Shipper avoids claim for cargo explosion

Sally-Ann Underhill and Emily Balment have reported in Shipping Law Log on the case of MVV Environment Devonport Ltd v. NTO Shipping GmbH & Co. KG MS Nortrader [2020] EWHC 1371 (Comm), (the MV NORTRADER)

Summary

The claimant was named as shipper on a bill of lading for a consignment of cargo on the MV Nortrader, despite not being a party to the contract of carriage. The defendant, the owner of the vessel, suffered losses after a cargo explosion occurred on board the vessel shortly after the cargo had been loaded.

The defendant commenced arbitration and brought a claim for damages against the claimant as the named shipper.

Although a London tribunal found it had jurisdiction to hear the dispute, the claimant was successful in its application to the High Court under section 67 of the Arbitration Act 1996 to set aside the award on the basis it was not the shipper and therefore was not a party to an arbitration agreement with the defendant.

The Facts

The claimant specialized in producing electricity from waste products. This resulted in a leftover residue known as ‘unprocessed incinerator bottom ash’ (UIBA). The claimant disposed of the UIBA by contracting with RockSolid BV to collect the UIBA from the claimant’s plant in Plymouth and to transport it to RockSolid’s plant in the Netherlands.

Under this UIBA Contract, risk and title transferred to RockSolid from the moment the UIBA was collected from the claimant’s plant. It was therefore RockSolid which chartered the vessel, and procured shipment on board the vessel and issuance of the bills of lading. In each bill of lading, the claimant was named as shipper and RockSolid as consignee.

The arbiters noted that it was significant that it was not in dispute that the UIBA Contract was not an agency agreement, but a ‘principal to principal’ agreement.

RockSolid subsequently appointed Sanders Stevens Limited (SS) as its shipping agents. In relation to the first shipment of UIBA, SS emailed RockSolid a draft bill of lading for approval (incorrectly identifying the claimant as shipper and RockSolid as consignee). RockSolid approved the draft, which was then used for 33 shipments between 25 June 2015 and 12 January 2017, without dispute.

On each occasion, SS emailed the bill of lading to the claimant for information purposes, without complaint.

On 12 January 2017, a consignment of UIBA was shipped on board the MV Nortrader, a vessel chartered by RockSolid from the defendant, and a bill of lading was issued, as per the first 33 shipments, naming the claimant as shipper. The bill of lading incorporated by reference the terms and conditions of a “C/P dd 10.01.2017 including arbitration”.

The following day an explosion occurred on board.

The defendant claimed the losses incurred as a result of the explosion from the claimant on the basis of an alleged contract of carriage, to which the claimant was alleged to be party, as evidenced by the bill of lading.

The defendant commenced an arbitration pursuant to the arbitration agreement said to have been incorporated into the bill of lading. The claimant denied the claim, arguing it was not the shipper or a party to the contract of carriage, and challenging the jurisdiction of the tribunal on the basis it was, therefore, not a party to an arbitration agreement with the defendant.

The tribunal concluded it had jurisdiction and in consequence, the claimant brought an application under section 67 of the Arbitration Act 1996.

The Issue

The judge held the ultimate issue before him was whether the claimant was a party to the contract of carriage as evidenced by the bill of lading. This depended on whether either RockSolid or SS had:

(1) express actual authority,

(2) implied actual authority, or

(3) ostensible authority to enter into a contract of carriage as agents for the claimant.

Decision

The writers said that the starting point in such cases is that the parties to a contract of carriage are the persons named in the bill of lading as the shipper and carrier, but it is open to a party to show it has been wrongly identified as a party to the contract of carriage.

It was found that there was no basis for contending the claimant had expressly or implicitly authorized either RockSolid or SS to enter into the contract of carriage on its behalf.

(i) RockSolid was exclusively responsible for the transportation of the UIBA; and

(ii) the UIBA Contract was one of principal to principal and not one of agency.

There was therefore no basis to argue that RockSolid was authorized to enter into the contract of carriage on behalf of the claimant. Further, when RockSolid wrongly approved the draft bill of lading, it was not granting SS express actual authority to enter into a contract of carriage on the claimant’s behalf, as it had no authority to do so.

There was no express or implied agreement between the claimant and SS. The decision to name the claimant as shipper was a mistake made by SS and, aside from the 33 emails sent to the claimant attaching the bill of lading for each previous shipment, there were no further courses of dealings between them. The claimant’s silence could not amount to an implied agreement that SS had been authorized to enter into a contract of carriage on its behalf.

Further, after the incident, the claimant requested that SS stop identifying it as the shipper, which SS and RockSolid adhered to without complaint.

Whilst authority could be inferred by the conduct of the parties through the doctrine of implied actual authority, the judge found that neither RockSolid nor SS had been given implied actual authority to enter into a contract of carriage on behalf of the claimant. Such implied actual authority could only have arisen if the claimant had previously granted some express authority to which the implied authority was connected. The claimant granted no such express authority.

Ostensible authority would require the claimant, by its words or conduct towards the defendant, to have held SS out as being authorised to act as its agent, which it clearly had not done.

Conclusion

The judge therefore determined that the claimant was not a party to the contract of carriage, which was said to be evidenced by the bill of lading, and was therefore not a party to the arbitration agreement with the defendant.

The writers observed that the decision highlighted that it could not be assumed that the shipper on the bill of lading was a party to the related contract of carriage, and the limitations on representations of authority by an agent. This put the carrier in a difficult position.

Further, the UIBA Contract was compared to an ex-works sale contract and the decision therefore has wider application beyond its own facts.