Facts
Claim against logistics company
Claim against shipping company
In October 2009 a clothing company entrusted a logistics company to transport a consignment of goods from China to the Brazilian port of South San Francisco. The logistics company issued bills of lading to the clothing company; in the meantime, a shipping company accepted the logistics company's commission and transported the goods. The shipping company then issued a bill of lading, payable to itself and showing the logistics company as the shipper.
The shipping company shipped the goods to the port of South San Francisco, but released the goods at the destination without the original bill of lading; the logistics company still held the full set of original bills.
Claim against logistics company
In July 2010 the clothing company filed a claim against the logistics company before the Shanghai Maritime Court on the grounds that the goods had been delivered without the original bill of lading. The court ordered the logistics company to pay Rmb208,859 (plus interest) in compensation. In February 2011 the logistics company appealed to the Shanghai High Court which, in May 2011, dismissed the appeal and upheld the original ruling.
Claim against shipping company
In June 2011 the logistics company took legal action against the shipping company. It maintained that the shipping company had been the carrier and had released the goods without either the original bill of lading or the permission of the logistics company (which still held the full set of bills). As the logistics company had been obliged to compensate the clothing company, it argued that the shipping company should bear the corresponding costs.
Co-defendant or third party?
In the dispute between the clothing company and the logistics company, the clothing company did not regard the logistics company and the shipping company as co-defendants. However, on appeal, the logistics company applied for the shipping company to be recognised as a third party. It argued that since the shipping company (being the carrier) had released the goods without the original bill of lading, it should bear the compensation costs. Moreover, unless the shipping company could make a case to the contrary based on Brazilian law, it should be held jointly and severally liable with the logistics company.
The court maintained that the clothing company's claim for compensation was based solely on its contractual relationship with the logistics company (rather than with the shipping company), which could be considered a waiver of its right to claim damages from the shipping company. Therefore, the court found that the logistics company assumed responsibility for the delivery of the goods without the original bill of lading.
Although the court did not agree with the logistics company's defence, its decision identified the shipping company as the actual carrier, which had delivered the goods without the original bill of lading. This finding proved helpful to the logistics company in its subsequent subrogation claim.
Main issues
In the case arising from the subrogation claim, involving the logistics company and the shipping company, two issues arose:
- whether Section 233 on the front of the bill of lading was effective; and
- whether the shipping company's delivery of goods without the original bill of lading was consistent with Article 7 of the Provisions of the Supreme People's Court on Several Issues Concerning the Application of the Law in Cases Regarding Delivery of Goods without an Original Bill of Lading.
In relation to the first issue, the logistics company argued that Section 233 should have indicated to the logistics company that once the cargo had been discharged, it was out of the carrier's control. The clause in question had not been negotiated, but had been drafted unilaterally, and as this standard term exempted the ocean carrier from its main obligation, it was invalid under Article 44 of the Maritime Law.
On the second issue, the shipping company referred to the Interview on Provisions of the President of the Fourth Court in relation to the Supreme People's Court's provisions. In so doing, it sought to show that in some countries, the carrier is required to deliver goods to Customs and the port authority, after which it ceases to have control over their delivery and assumes no civil liability for the delivery of goods without the original bill of lading. The logistics company argued that Brazilian law on the port of discharge was inconsistent with Article 7 of the Supreme People's Court's interpretation, and noted that Brazil is not among the countries mentioned in the interview.
The shipping company presented a legal opinion issued by a Brazilian lawyer and referred to a Brazilian decree in support of its contention that the Brazilian carrier was required to deliver the goods to the port authority and Customs, and that only these authorities were empowered to release the goods. The carrier could not exercise control over the goods, but the consignee was entitled to withdraw goods by a house bill of lading. The logistics company argued that this evidence had been prepared abroad and that no notarised original had been presented; therefore, a Chinese court could not recognise it as authentic and admissible. In addition, the logistics company maintained that on the basis of the information that it had assembled, there was no regulation under Brazilian law that allowed a carrier to deliver goods without an original bill of lading. It maintained that even where goods are under the control of the port authority, the latter is in charge of the goods on the carrier's behalf. If the port authority makes a mistake in releasing the goods, the carrier is entitled to claim against the port authority.
Although the shipping company insisted that the goods were beyond its control under Brazilian law, and that it therefore bore no responsibility, it failed to provide evidence within the specified time limit. The Shanghai Maritime Court found in favour of the logistics company. It held that the Section 233 of the bill of lading merely gave notice of risk; it did not explicitly state that the shipping company was exempt from legal liability in respect of delivery of the goods without the original bill of lading. Even if it were argued that this section made this point explicitly, it imposed a unilateral obligation on the carrier that was invalid under Article 44 of the Maritime Law. The shipping company argued that in accordance with Brazilian law, the goods in question were to be handed over to the port authority and Customs, and the carrier had no legal right of control over the goods after delivery. However, the evidence had not been adduced within the statutory time limit and this defence was not established. Therefore, the carrier bore liability for compensation in respect of the delivery of goods without an original bill of lading.
For further information on this topic please contact Jin Yu-Lai at Shanghai Kai-Rong Law Firm by telephone (+86 21 5396 1065), fax (+86 21 5396 1204) or email ([email protected]).