Sang Stone Hamoon Jonoub Co Ltd v Baoyue Shipping Co Ltd "Bao Yue"

Goods may be converted by creating a lien without the owner’s authority. However, where the owner authorises storage, a lien is authorised if it is a reasonable and foreseeable incident of the storage contract. A shipowner may land and warehouse cargo where the bill of lading holder fails to take delivery, and may recover reasonable expenses properly incurred. Denial of access constitutes conversion only where the conduct deliberately encroaches on the owner’s rights so as to exclude the owner from use and possession. A cargo holder who fails to take delivery has a continuing duty to co-operate in minimising storage loss and expense, including delivering up the bill of lading where this is necessary to enable a sale.

The claimant, the shipper and bill of lading holder, claimed damages in conversion against the defendant shipowner after iron ore was discharged into a bonded warehouse in Tianjin because no original bill of lading was presented. The original allegation of delivery to the buyer was abandoned.

The claimant instead alleged that the shipowner converted the cargo by creating a warehouse lien without authority and by denying access to the cargo. The defendant counterclaimed for reasonable storage charges and sought delivery of the bill of lading so that the cargo could be sold. The central issues were whether the storage arrangements constituted conversion, whether the conduct relied upon excluded the claimant from possession, and what financial and practical consequences followed.

1. Conversion. The claim was dismissed. The tort requires conduct inconsistent with the owner’s rights, deliberate conduct, and an encroachment sufficiently extensive to exclude the owner from use and possession. Denial of title alone is insufficient.
2. Creation of a lien. Goods can in principle be converted by creating a lien without the owner’s authority. That principle did not apply here. The claimant had authorised discharge and storage through the incorporated charterparty terms and its email of 6 March 2012. Under the principles of sub-bailment on terms, it was also taken to have authorised a lien which was a reasonable and foreseeable incident of the storage contract. The charges and storage arrangements were not shown to be unreasonable.
3. Denial of access. The statements and conduct relied upon did not deliberately exclude the claimant from use and possession. Statements by Mr Liang Lee were made on behalf of Teda, not the warehouse company or shipowner. The agent’s assurance that Teda could not obtain release without the bill protected, rather than denied, the claimant’s rights. The cargo remained available on presentation of the bill and payment of accrued charges.
4. Storage charges. The claimant was liable to reimburse the shipowner for reasonable storage charges paid to TQST. The amount of the shipowner’s reasonable liability up to 21 July 2015 was declared to be US $2,146,763.11.
5. Bill of lading. The claimant had breached its continuing duty to take delivery and to co-operate in minimising loss and expense. It was ordered to deliver the original bill of lading to the defendant, enabling the cargo to be cleared and sold.