Soggy seeds in salvage sale

A cargo recovery agent was engaged in relation to three containers of seeds that had arrived wet. The cargo had a total value of US$145,000.

An initial survey concluded that the wet damage was condensation caused due to the container vents being blocked, thereby preventing air circulation. A further more detailed survey found that only a small proportion of the cargo had been damaged with a value of around US$12,500.

The cargo recovery agent advised the cargo insurers of the survey results and asked, on numerous occasions, for instructions to decline the claim as condensation was not a covered loss. No instructions were received from the insurance company.

The surveyors obtained a salvage value, which was also forwarded to the insurance company and the consignees. Neither party responded. The surveyors reminded the cargo recovery agent that the salvage buyers needed a response. The recovery agent agreed that the sale should go ahead and that proceeds should be paid to the consignee (who was the owner of the cargo).

The consignees asked several times  who authorised the sale and noted that if they had known insurers were planning to reject the claim, they would not have agreed to the sale.

Ten months after the sale had taken place legal proceedings were issued by the consignees against the insurers, the cargo recovery agent and the cargo surveyor. The amount of the claim was US$200,000.

The cargo recovery agent had not been authorised to agree to the sale of the cargo by either the underwriters or the consignees. There was also a concern that the salvage value obtained was very low (considering most of the cargo was sound) and that only one quote had been obtained. Obviously there were mitigating factors, such as the lack of instructions from the insurance company and the consignees.

The matter was finally settled with a payment of US$75,000.