MSC MEDITERRANEAN SHIPPING CO SA V COTTONEX ANSTALT

[2016] EWCA Civ 789, Court of Appeal, Civil Division, Lord Justice Moore-Bick, Lord Justice Tomlinson and Mr Justice Keehan, 27 July 2016

Bills of lading - Container demurrage - Repudiation - Penalty clauses - Repudiation - Acceptance of repudiation and termination - Role of legitimate interest principle

A cargo of cotton was stuck for several years in storage in Chittagong, Bangladesh, inside 35 containers shipped under five bills of lading. MSC Mediterranean, the carrier, was the owner of the containers but not the cotton, and expected them to be redelivered to it. The shipper, Cottonex Anstalt, considered that it had been paid for the cotton and had no right to collect the containers. The consignee, who was not a party to these proceedings, took the view that the bills of lading presented under the letter of credit were fraudulent, showing a compliant but untruthful date, and had brought proceedings in a Chittagong court to prevent payment under the letter of credit. The containers, with the cotton, were now held in storage in Chittagong and the customs authorities refused to release them to the carrier for unpacking. The bills of lading contained a clause 14.8 stipulating demurrage payable by "the Merchant", which was defined inter alia as the shipper or consignee claiming the goods under the bill of lading. No one had done so or could do so, and the demurrage now amounted to approximately 10 times the value of the cargo of cotton inside. The carrier commenced proceedings under the bill of lading contracts against the shipper for demurrage in respect of the containers. The judge at first instance held that the shipper had repudiated the contracts, but that the carrier could not affirm the contracts and continue to claim demurrage indefinitely. The carrier appealed.