Standard Chartered Bank v Dorchester Lng (2) Ltd and Another

JurisdictionEngland & Wales
JudgeThe Honourable Mr. Justice Teare,Mr. Justice Teare
Judgment Date18 April 2013
Neutral Citation[2013] EWHC 808 (Comm)
CourtQueen's Bench Division (Commercial Court)
Date18 April 2013
Docket NumberCase No: 2011 Folio 546

[2013] EWHC 808 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMIRALTY COURT

Royal Courts of Justice

Rolls Building, 7 Rolls Buildings,

Fetter Lane, London EC4A 1NL

Before:

Mr. Justice Teare

Case No: 2011 Folio 546

Between:
Standard Chartered Bank
Claimant
and
Dorchester Lng (2) Limited
"MT Erin Schulte"
Defendant

Michael Tselentis QC and Socrates Papadopoulos (instructed by Norton Rose LLP) for the Claimant

Paul Downes QC and Fionn Pilbrow (instructed by Ince & Co LLP) for the Defendant

Hearing dates: 18-21 March 2013

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

The Honourable Mr. Justice Teare Mr. Justice Teare
1

This is the judgment of the Court on an action by the Claimant Bank ("SCB") against the Defendant Shipowner ("the Shipowner") for damages in the sum of US$6,132,355.74 for the misdelivery and/or conversion by the Shipowner of a cargo of about 9,208 mt of gasoil shipped on board the vessel Erin Schulte off Cotonou, Benin, on 13 May 2010. The principal issue is whether SCB has title to sue under the Carriage of Goods By Sea Act 1992 ("COGSA 1992") as the lawful holder of the bills of lading relating to the cargo. The debate has concerned the claim in contract because it is accepted that the claim in conversion adds nothing to the claim in contract.

2

SCB is engaged, inter alia, in the funding of international contracts of sale by letters of credit. The Shipowner is the registered owner of the vessel and is incorporated in the Isle of Man. The vessel was under a time charter and two voyage charters at the material time. The sub-voyage charterer, and the shipper of the cargo of gasoil, was Gunvor International BV ("Gunvor"), a major independent oil trader.

3

On 26 March 2010 a sale contract was entered into between United Infrastructure Development Corporation ("UIDC") and Cirrus Oil Services Ltd. ("Cirrus") pursuant to which Cirrus agreed to buy and UIDC agreed to sell 18,000mt of gasoil. UIDC sourced the gasoil from Gunvor and on or about 23 April 2010 agreed to purchase the gasoil from Gunvor. The gasoil was required for use in the mining industry and therefore was to be of a specified quality.

4

Both contracts of sale stipulated for the opening of letters of credit by the respective purchasers. On 6 April 2010 a letter of credit ("the prime letter of credit") was opened by the United Bank of Africa ("UBA") in favour of UIDC on the application of Cirrus. It was governed by UCP 600 and had an expiry date of 12 June 2010. The prime letter of credit was confirmed by SCB to UIDC on 12 April 2010. On 30 April 2010 Gunvor became the second beneficiary pursuant to a transfer of the prime letter of credit ("the transfer letter of credit"). The bank Societe Generale acted as the agent of Gunvor for the purpose of drawing under the transfer letter of credit.

5

On 12 May 2010 some 9,466 mt of gasoil were shipped on board the vessel Maria E off Cotonou for carriage to and delivery at Takoradi, Ghana pursuant to the sale contracts. On 13 May 2010 some 9,208 mt of gasoil were shipped on board the vessel Erin Schulte off Cotonou for carriage to and delivery at Takoradi also pursuant to the sale contracts. The bills of lading recorded that the shipper was Gunvor and the consignee "to the order of Societe Generale, Paris."

6

On 13 May 2010 Maria E arrived off Takoradi and a sample of her gasoil was taken. It was not of the required quality. Accordingly UIDC and Cirrus rejected the cargo on both vessels.

7

Cirrus offered to purchase the cargo on Maria E at a reduced price for general rather than mining use. It appears that UIDC accepted that offer. Cirrus did not wish to buy the cargo on Erin Schulte, even at a reduced price.

