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Note: Sabo SA (Seller) contracted to sell brickmaking equipment to Makkah Estate (Buyer). Payment for the equipment was to be by LC for DM3,500,000 issued in favor of Seller. The LC specifically provided that transshipment was not allowed. The documents required for presentation under the LC included a detailed shipping record listing ports of call and vessels employed. Seller contracted with United Arab Shipping Co. (Carrier) to transport the cargo from Piraeus, Greece, to Jeddah, Saudi Arabia, the destination port. Seller informed its insurers that the cargo would be transported by Carrier alone, aboard Carrier's vessel.

Carrier contracted for the cargo to be transshipped aboard the feeder vessel 'Carl Metz', owned by Hellenic Shipping Agencies Ltd. to Gioia Tauro, Italy, where it was to be transferred to Carrier's vessel for transport to Buyer. A Bill of Lading was issued for the voyage from Greece to Italy, and a second Bill of Lading was issued, listing the port of origin as Piraeus and the destination as Jeddah, and listing only Carrier's vessel as transport.

When the feeder vessel became stranded in Italy before reaching port, with consequent damage to cargo, the insurers refused to provide salvage security to salvors on Seller's behalf, maintaining that the policy did not cover the feeder vessel. Seller sued Carrier for damages resulting from misrepresentation, claiming it was unaware of the feeder vessel or any transshipment arrangements. Carrier denied any misrepresentation, and counterclaimed against Seller for charges relating to the shipping containers, which were unavailable for return due to litigation between Insurer and Seller.

The Queen's Bench Division of the Commercial Court, Cooke, J., dismissed both claims, finding that both Carrier and Seller knew of the transshipment, and it was their plan to deceive the issuing bank and Buyer by presenting a Bill of Lading which falsely showed no transshipment. The judge stated that "It is clear to me that SABO...regarded the 'no transshipment' provision in the l/c as a matter of paper compliance, rather than actual compliance."

[JEB/ees]

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