Freight forwarder had no right to retain possession of new goods as security for an old claim

A Norwegian exporter of fish (consignor) had sold a consignment of dried cod to a buyer in Congo (consignee). The carriage was to be performed by a Norwegian freight forwarder. The consignor had purchased the cod from two manufacturers who had retained title to the goods on account of the consignor's financial difficulties. This meant that the goods were to be stored in the freight forwarder's warehouse and could not be released until the consignor had discharged its debt.

The freight forwarder had previously provided freight forwarding services to the consignor and therefore had a due claim. The freight forwarder gave notice to the consignor that they had retained possession of the goods and would resell the goods unless the consignor paid the freight forwarder's claim within ten days. The freight forwarder referred to the General Conditions of the Nordic Association of Freight Forwarders (NSAB). The consignor was subsequently administered in bankruptcy. The consignor's estate took legal action against the freight forwarder, claiming that the retention of the goods was unlawful and that the resale of the goods was voidable.

Were the rules in NSAB 2000 agreed between the parties?

The Court began examining whether NSAB 2000 applied between the parties. As the rules were not expressly agreed between the parties, the decisive point was whether the freight forwarder could rely on the rules as against the consignor merely on the basis of the references to the rules in its invoices. The Court assessed hesitatingly that NSAB 2000 are well-established in the industry, which spoke in favour of letting the rules apply even though there was no express agreement between the parties. The crux of the matter was whether it was possible to create a lien as security for old claims and to sell the goods without the consignor being aware of this or having accepted NSAB 2000. The Court decided on this issue in connection with another question:

Were the retained goods and the due claim adequately related?

For a freight forwarder to be entitled to retain possession of goods, there must be a certain causal link between the claim secured by the retained goods and the goods themselves. The claims must arise from the same legal relationship. In other words, there must be a so-called connexity between the claims. If the rules in NSAB are agreed between the parties, the usual assumption is that liens and charges may also be exercised in security of claims from previous legal relationships. However, this requires that there are no voidable transactions under the bankruptcy rules.

The freight forwarder's claim for the carriage concerned had not fallen due for payment at the time when the goods came into the freight forwarder's possession. The retention and resale of the goods, which took place in July, concerned only old claims - two previous carriages from February and May of the same year.

As the parties had not entered into a framework agreement, it was necessary to assess each single contract of carriage individually. On these grounds, the Court found that even though the rules in NSAB 2000 are applicable, there was not the required causal link between the freight forwarder's old claims and the goods retained. Each carriage was to be viewed as an individual contract.

Voidable resale

The retention of the goods and the exercise of the lien corresponded to security for debt previously incurred. The Court held that this was a voidable transaction in respect of the consignor's estate as the other creditors of the estate were thereby overlooked. The resale was therefore voidable.

The consignor's estate thus succeeded in its claim that the freight forwarder's retention of the goods was unlawful. As a consequence, the freight forwarder had to repay the proceeds from the resale of the goods to the estate.

IUNO's opinion

The purpose of NSAB 2000 is that the rules are to apply to all carriages agreed between the freight forwarder and the customer. However, the Norwegian Court decided on the three different carriages which in the freight forwarder's opinion were each based on NSAB as three different contracts.

With the rules on liens in NSAB 2000, it is usually considered possible to obtain security for old claims which are not related to new claims. But the bankruptcy rules may render such a security unlawful when there is no overall contractual relationship with current accounts. The Norwegian judgment is an example of such a situation.

In this case the freight forwarder might have been in a better position if he had entered into an overall framework agreement with the customer in which NSAB 2000 was expressly agreed upon, rather than merely referring to NSAB 2000 in each single contractual relationship. The rules in NSAB 2000 do not in themselves constitute such a framework agreement.

[Judgment rendered by Frostating Court of Appeal on 23 February 2012, case no. LF-2011-33574]