Michael Fielding Wolff v Trinity Logistics USA Inc.

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeSir Timothy Lloyd,Lord Justice Newey,Lord Justice Longmore
Judgment Date12 December 2018
Neutral Citation[2018] EWCA Civ 2765
Date12 December 2018
Docket NumberCase No: A4/2017/2824

[2018] EWCA Civ 2765

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

DEPUTY HIGH COURT JUDGE SARA COCKERILL QC

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

The Right Honourable Lord Justice Longmore

The Right Honourable Lord Justice Newey

and

The Right Honourable Sir Timothy Lloyd

Case No: A4/2017/2824

Between:
Michael Fielding Wolff
Appellant/Defendant
and
Trinity Logistics USA Inc
Respondent/Claimant

Mr Michael Collett QC & Mr Oliver Hyams (instructed by Harold Benjamin Solicitors) for the Appellant

Mr Peter Knox QC (instructed by DMH Stallard) for the Respondent

Hearing dates: 20 th & 21 st November 2018

Approved Judgment

Lord Justice Longmore

Introduction

1

It has long been a cardinal principle of the English law of carriage by sea that the carrier should only deliver the goods to a person who presents an original bill of lading. If he delivers to anyone else he is liable for misdelivery. The reason for this cardinal principle is that the bill of lading is a document of title by indorsement and delivery of which the property in the goods can be transferred in return for the price payable to the supplier. The consignee or receiver of the goods can expect that in return for payment he will obtain an original bill of lading which can be presented to the carrier, see Goode Commercial Law (5 th ed. 2016) para 36.34 and Barclays Bank v Commissioners of Customs and Excise [1963] 1 Lloyds Rep 81, 89.

2

It is commonplace that payment is made through the banking system and the shipper/seller of the goods will present the original bills of lading to the bank which will then make payment and send or deliver the bills to the consignee or his agent. Often, as in this case, the bank will be the named consignee; if so, the bank will indorse the bills of lading to show that the buyer has paid for the goods and send the bills to the buyer or importer who will present one of them to the carrier or the carrier's agents and thus obtain the goods.

3

The same principles in theory apply to air waybills for carriage by air, although they sometimes have to be modified because an air waybill is not usually a document of title in the same way as a bill of lading and because air carriage is so much speedier than ocean carriage.

4

It is by no means unknown for carriers or their agents to succumb to pressure from the receivers/buyers of goods to release goods without production of an original bill. Any carrier who does so will be in breach of the contract of carriage, see Sze Hai Tong Bank Ltd. v. Rambler Cycle Co [1959] A.C. 576. He will therefore hardly ever release the goods without a guarantee or letter of indemnity from the receiver or whoever wants delivery of the goods.

5

This case is a good example of the dangers attaching to early delivery.

Relevant Parties

6

The Fielding Group Ltd (“TFG”) was at the material time a company engaged in importing clothing into the United Kingdom (“UK”) from Bangladesh. Mr Michael Wolff was a director of TFG and is the appellant in these proceedings. Mr Clifford Barker was the shipping manager against whom the proceedings were dismissed as they were also dismissed against Mr Peter Tuch the non-executive chairman of TFG. TFG went into administration on 24 th June 2014.

7

Trinity USA (“TUSA”) was a freight forwarder involved in arranging the shipment of clothing products, from suppliers in Bangladesh, to TFG in the UK. It issued bills of lading in its own name for carriage to the UK and arranged air transport on the importer's behalf. Relevant individuals connected to TUSA include Mr Pereira, the president of TUSA. TUSA was the claimant in these proceedings suing for the value of consignments of clothing, for which no payment had been made, on the basis that it was liable to the suppliers in Bangladesh for allowing TFG to obtain the goods without paying for them before TFG went into administration.

8

Trinity Logistics (Bangladesh) Ltd (“Trinity Bangladesh”) was a company that operated as the agent of TUSA in Bangladesh, owned as to 49% by TUSA. Mr Abdul-Razak was an employee of Trinity Bangladesh.

9

Trinity Europe Logistics Limited (“Trinity Europe”) was a company incorporated on 2 nd October 2013 that operated as the agent of TUSA in the UK, owned as to 60% by a corporate vehicle owned by Mr Goonewardena and his associates. Mr Goonewardena was Managing Director of Trinity Europe and the first defendant in the proceedings at first instance, against whom TUSA's claims succeeded.

Relevant agreements

Agreement with Trinity Bangladesh

10

On 1 st January 2012, TUSA and Trinity Bangladesh made a contract pursuant to which Trinity Bangladesh would be the agent of TUSA in relation to sea and air freight business from Bangladesh.

