The Notion of Fiduciary Trust - Case Study Example

The notion of fiduciary trust and its breach is at the heart of the contractual agreement between a consignee and a consigner as well all of the entities representing either of the parties. When dealing with a consignment agreement which involves the transport of goods by sea, the Hague-Visby rules as amended by the Brussels protocol 1968 as well as the Carriage of Goods by Sea Act 1992 delineate the obligations and rights of each party as well as the recourse each entity may have as a direct result of the breach of responsibility by opposing parties. First and foremost, Merchant LTD is a shipper which engaged in a consignment agreement with Wavy Line Carriers wherein Wavy Line was responsible for the transport of 3,000 tons of timber from Felixstowe to Rotterdam. Upon receipt of the timber, Wavy Line issued a bill of lading. The bill of lading indicated that 3,000 tons of timber was received from Merchant LTD and the timber was received in good condition. In examining Wavy Line's responsibilities with regards to Merchant LTD it is prudent for Merchant LTD to know that the issuance of a bill of lading is accompanied by legal rights and responsibilities. Those rights and responsibilities as delineated by the Hague-Visby rules denote that under the "contract of carriage" the responsibilities and liabilities of Wavy Line include the premise that Wavy Line is obligated to exercise a superior degree of care in order to: Ensure that the ship is made suitable for the impending voyage Ensure that the ship is adequately equipped in terms of manpower, supplies and equipment Ensure that the necessary accommodations are made for the safe transport of the goods (Article II-Hague-Visby Rules, 1968). In examining Article II of the Hague-Visby Rules, we can clearly see that there is a breach of the contract by Wavy Line in that Wavy Line was obligated to ensure that the ship is adequately staffed prior to embarking on the voyage. The fact that Wavy Line had to stop to pick up a relief master on the way indicates that the staffing responsibility was not met as necessitated by the Hague-Visby Rules. Article III Section 5 of the Hague-Visby Rules addresses remuneration under these circumstances. The rules indicate that the value of the goods must be explicitly stated on the bill of laden if the carrier is expected to be responsible for total remuneration to the property owner. If, however, the total value of the goods is not indicated in the bill of laden, then the carrier is only responsible for the value of 666.67 units of account per package and the total value of the goods are to be determined based on their value at the time they were contracted to be delivered (Article III, Section 5-Hague-Visby Rules, 1968). According to this, I would advise Merchant LTD that Wavy Line did in fact fail to uphold their obligation to deliver the timber at the specified time. This obligation was not mitigated by any justifiable circumstances such as acts of God but it was a direct result of Wavy Line's failure to exhibit due diligence. As such, Merchant LTD can receive some compensation for the loss but the compensation they are able to receive is less than the total demanded due to the fact that the value of the merchandise was not explicitly stated on the bill of laden. The case of Transfield Shipping Inc of Panama v. Mercator Shipping Inc of Monrovia, [2006] EWHC 3030 (Comm); [2006] can be utilized to substantiate the aforementioned analysis with regards to the party responsible for the loss, however, the amount of judgment based on Transfield Shipping Inc of Panama v. Mercator Shipping Inc of Monrovia, [2006] proves to be interesting. The facts of the case of Transfield Shipping Inc of Panama v. Mercator Shipping Inc of Monrovia, [2006] are such that in January of 2003, The Achilleas was time chartered to Transfield Shipping Inc. The charter was extended as delineated in a supplemental document at a new higher hire rate and the maximum duration of the agreement expired on 2 May 2004. Later, the owners entered into a charter agreement with Cargill International SA. The contents of the vessel were to be delivered and the vessel was to be redelivered to Transfield Shipping, Inc. on 11 May, 2004. The delivery was late and as a result, Transfield Shipping claimed damages of $158,301.17 as a direct result of the vessel being delivered late. This claim was based on the original discounted rate of charter. The findings of the case were such that the majority of the arbitrators found that Transfield Shipping, Inc. was entitled to recover $1,364,584.37 for damages for late redelivery of the vessel. The findings were made on the basis that the true loss as a result of the late delivery caused by the breach. Therefore, the majority of the arbitrators held that the loss was the entire responsibility of Cargill (England