'BALTIC STRAIT' – Who Is Entitled To Sue For 'Full Damages' In Respect Of Cargo Damage?

It is not unusual for a seller of goods to raise a credit note to their buyer, in respect of goods that are received in a damaged condition, as a result of the failure by a carrier to properly and carefully carry the goods. However, in this situation, it is often the buyer/receiver who has contractual title to sue under the bill of lading, by virtue of being the lawful holder of this document, pursuant to the operation of s.2 (1) of The Carriage of Goods by Sea Act 1992 ("COGSA 1992"). It is likely, however, that the buyer/receiver has not suffered any loss, because it has been reimbursed by the seller.

The implications this may have for title to sue in cargo recovery claims were recently considered by the English High Court in the case of Sevylor Shipping and Trading Corp v Altfadul Company for Foods, Fruits & Livestock & Another [2018] EWHC 629 (Comm) ("The BALTIC STRAIT").

The judgment considers issues relating to which party or parties are entitled to sue the carrier for the full extent of the loss arising from damage to a cargo, and the application of s.2(1) and s.2(4) of COGSA 1992. This case was an appeal to the Court from an arbitration award, in respect of a claim for loss and/or damage to a cargo of bananas ("the Cargo").

The seller/shipper, Co.Ma.Co ("CoMaCo"), sold the Cargo to Altfadul, who was the purchaser and receiver of the Cargo, and the lawful holder of the bill of lading. CoMaCo had also chartered the vessel, pursuant to a charterparty with the shipowners who were also the bill of lading contractual carrier.

On discharge, the cargo had deteriorated in condition and, as a result, had diminished in value in the amount of approx. US$4,500,000 ("the Full Damages"). CoMaCo agreed to give credit in the sum of approx. US$2,500,000, spread over the next three shipments, by way of a settlement under the sale contract (although not expressly stated, this was likely done to reflect the insurance proceeds that CoMaCo had received from the cargo insurers who were unable to pay Altfadul).

Altfadul commenced arbitration proceedings against the carrier claiming the Full Damages.

The shipowners contended that Altfadul's claim against them must be reduced accordingly, as the loss they suffered had been reduced by US$2,500,000. However, the Tribunal awarded the Full Damages to Altfadul (in fact the real claimant, acting as the assignee of Altfadul's rights, was SIAT, the subrogated cargo underwriters, but this is not relevant for the...