Standard Chartered Bank v Dorchester LNG (2) Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Moore-Bick,Lord Justice Briggs,Sir Bernard Rix |
| Judgment Date | 22 October 2014 |
| Neutral Citation | [2014] EWCA Civ 1382 |
| Docket Number | Case No: A3/2013/1490 |
| Court | Court of Appeal (Civil Division) |
| Date | 22 October 2014 |
[2014] EWCA Civ 1382
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMIRALTY COURT
Mr. Justice Teare
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Moore-Bick
Vice-president of the Court of Appeal, Civil Division
Lord Justice Briggs
and
Sir Bernard Rix
Case No: A3/2013/1490
Mr. David Foxton Q.C. and Mr. Fionn Pilbrow (instructed by Ince & Co LLP) for the appellant
Mr. Michael Tselentis Q.C. and Mr. Socrates Papadopoulos (instructed by Norton Rose Fulbright LLP) for the respondent
Hearing dates: 1 st & 2 nd July 2014
Background
This appeal raises an important question about the interpretation of the Carriage of Goods by Sea Act 1992 ("the Act"), which amended the law relating to the transfer of rights of suit under contracts of carriage contained in bills of lading. It concerns the meaning of the expression "completion, by delivery of the bill, of any indorsement of the bill" in section 5(2)(b) of the Act.
On or about 23 rd April 2010 Gunvor International B.V. ("Gunvor") agreed to sell 17,000mt. of gasoil +/—10% to United Infrastructure Development Corporation ("UIDC") c.i.f. Takoradi, Ghana. The goods were purchased by UIDC in order to meet a contract for the sale of a similar quantity of gasoil to Cirrus Oil Services Ltd ("Cirrus") entered into in March 2010. Both contracts provided for payment by letter of credit. On 6 th April 2010 the United Bank of Africa ("UBA") at the request of Cirrus opened a letter of credit ("the prime letter of credit") in favour of UIDC with the respondent, Standard Chartered Bank ("SCB"). It was governed by the ICC Uniform Customs and Practice for Documentary Credits 600 ("UCP 600") and expired on 12 th June 2010. On 12 th April 2010 SCB confirmed the letter of credit to UIDC. On 30 th April 2010 the letter of credit was transferred by SCB to Gunvor ("the transfer letter of credit"). Gunvor's bank, Société Générale, was appointed to act as its agent for the purpose of drawing under the transfer letter of credit.
The goods were shipped in two parcels from Cotonou, Benin, on successive days in May 2010. On 12 th May 2010 Gunvor shipped 9,466 mt of gasoil on board the vessel Maria E and on 13 th May 2010 it shipped a further 9,208 mt of gasoil on board the vessel Erin Schulte, in each case under a bill of lading providing for carriage of the goods to Takoradi. The bills of lading were consigned to Société Générale or order.
The Maria E arrived at Takoradi on 13 th May 2010. When the cargo was tested it was found not to be of the required specification, as a result of which Cirrus and UIDC rejected both cargoes. In the event Cirrus agreed to purchase the cargo on the Maria E at a reduced price, but it was unwilling to take the cargo on the Erin Schulte.
On 20 th May 2010 UBA advised SCB of Amendment No. 3 to the prime letter of credit, by which both the quantity of goods and the amount payable were reduced to correspond with the new agreement under which Cirrus had purchased the cargo on the Maria E. On 25 th May 2010 SCB asked UIDC for its agreement to Amendment No. 3, which UIDC gave on 1 st June 2010. On the same day SCB asked Gunvor for its agreement to Amendment No. 3, but at that point things began to go wrong, because SCB advised UBA that UIDC had agreed to the amendment without having first obtained Gunvor's agreement to a corresponding amendment of the transfer letter of credit. The effect of that oversight was that, although SCB remained liable to Gunvor to honour the transfer letter of credit in accordance with its original terms, it could seek recourse against UBA under the prime letter of credit only to the more limited extent resulting from Amendment No. 3.
In the event, UIDC was able to find new buyers for the cargo on board the Erin Schulte, Chase Petroleum Ghana Limited ("Chase") and UBI Energy Petroleum Ghana Limited ("UBI"). New letters of credit were opened in favour of UIDC, one by SCB itself (the Chase letter of credit) and the other by Trust Bank Ghana (the UBI letter of credit). UIDC asked SCB to transfer the Chase letter of credit to Gunvor, but before that could be done on 4 th June 2010 Gunvor presented documents in respect of the cargo on board the Erin Schulte under the original transfer letter of credit. On 7 th June 2010 Société Générale formally confirmed to SCB that Gunvor had rejected Amendment No. 3.