Agreement with Dart/Trinity Europe

11

By a counter-offer dated 30 th May 2013 sent by Mr Goonewardena on behalf of Dart Global Logistics Limited (“Dart”) to Trinity Bangladesh, subsequently accepted by conduct, Dart and Trinity Bangladesh made a contract whereby Dart agreed to act as the agent of Trinity Bangladesh in the UK, in particular by handling the UK end of carriage from Bangladesh. TUSA was an undisclosed principal to this agreement. The terms of the agreement were recorded in writing and headed “Agency Agreement”.

12

Article 2 of this Agency Agreement provided, inter alia:-

“4. The Receiving Party's responsibility, where shipments are consigned to a bank or custodian, is to advise bank or custodian of arrival … and to release shipments or documents only after receiving written authorisation for such release from said bank or custodian.

10. Release of Shipments: Each of Trinity Bangladesh and Dart agree not to release partially or totally any shipment until:

• Any and all freight charges and/or related charges are paid;

• Any and all written authorization required by bank is received; and

• Any and all written instructions and/or terms of release by other documents are satisfied.”

13

In the summer of 2013, Mr Goonewardena, at the time an employee of Dart, approached Mr Pereira with a proposal for a joint venture with TUSA, pursuant to which Trinity Europe was incorporated on 2 nd October 2013. Mr Goonewardena and Mr Pereira agreed that Trinity Bangladesh would move its business from Dart to Trinity Europe, and that Trinity Europe would secure the TFG business. The judge accepted the submission of TUSA that this agreement gave rise to an agreement between Trinity Bangladesh and Trinity Europe on the terms of the Agency Agreement. Again, TUSA was an undisclosed principal to this agreement.

The operation as envisaged by TUSA

14

In broad terms:-

i) TFG placed orders for clothing goods with suppliers in Bangladesh;

ii) TFG contracted with a UK freight forwarder (initially Dart; from November 2013, Trinity Europe) to arrange carriage of the goods from Bangladesh to the UK; and

iii) Dart/Trinity Europe arranged for such carriage via its counterpart in Bangladesh (Trinity Bangladesh), which would send the goods by sea or air, depending on the urgency with which they were required.

15

This operation was intended to involve the following issue and transfer of documents:-

i) on shipment of the goods, Trinity Bangladesh would issue to the supplier a bill of lading for sea transfer or an air waybill for air transport, referred to by the parties, respectively, as a “house bill of lading” (“HBL”) and a “house air waybill” (“HAWB”). In compliance with Bangladeshi law, a Bangladeshi bank was named as the consignee on the bills of lading;

ii) the supplier would send to TFG's nominated bank, namely National Westminster Bank (“NatWest”), a set of documents including (i) an invoice for the goods, and (ii) the HBL or HAWB as applicable;

iii) NatWest would advise TFG of receipt of those documents;

iv) TFG as importer would advise NatWest to transfer payment to the supplier's bank in respect of the invoice;

v) once NatWest had transferred payment to the supplier's bank, it would (a) in respect of shipments by sea, indorse the reverse of the HBL and post it to TFG and (b) in respect of shipments by air, issue a “Bank Release” order (referred to by the parties as a “BRO”) on headed note paper; and

vi) TFG would secure release of the goods by presenting to Dart/Trinity Europe (i) the indorsed HBL, or (ii) the BRO.

Release of shipments prior to payment

Arrangements for early release

16

In practice, despite the system outlined above, freight forwarders were willing to release goods to trusted buyers prior to payment. In the early 2000s, while TFG performed well financially, many freight forwarders, including Dart, were willing to offer this service to TFG. This was despite the well-recognised principle that goods should only be released on presentation of the correct shipping documents.

17

By early 2013, TFG was suffering severe financial difficulties, with the result that fewer freight forwarders were willing to operate this early release. Nevertheless, in May 2013, Mr Goonewardena (at that time, an employee at Dart) reached an agreement with Mr Wolff to provide early releases so long as Dart's fees were paid promptly.

18

The terms of this agreement between Mr Goonewardena and Mr Wolff are highly relevant to the dispute between TUSA and Mr Wolff because TUSA claims that Mr Wolff induced Dart and, subsequently Trinity Europe, to breach the Agency Agreement with Trinity Bangladesh/TUSA described in para 11 above. The deputy judge's findings are, therefore, important. She observed that it was common ground that numerous consignments were released by Trinity Europe before payment but “The exact means by which this occurred remains unclear”.

19

She continued:-

“42. A part of this narrative links to the financial position of TFG. Although the clothing market is plainly a competitive one, TFG was doing...

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