AP Moller-Maersk A/S (t/a "Maersk Line") v Sonaec Villas Cen Sad Fadoul & Ors

This is an application by A.P. MOLLER-MAERSK A/S, a Danish company (“Maersk”) which runs liner services throughout the world, for summary judgment under CPR 24 against the defendants on the basis, so it contends, that there is no real defence to its claim for two declarations. The claim relates to the terms of a bill of lading under which a large quantity of tiles was shipped from China to Benin in 30 containers and whether that bill of lading is any longer capable of giving rise to any legal rights.

Maersk originally sought judgment in default of any acknowledgment of service. Gloster J declined to give summary judgment in the light of the fact that the defendants had filed a lengthy document in response to the claim (“the response”), which although not amounting to an acknowledgment of service or a defence in proper form appeared to raise a number of potentially relevant issues. She suggested that Maersk apply for summary judgment at which evidence could be adduced. In the event, although the defendants have had notice of these proceedings, they have not been represented; nor have they filed any evidence; nor have they fortified the response with a statement of truth.

I have been asked to give a reasoned judgment on the basis that it may be of assistance to the Court in Benin.

There are three defendants. The first defendant, Sonaec Villas Cen Sad Fadoul (“Sonaec Villas”) appears not to be a legal entity separate from the second defendant. It is the name of a development in Benin for which the goods in the container were destined. The second defendant, Sonaec SA - (“Sonaec” (Footnote: ¹)) – is the Benin holding company which runs and owns the development. The development was a set of villas to be built by Sonaec for the CEN-SAD Heads of State and Government meeting. The third defendant, Zouhair Michel Fadoul – Mr Fadoul – appears to be the beneficial owner and controller of Sonaec

The relevant history is as follows. Yekalon Industry Inc (“Yekalon”), a Chinese company, sold the tiles to Sonaec. Under the contract of sale payment was to be made by Sonaec partly by a cash payment of 15% in advance and partly by a letter of credit. Delivery was to be FOB in accordance with Incoterms 2000.

The goods were booked on board Maersk’s liner service in China through High Goal Logistics GD Ltd (“High Goal”). On 17^th January 2008 Maersk issued a bill of lading (“the First Bill”), which was given to High Goal. The shippers named in the bill were B & D Co Ltd p/c (“pour compte de”) Vernal Investment (“Vernal”) & Yekalon. Vernal is a subsidiary or associate company of Sonaec. The port of loading was Sanshan, China and the port of discharge was Cotonou in Benin. The consignee was Sonaec Villas in Cotonou, Benin. The notify party was Vernal P/C Sonaec Villas.

Clause 26 of the First Bill provides, omitting terms relating to the carriage of goods to and from a port in the USA , as follows.

“In all other cases, this bill of lading shall be governed by and construed in accordance with English law and all disputes arising hereunder shall be determined by the English High Court of Justice in London to the exclusion of the courts of another country”.

Shortly after the First Bill was issued a dispute arose in China as to who was its lawful holder. Yekalon, who had not been paid, asked High Goal for it. High Goal refused on the basis that they had received instructions from B & D.

Yekalon made an application in the Guangzhou Maritime Court against High Goal for delivery up to them of the original Bills of Lading and a declaration that Yekalon were entitled to possession of the same.

Following an inter partes hearing the judge held that Yekalon was entitled to the Bills of Lading This decision was confirmed by the same judge by a Decision of Reconsideration dated January 31 2008 in which it was held (inter alia) that “as the owner and the shipper of the cargoes Yekalon is entitled to have the B/L” .

The Decision of Reconsideration records (in translation) the argument of High Goal that:

“It is alleged by [High Goal] that the cargoes were booked by B & D Company to ship. [High Goal] then booked with Maersk (China) Shipping Co Ltd to ship the cargoes. B & D Company paid the ocean freight in full. There is no relationship between Yekalon and [High Goal], neither is there any relationship between Yekalon and Maersk (China) Shipping Co Ltd, or their agent. [High Goal] shall deliver the B/L to B & D Company.

The operative part of the Decision records:

“According to the prima facie evidence provided by Yekalon, Yekalon is the owner and shipper of the cargoes. The carriers have already issued the B/L, which is under the control and custody of [High Goal]. And [High Goal] also confirmed in their application form that Yekalon is one of the shippers. Yekalon is entitled to have the B/L. It is proper for Yekalon to ask for delivery of the B/L from [High Goal]

I do not have the evidence referred to before me.

As a result of the order in the Chinese proceedings the First Bill was given up to Yekalon.

