LLOYD’S LAW REPORTS

[2015] Vol 1

The “SFL Hawk”

QBD (Comm Ct)]

QUEEN’S BENCH DIVISION
(COMMERCIAL COURT)
24 February; 2 March 2015
————
CARLOS SOTO SAU AND ANOTHER
v
AP MOLLER-MAERSK AS
(THE “SFL HAWK”)
[2015] EWHC 458 (Comm)
Before Mr Justice EDER
Carriage of goods by sea — Sale of goods (cfr) —
Cargo of frozen swordfish rejected as unfit for
human consumption — Bill of lading holder
claiming damages against carrier for breach
of contract of carriage — Whether bill of
lading holder was owner of goods — Whether
property passed on transfer of bill of lading —
Whether bill of lading holder entitled to rely
on “buyer in possession” exception to nemo
dat quod non habet rule — Whether carrier’s
breach caused claimants’ loss — Sale of Goods
Act 1979, section 25.
On 24 October 2012 PT Awindo International
(PT Awindo) agreed to sell a cargo of frozen
swordfish to Fishco BVBA (Fishco) cfr Vigo,
Spain at a price of US$112,250 with payment
by letter of credit 45 days after the bill of lading
date. In addition, the invoice contained reference
to the following clause:
“REJECTION CLAUSE: IN EVENT
OF REJECTION BY VET, SELLER TO
REFUND BUYER WITH 100% OF THE
INVOICE AMOUNT . . .”
Pursuant to the contract, Fishco procured the
opening of an irrevocable letter of credit by Bank
Central Asia on 30 October 2012. The letter of
credit provided for payment to be made 45 days
after the date of shipment. It also included a
rejection clause in the following terms:
“IF
BEFORE
MATURITY
DATE
APPLICANT PRESENTS COPY OF
REJECTION
CERTIFICATE,
THEN
PAYMENT WILL BE CANCELLED AND
APPLICANT WILL RELEASE THE CARGO
TO BENEFICIARY.”
It was common ground that the stipulated
“maturity date” was, in effect, the payment date,
ie 45 days after the date of shipment.
On the same day as the original sale contract
between PT Awindo and Fishco, Fishco entered
into an on-sale contract with the first claimant

537
PART 10

(Carlos Soto). Delivery was on the same basis,
“CFR Vigo”, but the price was slightly higher,
US$118,500, with payment 60 days after the
bill of lading date by way of an irrevocable
letter of credit. The contract did not include a
rejection clause.
On 31 October 2012 Carlos Soto duly opened
a letter of credit with Banco Santander in favour
of Fishco.
Thereafter, the cargo was shipped on board
the defendant’s vessel SFL Hawk, and a bill of
lading was issued dated 14 November 2012. The
bill of lading named PT Awindo as the shipper
and stated that the consignee was “TO ORDER”.
Carlos Soto was the stated notify party.
On 14 November 2012 the bill of lading was
endorsed and signed in blank by PT Awindo
and was then presented together with the other
shipping documents by PT Awindo under
the letter of credit in its favour. Thereafter,
Fishco delivered the bill of lading and the other
shipping documents down the chain to Banco
Santander. By a letter dated 11 December 2012
Banco Santander notified Carlos Soto of certain
discrepancies in the documents. Notwithstanding,
Carlos Soto waived the discrepancies and took
collection of the bill of lading and the other
shipping documents from Banco Santander on
13 December 2012. The documents received by
Carlos Soto included the original packing list
which stipulated in the box headed “Terms of
Delivery & Payment”:
“CFR VIGO, SPAIN & LC 45 DAYS
AFTER SHIPMENT WITH REJECTION
CLAUSE”
On 18 December 2012 the Port Health
Authority at Vigo rejected the cargo on the
ground that its temperature was too high and it
was unfit for human consumption. No payments
had yet been made under either letter of credit.
Shortly thereafter, Fishco presented to Bank
Central Asia the rejection certificate and on
19 December 2012 the bank cancelled the letter
of credit in favour of PT Awindo pursuant to the
rejection clause.
Carlos Soto did not reject the cargo, taking
the view that it still had to pay Fishco the full
purchase price because the damage occurred
during carriage when the goods were at its risk.
It decided to mitigate its loss by selling the goods
as salvage back to Fishco for US$11,853.24.
Thereafter, payment in the sum of US$118,532.38
was made by Banco Santander under its letter of
credit and debited to Carlos Soto’s account.
