UK: Cargo Damage Claims – The Angeliki B

Last Updated: 24 May 2011
Article by Jonathan Elvey and Evangelos Catsambas

Milan Nigeria Ltd v Angeliki B Maritime Company [2011] EWHC 892 (Comm)

Who has the burden of proving the cause of cargo damage when the shipowner relies on a defence to avoid liability? What is the effect of a Tribunal's order that certain arguments be shut out? And should cargo damage should be paid for in the claimant's local currency or U.S. dollars? These questions were considered in The Angeliki B.


The Court was asked to consider issues arising from an Award of the London arbitration Tribunal in favour of Milan Nigeria Ltd for damage to cargo carried on the Angeliki B. The English law bills of lading were subject to the Hague Rules. Milan said the ship-owner carriers had breached Article III rule 2 of the Rules by failing to "properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried". The shipowners sought to avoid liability under Article IV rule 2(m) on the basis that the cargo damage was due to an "inherent defect, quality or vice of the goods". The Tribunal granted Milan US$150,000 – just 38% of their claim. Milan appealed to the Court.

The Commercial Court decision

Question 1 – burden of proving the cause of the cargo damage

Milan appealed to the Court. They said the Tribunal had reduced their damages by 62% mistakenly believing Milan had the burden of proving the causes of the cargo damage and that the shipowners were responsible for them – which the Tribunal found they had not done. But since the shipowners were relying on a defence (Article IV rule 2(m)) to avoid liability for damage, they had to prove what damage was due to an "inherent defect, quality or vice" – and could only avoid liability for that damage. It was unlikely that 62% of the damage was due to an "inherent defect, quality or vice", so the damages had clearly been discounted too much. The Court agreed. This was an error of law. It directed the Tribunal to reconsider the question.

Question 2 – was the Tribunal wrong to decide that Milan had the right to sue under the bills of lading?

Under the Carriage of Goods by Sea Act 1992 (COGSA), only the shipper or a lawful holder of a bill of lading – someone to whom it is endorsed and delivered – can sue under it. The cargo claimant must prove its title to sue for the purposes of COGSA. So if the cargo had been delivered before Milan received the endorsed bills, Milan could not sue for the cargo damage. But, as an exception under COGSA, they could do so if they took the bills under a prior contractual or other arrangement.

In the arbitration, Milan (1) said that they were the lawful holders of the bills; (2) that their bank had endorsed the bills to them; and (3) gave evidence of when they took the bills. But they did not mention COGSA. The shipowners said Milan had not pleaded COGSA arguments. The Tribunal ruled that "No new issues/arguments/evidence will be allowed – such will be ignored".

Milan's closing submissions after that deadline said they were lawful holders of the bills under COGSA. The shipowners said the reliance on COGSA was a new argument, shut out under the Tribunal's ruling. The Tribunal replied that "if, when we come to consider the entirety of the submissions, we find that [Milan] have not previously relied on the Carriage of Goods by Sea Act 1992, that part of their closing submissions will be ignored." The Tribunal then found that Milan had title to sue – considering that it was sufficient that Milan had established that the bills had been endorsed and delivered to them before the cargo was discharged, even if they had not expressly mentioned COGSA.

The shipowners said this was a serious procedural irregularity causing them substantial injustice (section 68 of the Arbitration Act 1996): (1) the COGSA argument had been shut out; (2) the shipowners therefore had chosen not to make submissions or seek disclosure on it; (3) the Tribunal might well have formed a different view had the shipowners done so. The Court was asked to set aside the ruling or to remit the Award to the Tribunal. The Court refused the shipowners' application, finding as follows:

1. Milan had not raised a new argument. Their claim had clearly been based on endorsement and delivery of the bills under COGSA, even if COGSA was not mentioned. The shipowners and their lawyers must have known this and could have sought disclosure. They chose not to, perhaps hoping to take this artificial pleading point instead.

2. Also, additional disclosure was unlikely to change the Tribunal's decision. It was already satisfied that the bills had been endorsed and delivered to Milan before the cargo was discharged.

Question 3 – should damages have been awarded in Nigerian naira rather than U.S. dollars?

As was agreed, damages for a contract breach must be in the currency in which the claimant truly feels its loss. The shipowners said Milan as a Nigerian company felt their loss in Nigerian naira, so damages should be in that currency and not U.S. dollars (at current exchange rates, that would mean the U.S. dollar worth of Milan's claim falling by 1/4).

The Court refused to hear this issue for the following reasons:

1. The Tribunal had already decided it. There was no procedural irregularity in doing so (as the shipowners were arguing). Milan had clearly always been claiming in U.S. dollars (indeed, the shipowners' own settlement offers had been in U.S. dollars). The shipowners had been given ample opportunity to make submissions on this.

2. The Tribunal's decision was also correct. Milan had paid for the cargo in U.S. dollars, and so they felt their loss in U.S. dollars. In any case, where the loss was felt was a question of fact (not law) for the Tribunal – not the Court – to decide.


The Court's decision on the title to sue appeal may seem harsh. But appeals to the Court based on 'serious procedural irregularity' are not easily allowed. If a party is unsure what arguments a Tribunal has shut out, it should ask for this to be clarified before the Tribunal makes its Award. It may be too late after that.

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.

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