Web Alert: Delivering cargo against a damaged or lost/stolen bill of lading? Some guiding principles

The Standard Club is aware of a number of instances where its members have been asked to deliver cargo against damaged, destroyed or missing bills of lading. 
 
General position
 
Broadly speaking, as contractual carrier, a shipowner or charterer must deliver the cargo to the correct, entitled party, i.e. the lawful holder of the bill of lading. If not, the carrier may be liable to that party for a mis-delivery claim, up to the full value of the cargo.
 
The master is only obliged to deliver cargo against production of the original bill of lading. P&I cover may be prejudiced where cargo is delivered without the original bill of lading being duly presented at the port of discharge.
                                                                                    
There are, however, specific and limited circumstances where it may be possible to deliver cargo without production of the original bill of lading[1], such as where the bill has been lost, stolen, destroyed or damaged.
 
Lost, stolen or destroyed bills of lading

Under English law, there is authority that the contractual carrier may deliver cargo when the original bill has been lost, stolen or destroyed where the party requesting delivery is able to prove, to the master’s/carrier’s reasonable satisfaction:
 
1.      That the party requesting delivery of the cargo is so entitled to possession of the cargo; and
2.       What became of the bill of lading (e.g. it was stolen or lost – provided that such loss or theft did not involve the fault of the party claiming possession).
 
However, there is also a body of English case law[2] which appears to indicate that a reasonable explanation as to what happened to the bill of lading is not enough to effect delivery. These cases instead suggest that a formal court order is required before cargo can be delivered without presentation of the original bill of lading[3].
 
To succeed in obtaining an order for delivery from the relevant local court, the consignee would likely have to provide an indemnity to the carrier to protect the carrier from any possible (mis-delivery) claims, for delivering without production of the original bill of lading. 
                                                                                                                        
Damaged bills of lading

What is the position if the bill has only been partially damaged and not fully destroyed, such as by the bill being ripped into two pieces or becoming partially stained or burned?
 
In such a case, the bill has not been lost and it may still be possible to discern the relevant information from said document. In these circumstances, if the carrier is satisfied that they are able to make out the relevant parties and other information in the bill, the carrier may, taking a more commercial approach, deliver the cargo against the damaged document.
 
If the carrier chooses to deliver the cargo in such a case, the club recommends:
 
1.       If the document has been ripped or is in more than one piece – that the master is reasonably satisfied that both parts of the bill are from the same, original document; and
2.       That a reasonable explanation as to what happened to the bill is  obtained; and
3.       Reasonable steps are taken to establish that the party claiming the cargo is so entitled to delivery as per the damaged bill of lading; and
4.       A suitably worded letter of indemnity is received from the party requesting delivery.  
 
Comment

Delivering cargo without production of the original bill of lading may lead to claims for mis-delivery and may result in a loss of a member’s P&I cover. The club strongly advises members considering delivering cargo without a bill of lading, or against a damaged bill, to contact the club before doing so.
 
This article intends to provide general guidance on the issues arising. It is not intended to provide legal advice in relation to any specific query. The law is also not static. If in doubt, The Standard Club is always on hand to assist.

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[1] The Sormovskiy 3068 [1994] 2 Lloyd’s Rep. 266
[2] See East West Corpn v DKBS 1912 A/S [2003] EWCA Civ 83 and Motis Exports Ltd v Dampskibsselskabet AF 1912 and Aktieselskabet Dampskibsselskabet Svendborg [2000] 1 Lloyd’s Rep. 211 (CA)
[3]  The Houda [1994] 2 Lloyd’s Rep. 541