Following the rejection of the cargo, PT Awindo
brought a claim against the carrier (Maersk) in
respect of the cargo damage. On 10 May 2013

538 LLOYD’S LAW REPORTS [2015] Vol 1 The “SFL Hawk” Maersk entered into a settlement agreement with PT Awindo. the lawful holder of the bill of lading. On the trial of preliminary issues it was common ground that Carlos Soto paid for the cargo. and that the bill of lading was delivered/transferred to Carlos Soto with the consent of the seller. and that it was authorised to act on behalf of all other cargo interests. [QBD (Comm Ct) ———E Clemens Horst Co v Biddell Brothers [1911] 1 KB 934 and The Kronprinsessan Margareta [1921] 1 AC 486. at least. (3) As to causation. The contractbreaker was liable so long as his breach was “an” effective cause of his loss. On the evidence. Those special features of the contract between PT Awindo and Fishco justified the inference that it was never the intention for property in the cargo to pass to Fishco until. [2011] 1 Lloyd’s Rep 482. The settlement agreement stipulated that PT Awindo was acting “as or on behalf of the Shipper and/or Receiver and/or subrogated Cargo Underwriter and/or any other parties interested in the cargo (Cargo Interests)”. [1994] 1 WLR 1334. referred to. The mere fact that the payment date was postponed until 45 days after the date of shipment did not necessarily indicate an intention that property should not pass until payment was actually made.166. it was not necessary for a claimant to prove that the particular breach was “the” effective cause of the loss. that it paid for the cargo. It was their case that Carlos Soto was. considered. There was no dispute that the bill of lading was a “document of title” within the meaning of section 61 of the 1979 Act. ———Held by QBD (Comm Ct) (EDER J) that: (1) The claimants’ submission that property in the cargo passed when PT Awindo endorsed and tendered the bill of lading to Fishco’s bank on 14 November 2012 would be rejected.532. that no other party had title to sue. There had to be an event of such impact that it “obliterated” the wrongdoing of the defendant. The issues for decision were whether Carlos Soto was at all relevant times the owner of the cargo. Fishco paid and PT Awindo received the contract price under their contract (see para 23). The question as to when property passed in a cfr contract was one of “actual intention”.000 in full and final settlement of all claims on behalf of such “Cargo Interests”.24) plus handling fees at Vigo (€1. However.853. On that basis Carlos Soto was properly to be regarded as the owner of the goods from the date of receipt of the bill of lading on 13 December 2012 (see paras 26 and 29). considered. ———Borealis AB v Geogas Trading SA [2011] 1 Lloyd’s Rep 482. PT Awindo confirmed acceptance of the sum of US$15. in truth. ———The Saetta [1993] 2 Lloyd’s Rep 268. Carlos Soto obtained good title to the cargo as a bona fide purchaser for value pursuant to section 25(1) of the Sale of Goods Act 1979. together with the cargo insurers (AXA) brought the present proceedings against Maersk. Maersk’s submission that the claimants’ loss was caused by the intervening and wrongful acts of Fishco in failing to reimburse Carlos Soto once Fishco’s purchase of the cargo had been cancelled would be rejected. that was not necessarily so. Feuer Leather Corporation v Frank Johnstone & Sons [1981] Com LR 251. an effective cause of the claimants’ loss was Maersk’s assumed breach of duty. ———— The following cases were referred to in the judgment: Borealis AB v Geogas Trading SA [2010] EWHC 2789 (Comm). the facts were not such as to “obliterate” Maersk’s assumed breach of duty (see para 33). [1994] 1 WLR 1334 and Feuer Leather Corporation v Frank Johnstone & Sons [1981] Com LR 251. and was the lawful holder of the bill of lading and entitled to possession of the cargo. Carlos Soto. Carlos Soto received the bill of lading in good faith and without notice of the right of the seller in the goods.38) less the salvage value (US$11. and that PT Awindo warranted that it was the lawful holder of the bill of lading. On the evidence. . Forsythe International (UK) Ltd v Silver Shipping Co Ltd (The Saetta) [1993] 2 Lloyd’s Rep 268.16). and whether (on the assumption that the damage to the cargo was caused by Maersk’s breach of the contract of carriage) Carlos Soto and in turn AXA suffered any loss as a result of the alleged damage. E Clemens Horst Co v Biddell Brothers (CA) [1911] 1 KB 934. They said that none of the warranties given by PT Awindo in the settlement agreement with Maersk was true. Fishco had not merely the right to reject the goods but also the right to cancel the letter of credit in the stipulated circumstances. Although the transfer of a bill of lading was prima facie evidence of intention to pass property. Galoo Ltd v Bright Grahame Murray (CA) [1994] 1 WLR 1360. that in that capacity. The test as to what constituted an intervening act sufficient to break the chain of causation was a high one. In the present case. and (together with AXA) that it suffered loss represented by the difference between the market value of the cargo in sound condition (US$118. (2) However.

