LORD BINGHAM OF CORNHILL
My Lords,
1. In this action the seller (Scottish & Newcastle International Limited)
seeks to recover the price of goods sold from the buyer (Othon Ghalanos
Limited). S&N is a company based in Scotland, Ghalanos a company
registered in Cyprus. The contract related to 11 consignments of cider
shipped from Liverpool to Limassol in June-July 2004. The question
before the House is whether the English court has jurisdiction to entertain
the action. The answer to that question turns, by virtue of article 5(1)
(b) of Council Regulation (EC) No 44/2001, on whether, as a matter of
English law applied to the particular contract made between the parties,
the goods were or should have been delivered by S&N to Ghalanos in
England. Both Andrew Smith J ([2006] EWHC 1039 (Comm)) and the
Court of Appeal (Waller and Rix LJJ: [2006] EWCA Civ 1750, [2007] 1 All
ER (Comm) 1027) held in favour of S&N that the English court does have
jurisdiction, but Ghalanos challenges the correctness of that conclusion.
2. The general rule, expressed in article 2(1) of the Regulation referred
to, is that persons domiciled in a member state must, irrespective of their
nationality, be sued in the courts of their home state. That is the result
Ghalanos seeks, and if article 2(1) were applicable, S&N would have to
pursue its claim in the Cypriot court. But the general rule in article 2(1) is
qualified by a special rule in article 5(1) of the Regulation, which provides:
"A person domiciled in a Member State may, in another Member State, be
sued:
(1)(a) in matters relating to a contract, in the courts for the place of
performance of the obligation in question;
(b) for the purpose of this provision and unless otherwise agreed, the
place of performance of the obligation in question shall be:
- in the case of the sale of goods, the place in a Member State where,
under the contract, the goods were delivered or should have been
delivered,
- in the case of the provision of services, the place in a Member State
where, under the contract, the services were provided or should have
been provided,
(c) if subparagraph (b) does not apply then subparagraph (a) applies..."
Thus in matters of contract a person domiciled in one member state need
not be sued in the courts of that state but may be sued in the courts of
another member state if one or other of the conditions in the article is
satisfied.
3. Article 5(1)(a), applying to matters of contract quite generally and
therefore very broad in its scope, focuses attention on the particular
obligation in question in the particular action and permits a claimant
to sue in a member state other than that of the defendant's domicile if
the particular obligation in question was or should have been performed
in that other member state. But in subparagraph (b) a more specific
rule is laid down, not applicable to the whole field of contract, but only
to contracts for the sale of goods or the provision of services. In each
of these cases, in the absence of contrary agreement, the place of
performance of the obligation in question must be taken to be the place
where, under the particular contract between the parties, the goods
were or should have been delivered or the services were or should have
been provided, as the case may be. If subparagraph (b) does not apply,
whether because the contract is not one for the sale of goods or the
provision of services or because a contract of that character contains
no term as to the place of delivery of goods or the place of provision of
services, subparagraph (a) applies.
4. The sale of goods contract made between S&N and Ghalanos is,
as they agree, governed by English law. Thus it is to that contract,
interpreted according to the principles of English law, that we must look
to ascertain whether, under the contract, the goods were or should have
been delivered in England. This is made clear by the decision of the
European Court of Justice in (Case 12/76) Industrie Tessili Italiana Como
v Dunlop AG [1976] ECR 1473, paras 13-15. Thus (as the parties rightly
agree) the Regulation does not purport to impose a uniform concept
of delivery on all member states but leaves member states to apply
whatever, under their rules of private international law, is the law properly
applicable to the particular contract, in this case English law.
5. I am grateful to my noble and learned friends Lord Rodger of Earlsferry
and Lord Mance for their summaries of the terms of the contract upon
which this appeal turns, which I need not repeat. The issue is whether, as
held by the courts below, the goods were delivered to Ghalanos under the
contract in Liverpool.
6. For reasons given by Lord Mance in paragraph 31 of his opinion, I
would reject the primary argument of Ghalanos that Limassol was the
contractually agreed place of delivery because that port was entered in
box (iv), "Place of delivery", on the invoices. The courts below did not
accept that argument, and nor would I.
7. For reasons given by Lord Rodger in paragraphs 10 to 17 of his
opinion and by Lord Mance in paragraphs 36 to 48 of his opinion, I am
of opinion that on a proper analysis of this contract in accordance with
established principles of English commercial law the contractual agreed
place of delivery was Liverpool and the goods were duly delivered there
to Ghalanos. It follows that the English court has jurisdiction under
article 5(1)(b) of the Regulation to entertain this claim, and Ghalanos'
appeal must be dismissed. Like Lord Rodger, however, I would prefer to
reserve my opinion on the points discussed in paragraphs 49 to 55 of Lord
Mance's opinion, which do not arise for decision in this case.
LORD RODGER OF EARLSFERRY
My Lords,
8. In about April 2004 the appellants (Ghalanos), a company domiciled in
Cyprus, agreed to buy 11 container loads of cider from the respondents
(S & N), a company having its head office in Scotland. The contract was
subject to English law. The cider was shipped at Liverpool and taken by
Zim Line vessels to Limassol where Ghalanos took delivery. Ghalanos
have not, however, paid for the cider and S & N now sue them for the
price. It is common ground that, in terms of article 5(1)(b) of Council
Regulation (EC) No 44/2001, the English courts do not have jurisdiction
unless, according to English law, the cider was "delivered" in England –
more particularly, on shipment at Liverpool.
