England and Wales High Court (Admiralty Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
ADMIRALTY COURT

1. This matter comes before the court by way of an application for summary judgment under Part 24 of the Civil Procedure Rules. The action relates to the loss by misdelivery of goods carried by the defendants from Hong Kong and other ports in China to various ports in West Africa under seven bills of lading during the latter part of 1996 and early 1997. It is common ground that in each case the defendants were deceived by the production of forged bills of lading into releasing the goods to persons purporting to act on behalf of the ultimate purchasers. The goods carried under each of these bills of lading had been sold by the claimants to West African buyers on terms providing for payment against documents. The buyers failed to pay for the goods and the bills of lading were left with the collecting bankers by whom they were eventually returned to the claimants.
2. The claimants began these proceedings by writ issued on 3^rd March 1998 claiming damages for breach of contract or duty on the part of the defendants in delivering the goods to third parties without production of the bills of lading instead of to the claimants themselves. In their defence the defendants put the claimants to proof of their title to sue and put in issue the quantum of the claim. By way of positive defence they relied on the fact that they had been deceived into releasing the goods by the production of the forged bills and on clause 5(3)(b) of the bills of lading which purports to relieve the carrier from liability for loss or damage occurring to the goods after discharge from the vessel. This ground of defence was made the subject of a preliminary issue and on 1^st March 1999 Rix J. held that the deception practised on the defendants did not provide a defence to the claim. An appeal was dismissed in December that year.
3. The outcome of the preliminary issue meant that only two issues remained to be determined: the claimants’ title to sue and the amount of the loss. Directions were given in the ordinary way for preparations for trial, including the service of witness statements, but the defendants were apparently unable to comply with the timetable originally laid down and the matter came back before the court in September last year. On that occasion Longmore J. ordered that unless the defendants exchanged witness statements by 13^th October they should be precluded from serving any statements and from contesting the amount of the claim and that the trial should proceed only on the issue of the claimants’ title to sue. The defendants failed to exchange witness statements within the time prescribed by Longmore J.’s order and therefore since October of last year the only outstanding issue has been that of the claimants’ title to sue. It is in these circumstances that the claimants make this application for summary judgment. A trial has been fixed for May this year, but if in truth the defendants have no real prospect of successfully defending the claim, it is neither in the interests of the parties, nor is it a proper use of the court’s resources, for there to be a trial unless there is some other reason why the case should not be disposed of summarily.
4. Mr. Dunning on behalf of the defendants criticised, with some justification, the way in which the claimants have approached their obligation to give disclosure, but nonetheless there is a large body of evidence now before the court relating to the transactions which underlie the shipment of the goods under these seven bills of lading. Broadly speaking, each shipment followed a similar pattern. The claimants bought goods on terms c.i.f or f.o.b. West African ports from local suppliers for which they paid by letter of credit opened through a bank in Hong Kong. In two cases the goods were delivered to the claimants prior to shipment and the letter of credit provided for the presentation of a cargo receipt signed by the claimants rather than a bill of lading. In these two cases the goods were shipped by the claimants themselves. In the other five cases the letter of credit called for the presentation of shipping documents, including a bill of lading. In four of these cases the bills of lading show that the goods were shipped by the supplier purportedly on behalf of the claimants; in one case the goods were apparently shipped by the supplier on its own behalf.
5. The contracts under which the claimants sold the goods to their West African buyers provided for payment against documents and the claimants instructed their Hong Kong bank to act as agent for the collection of the price. The claimants also drew bills of exchange on the buyers which they sold to the collecting bank in Hong Kong at face value, subject to a right of recourse. In effect, therefore, the collecting bank simply lent the claimants the invoice amount pending receipt of the price payable in respect of the goods. Each of the bills of lading was indorsed in blank by the shipper and, where the claimants were not the shippers, in all but one case by the claimants as well. Mr. Mahbubani, the claimants’ chief executive officer, who describes these transactions in his evidence does not deal in very much detail with the nature of the arrangements between the claimants and the banks, but it is obviously possible, to say the least, that in each case the bank held the bill of lading as security for its advance. In the two cases where the goods were shipped by the claimants themselves the sellers were obliged to present under the letters of credit certificates signed by the claimants stating that the goods had been received by the claimants in trust for the bank. Mr. Mahbubani says that that simply reflected the fact that the documents were forwarded to the bank as agent for collection of the price under the sale to the claimants’ buyers in West Africa, but these were receipts for the goods delivered to the claimants under their purchase contract. In my view they tend to support the conclusion that the bank had an interest in the goods and held the bills of lading as security.
6. The Hong Kong bank forwarded the bills of lading to its correspondent in West Africa for collection of the price. However, in due course it became apparent that the buyers did not intend to take up the bills of lading or pay for the goods. The bills of lading were therefore returned to the bank in Hong Kong which debited the claimants’ account in respect of the amount paid in respect of the bills of exchange and returned the bills of lading to them. It was common ground that by the time this action was begun the claimants held all seven original bills of lading indorsed in blank.
