On 22nd October, the Court of Appeal (Moore-Bick LJ, Briggs LJ and Sir Bernard Rix) handed down judgment in Standard Chartered Bank v Dorchester LNG (2) Limited (“The Erin Schulte”)  EWCA Civ 1382. This judgment determines a number of points of general importance to the operation of bills of lading and letters of credit.
In simplified form, the relevant facts were as follows: Gunvor was the seller of two cargoes of gasoil to UIDC, who was in turn was on-selling them to Cirrus. Cirrus opened a letter of credit in favour of UIDC, which was confirmed by Standard Chartered Bank (“SCB”), and in due course, at UIDC’s request, transferred to Gunvor. There were issues between the parties to the sale contracts as to the quality of the gasoil, with the result that, as between UIDC and Cirrus, Cirrus accepted the first cargo only. An amendment to the letter of credit was requested by Cirrus’ bank, reducing the value and the quantity of the cargo covered by the letter of credit to that on board the first vessel. Having obtained the consent of UIDC, but before obtaining the consent of Gunvor, SCB consented to that amendment. The cargo on the second vessel, the Erin Schulte, was in due course on-sold by UIDC to new sub-purchasers. Gunvor rejected the requested amendment to the transfer letter of credit, and presented documents, including indorsed bills of lading, to SCB under the transfer letter of credit in respect of the cargo on the Erin Schulte. By virtue of its error in accepting the amendment without confirmation from both beneficiaries, SCB remained liable to Gunvor under the transfer letter of credit, but had no right of recourse in respect of that liability. SCB wrongfully rejected what was (and was subsequently agreed to be) a compliant presentation, and stated that it held the documents to the order of Gunvor. Gunvor continued over the following month to insist on the validity of its original presentation, but was met by intransigence on the part of the bank. During this period, the cargo was discharged against a letter of indemnity issued by Gunvor to the carrier, Dorchester LNG (2) Limited (“Dorchester”). After Gunvor had issued Commercial Court proceedings against SCB, the bank paid up, settling the claim by making payment in full of the amount due under the letter of credit, along with interest and costs (by now over a month after the original presentation and three weeks after the expiry of the letter of credit). Having paid Gunvor, SCB then sued Dorchester for misdelivery, since the carrier had delivered the cargo other than upon presentation of the bills of lading (which at all times were sitting at SCB’s counters). The issue between the parties was whether SCB had at any time become the holder of the bills of lading under the Carriage of Goods by Sea Act 1992 (“COGSA”), such that it had acquired rights of suit against Dorchester. Teare J decided at first instance ( EWHC 808 (Comm)), that SCB had become the holder of the bill of lading, either on 4 June 2010 (upon and by virtue of the original presentation, notwithstanding the rejection of that presentation) or alternatively on 7 July 2010, when SCB settled Gunvor’s claim in full.
Moore-Bick LJ, giving the judgment of the Court, ultimately dismissed the appeal, overturning the finding that SCB had become the holder of the bills on 4 June 2010, but affirming the conclusion that it became the holder on 7 July 2010.
The judgment rules on a number of points of general importance in the field of international trade. In particular, issues arose in the appeal as to:
As to those issues, the Court of Appeal concluded as follows:
The judgment is here.
Fionn Pilbrow appeared for Dorchester instructed by Ince & Co LLP.