9. For the reasons to be given by my noble and learned friend, Lord
Mance, I would reject the appellants' primary argument, that Limassol
was the contractually agreed place of delivery, because "Limassol"
was written into box (iv), headed "Place of delivery", on the invoices. I
concentrate on the appellants' alternative case.
10. So far as relevant, section 61(1) of the Sale of Goods Act 1979 ("the
Act") provides that, in the Act, unless the context or subject matter
otherwise requires, "delivery" means "voluntary transfer of possession
from one person to another". Section 32(1) provides:
"Where, in pursuance of a contract of sale, the seller is authorised or
required to send the goods to the buyer, delivery of the goods to a carrier
(whether named by the buyer or not) for the purpose of transmission
to the buyer is prima facie deemed to be a delivery of the goods to the
buyer."
From the definition of "delivery" in section 61(1) it follows that, in cases
where section 32(1) applies, by voluntarily transferring possession of the
goods to a carrier for the purpose of transmission to the buyer, the seller
is prima facie deemed to have voluntarily transferred possession of the
goods to the buyer. For purposes of article 5(1)(b) of the Regulation the
place where the seller voluntarily transferred possession of the goods to
the carrier would therefore be the place where the goods were "delivered"
to the purchaser.
11. S & N say that section 32(1) applies and provides the answer in this
case: the goods were delivered under the contract of sale when S & N
shipped them on board the Zim Line vessels at Liverpool. Even where
goods are delivered to a carrier, however, it does not automatically follow
that they are deemed to have been delivered to the buyer. The subsection
gives only a prima facie rule, which would have to yield if the terms of
the contract between the parties indicated that the seller was to keep,
rather than to transfer, possession of the goods. Similarly, it is accepted
that where the carrier is the employee or agent of the seller, delivery to
the carrier does not constitute delivery to the buyer.
12. The subsection reflects the position at common law. For example,
in the (much discussed) case of Dunlop v Lambert (1839) 6 Cl & F
600, a puncheon of whisky, which merchants in Edinburgh had sold
to a customer in England, was lost at sea during a voyage from Leith
to Newcastle. The merchants, who had contracted with the carriers,
sued them for the loss of the whisky. One of the questions which arose
was whether the whisky had been delivered to the purchaser, so that
the property or risk had passed to him, by the time it was lost. Lord
Cottenham LC observed, at p 620:
"It is no doubt true as a general rule, that the delivery by the consignor
to the carrier is a delivery to the consignee, and that the risk is after such
delivery the risk of the consignee. This is so if, without designating the
particular carrier, the consignee directs that the goods shall be sent by the
ordinary conveyance: the delivery to the ordinary carrier is then a delivery
to the consignee, and the consignee incurs all the risk of the carriage.
And it is still more strongly so if the goods are sent by a carrier specially
pointed out by the consignee himself, for such carrier then becomes his
special agent."
He added, at pp 620-621:
"But though the authorities all establish the general inference I have
stated, yet that general inference is capable of being varied by the
circumstances of any special arrangement between the parties, or of any
particular mode of dealing between them."
(The parallel report of both these extracts is to the same effect, even if
the language differs somewhat: Dunlop v Lambert (1839) Macl & Rob
663, 674-675.) The rationale for the approach which the Lord Chancellor
outlines must be that, when the consignor delivers the goods to the
carrier, the consignee is then in a position to take delivery of them from
the carrier at the other end.
13. In the present case the contract provided for S & N to send the
goods to Ghalanos. But Ghalanos designated the carrier to be used:
shipment was to be from Liverpool or Felixstowe "per Zim Line vessel
as per attached shipping schedule…." In addition, although S & N were
to pay the freight, Ghalanos told them that it was to be "at the rate of
Stg £275,00 liner terms all in plus BAF (Banker Adjustment Factor) per
20' container as agreed with the Cyprus agents of Zim Line." In other
words, the rate had already been negotiated between Ghalanos and the
Cyprus agents of the designated carriers, Zim Line. Having regard to
these factors and applying the approach of Lord Cottenham in Dunlop
v Lambert, I would hold that the carriers, Zim Line, are properly to be
regarded as the agents of Ghalanos for purposes of section 32(1). It
follows that, by shipping the containers of cider on board the vessels at
Liverpool, S & N are prima facie deemed to have delivered the cider to
Ghalanos in Liverpool. The question then is whether there is anything to
displace that prima facie conclusion.
14. Before Andrew Smith J it seems to have been common ground
that, since the terms of the contract were CFR, no distinction was to
be drawn between it and a CIF contract. In the Court of Appeal Rix LJ
observed, however, at para 9, that, although it was expressed to be CFR,
the contract contemplated by the parties differed very little from a form
of FOB contract. I agree. But I doubt whether it matters, for present
purposes, where exactly the parties' contract stands in the spectrum
of possible contracts. What matter are the terms of the arrangement
between the parties.
