Getting in on the act

THE new Sea Transport Documents Act applies generally to ‘sea transport documents’ issued in the Republic of South Africa and goods consigned to a destination within the republic or landed, delivered or discharged there. It further applies to all documents with regard to which proceedings are to be taken in any court or arbitration in the Republic of South Africa. The act also applies retrospectively to documents issued before its coming into operation on June 20, 2003.

The definition of ‘sea transport documents’ includes bills of lading and sea-way bills. Certain provisions of the act are, however, expressly applicable only to such documents as are transferable or negotiable.

Transfer of documents

The act makes provision for the minister to make regulations in due course for the electronic transfer of sea transport documents. It is a moot point as to whether such regulations are still necessary given that the Electronic Communications and Transactions Act 25 of 2002 lays the foundation and effectively provides for the use of the equivalent of an ‘electronic bill of lading’.

Further innovation is found in Clause 4(3), which deals with the situation where the bill of lading has been lost. A person will now be regarded as the holder of an original transport document if he is able to prove that the original document of which he was, or is entitled to be, in possession, has been lost.

A compromise has been reached concerning the much-debated question of whether transfer of a document, and the rights under it, should release the transferor from his obligations. The act deems the holder of a sea transport document to have ceded his rights and delegated his obligations to the new holder unless the transferor has bound himself to perform a particular obligation personally (delectus personae). In essence, a transferor of rights will now be released from his obligations unless he has bound himself to perform a particular obligation personally.

By way of example, the carrier would be able to sue the named consignee for outstanding freight in the following scenario. Where a carrier enters into a contract with a shipper to ship goods, freight being expressly payable at destination by the named consignee, and the consignee then transfers his rights to a third party who demands delivery of the goods, the consignee will not be released from his obligations towards the carrier, as he has undertaken personal responsibility for payment of the freight to the carrier. In terms of Sections 4(1)(a) and 7(2)(a), the person seeking delivery would also be liable for freight, in the alternative.

Representations

Where a document represents goods to have been shipped on board and is signed by a duly authorised person on behalf of the carrier, such representation will be regarded as prima facie evidence that the goods have, in fact, been shipped ‘in apparent good order and condition’. It is however open to the carrier to produce evidence to the contrary.

If there is a transfer of the document to a third party, however, such representation then becomes conclusive evidence and no evidence to the contrary may be tendered to refute statements on the face of a document (other than evidence that the subsequent holder was not bona fide and is, accordingly, precluded from relying on the representation).

Delivery

Section 7 of the act deals with the right of the carrier to be regarded as having performed his obligation to make delivery. The carrier is discharged if he makes delivery to a person entitled to delivery under the act.

The first person presenting a sea transport document is entitled to delivery of the goods to which it relates, provided that he complies with any obligations to which delivery may be subject, such as the payment of collect freight, and always in accordance with the contract and on the terms contained in the document. However, the carrier is now afforded an express right to require the person claiming delivery to establish his right to delivery by means satisfactory to the carrier or by application to court. Clearly this right will have to be reasonably exercised.

Persons who are not bona fide

The provisions regulating the transfer of rights and obligations, together with those regulating the question of delivery, are subject to the provisions of Section 8, which deals with the position of persons not bona fide. Naturally, there can be no claim against a carrier by a person who was aware that the document related to goods not shipped, or not received for shipment. Nor can there be any defence to a claim for delivery on the grounds that goods have already been delivered to someone known, or reasonably believed, not to have had the right to receive delivery. This section is aimed at combating maritime fraud.

Banks

In international commerce the very negotiability of a bill of lading lends itself to oiling the wheels of trade, ‘representing’, as it does, the cargo carried on board a ship. A banking institution can comfortably advance monies to a purchaser against the security of at least certain bills of lading, either a bill endorsed to the bank or an ‘order’ bill endorsed in blank being deposited with the bank. Sometimes the bill will name the bank as the consignee and/or notify party. The bank then holds the bill of lading pending payment by its customer, or alternative financing arrangement being put in place.

In terms of South African (Roman Dutch) law, what underlies the effectiveness of the security is that a bank is a pledgee of an order bill and in terms of the law in insolvency is a secured creditor in respect of the subject matter of the Agreement of Pledge. To be effective, a pledge must be perfected over movables by delivery of the movable to the pledge. In the case of a bill of lading, delivery is constructive or symbolic delivery of goods, which entitles the holder of the bill either to take the actual goods represented by that bill of lading into its physical possession or to dispose of them to a third party by onward endorsement.

Unlike the UK COGSA 1992, the new South African Sea Transport Documents Act does not distinguish between the rights to delivery transferred to the person who becomes the holder of the bill of lading (as does Section 2 of the UK Act) and any obligations or liabilities under the bill (where COGSA 92 provides in Section 3 that these only arise if demand to delivery or a claim is made). The South African act merely provides that a ‘holder’ of a bill of lading is subject to the same obligations and entitled to the same rights as the person to whom the bill was originally issued (the shipper).

A ‘holder’ under the South African act is in turn defined as the person to whom the document was issued, the consignee named in the document or the person to whom the document is transferred by delivery, endorsed as may be necessary, or through the use of a telecommunication system (to cater for e-commerce transactions). Banks will accordingly be protected to the extent that they will be entitled to all the rights of any other holder. However, they will also incur obligations and liabilities, whether or not they claim under or present the bill of lading for delivery of the cargo. These would include obligations to contribute in salvage, general average and, for instance, the payment of freight and other charges.

It seems unlikely that the banking sector in South Africa is, as yet, aware of this ‘new obligation’ or potential exposure that will be imposed on them where they require the bill of lading to be delivered or pledged to them as security for the advancement of funds or credit to their customers involved in international trade. It will be interesting to see how they respond.

Bareboat charters – in rem arrests

The act finally contains an amendment to the Admiralty Jurisdiction Regulation Act 105 of 1983, although the amendment does not relate to issues surrounding transport documents but rather to rights of arrest. It is not currently possible to arrest a vessel in rem for claims against the demised/bareboat charterer. This amendment now allows for an action in rem to be instituted against a ship in relation to a claim against its demise/bareboat charterer. South African law will now be in line with English and American law, where the charterer by demise is regarded as the owner of the vessel (for the period of the charter) for the purposes of an action in rem.