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DELIVERY WITHOUT PRESENTATION OF BILL OF LADING – LOI WON’T SAVE YOU: SHIPOWNER LIABLE FOR MISDELIVERY DESPITE INDEMNITY

1. Summary and Facts:

In United Overseas Bank Ltd v Owner and/or Demise Charterer of the Vessel “MAERSK KATALIN” [2024] 1 Lloyd’s Rep 18, United Overseas Bank (UOB) sued Maersk for misdelivery of gasoil carried on the vessel Maersk Princess. The cargo (under four bills of lading) was sold by Winson Oil Trading Pte Ltd to Hin Leong Trading (HL), which later became insolvent. UOB became holder of two bills of lading through letters of credit. Winson instructed Maersk to deliver the cargo to HL without presentation of the bills of lading but using letter of indemnity. The delivery was completed. After HL’s collapse in in April 2020, UOB obtained the bills of lading in July 2020 and later demanded delivery from Maersk in Feb 2021, then sued for misdelivery and related claims. Maersk defended the claim, arguing that under the charterparty it was allowed and even required to deliver without the bills of lading if indemnities were provided and challenged UOB’s right to sue and causation.

2. Legal Issues:

  • Whether the delivery of cargo without presentation of the original bills of lading amount to misdelivery.
  • Whether the shipowner is liable in damages to the lawful holder of the bills of lading.
  • Whether the bank acquired the bills of lading in good faith, so as to obtain the right to sue the shipowner for misdelivery.

3. Court’s Findings:

  • The Court allowed UOB’s claim and held shipowner liable for misdelivery and awarded US$39,372,300.
  • The shipowner was liable for misdelivery because the cargo was delivered without presentation of the original bills of lading.
  • Delivery without bill of lading constituted breach -Charterparty clause does not override the BIL.
  • The letter of indemnity does not excuse the obligation to deliver cargo against presentation of the original bills of lading.
  • The bills of lading were endorsed to the bank, transferring contractual rights, including the right to sue for misdelivery and therefore, has the right to sue.
  • The bank obtained the bills honestly, and acquiring them to pursue a claim did not amount to bad faith.
  • Bank only needs to show misdelivery caused loss and defendant failed to prove the bank would have allowed delivery anyway.
  • The shipowner was liable for misdelivery and must pay damages to the bank.

4. Practical Implications:

This judgment affirms the several principle of laws including:

  • Letter of Instruction only gives indemnity against the charterer and not as defence.
  • The owner of bill of lading can sue even the bills endorsed after delivery.
  • Bill of lading remain powerful document of title.

If you need more information on our legal updates, our Knowledge and Law News Division at lawnews@yhalaw.com.my would be pleased to assist.

Yew Huoi, How & Associates (Law Firm)
Advocates & Solicitors
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Taman Desa Tiara, Off Jalan Klang Lama
58200 Kuala Lumpur
Tel: +603-7971 3191
Fax: +603-7972 9131
Email: enquiry@yhalaw.com.my
Website: https://yhalaw.com.my

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Note: This material is intended for general information with regard to the practice of YHA. This profile is not intended to create, and does not create a solicitor-client relationship. If you are interested in having YHA to represent you, you must call or visit our office to enable us to discuss the legal matter with you. YHA reserves our right to decline any representation which is in contravention with the Legal Profession Act 1976 and/or the regulations therein.

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