Felipe Arizon, Arizon Abogados SLP, Spain

The Court of Appeal of Valencia handed down last 16 of January 2019 a judgment holding the freight forwarder responsible for the damages arising out of the delivery of the goods without production of the bill of lading.

The facts of the case were succinctly as follows: The shippers sued the forwarders and the line for having delivered their consignment of marble in Santos, Brazil, without production of the bill of lading. The line, ZIM, alleged that under the Master bill of lading the Court was not competent to hear the dispute. In addition, the line contended that it was not responsible for such delivery of the goods as the liner bill of lading contained a clause stating:

In accordance to the local regulations at the port of destination, the port authorities or customs authorities at destination may deliver the goods to the notify party or to the consignee of the goods without production of the original bill of lading and without notice to the carrier”.

Such a clause was not present the in house bill of lading issued by the forwarder.

The Commercial Court agreed to the question of competence put by ZIM and the proceedings continued against the forwarder alone. The Commercial Court refused the liability of the forwarder on the basis that the shipper had no title to sue the forwarder since he had sold the goods ex works and therefore the risk of loss had passed to the buyers qua receivers.

The matter was brought by the Shippers before the Court of Appeal, there were several arguments put by the appellants, inter alia, the existence of title to sue; the alleged time bar of the action, and finally whether the forwarder should be liable of the damages arising from the delivery of the goods without production of the bill of lading.

During the proceedings before the Commercial Court some legal experts from Brazil illustrated the Court under Brazilian law in respect to the delivery of the goods under bills of lading. The experts explained that between June and October 2013 in accordance the Brazilian law the goods could be delivered by the Port Authorities or by the Custom Authorities to the notify or consignee under the bill of lading without production of the bill.

The experts mentioned that such practice became very common, and that as a result the shipping lines issued notices to his customers alerting them of the situation, and included clauses in the bills of ladings to exempt their liability in such cases. The Brazilian experts explained that the alarming consequences of this practice were such that the Authorities had to issue new rules requiring the consignees to prove their ownership of the goods. This exercise often required the production of the original bill of lading, which reduced this practice substantially.

From the cross examination of the directors of the forwarding Company it was averred that the goods were to be delivered against presentation of the original bill of lading unless the legislation at the port of destination permitted otherwise; that the bills of lading were used by the shippers as a way to secure that the goods were paid for before they were delivered to their consignees; that they were aware of the exceptional position in Brazil for delivery of the goods without production of the bill of lading.

The Court of Appeal in a detailed judgment held that in the appellants had not lost title to sue the forwarders as they were named as shippers in the bill of lading and that the terms of their relationship with the buyers did not prevent them from having title to sue the carriers. In respect to the liability of the forwarders to the shippers the Court held that the forwarders were not able to rely on the liner terms inserted in the master bill of lading as they had issued their own home bill of lading that had not such clause and they had been sued under such bill of lading. The Court further held that the forwarders did not give notice to the shippers of the liner terms inserted in the line bill of lading.

In the Court’s view the forwarders as professional firm should have ensured that the terms inserted in their own bill of lading should be matched by the liner terms issued by the sea carrier, and if this was not the case they should have given notice to the shippers of such situation for the shippers to consider their risks and options.

The Court of Appeal is an interesting one: on the one hand for the reasoning behind the title to sue argument. There have been some CIF cases where actions led by the subrogated cargo insurers in Spain were refused for having subrogated in a party that had not suffered the loss in accordance to the sale contract. Most importantly the Court has taken the opportunity to emphasise the importance of the presentation rule for delivery of the goods carried under bills of lading, and to highlight what should the position of the forwarder be where the terms of the house bill of lading are different, and more onerous, to those contained in the master bill of lading.