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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> F H Bertling Ltd v Tube Developments Ltd [1998] ScotCS 42 (30 October 1998)
URL: http://www.bailii.org/scot/cases/ScotCS/1998/42.html
Cite as: [1999] 2 Lloyd's Rep 55, [1999] 2 LLR 55, [1998] ScotCS 42
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OPINION OF LORD HAMILTON in the cause F. H. BERTLING LIMITED Pursuers; against TUBE DEVELOPMENTS LIMITED Defenders:
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30 October 1998
The defenders ("Tube") are stockholders of steel pipes. In or about July or August 1996 Tube was approached by a representative of Oil & Gas Equipment Co. Limited ("Oil & Gas") with an enquiry concerning the possible sale to the latter by the former of steel pipes for use in Saudi Arabia. Oil & Gas had contracted or was about to contract for the supply of such pipes (and probably other materials) to Bugshan S. and W. Co. Limited ("Bugshan"), a company with a place of business in Saudi Arabia, for use at a refinery site at Ras Tanura in that country. Ras Tanura is situated some distance by land from the port of Dammam, also in Saudi Arabia.
On or about 15 August 1996 Tube submitted to Oil & Gas its written offer for the sale of certain pipes. The prices were, at the request of Oil & Gas, quoted in US dollars on the basis of "FOB UK port except London". The payment term in the offer was "Irrevocable and confirmed acceptable letter of credit at sight from UK bank". Telephone discussions subsequently took place between Mr Craig, Tube's Commercial Director, and Mr Cleghorn of Oil & Gas which resulted in the placing by Oil & Gas with Tube on 5 September 1996 of a purchase order for pipes. Nine types of pipe were specified in the purchase order, an enlargement of the scope of the materials in respect of which the written offer had been given. The price in the purchase order was, after a detailed calculation, totalled as follows:-
"TOTAL PRICE FOB UK PORT (USD) 354,737.62
LESS DISCOUNT (USD) 5,000.00
SEA FREIGHT COST (USD) 25,025.00
TOTAL PRICE C & F DAMMAM (USD) 374,762.62".
The payment term was specified as "PAYABLE BY IRREVOCABLE LETTER OF CREDIT 45 DAYS FROM SUBMISSION OF SHIPPING DOCUMENTS". Tube accepted that order. Certain of the pipes ordered required to be specially manufactured. Tube contracted with Tubular Supply Services Limited, a British Steel company, for the manufacture and supply of such pipes from the latter's plant at Stockton-on-Tees. The remaining pipes were to be supplied from Tube's stock held at Kilsyth. The delivery term in the contract between Tube and Tubular Supply Services Limited was "FOB UK PORT FOR SHIPMENT TO SAUDI ARABIA".
The inclusion in the purchase order of the entries "SEA FREIGHT COST (USD) 25,025" and "TOTAL PRICE C & F DAMMAM (USD) 374,762.62" was the result of a request by Mr Cleghorn to Mr Craig that the sea freight cost (from the UK port to Dammam) be included in the invoice to be rendered ultimately by Tube to Oil & Gas. Mr Cleghorn had led Mr Craig to believe that Oil & Gas had negotiated a sea freight price for the pipes with the pursuers ("Bertling"). The latter regularly acted as a freight forwarder for the transport to the Arabian Gulf of goods being supplied to customers there by Oil & Gas or by UK suppliers of the latter. Mr Craig understood that, although the order as placed by Oil & Gas was to be on FOB UK port terms, the arrangement was that Tube, on receipt of the specified sea freight price from Oil & Gas, would pass that sum on to Bertling. Although not specified in the documents produced it was the understanding of Mr Craig in 1996 and into early 1997 that the UK port from which the whole pipes would be shipped would be Hull. Sometime after placing the order with Tube in September, Oil & Gas cancelled certain of the items ordered. Tube, although not contractually obliged to do so, accepted that cancellation. At that stage the contract between Tube and Oil & Gas remained otherwise the same.
