Date: 19990218
Docket: T-877-96
BETWEEN:
KANEMATSU GMBH
Plaintiff
and
ACADIA SHIPBROKERS LIMITED, SEANAV
INTERNATIONAL LIMITED
Defendants
REASONS FOR JUDGMENT
DUBÉ J :
[1] This motion is for an order granting the plaintiff ("Kanematsu") summary judgment against the defendants. More specifically, Kanematsu seeks a declaration that the defendants are liable to it for having induced the owners of the "M.V. LARK", Bulklark Shipping Company ("Bulklark"), to breach their contractual and legal obligations towards Kanematsu by discharging and delivering a cargo of 6,368.200 metric tons of steel billets ("the cargo") to Nicco Industry Co. Ltd. ("Nicco") at Bangkok, without requiring the presentation and surrender of the originals of the bill of lading ("the Bill of Lading") issued by Bulklark in respect of the carriage of the cargo from Odessa to Bangkok. Alternatively, Kanematsu seeks a declaration that the defendants are liable to it for having converted the cargo.
1. Facts
[2] Kanematsu was, at the relevant time, the owner by purchase of the cargo and was also the holder for value of the Bill of Lading issued by the owners of the "M.V. LARK" in respect of the carriage of the cargo from Odessa to Bangkok. The Bill of Lading had been negotiated by Ironimpex S.A. ("Ironimpex") - from whom the plaintiff had purchased the cargo - for payment pursuant to a letter of credit that Kanematsu had caused its bank to open in Ironimpex' favour.
[3] Kanematsu sold the cargo to Nicco who was to have paid the purchase price by way of a letter of credit. Nicco, however, did not cause its bank to issue the letter of credit and Kanematsu never negotiated the originals of the Bill of Lading which remain in Kanematsu's possession. Nor did Nicco ever pay the plaintiffs for the cargo.
[4] The facts are not clear as to exactly how Nicco managed to obtain possession of the cargo but was able somehow to induce the owners of the vessel to release the cargo merely on the strength of a letter of indemnity issued to the owners by the defendants who were the charterers of the "M.V. LARK". The defendants, in turn, received "back to back" letters of indemnity from Nicco and Ironimpex. Neither the defendants, nor Nicco or Ironimpex ever informed Kanematsu that they had issued the letters of indemnity nor did they ask Kanematsu's permission to deliver the cargo to Nicco.
2. The Defendants' Position
[5] The defendants claim that the facts are too complex for summary judgment and give rise to credibility issues which could only be appreciated by a trial judge after hearing viva voce evidence. The evidence filed for summary judgment purposes comprises affidavits and transcripts of discovery for both parties.
[6] The defendant Acadia Shipbrokers Ltd. of Montreal ("Acadia") had time chartered the Maltese flag motorship the "M.V. LARK" from her owners, Bulklark, by virtue of a charterparty in the New York produce exchange form. Acadia, in turn, back to back time chartered the "M.V. LARK" to the co-defendant Seanav International Ltd. of Hamilton, Bermuda ("Seanav"). Seanav, as disponent owners, in turn voyage chartered the "M.V. LARK" on Gencon terms to Ironimpex of Basel, Switzerland, for a voyage from Odessa to Thailand and India. The shipment at issue was to Thailand. Various authorizations were given through the charterparties to sign bills of lading.
[7] Seagull Maritime Ltd. of Piraeus, who in fact was the agent of Ironimpex, issued various bills of lading on behalf of the owners of the "M.V. LARK". In particular three bills of lading, numbers 1, 3 and 4 were issued in the Congenbill form identifying Ironimpex as the shipper. Bill of lading number 1 which is the one before this Court, identified the consignee as "to order" and the notify address of Nicco. "All the terms, conditions, liberties and exceptions of the charterparty, dated as overleaf, are herewith incorporated". The charterparty identified overleaf was dated February 23, 1995, which is the voyage charterparty in the Gencon form between Seanav and Ironimpex. Bills of lading numbers 3 and 4 were consigned to the order of Thai Farmers Bank. Nicco was the notify addressee in both.
[8] The steamship agent in Bangkok was Pacific Ocean Shipping Co. Ltd. ("Pacific"). In reality Pacific was appointed by Ironimpex. Before the "M.V. LARK"'s arrival in Bangkok, Pacific informed Acadia that it had checked with Nicco who advised that bills of lading are expected not to be ready upon the vessel's arrival due to the long holiday at Bangkok. It also asked Acadia "to persuade the owners to instruct the master to allow us to come and discharge the cargoes without presenting bills of lading".
[9] After checking with Ironimpex and obtaining an indemnity from it, Nicco, Acadia and Seanav all issued the letter of indemnity to the owners of the "M.V. LARK". However, the instructions from Acadia to Pacific were to insure that the cargo not be released until "presentation of ovs/l or recvrs cover us (Seanav) with an L.O.I. countersigned by their bank".
[10] It is only in November 1995, more than six months after the discharge of the cargo at Bangkok, that the defendants heard the name of Kanematsu and that it purported to be the holder of the original Bill of Lading. It obtained that information from Watana Inter-Trade Co. Ltd. ("Watana") who was Kanematsu's agent. Pacific subsequently informed Ironimpex' agents that, after discharge, the cargo was on barges on which demurrage would normally be chargeable. Nevertheless, Nicco managed to get customs and port clearance without Pacific ever issuing the delivery order.
