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Unicredit Bank A.G. v Euronav N.V. [2022] EWHC 957 (Comm)

News & Insights 22 July 2022

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Key words: Bill of lading, Letter of credit

Lawyer looking at camera

Discharge without production of original bills –Misdelivery claim – Damages – Title to sue – Valid transfer of contractual rights

The decision concerns a claim by UniCredit Bank AG (the bank) against Euronav (the owners) for alleged breach of the contract of carriage (the bill of lading) by the owners in delivering the cargo without production of the bill of lading.

The owners had chartered the MT Sienna (the vessel) to BP. BP, who were also the shippers, had sold the cargo of 80,000mt of low sulphur fuel oil to Gulf Petrochem FZC (Gulf), who paid BP by way of letter of credit (LOC) from the bank. An agreement had been put in place between the bank and Gulf whereby the cargo would be re-sold to sub-buyers who would pay the bank directly.  As part of the deal, the charterparty was novated to Gulf, so that Gulf, rather than BP, became the charterer.  It contained a term that required owners to discharge without production of the bills if requested by the charterer, which is what happened.

At that stage (ie discharge), the bill of lading remained in BP’s possession and had not been endorsed. There were no concerns at that time about Gulf defaulting. However, by the time payment under the LOC fell due, Gulf went into liquidity distress.  It was only around that time that BP endorsed the bill of lading to the bank.

Having not been paid by Gulf or the sub-buyer, the bank brought a claim under the bill of lading for damages against the owners for delivering the cargo without production of the bill of lading.

High Court decision

The court found in the owners’ favour, ie that there was no breach, and dismissed the claim. In reaching its decision, the court considered the following two issues:

  1. Did the bill of lading contain and/or evidence a contract of carriage in respect of the cargo on or after the novation and prior to the alleged misdelivery?
  2. Alternatively, were the owners’ obligations as regards the carriage contained exclusively in the charterparty and/or the novation?

The court held:

  1. That where the shipper is also the charterer (as here) the bill of lading is not a contract of carriage but a mere receipt.  In other words, there was no contract of carriage to breach.
  2. The novation of the charterparty could not be treated as being the equivalent to endorsement by BP to Gulf of the bills of lading, so there was still no contract of carriage within the bills of lading at the time of discharge.
  3. Even if the bills had contained a contract of carriage at discharge the claim would have been dismissed as the loss was not caused by the failure to produce the bills of lading, and would have happened anyway.  Further, it was held on the facts that the bank knew of and implicitly accepted the likelihood of discharge without the original bills.

Comment

The decision serves as a reminder of the fundamental principle that prima facie, and in the absence of an express provision to the contrary, where the shipper is also the charterer, the bill of lading is to be looked upon as a mere receipt for the goods and not a contract of carriage.

Banks should also ensure that, where bills of lading are to be assigned to them as part of the security for the financing, those bills contain the relevant contracts of carriage giving them title to sue in respect of misdelivery or other claims against the carrier. Parties should be alive to the timing of endorsement of the bills, for example, to ensure that the sellers are still the charterers at the time of endorsement, and thus the bills are also in charterers’ possession.

  1. Link to commentary by Ince can be found here
  2. Link to commentary by Quadrant Chambers can be found here
  3. Link to i-law can be found here
  4. Link to the High Court decision can be found here

Category: Caselaw

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