15. In this case, not only were the sellers to pay the freight, but they
were also to obtain the bills of lading from the carriers. This is apparent
from the term providing for the documents to be forwarded to Ghalanos
immediately after shipment. The bills were, however, to be made out to
Ghalanos as consignee and were to be non-negotiable. Nor did S & N
reserve the right of disposal of the cider. Plainly, therefore, the property
in the cider had passed to Ghalanos and the consignors, S & N, were to
have no continuing interest in the cider once it had been shipped. This is
confirmed by the requirement that S & N were to forward the documents
to Ghalanos immediately, by registered and express mail: the clear
intention was that Ghalanos were to have the bills of lading, and so were
to be in a position to take delivery of the cider from the carriers, when
they were notified that the vessels had reached Limassol. This, again,
was consistent with payment of the price only being due 90 days after the
vessel arrived there.
16. In my view, all these factors combine to confirm that, by shipping
the containers on board the vessels at Liverpool with the intention that
Ghalanos should be in a position to take delivery of them immediately on
their arrival at Limassol, under section 32(1) of the Act S & N are deemed
to have delivered the cider to Ghalanos at Liverpool.
17. Another way of putting the same point would be to say that, in
these particular circumstances, where the property had passed and S
& N had no continuing interest in the cider after shipment, the bills of
lading evidenced a bailment, with Zim Line as bailee and the consignee,
Ghalanos, as bailor: Borealis AB v Stargas Ltd (The Berge Sisar) [2002] 2
AC 205, 219, para 18, per Lord Hobhouse of Woodborough.
18. I accordingly agree with Lord Mance that, in terms of article 5(1)(b)
of the Regulation, the High Court has jurisdiction in this case. He goes on
to indicate that, in his view, the place of shipment would also be the place
of delivery for the purposes of article 5(1)(b) in all types of FOB contracts,
including those which provide for the seller to retain the bills of lading, for
instance, until the buyer has paid for the goods. I readily acknowledge the
powerful factors in favour of that view, including the language of article
5(1)(b) – which may be thought to focus on the physical delivery of the
goods themselves – and the desirability of having an easily applicable rule
for determining jurisdiction.
19. Nevertheless, I prefer to reserve my opinion on the point. I can
explain my reasons very briefly.
20. A term under which the seller is to retain the bills of lading until
payment is, of course, common in both CIF and FOB contracts. Since the
bill of lading is the symbol of the goods, under such an arrangement the
seller or his agent not only retains possession of the bill of lading but
also, thereby, retains the right to possession of the goods until the price
is paid. Often, the property in the goods will also be intended to pass only
on payment. In such a case, even though the seller ships the goods on
board a vessel nominated by the buyer, by doing so, he does not intend
to transfer possession of the goods to the buyer. On the contrary, the
intention of the parties is that the buyer is not to obtain possession of the
bill of lading – and hence of the means to take delivery of the goods from
the carrier – unless and until he has paid the price. In that situation it
seems to me at least arguable that the prima facie rule in section 32(1)
of the Sale of Goods Act would be displaced by the terms of the contract
between the parties. So, under the English law of sale, the goods would
not have been "delivered" to the buyer by being shipped on the carrier's
vessel. I refer, by way of illustration, to the discussion of the passing
of the right to possession of the cargo in the judgments of Brandon J
and Roskill LJ in The Albazero [1977] AC 774, 800-801, and 809-812,
respectively. Their reasoning was approved by Lord Diplock in this House,
at p 840.
21. Whether, even if the goods had not been "delivered" for the purposes
English law, they would none the less have been "delivered" for the
purposes of article 5(1)(b) of the Regulation gives rise to other questions
which it is also unnecessary to decide on this occasion.
22. For these reasons I would dismiss the appeal.
LORD BROWN OF EATON-UNDER-HEYWOOD
My Lords,
23. I have had the advantage of reading in draft the opinion of my noble
and learned friend Lord Mance and for the reasons he gives, with which I
agree, I too would dismiss this appeal.
LORD MANCE
My Lords,
24. The question on this appeal is whether the English courts have
jurisdiction under article 5(1)(b) of the Judgments Regulation (EC) No
44/2001 over a claim for the price of cider sold and delivered by the
respondents, Scottish & Newcastle International Limited ("S&N") to the
appellants, Othon Ghalanos Limited ("Ghalanos"). S&N are a Scottish
company based in Edinburgh, where it appears that the price should
have been paid. Ghalanos are a Cypriot company, and were until 2004
distributors to S&N (following, it appears, a takeover by S&N of H.P.
Bulmer). The termination of their Cypriot distributorship has given rise
to separate proceedings in Cyprus. The present proceedings (which S&N
started before the Cypriot proceedings) are brought in England solely on
the basis that this is "the place….where, under the contract, the goods
were delivered…." within the meaning of article 5(1)(b).
25. Article 5(1)(b) was introduced into the Brussels regime by the
Regulation to provide in relation to contracts for the sale of goods and
provision of services a single point of reference for the alternative
head of contractual jurisdiction permitted by article 5(1). The basic
rule contained in article 5(1)(a) is that a person domiciled in a Member
State may be sued in another Member State in matters relating to a
contract in the courts for the place of performance of the obligation in
question. But article 5(1)(b) radically alters the effect of this provision by
providing that, for its purpose and unless otherwise agreed, the place of
performance of the obligation in question shall be, in the case of sale of
goods, the place in a Member State where, under the contract, the goods
were delivered or should have been delivered. Likewise, in the case of the
provision of services, it is now the place where, under the contract, the
services were provided or should have been provided.
