Jarl Trä v. Convoys

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Jarl Trä AB and others v Convoys Limited
English High Court: Moore-Bick, J.; 25 June 2003
Thomas Macey-Dare (instructed by Burges Salmon) for Jarl Trä and the other claimants
Jonathan Chambers (instructed by Aaron & Partners) for the defendants, Convoy
This case established that a sub-bailee could exercise a general right of lien against the owner of the goods - even though it had no direct contractual relationship with the owner and the amounts outstanding were owed by another party – where, as in this case, the contract between the owner and the bailor entitled the bailor to sub-contract the performance of the contract "on any terms".

DMC Category Rating: Developed

This case note is based on an Article in the July 2003 Edition of the ‘Bulletin’, published by the Marine and Insurance teams at the international firm of lawyers, DLA. DLA is an International Contributor to this website.

Between June and December 2001, the claimants (three Swedish companies), shipped various parcels of timber from Sweden to Chatham on three vessels operated by Siöwalls, a company running a liner service between Sweden and the UK.

In the timber trade, goods are sold on FOM (free on motor) and FBY (free buyer's yard) terms. This meant that Siöwalls had to arrange for the handling and storage of the goods at the port of discharge, for the loading of the consignees' lorries in the case of shipments on FOM terms and, in the case of shipments on FBY terms, for road haulage to the final destination.

Siöwalls engaged Convoys Limited, a firm of stevedores and wharfingers based in Chatham, to handle the cargoes. Towards the end of 2001, however, Siöwalls fell into severe financial difficulties and went into administration and subsequently into liquidation, owing Convoys over £118,000. Convoys promptly placed a lien on all parcels of timber in their possession that had been carried in Siöwalls' vessels.

The Swedish companies, which had already sold the timber to buyers in the UK, bought it back, taking assignments of their customers' rights so that they could contest the lien themselves. They then issued these proceedings, seeking delivery up of the goods and damages for wrongful interference.

The contracts of carriage between the Swedish companies and Siöwalls were agreed through freight brokers and evidenced by Siöwalls' standard form bills of lading. The bills stated on their face that the carrier's standard conditions of carriage applied and could be inspected or would be supplied on request. The brokers all had copies of these standard terms, although none of the Swedish companies could remember ever having seen them.

Siöwalls' standard terms were stated to apply to every contract of carriage for the performance of the entire transport, and that:

"[Siöwalls] shall be entitled to sub-contract on any terms the whole or any part of the carriage, loading, unloading, storing, warehousing, handling and any or all duties whatsoever undertaken by [Siöwalls] in relation to the Goods".

Convoys' terms of business were, in all material respects, the same as those of Crescent Wharves Limited, a company they bought out in 2000 and with whom Siöwalls had dealt for many years. These terms included Crescent's wharfingers clause in relation to handling, the United Kingdom Warehousing Association 1994 conditions in relation to storage, and the Road Haulage Association's Conditions of Carriage 1991 for road haulage.

The wharfingers clause provided that goods would be subject to a lien for all monies due to Convoys, whether for storage expenses incurred in connection with the goods, or charges, or otherwise "and subject also to a general lien for all monies due to [Convoys] from the customer upon any account whatsoever". The Warehousing Association terms also included a general lien entitling Convoys to retain the goods as security "for payment of all sums due from the customer on any account (relating to the goods or not)".

The first issue was whether the Swedish companies had had sufficient notice of Siöwalls' standard terms. On the facts, the judge was satisfied that copies were sent to at least two of the three companies, but that no-one had actually sat down and scrutinised them carefully. All three had been doing business with Siöwalls for many years, and none of them could have been in any doubt that Siöwalls' standard conditions would apply. They could easily have obtained a copy if they had wanted, but they had worked on the assumption that the conditions would be typical of those found in liner bills and had been prepared to ship their goods on that basis.

The second issue was whether Convoys could rely on their own standard terms as against the Swedish companies, bearing in mind that they had no direct contractual relationship with them. The judge held that they could. Convoys were sub-bailees of the goods from Siöwalls. If a bailee sub-bails the goods with the authority of the owner to a person who voluntarily accepts delivery of them, knowing that they belong to someone other than the bailee, a relationship of bailment arises between the owner and the sub-bailee. Terms in the sub-bailment are enforceable as against the owner to the extent the owner authorised the bailee to enter into those terms with the sub-bailor (The Pioneer Container [1994] 2 AC 324).

What was the extent of the authority given to Siöwalls to enter into a sub-bailment with a sub-contractor such as Convoys? Under Siöwalls' standard terms, it was entitled to sub-contract "on any terms". In these circumstances, only terms that were so unusual or so unreasonable that they could not reasonably be understood to fall within the consent would be held to be unenforceable.

Was the general lien unusual or unreasonable? No. The judge held that a term entitling a wharfinger to exercise a general lien is not so unusual that it could not reasonably be understood to fall within the scope of the shipper's consent. He accepted that the effect of a general lien exercisable by a sub-bailee could be very onerous, because the sub-bailee could seize goods belonging to one party in respect of a debt owed by another. But many sub-contractors of this kind did business on terms that included a general lien, so this aspect was one that had to be accepted as arising in the ordinary course of business.

Convoys could exercise their lien. But the judge found on the evidence that, shortly after Siöwalls' financial difficulties became known, Convoys gave Siöwalls an assurance that it would continue to provide services as long as they were paid for in advance, and would not detain any goods in respect of which advance payment had been made. Some, though not all, of the goods fell within this category. Convoys were not entitled to exercise their lien over those goods. In addition, its claim for storage charges incurred while it held the goods on lien failed, as such costs were not covered by the terms of the wharfingers clause.



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