Mr Bird on behalf of the claimants submitted that they should both be answered “Yes”. claiming damages following the rejection of the cargo as unfit for human consumption. and (ii) on behalf of Maersk.16). 2. Following the rejection of the cargo. the second claimant. there was served: (i) on behalf of the claimants.000 in full and final settlement of all claims on behalf of such “Cargo Interests”. Ms Paruk made an application to rely on a further witness statement of Mr Nadeak which I rejected for reasons which I gave in a separate judgment and which I do not repeat.”. I should also mention that. Spain in late 2012. In any event. 3. the Vigo Port Health Authority rejected the cargo as unfit for human consumption. There is no evidence or correspondence relating to the circumstances in which this claim was notified to Maersk.LLOYD’S LAW REPORTS [2015] Vol 1 The “SFL Hawk” QBD (Comm Ct)] Kronprinsessan Margareta. Mr Nadeak did not give live evidence. . In summary. and (2) AXA Securos Generales SA de Seguros y Reaseguros. PT Awindo acted: “. Tom Bird. Saira Paruk. . PT Awindo International (“PT Awindo”) brought a claim against Maersk in respect of the cargo damage. Sanders v Maclean (CA) (1883) 11 QBD 327. In summary.853. the claim is for the difference between the market value of the cargo in sound condition (ie US$118. Indonesia to Vigo. Outline of main events 7. and that PT Awindo warranted that it was the lawful holder of the bill of lading. for the defendant. instructed by Bentleys Stokes & Lowless LLP. PT Awindo confirmed acceptance of the sum of US$15. Ms Lopez gave evidence by video link. Ms Paruk on behalf of Maersk submitted that they should be answered “No”. that Carlos Soto was. In the event. It was then sold for salvage by the receivers of the cargo. on 10 May 2013. For present purposes. ———— This was the trial of preliminary issues in the action brought by: (1) Carlos Soto Sau. in truth. that no other party had title to sue and that it was authorised to act on behalf of all other cargo interests.24) plus handling fees at Vigo (ie €1. this short trial focused on the fourth and fifth issues. 6. the five preliminary issues as originally ordered by the court concern the claimants’ title to sue in respect of these alleged losses viz: (i) Did Carlos Soto pay for the cargo? (ii) Was Carlos Soto at all relevant times the lawful holder of the bill of lading? (iii) Was Carlos Soto at all relevant times entitled to possession of the cargo? (iv) Was Carlos Soto at all relevant times the owner of the cargo? (v) Have Carlos Soto and in turn AXA suffered any loss as a result of the alleged damage? 5. The main events were not controversial and can be summarised as follows. as or on behalf of the Shipper and/or Receiver and/or subrogated Cargo Underwriter and/or any other parties interested in the cargo (Cargo Interests) . two witness statements of Mr Madong Nadeak (who is an export manager employed by PT Awindo). that it paid for the cargo and (together with AXA) suffered the loss stated above. it is now common ground that the answer to each of the first three issues is “Yes”. This stipulated that in entering into such settlement agreement. the alleged owners of a cargo of frozen swordfish. The further facts are stated in the judgment of Eder J. Thus. Maersk entered into a settlement agreement with PT Awindo. the lawful holder of the bill of lading. As to the evidence.38) less salvage value (ie US$11. . On its arrival at Vigo on 18 December 2012. It is the claimants’ case that none of these warranties was true. instructed by Birketts LLP. that 539 [EDER J in that capacity. “AXA”) now seek to recover their alleged losses in these proceedings. the original shipper. This is the trial of what were originally five preliminary issues arising out of the carriage of a cargo of frozen swordfish by the defendant carrier (“Maersk”) from Jakarta. The [1921] 1 AC 486. the cargo insurers. his evidence was put in under a hearsay notice. Judgment was reserved. against the defendant carrier AP Moller-Maersk AS. I proceed on the assumption that the cargo suffered damage as a result of one or more breaches by Maersk of its obligations as carrier. . and that the claimants were and are entitled to sue to recover such loss.532. for the claimants. 2 March 2015 ———— JUDGMENT Mr Justice EDER: Introduction 1. In essence. two witness statements by Ms Francisca Lopez (who has worked in the import/ export department of Carlos Soto for 27 years and whose primary responsibility is to import/export frozen fish and shellfish). Monday. at the beginning of the trial. ie the first claimant (“Carlos Soto”) who (together with the insurers. .166. 4.