7. Mr. Meeson submitted on behalf of the claimants that they have an unanswerable claim against the defendants under each bill of lading, both in contract and tort. Mr. Dunning disputed that, but he also submitted that even if the claimants did have a good claim, they could not succeed on the basis of the claim as currently pleaded and that this application must therefore be dismissed in any event. An application for summary judgment is usually made at an early stage in the proceedings at a time when there has not been a full opportunity to examine the evidence as a whole. Indeed, one of the purposes of the application is to avoid the need to incur the delay and expense which such an exercise usually entails. That is one reason why on an application of this kind the court normally holds the applicant strictly to his pleaded case and is reluctant to allow him to succeed on a ground which would require an amendment. However, there are cases, of which this is one, where the application is made at a later stage when the bulk of the evidence, including the relevant documents, is already before the court. In such cases I think the court may well be justified in pursuit of the overriding objective in allowing a greater degree of latitude to an applicant, provided it is satisfied that the respondent has had a full and fair opportunity to deal with the substance of the case. In the present case the evidence now before the court is sufficient to enable the issues to be fully considered and therefore I think that the right course is to begin by considering the merits of the dispute and to postpone the question whether an amendment of the pleadings would be required to enable the claimants to succeed, and if so, whether it should be allowed.
8. It is convenient to begin by considering the claim in tort. Mr. Meeson submitted that at the time when the defendants parted with them the claimants were the owners of the goods and holders of the bills of lading with an immediate right to possession of them. Accordingly they had a cause of action in conversion against the defendants. Alternatively, he submitted, the claimants, as holders of the bills of lading, have a claim in conversion arising out of the defendants’ failure to deliver the goods to them on their demand. The defendants’ inability to deliver the goods as a result of an earlier misdelivery, even if that occurred before the claimants became holders of the bills, did not relieve them of liability. In support of that submission Mr. Meeson drew my attention to Bristol & West of England Bank v Midland Railway Co. [1891] 2 QB 653 and The “Future Express” [1993] 2 Lloyd’s Rep. 542.
9. Mr. Dunning did not seriously challenge either of these propositions, but he submitted that whichever way the claim was put there was a real possibility that it would fail on the facts. It is clear that at the time when the defendants released goods the relevant bill of lading was in the hands of the bank in West Africa acting as correspondent for the bank in Hong Kong. Although the Hong Kong bank was the claimants’ agent for collection of the purchase price, it also had a right of recourse against them in respect of the value of the bills of exchange if the buyers failed to pay. It is likely, therefore, Mr. Dunning submitted, that the bank held the bill of lading as a pledgee and not simply as an agent for collection. If that were the case, the claimants did not have an immediate right to possession of the goods at the time of the misdelivery and so had no title to sue in conversion. He also submitted that in the absence of cogent evidence that the claimants had paid their suppliers for the goods there was a real doubt whether property had passed to them even by the time of the misdelivery. As to the alternative basis of claim, Mr. Dunning submitted that there was no evidence before the court that the claimants had in fact made a demand on the defendants for the delivery up of the goods after becoming holders of the bills of lading.
10. I have already described in sufficient detail the nature of the transactions involving the claimants, their suppliers and the banks. It is sufficient for the purposes of this application to say that in my view there is certainly a serious issue in relation to the nature of the bank’s possession of the bills of lading which cannot be determined summarily. Without needing to say more about this limb of the argument, therefore, I am satisfied that on this application the claimants case in conversion cannot succeed on the first ground.
11. In his second witness statement Mr. Mahbubani describes what happened during 1996 and 1997 following the despatch of the goods. He says that it was not until about late October 1996 that he became aware that the buyers were having some financial difficulties, but even then he did not think that there was a serious problem and that he did not realise that the goods had already been released to them. He says that it was not until May 1997 when he heard rumours in the market that the cargo had been cleared that he took steps to contact the defendants in order to make enquiries. According to Mr. Mahbubani he sent a fax to the defendants asking about the position but received no response. Thereafter he was in contact with the defendants attempting to resolve the position amicably until the time came when, having failed to reach a solution, he decided to instruct lawyers.
12. The documents disclosed in the action, some of which are exhibited by the defendants, show that the banks returned all the bills of lading to the claimants and debited their account in the amount of the original advance in June and July 1997. It is almost certain, therefore, that the claimants were the holders of the bills at the time of their discussions with the defendants, but there is nothing, either in the documents or in Mr. Mahbubani’s evidence, which suggests that any formal demand was made for the delivery of the goods. I do not find that very surprising because both parties were well aware by that time that the defendants had parted with possession of the goods and could not give delivery, but the fact remains that there is no evidence of any formal demand. Nor is there evidence on which the court could find that the defendants waived the need for a demand. Moreover, it is fair to say that the claimants have never sought to put their case in that way, either in their statement of claim or in correspondence. In these circumstances I do not think that the application can succeed on this basis either.
13. I turn next to the claim in contract. Mr. Meeson submitted that the claimants as holders of the bills of lading are entitled under the Carriage of Goods by Sea Act 1992 to recover damages in respect of any breach of contract committed prior to the time at which they became holders of the bills.
14. The Carriage of Goods by Sea Act 1992, which replaced the Bills of Lading Act 1855, provides as follows:

“2 (1) 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 as if he had been a party to that contract.

. . . . . . . . . . . . . . . . . . . .

(4) Where, in the case of any document to which this Act applies

(a) a person with any interest or right in or in relation to goods to which the document relates sustains loss or damage in consequence of a breach of the contract of carriage; but

(b) subsection (1) above operates in relation to that document so that rights of suit in respect of that breach are vested in another person,

the other person shall be entitled to exercise those rights for the benefit of the person who sustained the loss or damage to the same extent as they could have been exercised if they had been vested in the person for whose benefit they are exercised.

(5) Where rights are transferred by virtue of the operation of subsection (1) above in relation to any document, the transfer for which that subsection provides shall extinguish any entitlement to those rights which derives

(a) where that document is a bill of lading, from a person’s having been an original party to the contract of carriage; or

(b) in the case of any document to which this Act applies, from the previous operation of that subsection in relation to that document;

. . . . . . . . . . . . . . . . . . . .

5 (2) 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;

(c) . . . . . . . . . .

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.”

15. It was common ground that the claimants were original parties to the contracts of carriage at least in those two cases in which they were named as shippers in the bill of lading. It was also common ground that in one case they were not original parties to the contract. Mr. Dunning submitted that in the four cases in which the bills of lading named the supplier as shipper “on behalf of Motis Exports Ltd” it was doubtful whether the claimants were in fact original parties to the contract in view of the evidence that the freight had been paid by the supplier rather than Motis. The wording of the bills of lading in these cases does not seem to me to leave much room for doubt and I am not sure that much weight can be attached to the identity of the person who actually paid the freight, but I am prepared to assume for the purposes of the present application that Mr. Dunning is right and that the claimants were not original parties to the contract of carriage. It follows that in five out of the seven cases they could only have become parties to the contracts contained in the bills of lading by virtue of section 2 of the Act.
16. Mr. Dunning also submitted that if, as was likely, the goods were in each case pledged to the bank by the deposit of a generally indorsed bill of lading, the bank as pledgee became the holder of the bill by virtue of section 5(2)(b) of the Act, thereby extinguishing any rights which the claimants previously enjoyed as original parties to the contract of carriage. Accordingly, even in the two cases in which the claimants were indisputably original parties to the contract of carriage, such rights as they now enjoy are derived solely from their becoming holders within the terms of the Act. In this connection Mr. Meeson drew my attention to the case of Short v Simpson (1866) L.R. 1 C.P. 248 in which a bill of lading had been indorsed in blank by the consignee, deposited with a bank to secure an advance and subsequently returned to the consignee on repayment of the advance. The members of the court all considered that the consignee was remitted to his original rights by the redelivery of the bill to him, although it is fair to say that Erle C.J., Willes J. and Montague Smith J. appear to have considered that he could also sue as holder of the bill of lading under the 1855 Act .
