The plaintiff shipped 12 containers of canned peach halves from Qingdao, China, to Manzanillo, Mexico, under a straight bill of lading which named Stern as the consignee and Assesoria (a custom broker) as the notify party. The defendant’s Mexican agents (Transglory) caused the cargo to be delivered to Stern without production of the original bill of lading and Stern never paid the plaintiff for the cargo. The plaintiff therefore sued the defendant, who was the contractual carrier under the bill of lading, for misdelivery of cargo and applied for summary judgment.

The defendant raised three defences.

First, the defendant argued that the plaintiff had consented to the release of the cargo to the consignee by way of email exchanges between the plaintiff and the defendants' agents.

Second, defendant relied on s 134 of the Navigation and Trade Law of Mexico, which provides for the application of the United Nations Convention on the Carriage of Goods by Sea 1978 (the Hamburg Rules). Art 4.2.b.iii of the Hamburg Rules provides that a carrier’s responsibility for the cargo ceases when it hands over the goods to an authority or third party pursuant to the law or regulations applicable at the port of discharge. In this regard, the defendant argued that because the cargo had to go through customs, the handing over of the goods to a customs broker was a handing over of the cargo to a third party within the ambit of art 4.2.b.iii of the Hamburg Rules.

Third, the defendant queried the plaintiff’s title to sue.

On the issue of quantum, the defendant argued that it was not liable for the full amount because of evidence from the defendant’s agent that 60% of the misdelivered cargo had oxidised.

Held: Summary judgment granted for the plaintiff for the full amount of the claim

Regarding the first defence, the Court found that there was nothing within the communication between the plaintiff and the defendant's agents to suggest that the plaintiff had consented to the delivery of the cargo to the consignee without production of the original bill of lading. The communication only referred to settlement negotiations for delayed payment of the misdelivered cargo but nothing concrete was achieved. There was therefore no agreement that the plaintiff had consented to the release of the cargo to the consignee.

Turning to the second defence under the Hamburg Rules, the Court clarified that art 4.2.b.iii covers a situation where, for example, customs had seized cargo that was contraband. Under such circumstances, the carrier would no longer be bound to hand over the cargo to the consignee under the bill of lading but was obliged by the local law to deliver the cargo to the customs (which is a third party) as the title of the cargo had vested in the State by virtue of it being contraband. The Court further explained that the Hamburg Rules could not possibly stand for the proposition which the defendant was arguing because that would mean that in every case where cargo has to be cleared through customs, the Hamburg Rules would override and negate a carrier’s obligation to deliver the cargo to an identified consignee. This would be an absurd result. Article 4.2.b.iii was therefore not an applicable defence in favour of the defendant.

In relation to the third defence on title to sue, the plaintiff as a bailor had title to sue because the plaintiff was an unpaid seller. The plaintiff therefore had a security interest over the cargo and could exercise a lien over the cargo or demand for its return. By causing the cargo to be delivered to an unauthorised consignee, the defendant as carrier was liable to account to the plaintiff for the value of the cargo at the time of the conversion.

On the issue of quantum, the Court found that there was no evidence whatsoever to suggest that cargo had oxidised because the statement from the defendant’s agents that the cargo had oxidised was a double hearsay statement. The defendant was therefore liable for the full sum of the plaintiff's claim.