Fortis Bank SA NV v Stemcor UK Ltd, Court of Appeal - Commercial Court, March 17, 2011, [2011] EWHC 538 (Comm)

Issuing Organization:Commercial Court
Actores:Fortis Bank SA NV v Stemcor UK Ltd
Resolution Date:March 17, 2011

Case No: 2009 Folio 34

Neutral Citation Number: [2011] EWHC 538 (Comm)




Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 17 March 2011

Before : Jonathan Hirst QC sitting as a Deputy Judge of the High Court

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Between :

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Timothy Young QC and Malcolm Jarvis (instructed by DLA Piper UK LLP)

for the Second Claimants

Sara Cockerill (instructed by Holman Fenwick Willan LLP) for the Defendants

Hearing dates: 14-16 February 2011

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Mr Hirst QC :

1. The issue before the Court is whether the Second Claimant (``Stemcor'') is entitled to recover damages from the Defendant Bank (``IOB'') for having wrongfully failed to honour five letters of credit, or alternatively to recover in restitution.

Background and previous judgments

2. Between 1 and 19 August 2008 Stemcor entered into five contracts Numbered RMS0098, RMS0099, RMS00105, RMS00110 and RMS00125. for the sale of a total of 15,500 MT (10% more or less in seller's option) shredded steel scrap to SESA International Limited (``SESA'') of Kolkata in India. The prices ranged from US$525 to $620 per metric tonne. Delivery was to be CFR CY Haldia/Kolkata in seller's option according to INCOTERMS 2000 - viz. Cost and Freight Container Yard Haldia/Kolkata. INCOTERMS 2000 provide that the carriage must be arranged and paid for by the seller and that risk transfer from seller to buyer occurs when the goods pass the ship's rail. The buyer must accept delivery at the named destination and pay all costs relating to the goods from the time they have been delivered.

3. Payment was to be 100% by sight letter of credit opened by a first class bank and advised by Fortis Bank (``Fortis'') in London. The sale contracts contained London arbitration clauses and were expressly governed by English law.

4. IOB opened five letters of credit in relation to the sale contracts and notified Fortis. They were as follows:

(The letters of credit will be referred to below by the number in the first column in the above table. The asterisks indicate confirmation by Fortis).

5. All were subject to the Uniform Customs and Practice for Documentary Credits, 2007 revision, ICC Publication no. 600 (``UCP 600''). The applicant for the L/Cs was MSTC Limited (``MSTC''), an Indian Government owned company operating under the aegis of the Ministry of Steel one of whose roles is to assist Indian companies purchasing steel scrap from abroad. MSTC was described as the ``facilitator'' in the letters of credit. The arrangements between MSTC and SESA appear to be governed by a memorandum of agreement dated 21 November 2006, as amended It has been produced as part of SESA's claims against MSTC and IOB in the Calcutta High Court..

6. On receipt of the L/Cs, Fortis advised Stemcor. In the case of L/Cs 1-3, Fortis added its confirmation. In the case of L/Cs 4-5, Fortis advised Stemcor without adding any engagement on its behalf. The L/Cs were all to be available at Fortis's London branch. Each L/C required presentation of bills of lading consigned to the order of IOB and showing 10 days free time at the discharge port.

7. Between 12 September and 1 November 2008, Stemcor duly shipped steel scrap in 20' containers for carriage from European ports to Haldia Port in India. The bills of lading named Stemcor as the shipper and the consignee was ``to the order of [IOB]''. The bills gave between 10 and 14 days free time at the discharge port. Several shipping lines were involved. Most bills of lading were issued by Mediterranean Shipping Company SA (``MSC'') as carrier, but some were issued by Safmarine Container Line NV (``SAFM'') and by Blue Anchor Line, part of Kühne & Nagel A/S (``K+N''). K+N used MSC and ANL vessels to carry the cargo but contracted as principals.

8. The MSC bills of lading contained, inter alia, the following terms on the reverse:


Merchant: includes the Shipper, Consignee, holder of this Bill of Lading, the receiver of the Goods and any Person owning, entitled to or claiming the possession of the Goods or of this Bill of Lading or anyone acting on behalf of this Person.


The contract evidenced by this Bill of Lading is between the Carrier and the Merchant. Every Person defined as ``Merchant'' is jointly and severally liable towards the Carrier for all the various undertakings, responsibilities and liabilities of the Merchant under or in connection with this Bill of Lading and to pay the Freight due under it without deduction or set-off. The Merchant warrants that in agreeing to the terms and conditions in this Bill of Lading, he is the owner of the Goods or he does so with the authority of the owner of the Goods or of the Person entitled to the possession of the Goods or of this Bill of Lading.


