Article

Negligent Misrepresentation; Conspiracy; Bill of Lading; Fraud

Note: When a confirmer that honored discrepant documents sought to obtain the goods, it discovered that the bill of lading had been antedated by more than one month and that the bitumen was defective. It sued the carrier, the beneficiary, and the beneficiary's broker for deceit, negligent misrepresentation, and conspiracy and prevailed as reported inStandard Chartered Bank v. Pakistan National Shipping Corp.,Queen's Bench Division (Commercial Court) (England) (1999),[1999] 1 Lloyd's Rep. 684,abstracted at1999 Annual Survey 390.

When the case was tried to determine damages, the defendants argued that the correct measure of damages was the difference between the amount paid on the LC and the market value of the goods at the time that the confirmer took control of the bill of lading.

"[The defendants] contend that the market value of the bitumen was at all relevant times greater than the amount paid by [the confirmer] to [the beneficiary], and that [the confirmer] failed to realize that market value through its own ineptitude. On the footing that there was an available market for the disposal of the cargo, they submit that the market price should provide the appropriate yardstick for measuring [the confirmer's] damages and that the decisions which [the confirmer] took for the disposal of the goods should properly be regarded as its own independent business decisions (ie decisions for which the defendants' wrongdoing provided the context but not the cause)."

Moreover, they argued that the confirmer's loss in not obtaining reimbursement from the issuer "was solely caused by its own negligence and not by the fraud in the dating of the bills of lading."

The Queen's Bench Division (Commercial Court), Toulson, J., ruled that "it is relevant to consider not just [the confirmer's] position vis-a-vis [the issuer] under the terms of the letter of credit, but also its position in relation to the documents and the goods themselves."

Additionally, the judge indicated that he was not 'persuaded' that there was a market for the cargo before its arrival. The court concluded:

"In this case the defects in the quality of the bitumen and drums existed at the time when [the confirmer] was fraudulently induced to accept the documents, and therefore the consequences of those defects lie ... with the defendants."

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