Lloyd's Maritime and Commercial Law Quarterly
MISDELIVERY AND THE BOUNDARIES OF CONTRACT AND TORT
East West
v. DKBS 1912
The action in bailment is a curious hybrid, part contractual, part tortious. Its true nature might be thought to be of academic or historical interest only. However, in East West Corporation
v. DKBS 1912
1
the classification of the action as tortious was to prove crucial to the decision of the Court of Appeal. The Hong Kong sellers were exporters of Chinese manufactured goods who had concluded sales contracts, cash against delivery, with a Chilean buyer, Gold Crown. In September and October 1998, in fulfilment of these contracts, they shipped containerized goods from Hong Kong to San Antonio, Chile, by liner services operated by Maersk Line. A further shipment was made in February 1999 using P.&O. Nedlloyd’s liner service. The sellers were issued bills of lading which named their Chilean bank as consignee, and Gold Crown as the notify party. The bank was to act under their directions at all times as regards the bills. The sellers then indorsed the bills to the bank with instructions that they were to be released to the buyers only in the event that full payment was received. On arrival at San Antonio, in accordance with Chilean Customs law, the containers were placed in a licensed Customs warehouse, pending payment of import duty. When this was paid, the goods were released to the Customs agent of the buyers, who had, however, paid only part of the price and were not in a position to present the bills of lading. The bank subsequently transferred the bills of lading back to the sellers but failed to indorse them in the sellers’ favour. The sellers then claimed against the carriers in respect of the losses which they had sustained by reason of the misdeliveries to the buyers. The claims were brought in contract under the bill of lading and also non-contractually in bailment, conversion and negligence.
The judgment of Thomas, J.
The sellers as initial holders of the bills of lading clearly had a contractual claim under that document at some stage. However, the bank had acquired rights of suit under s. 2(1) of the Carriage of Goods by Sea Act 1992 (“COGSA 92”) and, consequently, s. 2(5)2
divested
1. East West Corp
v. DKBS 1912 and AKTS Svenborg, Utaniko Ltd
v. P.&O. Nedlloyd BV
[2002] E.W.H.C. 83; [2002] 2 Lloyd’s Rep. 535 (Q.B.); aff’d
on different grounds [2003] EWCA Civ 83; [2003] 1 Lloyd’s Rep. 239.
2. “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;…”
413