AMS Ameropa Marketing and Sales AG & Anor v Ocean Unity Navigation Inc (Re 'Doric Valour')

Factual and Procedural Background

The appeal concerns whether a bill of lading holder claiming against a shipowner for cargo damage during a voyage must give credit for a payment received from the seller of the damaged goods. The trial judge, sitting as a Deputy High Court Judge, held that no such credit was required. The shipowner appealed.

The first claimant and respondent to the appeal ("Company A") is a Swiss company that purchased soybeans from Company B on FOB terms and chartered a vessel owned by the appellant shipowner to transport the cargo from Louisiana to Egypt. The cargo was loaded in early August 2020, and bills of lading were issued naming Company B as shipper and identifying an Egyptian company ("Company C") as the notify party.

Company A sold the cargo on CIF terms to Company C, with quality and condition final at loading as certified by an independent surveyor. Company C paid Company A and became holder of the bills of lading and owner of the cargo in early September 2020.

Upon arrival at the discharge port, damage was found to the cargo in one hold, with a mixture of sound and damaged goods segregated and stored separately. Company A arranged a salvage sale of the damaged cargo on behalf of Company C, with proceeds payable to Company C. Company A agreed to compensate Company C for the difference between the salvage sale price and the contract price under their sale contract.

Company C received the salvage sale proceeds and awaited compensation from Company A. Company A later issued a credit note to Company C representing the difference between the final sale price under the sale contract and the salvage sale price.

Company A arrested the vessel in South Africa in July 2021, claiming assignment of Company C’s rights. The shipowner’s P&I Club issued a Letter of Undertaking for the vessel’s release, and proceedings were issued in December 2021.

At trial, Company A claimed damages as assignee of Company C's rights under the bills of lading. The shipowner admitted liability for the cargo damage caused during the voyage but disputed the extent of damaged cargo. The judge awarded damages based on the difference between the sound arrived value and the actual value of the damaged cargo, using the CIF contract price and the salvage sale price as evidence of those values. The judge held that Company A did not have to give credit for the payment made to Company C by way of the credit note, regarding it as collateral or res inter alios acta. The shipowner appealed this ruling.

Legal Issues Presented

1. Whether a bill of lading holder making a claim against a shipowner for damage to cargo during the voyage must give credit for a payment received from the seller of the damaged goods.

Arguments of the Parties

Appellant's Arguments

• The payment made by Company A to Company C effectively made Company C whole (except for a small difference) and thus should reduce the damages recoverable from the shipowner.
• The payment was not collateral but arose out of the shipowner’s breach of contract of carriage.
• The case cited by the judge (R & W Paul) should be distinguished because the sale contract there was on terms that imposed liability on the seller for cargo condition at arrival, whereas here the sale contract was on CIF terms with risk passing on shipment and a final certificate limiting Company C's claims against Company A.
• Company C only became owner of the damaged cargo after payment, which was after the damage occurred, so the claimants' title timing differs from precedent cases.
• The claim in R & W Paul was brought in a "representative" capacity with liability to account to the seller, which is not the case here.
• The payment should be considered as arising from a composite arrangement linked to the shipowner’s breach and thus not collateral.