[11] The defendants claim that there was no inducement to deliver the cargo. The only inducement given to the owners of the "M.V. LARK", against whom the plaintiff had taken action in Malta, was to discharge the cargo. Kanematsu acquiesced in Nicco ultimately gaining possession of the cargo, and failed to take any timely steps whatsoever to repossess the cargo, notwithstanding that Nicco had already gained possession of cargoes discharged from two other ships prior to the arrival of the "M.V. LARK".
3. Issue
[12] Should the Court grant summary judgment or is there a genuine issue for trial?
4. Analysis
[13] Rule 216 of the Federal Court Rules, 1998, provides that where the Court is satisfied that there is no genuine issue for trial, it shall grant summary judgment accordingly. Section 2 of the Bills of Lading Act1 provides that every consignee of goods named in a bill of lading, to whom the property in the goods therein mentioned passes, is vested with all rights of action in respect of those goods as if the contract contained therein had been made with himself.
[14] Kanematsu was the holder for value of the Bill of Lading issued by the defendants as the owners of the "M.V. LARK" with reference to the carriage of the cargo in question. Thus, there was a contract of carriage between the defendants and Kanematsu. As the carrier of the cargo, the defendants had the legal obligation to insure that the cargo was not released save against the surrender of the originals of the Bill of Lading.
[15] It is common ground that the cargo was in fact released to Nicco without requiring the presentation and surrender of the said Bill of Lading. There are many other players involved, as expected in a carriage of goods by sea, but the fundamental situation is clear: the defendants parted with the cargo, or more precisely induced the owners of the vessel to part with the cargo, without securing the Bill of Lading.
[16] The defendants argue that in Canada where the owner of goods fails to land the goods, as is the case here, the shipowner may unship the goods and warehouse them at the cargo owner's expenses. All the defendants did, in this case, was to induce the shipowners to do what they were entitled to do under section 596 of the Canada Shipping Act: they discharged the cargo but they did not deliver it.
[17] The defendants claim that there is a genuine issue for trial, namely "how did Nicco obtain the cargo?". There were affidavits and discoveries, but the factual situation is not clear. Local corruption might be involved. Several other documents, apart from the Bill of Lading, changed hands. The plaintiff Kanematsu was negligent in not paying a closer look on its cargo on arrival and after discharge by the shipowners. There is no evidence as to how Nicco succeeded in getting the cargo past local customs. The defendants did not deliver the cargo to Nicco. They merely discharged it, apparently from the vessel onto some barges in the harbour. After all, still according to the defendants, the shipowners are not expected to keep the cargo on board for an extended period and it was Kanematsu's duty to mitigate damages by getting involved.
[18] In a 1959 House of Lords decision2, Lord Denning said as follows, at p. 586:
| It is perfectly clear law that a shipowner who delivers without production of the bill of lading does so at his peril. The contract is to deliver, on production of the bill of lading, to the person entitled under the bill of lading. In this case it was "unto order "or his or their assigns," that is to say, to the order of the Rambler Cycle Company, if they had not assigned the bill of lading, or to their assigns, if they had. The shipping company did not deliver the goods to any such person. They are therefore liable for breach of contract unless there is some term in the bill of lading protecting them. And they delivered the goods, without production of the bill of lading, to a person who was not entitled to receive them. They are therefore liable in conversion unless likewise so protected. |
[19] In the case at bar, the defendants relied at their peril on a letter of indemnity.
[20] Similar principles are invoked by Lord Diplock in Barclays Bank, Ltd. v. Customs and Excise3, at pp. 88-89:
| The contract for the carriage of goods by sea, which is evidenced by a bill of lading, is a combined contract of bailment and transportation under which the shipowner undertakes to accept possession of the goods from the shipper, to carry them to their contractual destination and there to surrender possession of them to the person who, under the terms of the contract, is entitled to obtain possession of them from the shipowners. Such a contract is not discharged by performance until the shipowner has actually surrendered possession (that is, has divested himself of all powers to control any physical dealing in the goods) to the person entitled under the terms of the contract to obtain possession of them. |
| So long as the contract is not discharged, the bill of lading, in my view, remains a document of title by indorsement and delivery of which the rights of property in the goods can be transferred. It is clear law that where a bill of lading or order is issued in respect of the contract of carriage by sea, the shipowner is not bound to surrender possession of the goods to any person whether named as consignee or not, except on production of the bill of lading (see The stettin, (1889) 14 P.D. 142). Until the bill of lading is produced to him, unless at any rate, its absence has been satisfactorily accounted for, he is entitled to retain possession of the goods and if he does part with possession he does so as his own risk if the person to whom he surrenders possession is not in fact entitled to the goods. |
[21] In the instant case, the Bill of Lading was not produced and its absence was not satisfactorily accounted for: consequently, the defendants parted with possession of the cargo at their own risk and to the prejudice of Kanematsu.
5. Disposition
[22] It follows that there is no genuine issue for trial and the Court grants summary judgment to the plaintiff accordingly. All with costs to the plaintiff. The quantum of damage is to be assessed by way of reference.
OTTAWA, ONTARIO
February 18 , 1999
Judge
__________________2 Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd., [1959] A.C. 576 (H.L.).