17. In my view Mr. Dunning was right in saying that the deposit of a generally indorsed bill of lading with the intention of creating a pledge over the goods operates to render the pledgee the holder of the bill under the Carriage of Goods by Sea Act 1992 with the consequences set out in section 2(1). Whatever the position may have been under the previous law, that seems to me to be the plain effect of clauses 2 and 5 of the Act. Subsection 5(2) (b) refers to the completion of any other transfer of the bill; these are wide words which in my view are capable of embracing a transfer by way of pledge. It follows, therefore, by virtue of subsection 2(5)(a) of the Act that if the bills were deposited with the bank by way of pledge, the claimants can now claim only as holders of the bills under section 2 even in those cases in which they were original parties to the contract of carriage.
18. The importance of this point for Mr. Dunning’s argument lay in the fact that, in his submission, the claimants had pleaded their claim on the basis that they were shippers, that is, original parties to the contract of carriage, not on the basis that they were holders of the bills of lading by virtue of the Carriage of Goods by Sea Act 1992. He also submitted that there is in this case a real question, which could only properly be resolved at trial, whether the claimants became holders of the bills in good faith. It is convenient to deal with this latter point first.
19. Mr. Dunning drew my attention to the manner in which the claimants approached the whole question of the payment by their buyers and the release of the goods as described by Mr. Mahbubani in his second statement. He submitted that there are grounds for thinking that by the time the claimants became holders of the bills of lading they were already aware that the goods had been released many months earlier and were, in effect, becoming holders of bills which they knew could not be accomplished in accordance with their terms. If so, he submitted, they did not become holders in good faith as required by section 5(2) of the Act and accordingly they could not exercise the rights of a holder under section 2.
20. I am very doubtful whether a person who becomes the holder of a bill of lading in the knowledge that the goods have been lost or destroyed while in the hands of the carrier can for that reason alone be said not to have become a holder in good faith, but it is unnecessary to decide the point because Mr. Dunning accepted that the proposition cannot extend to the case where the person in question became the holder of the bill pursuant to a pre-existing commercial arrangement. That, of course, is precisely what happened in the present case if one assumes, as I must for this purpose, that the bills of lading were deposited with the bank by way of security. (If the bills were not deposited as security, the claimants were the holders throughout.) Once it became clear to the bank that the buyers were unwilling to take up the bill, the bank became entitled to debit the claimants’ account in respect of the advance and on doing so was obliged to return the bill to the claimant. That is exactly what happened in this case and was a necessary incident of the arrangement under which the bill was deposited with the bank in the first place. It follows that the claimants became holders of the bills of lading pursuant to a commercial arrangement which had been entered into long before the goods reached their destination or were released by the defendants. I can see no grounds, therefore, for supposing that if the matter went to trial the defendants might successfully defend the claim on the basis that the claimants became holders of the bills otherwise than in good faith.
21. In these circumstances I think Mr. Meeson is right in saying that claimants have established their title to sue in contract as holders of the bills of lading; or, to put it another way, that the defendants have no real prospect of successfully defending a claim put on that basis. The question remains, however, whether the claimants have pleaded their claim in that way, and if not, whether they should be given permission to make the amendment necessary to enable this application to succeed.
22. The claim is pleaded in quite broad terms. Paragraph 1 of the statement of claim alleges that the defendants acknowledged shipment on board their vessels of various cargoes at various ports under seven bills of lading for carriage and delivery to the claimants at Cotonou and Abidjan. The shipper of the cargoes is not identified. The statement of claim then continues as follows:

