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Can the holder of a bill of lading claim damages for losses sustained by someone else?

This question came up before Mr Justice Baker as part of an appeal from a decision made in arbitration.

Bananas were loaded on a vessel called “The Baltic Strait”. Despite being loaded in apparent good order, they were found to be damaged on arrival at Tripoli. The buyers (Altfadul) rejected them and claimed US$4.5M from their sellers (Co Ma Co). The sellers (who were also the voyage charterers and who had arranged the shipment) paid damages of just over US$2.5M to Altfadul. Notwithstanding this, Altfadul brought a claim for the full US$4.5M against the carriers (Sevylor). The Tribunal held that Atlfadul could recover for the losses incurred by Co Ma Co pursuant to section 2(4) of the Carriage of Goods by Sea Act 1992.

Sevylor and their insurers argued that section 2(4) was not applicable. They argued:

(i) section 2(4) of COGSA 1992 did not operate where rights of suit under the bill of lading contract had not been previously vested in the party which had suffered loss i.e. Co Ma Co: it only operated where rights of suit were previously vested in that party but it had lost those rights by endorsement or transfer of the bill;

(ii) It was not possible for the lawful holder of the bill to claim for loss suffered by the charterer whose charterparty was with the carrier; and

(iii) Altfadul and it insurers were only entitled to damages representing their loss after taking into account their recovery from Co Ma Co.

Mr Justice Baker dismissed the first and third arguments and that was enough to dismiss the appeal itself. He held that this case fell squarely within R&W Paul Ltd v National Steamship Co Ltd 1 and that Altfadul as the holder of a bill of lading could recover in full the damages despite the earlier recovery from an intermediate seller. Altfadul would of course have to account to Co Ma Co but the fact that they had received a payment from Co Ma Co was irrelevant insofar as the claim against the carrier was concerned.

As regards the argument that Co Ma Co should have sued the carrier directly, the judge applied The Dunelmia which provides where an intermediate holder of the bill is also a voyage charterer, the bill is a mere receipt in his hands. The judge therefore said that Co Ma Co should have sued the carrier directly and could not have sued on the bill of lading. However, the fact that this was not done did not prevent Altfadul from bringing a claim for the full amount of the loss and accounting to Co Ma Co later. The common law principles of recovery are that, provided title to sue is established, a claim can be pursued irrespective of how financial loss reflecting or resulting from the cargo damage is to be distributed across the sale of goods chain.

All of this is of course a long winded way of saying – yes the holder can sue the carrier for damages or losses sustained by someone else and they have a duty then to account to that party on receiving any recovery from the carrier.

1 R&W Paul Ltd v National Steamship Co Ltd (1937) 59 Ll L Rep 28

2 The Dunelmia [1969] 2 Lloyd’s Rep 476
Source: BDM

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