26. S&N maintain that the cider was, for the purposes of article 5(1)
(b), delivered in Liverpool, where it was shipped for carriage to Cyprus
under eleven bills of lading on three different vessels in late June and
July 2004. Ghalanos submit that the contract provided, expressly or in
effect, for delivery in Limassol, Cyprus, or alternatively that the terms of
delivery were CFR Limassol, and in either case that delivery was not in
Liverpool. These submissions make it necessary to analyse the nature of
the contract.
27. By letter dated 3rd March 2004 Ghalanos ordered 11 containers of
cider. Under the heading "Shipment" the order provided "From Liverpool
or Felixstowe per Zim Line vessel as per attached shipping schedule".
It stipulated for email notification to Ghalanos when shipment was
effected. It gave full details of Zim Line's Liverpool and Felixstowe agents
(Bahr Behrend Agencies Ltd. at Liverpool). Under the head "Delivery", it
provided: "CFR Limassol", under "Payment": "90 days….from the date of
arrival of the vessel" and under "Freight": "Prepaid at the rate of Stg £275
liner terms all in plus BAF (Banker Adjustment Factor) per 20' container,
as agreed with the Cyprus agents of Zim Line". Under "Insurance" it
provided "Our care". Proforma invoices were to be provided showing FOB
prices, while the final invoices were to show the FOB prices stated in the
order, the total FOB value and the freight. The order further provided that
there should be a bill of lading "original and copy non negotiable, each
in three copies" for each container, stating "Notify Othon Ghalanos Ltd.".
Under "Documents", the order provided that separate documents for each
container should be issued in the name of and forwarded "immediately
after shipment by registered and express mail" to Ghalanos. This last
instruction was repeated at the end as one of five important "Notes".
28. S&N's response to this order was by letter dated 21st April to raise a
number of points, the first of which was that:
"you have mentioned that the terms are CFR Limassol while requesting
us to ship on an FOB basis. The pricing which we have on our records
shows that you have an FOB price and [we] will therefore treat your
order accordingly. Bearing this in mind we have asked your agents, Bahr
Behrend in Liverpool, for an FOB quote and are waiting for them to return
to us with this information."
Ghalanos replied on 3 May that
"Our prices are FOB UK port, but as per our agreement you prepay the
freight on our behalf, thus making the delivery terms CFR. The delivery
terms CFR should be stated on the invoice. The amount of the freight
prepaid, should also be stated on the invoice, separately, see attached
H. P. Bulmer's invoice. For the record please note that Bahr Behrend in
Liverpool are the agents of Zim Line in the U.K. and are not our agents.
…..
We reconfirm that the agreed freight rate we have with the Cyprus agents
of Zim Line is Stg£275 linerterms all in plus BAF (Banker Adjustment
Factor) per 20' container"
29. On 18th June 2004 S&N wrote forwarding proforma invoices covering
the 11 containers, saying that
"Your agreed freight charges will be added to the final invoices which will
be sent after the goods have been despatched.
I have contacted our shipping agent in the UK and we're aiming to
despatch the first 6 containers next week for shipment on the next
available vessel. …..".
All 11 proforma invoices showed the FOB price (as Ghalanos had
requested in their original order letter). Two of them stated expressly, in
a box with the printed heading "Terms of delivery and payment": "Free on
board. Payment due 90 days from date of arrival". The others stated "Cost
and Freight Limassol. Payment due 90 days from date of arrival" (or, in
three cases, "from date of invoice"), although only the FOB prices were
entered on them. After shipment, final invoices were made out, each
showing separately the FOB price and the freight incurred at the rate
which Ghalanos had agreed with Zim Line's Cyprus agent. The "Terms of
delivery and payment" boxes on these invoices were all completed "Cost
and Freight Limassol. Payment due 90 days from date of arrival."
30. The proforma and final invoices also contained a set of four boxes
with printed headings contemplating their use to show (i) the "Vessel/
flight no. and date", (ii) "Port/airport of loading", (iii) "Port/airport of
discharge" and (iv) "Place of delivery". These (with some exceptions as
regards the first two boxes in the proforma invoices) were completed by
entering in box (i) the relevant vessel's relevant shipment date, in box (ii)
Liverpool and in both of boxes (iii) and (iv) Limassol.
31. Ghalanos's primary case, on this basis, was that Limassol was the
contractually agreed place of delivery under the sale contract. Mr Richard
Lord QC for Ghalanos suggested that this case gained support from the
fact that Ghalanos would not in practice be able to inspect the goods until
after their arrival in Cyprus and from the provision for payment 90 days
after arrival. None of these submissions has in my opinion any force. The
standard printed heading to box (iv) refers to the place of delivery in the
context of transport arrangements which could well involve an element of
through or mixed transport, whereby goods discharged from a vessel or
aircraft at one place might well be on-carried for delivery at another final
destination. As completed with the word Limassol, the invoices merely
confirmed that the transport arranged went no further than the discharge
port of Limassol. That Ghalanos would not in practice inspect until after
arrival in Cyprus adds nothing. It is a commonplace of international sales.
The agreement for payment only 90 days after arrival was no more than
a relaxed payment regime with no significance in relation to the place of
delivery.
32. In the alternative to their primary case, Ghalanos submit that the
contract was on terms providing for delivery CFR Limassol and that "whilst
the focus of a fob contract is the place of shipment….the focus of a c&f
or cfr/cif contract is the place of discharge". In relation to a CFR (or
C&F) contract, Ghalanos maintain that delivery should be regarded as
occurring, at earliest, when the shipping documents were forwarded to
and/or received by Ghalanos.