8

On 20 May UBA advised SCB of Amendment no.3 to the prime letter of credit which amendment reduced the value and quantity of the cargo covered by the letter of credit to that shipped on board Maria E. SCB sent the Amendment no.3 to UIDC seeking its consent on 25 May 2010.

9

On 26 May 2010 Gunvor presented documents under the prime letter of credit to SCB in respect of the sale of the cargo on board Maria E.

10

On 1 June 2010 UIDC notified SCB of its agreement to Amendment no.3. On the same date SCB sent Amendment no.3 to Gunvor seeking its consent. Also on the same date SCB advised UBA that UIDC had consented to Amendment no.3. As events subsequently proved this was unwise in circumstances where SCB was still to hear whether Gunvor had consented to Amendment no.3. It was not disputed that the effect of sending this message to UBA was that whilst SCB remained obliged to honour the transfer letter of credit to its full value SCB could only seek recourse from UBA to the limited extent permitted by Amendment no.3.

11

On or about 2 June 2010 SCB paid Gunvor in respect of the presentation it had made on 26 May in respect of the cargo on board Maria E.

12

On 4 June 2010 UIDC informed Gunvor that two new buyers had agreed to buy the cargo on board Erin Schulte. One buyer was Chase Petroleum Ghana Limited ("Chase") and the other was UBI Energy Petroleum Ghana Limited ("UBI"). Two new letters of credit were opened in favour of UIDC, one by SCB (the Chase letter of credit) and the other by Trust Bank Ghana (the UBI letter of credit). UIDC requested SCB to transfer the Chase letter of credit to Gunvor.

13

However, that transfer never happened because on 4 June 2010 Gunvor presented documents under the original transfer letter of credit in respect of the cargo on board Erin Schulte. The documents which had been presented under cover of a letter dated 3 June 2010 included the bills of lading in respect of the cargo on board Erin Schulte which had been indorsed in favour of SCB. They were received by SCB's London office on 4 June 2010 at 9.34 am, scanned and sent to SCB's service centre in Chennai for checking.

14

On 7 June 2010 Societe Generale confirmed to SCB that Gunvor had rejected Amendment no.3.

15

On 9 June 2010 SCB sent a SWIFT message MT 734 to Societe General. The glossary of SWIFT messages indicates that MT 734 is "An Advice of Refusal". The message, so far as material, provided as follows:

"77J: Discrepancies:

This advice does not constitute a rejection of documents by applicant and is only sent in accordance with UCP600 article 16c. Discrepancies referred to applicant.

L/C amount overdrawn

Quantity overshipped

77B: Disposal of documents

/Hold/ at your disposal we have not contacted issuing bank await your disposal instructions."

16

The effect of this message has been the subject of debate in this action. I will return to its meaning and effect later in this judgment. The message appears to have been sent as a result of an error, namely, a belief by the service centre in Chennai that the documents were discrepant because of Amendment no.3. The service centre either cannot have seen or cannot have taken into account Gunvor's refusal to consent to that amendment.

17

On 11 June Societe Generale responded to the MT 734 message saying that the presentation was valid, which it was.

18

There then followed chasing messages by Gunvor and Societe Generale and discussions took place between SCB and UIDC. A view was formed within SCB as a result of those discussions that Gunvor may have agreed to Amendment no.3 and so on 16 June SCB advised Societe Generale that the documents should be presented under a different letter of credit. Societe Generale replied that day saying that there would be no other letter of credit, that complying documents had been presented and that payment should be made by SCB. At the same time there were discussions between SCB and Gunvor during which Gunvor demanded that SCB honour its obligation to pay. UIDC made clear to SCB that any payment by it under the transfer letter of credit was at SCB's risk and that UIDC could not accept such payment because the transfer letter of credit related to "a separate product and contract which [Gunvor] failed to honour".

