[1991] 2 Lloyd's Rep. 337, Court of Appeal
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Mail Paul Todd (author of these notes): toddpn2@cf.ac.uk
This page was last updated on 03 Mar 99.
This was a case of an alleged theft by shipowners of part (4,502 mt) of an oil cargo. The cargo-owners successfully established that they had title to sue, but failed on the substantive claim.
The sellers had purchased f.o.b. and sold c.i.f. They had a bill of lading but were also charterers, and the charterparty had an arbitration clause. Hence they had no claim on the bill of lading, and any claim on the charterparty had to go to arbitration (and was possibly time-barred).
The buyers had no contractual claim on the bill of lading, since it came into their possession some time after discharge (they clearly had no Bills of Lading Act 1855 s. 1 action). They could only succeed in tort, and needed to show that property had passed to them in respect of the cargo alleged to have been converted.
The shipowner argued (on the basis of The Delfini) that property passed on discharge, and never passed in respect of the oil r.o.b (remaining on board). The bill of lading was taken out to the sellers’ order, as required by the (standby) letter of credit. The Court of Appeal held (rebutting the presumption in s. 19(2) of the Sale of Goods Act 1979) that property had passed before discharge. It was necessary to distinguish two cases where the s. 19(2) presumption was not rebutted merely because sale was by documentary credit, the argument being that the seller did not need to retain property: The Glenroy [1945] AC 124 135 ("the bank might fail"); and Mitsui & Co Ltd v Flota Mercante Grancolombiana SA, The Ciudad de Pasto [1988] 2 Lloyd's Rep 208, 214 (CA) ("even the most copper-bottomed letter of credit sometimes fails to produce payment for one reason or another"). Important factors in the reasoning in The Filiatra Legacy was that the voyage was short, and that it was always contemplated that the bill of lading may not arrive in time. In any case the price was secured by the standby letter of credit, so there was no need for the sellers to reserve title (but this does not appear to have been expressly part of the reasoning).
The Court of Appeal therefore held (upholding Leggatt J) that the buyers had title to sue. The property in all the oil passed to the buyers when discharge commenced, if not before. The court did not decide when it passed, but it seems most likely that it passed on shipment. Leggatt J thought that it might alternatively have passed when the standby letter of credit was set up (some time after shipment).
Note also that it had not been necessary in The Delfini to ascertain exactly when property had passed, merely that it had passed prior to, and independently of, indorsement. The Delfini was not a clear authority in the shipowner's favour, therefore.
There may be a problem about appropriation if property passed after shipment, because there does not appear to have been any positive act by the seller appropriating the goods to pass property. See Bools' criticism of The Elafi, which also applies to this case (but not presumably if property passed on shipment, since shipment could have constituted unconditional appropriation): Bills of Lading and Documents of Title, Lloyd’s of London Press (1997).
These notes were last updated on 03 Mar 99.
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There was an apparent shortage on figures from one of the two shore tanks of 4,502 tonnes. The buyers alleged that this quantity must have been deliberately retained on board the ship, and thus was stolen and converted by the shipowners or their employees (for use as bunker fuel). They claimed agreed damages of $946,230. Leggatt J found in their favour, finding that the missing oil had been intentionally admixed with ballast water in the cargo tanks, and perhaps later disposed of or used as fuel.
The shipowners maintained that all the cargo on board was discharged with the exception of a small quantity amounting to 30 tonnes, which was unpumpable. If this were correct, it would follow that the buyers' records of the quantity discharged were inaccurate or incomplete.
The owners claimed that the cargo had been lost in the refinery, either by having been deliberately but negligently misrouted before it reached tanks 55 and 61, or after it reached those tanks but before they were measured on 13th and 19th December respectively, or had leaked from one or both of those tanks into other parts of the refinery system. They claimed that this could easily go undetected.
Note that there was no allegation that cargo was lost on the voyage, or in the sea-line at discharge.
There was simultaneous ballasting with discharge of 3 cargo holds (which had been crude oil washed), not just double-bottom and wing tanks. The owners claimed this was to speed turnaround, or perhaps because of failure of ballast-pumps.
The CA held in the owners’ favour on the shortfall issue - this was essentially a question of assessment of the evidence, the plaintiffs having failed to prove, in the manner appropriate to a case which involved the assertion of a serious crime, that their version of events was correct.
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This page was last updated on 03 May 99.
Mail Paul Todd (author of these notes): SLAPNT@cf.ac.uk