The documents presented by Société Générale on behalf of Gunvor to SCB at its London offices on 4 th June 2010 included a set of bills of lading covering the cargo on board the Erin Schulte indorsed in favour of SCB. They were scanned and sent by SCB to its service centre in Chennai for checking. On 9 th June SCB informed Société Générale that the documents did not comply with the letter of credit and that it was holding them to Société Générale's order. Discussions followed, in the course of which Société Générale and Gunvor continued to insist that the presentation was valid (as is now accepted to have been the case) and SCB continued to maintain the contrary.
On 9 th June 2010 the vessel arrived at Takoradi. In the absence of a bill of lading the cargo was discharged between 15 th and 19 th June 2010 against a letter of indemnity issued by Gunvor and was delivered to Chase and UBI. Gunvor continued to insist that the documents presented on 4 th June 2010 complied with the letter of credit and pressed SCB for payment, but to no avail. By late June 2010 Gunvor had instructed solicitors to press its claim, but SCB remained adamant and so, on 1 st July 2010, Gunvor commenced proceedings against SCB. Following service of the claim form SCB also instructed solicitors, who soon made it clear that their client was willing to concede Gunvor's claim. On 7 th July 2010 SCB paid the full the amount of the face value of the letter of credit together with interest and costs, following which the proceedings were discontinued by consent.
The proceedings
The Erin Schulte is owned by the appellant, Dorchester LNG (2) Ltd ("Dorchester"). Having been forced to capitulate to Gunvor's entirely justified claim, SCB turned its attention to the vessel's owners. On 6 th May 2011 it brought the present proceedings against them to recover the value of the cargo which, it alleged, they had misdelivered by discharging it without production of a bill of lading. Under the letter of indemnity the owners were entitled to be indemnified by Gunvor against any liability arising from the discharge of the cargo and accordingly, although the proceedings had been brought against Dorchester, Gunvor assumed the burden of defending them. The principal issue between the parties was whether SCB had obtained title to sue in respect of a misdelivery of the goods.
The statutory provisions
The important parts of the Act for present purposes are contained in sections 2 and 5. Section 2 provides (so far as material):
"2—(l) Subject to the following provisions of this section, a person who becomes—
(a) the lawful holder of a bill of lading;
…
shall (by virtue of becoming the holder of the bill … ) have transferred to and vested in him all rights of suit under the contract of carriage as if he had been a party to that contract.
(2) Where, when a person becomes the lawful holder of a bill of lading, possession of the bill no longer gives a right (as against the carrier) to possession of the goods to which the bill relates, that person shall not have any rights transferred to him by virtue of subsection (1) above unless he becomes the holder of the bill—
(a) by virtue of a transaction effected in pursuance of any contractual or other arrangements made before the time when such a right to possession ceased to attach to possession of the bill; …"
Section 5(2) of the Act provides as follows:
"References in this Act to the holder of a bill of lading are references to any of the following persons, that is to say—
(a) a person with possession of the bill who, by virtue of being the person identified in the bill, is the consignee of the goods to which the bill relates;
(b) a person with possession of the bill as a result of the completion, by delivery of the bill, of any indorsement of the bill or, in the case of a bearer bill, of any other transfer of the bill;
…
and a person shall be regarded for the purposes of this Act as having become the lawful holder of a bill of lading wherever he has become the holder of the bill in good faith."
The judge held that SCB had become the holder of the bill of lading on 4 th June 2010 when it was presented at its counters under the letter of credit and so had acquired the right to sue on the contract on that date. It was irrelevant, in his view, that SCB had received the documents for checking and, having carried out its checks, had declined to accept them. In the alternative, however, he held that SCB had become the holder of the bill of lading on 7 th July 2010 when it met Gunvor's demands.
Completion of indorsement by delivery
Section 5(2)(b) of the Act refers to "possession of the bill as a result of the completion, by delivery of the bill, of any indorsement." The issue which divides the parties can be stated quite simply: is the mere transfer of possession of a bill of lading sufficient to constitute completion of an indorsement by delivery, or is it necessary that the transferor and transferee should both intend that the rights under the bill...
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