Leigh & Sillavan Ltd v Aliakmon Shipping Co Ltd (The Aliakmon)

A claimant cannot recover in negligence for loss caused by damage to property unless the claimant had legal ownership or a possessory title when the damage occurred. Contractual rights, the incidence of risk and an expectation of later ownership are insufficient.

An equitable owner without possession must join the legal owner. The two-stage duty inquiry in Anns v Merton London Borough Council does not reopen a class of case in which authority has repeatedly denied a duty.

No special transferred-loss exception applies to a buyer bearing the risk under a c.i.f. or c. and f. sale. Contractual carriage protections cannot be converted into a tortious duty where the buyer never acquired rights under the bill of lading.

The appellants bought steel coils on c. and f. terms. Risk passed on shipment, but a later variation reserved the sellers’ right of disposal. The buyers therefore took delivery only as the sellers’ agents, and legal ownership did not pass until after the damaged goods had been discharged and warehoused.

Staughton J gave judgment for the buyers in contract without deciding negligence: [1983] 1 Lloyd's Rep. 203. The Court of Appeal set that judgment aside and dismissed both claims: [1985] 2 W.L.R. 289. Its members differed on whether the shipowners owed the buyers a duty of care.

The central issue was whether a buyer who bore the risk, but lacked legal ownership or a possessory title when damage occurred, could recover from the shipowner in negligence. A related issue was whether any duty could be qualified by the bill of lading and the incorporated Hague Rules.

1. Appeal dismissed unanimously. Lord Brandon of Oakbrook delivered the leading speech. Lord Keith of Kinkel agreed entirely with his reasoning and conclusions. Lord Brightman, Lord Griffiths and Lord Ackner also adopted his reasons. The Court of Appeal’s order was affirmed, and the appellants were ordered to pay the respondents’ costs.

2. Lord Brandon held that recovery in negligence for loss resulting from damage to property requires the claimant to have held legal ownership or a possessory title when the damage occurred. The rule is definite and ascertainable. Contractual rights, the burden of risk and prospective ownership do not suffice. The rule established by the non-recovery authorities and reaffirmed in Candlewood Navigation Corporation v Mitsui O.S.K. Lines Ltd (The Mineral Transporter) [1986] AC 1 applied to c.i.f. and c. and f. buyers.

3. Lord Brandon held that Margarine Union G.m.b.H. v Cambay Prince Steamship Co Ltd (The Wear Breeze) [1969] 1 Q.B. 219 was and remained good law. The contrary decision in Schiffahrt-und Kohlen G.m.b.H. v Chelsea Maritime Ltd (The Irene's Success) [1982] Q.B. 481 was wrong and overruled. Sheen J’s observations in The Nea Tyhi [1982] 1 Lloyd's Rep. 606 were disapproved.

4. Lord Brandon explained that the two-stage formulation in Anns v Merton London Borough Council [1978] AC 728 was not a universally applicable duty test. It addressed novel situations and did not require settled no-duty authorities to be reopened. Even if that framework were used, the established proprietary-interest limitation and the commercial need for certainty would negative the proposed duty at its second stage.

5. Lord Brandon rejected equitable ownership as an independent title to sue. An equitable owner possessing the goods may sue by virtue of that possessory title. An equitable owner without possession must join the legal owner. He expressed only a provisional view that sections 16 to 19 of the Sale of Goods Act 1893 treated statutory “property” as comprising both legal and equitable title.

6. Lord Brandon held that section 1 of the Bills of Lading Act 1855 gave the buyers no contractual right of suit because property did not pass upon or by reason of endorsement of the bill. The sellers’ bailment to the shipowners operated only between those parties. Without negotiation of the bill and attornment, its terms did not govern relations between the shipowners and buyers. The responsibilities, immunities, limits, time bars and evidential rules in the Hague Rules could not be synthesised into a tortious standard of care.

7. Lord Brandon rejected the Court of Appeal’s proposed principle of transferred loss. It lacked authority, conflicted with the established rule and was unnecessary. Ordinary contractual arrangements provided adequate protection, while the buyers’ unusual variation had deprived them of the statutory right they could otherwise have obtained.

• House of Lords: Dismissed the buyers’ appeal, affirmed the Court of Appeal’s order and awarded the respondents their costs.

• Court of Appeal: Allowed the shipowners’ appeal, set aside Staughton J’s judgment and dismissed the contractual and tortious claims: [1985] 2 W.L.R. 289. Sir John Donaldson M.R. and Oliver L.J. found that no duty of care was owed. Goff L.J. considered that a duty existed but found no breach.

• Commercial Court: Staughton J entered judgment for the buyers in contract and consequently did not decide the alternative negligence claim: [1983] 1 Lloyd's Rep. 203.