Bill of lading
Delivery without production of bill of lading - whether delivery made to persons entitled to possession of the cargo - whether shipowner entitled to deliver to such persons without demanding production of original bill of lading
Sucre Export SA v. Northern River Shipping Ltd., The ‘Sormovskiy 3068’
The Times, 13 May 1994
Clarke J.
Queen's Bench Division, 25 April 1994.
Facts:
The plaintiffs were sub-charterers of the vessel, Sormovskiy 3068, of which the defendants were owners. The plaintiffs were also f.o.b. purchasers of 3,000 tonnes (60,000 bags) of sugar. Three original bills of lading had been issued evidencing the shipment, and indorsed in blank in favour of the plaintiffs, who thereupon became owners of the cargo.
The plaintiffs re-sold the sugar c.i.f. to Forfar, the sale eventually being agreed as cash against documents, and Forfar re-sold to BMH. BMH paid Forfar for the sugar, but Forfar did not pay the plaintiffs, at any rate the full amount for the cargo. Because of a reservation of title clause in the contract between the plaintiffs and Forfar, title did not pass to Forfar. When the vessel arrived at the Commercial Sea Port (CSP) at Vyborg (near St. Petersburg), discharge began without the knowledge or consent of the plaintiffs, and without production of an original bill of lading, and over 2,000 tonnes had been discharged before the plaintiffs discovered the situation.
The main issue in the case involved the claim by the plaintiffs that the defendant shipowners were liable in contract and conversion, on the grounds that they had delivered without requiring production of an original bill of lading.
The defendants claimed that they were entitled to deliver the cargo to the persons entitled to it, even in the absence of an original bill of lading, and that they had indeed delivered to the parties entitled to possession since they (CSP) were the agents of the plaintiffs. They claimed that there is no authority for a term being implied into the carriage contract prohibiting the shipowner from delivering to the persons entitled to the cargo, in the absence of an original bill of lading.
In the alternative, the defendants claimed that they delivered in accordance with the practice, custom and local law of the port.
Other relevant facts are that the bill of lading was consigned to order, and that the address of BMH was given as the notify address.
Held:
1. The defendants were liable for delivering without production of an original bill of lading.
2. In any event, the defendants did not deliver to a person entitled to possession as an agent of the plaintiffs.
3. The defendants did not deliver in accordance with the practice, custom and local law of the port.
Comment:
The most significant aspect of the case relates to delivery without production of an original bill of lading.
The conventional view was probably that the defendants' case was almost unarguable, but surprisingly, there was little previous authority on the requirement for tender of an original bill of lading prior to delivery to a person entitled to possession of the cargo, such authority as was cited mostly concerning delivery to someone not entitled to possession of the cargo. The defendants also made the point that there must be some circumstances where the shipowner was entitled (and indeed obliged) to deliver without production, since an original bill of lading would not always be available, for example where it had been lost or stolen. They also cited Finlay v. The Liverpool and Great Western Steamship Company Limited (1870) 23 LT 251, where Martin B. held that the shipowners were not entitled to deliver, even against an original bill of lading, where it was known by the time of delivery that the bill of lading had been obtained fraudulently. The only authority cited which was clearly contrary to the defendants' case was The Stettin (1889) 14 PD 142, but the remarks made in that case were dicta, since the actual decision there was based on German rather than English law.
Nevertheless, Clarke J. was not convinced by the defendants' argument, summarising his conclusion as follows:
It makes commercial sense to have a simple rule that in the absence of an express term of the contract the master must only deliver the cargo to the holder of the bill of lading who presents it to him. In that way both the shipowners and the persons in truth entitled to possession of the cargo are protected by the terms of the contract. Where the master or shipowner delivers the cargo in breach of contract otherwise than in return for an original bill of lading the person entitled to possession will of course only be entitled to recover substantial damages if he proves that he has suffered loss and damage as a result. So for example if the cargo is delivered to the person entitled to possession he will not ordinarily be able to show that he has suffered a loss.
He was prepared to accept that there may be exceptions to the general rule, for example, where there is an express contractual term requiring the master to deliver the cargo against a letter of indemnity or bank guarantee. Indeed, such a clause incorporated was here from the charterparty (but the owners did not comply with it as they did not take a letter of indemnity or a bank guarantee). He would also have been prepared, had the issue arisen, to imply terms to cater for the loss or theft of the original bills, and for the situation where it was proved to the master's reasonable satisfaction that the person seeking delivery of the goods was entitled to possession, and an explanation was given as to the absence of the bills of lading. But Clarke J. was not prepared to accept the general proposition advanced by the defendants.
Even if he had been prepared to accept that argument, he did not accept that the shipowners had delivered to the persons entitled to possession of the sugar. The defendants argued that the plaintiffs constituted BMH (and hence CSP as agent of BMH) as their agents by selling the cargo to sub-buyers who in turn re-sold it to BMH, or alternatively by representing in the bill of lading and the charterparty that they would nominate agents, by stating in the bill of lading that BMH was the notify party and by sending a copy of the bill of lading, and the invoice between Forfar and BMH (stating that BMH were the buyers of the sugar) with the vessel. Clarke J. refused to hold that these facts led to the agency conclusion contended by the defendants.
The defendants' argument that they delivered in accordance with the practice, custom and local law of the port was also rejected. This was essentially an issue of fact, where there was a conflict of evidence between two experts on Russian law. Again, part of the argument was that CSP were agents of the plaintiffs, but this time it was conceded that Russian rather than English law should determine the matter. This aspect of the case raises no issues of general principle for English law.
The defendants also argued that they were protected by the following clause in the bill of lading:
... The Carrier shall in no case be responsible for loss of or damage to cargo arisen prior to loading or after discharging.
The argument was rejected on the grounds that the breach by the shipowners was permitting discharge without requiring production of an original bill of lading, and that but for the breach discharge would not have begun. Hence, it could not be said that the plaintiffs' loss had arisen only after discharging.
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These notes were last updated on 18 May 97.
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