Leigh and Sillavan Ltd v Aliakmon Shipping Co Ltd [1986] A.C. 785
Facts
The buyers agreed to purchase steel coils which were carried by sea. Under the sale arrangements, the risk of loss had passed to them, but ownership remained with the sellers. The cargo was damaged through negligent stowage. The buyers sought damages in negligence from the shipowners even though they had neither legal ownership nor a possessory title to the coils when the damage occurred. Their commercial exposure therefore arose from their contractual arrangements concerning goods belonging to another person. The proceedings tested whether that exposure was sufficient to support a negligence claim for the damaged cargo.
Legal Issue
Could buyers bearing the commercial risk recover in negligence for damaged cargo when they had neither legal ownership nor possessory title at the time of damage?
Held
Held that it was a long-established principle that C had to have had either legal ownership or possessory title to the property concerned at the time when the loss or damage occurred. It was not sufficient for C to merely have contractual rights in relation thereto which had been adversely affected by the loss of or damage. Since under the contract of sale C were neither the legal owners of the coils nor had any possessory title to them at the time, they had no right to sue D in tort. There is a long line of authority for the principle that a person must have had either the legal ownership of or possessory title to a property in order to claim in negligence for loss caused by reason of loss of or damage to the property concerned. It is not enough for them to have only had contractual rights in relation to the property which have been adversely affected by the loss of or damage.
⭐ Legal Principle
A claimant seeking negligence damages for physical damage to property must generally have legal ownership or possessory title when the damage occurs. Contractual exposure to the loss, including bearing the risk under a sale agreement, does not by itself supply that proprietary interest.
Significance
The Aliakmon is a leading authority on relational economic loss. Damage was physically inflicted on the steel, but the buyers' own loss depended on their contract rather than damage to property they owned or possessed. Distinguish proprietary standing in tort from contractual rights against a carrier. The Carriage of Goods by Sea Act 1992 subsequently changed the transfer of certain contractual rights under shipping documents; that statutory route should not be confused with a reversal of the negligence principle.
Common exam questions about this case
Why was bearing the risk of damage insufficient?
Risk allocation describes which contracting party suffers the financial consequences of loss. It does not necessarily transfer ownership or possession. The buyers bore that risk but lacked the proprietary interest required for this negligence claim. Their economic exposure therefore did not place them in the position of owners of the damaged coils.
Was there physical damage in the case?
Yes, the cargo was physically damaged. The difficulty was that it was not the buyers' property for the relevant negligence claim. The classification of their loss depended on their relationship to the goods, showing why physical damage somewhere in a transaction does not make every affected person's loss recoverable.
How should shipping legislation be addressed in a modern problem?
Check whether the claimant has contractual rights under the relevant shipping document and the Carriage of Goods by Sea Act 1992. That may provide a separate route against the carrier. It does not remove the need to identify ownership or possessory title when relying on the property-damage negligence principle in The Aliakmon.