Bertling carries on business as an international freight forwarder. In accordance with established practice such a freight forwarder who arranges the carriage of goods by a shipping line or other carrier incurs, albeit acting on behalf of a third party, personal liability to the carrier for the freight or other carriage charges. The freight forwarder is entitled to recover such charges from its principal. A prospective principal may request from a freight forwarder quotations for carriage by alternative routes. By December 1996 Oil & Gas was seeking from Bertling quotations for the transport of the pipes through the port of Antwerp as well as through the port of Hull. On 23 December an employee of Bertling, in response to such an enquiry, faxed to Oil & Gas a quotation for those alternative routes, in each case commencing at Kilsyth or Stockton and terminating at Ras Tanura. A price (based on a maximum total of twenty four trailer loads) was specified for road transport to each of Hull and Antwerp; and in each case a rate for ocean freight from the relative port of shipment to Dammam and a rate for onward carriage to Ras Tanura were specified. By 24 January 1997 Bertling, having received more details about the weights and dimensions of the pipes, was able, through Mr Bunyard, a Project Freight Manager employed by it and in charge of business with Oil & Gas, to offer to Oil & Gas a quotation for shipment from each of Hull and Antwerp expressed in lump sum terms for each of the three transport stages. That offer also identified vessels with expected dates of departure from each port respectively. The transit time via Antwerp was significantly shorter than that via Hull.
Towards the end of January 1997 Mr Cleghorn approached Mr Craig with a request that the pipes be shipped via Antwerp rather than via Hull. It appears that by that time prompt delivery of the pipes to Saudi Arabia was becoming urgent and that Oil & Gas formed the view that shipment through Antwerp would better meet the time constraints. Mr Craig responded that, as the prices had been agreed on an FOB UK port basis, these would required to be altered to reflect any altered transport arrangements. At Mr Cleghorn's request Mr Craig, having obtained an "ex works" quotation from Tubular Supply Services Limited for the pipes to be supplied by it, on 28 January faxed to Mr Cleghorn a list of ex works prices for the whole pipes then to be supplied by Tube. Although Mr Cleghorn did not respond in writing to that fax and although, despite a request for it, no amended order in writing was placed with Tube by Oil & Gas, the communings between Mr Cleghorn and Mr Craig at or about this time resulted in a variation of the contract between Oil & Gas and Tube to the effect that the sale of the pipes was amended from a FOB UK port to an ex works basis, the prices being reduced accordingly. The result of this amendment was that, as between Oil & Gas and Tube, the former was responsible for all transportation from the place of supply (Kilsyth or Stockton).
Following upon that change Oil & Gas on or about 29 January instructed Bertling to put in hand transportation of the pipes from those locations. Arrangements were made for shipment via Antwerp. In a fax transmitted on 29 January by Mr Bunyard to Mr Craig under reference to those goods it was stated:-
"We trust you are aware that OIL & GAS EQUIP have now confirmed for us to move the above order to Dammam from ex works".
On 31 January Mr Craig sent to Mr Cleghorn a fax which included the following:-
"We need an amended order changing unit prices to ex works as per my telefax 593 of 28 January.
As you know, we have no contractual arrangements with Bertlings on freight costs. Oil and Gas negotiate a price with Bertlings and, as per our arrangement, when you pay us the full amount, including freight, we pay Bertlings ...".
Mr Craig on the same day copied that fax to Mr Bunyard. Later that day Mr Bunyard faxed Mr Cleghorn a message which included the following:-
"It is understood that we will be paid by Tube Developments once they have been paid through the terms of the L/C. Please confirm to us by return what those payment terms are".
This fax was not copied to Mr Craig. Mr Cleghorn did not respond to either fax addressed to him. Mr Bunyard did not send any response to Mr Craig in respect of the copy fax sent by the latter to the former.
The goods could not be uplifted from Kilsyth or Stockton until Tube authorised their release. Tube was not prepared to do so until there was in its hands a letter of credit securing due payment for the goods. Tube had been pressing Oil & Gas for some months for delivery of such a letter of credit. On 4 February a letter of credit was eventually received by Tube from Oil & Gas. I shall return to its nature and terms. Following its receipt authority was given by Tube for release of the pipes. Some of those were uplifted on 4 February from Stockton. The remainder were uplifted from Kilsyth and Stockton in various loads over the next two weeks or so. The transportation had been arranged by Bertling acting on the instructions of Oil & Gas.
