LLOYDS LAW REPORTS

[2015] Vol 1

The SFL Hawk

QBD (Comm Ct)]

QUEENS BENCH DIVISION

(COMMERCIAL COURT)
24 February; 2 March 2015

CARLOS SOTO SAU AND ANOTHER

v
AP MOLLER-MAERSK AS
(THE SFL HAWK)
[2015] EWHC 458 (Comm)
Before Mr Justice EDER
Carriage of goods by sea Sale of goods (cfr)
Cargo of frozen swordfish rejected as unfit for
human consumption Bill of lading holder
claiming damages against carrier for breach
of contract of carriage Whether bill of
lading holder was owner of goods Whether
property passed on transfer of bill of lading
Whether bill of lading holder entitled to rely
on buyer in possession exception to nemo
dat quod non habet rule Whether carriers
breach caused claimants loss Sale of Goods
Act 1979, section 25.
On 24 October 2012 PT Awindo International
(PT Awindo) agreed to sell a cargo of frozen
swordfish to Fishco BVBA (Fishco) cfr Vigo,
Spain at a price of US$112,250 with payment
by letter of credit 45 days after the bill of lading
date. In addition, the invoice contained reference
to the following clause:
REJECTION CLAUSE: IN EVENT
OF REJECTION BY VET, SELLER TO
REFUND BUYER WITH 100% OF THE
INVOICE AMOUNT . . .
Pursuant to the contract, Fishco procured the
opening of an irrevocable letter of credit by Bank
Central Asia on 30 October 2012. The letter of
credit provided for payment to be made 45 days
after the date of shipment. It also included a
rejection clause in the following terms:
IF
BEFORE
MATURITY
DATE
APPLICANT PRESENTS COPY OF
REJECTION
CERTIFICATE,
THEN
PAYMENT WILL BE CANCELLED AND
APPLICANT WILL RELEASE THE CARGO
TO BENEFICIARY.
It was common ground that the stipulated
maturity date was, in effect, the payment date,
ie 45 days after the date of shipment.
On the same day as the original sale contract
between PT Awindo and Fishco, Fishco entered
into an on-sale contract with the first claimant

537
PART 10

(Carlos Soto). Delivery was on the same basis,

CFR Vigo, but the price was slightly higher,
US$118,500, with payment 60 days after the
bill of lading date by way of an irrevocable
letter of credit. The contract did not include a
rejection clause.
On 31 October 2012 Carlos Soto duly opened
a letter of credit with Banco Santander in favour
of Fishco.
Thereafter, the cargo was shipped on board
the defendants vessel SFL Hawk, and a bill of
lading was issued dated 14 November 2012. The
bill of lading named PT Awindo as the shipper
and stated that the consignee was TO ORDER.
Carlos Soto was the stated notify party.
On 14 November 2012 the bill of lading was
endorsed and signed in blank by PT Awindo
and was then presented together with the other
shipping documents by PT Awindo under
the letter of credit in its favour. Thereafter,
Fishco delivered the bill of lading and the other
shipping documents down the chain to Banco
Santander. By a letter dated 11 December 2012
Banco Santander notified Carlos Soto of certain
discrepancies in the documents. Notwithstanding,
Carlos Soto waived the discrepancies and took
collection of the bill of lading and the other
shipping documents from Banco Santander on
13 December 2012. The documents received by
Carlos Soto included the original packing list
which stipulated in the box headed Terms of
Delivery & Payment:
CFR VIGO, SPAIN & LC 45 DAYS
AFTER SHIPMENT WITH REJECTION
CLAUSE
On 18 December 2012 the Port Health
Authority at Vigo rejected the cargo on the
ground that its temperature was too high and it
was unfit for human consumption. No payments
had yet been made under either letter of credit.
Shortly thereafter, Fishco presented to Bank
Central Asia the rejection certificate and on
19 December 2012 the bank cancelled the letter
of credit in favour of PT Awindo pursuant to the
rejection clause.
Carlos Soto did not reject the cargo, taking
the view that it still had to pay Fishco the full
purchase price because the damage occurred
during carriage when the goods were at its risk.
It decided to mitigate its loss by selling the goods
as salvage back to Fishco for US$11,853.24.
Thereafter, payment in the sum of US$118,532.38
was made by Banco Santander under its letter of
credit and debited to Carlos Sotos account.
Following the rejection of the cargo, PT Awindo
brought a claim against the carrier (Maersk) in
respect of the cargo damage. On 10 May 2013