Some time before 18 February 2008, Maersk was told by Yekalon that it had not been paid under the Contract of Sale: as appears from a declaration made by Yekalon dated 7 April 2008. Yekalon then surrendered the three originals of the First Bill to Maersk and, at Yekalon’s request, a new Bill of Lading was issued to the order of Yekalon (“the Second Bill”). The destination on the Second Bill remained the same as on the First Bill. Yekalon sought to agree payment with Sonaec. Such payment was not forthcoming and Yekalon sought and found an alternative buyer, Hondugres SA.

On or about 18 February 2008, Yekalon therefore surrendered the Second Bill to Maersk and new Bill of Lading was issued by Maersk which identified Hondugres SA as the consignee with delivery in Honduras ("the Third Bill "). Maersk proceeded to deliver the cargo to Hondugres SA in Honduras, in accordance with the terms of the Third Bill.

On or about 27February 2008, Sonaec commenced proceedings against Maersk Benin SA, Maersk’s agent in Benin, and others. On or about 5^th March 2008 it commenced proceedings against Maersk itself.

In those proceedings Sonaec, relying upon a photocopy of the First Bill contended that it was the owner of the cargo described therein because the sale contract was FOB and the goods had been loaded on the vessel. It stated that is was therefore entitled to delivery of the goods from Maersk. In the judgment of the Court it is described as the consignee of the goods.

Maersk’s position was this:

Despite these submissions, on or about 10March 2008, the Benin Court made an interim ruling requiring Maersk to ship the cargo described in the First Bill to Sonaec in Cotonou and, pending such delivery, imposed a daily fine on Maersk of approximately US$ 4,800 per day.

Maersk then appealed the decision on jurisdictional grounds. But the appeal was dismissed, apparently on a technical point of procedure.

At the hearing of enforcement proceedings issued in Benin against the principal of Maersk’s Benin agents to enforce the decision (which was still only an interim decision), Maersk disputed the Court’s jurisdiction and argued that its actions in delivering the cargo to Honduras was predicated on the Chinese Court’s order i.e. that Yekalon was entitled to the First Bill and was the shipper of the goods.

Apparently the lawyer for Sonaec declared himself to be professionally embarrassed as he had not previously heard of the Chinese court’s order. He withdrew from the case and requested that the Judge make no order. He requested that the Benin court withdraw the application for enforcement of the fine. However, since then Sonaec has renewed its application before the Benin Court.

The first declaration which Maersk seeks is a declaration that all disputes arising under the First Bill are to be determined by the English High Court of Justice in London (to the exclusion of the jurisdiction of the courts in any other country) in accordance with clause 26 of the First Bill of Lading

It is quite clear that that is the position in English law under the First Bill. The language of clause 26 provides in unequivocal terms for English law and exclusive English jurisdiction (unless the carriage was to be to or from a port in the USA which this carriage was not).

There is, however, a question that arises as to the jurisdiction of this court to make any declaration to that effect. The jurisdiction of this Court, so far as presently relevant, is governed by Regulation 44/2001, the Judgments Regulation, which confers jurisdiction on a court, where the parties, one or more of whom is domiciled in a Regulation State, agree that the courts of another Regulation State are to have jurisdiction to settle any disputes arising out of a particular legal relationship. Clause 28 of the First Bill is an agreement between the parties to it to have “all disputes arising hereunder” determined by the English High Court and under English law. I have no doubt that a dispute as to whether a claim in respect of the First Bill is subject to English law and jurisdiction is a dispute arising thereunder. So, also, is a dispute as to whether or not Soanec still enjoys rights under that Bill.

More problematic is whether or not (a) any of the defendants were ever parties to the contract contained in or evidenced by the First Bill including the jurisdiction clause; (b) whether, if they were, they have ceased to be so; and (c) if so, whether the Court has any jurisdiction over them such as would entitle it to make a declaration.

As to (a) it is necessary to refer to the provisions of the Carriage of Goods by Sea Act 1992. That provides, so far as relevant:

“1.

Shipping documents etc to which Act applies

(1)

This Act applies to the following documents, that is to say–

(a)

any bill of lading;

(b)

any sea waybill; and

(c)

…

(2)

References in this Act to a bill of lading–

(a)

do not include references to a document which is incapable of transfer either by indorsement or, as a bearer bill, by delivery without indorsement; but

(b)

…

(3)

References in this Act to a sea waybill are references to any document which is not a bill of lading but–

(a)

is such a receipt for goods as contains or evidences a contract for the carriage of goods by sea; and

(b)

identifies the person to whom delivery of the goods is to be made by the carrier in accordance with that contract.