Mr Bunyard accepted in evidence that up to and including 4 February 1997 he considered Oil & Gas to be the principal of Bertling in respect of the transportation of the goods from Kilsyth or Stockton to Ras Tanura. That commercial impression clearly reflected the contractual situation at that stage. Bertling, who had acted or were acting for Oil & Gas in a number of other freight forwarding transactions to the Gulf, had been instructed by Oil & Gas to arrange the transport of the steel pipes from Kilsyth or Stockton via Antwerp to Ras Tanura. Bertling was aware that the contract between Oil & Gas and Tube, although originally FOB UK port, had been varied to ex works. The dealings between Tube and Bertling had up to that stage been restricted to the passing of information about pipe weights and dimensions. Although there had been some communications (with the exception of the copy fax of 31 January only between parties other than between Tube and Bertling) touching on payment of Bertling (either generally or in respect of a fixed sea freight cost from a UK port to Dammam) through Tube, Tube had not as at 4 February undertaken to Bertling to pay to it the whole or any part of the transport costs. As at that time Bertling's right to recover those costs lay solely against its principal, Oil & Gas.
The letter of credit received by Tube from Oil & Gas on 4 February was a transferable and transferred letter of credit. It was dated 30 January 1997 and was drawn on the Saudi American Bank in London. It was a subsidiary letter of credit to a master letter of credit issued on the application of Bugshan, Oil & Gas' customer. Although the master letter of credit was not before the court and the subsidiary letter of credit had the master's credit amount blanked out, it seems clear that the master was intended to cover a range of transactions between Oil & Gas and Bugshan. Mr Bunyard was as at early 1997 familiar with the master letter of credit from other transactions in which he had been involved. The subsidiary letter of credit opened as follows:-
"AT THE REQUEST OF THE FIRST BENEFICIARY OIL AND GAS EQUIPMENT CO LTD ... WE HEREBY TRANSFER IRREVOCABLE DOCUMENTARY LETTER OF CREDIT NUMBER 3000320969 ISSUED BY SAUDI AMERICAN BANK ... FOR AN AMOUNT OF
DDU (DELIVERED DUTY UNPAID) DELIVERY AT RAS TANURA REFINERY JOBSITE, SAUDI ARABIA IN FAVOUR OF TUBE DEVELOPMENTS LTD ...
THIS CREDIT IS PAYABLE AS FOLLOWS:- 80 PERCENT OF INVOICE VALUE IS PAYABLE AT 45 DAYS AFTER B/L DATE AND THE BALANCE OF 20 PERCENT IS PAYABLE 30 DAYS AFTER RECEIPT OF GOODS AND AGAINST AN ACCEPTANCE CERTIFICATE ISSUED BY BUGSHAN S & W CO LTD AND SUBMITTED DIRECT TO THE OPENING BANK IN ALKHOBAR.
DRAFTS MUST BE DRAWN PAYABLE AS ABOVE ON SAUDI AMERICAN BANK ALKHOBAR BEARING THE CLAUSE 'DRAWN UNDER DOCUMENTARY CREDIT NUMBER 3000320969 OF SAUDI AMERICAN BANK, ALKHOBAR, SAUDI ARABIA, ACCOMPANIED BY THE FOLLOWING DOCUMENTS:-
1 - COMMERCIAL INVOICE IN THREE ORIGINALS DULY SIGNED ONE OF WHICH MUST BE CERTIFIED BY THE CHAMBER OF COMMERCE AND LEGALISED BY THE SAUDI ARABIAN EMBASSY OR CONSULATE STATING THAT IT COVERS - CARBON STEEL PIPES AS PER P.O. NO. JNCI-M98-01-A001-DA
2 - 1/3 OF CLEAN 'ON-BOARD' THROUGH BILLS OF LADING MADE OUT TO THE ORDER OF BUGSHAN S & W CO LTD ...
BILLS OF LADING MUST BE MARKED 'FREIGHT PREPAID'. LATEST SHIPMENT DATE 28TH FEBRUARY 1997 EVIDENCING SHIPMENT FROM EUROPE EXCEPT FEDERAL REP. OF YUGOSLAVIA, SERBIA AND MONTENEGRO TO RAS TANURA SAUDI ARABIA ...
3 - BENEFICIARY'S CERTIFICATE STATING THAT THE FOLLOWING DOCUMENTS HAVE BEEN FORWARDED DIRECTLY TO THE APPLICANT BY COURIER SERVICE (COPIES OF THE SAME TO BE PRESENTED TO THE BANK FOR NEGOTIATION TOGETHER WITH THE COURIER RECEIPT) ..."
Various documents were then specified including a vessel certificate and a certificate of origin of the goods.
The subsidiary letter of credit was expressed as expiring for negotiation on 21 March 1997. Certain further conditions followed. The subsidiary letter of credit concluded:-
"EXCEPT AS FAR AS OTHERWISE EXPRESSLY STATED THIS DOCUMENTARY CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICES FOR DOCUMENTARY CREDITS OF THE I.C.C. 1993 REVISION PUBLICATION NO. 500".
