A German company (A), which specialises in the recycling and scrap metal sector, bought scrap metal from a subsidiary company (B) based in Denmark and then resold it to a company (C) based in the United Arab Emirates.
B facilitated the sale by negotiating terms with C, which were passed on to A with the purpose of establishing an agreement between A and C. It was agreed that the scrap metal would to be transported to India, where C had a buyer in place.
The sales contract between A and the Indian buyer stated as follows:
If any payment is not made punctually as per contractual terms, the seller reserves the right to strictly cancel the contract after one reminder to the buyer. In that case the deposit will be used by seller as compensation for the resulting loss. The goods remain property of the seller until the invoice amount has been paid in full.
It was further set out in A's additional conditions for sales contracts of steel scrap as follows:
Title shall pass from Seller to the Buyer as soon as the cargo crosses over the ship's rail at the port of loading and risk shall pass from Seller to the Buyer as soon as the cargo crosses over the ship's rail at the port of loading in accordance with INCOTERMS 2010.
B facilitated contact with a Danish logistics services provider, which drew up the transportation documents and booked the consignment's transportation to India. It was decided that Carrier F would transport the consignment from Copenhagen to India.
Due to a misunderstanding, the consignment was released without A's knowledge and acceptance and without it having received payment from C.
As a result, A brought legal proceedings against the Danish logistics service provider and claimed €593.269,47 in compensation for the loss caused by the release of the consignment without the presentation of the bills of lading that the carrier had issued. The Danish logistics service provider denied any liability and submitted that:
- A had suffered no loss; and
- it had acted as an intermediary only and had undertaken no responsibility as a contracting carrier.
The Maritime and Commercial Court ruled in favour of the logistic services provider.(1) The court found that A could not claim compensation from the logistic services provider as the invoice amount for the released consignment could not be claimed as a recoverable loss for the following reasons:
- No information had been provided on whether A had demanded C to pay the outstanding amount or taken any legal steps to collect payment of the invoice amount from the buyer. The court found that the risk of loss and title to the goods, pursuant to A's additional conditions for the sales contract, had passed to the buyer "as soon as the cargo crossed over the ship's rail at the port of loading".
- Information about C's financial status and position on payment of the outstanding amount had not been not provided.
As a result, A had not demonstrated that it had suffered a financial loss. Therefore, court found it unnecessary to rule on whether the logistics service provider should to be seen as a carrier or agent.
The above decision shows that in order to obtain compensation after cargo has been delivered without the presentation of a bill of lading, it must be proven that the release of said cargo resulted in financial loss. This means that, in order to pursue compensation from a carrier or agent, a seller that has received no payment from its buyer for the delivery of a consignment may need to demonstrate that said buyer had not already obtained title to the goods delivered before their release.
For further information on this topic please contact Jesper Windahl at Windahl Sandroos & Co by telephone (+45 3525 3800) or email ([email protected]). The Windahl Sandroos & Co website can be accessed at www.wsco.dk.
Endnotes
(1) Maritime and Commercial Court judgment of 23 November 2018 (Case H-8-17).
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