Sang Stone Hamoon Jonoub Co Ltd v Baoyue Shipping Co Ltd (“The Bao Yue”)  EWHC 2288 (Comm)
The dispute related to a cargo of iron ore carried from Iran to China by the Defendant Shipper. The bill of lading had been issued “to order”, with no consignee named. The Shipper was requested to discharge the cargo to the bill of lading holder’s agent, who would release it against presentation of the bill of lading.
Due to a dispute between the bill of lading holder and the buyer of the cargo, no bill of lading was presented at the discharge port. As a result, the Shipper ordered that the cargo be discharged into storage in China. The storage charges exceeded the value of the cargo, and the warehouse operator refused to release the cargo without payment of those charges.
The bill of lading holder accepted that the Shipper had been entitled to discharge the cargo into storage. However, it brought a claim in tort for the conversion of the cargo on the basis that:
- a lien for storage charges was created in favour of the warehouse operator without the bill of lading holder’s authority; and
- statements had been made by the warehouse operator and the bill of lading holder’s agent which amount to denying the bill of lading holder access to the cargo, regardless of whether it presented the bill of lading.
The Shipper denied conversion, and counterclaimed for the storage charges incurred. The bill of lading holder’s claim was dismissed, and the Shipper’s counterclaim was upheld.
In principle, goods may be converted where a lien is created without the authority of the owner of the goods. However, there was no such conversion in this case. The Shipper had been entitled to warehouse the cargo, and so it was not unreasonable for it to have agreed a term in the storage contract which conferred a lien on the warehouse operator for its charges. Indeed, the creation of a lien was a reasonable and foreseeable incident of the storage contract, because the bill of lading incorporated charterparty terms which expressly permitted the discharge and storage of the cargo.
As regards denial of access to the goods, this could constitute conversion if the conduct in question amounted to deliberate encroachment of the rights of the owner of the goods, so as to exclude him from the use and possession of them. The facts in this case fell far short of this requirement. The bill of lading holder had never been “deprived” of the use and possession of the cargo. It had always been available on presentation of the bill of lading and payment of the accrued charges, but the bill was never presented and the charges never paid.
In respect of the Shipper’s counterclaim, it had been argued that the Shipper had failed to mitigate its loss by selling the cargo. The court found that there had been no such failure on the part of the Shipper, because for the cargo to be sold and cleared through customs, the bill of lading would have been required and the Shipper did not have it.
This case provides some useful insight into the circumstances required to found a successful claim in conversion where a cargo cannot be discharged into the custody of its owner because that owner has not presented the relevant bill of lading. Parties should carefully check the contract terms in order to determine what they are entitled to do where the bill of lading is not presented, and should consider whether actions alleged to have deprived a part of use and possession of goods have in fact genuinely done so.