Web alert: cargo claim dismissed for lack of title – Straight Bills of Lading - A timely reminder

News & Insights 25 March 2015


In this recent English High Court case the owner/carrier had agreed to carry 76 drums of coal tar in two containers between Tanzania and China. Upon discharge it was discovered that the cargo had been substituted with sand and pebbles.

Background

In this recent English High Court case[1] the owner/carrier had agreed to carry 76 drums of coal tar in two containers between Tanzania and China. Upon discharge it was discovered that the cargo had been substituted with sand and pebbles. The claimant cargo interests brought a claim against the owner, based on their allegation that the substitution must have occurred during the sea carriage. 

Under the straight bills of lading, the consignee was a Chinese company. The first claimant was only the notified party under the bill, who had bought the goods from the second claimant and then resold them back to the consignee under the bill of lading. Therefore, neither of the claimants were a party to the contract of carriage.  On top of that, the Hague-Visby Rules applied and, thus, all claims were extinguished one year following delivery of the containers.

The defendant owner submitted an application into court asking for summary (early) judgment on the basis that the claim had ‘no real prospect of success’. The issues for the court to consider were the following:

  1. Whether the claim was bound to fail as a matter of law as the claimants had no contractual title to sue; and
  2. Whether the claim was, in any event, time barred.

The court decision
The English court held that there was no possibility for these cargo claimants to bring a contractual claim against the owner, because the bill of lading in question was a straight bill and neither of the claimants were a party to it. Therefore, neither of the claimants had legal title to sue the owner/carrier.

The English court further upheld that although the first claim was made in time, the second was made after the one year time bar, by which time the claimant’s rights were all extinguished on the basis that Hague-Visby Rules applied to the carriage. Consequently, there was no valid claim.

It was therefore decided that the defendant was entitled to summary judgment on the basis that the cargo claim had no real prospect of success.

Conclusion

This case highlights the importance of checking very carefully, upon receipt of any cargo claim, that the claimant has legal title to sue under the contract of carriage. It is common for a party to have good factual grounds on which to bring a claim, but if they have no legal title to do so then the claim should fail ‘at the first hurdle’. On top of that, owner/carrier interests should carefully monitor any applicable time bars.

This article intends to provide general guidance on the issues arising as a matter of English law. It is not intended to provide legal advice in relation to any specific query. Members requiring further information on this topic should direct their enquiries to either the authors of this article, or their usual club contact.

The club has over 50 qualified lawyers and barristers working in house, spread across London, Piraeus, New York, Singapore, Hong Kong and Rio de Janeiro. All of our claims handers have considerable experience in handling cargo claims and the various bill of lading issues that arise in relation thereto.
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[1] Sumanu Natural Resources Limited vs. Mediterranean Shipping Company SA [2014] EWHC 2829 (Comm)

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