This was an appeal from Langley J's decision in the High Court in JI MacWilliam Co Inc v Mediterranean Shipping Co SA [2002] EWHC 593 (Comm) (CMI2236) in favour of the carrier, Mediterranean Shipping Co SA (MSC). The buyer, JI MacWilliam Co Inc (MacWilliam) appealed to the Court of Appeal.

Three questions arose on appeal. The first was whether the carriage contract was a single contract, or two separate contracts governing each leg. The second (and key) question was whether a straight bill was a bill of lading or similar document of title within the meaning of the Hague Rules (HR). If it was not, the parties agreed that the more generous package limitation regime of the Hague-Visby Rules (HVR) did not apply. The third question only arose if the second leg was governed by a contract within s 1(4) of the Carriage of Goods by Sea Act 1971 (UK) (the 1971 Act) and asks whether there was a 'port of shipment' in the UK within the meaning of s 1(3) of the 1971 Act, namely Felixstowe. MacWilliam argued that there was. This third question was obscured when the dispute was before the arbitrators and Langley J. Thus the arbitrators considered only two issues: (1) was there one carriage contract or two?; (2) was the straight bill a 'bill of lading' within the 1971 Act? They answered 'One' and 'No' respectively. This prevented MacWilliam from avoiding the US Carriage of Goods by Sea Act (US COGSA) limit on two separate grounds.

MSC argued that only a transferable bill of lading can be a 'document of title' or a 'similar document of title', citing the travaux préparatoires of the HR, the Law Commission, Rights of Suit in Respect of the Carriage of Goods by Sea (Law Com No 196, 1991) para 2.50 (Law Commission Report), and the ensuing Carriage of Goods by Sea Act 1992 (UK) (the 1992 Act), which treats a straight bill as if it were a sea waybill and not a bill of lading. The earlier 1971 Act also treated 'a bill of lading' and 'a non-negotiable document' separately in ss 1(6)(a) and (b).

MacWilliam argued that a straight bill can be transferred, albeit only once, namely to the named consignee. The straight bill performs all the functions of a transferable bill of lading. It is a 'document of title'. The consignee cannot obtain possession of the goods without it. The HR are not concerned with transferability per se, but with securing an international regime of minimum standards as to the substance of the bill of lading contract, to protect parties who are not privy to its negotiation themselves but are nevertheless bound by its terms by reason of its transfer to them. This explains the HR's exception for charterparties. The rationale of the HR applies equally to the first transferee that is not in privity with the shipowner prior to transfer even if that transferee is also the only possible and last transferee. Since the HR are an international Convention, they should not be construed narrowly according to domestic English concepts. The travaux préparatoires demonstrate that straight bills were recognised in 1924, and that the HR were intended to embrace them. The Law Commission Report and the 1992 Act are based on narrow domestic law and are too late to affect the issue.

MSC counterargued that a first transferee is not to be treated as a 'third party' to the original bill of lading contract, being an immediate party to an underlying sale of goods contract with the shipper who thus can influence the terms of the contract of carriage.

Held: Appeal allowed.

Rix LJ wrote the leading judgment. The HVR are an amended version of the HR. They contain a more generous package limitation. The US COGSA reflects the earlier HR limitation regime and limits any recovery to USD 500 per package. The HR were enacted to regulate the minimum terms by which international shipping contracts of carriage of goods by sea should be governed. The HR derived from standard rules originally designed for incorporation into bills of lading as a matter of contract which were negotiated at The Hague in 1922. By HR art 1.b, the HR applied only to contracts of carriage 'covered by a bill of lading or any similar document of title'. A straight bill is to be contrasted with a bill of lading transferable to any number of transferees in succession either by endorsement (an order bill) or delivery (a bearer bill). A transferable bill of lading is a symbol of the goods, a 'key which in the hands of a rightful owner is intended to unlock the door of the warehouse': Sanders v Maclean (1883) 11 QBD 327 (CA) 341. A straight bill, however, requires delivery of the goods to the named consignee and (subject to the shipper's ability to redirect the goods) to no other.

There were two separate contracts. Felixstowe-Boston was a separate contract of carriage, which entitled the shipper to demand a bill of lading and therefore, subject to the straight bill issue, meant that the contract was 'covered by a bill of lading' for the purposes of art 1.b of the HR or HVR: Parsons Corp v CV Scheepvaartonderneming (The Happy Ranger) [2002] 2 Lloyd's Rep 357 (CA) (CMI829). Accordingly, it was unnecessary to decide whether Felixstowe was a 'port of shipment'.

A straight bill is a bill of lading within the meaning of the HR. The straight bill in this case was a bill of lading or similar document of title to which the HVR applied.