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Maersk entered into a settlement agreement with
PT Awindo. The settlement agreement stipulated
that PT Awindo was acting as or on behalf of the
Shipper and/or Receiver and/or subrogated Cargo
Underwriter and/or any other parties interested in
the cargo (Cargo Interests); that in that capacity,
PT Awindo confirmed acceptance of the sum
of US$15,000 in full and final settlement of all
claims on behalf of such Cargo Interests; and
that PT Awindo warranted that it was the lawful
holder of the bill of lading, that no other party
had title to sue, and that it was authorised to act
on behalf of all other cargo interests.
Carlos Soto, together with the cargo insurers
(AXA) brought the present proceedings against
Maersk. They said that none of the warranties
given by PT Awindo in the settlement agreement
with Maersk was true. It was their case that Carlos
Soto was, in truth, the lawful holder of the bill of
lading; that it paid for the cargo, and (together
with AXA) that it suffered loss represented by
the difference between the market value of the
cargo in sound condition (US$118,532.38) less
the salvage value (US$11,853.24) plus handling
fees at Vigo (1,166.16).
On the trial of preliminary issues it was
common ground that Carlos Soto paid for the
cargo, and was the lawful holder of the bill of
lading and entitled to possession of the cargo.
The issues for decision were whether Carlos
Soto was at all relevant times the owner of the
cargo, and whether (on the assumption that the
damage to the cargo was caused by Maersks
breach of the contract of carriage) Carlos Soto
and in turn AXA suffered any loss as a result of
the alleged damage.
Held by QBD (Comm Ct) (EDER J) that:
(1) The claimants submission that property in
the cargo passed when PT Awindo endorsed and
tendered the bill of lading to Fishcos bank on
14 November 2012 would be rejected. Although
the transfer of a bill of lading was prima facie
evidence of intention to pass property, that was
not necessarily so. The question as to when
property passed in a cfr contract was one of
actual intention. The mere fact that the payment
date was postponed until 45 days after the date of
shipment did not necessarily indicate an intention
that property should not pass until payment was
actually made. However, Fishco had not merely
the right to reject the goods but also the right
to cancel the letter of credit in the stipulated
circumstances. Those special features of the
contract between PT Awindo and Fishco justified
the inference that it was never the intention for
property in the cargo to pass to Fishco until, at
least, Fishco paid and PT Awindo received the
contract price under their contract (see para 23);

[QBD (Comm Ct)

E Clemens Horst Co v Biddell Brothers

[1911] 1 KB 934 and The Kronprinsessan
Margareta [1921] 1 AC 486, referred to.
(2) However, Carlos Soto obtained good title
to the cargo as a bona fide purchaser for value
pursuant to section 25(1) of the Sale of Goods
Act 1979. There was no dispute that the bill
of lading was a document of title within the
meaning of section 61 of the 1979 Act, and that
the bill of lading was delivered/transferred to
Carlos Soto with the consent of the seller. On the
evidence, Carlos Soto received the bill of lading
in good faith and without notice of the right of the
seller in the goods. On that basis Carlos Soto was
properly to be regarded as the owner of the goods
from the date of receipt of the bill of lading on
13 December 2012 (see paras 26 and 29);
The Saetta [1993] 2 Lloyds Rep
268; [1994] 1 WLR 1334 and Feuer Leather
Corporation v Frank Johnstone & Sons [1981]
Com LR 251, considered.
(3) As to causation, it was not necessary for a
claimant to prove that the particular breach was
the effective cause of the loss. The contractbreaker was liable so long as his breach was
an effective cause of his loss. On the evidence,
an effective cause of the claimants loss was
Maersks assumed breach of duty. Maersks
submission that the claimants loss was caused
by the intervening and wrongful acts of Fishco
in failing to reimburse Carlos Soto once Fishcos
purchase of the cargo had been cancelled would
be rejected. The test as to what constituted an
intervening act sufficient to break the chain of
causation was a high one. There had to be an
event of such impact that it obliterated the
wrongdoing of the defendant. In the present
case, the facts were not such as to obliterate
Maersks assumed breach of duty (see para 33);
Borealis AB v Geogas Trading SA [2011]
1 Lloyds Rep 482, considered.