The I.C.C. Uniform Customs and Practices for Documentary Credits (1993 Revision) deals at Article 48 with transferable credits. That Article provides inter alia:-
"(a) A transferable Credit is a Credit under which the Beneficiary (First Beneficiary) may request the bank authorised to pay ... to make the Credit available in whole or in part to one or more other beneficiary(ies) (Second Beneficiary(ies)) ...
(h) The Credit can be transferred only on the terms and conditions specified in the original Credit, with the exception of:
(i) the amount of the Credit,
(ii) any unit price stated therein,
(iii) the expiry date,
(iv) the last date for presentation of documents in accordance with Article 43,
(v) the period for shipment,
any or all of which may be reduced or curtailed ...
(i) The First Beneficiary has the right to substitute his own invoice(s) (and Draft(s)) for those of the Second Beneficiary(ies), for amounts not in excess of the original amount stipulated in the Credit and for the original unit prices if stipulated in the Credit, and upon such substitution of invoice(s) (and Draft(s)) the First Beneficiary can draw under the Credit for the difference, if any, between his invoice(s) and the Second Beneficiary's(ies') invoice(s)".
On receipt by Tube of this subsidiary letter of credit it was passed to Mr Douglas Kay, Tube's Company Secretary. Mr Kay was not altogether happy with its terms but, against the risk that if he declared it to be unacceptable, the whole order might be cancelled, he took the commercial decision to accept it and, as earlier narrated, to authorise release of the goods.
On 5 February Mr Kay sent a copy of that letter of credit to Mr Bunyard at Bertling under cover of a fax message in the following terms:-
"I enclose a copy of our L/C from Oil & Gas and trust you can arrange the various shipping documents.
Please fax copies to us as soon as they are available to allow us to check the content".
The goods were, after some difficulty and delay, ultimately shipped from Antwerp to Dammam and from there transported on to Ras Tanura. While at Antwerp certain of the pipes were found to have been damaged or to be rust stained (apparently caused while at that port). In light of that finding the bill of lading issued by the shipping line was "claused", i.e. it qualified the statement that the goods were shipped in apparent good order and condition by recording on the bill the damage and rust staining. A bill so claused would not have been a "clean" bill of lading within the requirements of the letter of credit. The issuing bank would, in that state of affairs, have been entitled to decline to pay under the letter of credit any invoice presented to it in respect of the goods. A regular practice to obviate such difficulties is for the shipping line to be granted a letter of indemnity against any claims arising from the imperfect state of the goods as shipped. Such an indemnity is commonly granted to the shipping line by the freight forwarder (with whom it is in contractual relations), the freight forwarder in turn obtaining a counter indemnity from its principal.
A similar difficulty arose in relation to the port of loading specified in the bill of lading issued by the shipping line. It, naturally, specified Antwerp as the port of loading. This potentially gave rise to an inconvenience in respect that the letter of credit envisaged notarisation or legalisation of the vessel certificate and of other documents at a Saudi Arabian Consulate in the country of the port of loading. If Antwerp remained on the bill of lading as the declared port of loading, it would be necessary to obtain notarisation and legalisation in Belgium, a less convenient arrangement than such procedures in the UK. Apparently some carriers are prepared, on being granted an appropriate letter of indemnity, to issue a bill of lading showing a port of loading other than that at which in fact the goods were loaded.
The shipping line carrying the goods from Antwerp, while prepared on receiving an appropriate letter of indemnity to provide a clean bill of lading for shipment from Antwerp to Dammam, was not prepared to show a UK port on the bill as the port of loading. To meet that difficulty Bertling indicated to Oil & Gas that it (Bertling), on being granted an indemnity by Oil & Gas, was prepared to issue a bill of lading in its own name as carrier showing Hull as the port of loading. Oil & Gas granted such a letter of indemnity and on 14 March 1997 Bertling itself issued a clean bill of lading showing Hull as the port of loading. Prior to doing so it had also obtained from Oil & Gas a letter of indemnity in respect of damage to one of the pipes, though not in respect of the whole defects to the pipes noted at Antwerp. Bertling had previously applied to Tube to grant it a letter of indemnity in respect of the whole defects to the pipes but Tube had declined to grant any such document.