Very shortly thereafter. and the agreed price was US$112. no payments had yet been made under either letter of credit. The cargo was carried in a refrigerated container numbered MMAU 115549-1. the invoice contained reference to the following clause: “REJECTION CLAUSE: IN EVEN[T] OF REJECTION BY VET. SPAIN & LC 45 DAYS AFTER SHIPMENT WITH REJECTION CLAUSE” 14. Fishco delivered the bill of lading and the other shipping documents down the chain to Banco Santander. The letter of credit provided for payment to be made 45 days after the date of shipment. On or about 14 November 2012 the bill of lading was endorsed and signed in blank by PT Awindo and was then presented together with the other shipping documents by PT Awindo under [2015] Vol 1 [QBD (Comm Ct) the letter of credit in its favour. ie 45 days after the date of shipment. ie 24 October 2012. I should mention that Mr Bird on behalf of the claimants submitted that this was sufficient to give Carlos Soto title to sue and that therefore the answer to the fourth preliminary issue was irrelevant. THEN PAYMENT WILL BE CANCELLED AND APPLICANT WILL RELEASE THE CARGO TO BENEFICIARY. On 18 December 2012 the Port Health Authority at Vigo rejected the cargo on the ground that its temperature was too high. Thereafter. in effect. By a letter dated 11 December 2012. . the payment date under the Fishco letter of credit was 27 December 2012. On 24 October 2012 PT Awindo agreed to sell the intended cargo to Fishco BVBA (“Fishco”). still well within the period allowed for payment under either letter of credit.532. Thereafter. SELLER TO REFUND BUYER WITH 100% OF THE INVOICE AMOUNT . As appears from the pro forma invoice issued by PT Awindo.853. 16. the payment date. However. Banco Santander notified Carlos Soto of certain discrepancies in the documents including the fact that the quality certificate was missing and “Health Cert.500 with payment 60 days (rather than 45 days) after the bill of lading date by way of an irrevocable letter of credit. of course. MV SFL Hawk. 12. ie US$118. According to Ms Lopez. . On this basis and as a matter of calculation.24 (a 90 per cent discount) as evidenced by an invoice dated 4 January 2013. The terms of this contract were similar (but not identical) to the original contract. the cargo was duly shipped on board the carrying vessel. so. Pursuant to the contract. payment in the sum of US$118. Fishco entered into an on-sale contract with Carlos Soto. Carlos Soto in effect waived these discrepancies and took collection of the bill of lading and the other shipping documents from Banco Santander on or about 13 December 2012. ie delivery was on the same basis. 13.38 was made by Banco Santander under its letter of credit and debited to Carlos Soto’s account. Notwithstanding.250 with payment by LC (ie letter of credit) 45 days after BL (ie bill of lading) date. at this stage. it appears that Fishco presented to the Bank Central Asia the rejection certificate and on 19 December 2012 the bank cancelled the letter of credit in favour of PT Awindo pursuant to the rejection clause. As already noted. Carlos Soto still had to pay Fishco the full purchase price because the damage occurred during carriage when the goods were at its risk. 10. Carlos Soto did not reject the cargo. It also included a rejection clause in the following terms: “IF BEFORE MATURITY DATE APPLICANT PRESENTS COPY OF REJECTION CERTIFICATE. It is common ground that these documents received by Carlos Soto included the original packing list which stipulated in the box headed “Terms of Delivery & Payment”: “CFR VIGO. importantly this contract did not include a rejection clause. . 11. and that accordingly. In addition. 17.” 9. ie “CFR Vigo” but the price was slightly higher. Thereafter. Against that background.” It was common ground that the stipulated “maturity date” was.540 EDER J] LLOYD’S LAW REPORTS The “SFL Hawk” 8. On the same day as the original sale contract between PT Awindo and Fishco. The bill of lading named PT Awindo as the shipper and stated that the consignee was “TO ORDER”. not as per L/C (Not showing date of freezing)”. Fishco procured the opening of an irrevocable letter of credit by Bank Central Asia on 30 October 2012. Spain. it was agreed that the first three issues should be answered “yes”. This was. The effect of this rejection was that the cargo could not be sold in the European Union. I turn to consider the preliminary issues. and a bill of lading in standard form was issued dated 14 November 2012. I say nothing more about it. Mr Bird may well be right in that submission but he did not develop it and Ms Paruk did not address me on it. the view taken by Carlos Soto was that the goods were at Carlos Soto’s risk. On 31 October 2012 Carlos Soto duly opened a letter of credit with Banco Santander in favour of Fishco. 15. the payment date under the Carlos Soto letter of credit was on or about 12 January 2013. Carlos Soto was the stated notify party. Carlos Soto decided to mitigate its loss which it did by selling the goods as salvage back to Fishco for the sum of US$11. that the letter of credit which it had issued in favour of Fishco was irrevocable (at least once it had waived the discrepancies in the shipping documents). Therefore. the contract was cfr Vigo.

