Whether Carriers Can Be Liable for Conversion for Storing Uncollected Goods?
Introduction
What happens when
a cargo owner who ordered its cargoes to be delivered by a shipowner fails to
collect the cargoes upon their arrival at the discharge port within a
reasonable time? Will the shipowner be allowed to store such unclaimed cargoes
in their warehouse? Whether such storage into a warehouse by the shipowner
would amount to an unlawful conversion of the cargoes?
The Court considered
these questions in the recent case of Sang
Stone Hamoon Jonoub Co Ltd v Baoyue Shipping Co Ltd [2015] EWHC 2288
(Comm). In that case, the Iranian shipper and bill of lading holder Sang Stone
Hamoon Jonoub co (the “Sang Stone”)
was found to be liable to the shipowner, Baoyue Shipping Co Ltd (“Bao Yue”), for an enormous amount of
storage charges which exceeded the value of the unclaimed cargoes. Sang Stone’s
claim for unlawful conversion of cargoes failed.
The Facts
Sang Stone was both
the bill of lading holder and the shipper in respect of a cargo of iron ore
being carried by Bao Yue’s vessel from Bandar Abbas in Iran to Tianjin in
China. Clause 12 of the bill of lading (which was in the Gencon 1994
charterparty form) stipulates that:
“…In case original Bs/L would not be ready upon vessel’s arrival at
discharge port, Owners allow to discharge cargo upon arrival to custom bonded
warehouse area against Charterer’s single LOI with Owners P&I Club wording
signed by Chrs.
Release cgo against original bill of lading. In the event cargo being
kept in the warehouse in lieu of waiting for OBL to arrive at the discharge
port, the expense of warehouse and all relevant costs to be for Chrtrs’
account…” (“Clause
12”)
In other words, it is
provided rather clearly by virtue of Clause 12 that if the original bills of
lading are not ready on arrival at the discharge port, Bao Yue may discharge
the cargo to a warehouse and the bill of lading holder would be responsible for
the storage expenses at the warehouse.
When the vessel
arrived at Tianjin, no bill of lading was presented. Accordingly, Bao Yue’s
agent discharged the cargoes into the warehouse TQST in accordance with Clause
12.
The cargoes remained
in storage for over three years. Sang Stone made no effort to claim them and
eventually, storage charges of the cargoes exceeded the value of the same
eventually. TQST claimed that a lien over the cargoes have been created and
hence refused to release the cargoes unless and until the storage charges have
been duly settled by Sang Stone.
Sang Stone then
commenced the present action to sue Bao Yue for committing the tort of
conversion, seeking to claim damages for the cargoes. Bao Yue counterclaimed
the storage charges incurred for the cargo.
The Judgment
What amounts to
conversion of cargoes?
The Court clarified
that under English law, conversion of cargoes may be found where acts of a
shipowner can be seen as a “deliberate encroachment” of rights of the cargo
owner such that the latter is deprived of its rights to use or possess the
cargoes in question. In other words, the extent of how the rights of the cargo
owner in respect of the cargoes are limited is a factor indicating whether
conversion occurred.
The decision
In this case, after
hearing the parties’ submission, the Court ruled in favour of the shipowner Bao
Yue for the following reasons:
1.
Clause 12 of the bill of lading clearly allowed and authorized Bao Yue
to deliver cargoes to their selected storage location when the owner of the
same failed to take delivery of the same at the discharge port. By virtue of
the same clause, Bao Yue, as the shipowner, is also entitled to create a lien
for the necessary resulting storage expenses under the bill of lading as the
creation of a lien is a reasonable and foreseeable incident in the
circumstances.
2.
The Court also expressed that it is well established under English law
that, if a cargo owner does not claim delivery of the goods within a reasonable
time the shipowner may discharge and warehouse a cargo at the expense of the
owner in order to avoid the accrual of hire or demurrage.
3.
Conversion of cargoes requires a “deliberate encroachment” of rights of
the cargo owner. Whilst conversion may be found against a shipowner in
circumstances where the cargo owner is denied access or possession of the
goods, Sang Stone’s claim fell short of any such “deliberate encroachment of
rights” by Bao Yue. Sang Stone had never been deprived of the possession of the
unclaimed cargoes, as they remained at the warehouse and are at all times
available to Sang Stone upon its presentation of the original bill of lading
and the payment of the storage charges that have accrued.
For the aforesaid
reasons, Sang Stone’s claim of unlawful conversion of cargoes failed and it was
found liable to reimburse Bao Yue for the reasonable storage charges that it
had paid TQST. Sang Stone was further ordered to deliver the original bill of
lading to Bao Yue in order to collect the cargos.
Conclusion
This case sheds light
on when a case of unlawful conversion of cargoes would arise. It also serves as
a timely reminder to cargo owners who have their cargoes delivered through
vessels that they should take delivery of their cargoes within a reasonable
time and in accordance with the bills of lading. Otherwise, they may be held
liable for the storage expenses incurred by the shipowner. Adverse financial
consequences may occur upon cargo owners’ failure to present their original
bills of lading at the discharge ports.
If the cargo owners
wish to avoid being liable in such circumstances, it is advisable for them seek
legal advice and to limit the scope of their responsibilities expressly in the
respective bills of lading or charterparties.
For enquiries,
please contact our Litigation & Dispute Resolution Department: |
|
E: shipping@onc.hk T: (852)
2810 1212 19th Floor, Three Exchange Square, 8 Connaught
Place, Central, Hong Kong |
|
Important: The law and procedure on
this subject are very specialised and
complicated. This article is just a very general outline for reference and
cannot be relied upon as legal advice in any individual case. If any advice
or assistance is needed, please contact our solicitors. |
|
Published by ONC Lawyers © 2016 |