33. Rix LJ took a different view of the general nature of the contract. He
considered that "the contract contemplated by the parties differed very
little from a form of FOB contract, although it was expressed to be CFR". I
agree and would if anything go further. It was to all intents and purposes
an FOB contract, although, at Ghalanos's request, the sum of the agreed
FOB price and the freight which S&N prepaid on Ghalanos's behalf led to
the description CFR being applied, in the final invoices in particular.
34. There is considerable flexibility both within and between
categorisations such as FOB, CFR (or C&F), CIF and ex-ship: see e.g. The
Parchim [1918] AC 157 (PC) and The Gabbiano [1940] P 166, 173-4. The
editors of Benjamin's Sale of Goods (7th Ed.) (2006) observe at para.
20-001 – quoting Devlin J in Pyrene v. Scindia [1954] 2 QB 402, 424
– that the FOB contract has become "'a flexible instrument', so much
so that no really satisfactory definition of such a contract is possible".
It embraces (a) cases where the buyer arranges and nominates the
ship, but the seller ships and takes the bill of lading in his own name as
consignor, (b) cases where the seller arranges shipment and takes the bill
in his own name as consignor and (c) cases where the buyer arranges and
nominates the ship, and the seller ships but the buyer is named in the bill
as consignor: Benjamin para. 20-003. Further, in cases (a) and (b), the
seller may be either the only party to the bill of lading or acting as agent
for the buyer as a (more or less undisclosed) principal: see Benjamin
para. 20-008 and East West Corp. v. DKBS AF 1912 A/S [2003] EWCA Civ
83, [2003] QB 1509, para. 34. In either of cases (a) and (b) the seller
may of course prepay the freight, and recoup himself by invoicing the
buyer.
35. However, there are three general differences between FOB and C&F
contracts:
(i) First, an FOB contract specifies a port or a range of ports for shipment
of the goods. A C&F contract specifies a port or ports to which the goods
are consigned.
(ii) Secondly, an FOB contract requires shipment (whether by or on behalf
of the seller or the buyer) of the goods at the port (or a port within the
range) so specified; i.e. the seller cannot buy afloat: see Benjamin para.
20-009. In contrast, under a C&F contract responsibility for shipment
rests on the seller, and this can be fulfilled by the seller either shipping
goods or acquiring goods already afloat after shipment, and moreover
shipment can be at any port (unless the contract otherwise provides).
(iii) Thirdly, and as a result, a C&F contract involves (subject to any
special terms) an all-in quote by the seller, who carries the risk of any
increase (and has the benefit of any reduction) in the cost of carriage.
In contrast, under an FOB contract, although the seller may contract for
and pay the freight, the buyer carries the risk (and has the benefit) of any
such fluctuation.
36. So viewed, it is clear that the present contract was and should be
regarded as being in all essential respects an FOB contract. All the indicia
of an FOB contract are present. Shipment was required to be made by
S&N at one of two ports of shipment contractually specified by the buyer.
Indeed, Ghalanos went further and specified in the contract the shipping
line and Liverpool shipping agents, with whom S&N were to arrange for
carriage to Cyprus. There was no question of buying afloat, and S&N
never offered or agreed an all-in price. On the contrary, Ghalanos had
made an agreement on the freight rate with the line's Cyprus agents
which the sellers were to invoke when arranging carriage; further, the sale
contract specified that the invoices should show the FOB price separately
from such freight, and required proforma invoices showing only the FOB
prices, with final invoices showing the total FOB value and whatever
freight was paid separately. The price was in other words to be FOB,
with the actual freight rate to be added in the final invoices, once it was
ascertained.
37. S&N had no commercial interest in the goods after shipment. The bills
of lading were to be and were (a) made out to the buyer as consignee and
(b) non-negotiable, and were to be forwarded to the buyer "immediately
after shipment". Risk and property therefore both passed on shipment:
Sale of Goods Act 1979 s.18 Rule 5(1) and (2), ss.19(2) and 20(1). Here,
the goods were not deliverable to the order of the seller or his agent, so
there was no reservation of any right of disposal within s.19(2).
38. As to delivery, Rix LJ in the Court of Appeal (para. 21) noted that
s.61 of the Sale of Goods Act defines this as meaning (unless the context
or subject-matter otherwise requires) "voluntary transfer of possession
from one person to another". Rix LJ referred to s.32 as dealing expressly
with the concept in the present context of an international sale of goods
involving carriage by sea, and concluded (para 23) that delivery under the
present contract was thus prima facie effected on shipment, together with
the transfer of title and risk. S.32(1) and (2) read:
"(1) Where, in pursuance of a contract of sale, the seller is authorised or
required to send the goods to the buyer, delivery of the goods to a carrier
(whether named by the buyer or not) for the purpose of transmission
to the buyer is prima facie deemed to be a delivery of the goods to the
buyer.
(2) Unless otherwise authorised by the buyer, the seller must make such
contract with the carrier on behalf of the buyer as may be reasonable
having regard to the nature of the goods and the other circumstances
of the case; and if the seller omits to do so, and the goods are lost or
damaged in course of transit, the buyer may decline to treat the delivery
to the carrier as a delivery to himself or may hold the seller responsible in
damages."
