MSC Mediterranean Shipping Company S.A. (Claimant/Appellant) v Cottonex Anstalt

JurisdictionEngland & Wales
JudgeLord Justice Moore-Bick,Lord Justice Tomlinson,Mr. Justice Keehan
Judgment Date27 July 2016
Neutral Citation[2016] EWCA Civ 789
Docket NumberCase No: A3/2015/0750
CourtCourt of Appeal (Civil Division)
Date27 July 2016
Between:
MSC Mediterranean Shipping Company S.A.
Claimant/Appellant
and
Cottonex Anstalt
Defendant/Respondent

[2016] EWCA Civ 789

Before:

Lord Justice Moore-bick

Vice-president of the Court of Appeal, Civil Division

Lord Justice Tomlinson

and

Mr. Justice Keehan

Case No: A3/2015/0750

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Mr. Justice Leggatt

[2015] EWHC 283 (Comm)

Royal Courts of Justice

Strand, London, WC2A 2LL

Mr. Michael Davey Q.C, and Mr. Emmet Coldrick (instructed by Duval Vassiliades) for the appellant

Mr. Steven Berry Q.C. and Luke Pearce (instructed by Holman Fenwick Willan LLP) for the respondent

Hearing date: 25 th May 2016

Judgment Approved

Lord Justice Moore-Bick
1

This matter comes before the court by way of an appeal and cross-appeal against the order of Leggatt J. giving judgment for the appellant, MSC Mediterranean Shipping Co. S.A. ("the carrier") against the respondent, Cottonex Anstalt ("the shipper"), for the sum of US$98,599.70 in respect of demurrage on 35 containers used for the carriage of raw cotton from Bandar Abbas and Jebel Ali to Chittagong.

Background

2

The facts giving rise to the dispute between the parties are set out in detail in the judgment below. The following summary is sufficient for present purposes.

(i) Between 7 th April 2011 and 4 th June 2011 the carrier contracted with the shipper to carry various parcels of cotton from Bandar Abbas and Jebel Ali to Chittagong. The cargo was shipped in three consignments under five bills of lading. The first consignment of 19 containers was shipped at Bandar Abbas under two bills of lading each dated 7 th April 2011; the second consignment of 12 containers was shipped at Bandar Abbas under two bills of lading dated 11 th and 17 th April 2011; the third consignment of 4 containers was shipped at Jebel Ali under a single bill of lading dated 4 th June 2011.

(ii) Each of the bills of lading contained a clause providing for a period of free time for the use of the containers at their destination, after which demurrage became payable at a daily rate.

(iii) The shipper sold the cotton to a company in Bangladesh called Regent Spinning Mills Ltd, which was named as consignee in the bills of lading. Payment was to be made by confirmed letter of credit. In due course a letter of credit was opened in favour of the shipper by Islamic Bank and confirmed by Habib Bank in London.

(iv) The containers were discharged at Chittagong on various dates between 13 th May and 27 th June 2011. Following a collapse in the price of raw cotton, a dispute arose between the shipper and the consignee over the dating of the bills of lading. That led to proceedings before the High Court in Dhaka, in which the consignee appears to have obtained an injunction to prevent the opening bank from taking up and paying for the documents. The consignee was therefore unwilling to take delivery of the goods. However, the shipper presented the documents to the confirming bank and obtained payment. The price of the goods covered by the first four bills of lading was paid on 23 rd May 2011. By 27 th September 2011 the shipper had also received payment for the second consignment. Although it had not by that time received payment in respect of the third consignment, it appears that the documents had been presented to and accepted by Habib Bank. As a result, the shipper considered that it had no right to deal with the goods, because (in its view) property in them had passed to the consignee. The result was that neither the consignee nor the shipper, nor any one else for that matter, was willing or able to take delivery of the goods, which remained at the port under the control of the customs authorities.

(v) The bills of lading contained terms which gave the carrier the right under certain circumstances to unpack the goods and dispose of them, but the customs authorities at Chittagong refused to allow the carrier or any one else to deal with them in any way without the permission of the court. No order giving permission to unpack the goods has yet been made. As a result, the containers and their contents remain at the port.

