Borealis AB v Stargas Ltd (The Berge Sisar)

Under Carriage of Goods by Sea Act 1992, section 3 confines contractual liabilities to a lawful bill-of-lading holder who enforces, or seeks to enforce, rights under the contract of carriage. An intermediate holder who has made a demand or claim does not remain irrevocably liable if it endorses the bill to a later holder who also satisfies the statutory conditions for liability.

The later holder's liability is substituted for that of the previous holder unless the previous holder has taken actual delivery or the nature of its acts otherwise prevents further dealing with the goods. The statutory scheme preserves the original shipper's liability, but does not impose cumulative liability on successive intermediate holders.

Borealis bought a cargo of propane from Stargas. The cargo was carried under bills of lading naming Saudi Arabian Oil Co as shipper. After the cargo was found to be corrosive, Bergesen, the vessel owner, claimed against Borealis under the bills of lading. Borealis sought an indemnity or contribution from Saudi Arabian Oil Co and obtained leave to serve it out of the jurisdiction.

Waller J refused Saudi Arabian Oil Co's application to set aside that leave: [1997] 1 Lloyds Law Reports 642. On appeal, the central issue was whether Borealis, having briefly become the lawful holder after requesting delivery but then endorsing the bills to Dow Europe, remained liable to Bergesen under section 3 of the Carriage of Goods by Sea Act 1992.

1. Appeal allowed by a majority of two to one. Lord Justice Millett gave the majority reasoning on section 3 of the Carriage of Goods by Sea Act 1992, with which Lord Justice Schiemann agreed. Sir Brian Neill dissented on that issue.

2. All members of the court agreed that, apart from the statutory point, Waller J's discretionary decision under RSC Order 11 should not be disturbed. An appellate court should interfere with such a discretionary decision only for an error of principle or where it is plainly wrong. Neither basis was established.

3. Lord Justice Millett held that section 3(1) limits, rather than expands, the class of persons liable under a bill of lading. A person becomes liable only where rights are vested in that person under section 2(1) and that person takes or demands delivery, makes a claim, or falls within section 3(1)(c). The provision does not make every lawful holder automatically liable.

4. An intermediate holder who has merely made a demand or claim remains able to withdraw it and endorse the bill. If the bill is transferred to a later holder who fulfils the statutory conditions for liability, the earlier holder is exonerated. Although section 3 contains no express divesting provision, the transfer of rights under section 2 means that the endorser no longer answers the opening description in section 3(1). This construction was consistent with the position under the Bills of Lading Act 1855 and did not leave liability cumulatively with an intermediate holder.

5. Sir Brian Neill would have dismissed the appeal. He considered that liability, once triggered while the holder had section 2 rights, remained accrued unless Parliament used clear words to transfer or extinguish it. That view did not command the court.

6. Borealis was therefore not liable to Bergesen after the transfer to Dow Europe. Its contribution claim against Saudi Arabian Oil Co had no sufficient foundation. The appeal was allowed with costs here and below; permission to appeal to the House of Lords was refused.

• Court of Appeal: Allowed Saudi Arabian Oil Co's appeal by a majority and set aside the refusal to revoke leave for service out of the jurisdiction: [1999] QB 863.

• High Court, Commercial Court (Waller J): Dismissed Saudi Arabian Oil Co's application to set aside Clarke J's order granting Borealis leave to issue a concurrent writ and serve it out of the jurisdiction: [1997] 1 Lloyds Law Reports 642.

• High Court, Commercial Court (Clarke J): Granted leave on 30 October 1995 to issue a concurrent writ and serve Saudi Arabian Oil Co in Saudi Arabia.