UK: Switching Bills - The Rights of The Original Consignee

Last Updated: 22 July 2010
Article by Fionna Gavin

A.P. Moller - Maersk A/S (trading as "Maersk Line") v Sonaec Villas Cen Sad Fadoul [2010] EWHC 355

It is clear that owners will be taking considerable risks where new bills of lading are issued without surrender of the original set. This recent decision of the High Court, one of very few English authorities on the practice of switching bills, illustrates the difficulties that can arise even where the original bills are surrendered prior to issue of a second set and the importance of ensuring that the shipper is clearly identified in the bill.

The First Bill

Yekalon Industry Inc sold a consignment of tiles to Sonaec Villas in Benin. The goods were booked and shipped on Maersk's liner service through local agents, High Goal Logistics GD Limited. A bill of lading was issued on 17 January 2008 (the "First Bill") naming Sonaec as consignee and the shippers as B&D Co Ltd P/C ("par compte de") Vernal Investment ("Vernal") and Yekalon. Vernal was a subsidiary of Sonaec. The port of discharge was Benin.

The Chinese Proceedings

Shortly after the First Bill was issued, a dispute arose in China as to who was its lawful holder. Yekalon who had not been paid by Sonaec asked High Goal for the bill, but High Goal refused on the basis that they had received instructions from B&D. Yekalon then applied to the Guangzhou Maritime Court for delivery of the original First Bill and a declaration that Yekalon was entitled to possession of it, which declaration was granted.

The Second and Third Bill

Yekalon surrendered the original bills to Maersk and requested a new bill (the "Second Bill") be issued to the order of Yekalon. Yekalon then found a new buyer and also surrendered the Second Bill for a further replacement bill of lading, with Hondujres SA now named as consignee and with delivery in Honduras.

The Benin Proceedings

On 27 February, Sonaec commenced proceedings in Benin, claiming the goods were sold on an FOB basis; property had passed on loading; they were the owners of the cargo and entitled to delivery of the same. Maersk disputed the Benin court's jurisdiction, the First Bill being subject to an exclusive English law and jurisdiction clause and asserted that any rights which Sonaec may have had under the First Bill had been brought to an end when the First Bill was cancelled by the rightful shipper and replaced. Despite these submissions, the Benin Court made an interim ruling requiring Maersk to ship the cargo to Sonaec in Cotonou and imposing a daily fine on Maersk of US$4,800.

The English Proceedings

Maersk then sought a declaration from the High Court of Justice in London that:

  1. all disputes arising under the First Bill were to be determined by the English High Court of Justice in London (to the exclusion of the jurisdiction of the courts of any other country) in accordance with the exclusive law and jurisdiction clause in that Bill; and
  2. Sonaec had no title to sue under the First Bill.

Sonaec were not represented at the hearing in the High Court.

Jurisdiction

The exclusive jurisdiction clause would be binding on Sonaec only if Sonaec was a party to the contract contained in or evidenced by the First Bill. This depended on whether Sonaec was a party to whom rights would pass under the Carriage of Goods by Sea Act 1992 ("COGSA 1992") and, if so, whether upon surrender of the First Bill Sonaec continued to be bound by the exclusive jurisdiction clause.

The First Bill was not "to order", but identified Sonaec as a named consignee. It did not therefore fall within the definition of a bill of lading for the purpose of COGSA 1992, as being a document that was capable of transfer by indorsement or delivery. However, it did fall within the definition of a seaway bill for the purpose of COGSA 1992, being a receipt for the goods, containing or evidencing a contract for the carriage of goods by sea and identifying the person to whom delivery of the goods was to be made.

Under Section 2.(1)(b) of COGSA 1992, the person to whom delivery of goods to which a seaway bill relates is to have "transferred to and vested in [it] all rights of suit under the contract of carriage as if [it] had been a party to that contract". Consequently, at some stage Sonaec was a party to the First Bill, including the law and jurisdiction clause.

Effect of Surrender of the First Bill on the Exclusive Jurisdiction Agreement

Maersk were also seeking a declaration that any rights of suit that Sonaec may have had under the First Bill had ceased to exist upon surrender of that Bill. It was therefore necessary for the Court to determine whether Sonaec and Maersk continued to be bound by the jurisdiction clause following surrender of the First Bill. On this issue, the Judge noted that it is well established that arbitration agreements are ancillary to and will survive termination of the main contract. Although no authority had been cited to him on this issue, he held that similar principles applied to an exclusive jurisdiction clause. Consequently, even if Sonaec had ceased to have rights under the First Bill upon its surrender, the law and jurisdiction clause survived and any claim under the First Bill must be brought in England.

Did surrender of the First Bill bring to end Sonaec's rights under that Bill?

The transfer of rights under COGSA 1992, whether under a bill of lading or a seawaybill, is expressly stated to be "without prejudice to any rights which derive from a person's having been an original party to the contract contained in or evidenced by, a seaway bill" (section 2(5)). Consequently, a shipper who is and remains party to the contract of carriage does not lose his right vis-à-vis the carrier to divert the goods, as he may wish to do if he is not paid for them. Maersk argued that if a shipper can re-direct the goods, by changing the terms, the shipper must also be entitled to agree with the owners to terminate the contract and substitute a new contract of carriage contained in a new bill of lading, with a new consignee. The Judge agreed, holding there was no reason that the shipper could not agree with the carrier to replace the original bill of lading with another one.

However, Maersk faced a further difficulty insofar as it was not clear that it was Yekalon that was the original shipper and, therefore, the party entitled to re-direct re-delivery. The shipper had been described on the First Bill as "B&D Co Ltd [pour compte de] Vernal & Yekalon". As Vernal was an associate company of Sonaec, Vernal and Yekalon were parties with potentially antithical interests and it was not clear whether B&D were purporting to act as agent for both and, if so, in what respect.

There was conflicting evidence in the Chinese and Benin proceedings as to the precise sequence of events leading to the shipment of cargo and the issue of the bill of lading. Rather than reach a conclusion on this evidence, the Judge determined the matter on the basis that the Chinese Court had ordered delivery of the First Bill to Yekalon on the footing that Yekalon was the shipper and entitled to the First Bill. In these circumstances, the Judge held that Yekalon became the party entitled to the rights of the shipper under the First Bill and that Yekalon was, therefore, the party entitled to re-direct delivery or cancel the First Bill. Consequently, Maersk was entitled to a declaration that any rights of Sonaec under the First Bill, were brought to an end prior to 18 February 2008.

Comment

The decision of the High Court will provide some reassurance to owners regarding the rights of a consignee under English law where an original bill of lading or seaway bill has been switched. However, the facts highlight the risk of proceedings being brought by the consignee under the original bill in another jurisdiction, in which in English judgment may ultimately be of limited use to the owners defending such a claim.

Finally, the case is a useful reminder of the difficulties that can arise and additional costs that may result, here both in proceedings in China and in England, where the description of the shipper is not sufficiently clear to enable that party to be identified with certainty. In this case, the Judge accepted the Chinese Court's ruling that Yekalon was the shipper under the First Bill. However, it is not apparent from the judgment that Sonaec were party to those Chinese proceedings and, had they been represented and put forward evidence in the London High Court proceedings, it is possible that a different conclusion may have been reached.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions