Charlotte J. van Steenderen, Van Steenderen Mainport Lawyers, Rotterdam
Ref: Judgment of the Rotterdam District Court 14 November 2024, ECLI:NL:RBROT: 2024:11505 in the interim relief proceedings between Intertoys B.V., claimant and Flexport International LLC, respondent.
- Summary
What has happened?
Exercise of extended right of retention on containers belonging to Intertoys by Flexport due to outstanding invoices from Flexport to Intertoys and its sister company Blokker. At the beginning of 2023, Mirage concludes a framework agreement with Flexport for forwarding work to be carried out by Flexport for Mirage itself and for four subsidiaries, including Intertoys and Blokker. Article 2.7 of the framework agreement states, among other things: “Supplier will have a general lien on all goods based on the above mentioned Fenex conditions as laid down in art. 19 and 17 under 4 FENEX for receivables due”.
On 4 November 2024, Blokker was granted a suspension of payments and on 13 November 2024, Blokker was declared bankrupt. In response to Blokker’s situation, Flexport invoked its right of retention by letter dated 7 November 2024, based on Article 2.7 of the framework agreement. From that moment on, Flexport retained the Blokker and Intertoys containers that arrived in the port and refused to release the containers. Flexport also withdrew the credit limit of Blokker, Intertoys and Mirage. Intertoys is seeking an order for the delivery of the containers intended for it, including future containers, on the condition that Intertoys is not in arrears.
The Court finds that it is not sufficiently plausible that Flexport can exercise an extended right of retention on goods belonging to Intertoys on the basis of Article 2.7 of the framework agreement for the collection of claims it has on Blokker. Article 2.7 of the framework agreement refers to Articles 19 and 17, paragraph 4 of the Fenex terms and conditions, while those articles in the latest version of the Fenex terms and conditions (the 2018 version) do not relate to rights of retention.
Flexport’s position that the parties intended to refer to the relevant articles of the 2004 Fenex terms and conditions (which do concern rights of retention) and that the reference was mistakenly not changed to the correct articles of the latest version, is not supported by the documents.
In addition, Article 2.7 of the framework agreement does not specifically state that Mirage’s subsidiaries can be held mutually liable for each other’s debts. The connection between the claim and the retained goods required for invoking the right of retention therefore does not follow from that article.
Flexport is therefore not entitled to invoke the right of retention on the Intertoys containers to recover the claim against Blokker, so it must release the Intertoys containers. It is also important that Intertoys pays the invoices owed for this immediately, i.e. without a payment term. Mirage’s guarantee for the debts of Intertoys and Blokker in the framework agreement no longer has any meaning, because Mirage has announced that it is insolvent. In addition, an amount of USD 839,551.71 has been invoiced to Intertoys and is still outstanding. Credit rating agencies have set Intertoys’ credit limit at zero. This means that Flexport has good reason to fear that Intertoys will not fulfil its payment obligations.
- The facts
2.1. Intertoys operates a chain of toy shops in the Netherlands and is a group company of Mirage Retail Group B.V. (hereafter: Mirage).
2.2. In early 2023, Mirage entered into a Supply Framework Agreement (hereinafter: the framework agreement) with Flexport for itself and four subsidiaries, which sets out the conditions under which Flexport performs freight forwarding activities. The four subsidiaries, including Intertoys and Blokker B.V. (hereafter: Blokker), have co-signed the framework agreement.
2.3. The framework agreement states, insofar as relevant:
“(…)
2.2 This Agreement applies to all orders and deliveries of the Performance to Client [i.e. Mirage] and its Subsidiaries. The liability of the Supplier [i.e. Flexport] for loss or damages during transportation services shall be in the scope of the latest version of the FENEX Dutch Forwarding Conditions (sea freight and additional forwarding services), CMR Convention /General Transport Conditions (AVC2002) (CMR for international and AVC for domestic trucking) and Montreal Air convention (air freight) will be leading (the ‘Transport Conditions’). In the event that no Transport Condition will apply, the purchase conditions of Client (the ‘Purchase Conditions’) will apply.
(…)
2.7 Supplier will have a general lien on all goods based on the above mentioned Fenex conditions as laid down in art. 19 and 17 under 4 FENEX for receivables due. (…)
(…)
10.1 In order to act as a guarantor for debts arising from legal acts Client (previously named Blokker Holding BV) has filed a liability statement as mentioned in Art. 2:403 BW Dutch Civil Code (Burgerlijk Wetboek) with the Dutch Chamber of Commerce in favour of Blokker B.V. filed on 25 March 1998 and in favour of Intertoys B.V. filed on 11 January 2021. This entails that Client will be severally liable for all debts and liabilities incurred by Supplier’s under this Agreement in relation to Blokker B.V. and/or Intertoys B.V. (…)
(…)
11.10 In signing this Agreement, all and any earlier oral or written agreements between the Parties on delivery of Performance as agreed in this Agreement are cancelled. Any amendments to this agreements have to be executed in writing by the Parties.
(…)”
2.4. Insofar as relevant, the Purchase Conditions of Mirage (hereafter: the MRG purchase conditions) state:
“6.4. The Supplier waives the rights and powers that accrue to the Supplier pursuant to the right of retention.”
2.5. In October 2024, Mirage and Flexport concluded an addendum to the framework agreement (hereafter: the addendum). It states, insofar as relevant:
“(…) Flexport and Mirage specifically agree as follow:
(A) The Parties wish to extend the Initial Term, section 5.2. of the Agreement, until 31 December 2025 in order to keep the framework agreement for general services active.
(B) The Parties wish to enter into a BSA and the provisions below replace the corresponding provisions in section 3 (‘BSA Specific Terms’) of the Agreement in its entirety or are added to the Agreement as applicable.
(…)
4.4 A Subsidiary under the Agreement cannot be held liable by Flexport for costs, charges, non-payment or other shortcomings deriving from the delivery of services by Flexport to another Subsidiary or Mirage as a whole. (…)”
2.6. By decision of 4 November 2024, the Amsterdam District Court granted Blokker a suspension of payments. On 13 November 2024, the Amsterdam District Court declared Blokker bankrupt.
2.7. In response to Blokker’s situation, Flexport informed Mirage in a letter dated 7 November 2024 that it was invoking its right of retention under Article 2.7 of the framework agreement. Since then, Flexport has retained the Blokker and Intertoys containers that arrive at the port and has refused to release them. Flexport has also withdrawn the credit limit of Blokker, Intertoys and Mirage.
- The interim relief judge’s assessment
Jurisdiction
3.1. As Flexport is based in the United States, the dispute is international in nature and it must first be assessed whether the interim relief judge has jurisdiction. In that context, Intertoys has stated that after the dispute arose, the parties made a choice of forum that gives the interim relief judge of the Rotterdam court jurisdiction to rule on the dispute that has arisen and that the parties have opted for the applicability of Dutch law. Flexport has not refuted this, so the interim relief judge proceeds on that basis and considers himself competent to decide on the dispute.
Right of retention
3.2. The dispute concerns the question of whether Flexport, as it claims, is entitled to invoke a (extended) right of retention with regard to the Intertoys containers on the basis of Article 2.7 of the framework agreement. The parties disagree on how certain articles in the framework agreement and the addendum should be interpreted.
3.3. The interim relief judge is of the opinion that it is insufficiently plausible that Flexport can exercise an extended right of retention on the basis of article 2.7 of the framework agreement on goods from Intertoys for the collection of claims it has on Blokker. This will be explained below.
3.4. Intertoys’ position is followed for the interpretation of Article 2.2 of the framework agreement. It follows from the second and third sentences of that Article that the latest version of the Fenex and other transport conditions only apply to Flexport’s liability for loss or damage during transport. In other situations, for example in the case of debts owed by Blokker to Flexport that Flexport wishes to recover as discussed here, the MRG purchasing conditions apply. With Article 6.4 of the MRG purchasing conditions, Flexport has waived the right to invoke a right of retention. In that sense, Article 2.7 of the framework agreement with the MRG purchasing conditions takes precedence.
3.5. Article 2.7 of the framework agreement refers to Articles 19 and 17, paragraph 4 of the Fenex conditions, while those articles in the latest version of the Fenex conditions (the 2018 version) do not relate to rights of retention. The documents do not support Flexport’s position that the parties intended to refer to the relevant articles of the 2004 Fenex terms and conditions (which do concern rights of retention) and that the reference was mistakenly not amended to the correct articles of the latest version. Flexport itself states in paragraphs 44 and 45 of the statement of defence that Article 2.7 of the framework agreement is derived from the first Supply Agreement between Blokker and Flexport in mid-2019. The Fenex terms and conditions of 2018 were already in force at that time. The fact that Flexport apparently did not notice the incorrect reference in its view and that reference was consistently copied in later agreements lies within Flexport’s sphere of risk. Against that background and because Intertoys objects to this, the application of the 2004 Fenex terms and conditions cannot be assumed.
3.6. In addition, Article 2.7 of the framework agreement does not specifically state that Mirage’s subsidiaries can be held mutually liable for each other’s debts. The connection between the claim and the retained goods required for invoking the right of retention therefore does not follow from that article.