Respondent's Arguments

• The payment from Company A to Company C was collateral, arising under the sale contract and not out of the shipowner’s breach.
• The established shipping law principle is that damages are assessed by reference to the difference between sound arrived value and actual value of the damaged cargo without credit for payments under separate sale contracts.
• Precedents establish that payments under contracts of sale to which the bill of lading holder is a party are generally res inter alios acta and do not reduce the shipowner’s liability.
• The payment was a commercial settlement linked to the sale contract relationship and not a mitigation step arising from the shipowner’s breach.
• Company C’s claim against the shipowner was valid and assigned to Company A without the need to give credit for the payment received.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Swynson Ltd v Lowick Rose LLP [2017] UKSC 32	General principles on avoided loss and collateral payments (res inter alios acta).	Established that collateral benefits are those arising independently of the loss-causing event and need not reduce damages.
ED & F Man Capital Markets Ltd v Come Harvest Holdings Ltd [2022] EWCA Civ 1704	Clarification of collateral benefits and causation in avoided loss cases.	Confirmed that the character of the benefit, not just its source, determines whether it is collateral.
Sainsbury's Supermarkets Ltd v Visa Europe Services LLC [2020] UKSC 24	Principles of causation in assessing avoided loss.	Used to support the causation analysis of whether a benefit arises out of the transaction.
R & W Paul v National Steamship Co (1937) 59 Ll LR 28	Bill of lading holder entitled to recover full damages despite compensation from seller under sale contract.	Key authority confirming that payments under sale contracts do not reduce shipowner’s liability.
The Sanix Ace [1987] 1 Lloyd's Rep 465	Full damages recoverable by charterer despite subsequent payments from receivers under sale contracts.	Reinforces that sale contract arrangements are collateral and do not extinguish shipowner's liability.
The Baltic Strait [2018] EWHC 629 (Comm)	Bill of lading holder not required to credit settlement received from seller under sale contract.	Recent authority affirming the principle that such payments are res inter alios acta.
Veba Oil Supply & Trading GmbH v Petrotrade Inc [2001] EWCA Civ 1832	Example of challenges to final quality certificates under sale contracts.	Referenced to illustrate potential claims under sale contracts despite final certificates.
The Kriti Palm [2006] EWCA Civ 1601	Similar to Veba Oil, concerning sale contract disputes.	Used to show possible grounds for claims under sale contracts.
Arab Bank Plc v John D Wood Commercial Ltd [2000] 1 WLR 857 (CA)	Distinction between collateral benefits and those derived from contracts for the benefit of the wrongdoer.	Applied in explaining when benefits reduce damages.
British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Ltd [1912] AC 673	Benefits derived from mitigation steps taken by claimant.	Referenced in context of avoided loss principles.

Court's Reasoning and Analysis

The court analysed whether the payment made by Company A to Company C should reduce the damages recoverable from the shipowner. It applied established principles on avoided loss and collateral benefits, particularly as explained in Swynson Ltd v Lowick Rose LLP and subsequent cases, emphasizing that collateral benefits are those arising independently of the loss-causing event.

The court found that the payment from Company A arose out of the sale contract relationship between Company A and Company C, not out of the shipowner’s breach of the contract of carriage. It was therefore collateral or res inter alios acta, meaning it did not make good the claimant’s loss for the purpose of reducing damages recoverable from the shipowner.

The court relied heavily on the precedent of R & W Paul v National Steamship Co, where a bill of lading holder was entitled to recover full damages from the shipowner despite having been compensated by the seller under the sale contract. The court rejected the shipowner's attempt to distinguish that case based on differences in sale contract terms and timing of ownership, finding the reasoning equally applicable.

Further support was drawn from The Sanix Ace and The Baltic Strait, which confirm that payments under sale contracts to which the claimant is a party are, absent special circumstances, collateral and do not reduce damages recoverable from the shipowner.

The court also considered and rejected the appellant’s argument that the payment was part of a composite arrangement linked to the breach, holding instead that the claim was based on the conventional difference between sound arrived value and actual value, with the payment being a commercial settlement under the sale contract.

Accordingly, the court held that Company C’s claim against the shipowner was valid without credit for the payment, and that Company A, as assignee, was entitled to recover damages accordingly.

Holding and Implications

The appeal was dismissed.

The court affirmed the principle that a bill of lading holder suing a shipowner for cargo damage is not required to give credit for payments received from the seller of the damaged goods under a separate sale contract, as such payments are collateral and arise independently of the shipowner's breach. This decision reinforces established shipping law principles promoting certainty and straightforward application in commercial disputes involving cargo damage. No new precedent was set beyond confirming the application of existing authorities to the facts of this case.