The terms and conditions of the Carrier's applicable Tariff are incorporated into this Bill of lading. Particular attention is drawn to terms and conditions concerning additional charges including demurrage, per diem, storage expenses and legal fees, etc. A copy of the applicable Tariff can be obtained from the Carrier or its agent upon request and the Merchant is deemed to know and accept such Tariff. In the case of any conflict or inconsistency between this Bill of Lading and the applicable Tariff, it is agreed that this Bill of Lading shall prevail.


16.1 Freight has been calculated on the basis of the Shipper's particulars and if such particulars are found to be erroneous and additional Freight is payable, the Merchant shall be liable therefore and also for any expense thereby incurred.

16.2 All Freight is earned and due upon receipt of the Goods by the Carrier, whether the Freight is prepaid or collect and the Carrier shall be entitled to all Freight due under all circumstances, ship and/or cargo lost or not lost or the voyage abandoned. All Freight shall be paid when due without any set-off, counter claim or deduction.

16.3 Every Person defined as ``Merchant'' in clause 1 shall be jointly and severally liable to the Carrier for the payment of all Freight and charges and for the performance of the obligations of each of them hereunder. Any Person engaged by the Merchant to perform forwarding services with respect to the Goods shall be considered to be exclusively the Merchant's agent for all purposes, and any payment of Freight to such Person shall not be considered payment to the Carrier in any event whatsoever. Failure of such third parties to pay any part of the Freight to the Carrier shall be considered a default by the Merchant in the payment of Freight.


THE CARRIER, ITS SERVANTS OR AGENTS SHALL HAVE A LIEN ON THE GOODS AND ANY DOCUMENT RELATING THERETO FOR FREIGHT AND FOR GENERAL AVERAGE CONTRIBUTIONS TO WHOMSOEVER DUE. THE CARRIER, ITS SERVANTS OR AGENTS SHALL ALSO HAVE A LIEN AGAINST THE MERCHANT ON THE GOODS AND ANY DOCUMENT RELATING THERETO FOR ALL SUMS DUE FROM THE MERCHANT TO THE CARRIER UNDER ANY OTHER CONTRACT. The Carrier may exercise its lien at any time and any place in its sole discretion, through the action of any servant, agent or Subcontractor, whether the contractual carriage is completed or not. The Carrier's lien shall also extend to cover the cost and legal expense of recovering any sums due. The Carrier shall have the right to sell any Goods liened by public auction or private treaty, without notice to the Merchant. Nothing herein shall prevent the Carrier from recovering from the Merchant the difference between the amount due to the Carrier and the net amount realised by such sale.


20.1 Any mention in this Bill of Lading of parties to be notified of the arrival of the Goods is solely for information of the Carrier. Failure to give such notification shall not subject the Carrier to any liability nor relieve the Merchant of any obligation hereunder.

20.3 If the Goods are unclaimed within a reasonable time or whenever in the Carrier's opinion the Goods are likely to deteriorate, decay or become worthless, or incur charges whether for storage or otherwise in excess of their value, the Carrier may at its discretion and without prejudice to any other rights which it may have against the Merchant, without notice and without any responsibility attaching to it, sell, abandon or otherwise dispose of the Goods at the sole risk and expense of the Merchant and apply any proceeds of sale in reduction of the sums due to the Carrier from the Merchant under or in connection with this Bill of Lading.

20.4 Refusal by the Merchant to take delivery of the Goods in accordance with the terms of this clause and/or to mitigate any loss or damage thereto shall constitute an absolute waiver and abandonment by the Merchant to the Carrier of any claim whatsoever relating to the Goods or the carriage thereof. The Carrier shall be entitled to an indemnity from the Merchant for all costs whatsoever incurred, including legal costs, for the cleaning and disposal of Goods refused and/or abandoned by the Merchant.

The other bills of lading contained materially identical terms.

9. Shortly after shipment, Stemcor presented the documents for payment under the respective L/Cs at Fortis' London branch. The documents presented in respect of each drawing under L/C numbers 1-3 were negotiated and honoured by Fortis pursuant to its confirmation and forwarded by Fortis to IOB. Fortis duly paid the following sums to Stemcor:

L/C 1: $928,249.40 (in respect of 5 shipments);

L/C 2: $1,461,888.00 (in respect of 3 shipments);

L/C 3 : $2,633,904.00 (in respect of 7 shipments).

The documents presented in respect of each drawing under L/Cs 4-5 (in respect of which Fortis had not added its confirmation) were forwarded by Fortis to IOB.

10. By the time of shipment the market price for scrap steel had...

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