Bill of lading - Merchant responsible for container demurrage - freight forwarder not responsible to ocean carrier - containers not unpacked at forwarder's premises

by Martin Davies (Blake Dawson and Waldron)

Facts:

 

Over a period of time, the plaintiff, an ocean carrier, delivered many containerized cargoes to the defendant, a freight forwarder, at the ports of Melbourne and Sydney. The plaintiff sued to recover container demurrage charges from the defendant pursuant to a clause in its standard form bills of lading and waybills that imposed liability for late return of containers on the Merchant. Merchant was defined broadly, and included any person owning or entitled to possession of the goods and anyone acting on behalf of any such person. The defendant moved for summary judgment, arguing that it was merely a freight forwarder and the containers in question were all actually delivered to and then detained by its clients, the owners of the goods. The plaintiff did not challenge that account, but argued that the defendant was liable for container demurrage nonetheless. At first instance, Byrne, J. of the Supreme Court of Victoria gave summary judgment for the defendant. The plaintiff appealed. Decision: Appeal dismissed. Summary judgment for the defendant was appropriate, as the plaintiffâs claim was bound to fail.  

Held:

 

(1) The words Merchant and Merchants caught all those persons falling within the definition who were parties to the contract of carriage. The defendant's customers, although owners of the goods, were strangers to the contracts of carriage and had no rights or obligations under them. 

(2) The container demurrage clause in the bills of lading and sea waybills began with the words, If containers supplied by or on behalf of the Carrier are unpacked at the Merchant's premises. In the present case, all of the containers were unpacked at the premises of the defendantâs clients, who were not Merchants for the purposes of the contracts. Although the defendant did qualify as a Merchant, no containers were unpacked at its premises. Accordingly, the condition upon which the operation of the container demurrage clause depended was not fulfilled. The plaintiff's claim based upon that clause was therefore bound to fail. Summary judgment for the defendant was appropriate in the circumstances.

Comment:

This decision has caused some consternation among ocean carriers, some of whom think it stands for the proposition that an ocean carrier may never recover container demurrage from a freight forwarder. That is not what the Victorian Court of Appeal decided, though. If the container demurrage clause had been worded differently, so that it was not premised upon the container being unpacked at the Merchantâs premises, the ocean carrier would have been entitled to recover from the forwarder as Merchant. Any container demurrage clause that simply imposes an obligation on the Merchant to pay the ocean carrier in the event of late container redelivery will still be effective to impose a container demurrage obligation on a freight forwarder who is party to the contract. Of course, that leaves the forwarder caught between its obligation to the ocean carrier and the fact that it is unable to return the containers on time itself, because they are being held by its clients, the goods-owners. However, a forwarder can (and should) protect itself against this eventuality by inserting appropriate clauses in the carriage documents it issues to its own clients.

Commentary on Malaysia International Shipping Corp Bhd v. Vi.Sa Australia Pty Ltd.   [2003] VSCA 64.by Professor Martin Davies, Consultant to Blake Dawson and Waldron.  Permission to publish gratefully acknowledged. 

Peter McQueen, the  National Editor for Australia, adds this word of practical advice to forwarders:

"The case reinforces the need for all forwarders who issue bills of lading/sea waybills as principals to ensure that the terms and conditions in those documents allow them to recover container detention charges from the "merchant' as defined in such circumstances as obtained in this case."

December 14, 2004