The following cases were referred to in the

judgment:
Borealis AB v Geogas Trading SA [2010] EWHC
2789 (Comm); [2011] 1 Lloyds Rep 482;
E Clemens Horst Co v Biddell Brothers (CA) [1911]
1 KB 934;
Feuer Leather Corporation v Frank Johnstone &
Sons [1981] Com LR 251;
Forsythe International (UK) Ltd v Silver Shipping
Co Ltd (The Saetta) [1993] 2 Lloyds Rep 268;
[1994] 1 WLR 1334;
Galoo Ltd v Bright Grahame Murray (CA) [1994]
1 WLR 1360;

LLOYDS LAW REPORTS

[2015] Vol 1

The SFL Hawk

QBD (Comm Ct)]

Kronprinsessan Margareta, The [1921] 1 AC 486;

Sanders v Maclean (CA) (1883) 11 QBD 327.

This was the trial of preliminary issues in the

action brought by: (1) Carlos Soto Sau, the alleged
owners of a cargo of frozen swordfish; and (2) AXA
Securos Generales SA de Seguros y Reaseguros,
the cargo insurers, against the defendant carrier AP
Moller-Maersk AS, claiming damages following
the rejection of the cargo as unfit for human
consumption.
Tom Bird, instructed by Birketts LLP, for the
claimants; Saira Paruk, instructed by Bentleys
Stokes & Lowless LLP, for the defendant.
The further facts are stated in the judgment of
Eder J.
Judgment was reserved.
Monday, 2 March 2015

JUDGMENT
Mr Justice EDER:
Introduction
1. This is the trial of what were originally five
preliminary issues arising out of the carriage of a
cargo of frozen swordfish by the defendant carrier
(Maersk) from Jakarta, Indonesia to Vigo, Spain
in late 2012. On its arrival at Vigo on 18 December
2012, the Vigo Port Health Authority rejected the
cargo as unfit for human consumption. It was then
sold for salvage by the receivers of the cargo, ie
the first claimant (Carlos Soto) who (together
with the insurers, the second claimant, AXA)
now seek to recover their alleged losses in these
proceedings. In summary, the claim is for the
difference between the market value of the cargo
in sound condition (ie US$118,532.38) less salvage
value (ie US$11,853.24) plus handling fees at Vigo
(ie 1,166.16).
2. Following the rejection of the cargo,
the original shipper, PT Awindo International
(PT Awindo) brought a claim against Maersk in
respect of the cargo damage. There is no evidence
or correspondence relating to the circumstances
in which this claim was notified to Maersk. In
any event, on 10 May 2013, Maersk entered into
a settlement agreement with PT Awindo. This
stipulated that in entering into such settlement
agreement, PT Awindo acted: . . . as or on behalf
of the Shipper and/or Receiver and/or subrogated
Cargo Underwriter and/or any other parties
interested in the cargo (Cargo Interests) . . .; that

539
[EDER J

in that capacity, PT Awindo confirmed acceptance

of the sum of US$15,000 in full and final settlement
of all claims on behalf of such Cargo Interests;
and that PT Awindo warranted that it was the lawful
holder of the bill of lading, that no other party had
title to sue and that it was authorised to act on behalf
of all other cargo interests. It is the claimants case
that none of these warranties was true; that Carlos
Soto was, in truth, the lawful holder of the bill of
lading; that it paid for the cargo and (together with
AXA) suffered the loss stated above; and that the
claimants were and are entitled to sue to recover
such loss.
3. For present purposes, I proceed on the
assumption that the cargo suffered damage as a
result of one or more breaches by Maersk of its
obligations as carrier.
4. In essence, the five preliminary issues
as originally ordered by the court concern the
claimants title to sue in respect of these alleged
losses viz:
(i) Did Carlos Soto pay for the cargo?
(ii) Was Carlos Soto at all relevant times the
lawful holder of the bill of lading?
(iii) Was Carlos Soto at all relevant times
entitled to possession of the cargo?
(iv) Was Carlos Soto at all relevant times the
owner of the cargo?
(v) Have Carlos Soto and in turn AXA suffered
any loss as a result of the alleged damage?
5. In the event, it is now common ground
that the answer to each of the first three issues is
Yes. Thus, this short trial focused on the fourth
and fifth issues. In summary, Mr Bird on behalf of
the claimants submitted that they should both be
answered Yes. Ms Paruk on behalf of Maersk
submitted that they should be answered No.
6. As to the evidence, there was served: (i) on
behalf of the claimants, two witness statements by
Ms Francisca Lopez (who has worked in the import/
export department of Carlos Soto for 27 years and
whose primary responsibility is to import/export
frozen fish and shellfish); and (ii) on behalf of Maersk,
two witness statements of Mr Madong Nadeak (who
is an export manager employed by PT Awindo).
Ms Lopez gave evidence by video link. Mr Nadeak
did not give live evidence; his evidence was put in
under a hearsay notice. I should also mention that,
at the beginning of the trial, Ms Paruk made an
application to rely on a further witness statement of
Mr Nadeak which I rejected for reasons which I gave
in a separate judgment and which I do not repeat.
Outline of main events
7. The main events were not controversial and
can be summarised as follows.