The bill of lading issued by Bertling as carrier was a multimodal transport bill of lading issued under I.C.C. rules and covering both ocean carriage and onward carriage from Dammam to Ras Tanura. It was accordingly a "through" bill of lading as required by the letter of credit. It was also clean and was marked "freight prepaid", both also requirements of the letter of credit. Tube was shown as the consignor. Bertling also appended to the bill of lading a notarised vessel certificate.
On 26 March Bertling sent to Tube by special delivery three original bills of lading (together with five non-negotiable copies) and a vessel certificate. On 27 March Tube presented to the Saudi American Bank in London the subsidiary letter of credit, its invoice for the goods sold by it to Oil & Gas, one of the original bills of lading and a beneficiary's certificate. The invoice so submitted did not include any freight or other transportation charges. Ultimately Tube was paid under the subsidiary letter of credit 80% of its invoice value, the balance of 20% being retained due to an acceptance certificate not having been issued by Bugshan. Tube is still pressing for such a certificate.
In this action Bertling sues Tube for the whole costs incurred by it in securing the transportation of the pipes from Kilsyth or Stockton to Ras Tanura. In its pleadings Bertling claimed payment on three separate legal bases - (1) under contract, (2) on the ground of alleged misrepresentation and (3) on the ground of unjust enrichment. At the hearing on evidence bases (2) and (3) were departed from. Nothing further need accordingly be said about them. The only question for determination is whether Tube is contractually obliged to make the payment claimed.
The central proposition advanced at the hearing on evidence by Mr Howlin on behalf of Bertling was that Tube, by sending to Bertling the fax of 5 February 1997 with the attached copy letter of credit, had effectively constituted Bertling as its agent for the purpose of implementing the requirements of the letter of credit, in particular those of providing clean through bills of lading marked "freight prepaid", and that, in the absence of a clear understanding to the contrary, Tube had thus by implication of law become subject to an obligation to reimburse Bertling in respect of the costs of meeting those requirements (including the costs of transportation from Kilsyth or Stockton to Ras Tanura).
In its written pleadings Bertling, after reference to the sending of the fax and the enclosed letter of credit, advanced the following propositions:-
"In so doing the defenders offered to contract with the pursuers on terms that, in consideration of the pursuers continuing to make the necessary arrangements for the transportation of the pipes to the refinery at Ras Tanura, the defenders would pay to the pursuers the whole of the expenses thereby incurred by the pursuers, including such expenses as were attributable to the transportation of those consignments which had already been collected from Kilsyth and Stockton-on-Tees. Those terms resulted by necessary implication from the telefax message in conjunction with the text of the L/C and in particular the reference to 'DDU (delivered duty unpaid) at Ras Tanura Refinery Jobsite'. Only after the pursuers had provided and paid for the requisite services and rendered their invoice to the defenders did the defenders seek to suggest that their contract with O & G was not on the 'DDU' terms mentioned above".
At the hearing on evidence it was conceded by Mr Howlin that the reference to "DDU (delivered duty unpaid) at Ras Tanura Refinery Jobsite" in the letter of credit was of no significance in relation to the contract between Tube and Oil & Gas or in relation to the constitution of any contractual relationship between Tube and Bertling. That concession was inevitable. The letter of credit was expressly subject to the I.C.C. Uniform Customs and Practices for Documentary Credits (1993 Revision) which regulated the condition on which a transferable letter of credit could be transferred. Such credit could be transferred only on the terms and conditions of the original credit subject to certain specified exceptions. Those exceptions did not include the term as to transportation obligations (such as DDU). Thus, the subsidiary letter of credit inevitably reflected in this respect the terms of the master letter of credit (which no doubt reflected in turn the contractual terms between Bugshan and Oil & Gas). The subsidiary letter of credit accordingly founded no basis for any belief reasonably entertained by Bertling that DDU (which, of the range of possible transport obligations as between buyer and seller, imposes one of the most onerous for the seller) was a term of the contract between Oil & Gas and Tube or that, as between Oil & Gas and Tube, the latter would be responsible for the freight forwarder's costs.
This concession was the basis of a submission by Mr Glennie on behalf of Tube that the case now sought to be presented by Bertling was not open to it on its pleadings. He submitted that no case was pled that, irrespective of the terms of the contract between Oil & Gas and Tube and any representations made about it in the letter of credit, a contractual obligation was in some other way impliedly constituted between Bertling and Tube. He also argued that there was a material difference between the averment of "continuing to make the necessary arrangements for the transportation of the pipes to the refinery at Ras Tanura" and the reliance now put on processing the shipping documents to allow the letter of credit to be presented for payment.