First, the HR is predominately concerned with the content of a contract of carriage in circumstances where such a contract as found in a bill of lading may come to affect a third party into whose hands such a bill is transferred. A named consignee under a straight bill, unless it is the same person as the shipper, is such a third party falling within the concern of the HR.

Secondly, although a straight bill can be used in circumstances where there is no intention of transferring it to the consignee, in practice the straight bill is used as a document against which payment is required and the transfer of which thus marks the intended transfer of property. The straight bill can be transferred by delivery to the named consignee, but no further. In these circumstances, the shipper and its bankers and insurers need the same protection as the shipper under a classic bill of lading; and the consignee itself and its insurers in turn need to have rights against the carrier under the contract of carriage.

Thirdly, a straight bill is, in practice, written on the form of an otherwise classic bill and requires production of the bill on delivery. A consignee must have it transferred to itself to obtain delivery.

Fourthly, in the context of the HR, the straight bill is in principle, function, and form much closer to a classic negotiable bill, than to a non-negotiable receipt, which, to judge from HR art 6, was viewed as something far more exotic.

Fifthly, the travaux préparatoires of the HR, despite lacking unequivocal cogency, are consistent and supportive of the view preferred by the Court. The parties accepted that 'only a bull's eye counts', but neither scored a bull's eye. The travaux préparatoires were rich in ambiguity. Yet there was some clarity that the representatives were anxious to preserve freedom of contract for immediate parties and protection for third parties; that straight bills were discussed, without an unequivocal result; but also that it is impossible to find any clear statement of an intention to exclude straight bills from the protection of the HR. The travaux préparatoires show that the chief concern was the archetypal fully transferable bill of lading. Such a document was the prime focus of the HR. There were cases where the representatives clearly intended the HR to be disapplied: (1) the charterparty; (2) the bill of lading issued under a charterparty to a shipper in whose hands it remained a mere receipt; (3) a mere receipt marked non-negotiable for extraordinary shipments; and (4) a bill of lading which could never come into the hands of a third party as a document of title because it was consigned by a shipper only to itself. English statutes giving effect to international Conventions (like the HR) need to be interpreted with the international origin of the Rules well in mind: Stag Line v Foscolo, Mango & Co [1932] AC 328 (HL) 342, 343, 350.

Sixthly, MSC's arguments based on the 1971 and 1992 Acts would be rejected. Both Acts may reflect a developing view under domestic English law about how to categorise bills of lading, non-negotiable receipts, and sea waybills. But they cannot control the meaning of the HR, which are much earlier and of international scope. The 1992 Act is drafted on the basis that a straight bill is not a bill of lading for the purposes of the 1992 Act, but leaves open the question for the purposes of the HR, HVR, and the 1971 Act. Section 5(5) of the 1992 Act states that the 1992 Act takes effect 'without prejudice to the application, in relation to any case, of the rules' (ie the HVR) which have the force of law under the 1971 Act. Although the Law Commission's Report stated that for a straight bill to be a bill of lading would be inconsistent with the HVR, that Report preceded the 1992 Act. The 1992 Act was not concerned with the content of a contract for the carriage of goods by sea, but with the transfer of rights and liabilities under it. The Commission's view that a straight bill 'is not a document of title at common law' was not adopted.

Next, the attestation clause in the straight bill is applicable either when the bill is used in its negotiable form or as a straight bill. If it should not apply when the bill was used in non-negotiable form, then it could easily have said so.

A straight bill of lading, which has to be produced to obtain delivery, is a document of title: Peer Voss v APL Co Pte Ltd [2002] 2 Lloyd's Rep 707 (Singapore CA) (Peer Voss); The MSC Magallanes (Court of Appeal of Rennes, France) (16 May 2002); The Duke of Yare (ARR-RechtB Rotterdam, Netherlands) (10 April 1997). Moreover, the straight bill is in principle a document of title, even in the absence of an express provision requiring its production to obtain delivery: Peer Voss. Meanwhile, The Brij [2001] 1 Lloyd's Rep 431 (HK HC) can be distinguished on its special facts. The Happy Ranger [2001] 2 Lloyd's Rep 530 should not be followed because it relied on The Captain Gregos [1990] 1 Lloyd's Rep 310 (CA) for support when such support did not exist.

The straight bill is a 'similar' document of title, on the basis that negotiability is not a necessary requirement of a 'bill of lading' within the meaning of the HR. A straight bill whose production is required for delivery of the goods is a document of title, which in turn supports the answer to the prior question of whether a straight bill is a 'bill of lading'.