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8. On 24 October 2012 PT Awindo agreed to

sell the intended cargo to Fishco BVBA (Fishco).
As appears from the pro forma invoice issued by
PT Awindo, the contract was cfr Vigo, Spain; and
the agreed price was US$112,250 with payment
by LC (ie letter of credit) 45 days after BL (ie bill
of lading) date. In addition, the invoice contained
reference to the following clause:
REJECTION CLAUSE: IN EVEN[T] OF
REJECTION BY VET, SELLER TO REFUND
BUYER WITH 100% OF THE INVOICE
AMOUNT . . .
9. Pursuant to the contract, Fishco procured the
opening of an irrevocable letter of credit by Bank
Central Asia on 30 October 2012. The letter of credit
provided for payment to be made 45 days after the
date of shipment. It also included a rejection clause
in the following terms:
IF
BEFORE
MATURITY
DATE
APPLICANT
PRESENTS
COPY
OF
REJECTION
CERTIFICATE,
THEN
PAYMENT WILL BE CANCELLED AND
APPLICANT WILL RELEASE THE CARGO
TO BENEFICIARY.
It was common ground that the stipulated
maturity date was, in effect, the payment date, ie
45 days after the date of shipment.
10. On the same day as the original sale contract
between PT Awindo and Fishco, ie 24 October
2012, Fishco entered into an on-sale contract
with Carlos Soto. The terms of this contract were
similar (but not identical) to the original contract,
ie delivery was on the same basis, ie CFR Vigo
but the price was slightly higher, ie US$118,500
with payment 60 days (rather than 45 days) after
the bill of lading date by way of an irrevocable letter
of credit. However, importantly this contract did not
include a rejection clause.
11. On 31 October 2012 Carlos Soto duly
opened a letter of credit with Banco Santander in
favour of Fishco.
12. Thereafter, the cargo was duly shipped on
board the carrying vessel, MV SFL Hawk, and a
bill of lading in standard form was issued dated
14 November 2012. On this basis and as a matter
of calculation, the payment date under the Fishco
letter of credit was 27 December 2012; the payment
date under the Carlos Soto letter of credit was on or
about 12 January 2013. The cargo was carried in a
refrigerated container numbered MMAU 115549-1.
The bill of lading named PT Awindo as the shipper
and stated that the consignee was TO ORDER.
Carlos Soto was the stated notify party.
13. On or about 14 November 2012 the bill of
lading was endorsed and signed in blank by PT
Awindo and was then presented together with the
other shipping documents by PT Awindo under

[2015] Vol 1
[QBD (Comm Ct)

the letter of credit in its favour. Thereafter, Fishco

delivered the bill of lading and the other shipping
documents down the chain to Banco Santander. By
a letter dated 11 December 2012, Banco Santander
notified Carlos Soto of certain discrepancies in the
documents including the fact that the quality certificate
was missing and Health Cert. not as per L/C (Not
showing date of freezing). Notwithstanding, Carlos
Soto in effect waived these discrepancies and took
collection of the bill of lading and the other shipping
documents from Banco Santander on or about
13 December 2012. It is common ground that these
documents received by Carlos Soto included the
original packing list which stipulated in the box
headed Terms of Delivery & Payment:
CFR VIGO, SPAIN & LC 45 DAYS AFTER
SHIPMENT WITH REJECTION CLAUSE
14. On 18 December 2012 the Port Health
Authority at Vigo rejected the cargo on the ground
that its temperature was too high. The effect of this
rejection was that the cargo could not be sold in
the European Union. This was, of course, still well
within the period allowed for payment under either
letter of credit; so, at this stage, no payments had
yet been made under either letter of credit.
15. Very shortly thereafter, it appears that Fishco
presented to the Bank Central Asia the rejection
certificate and on 19 December 2012 the bank
cancelled the letter of credit in favour of PT Awindo
pursuant to the rejection clause.
16. Carlos Soto did not reject the cargo.
According to Ms Lopez, the view taken by Carlos
Soto was that the goods were at Carlos Sotos
risk; that the letter of credit which it had issued
in favour of Fishco was irrevocable (at least once
it had waived the discrepancies in the shipping
documents); and that accordingly, Carlos Soto still
had to pay Fishco the full purchase price because
the damage occurred during carriage when the
goods were at its risk. Therefore, Carlos Soto
decided to mitigate its loss which it did by selling
the goods as salvage back to Fishco for the sum of
US$11,853.24 (a 90 per cent discount) as evidenced
by an invoice dated 4 January 2013. Thereafter,
payment in the sum of US$118,532.38 was made
by Banco Santander under its letter of credit and
debited to Carlos Sotos account.
17. Against that background, I turn to consider
the preliminary issues. As already noted, it was
agreed that the first three issues should be answered
yes. I should mention that Mr Bird on behalf of the
claimants submitted that this was sufficient to give
Carlos Soto title to sue and that therefore the answer
to the fourth preliminary issue was irrelevant.
Mr Bird may well be right in that submission but he
did not develop it and Ms Paruk did not address me
on it. I say nothing more about it.