(iv) For similar reasons. But such statement is only part of the entirety of the evidence which I have to consider. property in the cargo remained throughout with PT Awindo. See Benjamin’s Sale of Goods at para 21-013. ie 45 days after . The same result occurs when a buyer rejects goods on the basis that they do not comply with their contractual description. a bill of lading is generally regarded as a document of title. property was intended to pass when Carlos Soto waived the discrepancies in the shipping documents and the letter of credit became irrevocable (on or about 12 or 13 December 2012). 9th Edition. (ii) the rejection clause. it is often assumed that property will pass under a cfr (or cif) contract at the latest when the bill of lading is endorsed and delivered to the buyer (or to the buyer’s bank under a letter of credit). paras 19-103 and 19-104. this is not necessarily so: see E Clemens Horst Co v Biddell Brothers [1911] 1 KB 934 at page 957. and more generally. Ms Paruk submitted that as a matter of objective contractual intention between PT Awindo and Fishco. (iii) The “rejection clause” in the original sale contract does not affect that analysis. and given that PT Awindo told what appears to be a number of untruths in the settlement agreement. In circumstances where the clause was triggered. entitled Fishco to reject the cargo in the stipulated circumstances and. Mr Bird submitted that property in the cargo passed when PT Awindo endorsed and tendered the bill of lading to Fishco’s bank on 14 November 2012. After all. unconditionally to appropriate the goods to the contract. In support 541 [EDER J of such submission. the question as to when property passed is one of “actual intention”. This was disputed by Mr Bird. at para 10-014. However. at the latest). in the alternative. he submitted. to reserve the right of disposal.[2015] Vol 1 LLOYD’S LAW REPORTS QBD (Comm Ct)] The “SFL Hawk” Preliminary issue 4: was Carlos Soto at all relevant times the owner of the cargo? 18. However. on the one hand. on presentation of the rejection certificate. Benjamin’s Sale of Goods. at first blush. Notwithstanding. which was payable 45 days after the date of shipment (well after the cargo’s arrival at Vigo on 12 December 2012). Alternatively. (ii) The original sale contract provided for payment by way of an irrevocable letter of credit. it provided that the price would be refundable and Fishco would return the cargo. 21. there was broad agreement between Mr Bird and Ms Paruk that the correct approach is as summarised in Benjamin’s Sale of Goods. PT Awindo could be adequately assured of payment. First. that Carlos Soto took delivery of the bill of lading in good faith and with no actual knowledge of PT Awindo’s alleged interest in the cargo and that therefore Carlos Soto obtained good title to the cargo as a bona fide purchaser for value pursuant to section 25(1) of the Sale of Goods Act 1979 (the “1979 Act”). In accordance with these principles. and also The Kronprinsessan Margareta [1921] 1 AC 486 at pages 511 to 518. it is plain that although the transfer of a bill of lading is prima facie evidence of intention to pass property. para 19-099: “The courts look to those dealings in order to determine whether the seller intended. It is true that that is what Mr Nadeak says in his witness statement. The right of rejection has no bearing on when property is intended to pass. I deal with each of these points in turn. As to the first point. in effect. 20. 22. I do not consider that Mr Nadeak’s evidence can be safely relied upon in this context. Mr Bird made the following further points: (i) PT Awindo did not reserve any right of disposal in the PT Awindo/Fishco contract. Fishco and Carlos Soto intended property in the cargo to pass under their contract when the bill of lading was delivered to Banco Santander/Fishco (by 13 December 2012. still less be determinative of the issue. Ms Paruk submitted that this analysis was flawed for a number of reasons. There is. she relied on the evidence of Mr Nadeak that ownership never passed to Fishco. or. This was disputed by Ms Paruk. As the question of passing of property is one of ‘actual intention’ it is ‘impossible to lay down a general rule applicable to all cif contracts’. the buyer would also be entitled to recover the price previously paid against documents and the seller would be able to deal with the rejected goods: see Scrutton on Charterparties. in effect to cancel the letter of credit within that same period. good reason for such assumption. 19.” It was also common ground that the same principles apply to cfr contracts. By relying on the bank’s promise. The argument under this head fell into two main parts. and if a seller gives up possession of the bill of lading and puts it into circulation. Thus. per Kennedy LJ. In particular. it is perhaps not unnatural to suppose that the seller is intending to transfer property in the goods to the recipient. In that situation. on the other hand. 22nd Edition. citing Sanders v Maclean (1883) 11 QBD 327. it is my conclusion that (subject to the further argument in relation to section 25(1) of the 1979 Act) Ms Paruk is right in her submission that property remained with PT Awindo in particular because: (i) payment was delayed under the PT Awindo/ Fishco contract and letter of credit until 45 days after the date of shipment. As to the applicable principles.

