[1990] 1 Lloyds Rep 252
Court of Appeal
Summary , Passing of property; Notes
These notes were last updated 02 May 98.
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In an alleged short-delivery claim, the main
importance of this case lay in its narrow interpretation given to
section 1 of the Bills of Lading Act 1855 (disapproving contrary
statements by Roskill LJ, obiter in The San Nicholas [1976] 1
Lloyd's Rep 8, and Lloyd J in The Sevonia Team [1983] 2
Lloyd's Rep 640). This aspect of the case is no longer relevant
in the light of the replacement of that
Act by the Carriage of Goods by Sea Act 1992. Nevertheless, the
case is still of importance in determining when property passes
under a c.i.f. contract, where the bill of lading was taken to
the seller's order.
These notes were last updated 02 May 98.
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The bill of lading was not indorsed in the plaintiff's favour until some time after discharge, and as it was made out to seller's order, it was argued that the sellers had retained a right of disposal, and that property did not therefore pass until indorsement. This argument was rejected and s. 19(2) of the Sale of Goods Act 1979 rebutted, in spite of the sale contract being on c.i.f. terms, where payment was by standby letter of credit which guaranteed payment to the seller, and which could operate entirely independently of the bill of lading. Property therefore passed at latest on discharge (when the cargo was delivered under the contract of sale), and arguably earlier, when the buyers were invoiced for payment, and independently of the later indorsement.
Note that the precise moment of passing of property did not need to be decided in The Delfini. The Court of Appeal took the view that it passed at latest on discharge, but it could presumably have passed earlier. The important point was that it passed prior to, and independently of, indorsement, the consequence being that s. 1 of the Bills of Lading Act 1855 could not be triggered.
Mustill LJ clearly thought the seller's argument that passing of property be postponed until indorsement absurd, given that this could be months after discharge, and indeed even after cargo had become admixed with other cargo belonging to the receivers.
The Filiatra Legacy raised similar issues - there property was held to pass earlier still, on shipment, s. 19(2) again being rebutted, for similar reasons. This was an f.o.b. contract, but the material factor appears to have been that the bill of lading played no part at all in the mechanism for payment, so that there was no possible reason for the sellers to reserve title.
Note that in The Filiatra Legacy, the Court of Appeal, in holding that the buyers had title to sue, had to hold that property passed prior to discharge. This was because the action was brought in tort, since the buyers never obtained a bill of lading, and could clearly not bring any action based on s. 1. The tort action required the buyers to have property in the disputed cargo at the time of the alleged tort, but since they were claiming short delivery, they would never have obtained title to the disputed cargo had property passed on discharge (because the claim was that it was never discharged).
By contrast, in The Delfini, had the buyers succeeded on their s.1 claim, as a contract action it would have applied to the entirety of the cargo, whether or not the buyers ever obtained property to any particular part of it.
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Note that the in The Delfini, the CA neither adopted nor disapproved the view of Phillips J at first instance that the bill of lading was incapable of passing property after the discharge of the cargo because it had become exhausted (even though, because of the short delivery not all the property had been discharged). This issue remains undecided. However, in The Future Express at first instance, Diamond J thought that a bill of lading would be discharged only when delivery was made against its production, which did not happen in The Delfini.
These notes were last updated 02 May 98.
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