[2015] Vol 1

LLOYDS LAW REPORTS

QBD (Comm Ct)]

The SFL Hawk

Preliminary issue 4: was Carlos Soto at all

relevant times the owner of the cargo?
18. The argument under this head fell into two
main parts. First, Ms Paruk submitted that as a
matter of objective contractual intention between
PT Awindo and Fishco, property in the cargo
remained throughout with PT Awindo. This was
disputed by Mr Bird. However, he submitted, in
the alternative, that Carlos Soto took delivery of
the bill of lading in good faith and with no actual
knowledge of PT Awindos alleged interest in the
cargo and that therefore Carlos Soto obtained good
title to the cargo as a bona fide purchaser for value
pursuant to section 25(1) of the Sale of Goods
Act 1979 (the 1979 Act). This was disputed by
Ms Paruk. I deal with each of these points in turn.
19. As to the first point, it is often assumed that
property will pass under a cfr (or cif) contract at
the latest when the bill of lading is endorsed and
delivered to the buyer (or to the buyers bank under a
letter of credit). There is, at first blush, good reason
for such assumption. After all, a bill of lading is
generally regarded as a document of title; and if a
seller gives up possession of the bill of lading and
puts it into circulation, it is perhaps not unnatural
to suppose that the seller is intending to transfer
property in the goods to the recipient. However, it is
plain that although the transfer of a bill of lading is
prima facie evidence of intention to pass property,
this is not necessarily so: see E Clemens Horst Co v
Biddell Brothers [1911] 1 KB 934 at page 957, per
Kennedy LJ, citing Sanders v Maclean (1883) 11
QBD 327; and more generally, Benjamins Sale of
Goods, 9th Edition, paras 19-103 and 19-104.
20. As to the applicable principles, there was
broad agreement between Mr Bird and Ms Paruk
that the correct approach is as summarised in
Benjamins Sale of Goods, para 19-099:
The courts look to those dealings in order to
determine whether the seller intended, on the one
hand, unconditionally to appropriate the goods
to the contract, or, on the other hand, to reserve
the right of disposal. As the question of passing
of property is one of actual intention it is
impossible to lay down a general rule applicable
to all cif contracts.
It was also common ground that the same
principles apply to cfr contracts. See Benjamins
Sale of Goods at para 21-013; and also The
Kronprinsessan Margareta [1921] 1 AC 486 at
pages 511 to 518. Thus, the question as to when
property passed is one of actual intention.
21. In accordance with these principles, Mr Bird
submitted that property in the cargo passed when
PT Awindo endorsed and tendered the bill of lading
to Fishcos bank on 14 November 2012. In support