39. Mr Lord submits that Rix LJ failed to appreciate the limited scope of
application of s.32(1) and (2) in relation to documentary sales of goods
involving bills of lading. Mr Lord points out that Benjamin at para. 8-014
states that s.32(1) does not apply where the carrier is the servant or
agent of the carrier, citing in support inter alia Dunlop v. Lambert (1839)
6 Cl & F 600 and The Albazero [1977] AC 774. He suggests that in "a
typical cif contract" the carrier is the seller's agent, "because the carrier is
engaged by the seller (on his own behalf) and not the buyer". However, I
need say nothing about the position under a typical CIF (or CFR) contract,
because the present contract belongs for reasons already indicated to a
different category.
40. Both Dunlop v. Lambert and The Albazero concerned the extent to
which a consignor can claim damages against a carrier in circumstances
where the consignor did not retain either property or risk. Both cases
contain statements affirming that the principles in s.32 may apply to
documentary sales involving bills of lading where the consignor retains
property and risk. In Dunlop v. Lambert Lord Cottenham LC said at p.620
that:
"It is no doubt true as a general rule, that the delivery by the consignor
to the carrier is a delivery to the consignee, and that the risk is after such
delivery the risk of the consignee….And it is still more strongly so if the
goods are sent by a carrier specially pointed out by the consignee himself,
for such carrier then becomes his special agent.
But though the authorities all establish the general inference I have
stated, yet that general inference is capable of being varied by the
circumstances of any special arrangement between the parties, or any
particular mode of dealing between them."
At both pp. 620 and 621 Lord Cottenham mentioned that the consignor
might have paid the freight in terms indicating that this did not conclude
the question for whom the carriage was being undertaken. He also gave,
as two examples where the "general inference" was varied, cases where
the consignor by agreement retained the risk until delivery, but added
that in "an infinite variety of circumstances, the ordinary rule may turn
out not to be that which regulates the liabilities of the parties."
41. In The Albazero Lord Diplock explained the common law approach
underlying s.32 in terms of bailment, saying at pp.841-2 that:
"The question who stood in relation of bailor to carrier and so was entitled
to sue him for the full value of the goods lost or the full amount of
the damage could only arise where the consignor and consignee were
different persons. In such a case the presumption was that the bailor was
the person named as consignee and that in delivering possession of the
goods to the carrier the consignor was acting and purporting to act as
agent only for a designated principal – the consignee."
He added that a consignor could make with the carrier a "special contract"
– one entered into on his own behalf and not as agent for the consignee –
but that, where the consignor was selling to the consignee, the question
whether or not he had done so would often be a matter of inference from
the terms of the contract of sale.
42. The application of the common law principle described by Lord Diplock
was also contemplated by Lord Hobhouse of Woodborough in Borealis
AB v. Stargas Ltd. (The Berge Sisar) [2001] UKHL 17, [2002] 2 AC 205,
when he said at para. 18:
"The bill of lading acknowledges the receipt of the goods from the shipper
for carriage to a destination and delivery there to the consignee. It
therefore evidences a bailment with the carrier who has issued the bill of
lading as the bailee and the consignee as bailor".
Commenting on this dictum in East West Corporation v.
Dampskibsselskabet AF, 1912, Aktieselskabet [2003] EWCA Civ 83,
[2003] QB 1509, paras. 34-35, I said:
"34. …This was said in a context where the named consignees were FOB
buyers: cf pp. 215, 216, paras. 7 and 10. In such a context, a shipper
may readily, indeed normally, be regarded as acting as agent for a named
consignee in making the relevant bill of lading contract: cf Albacruz v.
Albazero (The Albazero) [1977] AC 774, 786A-B, per Brandon J. The
goods will then have been from the outset bailed by the consignee, acting
through the agency of the consignor, to the carrier. But this is only the
first of three categories identified by Brandon J in a close analysis of the
authorities, which later received approval in the House of Lords [1977] AC
774, 842H, per Lord Diplock, with whose speech all other members of the
House agreed. The other categories were: (2) cases where the consignor
in delivering the goods to the carrier was acting as principal on his own
account, with property and risk remaining in him during the carriage; and
(3) cases where the consignor was held entitled to sue, whether or not
the property and risk in the goods was in him at any material time, on the
ground that the consignor had made a 'special contract' with the carrier,
and that, because of this, the carrier could not dispute the consignors'
title to sue. …..
35. …It is clear both from Brandon J's definition of the three categories
and from Lord Diplock's speech [1977]
AC 774, 842C-843A that (a) whether a consignor has contracted with
the carrier on behalf of an named consignee or on his own behalf (i.e.
whether the case falls within the first or second category) depends upon
an analysis of the terms, e.g. of any contract for sale, agreed between
the consignor and consignee, which would normally be quite unknown to
the carrier, while (b) the question whether the case falls within the third
category (i.e. is one where, whatever the position regarding property and
risk, the consignor has made a 'special contract' with the carrier) involves
an analysis of the relationship between the consignor and carrier. Thus, in
circumstances where a consignor was acting on his own behalf in shipping
the goods, or at all events reserving the right vis-à-vis the consignees to
deal with and redirect the goods, Lord Brandon's analysis in The Aliakmon
[1986] AC 785, 818 was that: "The only bailment of the goods was one
by the sellers to the shipowners." See also Carver on Bills of Lading, para.
7-038, footnote 47 and Benjamin's Sale of Goods, 6th ed (2002), para
18-057."
