The Counterfactual Defence

1. The term “counterfactual” came into prominence after the English judgement on Unicredit Bank A.G. v Euronav N.V. (“The Sienna”). This word was used once in the High Court Judgement (Para 17) and six times in the Court of Appeal judgement. Given that this is an uncommon word and which now has sprung to be commonly used as a defence to mis-delivery, it is important to understand what is counterfactual?
2. Our search in ChatGPT on counterfactual in English Law reveals that “it refers to a hypothetical scenario used to assess the causation of a particular outcome. Specifically, it involves considering what would have happened if a defendant had not acted in a certain way. This concept helps determine whether the defendant’s conduct was a necessary cause of the plaintiff’s loss or injury by comparing the actual events to the hypothetical scenario where the defendant’s conduct was absent. Counterfactual reasoning is often applied in negligence cases to establish causation, especially when multiple factors could have contributed to the harm. The idea is to identify if the harm would have occurred regardless of the defendant’s actions or if their conduct was a significant contributing cause”.
3. Some of the possible defences to a Bill of Lading (“BL”) mis delivery claimsⁱ are that the Claimants
   1. did not receive any rights under the BL given that they were spent i.e. the BL’s have served their purpose and are no longer valid for use.
   2. agreed or acquiesced to delivery without BL’s (The “consent” defence)
   3. would have, if asked, agreed to deliver without presentation of BL (the Causation defence of which the counterfactual is a part of)
   4. did not become holders of the BL in good faith in that they were aware that the previous holders had instructed for the cargo to be delivered without BL
   5. Other defences such as Time Bar and Limitation of Liability available (by law or contractually).
4. In The Sienna, it was successfully argued by the Owners that the Claimants (who were a Bank) would have agreed for the cargo to be delivered to the receivers without production of an original BL. This was in spite of the fact that the Owners had taken (or deemed to have taken) a Letter of Indemnity (“LOI”)ⁱⁱ from the Charterers prior to giving delivery. Our instinctive reactionⁱⁱⁱ to the Seinna judgement was that this decision cannot be correct!
5. We are now pleased to see that the other courts (Singapore and Indian)^iv have not followed the English decision of The Sienna. This is obviously a return to the orthodoxy^v and therefore should an Owner decide to deliver cargo to the receivers without presentation of the OBL, they must be prepared to accept the risks of mis-delivery. If they (Owners) are comfortable with a LOI^vi provided by the Charterers/Receivers, then Owners must look at recovery from the issuer of the LOI. Obviously, if the Owners have got a LOI which is worthless i.e. if the issuer is no longer live or a going company, then this is a risk which they(Owners) have willingly taken and which could have been avoided by doing a proper KYC.
6. In conclusion
   1. Delivery of cargo without a BL may result in Owners/Carriers being liable to the holders for at least the value of the cargo.
   2. The Counterfactual defence, has had a good run, and may no longer be a valid defence, particularly when the delivery has been effected on receipt of a LOI.

^i. We must thank Ting Yong Hong of Rajah & Tann for his wonderful presentation during the SCMA Vietnam Conference held on 23^rd Sep 2025 and which touched on the possible defences to an mis-delivery claim.
^ii. In Charterparty situations, it is quite common for Owners to deliver the cargo to receivers on the basis of a LOI (as this would be contractually provided in the C/P).
^iii. Paul Rowland’s in his address as the then (2014/2015) Chairman of the Association of Average Adjuster on “Basic Instinct” – touched on the basic instincts or gut reactions of a practitioners if they should see something obviously going against the established practice. This address is available to members and subscribers at the AAA’s website.
^{iv. See the decision on Winson Oil Trading Pte Ltd and United Overseas Bank  (The Maersk Katalan) argued both at the Singapore High Court & the Court of Appeal and Banque Cantonale de Geneve v Owners and Parties interested in MV Polaris Galaxy [2025] decided by the Madras High Court.
v. See Article on Misdelivery Liability: The Maersk Katalin and the Carrier’s Duty by Hui Tsing Tan of DennisMathiew
vi. See our earlier articles on Bills of Lading and Letters of Indemnity and Release of Cargo against a Letter of Indemnity / Bank Guarantee:}