541
[EDER J

of such submission, Mr Bird made the following

further points:
(i) PT Awindo did not reserve any right of
disposal in the PT Awindo/Fishco contract.
(ii) The original sale contract provided for
payment by way of an irrevocable letter of credit,
which was payable 45 days after the date of
shipment (well after the cargos arrival at Vigo
on 12 December 2012). By relying on the banks
promise, PT Awindo could be adequately assured
of payment.
(iii) The rejection clause in the original
sale contract does not affect that analysis. In
circumstances where the clause was triggered, it
provided that the price would be refundable and
Fishco would return the cargo. The same result
occurs when a buyer rejects goods on the basis
that they do not comply with their contractual
description. In that situation, the buyer would
also be entitled to recover the price previously
paid against documents and the seller would be
able to deal with the rejected goods: see Scrutton
on Charterparties, 22nd Edition, at para 10-014.
The right of rejection has no bearing on when
property is intended to pass.
(iv) For similar reasons, Fishco and Carlos
Soto intended property in the cargo to pass under
their contract when the bill of lading was delivered
to Banco Santander/Fishco (by 13 December
2012, at the latest). Alternatively, property was
intended to pass when Carlos Soto waived the
discrepancies in the shipping documents and the
letter of credit became irrevocable (on or about
12 or 13 December 2012).
22. Ms Paruk submitted that this analysis was
flawed for a number of reasons. In particular,
she relied on the evidence of Mr Nadeak that
ownership never passed to Fishco. It is true
that that is what Mr Nadeak says in his witness
statement. But such statement is only part of the
entirety of the evidence which I have to consider;
and given that PT Awindo told what appears to be
a number of untruths in the settlement agreement,
I do not consider that Mr Nadeaks evidence can
be safely relied upon in this context, still less be
determinative of the issue. Notwithstanding, it is
my conclusion that (subject to the further argument
in relation to section 25(1) of the 1979 Act) Ms
Paruk is right in her submission that property
remained with PT Awindo in particular because:
(i) payment was delayed under the PT Awindo/
Fishco contract and letter of credit until 45 days
after the date of shipment; (ii) the rejection clause,
in effect, entitled Fishco to reject the cargo in the
stipulated circumstances and, on presentation of
the rejection certificate, in effect to cancel the letter
of credit within that same period, ie 45 days after

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shipment; and (iii) that is what Fishco did with the

result that the price was never paid.
23. These matters taken together persuade me
that it was never the intention for property in the
cargo to pass to Fishco until, at least, Fishco paid
and PT Awindo received the contract price under
their contract. I reach this conclusion for the
following reasons:
(i) As stated above, the mere transfer of the
bill of lading is only prima facie evidence of the
transfer of property. It is not determinative.
(ii) Here, I fully recognise that, as emphasised
by Mr Bird, PT Awindo did not reserve to
themselves an express right of disposal. I also
recognise that this is not a case of cash against
documents and that PT Awindo had the benefit
of a letter of credit. In the ordinary case and
without laying down any general rule, I accept
that the endorsement and delivery of a bill of
lading under a letter of credit may be regarded as
evidence of an actual intention to pass property
in the goods even where payment under such
letter of credit is postponed to a future date.
So, I do not consider that the mere fact that
the payment date was postponed until 45 days
after the date of shipment necessarily indicates
an intention that property should not pass until
payment is actually made. However, in my
judgment, that is the proper inference in the
particular circumstances of the present case, ie
where Fishco had a right both to cancel the letter
of credit and to reject the goods in the stipulated
circumstances.
(iii) As already noted, Mr Bird submitted that
the ordinary right of rejection of the goods has
no bearing on when property is intended to pass.
I am prepared to assume in Mr Birds favour that
that submission is correct. However, here Fishco
had not merely the right to reject the goods but
also the right to cancel the letter of credit in the
stipulated circumstances. In my judgment, it is
these special features of the contract between PT
Awindo and Fishco which justify the conclusion
stated above.
24. In fairness to Mr Bird, he rightly acknowledged
these features. However, he submitted that they
were not inconsistent with his primary submission
that property was intended to and did pass as stated
above; and that the effect was simply that if and
when the rejection clause was operated, property in
the cargo would simply revert back to PT Awindo
although this was subject to his further qualification
that the rejection clause could not be operated by
Fishco in circumstances where, as here, the cargo
had been sold on to a third party, ie Carlos Soto,
under terms which did not include a similar rejection
clause. I do not accept that submission in particular

[2015] Vol 1
[QBD (Comm Ct)