there was a large measure of agreement as to the applicable principles. the effect is that. I am prepared to assume in Mr Bird’s favour that that submission is correct. However. or by a mercantile agent acting for him. as here. the cargo had been sold on to a third party. with the consent of the seller. I turn then to consider Mr Bird’s alternative argument based on section 25(1) of the 1979 Act which provides as follows: “Where a person having bought or agreed to buy goods obtains. ie Carlos Soto. (ii) Here. However. that is the proper inference in the particular circumstances of the present case. It is not determinative. it is these special features of the contract between PT Awindo and Fishco which justify the conclusion stated above. It was common ground that if Carlos Soto can rely upon this provision. pledge. (3) In deciding whether a person in the position of the defendants had actual notice: (a) the court will apply an objective test and look at all the . These matters taken together persuade me that it was never the intention for property in the cargo to pass to Fishco until. and (ii) the analysis stated above is one which seems to me to accord better with the intention of the parties. I do not accept that submission in particular [2015] Vol 1 [QBD (Comm Ct) because: (i) it is unnecessarily complicated. It was also common ground that the opening part of this section is satisfied.542 EDER J] LLOYD’S LAW REPORTS The “SFL Hawk” shipment. In my judgment. the delivery or transfer by that person. of the goods or documents of title. As to that dispute. In this context.” 26. PT Awindo did not reserve to themselves an express right of disposal. the main focus of the argument between Mr Bird and Ms Paruk was whether Carlos Soto received the bill of lading “in good faith and without notice” of the right of the seller in the goods. So. that the bill of lading was indeed received by it in good faith and without the requisite notice. I also recognise that this is not a case of cash against documents and that PT Awindo had the benefit of a letter of credit. I fully recognise that. has the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods or documents of title with the consent of the owner. citing Feuer Leather Corporation v Frank Johnstone & Sons [1981] Com LR 251. 25. in my judgment. 24. a “document of title” is defined in section 61 of the 1979 Act as including “any bill of lading”. under any sale. for the purposes of these proceedings. I do not consider that the mere fact that the payment date was postponed until 45 days after the date of shipment necessarily indicates an intention that property should not pass until payment is actually made. In particular. Carlos Soto is properly to be regarded as being the “owner” of the cargo. as emphasised by Mr Bird. Mr Bird submitted that the ordinary right of rejection of the goods has no bearing on when property is intended to pass. property in the cargo would simply revert back to PT Awindo – although this was subject to his further qualification that the rejection clause could not be operated by Fishco in circumstances where. Both counsel also relied upon the principles as stated in Forsythe International (UK) Ltd v Silver Shipping Co Ltd (The Saetta) [1993] 2 Lloyd’s Rep 268 at page 279. or other disposition thereof. Fishco paid and PT Awindo received the contract price under their contract. and that the effect was simply that if and when the rejection clause was operated. possession of the goods or the documents of title to the goods. However. to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods. In the ordinary case and without laying down any general rule. viz: “(2) For this purpose the court is concerned with actual notice and not with constructive notice. whether it is done negligently or not”. on a balance of probability. he rightly acknowledged these features. I reach this conclusion for the following reasons: (i) As stated above. here Fishco had not merely the right to reject the goods but also the right to cancel the letter of credit in the stipulated circumstances. In fairness to Mr Bird. the mere transfer of the bill of lading is only prima facie evidence of the transfer of property. (iii) As already noted. ie where Fishco had a right both to cancel the letter of credit and to reject the goods in the stipulated circumstances. under terms which did not include a similar rejection clause. per Neill J at page 253. it was common ground that the burden of proof fell on Carlos Soto to persuade the court. at least. and there was no dispute that the bill of lading was delivered/transferred to Carlos Soto with the consent of the seller. It was also common ground that by virtue of section 61(3) of the 1979 Act. a thing is deemed to be done in good faith “when it is in fact done honestly. and (iii) that is what Fishco did with the result that the price was never paid. In particular. I accept that the endorsement and delivery of a bill of lading under a letter of credit may be regarded as evidence of an actual intention to pass property in the goods even where payment under such letter of credit is postponed to a future date. 27. 23. he submitted that they were not inconsistent with his primary submission that property was intended to and did pass as stated above.