2Rights under shipping documents

(1)

Subject to the following provisions of this section, a person who becomes–

(a)

the lawful holder of a bill of lading;

(b)

the person who (without being an original party to the contract of carriage) is the person to whom delivery of the goods to which a sea waybill relates is to be made by the carrier in accordance with that contract; or

(c)

…

shall (by virtue of becoming the holder of the bill or, as the case may be, the person to whom delivery is to be made) have transferred to and vested in him all rights of suit under the contract of carriage as if he had been a party to that contract.

(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;

but the operation of that subsection shall be without prejudice to any rights which derive from a person´s having been an original party to the contract contained in, or evidenced by, a sea waybill...

The First Bill is not marked to order but does contain or evidence a contract of carriage and identifies a person to whom delivery of the goods is to be made i.e. the named consignee, which I take to be the same as Sonaec (not least because Sonaec is the claimant in Benin). On no view is it Mr Fadoul. As a result, if Sonaec was not an original party to the contract of carriage,sections 1.1 (2) (a) and 1 (3) are applicable so that, for the purposes of the Act, the First Bill is to be treated as a sea waybill. Section 2 (1) provides that the Sonaec has “transferred to and vested in [it] all rights of suit under the contract of carriage as if [it] had been a party to that contract”. Accordingly at some stage Sonaec had vested in it all rights of suit under the contract of carriage. Those rights were rights which were exclusively to be adjudicated upon by the English High Court. Accordingly, if Sonaec was not an original party, it became a party to the First Bill, including clause 26 which provides that disputes under it should be determined in England.

There is, however, a further problem, which I drew to Mr Brier’s attention. Maersk contends, as I understand it, that Sonaec was not an original party to the First Bill, and that, whatever might have been the position under the First Bill and the 1992 Act at one stage, the First Bill is now inoperative, it having been surrendered to Yekalon and followed by the issue of the Second and Third Bills. Maersk asks me to declare that any rights of suit the defendants may have had under the First Bill have ceased to exist. If that is so then, on one view, the granting of the second declaration would definitively establish that the court had no jurisdiction over Sonaec to declare that that is so.

Mr Brier observed that whether or not rights under the First Bill have ceased to exist is in dispute and that, in any event, clause 26 may be regarded as an ancillary contract (albeit contained in the First Bill), which survived any cessation of the operation of the other parts, so that the High Court can decide and declare that no rights under that Bill now subsist.

The former observation does not carry matters any further forward since Maersk contends that the dispute should be summarily resolved in their favour and that I should make a declaration to that effect.

As to the latter submission, it is now established that an arbitration agreement is a contract collateral to the main contract, and that it may survive the termination of the latter. Thus, if it is alleged that the contract, although once existing, has come to an end by the acceptance of a repudiation or frustration, or through the operation of a termination provision in the contract itself or the failure of a condition precedent, the arbitration clause may still operate: see Mustill and Boyd, Commercial Arbitration, 2^nd Edition pages 110 -112. If clause 26 was an arbitration agreement it would, in my judgment, be open to the arbitrator to make a declaration as to the continued effectiveness (or otherwise) of the First Bill.

No authority was cited to me which deals with the position so far as an exclusive jurisdiction clause is concerned. It seems to me however that similar principles should apply. Further in Benincasa v Dentalkit Srl [1997]ECR 1-3767 the European Court of Justice held that the courts of a Contracting State which have been designated in a jurisdiction clause validly concluded under the first paragraph of Article 17 of the Convention (the predecessor to Article 23 of the Judgments Regulation) also have exclusive jurisdiction where the action seeks a declaration that the contract containing that clause is void.

I do not, therefore, regard myself as lacking in jurisdiction to make the first declaration sought, even if all Maersk’s submissions are entirely correct, and I propose, therefore, to make it.

I do not purport to decide anything about the jurisdiction of the court in Benin, which is a question for it. What I do decide is that, in English law, by which the First Bill is expressly governed, the First Bill is subject to the exclusive jurisdiction of the High Court in England & Wales and any claim under it must be brought here.

The second declaration sought relates to the question whether the defendants have any title to sue in any event under the First Bill. Maersk contends that they do not.

The First Bill was a “straight” bill of lading in that it contained or evidenced a contract of carriage for delivery to a named consignee and was not marked “to order”. For the purposes of the 1992 Act, it was, thus a “sea waybill”. As I have noted, under section 2(1) (b) of the Act rights under a sea waybill and the contract of carriage contained in or evidenced thereby are ‘transferred’ to the named consignee as soon as the bill is signed. But a shipper who is and remains party to the contract of carriage does not lose his right viz-a-viz the carrier to divert the goods, as he may wish to do if he is not paid for them.