Meanwhile, some HR provisions, like arts 1.b, 5, and 6, can be explained by the distinction drawn between the freedom of contract which was unobjectionable as between immediate parties to a contract of carriage and the need for protection for subsequent transferees. Articles 1.b and 5 both indicate that the Rules do not apply to charterparties at all (being contracts between immediate parties) and that the Rules only apply to bills of lading issued under a charterparty once they have started to regulate the relations between the carrier and a bill of lading holder. Because parties did not place much weight on HR art 6, Rix LJ tentatively observed that the exceptional, permissive regime of HR art 6 exists only at the fringes of carriage by sea. It does not support the proposition that a straight bill dealing with ordinary commercial shipments would lie outside the international minimum standards of the HR.

The 1971 Act introduced the HVR into English law. The 1971 Act required a 'bill of lading or any similar document of title'. However, the concept of a 'receipt which is a non-negotiable document marked as such' and which 'expressly provides that the Rules are to govern the contract as if the receipt were a bill of lading' makes its entrance. Sections 1(4) and (6) of the 1971 Act are relevant. Articles 1.b, 5, and 6 of the HVR (as scheduled to the 1971 Act) remained as they had done under the HR. The concept of a receipt which is a non-negotiable document marked as such derives from HR art 6: but there, as in the same article of the HVR, it was a means for contracting out of the HR; whereas under s 1(6) it is an alternative means for incorporating the HR. However, s 4 of the Carriage of Goods by Sea Act 1924 (the 1924 Act), which disapplied the final proviso of HR art 6 in the case of coastal voyages, now disappears.

Rix LJ rejected MSC's argument that the concept of a non-negotiable receipt in s 1(6) of the 1971 Act was an indication that a bill of lading within the meaning of the HR and the 1971 Act, is something different from a bill of lading. A non-negotiable receipt is not the same as a straight bill. Otherwise, a straight bill is a contradiction in terms. Rix LJ surmised that the distinction drawn in s 1(6) derived from the previous concepts of HR art 6 and s 4 of the 1924 Act. Article 6 says that carriers are only very exceptionably permitted to avoid issuing a bill of lading where otherwise required to do so, and thus to take the carriers outside the HR, but that when entitled to do so the carriers must do so in a very clear manner, avoiding the language of a bill of lading and making it clear that the document concerned, described as a receipt, is non-negotiable. It is clear from HR art 6 and the travaux préparatoires that HR art 6 is not covering the ground of a straight bill. Section 4 of the 1924 Act said that the carriers could use that device in less restricted circumstances, namely in all coasting voyages between ports in the British Isles including all of Ireland. Section 1(6) of the 1971 Act now provided that the same technique could be used not only to take the carriers outside the HR but, where the document also makes it clear that the HVR are to govern as if the document were a bill of lading, to bring one back inside the Rules. It appears that such documents are in use on short journeys where it is not necessary or practicable to employ a bill of lading surrender of which by the receiver is required to obtain delivery of the goods. Nevertheless, there is no inevitable desire in such a trade to stand outside the terms of the Rules; and so special provision was made to allow such documents to come back within the regime of the Rules. See The Vechscroon [1982] 1 Lloyd's Rep 301; The European Enterprise [1989] 2 Lloyd's Rep 185. It is understandable that the UK, with its enormous trade between its own islands and the Continent, might wish to make special provision for such circumstances.

Jacob J also allowed the appeal. Jacob J found that the straight bill is a document of title in the sense that its transfer to the consignee entitles the latter to delivery and is essential to that entitlement. Thus, the straight bill was a 'bill of lading or any similar document of title' within the meaning of s 1(4) of the 1971 Act. That phrase derives from HVR art 1.b, and shares the same meaning. The HVR applied with the consequence that liability cannot be capped by anything in the contract of carriage (art 3.8). The purpose of the HR is to provide protection from onerous terms in the contract of carriage. Jacob J disagreed with MSC's argument that such protection is only to be provided if there is a document of title in the sense of a document which can be used to convey title generally (eg an order bill of lading). An order bill protects not only the indorsee(s) of the bill but also the original consignee. Jacob J did not find any rational reason for giving such a consignee protection but not a consignee who is not able to transfer title by indorsement. If the consignee had a say in the terms of the bill of lading, and wanted the goods purely for itself rather than for dealing in, there is no reason why it would want the goods delivered to its order. It is illogical that without the 'order' words the consignee loses protection. Opinions to the contrary do not sufficiently explain why the consignee's protection against onerous terms in the contract of carriage, or the consignor's protection in respect of receiving his money before delivery, should depend on whether it is a straight or order bill. As for the cross-appeal, Jacob J agreed with Rix LJ and had nothing to add.

Peter Gibson LJ agreed with Rix LJ, and added that he now took a different view of some of the statements made in para 2.50 of the Law Commission's Report that he signed.

[For the final unsuccessful appeal to the House of Lords, see JI MacWilliam Co Inc v Mediterranean Shipping Co SA (The Rafaela S) [2005] UKHL 11, [2005] 2 AC 423 (CMI632).]