UK: Collecting Your Goods – Electronic Release System

The Court of Appeal handed down a judgment this week in MSC Mediterranean Shipping Company SA v Glencore International AG [2017] EWCA Civ 365 relating to a dispute arising out of the Electronic Release System ("ERS") in operation at the port of Antwerp.

Background to ERS

Under the ERS, carriers provide computer generated electronic numbers which are given to the relevant receivers or their agents, against bills of lading, and the port terminal. These numbers are given instead of Delivery Orders or Release Notes. The holders of the bills then have to present the pin codes to the terminal to take delivery of the goods. In practice this is done by the collecting driver entering the pin codes manually to gain access to the terminal and collect the containers. This system has been running for the last six years, but it is not mandatory and is not adopted by all the carriers using the port.

MSC operated the system by sending a release note providing the pin codes by email on presentation of a bill of lading (and payment of all outstanding charges). The Judge at First Instance ("the Judge") found that Glencore was unaware when entering into the contract that any ERS was in use.

Background to the dispute

In this particular case Glencore had made 69 shipments of drums of cobalt briquettes to Antwerp between January 2011 and June 2012, all of which were carried by MSC. In relation to the 70th shipment, when the driver went to collect the goods, two of the three containers were missing.

The bill of lading was a negotiable bill marked "to order" and providing "If this is a negotiable (To Order/of) Bill of Lading, one original Bill of Lading, duly endorsed must be surrendered by the Merchant to the Carrier (together with outstanding freight) in exchange for the Goods or a Delivery Order".

Decision at first instance

  1. Whether MSC's provision of the pin codes to Glencore's agents at the port, being the notify party in the bill of lading, constituted provision of a Delivery Order within the meaning of the bill of lading. The Judge held that "Delivery Order" must be reference to a ship's delivery order as defined in Section 1 (4) of the Carriage of Goods by Sea Act 1992 ("COGSA"), ie " ...any document which is neither a bill of lading nor a sea waybill, but containing an undertaking.... by the carrier to a person identified in the document to deliver the goods to which the document relates to that person". It was held that the undertaking was an essential feature of such a document, and that this was not satisfied by the carrier providing a release note with a pin code.
  2. Whether the previous course of dealing between MSC and Glencore provided a basis for a term to be implied into the bill of lading that "upon surrender of the bill of lading by a lawful holder, a carrier or its agent may provide an import pin code...". The Judge rejected this on a number of bases, including that it "sat awkwardly" with the express terms of the bill of lading, ie that the goods or a Delivery Order were to be provided in exchange for it; that it could not be said that business requirements dictated its use, as carriers were not obliged to use the ERS and not all did; and that the position would only be known to the original parties to the bill of lading, being a document of title.
  3. Whether MSC's correspondence with the agents in January 2011 varied the terms of the bill of lading so that it could be exchanged for pin codes that were valid under the ERS – this was rejected on the facts.
  4. Whether Glencore was estopped from asserting that the delivery of the cargo upon presentation of a pin code was a breach of contract or a duty by MSC. It was held that there was no basis for saying that Glencore had represented, or so conducted itself as to let it be understood that it accepted this. Its limited knowledge about the use of the ERS was significant.

Court of Appeal

In dismissing MSC's appeal, the Court of Appeal considered the following issues:

Pin codes as (symbolic) delivery

It was argued that the Judge was in error in failing to find that the provision of the pin codes to the agents itself amounted in law to delivery of possession of the goods. Reference was made to the position in sale of goods cases where "delivery can be effected by the handing to the buyer the key of a warehouse or other place where the goods are stored, provided that a licence to enter and take the goods can be implied".

It was found that there were a number of differences in the current situation where (i) the parties had contemplated either actual delivery against presentation of a bill of lading or in accordance with a Delivery Order; and (ii) the local agent for MSC retained, at all times, the power, (albeit not the contractual right) as against Glencore or its agents, to invalidate the pin code, which meant that, as held by the Judge, "MSC did not, ....divest itself of all powers to control any physical dealing in the goods".

The Court of Appeal accepted that "where the parties have agreed that symbolic delivery suffices, then such delivery takes place when the symbol is delivered, notwithstanding that the deliverer of the symbol may in practice be able to deprive the recipient of the actual goods after the symbol has been handed over, or does so, the remedy in the latter case being in conversion" but found that the more important question was the form of delivery that the contract contemplated. It held that in this case the bill of lading did not provide that provision of the pin codes amounted to delivery. At best the code was some form of delivery order.

Whether the Release Note containing the pin codes was itself a Delivery Order for the purposes of the Bill of Lading

The Court of Appeal agreed with the Judge that under an English law contract, a Delivery Order should be regarded as having the same meaning as a ship's delivery order, under COGSA 1992. It was therefore held that it was not possible to treat the obligation to produce a Delivery Order as satisfied by a Release Note which did no more than instruct the terminal to deliver against the entry of pin codes which it provides to the receiving/notify party.

It is worth noting that the Court was happy to extend the meaning of "any document" in Section 1 (4) COGSA 1992 to an email, and said that even if it did not, it would still regard an email which contained the necessary undertaking as a Delivery Order.

Whether the Release Note with the pin codes contained in it was, on proper analysis, a ship's Delivery Order within Section 1 (4) COGSA 1992

The Court considered whether the Delivery Order contained an undertaking to deliver. It was held that the critical question relates to the nature of the obligation (if any) which is required to be accepted in order for a document to constitute a Delivery Order. The Court's view was that a delivery order under the bill of lading required an undertaking on the part of MSC to deliver in favour of Glencore or its agent, which the release note with the pin codes did not contain, either expressly or by implication.

Whether Glencore was estopped from contending that delivery of the cargo upon presentation of a pin code was a breach of contract and / or duty on the part of MSC

The court considered what representation Glencore would have had to make to give rise to estoppel, MSC seeking to rely on an allegation that Glencore had given the appearance that it was content for the ERS to be used for the 69 previous shipments and could not now complain that it was used for the three containers under the subject bill of lading.

The Court of Appeal agreed with the Judge's conclusion that what was required was a representation by Glencore, or on its behalf, that delivery otherwise than to it would be acceptable provided that it was made to the first presenter of the codes. No such representation had been made.

Lessons Learned

The parties in this case have since altered the arrangements for releasing containers, to provide extra security and avoid another such loss, but the case provides an interesting insight into the issues that can arise when parties look for ways to effect delivery other than against presentation of the bill of lading. In such cases the parties must ensure that the contractual provisions reflect their intentions, at least until statutory provisions are introduced to account for such changes in practice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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