I am unable to accept Mr Glennie's submission to the effect of rejecting Bertling's claim on the basis that, as finally formulated, it is not one open to it on its pleadings. While departure from reliance on the DDU provision in the letter of credit removes an apparently important element from Bertling's case as pled, the case remains one in which the contractual basis argued for turns essentially on the sending of the fax of 5 February and the accompanying letter of credit. The particular case now presented can, in my view, properly be described as a variation, modification or development of what is averred. The emphasis has shifted from one aspect of the letter of credit to another. However, Tube was not, in my view, materially prejudiced in the presentation of its defence by that shift. It would be inappropriate, particularly in a commercial action, to sustain this pleading argument.
Much of the factual history of the relevant dealings was not seriously in dispute. It is appropriate, however, to discuss and decide certain factual issues which did arise. Mr Bunyard denied in evidence having agreed at any stage with Mr Cleghorn or with any other officer of Oil & Gas the sea freight cost of $25,025 referred to in the attachment to Oil & Gas' purchase order of 5 September 1996. Mr Cleghorn did not give evidence. Although the entry "$25,025 Oceanfreight" appears in Mr Bunyard's handwriting in a telephone note which was made at some time prior to 16 December 1996, I found no sufficient basis in the evidence for disbelieving Mr Bunyard's testimony on this matter. It seems likely that at some stage this figure (which, unless mis-stated, appears to be calculated rather than estimated) was mentioned in a telephone conversation between Mr Bunyard and someone from Oil & Gas (possibly Mr Cleghorn). The figure seems, as Mr Bunyard testified, low for freight from a European port to the Gulf; Bertling's ultimate freight charge for shipment from Antwerp to Dammam was US $40,453.88. The lower figure may possibly have been mentioned by Mr Cleghorn in the context of discussions at an early stage about shipment of a smaller quantity of pipes. However that may be, the figure of US $25,025 appears to have no relevance to the shipping arrangements envisaged from and after December 1996 by which time Bertling was quoting various rates for transportation to Oil & Gas. Accordingly I find, on the basis of the evidence led in this case, that Bertling did not commit itself to a fixed figure of US $25,025 as sea freight for the goods which were in the event shipped from Antwerp to Dammam.
A factual issue also arose in the course of the proof in relation to the content of a telephone discussion between Mr Bunyard and Mr Craig. In a fax sent on 5 February 1997 by the former to the latter, Mr Bunyard stated inter alia:-
"Further to our discussions we expect payment for the freight within the terms of the L/C. That is 80% 45 days after B/L date and 20% 30 days after received on site date in Ras Tanura".
In cross-examination Mr Bunyard testified that at some stage in the course of a telephone conversation Mr Craig had told him that Tube would pay the freight costs to Bertling, though it would not do so immediately but on the payment terms of the letter of credit.. No such telephone conversation had been referred to by Mr Bunyard in the very full affidavit sworn by him in advance of the proof; no reference to such a conversation had been made by him in the course of his evidence in chief. Mr Craig denied in evidence having ever made any such statement.
I am unable to accept Mr Bunyard's evidence on this matter. While I found him to be an honest and straightforward witness and one who was endeavouring to give an accurate account of events as he recalled them, I am not satisfied that his evidence on this particular matter is reliable. He was unable to identify when the conversation took place or to recall the words actually used. I do not find convincing his suggestion that it was because of those difficulties in recollection that he had not mentioned this potentially important conversation either in his affidavit or in his evidence in chief. There were undoubtedly telephone conversations between Mr Bunyard and Mr Craig at or about 5 February but I not satisfied that it has been proved that in the course of any of them Mr Craig made any statement about payment of the freight costs. Mr Craig had made it plain in his fax sent on 31 January 1997 to Mr Cleghorn and copied to Mr Bunyard that Tube had no contractual arrangements with Bertling on freight costs. Although the statement in the latter part of the second sentence of the second paragraph of that fax is difficult to understand in the situation which obtained by that time (and Mr Craig's explanation that it referred to a possible reversion by Oil & Gas to earlier transport arrangements was unconvincing), there was no reason why Mr Craig should have said anything by telephone to Mr Bunyard which departed from or went beyond the position stated in that fax. Mr Bunyard ultimately stated in cross examination that the telephone conversation to which he referred had not taken matters further than what was stated in the fax of 31 January. Any expectation which Mr Bunyard entertained going beyond that was not, I find, based on anything said by Mr Craig.