43. In the most recent (7th) edition of Benjamin at para. 18-065, Sir
Guenther Treitel points to possible difficulties about Lord Hobhouse's
invocation of the common law principle on the particular facts of The
Berge Sisar. These do not affect the general distinction drawn in the East
West Corporation case between situations where, on the one hand, a
seller ships goods on the buyer/consignee's behalf and, on the other
hand, a seller acts on his own behalf, whether because he retains property
and risk or simply because he reserves rights to deal with and redirect the
goods, for example against the event that the buyer defaults in taking up
and paying for the goods against the documents.
44. None of the latter features exists in the present case. Here the bills
of lading were, under the sale contract between S&N and Ghalanos
to be, and were, non-negotiable. They were made out to Ghalanos
as consignees. The sale contract required them to be forwarded
"immediately after shipment by registered and express mail" to Ghalanos.
S&N were to arrange and "prepay" on behalf of Ghalanos freight at a
rate negotiated by Ghalanos. The price and freight were not payable by
Ghalanos against transfer of the bills, but 90 days after each vessel's
arrival in Cyprus. S&N were to have no actual or potential right or interest
in the goods or the bills of lading after shipment.
45. The only factor that, it may be suggested, takes the present case
outside s.32 and outside the analysis of the position in bailment in the
statement by Lord Diplock in The Albazero (paragraph 41 above) is that
S&N accept that they incurred liability as principals to the carriers for
the freight, which, as between S&N and Ghalanos, S&N were requested
to "prepay" on Ghalanos's behalf. But this factor could mean (at most)
that S&N were party to a special contract with the carriers, and could
have claimed damages in respect of any breach of that contract, e.g.
involving loss or damage to the goods. In relation to Ghalanos, S&N may
still have been acting as an agent, rather than a principal, in shipping the
goods and/or in holding the bills of lading received upon shipment. An
analysis, according to which S&N, when contracting personally with the
carrier, were also contracting on behalf of Ghalanos was not suggested
below, though there could have been much to say for it (cf also Bowstead
& Reynolds on Agency (18th ed.) para. 9-006). But, assuming that S&N
alone were party to the carriage contract, everything still indicates that
S&N ceased as regards Ghalanos to have any interest in the goods upon
shipment and held the bills of lading issued upon shipment on behalf of
Ghalanos, with the corresponding obligation to forward them to Ghalanos
immediately. The bills symbolise the goods, and possession of the goods
was on this basis held by S&N for and on behalf of Ghalanos as from
shipment.
46. This conclusion is consistent with general principle. "The legal
relationship of bailor and bailee of a chattel can exist independently of
any contract": Morris v. Martin Ltd. [1966] 1 QB 716, 731, per Diplock
LJ, and East West Corporation, para. 24. A bailee may owe duties in
bailment not merely to his immediate bailor, but also to a third party
owning or having an immediate proprietary interest in the goods, certainly
where the bailee is on notice that such a third party exists: East West
Corporation, paras. 25-27 and cf generally Palmer on Bailment (2nd ed.)
chaps. 15(II) and 20. Cases of sub-bailment are only one example. In
East West Corporation bills of lading were made out by the shippers to
Chilean banks or order and delivered to the banks, who were acting vis-
a-vis the shippers purely as agents (to collect on behalf of the shippers
the price payable by buyers at destination). Under the Carriage of Goods
by Sea Act 1992 the contractual rights of suit evidenced by the bills of
lading were transferred to the banks. However, the shippers retained an
immediate possessory interest in the goods, entitling them to hold the
carriers responsible as bailees accordingly: East West Corporation, paras.
27 and 37-39.
47. Here, there is every reason, in view of the nature and terms of the
sale contract, to regard S&N as bailing the goods to the carriers on behalf
of Ghalanos, even if Ghalanos were not party to any contract which S&N
made with the carriers. The carriers could not reasonably suggest that
they thought that S&N were the only persons likely to own and be at
risk in respect of the goods on or from shipment. The fact that the bills
were non-negotiable and made out to Ghalanos as consignees were clear
contrary indications. Ghalanos would be bound by the terms of the bills
of lading qualifying the carriers' liability in respect of the goods and their
carriage: The Pioneer Container [1994] 2 AC 324. If the bills of lading
had been taken out and held by S&N in their own interests (e.g. pending
payment of the price), then delivery of the bills to Ghalanos as the named
consignees could have been required before Ghalanos acquired any
possessory interest. But that sheds no light on the present case, where
S&N made the shipment and held the bills throughout for Ghalanos.
48. In these circumstances, under the principles contained in the Sale of
Goods Act, Rix LJ was in my opinion correct to treat delivery of possession
of the goods as well as property and risk in respect of them as having
taken place upon shipment. It follows that delivery of the goods took
place upon shipment in every sense that can conceivably be relevant
under article 5(1)(b) of the Judgments Regulation and that the appeal
should be dismissed on that basis alone.
49. It thus becomes unnecessary to consider what the position might
have been after the passing of property and risk on shipment if S&N
had not only made a special contract with the carriers but had also, for
some reason (e.g. to secure payment of the price), retained symbolic
possession of the goods through the bills of lading until these were
forwarded to and/or received by Ghalanos. I will however say something
about the position on this hypothesis. Mr Lord's primary submission
was that the "place of delivery" under article 5(1)(b) would then be (i)
nowhere, (ii) the place of shipment, Liverpool, (iii) the place where the
documents were transferred, (iv) the place where the goods happened
to be when the documents were transferred (at least if that was within
the territory or territorial waters of a Member State) or (v) the place of
destination, Cyprus. It might, he suggested, be necessary to consider
referring to the European Court of Justice the question what is the correct
approach under a documentary sale such as the present.