” 28. However. it is my conclusion that Carlos Soto is entitled to rely upon section 25(1) of the 1979 Act. this is not the loss suffered by the claimants. However. Ms Paruk submitted that even on the assumption that Maersk was in breach of duty. Carlos Soto fails to satisfy the burden on it to bring itself within section 25(1). here. (b) if by an objective test clear notice was given liability cannot be avoided by proof merely of the absence of actual knowledge. it is properly to be regarded in these proceedings as the owner of the goods from the date of receipt of the bill of lading. and that the answer to the fourth preliminary issue is: “Yes”. there is a tension between what is there stated and the earlier subparagraphs. In such circumstances. Court of Appeal (Civil Division) Transcript No 465 of 1977)]. that. for present purposes. I also draw no distinction. (c) a person will be deemed to have had notice of any fact to which it can be shown that he deliberately turned a ‘blind eye’ . I do not consider that there is anything in the point concerning the discrepancies in the documents which would have alerted Ms Lopez to such possibility. and that. (ii) Further. Mr Bird relied 543 [EDER J on what is stated in para 3(d) and (e) in the passage cited from Feuer. It was common ground that in order to succeed in their claim. the claimants’ loss was caused by the intervening and wrongful acts of Fishco in . although Maersk’s alleged breach of the contract of carriage. It is not enough that the breach was merely the occasion for the loss. the only purpose of a packing list is to confirm the number of cartons and weight of the goods. (v) Rather. Whether this is so depends on the court’s common sense in interpreting the facts: Galoo Ltd v Bright Grahame Murray [1994] 1 WLR 1360.[2015] Vol 1 QBD (Comm Ct)] LLOYD’S LAW REPORTS The “SFL Hawk” circumstances. I should say that no distinction was drawn between Carlos Soto and AXA. Have Carlos Soto and in turn AXA suffered any loss as a result of the alleged damage? 31. (b) and (c). such breach did not “cause” the claimants’ loss. 1 December 1977. that the discrepancies in the documents presented to Banco Santander indicated that something was amiss. which (for present purposes is assumed) caused the cargo to be damaged. it still remains the case that all the circumstances of the case will be relevant. she submitted (at least originally) as follows: (i) The claimant may recover damages for a loss only where the breach of contract was the “effective” or “dominant” cause of that loss. the claimants must show that their loss has been caused by Maersk’s breach of duty. at the very least. on that basis. Such a rule seems to me to be logical and is in accordance with the judgment of Danckwerts J in G L Baker Ltd v Medway Building and Supplies Ltd [1958] 1 WLR 1216. Fishco has wrongfully profited by 90 per cent of the value of the cargo. and. Ms Lopez’s evidence (which I accept) was that she did not see or read those words. Fishco did not pay PT Awindo for the cargo. from Carlos Soto’s perspective. that in order for Ms Lopez to maintain that Carlos Soto had no notice of PT Awindo’s interest in the cargo. such words did not and would not have alerted Carlos Soto to the possibility that PT Awindo retained ownership of the goods. Accordingly. I do not accept that submission. In particular. Equally. (4) The burden of proving a bona fide purchase for value without notice rests on the person who asserts it. As to the facts. the intervening act of a third party will normally break the chain of causation: Chitty on Contracts at para 26-059. Insofar as may be relevant. in any event.) Here. I am satisfied that the bill of lading was received in good faith and without notice. (For the sake of clarity. Carlos Soto will have had to have turned a blind eye to the documents presented to them. even assuming that the claimants’ version of events is proven. This preliminary issue goes to the question of causation. Plainly. 29. Ms Paruk submitted that Ms Lopez accepts that Carlos Soto received the packing list which made express reference to the rejection clause. Fishco then paid Carlos Soto 10 per cent of the initial value of the cargo. that. that also seems to me confirmed by the subsequent conduct of Carlos Soto as referred to above. do those circumstances constitute notice? This must be a matter of fact and degree to be determined in the particular circumstances of the case:’ see Scarman LJ in [By Appointment (Sales) Ltd v Harrods Ltd (trading as Rackhams) (unreported). (d) on the other hand the court will not expect the recipient of goods to scrutinise commercial documents such as delivery notes with great care. (e) there is no general duty on a buyer of goods in an ordinary commercial transaction to make inquiries as to the right of the seller to dispose of the goods. 30. as summarised in her skeleton argument. Carlos Soto paid Fishco for the cargo. It is right that Carlos Soto did receive the packing list (together with the other shipping documents) and that this particular document did contain a reference to a “rejection clause”. However. (f) ‘the question becomes: looking objectively at the circumstances which are alleged to constitute notice. and that. For these reasons. Ms Paruk relied heavily on what is stated above in para (3)(a). . ie 12 to 13 December 2012. . (iv) Accordingly. Here. 1220. (iii) In the present case.