Those factual issues are, however, peripheral to the central dispute between the parties (as matters stood at the close of the case). That dispute is whether Tube and Bertling entered into a contract under which Tube became obliged to reimburse Bertling for the costs incurred by the latter in securing the transportation of the pipes from Kilsyth or Stockton to Ras Tanura. On the face of matters as they stood immediately prior to 5 February that would be a surprising turn of events. The contract between Oil & Gas and Tube had, as Bertling knew, become an ex works contract under which, as between buyer and seller, the whole transportation costs fell on Oil & Gas as buyer. Oil & Gas had sought quotations from Bertling as freight forwarder for the costs of transportation from Kilsyth or Stockton to Ras Tanura. Oil & Gas had, prior to 4 February, instructed Bertling as freight forwarder to implement transportation from Kilsyth or Stockton via Antwerp to Ras Tanura. By 4 February Bertling had begun implementation of those instructions by causing some of the pipes to be uplifted from Stockton. There was no suggestion in the evidence that Oil & Gas ever countermanded those instructions to any extent. On the contrary Oil & Gas and Bertling continued to act as principal and agent in relation to the shipping arrangements. Oil & Gas ultimately issued an instruction that the damaged pipe be shipped in its existing state; Bertling implemented that instruction. An account for surveying the pipes was rendered by Bertling to Oil & Gas, as was an account for marking them. Bertling regarded it as appropriate that claims for reimbursement against the Antwerp stevedore for the damage to the pipes be made by Oil & Gas as the relevant contracting party. Bertling intimated to the shipping line that "our principal" had requested that the bills of lading be issued showing a UK port of exit. The "principal" there referred to was Oil & Gas. The natural inference is that such transportation was effected by Bertling on the instructions of Oil & Gas and that, subject to any contractual provision to the contrary, Oil & Gas is the party and the only party liable to Bertling for those costs.
Mr Howlin submitted that it was possible for a freight forwarder to have two principals. While that is no doubt possible and perhaps not unlikely where for convenience a single freight forwarder is used by a buyer and a seller for discrete stages in circumstances where the buyer and seller have divided responsibility for transport, it is prima facie improbable where only one party viz the buyer has responsibility for transport - unless for some reason the buyer and seller accept joint and several liability to the freight forwarder. As the expert evidence in the case disclosed, it is of course possible for a buyer and seller to make any arrangements inter se they choose; but in the circumstances of this case it is, in my view, plain that the implementation by Bertling of the transportation of the goods was throughout on the instructions of Oil & Gas. The latter's involvement is unsurprising. It had under its contract of sale with the ultimate buyer, Bugshan, an obligation to secure delivery of the goods to Ras Tanura; as primary beneficiary it had an interest in the master letter of credit under which it would expect its invoice (presumably with prices marked up from those on which it had purchased from Tube) to be paid by substitution of its own invoice, as envisaged in Article 48(i) of the Uniform Customs and Practices for Documentary Credits.
It is customary for a freight forwarder, in addition to arranging the international carriage of goods, to organise the shipping documentation required for the purposes of any letter of credit issued relative to such goods. For the latter purpose a freight forwarder will commonly receive a copy of any relative letter of credit with a view to securing that the shipping documents are issued in a form which meets the requirements of that credit. The copy letter of credit will frequently come to the freight forwarder for that purpose from its principal, i.e. from the party which has instructed it to arrange the transport; but that will not always be so. On occasions a freight forwarder may receive a copy letter of credit from another party concerned with the goods and who has an interest in the shipping documents conforming to the requirements of that credit. The above propositions can, in my view, fairly be drawn from the expert evidence led in this case.
The dispatch by an interested party to the freight forwarder of a copy letter of credit for that purpose does not, in my view, give rise to any necessary implication that such party is intending or offering to assume the role of the freight forwarder's principal in relation to the transportation of goods; nor does the circumstance that the freight forwarder then takes steps to secure that the shipping documents do comply with such a letter of credit give rise, in my view, to any necessary implication that the freight forwarder is accepting that party as its principal in relation to such transport. These propositions apply, in my view, whether or not the letter of credit provides for the bills of lading to be marked "freight prepaid".
