Carlos Soto Sau & anor v AP Moller-Maersk AS

In determining when property passes under a CFR contract, the court must identify the parties’ actual intention from all the dealings. Delivery of a bill of lading is prima facie evidence of an intention to pass property, but it is not conclusive. A contractual right to reject goods and cancel the related letter of credit may justify concluding that property remains with the seller until payment.

A buyer may nevertheless obtain good title under Sale of Goods Act 1979, s25(1), where it receives the bill of lading in good faith and without actual notice of the original seller’s rights. In causation, the breach need only be an effective cause of loss. A later act breaks the chain only in exceptional circumstances, where it effectively obliterates the defendant’s wrongdoing.

The claimants sought damages for loss arising from the carriage of frozen swordfish from Jakarta to Vigo. The cargo was rejected by the Vigo Port Health Authority as unfit for human consumption and sold for salvage.

The original shipper had settled its claim with the carrier. The claimants contended that they held title to sue and had suffered the relevant loss. Five preliminary issues were identified. The first three were agreed in the claimants’ favour. The trial concerned whether Carlos Soto owned the cargo and whether Carlos Soto and AXA had suffered loss caused by the carrier’s assumed breach.

1. Preliminary issues. By consent, the first three issues were answered “Yes”. The court also answered the fourth and fifth issues “Yes”.
2. Passing of property. Under a CFR contract, the question is the parties’ actual intention. The transfer of a bill of lading is prima facie evidence of an intention to pass property, but is not determinative. The same approach applies to CFR and CIF contracts. Here, the delayed payment arrangement, together with Fishco’s contractual right to reject the cargo and cancel the letter of credit, showed that property had not passed from PT Awindo to Fishco before payment.
3. Good title under s25(1). Carlos Soto received the bill of lading with the seller’s consent. The burden was on Carlos Soto to establish receipt in good faith and without notice of the seller’s rights. Good faith under s61(3) means honesty in fact, whether or not the conduct was negligent. The relevant notice was actual notice, assessed objectively in all the circumstances. There was no general duty in an ordinary commercial transaction to investigate the seller’s title, and a buyer need not scrutinise commercial documents with great care.
4. The reference to a rejection clause in the packing list, and discrepancies in the shipping documents, did not amount to notice that PT Awindo retained ownership. The court accepted the evidence that Carlos Soto had not read the relevant words and had not been alerted to the seller’s interest. Carlos Soto therefore obtained good title under s25(1) from receipt of the bill of lading on 12 or 13 December 2012.
5. Causation. The claimants bore the burden of proving causation, but the carrier’s breach did not need to be the effective or dominant cause. It was sufficient that the breach was an effective cause, even if another cause contributed equally. The claimants’ loss crystallised when the damaged cargo arrived at Vigo. Fishco’s subsequent conduct therefore did not break the chain. In any event, the test for an intervening act is demanding: the event must be so significant that it obliterates the defendant’s wrongdoing. That threshold was not met.
6. The consequential order was to be agreed, failing which outstanding matters would be determined by the court.