This is made clear by Carver on Bills of Lading, 2^nd Ed, at paragraphs 8-013 and 8-014:

“8-013:Rights of original shipper. Section 2(1) refers to rights of suit being “transferred” to the person to whom delivery is to be made under a sea waybill. If full force were given to the word “transferred”, then A (the shipper) would lose his rights under the contract of carriage when C (the consignee) acquired such rights; and since in our example the contract contained in or evidenced by the sea waybill from its inception provided for delivery to C, it might seem at first sight to follow that A lost his rights under the contract as soon as it was made. Quite apart from the logical difficulty of such a concept, the reasoning would also give rise to the practically undesirable consequence of depriving A of the rights which a shipper has at common law of redirecting the goods; and we have seen that the Act is intended to preserve and does preserve this right. It does so by providing in s.2(5) that the operation of s.2(1) “shall be without prejudice to any rights which derive from a person’s having been an original party to the contract contained in, or evidenced by, a sea waybill......

8-014: Change in consignee. Where goods are shipped by A in B’s ship under a sea waybill naming C as consignee, A may exercise his power to redirect the goods by substituting D for C as consignee. Where A does this, C ceases to be, and D becomes, “the person to whom delivery.... is to be made by the carrier” so that rights under the contract of carriage are vested in D by virtue of s.2(1) and any rights which were previously vested in C become extinct under s.2(5)....”.

Maersk submits that, logically, if A, the shipper, has the right to redirect the goods by changing the terms of the original sea waybill so as to substitute a different named consignee, he must also have the right to agree with B, the counterparty to the contract of carriage, to terminate that contract and substitute a new contract of carriage (by way of a new bill of lading) with a new named consignee. This is precisely what happened in the present case when the First Bill of Lading was cancelled by Yekalon and Maersk and replaced with the Second and later the Third Bill of Lading.

Maersk relies on the summary of the law contained in chapter 3 (written by Professor Charles Debattista), page 101 of Southampton on Shipping Law (2008), published by the Institute of Maritime Law, where he says :

“It is clear that the main advantage of sea waybills and straight bills is that rights of suit against C [Carrier] can travel from S [Shipper] to B [Buyer/Consignee] without physical transfer of the sea waybill of the straight bill of lading by S to B. There are, however, three possible consequences of the use of such documents which need to be weighed up against this advantage. First, because B’s rights of suit against C depend exclusively on its being named as consignee on the document, those rights of suit vanish as soon as B stops being named as consignee – and S can, so far as concerns its contracts of carriage with C, name another person as consignee at any time until the goods are discharged: B’s rights of suit against C are consequently precarious in that S can deprive B of such rights through the simple expedient of giving alternative delivery instructions to C.... ”

Thus, the position as a matter of English law is that, insofar as any of the Defendants ever acquired any rights under the First Bill by virtue of the operation of section 2(1) of the 1992 Act, any such rights were lost when that First Bill was cancelled and replaced at some point prior to 18 February 2008.

I accept the submissions which Maersk makes in paragraphs 35 – 39 above. In particular, as to para 37, if the shipper is entitled to direct delivery to a different consignee he could direct delivery to himself. There can, therefore, be no reason why he cannot agree with the carrier to replace the First Bill with another one.

Whether or not Yekalon was, in truth, the shipper contracting with the carrier and thus (a) a party to clause 26 originally; and (b) able to direct that the cargo should not be delivered to Sonaec is less clear. Maersk asserts that that is so. The Chinese court has so ruled, but on evidence which is not before me. Moreover the First Bill was not directly in Yekalon’s name. The named shipper was B & D Co Ltd “pour compte de” Vernal and Yekalon. Vernal and Yekalon had potentially antithetical interests. It is not entirely clear what “pour compte de” was supposed to signify and, in particular whether B & D was purporting to act as agent for both of them and, if so, in what respects.

A possible view is that B & D was contracting for the carriage on behalf of Vernal (which appears to have paid the freight (Footnote: ²)) for Sonaec; but also for Yekalon, since, by shipping goods on board Yekalon fulfilled its duties as FOB seller.

In Pyrene v Scindia [1954] 2 QB 402,426 where all the arrangements for the carriage of the good had been made between the carrier and the buyers Devlin J said: “There is no difficulty in principle about the concept of an f.o.b buyer making a contract of affreightment for the benefit of the seller as well as himself.” He considered that the seller participated in the contract of affreightment “so far as it affected him”. He also considered with markedly less enthusiasm the possibility that there was an implied contract between carrier and shipper constituted by the carrier’s invitation to the seller to load and the carrier’s receipt of the goods.