(vi) On 27 th September 2011, when the impasse had continued for some weeks, the shipper sent the following message to the carrier:

"We informed that we do not have legal title to this cargo in a result of receiving financial means against the cotton and actually goods belong to Habib Bank London / Islami Bank Ltd thus would be inconvenient to remit yr debit notes as could be very difficult to regain the money from the bank later on. As soon as conflict and disputes between the banks are solved yr dues will be fully covered by the bank. From our party the situation is observing and followed and any further news will be passed to you immediately."

The judge interpreted that message as a statement that the shipper no longer had title to any of the goods and would be unable to redeliver the containers within the foreseeable future, if at all. Whether the carrier interpreted it in that way, however, is doubtful. At all events, it continued to insist that the containers be redelivered and that in the meantime demurrage would continue to accrue.

(vii) On 2 nd February 2012, as a way of breaking the deadlock, the carrier offered to sell the containers to the shipper. Unfortunately, however, the negotiations came to nothing, because the shipper considered that the price being demanded for them was too high.

(viii) At all material times replacement containers were immediately available for purchase at Chittagong at a price of US$3,262 each.

The bills of lading

3

Each of the bills of lading contained the following clauses:

"14.8 The Carrier allows a period of free time for the use of the Containers and other equipment in accordance with the Tariff and as advised by the local MSC agent at the Ports of Loading and Discharge. Free time commences from the day the Container and other equipment is collected by the Merchant or is discharged from the Vessel or is delivered to the Place of Delivery as the case may be. The Merchant is required and has the responsibility to return to a place nominated by the Carrier the Container and other equipment before or at the end of the free time allowed at the Port of Discharge or the Place of Delivery. Demurrage, per diem and detention charges will be levied and payable by the Merchant thereafter in accordance with the Tariff.

14.9 The Merchant shall redeliver, to a place nominated by the Carrier, the Containers and other equipment in like good order and condition, undamaged, empty, odour free, cleaned and with all fittings installed by the Merchant removed and without any rubbish, dunnage or other debris inside. The Merchant shall be liable to indemnify the Carrier for any and all costs incurred reinstating or replacing Containers and other equipment not returned in the condition as specified above, including the reasonable legal expenses and costs of recovering the costs incurred and interest thereon.

20.2 The Merchant shall take delivery of the Goods within the time provided for in the Carrier's applicable Tariff or as otherwise agreed. If the Merchant fails to do so, the Carrier may without notice unpack the Goods if packed in Containers and/or store the Goods ashore, afloat, in the open or under cover at the sole risk of the Merchant… ."

4

In the present case the parties agreed that the Merchant should have the benefit of 14 days free time at Chittagong.

The proceedings below

5

The present proceedings are the culmination of the dispute between the carrier and the shipper. By a claim form issued on 10 th June 2013 the carrier sought to recover the sum of US$577,184 in respect of demurrage incurred up to 30 th April 2013 and said still to be accruing at the rate of US$840 a day. Its case was that demurrage would continue to accrue at that rate until the containers were redelivered. By its re-amended points of defence the shipper alleged that its obligation to redeliver the containers was conditional upon the nomination of a place at which redelivery was to take place. No place of redelivery had been nominated and no demurrage was therefore payable. It also contended that the carrier should have mitigated its loss by exercising its rights under the bills of lading to unpack the containers and dispose of the goods or by purchasing replacement containers. It was not part of the shipper's case at that stage that the contracts of carriage had been discharged as a result of its own repudiatory breach.

6

The matter came on for trial before Leggatt J. As part of his skeleton argument for the trial Mr. Pearce, who represented the shipper, sought to raise for the first time an argument that by late 2011 or early 2012 his client's inability to redeliver the containers within the foreseeable future amounted to a repudiation of the contracts which the carrier was obliged to accept, thereby bringing to an end any continuing obligation to pay demurrage. The judge allowed him to argue the point and gave him permission to amend the points of defence in order to ensure that it was properly pleaded. That decision has given rise to one of the grounds of appeal, to which it will be necessary to refer in due course.

7

The trial concluded on 2 nd December 2014. A few days later two additional points occurred to the judge on which he sought the parties' assistance. On 8 th December 2014 he wrote to the parties inviting their comments on the construction of clauses 14.8 and 14.9 of the bill of lading and on whether, if clause 14.8 had the effect for which the...

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