Electronic bill raises interpretation questions

01 Dec 2000 - by Staff reporter

Alan Peat

Legal experts answer
THE SEA Transport Documents Bill - SA's legislative entry into electronic communication of paperwork - has passed its final reading, according to information received by Durban-based maritime legal specialists, Shepstone & Wylie.
It has been approved by Parliament, Mark van Velden told FTW, and is due to be signed into law by the President within weeks.
But, while legally and governmentally approved, there are still some questions about the detail of the bill in the shipping industry.
In this case, Bentley Cook, freight manager of African Explosives, expressed his concern about the wording and put a series of questions to Van Velden.
Because of space restraints, FTW cannot print a copy of the draft - to which Cook refers under specific clause numbers. But, if you do not have a copy, you can find it on the University of Cape Town web page, at address: www.uct.ac.za/depts/shiplaw/contents.htm - In the Information box, look under the sub-heading of Legislation.
Cook - Clause 4 appears to relegate the Sea Transport Document to mere evidence of title, whereas a Bill of Lading (BoL) is a document of title.
How does mere evidence of title qualify as a negotiable instrument (also see Clause 6)?
Van Velden - Answer: I am not sure that there is any distinction between the document being evidence of title and being a document of title. Either way, possession of the BoL evidences the fact that the holder has title to the goods. This evidence can however be rebutted where, for example, it can be shown that the document has been stolen. Clause 3.3 attempts to provide a very reasonable remedy for lost documents - but does not appear to call for obligatory proof of ownership. If my interpretation is correct, then surely this leaves the door wide open for all sorts of funny business?
This needs to be read in conjunction with section 7(3). In other words, where a person presents himself to the Master and claims to have been the holder of the bill of lading which has since been lost, and requests delivery, the Master may accept that person's explanation or require them to establish their entitlement to delivery by application to court.
In terms of section 7(3)(c) - if the Master does not require the party to obtain a court order - the carrier bears the risk of mis-delivery. It is my view, therefore, that carriers are highly unlikely to deliver without a court order in circumstances where a bill of lading has been lost. Once the party claiming delivery obtains a court order effectively deeming him to be in possession of the BoL - and ordering delivery of the cargo - the carrier will be off the hook in the event that the receiver has, for example, misled the court, and a further party then lays legitimate claim to the cargo.
So while the provision does not call for obligatory proof of ownership, the mechanism is there. Failure by the Master to properly satisfy himself of the party's entitlement to delivery would render the carrier liable for mis-delivery if the Master got it wrong. The carrier can therefore decide to believe the person claiming delivery (at his own risk) or require the party to satisfy a court of his entitlement - thereby divesting the carrier of liability for mis-delivery.
3: I notice that the draft refers to a subsequent holder. Is it safe to assume that this is either the modern terminology for - or has the same legal status as - a holder in due course?
Yes, a subsequent holder of a sea transport document is effectively the holder in due course.
Memorandum page 10 paragraph 3.8 relating to clause 6 - How can a received for shipment bill be evidence that the goods were shipped, unless it has been endorsed shipped on board? A received for shipment bill is issued when a carrier receives the cargo into his warehouse or into the ship's stack ASHORE. Only once it has been physically loaded on board the ship does it become a shipped on board document.
You will see that Section 6 provides that a sea transport document - which represents that goods have been shipped on board, or have been received for shipment on board - is evidence (prima facie or conclusive) of the shipment of the goods or of their receipt for shipment, as the case may be. The distinction between shipped on board and received for shipment BoL's is, therefore, properly dealt with. The memorandum on the bill is not part of the bill, nor will it become law. It is purely a commentary to aid those considering the bill. The draftsman of the memorandum has simply omitted to add or of the receipt for shipment, as the case may be, in error.
5: Section 2.2 (just after line 30) states that the bill applies only to transport documents that are transferable or negotiable. Whereas Section 3 (duly qualified by Section 9) allows for the transfer to a holder of such a document through the use of a telecommunication system (line 5 on p4). How does one transfer an original, negotiable instrument electronically? Surely the potential for fraud is immense?
Looking at Section 2.2 first - Section 1 of the bill defines a Sea Transport Document as including a sea waybill - and various other documents which are not transferable or negotiable. Section 2.2 provides only that Sections 3, 4, 5 and 6 will not apply to these non-transferable or non-negotiable documents. The rest of the bill applies to all sea transport documents - negotiable or not.
You rightly point out that Section 3(1)(b) is expressed as being subject to Section 9(1)(a). The effect of this is that - until such time as the Minister of Transport makes regulations with regard to how electronic transfer of negotiable documents can take place - the law does not recognise electronic transfer. For the moment, therefore, the Act (when it comes into force) will not allow for electronic transfer of sea transport documents. How such transfer could take place is an entire subject on its own. We can tell you, however, that there is at least one system already in place - namely Bolero (See FTW November 24, 2000) - through which subscribing parties are already making use of electronic transfer of bills of lading.
I agree with your concern that it is extremely difficult these days to distinguish between a document which has been printed from a PC, or is a fax, or even a photocopy.
It is just these concerns which have led to the requirement that specific regulations be passed in relation to non-physical transfer of negotiable documents. It is hoped that the Minister will confer closely with the Maritime Law Association and other interested parties before promulgating any regulations - at which stage such concerns will be properly addressed.