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

Facts

Leigh and Sillivan agreed to buy a cargo of steel coils from sellers in South Korea, to be shipped to England. The contract made the buyers bear the risk of loss from the time of shipment, but the property in the goods was not to pass to them until they had paid, and they did not own the goods when the damage occurred. The coils were shipped on the Aliakmon and were damaged during the voyage through the shipowner's negligence in carrying them. The buyers sued the shipowner for the loss they suffered.

Issue

Whether the buyers, who bore the risk of damage but had neither legal ownership nor possession of the goods at the time of damage, could recover in negligence from the shipowner for the loss caused by the damage; and whether they could sue under the Bills of Lading Act 1855.

Held

The buyers claim failed. They could not sue in negligence for the damage because at the time it occurred they had neither legal ownership nor a possessory title to the goods; having the risk was not enough. They also could not rely on the Bills of Lading Act 1855, because property in the goods had not passed to them upon or by reason of the endorsement of the bill of lading.

Ratio

• To recover in negligence for physical damage to goods, a claimant must have had legal ownership of, or a possessory title to, the goods at the time the damage occurred; a mere contractual right or risk is not enough.
• A person who suffers loss only because he bore the risk under a contract with the owner suffers pure economic loss, which is not recoverable from a stranger to that contract in negligence.

The judgments

Key reasoning

• The law has long confined recovery for damage to property to those with a proprietary or possessory interest, and to allow a person who bears contractual risk to sue would extend the duty to a wide and uncertain class.
• The buyers had a remedy in the contract of sale, and the commercial parties were free to allocate risk and to arrange for transfer of rights of suit through the contract of carriage, and the law should not use tort to provide what the contract had omitted.
• The Bills of Lading Act 1855 gave rights of suit only to those to whom property passed upon or by reason of the consignment or endorsement, and here the property had not so passed.

Where it fits in the module

In Tort (FHS), on Negligent damage to property, The Aliakmon is the main authority on who may sue for damage to goods. It is read with Cattle v Stockton Waterworks Co (1875) LR 10 QB 453, Spartan Steel and Alloys Ltd v Martin and Co (Contractors) Ltd [1973] QB 27, Junior Books Ltd v Veitchi Co Ltd [1983] 1 AC 520 and Murphy v Brentwood DC [1991] 1 AC 398, and with the Carriage of Goods by Sea Act 1992, which gave rights of suit to lawful holders of bills of lading. Candidates need to discuss whether the rule is a principled application of the exclusionary rule on pure economic loss, or an arbitrary distinction between those with proprietary rights and those who bear the loss, and whether a contractual allocation of risk should be able to alter tort duties.

Criticisms

• The rule treats the buyer who bears the risk as suffering pure economic loss, though the loss is the direct and obvious consequence of the careless damage to goods that are in all but name its own, so the label seems formal.
• Making recovery depend on the moment at which property passes allows the parties' contractual arrangements about title to decide the outcome, which are matters on which the carrier has no interest and for which the buyer may have no choice.
• The decision leaves a gap in cases in which the owner has no loss because it has been paid and has no incentive to sue, so a careless carrier may escape liability; the Carriage of Goods by Sea Act 1992 had to address the problem for bills of lading.
• Other common law jurisdictions have been more willing to allow claimants with a contractual relationship to the goods to sue, which suggests that the English rule is not required by principle.