“2. The plaintiff was at all material times the owner of the said goods and entitled to possession thereof.

3. In breach of the contract contained in or evidenced by the bills of lading, and in breach of their duty as carriers for reward, the defendants failed to deliver the goods to the plaintiffs.

4. Further or alternatively, in breach of the contract or duty, the defendants their servants or agents wrongfully and without authority delivered the goods marked as above to Panafrimex or other unknown parties at Abidjan and Cotonou without production of the relevant and original bills of lading, thereby converting the said goods.”

23. Mr. Dunning pointed out, quite correctly, that the statement of claim contains no allegation that the claimants became holders of the bills of lading in the manner contemplated by the Carriage of Goods by Sea Act 1992, nor that they are entitled to claim as holders of the bills under that Act. He submitted that the contractual claim can only properly be understood as a claim by the shipper, even though there is no allegation that the claimants were the shippers of the goods. In my view, however, this is to take too narrow an approach to this pleading. In the first place, I have little doubt that when read as a whole the nature of the claimants’ case is clear enough. They say that the defendants were under a duty, both as a matter of contract and at common law, to deliver the goods to them and that they failed to do so. If, therefore, the question is whether the defendants were fairly informed of the case the claimants are seeking to make, the answer in my view is that they were. In these circumstances I do not think that the pleading requires amendment in order to ensure that the defendants are made aware of the general nature of the case being made against them.
24. Moreover, even taking a more technical approach to the question, I do not think that the claimants are seeking to make a claim which falls outside the scope of their existing pleading. Paragraph 3 contains the averment, admittedly unparticularised, but a clear averment nonetheless, that in relation to each cargo there was a contract between the claimants and the defendants contained in or evidenced by the bill of lading which the defendants broke by failing to deliver the goods to the claimants. It is in my view wide enough to encompass the way in which Mr. Meeson put the claimants’ case. As Parker L.J. pointed out in The “Kapetan Markos” [1986] 1 Lloyd’s Rep. 211 at page 230, where a contractual right is pleaded in terms as broad as this, the party making the allegation, if not confined by particulars, is entitled at trial to establish his case by any route he can. Despite the absence of any reference to the Carriage of Goods by Sea Act, therefore, the existing statement of claim is in my view sufficient to entitle the claimants to prove that contracts existed between them and the defendants in the terms of the bills of lading by operation of the Act. No amendment is therefore necessary to cover the point,
25. For these reasons I am satisfied that the defendants have no real prospect of successfully defending the claim as it is pleaded at present. Despite the criticisms which the defendants have made of the claimants’ conduct, both in connection with disclosure and more generally, this is not in my view a case which for that or any other reason ought to go to trial rather than be disposed of summarily. The suggestion that the claimants may have been in league with their buyers to enable them to obtain delivery of the goods from the defendants without paying for them would, of course, have been a good reason to send the matter to trial had there been any evidence to support it, but in truth there is none. Accordingly, this application must succeed.