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When is a shipper not a shipper?

Insights / 24-06-2020

MVV Environment Devonport Ltd v. NTO Shipping GmbH & Co KG & Ors (MV Nortrader) [2020] EWHC 1371 (Comm)

A party named as the shipper in a bill of lading has successfully argued that it was not the shipper under the contract of carriage and that its inclusion in the bill of lading was a mistake. It was not, therefore, party to the arbitration agreement in the bill of lading and the tribunal had no jurisdiction over it in respect of a claim brought by the carrier. The decision is a reminder that a bill of lading only evidences the terms of the contract of carriage that has already been concluded beforehand. While the true parties to the contract of carriage will usually be those named in the bill of lading, this will not always necessarily be the case.

The background facts

Pursuant to a bill of lading dated 12 January 2017, a cargo of unprocessed incinerator bottom ash (“UIBA”) was shipped onboard a vessel owned by NTO Shipping GmbH & Co KG (“NTO”) for a voyage from Plymouth to the Netherlands. The bill of lading incorporated the terms and arbitration clause of a voyage charterparty dated 10 January 2017 and named MVV Environment Devonport Ltd (“MVV”) as the shipper. On 13 January 2017, an explosion occurred on board, injuring the vessel’s Chief Officer and causing NTO losses of around €722,000. NTO commenced arbitration against MVV to recover those losses.

MVV challenged the tribunal’s jurisdiction, arguing that although it had been named as the shipper in the bill, it was not in fact a party to the contract of carriage evidenced by that bill. The tribunal held that it had jurisdiction over the dispute. MVV appealed to the Court.

The Commercial Court decision

The Court considered the background to the contract of carriage. MVV specialised in converting waste products into energy and, in the process, created UIBA as a waste product. In order to dispose of the UIBA, MVV had entered a contract with RockSolid BV (“RS”) (the “IBA Contract”). Under the terms of the IBA Contract, RS was to transport the UIBA from MVV’s plant to RS’s facilities in the Netherlands for its treatment, recycling and disposal and the UIBA was to become RS’s property and responsibility from the moment it left MVV’s plant. RS arranged transportation of the UIBA to Plymouth where shipment to the Netherlands was arranged by their shipping agent, Sanders Stevens Limited (“SS”).

By the time of the 12 January 2017 shipment, 33 shipments of the UIBA had been arranged. For each shipment, SS prepared the necessary paperwork, including bills of lading. Each bill of lading named MVV as the shipper and RS as the consignee. SS had inserted MVV as shipper in the draft bill of lading for the first shipment on the basis that MVV was identified as “export-notifier” in the notification document required under European legislation concerning cross-frontier movement of waste. This first draft bill had been approved by RS and SS had named MVV as the shipper for each subsequent shipment. For each shipment, once the documents had been generated and the UIBA had been loaded onto the vessel being used, SS sent a copy of the shipping documentation to a variety of different email addresses, including MVV and RS.

The Court stated that a contract of carriage comes into existence at the time when goods are presented for and accepted by the carrier for shipment. Therefore, the contract always precedes and is only evidenced by a bill of lading. Consequently, the question was not whether MVV was a party to the bill of lading contract, but whether the information set out in the bill of lading accurately reflected the terms of the contract of carriage which it evidenced.

In order for MVV to have been the shipper under the contract of carriage, RS or SS must have had authority to enter into the contract of carriage as agent for MVV. However, there was nothing in the contractual documentation to indicate that either RS or SS had been given express authority by MVV to enter into a contract of carriage on its behalf in relation to any UIBA collected by RS from MVV’s plant. In fact, the IBA Contract made RS exclusively responsible for transportation of the UIBA once it left MVV’s plant. There was also nothing to indicate that SS had express authority to act as MVV’s agent on the basis of an implied agreement by which MVV had conferred authority on SS to enter into contracts on its behalf. The copy shipping documentation emailed by SS to MVV after each shipment appeared to have been sent for information purposes only and there was no other contact between them. MVV’s agreement to being named as shipper could not be inferred from its silence and there was no other indication of any such assent.

The Court also found that there was no implied actual authority for RS or SS to act as MVV’s agent. Such authority could not be inferred from the parties’ conduct or the circumstances of the case. Implied actual authority can only arise in relation to a party which has been given some amount of express authority to which the implied authority is attached. For example, a director with express authority to act for the company in specified ways might (depending on the circumstances) have implied actual authority to bind the company beyond the scope of the express authority. Given that neither RS nor SS had any express authority to act as MVV’s agent, there could be no implied actual authority either. Further, the implied actual authority was said to arise due to MVV’s failure to object on receiving the 33 prior bundles of shipping documents which included bills of lading naming MVV as the shipper. Generally, however, silence is incapable of giving rise to implied actual authority without more.

Finally, SS did not have ostensible authority to act as MVV’s agent. This involved considering whether MVV, by its words and conduct to NTO, had held out SS as being authorised to act as MVV’s agent and whether NTO had relied on this representation. The fact that MVV had not expressly objected to being named as shipper in the previous shipping documentation was not enough. At the time the contract of carriage for this cargo was entered into, NTO had no knowledge of SS having sent the documentation for previous shipments to MVV. It was, therefore, impossible to say that this constituted a representation by MVV to NTO or that NTO had relied on such a representation.

In conclusion, neither RS nor SS had authority to enter into the contract of carriage with NTO on MVV’s behalf. Accordingly, MVV was not a party to the contract of carriage purportedly evidenced by the bill of lading and so was not a party to the arbitration agreement. The tribunal did not, therefore, have jurisdiction over it.

Comment

The judgment provides a useful reminder of the requirements for demonstrating an agency relationship and the basis of any authority granted to the agent. It is also a reminder that, where appropriate, the English Court will look behind potentially erroneously drafted written agreements to ascertain the correct terms or parties to the contract. Other jurisdictions might take a different view, however, so best practice remains to ensure that the contractual documentation is accurate.

Jamila Khan

Jamila Khan Partner

Natalie Nielsen

Natalie Nielsen Managing Associate

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Maritime / Bills of Lading