3.7. Article 4.4 of the addendum stipulates that Flexport cannot hold a subsidiary of Mirage liable for shortcomings of another subsidiary. Although it is clear that this article only applies to section 3 of the framework agreement (the BSA Specific Terms) and is not relevant in this case, it does indicate that Flexport believes that one subsidiary is not responsible for the debts of another subsidiary.
Intertoys’ payment term and credit limit
3.8. Flexport has unilaterally withdrawn Intertoys’ credit limit. This effectively means that Flexport will only release goods once it has been paid for its services. The question is whether this is allowed.
3.9. The principle of equal crossing applies to payment terms. The parties initially agreed on a payment term of 45 days. Flexport now claims that this payment term is dependent on not exceeding the credit limit it has set. The credit limits are not included in the agreement. Flexport claims that it sets these limits at its own discretion and objectively based on recommendations from credit rating agencies and then communicates these to customers verbally. According to Flexport, this is a verbal agreement between the parties. Even leaving aside the fact that Intertoys disputes this verbal agreement, it conflicts with Article 11.10 of the framework agreement, which stipulates that all amendments to the framework agreement must be recorded in writing. Against this background, it is difficult to say the least that Flexport wants to hold Intertoys to a verbal agreement. The interim relief judge will return to this in the context of the weighing of interests in the conclusion.
Does Flexport have sufficient collateral in the context of the weighing of interests?
3.10. Flexport is holding containers intended for Blokker. Intertoys has stated that the retained containers have a purchase value of USD 13,467,911.90 and a sales value of over USD 59 million, while Blokker’s debt (and Mirage’s) amounts to USD 5,087,915.00 (paragraph 2.21 of its closing argument).
According to Flexport, the execution value is lower than the expected sales value and the bankruptcy trustee may claim the retained stocks in accordance with Article 60 of the Bankruptcy Act. Therefore, according to Flexport, it is uncertain whether it can expect to receive payment.
3.11. The judge in the interim relief proceedings is of the opinion that, in the context of balancing interests, it cannot be ruled out that Flexport has sufficient collateral in the form of the right of retention on the Blokker containers. The value of the retained goods is well in excess of Blokker’s debt, even if one assumes the execution value and having to contribute to the bankruptcy estate costs. Moreover, it follows from Article 60 of the Bankruptcy Act that the priority position of the retentionist is maintained in the event of bankruptcy. Another factor is that Flexport itself is to blame for allowing Blokker’s debt to accumulate to such a high level.
Conclusion
3.12. As ruled, Flexport is not entitled to invoke the right of retention on the Intertoys containers to recover the debt from Blokker, so it must release the Intertoys containers. In addition, the interim relief judge does consider it important that Intertoys pay the invoices owed for this immediately – that is to say, without a payment term applying and with due observance of what is considered below in 3.14. According to Flexport, Mirage’s guarantee for the debts of Intertoys and Blokker in Article 10.1 of the framework agreement no longer has any significance, because Mirage, after being referred to Article 10.1, has announced that it is insolvent. In addition, as Flexport states in its statement of defence and as Intertoys acknowledged at the hearing, an amount of USD 839,551.71 has currently been invoiced to Intertoys and is still outstanding (although at the end of the oral hearing Intertoys mentioned an amount of EUR 100,000.00 paid that week). Credit rating agencies have set Intertoys’ credit limit at zero. Intertoys has not contested this. This means that Flexport has good reason to fear that Intertoys will not fulfil its payment obligations.
3.13. The interim relief judge notes that Intertoys refers to its exhibit 3 in its claim for an overview of the containers to be released, but in view of the exhibit list it is clear that it intended to refer to exhibit 4.
3.14. All of this means that Flexport is ordered to deliver the containers named in exhibit 4 of the writ of summons, as well as future containers, to the Intertoys distribution centre in Waddinxveen within one day of this judgment being served. This judgment is subject to the condition that the containers in question have been released, due to the risk that the carrier or supplier of the products will not release the container or the transport documentation. In addition, Intertoys must have paid Flexport the invoices relating to the container in question prior to release.
3.15. A one-off penalty payment of EUR 10,000.00 per container that Flexport fails to deliver in the manner described in 3.14. will be attached to the conviction.
3.16. Flexport will be ordered to pay Intertoys’ legal costs as the largely unsuccessful party in the case.
3.17. The statutory interest on the legal costs claimed is awarded as stated in the decision.
An order for the delivery of containers (including future ones) is issued, under the condition that the relevant container has been released and that Intertoys has paid the invoices relating to that container prior to release.