A Buyer Took the Goods Without Payment in D/P Collection. Who Should Be Responsible?

A Buyer Took the Goods Without
Payment in D/P Collection.
Who Should Be Responsible?

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A Seller v. A Remitting Bank, A Collecting Bank, A Warehouse & A Buyer.
A firm in country A (the Seller or the Principal), with exclusive right to distribute seafood products (the Goods) of country B origin, appointed a local sales agent in country C (the Buyer or the Drawee) to develop the market there. Several shipments were made from country B to the buyer. The buyer reported that the market in country C was soft, with strong competition and the product quality was below users' expectations. Hence payment was always delayed. Nevertheless, four subsequent shipments were made. Payment was under documentary collections on "Documents Against Payment (D/P) Sight" terms. The seller, as the principal, gave the following collection instructions to the remitting bank:

to arrange storage of the goods on the principal's behalf;

to arrange insurance coverage of the goods against water damage, fire and theft risks;

to release the goods to the drawee only against payment; and

to allow partial delivery of the goods against partial payment.
Payment of CIF value USD250,000 was long overdue, despite repeated reminders being sent. The seller finally determined to claim back the goods from the warehouse in country C and sold to a third party in country D. The warehouse reported through the collecting bank (in country C) and the remitting bank (in country A) that there was no more goods left, all claimed by the buyer already. However, according to the record kept by the seller, there should be goods of CIF value USD250,000 left unclaimed in the warehouse. It was later revealed that the warehouse warrants were issued "held to the order of the buyer", rather than "held to the order of the collecting bank" as instructed The above transactions were not covered by any export credit insurance programme.
The seller put the matter to the attention of its legal counsel, which is one of the biggest ten law firms in country A. Strongly worded letters were sent to the remitting bank, the collecting bank, the warehouse and the buyer,

holding the remitting bank, the collecting bank and the warehouse jointly and severally liable for not following strictly the collection instructions given by the seller, the principal;

charging the remitting bank, particularly the collecting bank, negligent in their duties in supervising the warehouse, to ensure that the warehouse warrants were "held to the order of the collecting bank";

charging the warehouse for

not issuing the warehouse warrants to the order of the collecting bank; and
release of the goods to the buyer without the approval of the collecting bank;

charging the buyer for default in payment of USD250,000 after receipt of the goods.
The warehouse and the buyer both remained silent.
The legal counsel of the collecting bank pleaded that they had passed on the collection instructions from the remitting bank to the warehouse and assumed no further responsibilities.
The remitting bank was the seller's banker. It was annoyed by the above mentioned letter and as a result, immediately suspended all banking facilities previously made available to the seller. As the seller relied on only one banker, it could not settle any imports by T/R (trust receipt) facilities nor could it open any letter of credit to its suppliers. Business was then at a stand still. The seller was not able to obtain banking facilities successfully from another bank because of the tight cash flow situation amongst the banks in country A at the time, as a result of the Asian finance turmoils triggered off by Thailand.
One of our clients from country A referred the seller to us.
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