Oldendorff GmbH & Co KG (Oldendorff) v Sea Powerful Ii Special Maritime Enterprises (Head Owners)

Discharge and delivery are distinct concepts. Delivery occurs when the shipowner surrenders possession and loses the power to prevent the consignee obtaining possession. An indemnity for delivery without an original bill of lading is engaged where the cargo is delivered to a person acting on behalf of the party named in the indemnity. The fact that the same agent acts for the shipowner or charterer for other purposes does not determine the capacity in which the agent receives delivery. An indemnity may also be engaged where the shipowner honestly believes that the recipient acts for the named party. In a chain of materially identical indemnities, liability passes down the chain.

The consolidated proceedings concerned indemnities given for delivery of iron ore without production of an original bill of lading. The cargo was discharged at Lanshan to Sea-Road, the nominated discharge-port agent, after the vessel’s owners received an indemnity requiring delivery to Xiamen or its representative. The Bank of China later arrested the vessel, asserting rights under the original bill of lading. The court determined the indemnity claims between the owners, charterers and the parties further down the chartering chain. It also considered whether the absent defendants’ claims should be determined on their merits.

1. Discharge and delivery. Discharge is the movement of cargo ashore, whereas delivery is the transfer of possession. Possession is transferred when the shipowner surrenders it and no longer has the power to prevent the consignee obtaining possession. The court relied on The Bremen Max [2009] 1 Lloyd’s Reports 81 and The Jag Ravi [2012] All E.R. (Comm) 707.
2. Capacity in which Sea-Road acted. The evidence showed that Xiamen intended Sea-Road to receive the cargo on its behalf. The wording of Xiamen’s indemnity, the communications between the parties, Sea-Road’s conduct and the master’s evidence supported that conclusion. Sea-Road’s agency for the owners or charterers in relation to other matters did not mean that it received delivery in that capacity.
3. Operation of the indemnity. Delivery to Sea-Road was therefore delivery to Xiamen within the indemnity. The owners were entitled to protection under the indemnity, and Oldendorff was liable for the consequences of the arrest and the Bank of China’s claim. The materially identical indemnities down the chain produced corresponding liabilities from SCIT Services to Oldendorff Carriers and from Xiamen to SCIT Trading.
4. Alternative basis. Even if Sea-Road had not acted for Xiamen, the indemnity would have been engaged because the owners honestly believed that Sea-Road acted for Xiamen. It was unnecessary to decide whether that contractual belief was subject to an implied constraint against arbitrary, capricious or irrational reliance, although the belief was in any event rational. The court referred to Braganza v BP Shipping [2015] 1 WLR 1661.
5. Procedural and agency points. The court determined the merits of the claims involving absent defendants because that approach would assist recognition or enforcement of the judgment, consistently with Habib Bank Limited v Central Bank of Sudan [2014] EWHC 2288 (Comm). Oldendorff Carriers could rely on the owners’ beliefs because the owners vicariously performed its charterparty obligations, applying The Global Santosh [2016] 1 WLR 1853.

The owners, Oldendorff Carriers and SCIT Trading were each entitled to the corresponding indemnity.

First-instance decision. No appellate history was stated in the judgment.