Forged Bills of Lading

The Commercial Court was recently asked to consider a dispute in which competing parties claimed to be owners of the same goods. I represented the innocent unpaid seller. The case is a timely reminder of the ever present risk of fraud faced by owners and charterers and their insurers as well as by traders and their banks engaged in international trade.

In Transpacific Eternity SA -v- Kanematsu Corporation and another [2002] 1 Lloyd's Rep 233 the owners of the Antares III sought interpleader relief because they faced rival claims by parties holding different bills of lading in respect of the same part cargo on board their vessel.

Vinsari Fruitech Limited, the second defendant, sold 4,500 mt of Indian yellow toasted soyabean extraction meal and flake to Silijan Pte Limited on FAS (free alongside) Bedi terms. The sale was on FOSFA terms and the contract was silent as to when property passed. Silijan in turn sold the goods on to Kanematsu Corporation, the first defendant. Payment in each case was by means of a letter of credit. The bill of lading named Vinsari as the shipper and was made out to their order. However, when Vinsari presented their documents for payment under the letter of credit to Silijan's bank the documents were rejected and payment refused.

The Antares III had been chartered by an associate company of Silijan who, pursuant to an authority contained in the charterparty, issued a switch bill of lading naming Silijan as shipper for the entire quantity of cargo loaded. Kanematsu was shown as the notify party. Thus armed with the fraudulent switch bill of lading, Silijan presented it and other shipping documents for payment under the letter of credit opened by Kanematsu. The result was that Kanematsu were defrauded of approximately US$2,000,000.

Silijan then ordered the Antares III to sail to Kagoshima, Japan. Upon arrival of the vessel at Kagoshima, Kanematsu presented the switch bill they had paid for and discharge commenced. Shortly thereafter the shipowners learned that Vinsari claimed ownership of part of the cargo as unpaid Sellers.

The principle issue before the court was who owned the cargo, Kanematsu or Vinsari. Silijan played no part in the proceedings.

Vinsari submitted that it owned the cargo because property had never passed to Silijan under its sale agreement and since Silijan had never owned the cargo Kanematsu did not and indeed could not have obtained title. Vinsari submitted that it was intended by the parties...