because: (i) it is unnecessarily complicated; and

(ii) the analysis stated above is one which seems to
me to accord better with the intention of the parties.
25. I turn then to consider Mr Birds alternative
argument based on section 25(1) of the 1979 Act
which provides as follows:
Where a person having bought or agreed
to buy goods obtains, with the consent of the
seller, possession of the goods or the documents
of title to the goods, the delivery or transfer by
that person, or by a mercantile agent acting for
him, of the goods or documents of title, under
any sale, pledge, or other disposition thereof, to
any person receiving the same in good faith and
without notice of any lien or other right of the
original seller in respect of the goods, has the
same effect as if the person making the delivery
or transfer were a mercantile agent in possession
of the goods or documents of title with the
consent of the owner.
26. It was common ground that if Carlos Soto
can rely upon this provision, the effect is that, for
the purposes of these proceedings, Carlos Soto is
properly to be regarded as being the owner of the
cargo. It was also common ground that the opening
part of this section is satisfied. In particular, a
document of title is defined in section 61 of
the 1979 Act as including any bill of lading;
and there was no dispute that the bill of lading
was delivered/transferred to Carlos Soto with the
consent of the seller.
27. In this context, the main focus of the argument
between Mr Bird and Ms Paruk was whether Carlos
Soto received the bill of lading in good faith and
without notice of the right of the seller in the
goods. As to that dispute, there was a large measure
of agreement as to the applicable principles. In
particular, it was common ground that the burden of
proof fell on Carlos Soto to persuade the court, on
a balance of probability, that the bill of lading was
indeed received by it in good faith and without the
requisite notice. It was also common ground that
by virtue of section 61(3) of the 1979 Act, a thing
is deemed to be done in good faith when it is in
fact done honestly, whether it is done negligently or
not. Both counsel also relied upon the principles
as stated in Forsythe International (UK) Ltd v Silver
Shipping Co Ltd (The Saetta) [1993] 2 Lloyds Rep
268 at page 279, citing Feuer Leather Corporation v
Frank Johnstone & Sons [1981] Com LR 251, per
Neill J at page 253, viz:
(2) For this purpose the court is concerned
with actual notice and not with constructive
notice.
(3) In deciding whether a person in the position
of the defendants had actual notice: (a) the court
will apply an objective test and look at all the

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The SFL Hawk

circumstances; (b) if by an objective test clear

notice was given liability cannot be avoided by
proof merely of the absence of actual knowledge;
(c) a person will be deemed to have had notice
of any fact to which it can be shown that he
deliberately turned a blind eye . . . (d) on the
other hand the court will not expect the recipient
of goods to scrutinise commercial documents
such as delivery notes with great care; (e) there is
no general duty on a buyer of goods in an ordinary
commercial transaction to make inquiries as to
the right of the seller to dispose of the goods;
(f) the question becomes: looking objectively at
the circumstances which are alleged to constitute
notice, do those circumstances constitute notice?
This must be a matter of fact and degree to be
determined in the particular circumstances of
the case: see Scarman LJ in [By Appointment
(Sales) Ltd v Harrods Ltd (trading as Rackhams)
(unreported), 1 December 1977; Court of Appeal
(Civil Division) Transcript No 465 of 1977)].
(4) The burden of proving a bona fide
purchase for value without notice rests on the
person who asserts it. Such a rule seems to
me to be logical and is in accordance with the
judgment of Danckwerts J in G L Baker Ltd v
Medway Building and Supplies Ltd [1958] 1
WLR 1216, 1220.
28. Here, Ms Paruk relied heavily on what is
stated above in para (3)(a), (b) and (c). As to the
facts, Ms Paruk submitted that Ms Lopez accepts
that Carlos Soto received the packing list which
made express reference to the rejection clause;
that the discrepancies in the documents presented
to Banco Santander indicated that something was
amiss; that in order for Ms Lopez to maintain that
Carlos Soto had no notice of PT Awindos interest
in the cargo, Carlos Soto will have had to have
turned a blind eye to the documents presented to
them; and that, at the very least, Carlos Soto fails
to satisfy the burden on it to bring itself within
section 25(1).
29. I do not accept that submission. It is right that
Carlos Soto did receive the packing list (together
with the other shipping documents) and that this
particular document did contain a reference to a
rejection clause. However, Ms Lopezs evidence
(which I accept) was that she did not see or read
those words; that, from Carlos Sotos perspective,
the only purpose of a packing list is to confirm the
number of cartons and weight of the goods; and
that, in any event, such words did not and would not
have alerted Carlos Soto to the possibility that PT
Awindo retained ownership of the goods. Equally,
I do not consider that there is anything in the point
concerning the discrepancies in the documents
which would have alerted Ms Lopez to such
possibility. In such circumstances, Mr Bird relied