———————————————— .) 33. whatever attraction there may be in Ms Paruk’s argument. and I would also answer the fourth and fifth preliminary issues: “Yes”. but the claimants’ losses cannot be said to flow from Maersk’s breach. I accept that the burden lies on the claimants to prove that their loss was caused by Maersk’s breach. there must be an event of such impact that it “obliterates” the wrongdoing of the defendant: see per Gross LJ in Borealis AB v Geogas Trading SA [2011] 1 Lloyd’s Rep 482 at para 44. it nevertheless obtained the price from Carlos Soto under the letter of credit from Carlos Soto’s bank. it seems to me that [2015] Vol 1 [QBD (Comm Ct) applying “common sense”. Banco Santander. broke the chain of causation. by consent. The contract-breaker is liable so long as his breach was ‘an’ effective cause of his loss: the court need not choose which cause was the more effective. be answered: “Yes”. it seems to me that the position is clear from the authorities. Failing agreement. Accordingly. the party responsible for the breach is liable to the claimant for that loss. In that regard. I would answer the fifth preliminary issue: “Yes”. that her original submission as formulated in para 31(v) above was not entirely correct. the first three preliminary issues should. I would request counsel to seek to agree an order for my approval including all consequential matters. on the claimants’ own case. Thus.544 EDER J] LLOYD’S LAW REPORTS The “SFL Hawk” failing to reimburse Carlos Soto once Fishco’s purchase of the cargo had been cancelled. As to these submissions. here.” (Emphasis added. I think. “the” or at least “an” effective cause of the claimants’ loss was indeed Maersk’s breach of duty (if such be proved). it is not necessary for a claimant to prove that the particular breach is the “effective” or “dominant” cause of the loss. In any event. contrary to Ms Paruk’s submission and as. she accepted. I accept that the claimants’ loss might be said to be caused or contributed to by Fishco in the sense that although it relied upon the rejection clause as against PT Awindo. In conclusion. whether or not Carlos Soto can establish ownership of the cargo at the relevant time. it does not seem to me that any act of Fishco after that date can cause the chain of causation to be broken. Maersk’s alleged breach of the contract of carriage merely provided the occasion for Fishco to act. However. in such circumstances. the claimants’ loss crystallised (at the latest) when the cargo arrived in damaged condition in Vigo on or about 18 December. I will deal with any outstanding issues. I think. and. both cooperating and both of equal efficacy in causing loss to the claimant. However. At its highest. given the circumstances. As submitted by Mr Bird. she accepted. (vi) Thus. 34. the test as to what constitutes an intervening act sufficient to break the chain of causation is a high one. Chitty summarises the position clearly at para 26-067: “If a breach of contract is one of two causes. For these reasons. this part of Ms Paruk’s argument fails for at least two reasons. First. Although the language in Chitty at para 26-057 might suggest otherwise. as a matter of timing. Secondly. Nor do I accept that Ms Paruk’s argument that the chain of causation was broken by the intervening and wrongful acts of Fishco. 32. in my view. the losses claimed arise out of Fishco’s actions which. I do not consider that the facts are such as to “obliterate” Maersk’s breach of duty (if it be proved). Here. Conclusion 35.