The claimants sold goods to a Chilean company Gold Crown and shipped these goods from Hong Kong to Chile using the liner services of the defendants (Maersk and P&O Nedlloyd BV). The defendants issued bills of lading naming the claimants as shippers and Gold Crown as notify parties. The claimants made arrangements with their bank for the shipping documents to be sent to Chilean banks so that the documents would only be released on payment by Gold Crown. The goods arrived in Chile and because duty was not paid, they were discharged and placed in a licensed Customs warehouse. Eventually, duty was paid and the goods were released to Gold Crown’s agents without the production of the original bills of lading. Gold Crown did not pay for all of the goods and the bank requested to return the bills of lading to the claimants without endorsing them back. The claimants then made a claim against the defendants for misdelivery of the goods.

The defendants raised a number of defences including that:

(i) the claimants had no title to sue. In particular, the claimants had endorsed the bills of lading to the Chilean banks and the banks had not endorsed the bills of lading back to the claimants;

(ii) the defendants were not negligent in delivering goods without production of the bill of lading;

(iii) Chilean law requires carriers to deliver goods to a licensed Customs warehouse (which the defendants had to do without the presentation of bills of lading) and once this is done, the defendants had discharged their obligations under the contract of carriage. Further, the United Nations Conventions on the Carriage of Goods by Sea 1978 (the Hamburg Rules) were in force in Chile and under art 4 of the Hamburg Rules, the defendants would be discharged from responsibility in the aforementioned circumstances.

Held: The defendants are liable to the claimants in tort.

On issues (i) and (ii), although the Court found that the bills of lading were not spent and the holder of the bills of lading under ss 2 and 5 of the Carriage of Goods by Sea Act 1992 (UK) (the Act) was not the claimants, the defendants were still liable to the claimants in tort.

On issue (iii), the Court found that under Chilean law, delivery by a carrier to the Customs warehouse was not a delivery to Customs and was not a delivery of the goods which would relinquish the carriers' control over the goods. Chilean law further provided that the original bills of lading had to be retained by the customs agent. Although the obligations under bills of lading were modified by Chilean laws, they were still not inconsistent with the basic principles of English law in that goods had to be delivered against presentation of an original bill of lading. Chilean law did not prevent the defendants from contracting with the warehouse to release the goods only upon presentation of the original bills of lading. The defendants failed to do so and were therefore liable in tort.

The Court noted that Chile had incorporated the Hamburg Rules into its Code of Commerce in 1988. Article 1.7 of the Hamburg Rules provides: 'The bill of lading is a document which evidences a contract of carriage by sea and the taking over or loading of the goods by the carrier, and by which the carrier undertakes to deliver the goods against surrender of the document. A provision in the document that the goods are to be delivered to the order of a named person, or to order, or to bearer, constitutes such an undertaking.'

Article 4 of the Hamburg Rules is entitled 'period of responsibility'; it provides: '1. The responsibility of the carrier for the goods under this [Convention] covers the period during which the carrier is in charge of the goods at the port of loading, during the carriage and at the port of discharge.'​ Article 4 of the Hamburg Rules continues: '2. For the purposes of para 1. of the Article, the carrier is deemed to be in charge of the goods ... (b) until the time he has delivered the goods: (i) by handing over the goods to the consignee; or ... (iii) by handing over the goods to an authority or other third party to whom, pursuant to the contract of carriage or with the law or with the usage of the particular trade applicable at the port of discharge, the goods must be handed over.'

There was some dispute between the experts over the precise translation of the Spanish text in the equivalent article of the Chilean Commercial Code (art 983) and in particular as to whether the Spanish text 'the goods must be handed over' should read 'may be handed over'. The text is identical to the text of the Hamburg Rules in all material respects; the Court therefore considered it correct to use the official language version of the Article contained in the Hamburg Rules.

Article 5 of the Hamburg Rules is entitled 'basis of liability'; it provides that:

1. The carrier is liable for loss resulting from loss of or damage to the goods, as well as from delay in delivery, if the occurrence took place while the goods were in his charge as defined in art.4., unless the carrier proves that he his servants or agents took all measures that could reasonably be required to avoid the occurrence or its consequences. ...

3. The person entitled to make a claim for the loss of the goods may treat the goods as lost if they have not been delivered as required by art. 4 within 60 consecutive days.

The Court was satisfied that the carrier was not obliged to hand over the goods to Customs; it did not deliver them to Customs, but placed them with a Customs warehouse operator subject to the jurisdiction of Customs. The carrier could enter into a contract with that operator that the goods should not be released without presentation of the bill of lading. Thus the carrier could not rely on art 4.2.c of the Hamburg Rules.

If, however, the carrier was obliged to make a delivery to Customs, it would have been difficult to accept the distinction that the claimants sought to make between the end of the carrier's period of responsibility and custody for the purposes of a claim for loss or damage of the goods and the carrier's continuing responsibility to deliver only against presentation of a bill of lading. The purpose of art 4.2.b.iii was accurately stated in a report of the UNCTAD Secretariat entitled 'The economic and commercial implications of the entry into force of the Hamburg Rules' (December 1987) at p 36:

These provisions concern port authorities and other third parties to whom the goods must be handed over before shipment or after discharge in accordance with the laws or regulations of the loading or discharge ports. National laws or regulations frequently grant monopolies to State-owned or private warehouses or docks for handling and storage of goods, particularly in connection with Customs procedures. The policy of these provisions is that if the carrier is not free to chose such a facility, he should not be liable for damage to the goods caused by the facility. Article 4.2(b) (iii) states that he is not in charge of the goods in those circumstances.

It is difficult to see what proper distinction can be made on the basis of the policy of the Hamburg Rules between damage to the goods by a warehouse the carrier is forced to use to and misdelivery of the goods by the warehouse. The loss has occurred when the goods are not in the carrier’s custody as a result of the action of a person which the carrier was not free to chose.