No set-off rule does not apply to freight forwarding contract.

 

More developments on the no-set off rule in The “Aries” [1977] 1 WLR 185 (HL), which bars set-off against freight claims. As noted in this blog,     https://iistl.blog/2017/11/22/in-the-air-with-the-aries-freight-no-set-off-rule-also-applies-to-air-carriage/     the rule was held to extend to carriage by air in Schenker Ltd v Negocios Europa Ltd [2018] 1 WLR 718.

 

In Globalink Transportation and Logistics Worldwide LLP v DHL Project & Chartering Ltd [2019] EWHC 225 (Comm) (19 February 2019), it was held that the rule does not apply to freight forwarding contracts under which the forwarder has contracted to arrange carriage rather than to act as the carrier.

Sinopec engaged DHL to arrange the carriage of large items of plant and machinery from China to Kazakhstan. DHL sub-contracted the arrangement of carriage from the Black Sea onwards to Globalink. One of the barges involved was delayed and it was then fount that its draught was too deep to enable it to complete the final leg of the voyage before the Ural-Caspian canal closed for the winter, resulting in the cargo having to be stored until the Spring when Globalink were engaged to arrange completion of the carriage.

DHL refused to pay the two last instalments due under its contract with Globalink arguing a set-off of its counter claims for breach of contract arising out of the delays with the second barge.

Nicholas Vineall QC held that:

“the rule in The Aries does not extend, and should not be extended, to cover the services provided by a freight forwarding agent, when those services are to arrange the carriage of goods. It is not suggested that parties to freight forwarding contracts invariably contract on the assumed basis that no set off is available, and I see no justification for extending the ambit of a rule which is, in Lord Simon’s phrase, a pre-Cambrian outcrop, beyond contracts of carriage and into a new – albeit adjacent – area. To do so would run counter to the general principle of the law which is that a cross claim can in principle operate as a defence by way of set off. I see no basis upon which it could properly be open to me to extend the rule in The Aries into a new area.” [61]

However, in Britannia Distribution v Factor Pace [1998] 2 Lloyds Rep 420, it was held that freight forwarders acting as agents had the benefit of the no set-off rule to the extent that they could show that the sum of which they sought payment was in respect of freight that they had paid to a carrier.

Accordingly, as regards US$113,000 of the US$1.65 million total claimed that could be shown to be freight payable by Globalink to a carrier, an order for payment should be made, conditional on proof of payment by Globalink

 

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Professor Simon Baughen

Professor Simon Baughen was appointed as Professor of Shipping Law in September 2013 (previously Reader at the University of Bristol Law School). Simon Baughen studied law at Oxford and practised in maritime law for several years before joining academia. His research interests lie mainly in the field of shipping law, but also include the law of trusts and the environmental law implications of the activities of multinational corporations in the developing world. Simon's book on Shipping Law, has run to five editions and is already well-known to academics and students alike as by far the most learned and approachable work on the subject. Furthermore, he is now the author of the very well-established practitioner's work Summerskill on Laytime. He has an extensive list of publications to his name, including International Trade and the Protection of the Environment. He has also written and taught extensively on commercial law, trusts and environmental law. Simon will be a member of the Institute of International Shipping and Trade Law, a University Research Centre within the School of Law, and he will teach on both the LLM (Carriage of Goods by Sea, Land and Air and Oil and Gas Law) and LLB programmes at Swansea.

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