Glencore v. Cherry CofA
DMC Rating Category: Developed
This Case Note was contributed by Ang & Partners, the Website’s International Contributors for Singapore
1) Oil carried on board the vessel "Cherry"
from Kuwait to Fujairah and partially discharged in Fujairah;
Glencore were voyage charterers and bill of lading holders for the first three cargoes. It did not have a contract with the "Cherry" for the Hyperion cargo. Glencore claimed that the four parcels were supposed to have been completely discharged at Fujairah. For the undischarged portions of the first three parcels, it sued each of the owners of the "Cherry", the "Epic" and the "Addax" for breach of the bill of lading contracts and/or duty as bailees. For the Hyperion cargo, Glencore sued the owners of the "Cherry" for conversion, as it lacked the requisite contractual relationship. The various actions were consolidated and dealt with at a joint hearing as the basic facts were similar.
Glencore’s immediate seller was Metro, who also owned the floating storage facility in Fujairah. Metro was the time charterer of the vessels. Glencore had an arrangement with Metro to re-sell the cargoes to Metro upon their discharge at Fujairah and Metro would be at liberty to re-sell the cargoes. The shipowners had followed Metro’s instructions on the disposal of the cargo. Glencore had given instructions to Metro to discharge the cargoes fully in Fujairah. These instructions were not passed on by Metro to the shipowners, who, in accordance with Metro's instructions and against Metro's indemnity, carried part of the cargoes to the Far East, and there disposed of it.
The trial judge gave judgment to Glencore for all four parcels. At the appeal, the owners of the vessels argued that:-
1) Metro was acting as the agent of Glencore in giving instructions on disposal of the cargo;
2) The shipowners did not cause Glencore’s loss as Metro would have re-sold the cargo if it had all been discharged and Glencore would not have been paid anyway. Metro had collapsed in February 1998; and
3) Glencore did not have the immediate right of possession of the Hyperion cargo necessary to sue for its conversion.
The Court of Appeal dismissed the shipowners’ appeal in relation to the first three cargoes but allowed the appeal on the Hyperion cargo.
1. The rule that a carrier who delivers cargo without surrender of the original bill of lading does so at his peril is long established. The corollary of this proposition is that neither the owner of the cargo nor anyone else can insist on delivery of the cargo being made to him if he is unable to produce the bill of lading. The shipowners acted on the instructions of Metro in full knowledge that Metro could not produce the bills at that stage. The shipowners thus knowingly committed acts that were in breach of contract and to escape liability for doing so they would have to establish that Glencore had given the instructions on which they acted or could be deemed to have done so.
2. The Court of Appeal agreed with the trial judge that Glencore’s instructions to Metro required full discharge of the cargo from the ships into the Fujairah facilities.
3. In the UK proceedings to which Metro, Glencore and the shipowners were parties, the judgment of the English court had confirmed that Metro had no actual authority to dispose of the oil and were not entitled to use the oil as though it was their own from the moment of its arrival at Fujairah. This finding bound the shipowners in the Singapore proceedings.
4. The falsification of documents, like ship’s documents and telexes showing that the cargoes had been discharged in full when they had not, showed that the shipowners knew Metro did not have authority to order the vessels not to discharge nor to deal with the cargoes as though they belonged to Metro.
5. Metro had invoked the timecharterparty clause in requesting discharge and delivery without production of the bills. The shipowners therefore knew that they would be acting on the instructions of Metro as timecharterers. Metro’s instructions could not have constituted them Glencore’s agents, let alone Glencore’s agents for taking delivery of the cargoes.
6. The principles relating to implied actual authority did not assist the shipowners as the extent of Metro’s actual authority as evidenced by Glencore’s instructions to them was to arrange for the cargoes to be discharged at Fujairah and stored there. The authority was specific, not general.
7. A claimant can recover damages for a breach of contract or in tort where that breach (or wrong) was the "effective" or "dominant" cause of the loss. The courts adopt a common sense approach in interpreting the facts of each case to determine whether the breach was the cause of the loss or merely gave the opportunity for the loss to be sustained. Though different terms have been used, the law of causation in tort and contract is the same.
8. The most relevant fact was that the oil complained about was not put into the tanks. It was taken away. There was no evidence that had all the oil been put into the tanks in Fujairah in December 1997, it or most of it would not still have been there in February 1998 when Metro collapsed. While Metro could have lawfully dealt with the "Epic" oil and the "Cherry" oil from January 1998 onwards pursuant to its arrangement with Glencore, this did not prove that Metro would have so dealt with all of the oil so as to remove it entirely from the storage facility by the time of its collapse. As long as the oil or part of it was still in the facility when Metro collapsed, Glencore could have reclaimed it since, contractually, they retained title until payment. Even if they had transferred title, the remaining oil could have been the subject of execution proceedings.
9. On the face of it, the shipowners’ action caused the oil to be lost and the shipowners had failed to discharge the burden of showing that it would have been lost in any case.
The Hyperion cargo
11. The Court of Appeal did not agree with the trial judge’s interpretation of the English case of Bristol & West of England Bank v Midland Railway Co  2 QB 653 as stating that the right to sue in conversion may be transferred to the plaintiff by a preceding holder of that right. The Court of Appeal held that the English case did not overrule the requirement that a plaintiff suing in conversion must have had the immediate right to possession at the time of the alleged conversion in order to maintain such an action. Moreover, that case did not allow the right of possession to be transferred retrospectively to the date when the act of conversion occurred.
12. The act of conversion was alleged to have taken place on 7 December 1997. The evidence showed that, as of that date, Glencore did not hold the bill of lading issued by the owners of "Hyperion". Glencore asserted that they were the owners of the cargo at all material times and therefore entitled to possess it. Having title to the goods, however, does not mean having the immediate right to possession. According to section 19(2) of the Sale of Goods Act (Cap 393), where the bill of lading makes the goods deliverable to the order of the seller or his agent, the seller is presumed to have reserved the right of disposal. Hence, the presumption is that the immediate right of possession would lie with the supplier named on the bill, until it had endorsed the bill over to the buyer or its bank. Glencore did not obtain the bill of lading until after 15 December 1997. It was not the person entitled to possession of the goods on 7 December 1997.
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