Tube knew that Bertling had been engaged by Oil & Gas as freight forwarder in respect of the consignment of steel pipes. Tube assumed and reasonably assumed that, as the acting freight forwarder, Bertling would be prepared to arrange the shipping documents to comply with the letters of credit issued in respect of such goods, including the subsidiary letter of credit issued to Tube. Compliance of the shipping documents with the terms of that credit was also important to Bertling's principal, Oil & Gas, whose entitlement to payment under the master letter of credit (inevitably in identical terms in relation to the shipping documents) was also dependent on the terms of such documents. The fax of 5 February with the enclosed copy letter of credit constitutes, in my view, no more than a request sent by Tube to Bertling on the assumption that the latter would be prepared, in its role as freight forwarder, to arrange the shipping documents in Tube's interests as well as in the interests of Bertling's principal, Oil & Gas. It does not, in my view, constitute an instruction by Tube to Bertling to arrange the transport nor an offer by Tube to act as Bertling's principal in respect of such transport. The language of the fax as read with the letter of credit is not, in my view, on a fair construction apt for either purpose. Nor on a fair construction of his evidence did Mr Bunyard at the time of receipt of the fax and its enclosure construe the parts of the copy letter of credit now relied on as having that effect. The inference he then drew (and upon which he relied to draw a further inference about the relationship between Bertling and Tube) was that the DDU term of the letter of credit reflected the final contractual position between Oil & Gas and Tube. As he acknowledged in the witness box, that inference was on reflection not justified by the appearance of DDU in the subsidiary letter of credit.
Mr Howlin referred to Bell's Commentaries (McLaren's Ed.) Volume 1 at page 534 where the annotator, in discussing the claims of an agent in his principal's bankruptcy, states that these will include a claim for reimbursement and for indemnification against obligations undertaken to third parties. The annotator continues:-
"The claim for reimbursement or indemnification must be on the ground of the disbursements having been made and the obligations incurred ex causa mandati and inculpabiliter".
Accepting as I do that claims available in bankruptcy would also be available where the principal was solvent and that no question of culpability arises and also assuming for the purposes of the argument that an agency of some kind was constituted, I am of opinion that it is necessary to identify the character of that agency before it is possible to determine whether the disbursements claimed are ex causa mandati. If any agency was constituted between Bertling and Tube, it was not, in my view, an agency to arrange the transport. Accordingly, costs incurred in making such arrangements would not arise by reason of that agency. Mr Howlin also cited Bowstead & Reynolds on Agency (16th ed.) para 7-058 where the learned authors state:-
"Where the agency agreement is contractual, the agreement to reimburse and indemnify, if not express, can be regarded as an implied term of the contract that operates unless clearly excluded".
From the next sentence, however, it is plain that the implied term applies only to "payments made and liabilities incurred within the agent's express or implied authority". Any authority vested in Bertling by Tube did not, in my view, extend to authority to incur the transportation costs.
In these circumstances it is unnecessary to decide whether a less extensive agency came into existence between Tube and Bertling, namely, one restricted to arranging that the shipping documents complied with the subsidiary letter of credit. However, I record my view that no such agency did in fact come into existence. The language of the fax of 5 February, considered against the background circumstances, is not in my view apt to constitute a contractual offer or instruction. It is more in the nature of a request to discharge a function which the recipient would in ordinary circumstances be carrying out in any event as part of an existing relationship - in this case with Oil & Gas.
Mr Glennie submitted that, even if the fax as read with the letter of credit could be construed as an instruction, no contract of agency was constituted as it had not been established that Bertling had accepted such instructions from Tube. If Bertling were in any event going to do (under pre-existing arrangements) certain things and in fact did them, the doing of those things did not, so ran the argument, import acceptance of Tube's instructions; it imported simply the carrying through of the pre-existing arrangements. There is considerable force in this submission in relation to the contention that the agency was of the more extensive character viz included arranging the shipping. It is in my view quite clear that those arrangements continued to be progressed by Bertling in furtherance of Oil & Gas' instructions and not as a consequence of Tube's communication of 5 February. The submission has less force in relation to the more limited agency, namely, to arrange in Tube's interests compliance of the shipping documents with the subsidiary letter of credit. However, as such an agency would not, in my view, entitle Bertling to reimbursement by Tube of the transportation costs, it is unnecessary to discuss this aspect further.
Mr Howlin acknowledged that, on any view, Bertling would have difficulty in making out a case for recovering from Tube the transportation costs insofar as incurred prior to 5 February. He sought an opportunity by further procedure to discriminate between those costs and the costs subsequently incurred. In the event, however, this issue does not arise.
In the whole circumstances I shall repel the pleas-in-law for the pursuers, sustain the third plea-in-law for the defenders and assoilzie the defenders from the conclusion of the summons.