Paul Bugden, Bugden + Co., London

Ref: Sevylor Shipping v Altfadul Company (The Baltic Strait) [2018] EWHC 629 (Comm) Andrew Baker J.

This was an appeal to the High Court under section 69 of the Arbitration Act 1996 arising out of a London arbitration award whereby the ship-owners (the Owners) were found liable to the claimant, Altfadul, for damage to a cargo of boxed fresh bananas shipped on the MV Baltic Strait.

Altfadul were holders of the relevant bills of lading for the cargo. Its CIF sellers were CoMaCo who had voyage chartered the carrying vessel from the Owners. CoMaCo gave a credit to Altfadul for part of Altfadul’s loss in its subsequent contracts of sale with Altfadul.

The arbitrators held that Altfadul could recover not only its own loss but also that of CoMaCo (namely the loss suffered by when it gave the credit to Altfadul) by virtue of s.2(4) of the Carriage of Goods by Sea Act 1992 so that Altfadul was thereby entitled to the entire difference between the value of the cargo as discharged and its value on arrival in sound condition.

On appeal, Owners sought to challenge the finding that Altfadul was entitled to claim the loss suffered by CoMaCo on two legal points; namely that;

  1. s.2(4) of the 1992 Act only operates where rights of suit were previously vested in the party suffering the relevant loss but it has lost them by virtue of the operation of s.2(1) of the 1992 Act,

2 s.2(4) of the 1992 Act does not in any event permit the bill of lading holder to claim a charterer’s loss under the bill of lading contract.

Altfadul’s primary case on appeal was the Award should be upheld award upon an entirely discrete and different legal basis, albeit rather oddly one not apparently raised before the tribunal. Altfadul argued it was entitled to damages equal to the full value of the cargo as a matter of English common law by reason of having the property in the goods at the relevant time so that there was no need as such to rely on sect 2 (4)of the 1992 Act at all. In other words Altfadul argued that the entire loss was its own loss anyway.

Hardly surprisingly the judge agreed with Altfadul. He held that Altfadul’s property in the goods carried with it the right to recover full damages and that such right was entirely abstracted from the personal financial circumstances of the claimant and quite irrespective of the absence of any personal ‘economic’ loss on the part of Altfadul.  The ‘loss’ in the eyes of the law to a contractual claimant in such a case of physical damage is the diminution to the market value of his property interest in the cargo.

Absent any property interest or physical damage the contractual (but not purely tortious) claimant may sue for some purely personal loss on his part, as where the goods are at his risk. But where he sues for damage to his property interest the absence of personal loss (as where, say, the goods are not at his risk or he has paid nothing for the goods or in fact recovers more or less then the market value of the damaged goods) is altogether irrelevant.

On this basis the appeal failed and the sect 2(4) points were as such an irrelevance. The arbitrators’ award of full damages to Altfadul was correct in law whether or not they were right in their view as to the effect of s.2(4) of  the 1992 Act. Nevertheless the  judge went on to consider them anyway on an obiter basis.

As to the Owners’ first argument, namely that for section 2(4) to operate at all the rights of suit vested in the bill of lading holder must have been previously vested in the party suffering loss, the Judge found that there was nothing in the statutory language to suggest that s.2(4) was so narrow drafted. That further requirement is not expressly stated in terms by the section and there was nothing in the statutory language used to suggest that it should be imputed.

As to the  Owners’ second argument, namely that section 2(4) does not permit the bill of lading holder to claim a charterers’ losses under the bill of lading, the Judge agreed with Owners. As the bills of lading constituted nothing more than a receipt in charterers’ hands, the charterers would not be entitled to recover anything under the bill of lading contracts; as opposed to loss suffered under any contract of charter with Owners.