Life after novation. Indorsee’s consent to discharge of cargo without production of bill of lading.

The Sienna, Unicredit Bank AG v Euronav NV [2023] EWCA Civ 471 involved a claim by a financing bank against shipowners for delivery of cargo without production of a bill of lading. The cargo had been carried under a charter with BP who were the initial holder of the bill of lading as shipper. The charter was novated, and subsequently BP indorsed the bill of lading to the bank who received it after the cargo had been discharged against an indemnity in the charter, without production of the bill of lading.

Moulder J found that the bank could not sue the owners under the bill of lading because the bill of lading lost its potential contractual status when there was a novation of the charter with BP. She also found that if there had been a contract with the indorsee as the lawful holder of the bill of lading, there would have been no breach. The indorsement and transfer of the bill of lading to the Bank was being held up largely due to the effect of the first Covid lockdown in the UK in March 2020. She found that had the shipowner refused to deliver the cargo without production of the bill of lading it would have sought instructions from BP who would have referred to the Bank as the intended indorsee and the Bank would have agreed that the cargo be discharged without production of the bill of lading.

On appeal the Court of Appeal overturned the first basis of the decision, but upheld the second.

On the first ground, it was clear that where a shipper is also the charterer, the bill of lading is generally not a contract of carriage but a mere receipt, but when indorsed to a third party, it attains contractual status upon indorsement on the basis that “a new contract appears to spring up between the ship and the consignee on the terms of the bill of lading” (Tate & Lyle Ltd. v Hain Steamship Co. (1936) 55 Lloyd’s Rep 159, 174). However, Moulder J had found that this was not the case as regards the indorsee when the bill of lading had remained in the hands of the charterer after the charterer ceased to be a party to the charterparty. Popplewell LJ giving the judgment of the Court of Appeal, characterised the ‘mere receipt’ rule as follows. In issuing a bill of lading, the carrier usually contracts with the holder on those terms save only for so long as the holder is a charterer, and save to the extent thereafter (if at all) that the contractual relationship with the carrier for performance of the carriage remains governed by the charterparty (as it was for pre Novation Agreement conduct in the present case). The bill of lading will not otherwise be a mere receipt but will contain or evidence a contract of carriage. This reflects the presumed intention of the parties. Popplewell LJ found that the bill of lading was not a mere receipt in BP’s hands at the time of discharge as it had become a document containing or evidencing a contract with BP from the date of the Novation Agreement, and remained so at the date of discharge.

Furthermore, dealing with an argument not raised before Moulder J, he found that the indorsee is put in the same position as if he had been a party to a contract on the terms of the bill from the date of its issue: Monarch Steamship Co Ltd v A/B Karlshamns Oljefabriker [1949] AC 196, 218. The language of s. 2(1) makes clear that it operates retrospectively. The position is no different for an indorsee from a charterer from that which applies to an indorsee from a non-chartering shipper. The position would be the same where indorsement takes place after discharge than it is where indorsement takes place before provided the indorsee takes pursuant to pre-existing contractual arrangements,  as required by s2 (2) of COGSA 1992, which is what the Bank did in this case.

Turning to the second ground of Moulder J’s decision, although the indorsee would not be affected by any agreement between the owners and the charterer that the cargo could be delivered against a letter of indemnity in the absence of a bill of lading, the indorsee itself could consent to this. The bill of lading in this case was on its way to the bank and was held up due to administrative reasons largely connected with the initial COVID lockdown in the UK, rather than commercial ones. Had Owners initially complied with the obligation not to discharge without production of the Bill, they would have sought and obtained express consent to do so from both the holder and the bank as intended indorsee. Delivery without production of the bill of lading would no longer have been a breach of the contract and so the initial breach would have caused no loss.

Accordingly, the Court of Appeal upheld Moulder J’s findings on causation and owner’s appeal was dismissed.

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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 seven editions (soon to be eight) 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, and Human Rights and Corporate Wrongs - Closing the Governance Gap. He has also written and taught extensively on commercial law, trusts and environmental law. Simon is a member of the Institute of International Shipping and Trade Law, a University Research Centre within the School of Law, and he currently teaches at Swansea on the LLM in:Carriage of Goods by Sea, Land and Air; Charterparties Law and Practice; International Corporate Governance.

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