In The Athanasia Comninos [1990] 1 Lloyd’s Rep 277, 280 where the shippers were named in the bill, but the contract of affreightment had been made with the buyers, Mustill, J addressed an argument that it was the buyers who were participants in the contract of carriage by saying that, even if they were, it would make no difference to the shipper’s liability.

It is thus possible for both seller and buyer to be party to the contract of carriage, in which case it would be necessary to decide whether seller and buyer are to be regarded as joint principals; if not, who is agent for whom; and who is entitled to give orders for a change of consignee.

The defendants’ response is lengthy, repetitive, discursive and not always easy to follow, particularly in translation. But it appears to be contending (i) that B & D was the shipper and not Yekalon; (ii) that freight was paid either by Vernal (para 27) or B & D (para 36); (iii) that both Vernal and Yekalon appointed B & D to make the booking (para 32) ; (iv) that at some stage B & D received the goods from Yekalon and took them over for the account of Sonaec (para 33); (v) that a certificate of taking over was delivered to Yekalon who then ceased to be the owners of the goods (para 34); and (v) that B & D on account of Vernal instructed Maersk to load the containers (para 35).

None of this is supported by a witness statement or a statement of truth or by any supporting documents. Mr Brier submitted that in those circumstances I could ignore what was said, or treat it with extreme caution, not least because Gloster J’s reluctance to grant judgment in default gave the defendants the opportunity to file evidence and make submissions, of which they have not availed themselves.

At the same time, the account given in the response is broadly consistent with what the court in Benin has so far found; and with what was submitted to the Chinese court. Further I have no evidence from Maersk or their Chinese agents as to (i) how they came to issue (as they did) a bill of lading in this form; (ii) why it was issued to B & D and not to Yekalon or to someone on their behalf alone; (iii) who paid the freight; and (iv) whether Maersk has any knowledge of the “certificate of taking over” referred to in the response.

I am thus left in a position where the evidence (such as it is) on potentially important matters is in an unsatisfactory state; largely because the defendants have done nothing. If matters stood there I would, with a degree of reluctance, have declined to give any summary judgment. My reluctance arises from two things. Firstly, I suspect that the correct analysis is that Yekalon participated in the contract evidenced by the First Bill at least to the extent of being entitled to exercise the right of a shipper to change the consignee prior to the delivery of the goods to the buyers. Secondly defendants cannot usually escape summary judgment by raising points in a document which is not a pleading but failing to file any evidence or a statement of truth or to produce the relevant documents. At the same time, but for the consideration to which I refer in the next paragraph I would not regard it as satisfactory to give summary judgment on the present state of the material, and where potential evidence from Maersk is also lacking, not least because I doubt that a judgment given in those circumstances would provide much assistance to the Benin Court.

There is, however, another consideration which seems to me to be determinative. The Chinese court refused to order delivery up of the First Bill to B & D but ordered High Goal to hand over the complete set of papers concerning the First Bill and the containers listed in it to Yekalon, on the footing that Yekalon was the shipper of the containers and entitled to the First Bill. The First Bill was not a mere piece of paper. It was or represented the contract of carriage with Maersk. It did so by order of the Chinese court (which has never been set aside). The fact that it was compelled to do so does not alter the fact that the surrender took place. In those circumstances Yekalon became the party entitled to the rights of shipper under the Bill (those rights being subject to clause 26), even if it had not done so before, or only enjoyed them in some qualified sense. Those rights included a right to order the goods to be delivered otherwise than to the named consignee and to agree to the issue of a substitute Bill, as in the event occurred. Sonaec’s lawyer was right to think that the order of the Chinese court made all the difference.

There can be no doubt but that the Chinese court made the order to which I have referred. Nothing in the defendants’ response or elsewhere disputes what happened there; indeed the response does not mention the court’s decision; nor is it referred to in the judgment of the Benin Court. The fact that Yekalon acted as it did may or may not give Sonaec rights against Yekalon under the sale contract. But the fact that such rights may exist cannot affect the position under the contract of carriage.

Accordingly Maersk is, in my judgment, entitled to the second declaration, namely that any rights which any of the defendants may have had under the First Bill were brought to an end prior to 18^th February 2008 when the First Bill was cancelled and replaced with the Second, and later the Third Bill of Lading. There is no real defence to Maersk’s claim to such a declaration nor any compelling reason why I should not grant it. Insofar as the claim for a declaration is made in proceedings against Mr Fadoul, I do not consider that the Court has any jurisdiction to make it since he is not party to any jurisdiction agreement. But there is no reason why I should not make a declaration in the form sought as between Maersk and the first two defendants.

I invite counsel to draw up an order to give effect to these conclusions.