19

Mr. Meyern, SCB's European Head of Trade and Lending Operations, became involved in the matter on or about 16 June 2010. He formed the view, correctly, that SCB was obliged to pay Gunvor under the transfer letter of credit. Notwithstanding the formation of this view SCB's legal department became involved. Gunvor instructed Ince & Co LLP to defend its interests.

20

Between 15 and 19 June 2010 the cargo on board Erin Schulte was discharged on the instructions of Gunvor. Discharge was not given against production of a bill of lading but on production of letters of indemnity. Delivery was taken by the two new purchasers of the cargo, Chase and UBI.

21

On 18 June 2010 SCB wrote to Ince & Co. seeking a meeting and clarification as to various matters. SCB said, in particular:

"One of the specific issues we would like to discuss is whether and if so the basis upon which Gunvor has instructed the carrier to split the gasoil cargo and discharge the same apparently without reference to [SCB] as the rightful holder of the Bill of Lading."

22

A similar letter was sent to UIDC. It was apparent that SCB, having realised that it had no right of recourse from UBA in respect of its liability to Gunvor, hoped to find a commercial solution to its problem.

23

But Ince & Co. replied on the same day, saying that the position remained the same, that SCB ought to have paid Gunvor and that there was nothing to discuss.

24

On 21 June 2012 SCB said in terms that it was not obliged to make payment to Gunvor. This was not a contention that could be supported.

25

Ince & Co. replied on 24 June, saying that unless payment (together with interest) was paid by 30 June 2010, legal proceedings would be commenced. On 30 June 2012 SCB requested a meeting...

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4 cases
  • Standard Chartered Bank v Dorchester LNG (2) Ltd
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 22 October 2014
    ...COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION ADMIRALTY COURT Mr. Justice Teare [2013] EWHC 808 (Comm) Royal Courts of Justice Strand, London, WC2A 2LL Lord Justice Moore-Bick Vice-president of the Court of Appeal, Civil Division Lord Justi......
  • The “Yue You 902”
    • Singapore
    • High Court (Singapore)
    • 24 April 2019
    ...1912 [2002] 2 Lloyd's Rep 182, HC (Eng) (folld) East West Corp v DKBS AF 1912 A/S [2003] QB 1509, CA (Eng) (folld) Erin Schulte, The [2013] 2 Lloyd's Rep 338, HC (Eng) (not folld) Erin Schulte, The [2015] 1 Lloyd's Rep 97, CA (Eng) (folld) Future Express, The [1992] 2 Lloyd's Rep 79 (refd) ......
  • Tritton Resources Pty Ltd v Ever Rock Navigation S.A.
    • Australia
    • Federal Court
    • 6 March 2019
    ...Chunder Dey v Gopal Chunder Laha (1892) LR 19 Ind App 203 Standard Chartered Bank v Dorchester LNG (2) Ltd (The “Erin Schulte”) [2013] 2 Lloyds Rep 338 The “Breydon Merchant” [1992] 1 Lloyds Rep 373 The “Stolt Loyalty” [1995] 1 Lloyds Rep 598 (CA) The Henrik Sif [1982] 1 Lloyds Rep 456 The ......
  • The "Yue You 902" and another matter
    • Singapore
    • High Court (Singapore)
    • 24 April 2019
    ...that such “reason or cause” should be the “immediate reason and proximate cause of the transfer” (at [85]). In The Erin Schulte [2013] 2 Lloyd’s Rep 338 (“The Erin Schulte (HC)”), Teare J disagreed that the test should be “immediate reason” or “proximate cause”. Instead, Teare J held that t......
1 books & journal articles
  • Admiralty and Shipping Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2019, December 2019
    • 1 December 2019
    ...[2020] 3 SLR 573 at [81]. 54 Bills of Lading Act (Cap 384, 1994 Rev Ed) s 2(2)(a). See The Yue You 902 [2020] 3 SLR 573 at [87]. 55 [2013] 2 Lloyd's Rep 338. 56 The Yue You 902 [2020] 3 SLR 573 at [95]. See also [88]–[91]. 57 The Yue You 902 [2020] 3 SLR 573 at [94]. 58 The Yue You 902 [202......

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