STANDARD CHARTERED BANK V DORCHESTER LNG (2) LTD (THE "ERIN SCHULTE")

[2013] EWHC 808 (Comm), Queen's Bench Division, Admiralty Court, Mr Justice Teare, 18 April 2013

Sale of goods - Letters of credit - Whether bank lawful holder of bill of lading - Whether bank having title to sue - Delivery without production of bills of lading - Whether bank suffered loss - Carriage of Goods by Sea Act 1992

The claimant bank, SCB, sued the defendant shipowner for damages in the sum of US$6,132,355.74 for the misdelivery and/or conversion by the shipowner of a cargo of about 9,208 mt of gasoil shipped on board the vessel Erin Schulte off Cotonou, Benin, on 13 May 2010. On 26 March 2010 a sale contract was entered into between U and C for the sale of 18,000 mt of gasoil. The gasoil was sourced by U from G by a contract made on or about 23 April 2010. It was required for use in the mining industry and therefore was to be of a specified quality. Both contracts of sale stipulated for the opening of letters of credit by the respective purchasers. On 6 April 2010 a letter of credit was opened by the United Bank of Africa in favour of U. It was governed by UCP 600 and had an expiry date of 12 June 2010. This letter of credit was confirmed by SCB to U on 12 April 2010. On 30 April 2010 G became the second beneficiary pursuant to a transfer of the letter of credit. The bank Societe Generale acted as the agent of G for the purpose of drawing under the transfer letter of credit. On 12 May 2010 some 9,466 mt of gasoil were shipped on board the vessel Maria E off Cotonou for carriage to and delivery at Takoradi, Ghana, pursuant to the sale contracts. On 13 May 2010 some 9,208 mt of gasoil were shipped on board the vessel Erin Schulte off Cotonou for carriage to and delivery at Takoradi also pursuant to the sale contracts. The bills of lading recorded that the shipper was G and the consignee "to the order of Societe Generale, Paris". On 13 May 2010 Maria E arrived off Takoradi and a sample of her gasoil was taken. It was not of the required quality and was rejected. UBA advised SCB of an Amendment, number 3, to the letter of credit which reduced the value and quantity of the cargo covered by the letter of credit to that on board Maria E. U and SCB agreed to that amendment and also prematurely advised UBA of G's agreement (G eventually rejected this amendment). G presented documents under the original letter of credit to SCB in respect of the sale of the cargo on board Maria E and was paid by SCB. New letters of credit were opened for new buyers to purchase the Erin Schulte cargo but G also pursued that purchase and the bills of lading were presented under the original letter of credit. The result of these events was that although U had been paid for the cargo it had not paid either G or SCB. U was therefore the beneficiary of a windfall which resulted from SCB's error in notifying UBA of U's agreement to Amendment no 3 without obtaining G's agreement to that amendment. That exposed SCB to the risk, which materialised, of having to pay G with no right of recourse from UBA. The question raised was whether SCB could recoup its loss from the shipowner on the basis that SCB was the lawful holder of the bills of lading. If so, G would have to indemnify the shipowner pursuant to the letters of indemnity it gave in order that the cargo might be discharged without production of the bills of lading.