RULE 5 - Indemnity

Has the cargo owner authorised release in writing?

A Turkish liner agent was requested by the receiver of 12 containers of frozen meat shipped from Denmark to deliver them without original bills of lading.  The carrier's bills of lading were consigned "to order" of the Danish shipper and the receiver produced a fax from the shipper, confirming that he was the owner of  the cargo and authorising delivery without the original bills of lading.  The fax bore the shipper's logo, a transmission record on the top, and appeared to be signed by the same person who had signed the invoices.  In view of the perishable nature of the cargo and the contents of the fax, the ship agent released the containers to the receiver in exchange for his personal letter of indemnity.  The receiver subsequently failed to pay for the meat and the fax was found to have been forged by a former employee of the Danish shipper.  The carrier was liable for the shipper's loss and in turn claimed US$ 400,000 from his agent. 

The agent should have checked with both  his principal and  the shipper to ensure that  the former agreed to the release without the original bills of lading and that the latter had in fact sent the fax to the receiver.
 
An English port agent was appointed by the charterer's general agent, who instructed him to release 500 metric tonnes of steel without production of the original bill of lading. Subsequently the shipper of the steel arrested the ship and commenced proceedings against the shipowner, who then joined in the ship agent as a third party.  It transpired that the charterer, who was also the receiver of the steel, had on-sold it to the ultimate consignee without paying the shipper and without retrieving the original bill of lading.  The charterer went into liquidation.  The shipowner paid US$ 95,000 in settlement of the shipper's claim and commenced proceedings against the port agent.  As the port agent had been acting both for the shipowner and the charterer, he had failed in his duty of care to the owner in releasing the cargo without the original bills of lading on the instructions of the charterer's general agent.  The port agent reimbursed the shipowner.

Was the charterer's  general agent also to blame?  The answer is "NO", as he  had no duty of care to the shipowner and had not released the cargo.  It was the duty of the port agent to act in the shipowner's interest, and he failed to do so.

"It is perfectly clear 
 law that a shipowner 
 who delivers without 
 production of the bill of 
 lading does so at his 
 peril."
Lord Denning