543
[EDER J

on what is stated in para 3(d) and (e) in the passage

cited from Feuer. Plainly, there is a tension between
what is there stated and the earlier subparagraphs.
However, here, I am satisfied that the bill of lading
was received in good faith and without notice.
Insofar as may be relevant, that also seems to me
confirmed by the subsequent conduct of Carlos
Soto as referred to above.
30. For these reasons, it is my conclusion that
Carlos Soto is entitled to rely upon section 25(1) of
the 1979 Act; that, on that basis, it is properly to be
regarded in these proceedings as the owner of the
goods from the date of receipt of the bill of lading,
ie 12 to 13 December 2012; and that the answer to
the fourth preliminary issue is: Yes.
Have Carlos Soto and in turn AXA suffered any
loss as a result of the alleged damage?
31. This preliminary issue goes to the question
of causation. It was common ground that in order
to succeed in their claim, the claimants must show
that their loss has been caused by Maersks breach
of duty. (For the sake of clarity, I should say that
no distinction was drawn between Carlos Soto and
AXA; and, for present purposes, I also draw no
distinction.) Here, Ms Paruk submitted that even on
the assumption that Maersk was in breach of duty,
such breach did not cause the claimants loss. In
particular, as summarised in her skeleton argument,
she submitted (at least originally) as follows:
(i) The claimant may recover damages for a
loss only where the breach of contract was the
effective or dominant cause of that loss. It
is not enough that the breach was merely the
occasion for the loss. Whether this is so depends
on the courts common sense in interpreting
the facts: Galoo Ltd v Bright Grahame Murray
[1994] 1 WLR 1360.
(ii) Further, the intervening act of a third party
will normally break the chain of causation: Chitty
on Contracts at para 26-059. However, it still
remains the case that all the circumstances of the
case will be relevant.
(iii) In the present case, even assuming that
the claimants version of events is proven, Carlos
Soto paid Fishco for the cargo. Fishco did not pay
PT Awindo for the cargo. Fishco then paid Carlos
Soto 10 per cent of the initial value of the cargo.
Accordingly, Fishco has wrongfully profited by
90 per cent of the value of the cargo.
(iv) Accordingly, although Maersks alleged
breach of the contract of carriage, which (for
present purposes is assumed) caused the cargo
to be damaged, this is not the loss suffered by
the claimants.
(v) Rather, the claimants loss was caused by
the intervening and wrongful acts of Fishco in

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failing to reimburse Carlos Soto once Fishcos

purchase of the cargo had been cancelled. At its
highest, Maersks alleged breach of the contract
of carriage merely provided the occasion for
Fishco to act, but the claimants losses cannot be
said to flow from Maersks breach.
(vi) Thus, whether or not Carlos Soto can
establish ownership of the cargo at the relevant
time, on the claimants own case, the losses
claimed arise out of Fishcos actions which, given
the circumstances, broke the chain of causation.
32. As to these submissions, I accept that the
burden lies on the claimants to prove that their
loss was caused by Maersks breach. However,
contrary to Ms Paruks submission and as, I think,
she accepted, it is not necessary for a claimant to
prove that the particular breach is the effective
or dominant cause of the loss. Although the
language in Chitty at para 26-057 might suggest
otherwise, it seems to me that the position is clear
from the authorities. Thus, Chitty summarises the
position clearly at para 26-067:
If a breach of contract is one of two causes,
both cooperating and both of equal efficacy in
causing loss to the claimant, the party responsible
for the breach is liable to the claimant for that
loss. The contract-breaker is liable so long as his
breach was an effective cause of his loss: the
court need not choose which cause was the more
effective. (Emphasis added.)
33. I accept that the claimants loss might be
said to be caused or contributed to by Fishco in
the sense that although it relied upon the rejection
clause as against PT Awindo, it nevertheless
obtained the price from Carlos Soto under the
letter of credit from Carlos Sotos bank, Banco
Santander. However, here, it seems to me that

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applying common sense, the or at least an

effective cause of the claimants loss was indeed
Maersks breach of duty (if such be proved). Nor
do I accept that Ms Paruks argument that the chain
of causation was broken by the intervening and
wrongful acts of Fishco. In that regard, she accepted,
I think, that her original submission as formulated
in para 31(v) above was not entirely correct. In
any event, in my view, this part of Ms Paruks
argument fails for at least two reasons. First, as a
matter of timing, the claimants loss crystallised
(at the latest) when the cargo arrived in damaged
condition in Vigo on or about 18 December; and,
in such circumstances, it does not seem to me
that any act of Fishco after that date can cause the
chain of causation to be broken. Secondly, the test
as to what constitutes an intervening act sufficient
to break the chain of causation is a high one. As
submitted by Mr Bird, there must be an event of
such impact that it obliterates the wrongdoing of
the defendant: see per Gross LJ in Borealis AB v
Geogas Trading SA [2011] 1 Lloyds Rep 482 at
para 44. Here, whatever attraction there may be in
Ms Paruks argument, I do not consider that the
facts are such as to obliterate Maersks breach of
duty (if it be proved).
34. For these reasons, I would answer the fifth
preliminary issue: Yes.
Conclusion
35. In conclusion, the first three preliminary
issues should, by consent, be answered: Yes; and
I would also answer the fourth and fifth preliminary
issues: Yes. Accordingly, I would request counsel
to seek to agree an order for my approval including
all consequential matters. Failing agreement, I will
deal with any outstanding issues.