB (Hons) dissertation, The University of Auckland, 2004. I would like to

thank and acknowledge Paul Myburgh and Elsabe Schoeman from the University of Auckland for their invaluable guidance, feedback and

support throughout the process of writing my dissertation.

1 (2001) 16 PRNZ 55 (The Seven Pioneer).

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2. The Func tional Development of the La w Re lating to Bills of Lading

2.1 Bills of Lading and their Functions

While there is no absolute definition of a bill of lading, it can be described as a document issued by or on behalf of

the carrier of goods by sea to the person with whom there is a contract for the carriage of those goods.2 At the most

basic level it contains promises by the carrier to carry the goods to the agreed destination, subject to its terms, and

deliver them there according to the instructions of the shipper. It also contains a promise by the shipper to pay the

charges under the contract, known as freight.3

The functions of a bill of lading are traditionally recognised as being threefold. First, a bill of lading is a receipt for

the goods shipped by the carrier. Second, it acts as a document of title to the goods. Finally, it is a document

containing or evidencing the contract of carriage.4 While these are the traditional categories into which a bill of

lading can be broken down, it is important to note that bills of lading perform a broader legal and commercial

function: as well as being a receipt, evidence of the contract of carriage and a document of title to which goods

relate, it also provides a mechanism for transferring rights and imposing liabilities arising under the contract to

persons who were not originally parties to the contract.5 It is important to note that while there is a close link

between the function as a document of title and as a mechanism to transfer rights these are distinct functions. The

fact that a bill of lading can be a document of title without being able to transfer rights and that it is not a document

of title merely because it is capable of transferring contractual rights is a distinction that can be traced back to the

very foundations of the bill of lading, as it is presently known.6 Each of the three functions outlined will be

examined in turn.

2.2 The Bill of Lading as a Rec eipt

2.2.1 Historic al De velopment of the Rec eipt Func tio n

The necessity of the receipt function of a bill of lading can be traced back to the growth in trade between the ports of

the Mediterranean after the 11th century, which led to the need for a record of goods that were shipped.7 Originally

this could be done by the ship’s register, however, by the 14th century, when merchants were no longer constantly

travelling with their goods, carriers were using a document called an on-board record as a receipt for goods shipped,

with a copy being sent by a merchant to advise the person who would receive the goods about their nature and use.8

Originally there was no need to prove the consignee’s entitlement to the goods because such entitlement was

recorded in the carrier’s register before the voyage began. However, as international trade began to develop the

possibility of goods being traded at sea resulted in the need for a document that could be transferred, by the shipper

at least, and could evidence an entitlement to receive the cargo once it had reached its destination.9 There is no

evidence bills of lading were used in this way in 14th century and it was not until the mid 16th century that

transferability started to become an issue.10 In this way, the modern bill of lading began life as a simple bailment

receipt that was required to obtain delivery of the goods once they reached their destination,11 rather like a modern

sea waybill.

2 Guenter Treitel and FMB Reynolds, Carver on Bills of Lading (1st ed, 2001), 1 (Carver on BOLs).

3 Ibid.

4 Carver on BOLs above n 2; John F Wilson, Carriage of Goods by Sea (4th ed, 2001) 121-122 (Wilson).

5 Carver on BOLs above n 2, 1.

6 See Carver on BOLs above n 2, 1, particularly fn 1 and 2 which give examples to support this proposition.

7 MD Bools The Bill of Lading: A document of title to goods (1997), 1 (Bools).

8 Bools above n 7, 3.

9 Ibid.

10 Ibid.

11 Wilson above n 4, 122.

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Transferring Rights of Suit under Bills of Lading

(2006) 20 A&NZ Mar LJ