and Wales High Court (Commercial Court) Decisions, 2006). In examining Wavy Line's claim of '3,800 against Merchant LTD it is prudent that we examine the implications of the bill of laden as delineated by both the Hague-Visby Rules and the Carriage of Goods by Sea Act of 1992. The first question with regards to the claim made by Wavy Line against Merchant LTD is one which questions the ownership of the bill of laden. As delineated by the Carriage of Goods by Sea Act of 1992 the legal ownership of the bill of laden was transferred from Merchant LTD to Argent when they accepted the timber shipment from Wavy Line. The fact that they returned it to Merchant LTD does not negate their ownership. As delineated by Section 2 [Rights under shipping document] of the Carriage of Goods by Sea Act of 1992, Argent was the legal owner of the bill of laden. As such, this entity retained the right to seek remuneration for any cause of action resulting from this transaction. Another consideration with regards to the ability for Wavy Line to seek remuneration relates to the fact that the bill of laden indicated that the merchandise was received by Wavy Line in good order. The bill of laden was issued under this condition but one has to question whether Wavy Line could have reasonably known that the shipment was infested with Dutch elm disease. In examining the research on the ability to tell whether lumber was infected with Dutch elm disease, Deacon (2000) & Brasier (1996) indicate that the presence of Dutch elm disease is very apparent when looking at the lumber. Its presence is made noticeable by the presence of a ring of blocked, discolored xylem vessels when a segment of the wood is examined utilized using the naked eye. Clearly this should have been noticed by the individuals within Wavy Line who issued the bill of laden and verified the condition of the timber upon receipt. The fact that the bill of laden indicated that the goods were received in good condition can serve to negate the responsibility of Argent. Support for the determination made here can be obtained in case law in the case of East West Corporation v Maersk and P&O [2003] when the judge held that, by being named as consignees in the bills of lading, the banks became holders of the bills under s.5(2)(a)1 of the Carriage of Goods by Sea Act, 1992, with rights of suit under s.1 of the Act, and, as a result, the shippers' right to sue under the bills was extinguished by s.2(5) of the Act (East West v. DKBS 1912, 2003). In applying the ruling made in the case of East West Corporation v Maersk and P&O [2003] to the case in point, one can clearly and logically extend the determination that the right to sue was negated by the consignment agreement to the right to be sued. In fact the implications of s. 5(2)(a)1are such that Merchant LTD has no standing in any causes of action arising as a direct result of the transportation of the timber by Wavy Line. An interesting appeal was made in the case of Effort Shipping Company Limited v. Linden Management SA and others (1998) whereby an appeal was made on the grounds that in a consignment agreement, the bill of laden facilitates a transfer of liability from the shipper to the consignee but this transfer does not afford the shipper immunity from litigation. This appeal was dismissed and the final ruling maintained that the shipper was not liable in any causes of action when a bill of laden has been issued to a consignee. References Brasier, C. (1996). New Horizons in Dutch Elm Research. Retrieved 8, February, 2007, from http://www.forestresearch.gov.uk/pdf/New_horizons_DED.pdf/$FILE/New_horizons_DED.pdf. Crown (1992). Carriage of Goods by Sea Act 1992 (c.'50). Retrieved 1, February, 2007, from http://www.opsi.gov.uk/acts/acts1992/Ukpga_19920050_en_1.htm Deacon, J. (2000). The Microbial World: Vascular wilt diseases - Dutch elm disease. Retrieved 8 February, 2007, from http://helios.bto.ed.ac.uk/bto/microbes/dutchelm.htm East West v. DKBS 1912 (2003). East West Corporation v DKBS 1912 and AKTS Svenborg: Utaniko Ltd v P&O Nedlloyd BV English Commercial Court: Thomas J.: 27 February 2002. Retrieved 1, February, 2007, from http://www.onlinedmc.co.uk/east_west_v__dkbs_1912.htm. England and Wales High Court (Commercial Court) Decisions (2006). Transfield Shipping Inc of Panama v Mercator Shipping Inc of Monrovia [2006] EWHC 3030 (Comm) (01 December 2006). Retrieved 8 February 2007, from http://alpha.bailii.org/ew/cases/EWHC/Comm/2006/3030.html House of Lords (1998). Judgments - Effort Shipping Company Limited v. Linden Management SA and Others. Retrieved 1 February, 2007, from http://www.publications.parliament.uk/pa/ld199798/ldjudgmt/jd980122/effort01.htm LexMercatoria (1997). The Hague Rules as Amended by the Brussels Protocol 1968. Retrieved 1 February, 2007, from http://www.jus.uio.no/lm/sea.carriage.hague.visby.rules.1968/portrait.pdf Read More