50. For reasons already indicated, I see no basis for possibility (v).
Possibility (i) arises, in Mr Lord's submission, from the nature of a
documentary sale, under which delivery takes place in more than one
sense and may therefore take place in more than one place. It is true
that article 5(1)(c) itself contemplates that article 5(1)(b) may not
apply. However, the most obvious reason for article 5(1)(c) is that not
all contracts are for the sale of goods or provision of services, and still
less for the delivery or goods or the provisions of services in any Member
State. Article 5(1)(a) thus covers for example a contract for the sale of
goods for delivery in South Africa. It would seem surprising however if
there was no place of delivery at all within article 5(1)(b) even though
all the places identified under possibilities (ii), (iii) and (iv) lay within
Member States.
51. In its recent decision in Color Drack GmbH v. Lexx International
Vertriebs GmbH (Case C-386/05) [2007] I.L.Pr. 35, the European
Court of Justice explained the aim of Regulation EC 44/2001 as being
to enable a claimant "to identify easily the court in which he may sue
and the defendant reasonably to foresee before which court he may be
sued" (paras. 19, 20, 32 and 33) and the origin of article 5(1)(b) as an
exception to the original rule reflected in article 5(1)(a):
"By that provision (article 5(1)(b)), the Community legislature intended,
in respect of sales contracts, expressly to break with the earlier solution
under which the place of performance was determined, for each of the
obligations in question, in accordance with the private international rules
of the court seised of the dispute. By designating autonomously as 'the
place of performance' the place where the obligation which characterises
the contract is to be performed, the Community legislature sought to
centralise at its place of performance jurisdiction over disputes concerning
all the contractual obligations and to determine sole jurisdiction for all
claims arising out of the contract." (para. 39)
52. Article 5(1)(b) takes a very simple contractual model. It directs
attention to a place of physical delivery of goods. The physical obligation
by way of delivery which characterises an essentially FOB contract such
as the present is clearly shipment. That involves an easily identifiable
physical delivery at an easily identifiable place. It is on and at shipment
that the goods have to be of the contractual quantity and quality as
well as fit for carriage to destination (ss. 2, 14, 15 and 30 of the Sale of
Goods Act), and it is then that the risk of any subsequent loss, damage
or problem passes to the buyer (ss.18 rule 5 and 20(1)). The transfer
of documents may under some FOB sales give rise to a notional passing
of possession in the goods: cf e.g. Kwei Tek Chao v. British Traders and
Shippers Ltd. [1954] 2 QB 459, 486. But it would be highly undesirable
that the place of delivery for the purpose of article 5(1)(b) should be
understood in a way which could mean that it varied according to an
analysis of which of the types of FOB contract identified in paragraph 34
above was involved. The place where possession passes, or where either
the shipping documents or the goods are when it passes, is generally
irrelevant under FOB contracts and under this particular contract. Further,
any place with which such events might be associated could not be
regarded as either easy to identify or reasonably foreseeable.
53. That shipment identifies the place of delivery with which FOB
contracts are naturally associated is illustrated by a number of passages
in Benjamin. In the chapter on FOB contracts, para. 20-014 headed "Place
of delivery" reads:
"An f.o.b. contract will normally indicate the port of shipment, either by
naming it or by stating which party has the right to name it. The place of
delivery may also be stated more narrowly, as a particular wharf within a
port. An f.o.b. contract which contains no indication at all as to the place
of delivery may be void for uncertainty."
In considering the duty to obtain and tender shipping documents at paras.
20-020 to 20-027, Benjamin also observes (in para. 20-026) that
"There is no necessary connection between delivery and passing of
property, and a seller may perform his duty to deliver by shipping the
goods without at the same time unconditionally appropriating them to the
contract so as to pass the property."
In relation to the governing law of an FOB contract, Benjamin also
identifies (para. 25-010)
"the observable tendency in the relatively few authorities to treat the
country of shipment as the place of performance by delivery on board the
ship and to regard the contract as governed by the law of that place in the
absence of any countervailing considerations".
54. The Sale of Goods Act generally uses delivery to refer to passing of
possession, and this under some FOB contracts will be associated with
the transfer of the shipping documents. But there are, as the definition
in s.61(1) contemplates, occasions when in the Act delivery is used in
another sense. An example is s.30, dealing with the seller's obligation
to deliver the contractual quantity, which must in the context of an FOB
contract refer to delivery by shipment.
55. Bearing in mind the general aim of article 5(1)(b) as explained
in Color Drack and the general nature of FOB contracts, I would
consider it clear that the place of shipment is the place of delivery which
characterises an FOB contract such as the present and is relevant under
article 5(1)(b). This is so whether the matter is viewed simply under
domestic law (as in both parties' primary submissions can and should be
done) or is viewed as engaging autonomous conceptions of delivery (as
Mr Lord submitted in an alternative).
56. For the reasons given in paragraphs 24 to 48 above, I would hold that
the place of delivery under the present sale contract was Liverpool and
would accordingly dismiss this appeal.
LORD NEUBERGER OF ABBOTSBURY
My Lords,
57. I have had the advantage of reading in draft the opinion of my noble
and learned friend Lord Mance and for the reasons he gives, with which I
agree, I too would dismiss this appeal.