Stournaras Stylianos Monoprosopi EPE v Maersk A/S (The “Maersk Klaipeda”)
DMC/SandT/24/14
England
Stournaras Stylianos Monoprosopi EPE v Maersk A/S (The “Maersk Klaipeda”)
English Commercial Court: Lionel Persey KC (sitting as a Judge of the High Court): [2024] EWHC 2494 (Comm): 7 October 2024
Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWHC/Comm/2024/2494.html
Alexander Wright KC and Tom Nixon (instructed by Watson Farley & Williams LLP) for Stournaras (Consignees)
John Passmore KC (instructed by Campbell Johnston Clark) for Maersk (Owners)
CARRIAGE OF GOODS BY SEA: BILLS OF LADING ISSUED FOR CONTAINERS: UPON DELIVERY, CONTAINERS FOUND NOT TO CONTAIN CARGO STATED ON FACE OF BILLS OF LADING: CONSIGNEES CLAIMED OWNERS SHOULD NOT HAVE ISSUED BILLS OF LADING OR SHOULD HAVE CLAUSED THEM: OWNERS’ COUNTERCLAIM FOR INDEMNITY FOR COSTS ARISING FROM SHIPPERS’ FAILURE TO ENSURE DESCRIPTION OF CARGO WAS ADEQUATE AND CORRECT PURSUANT TO PRINTED TERMS OF THE BILLS OF LADING: ARTICLE III 3(C) OF THE HAGUE RULES
Summary
In finding for Owners, the High Court held that Owners owed no contractual obligation or duty of care to verify weights declared by Shippers.
The dispute arose when Consignees took delivery of 22 containers said to contain copper scrap (“Cargo”), which were in fact stuffed with worthless concrete blocks. Having claimed unsuccessfully against Shippers in Dubai,
Consignees then claimed against Owners of the “MAERSK KLAIPEDA”, who had carried the containers from Jebel Ali, United Arab Emirates, to Piraeus, Greece. They alleged that Owners should have known that the containers weighed less than the Cargo described in the shipping instructions (“Instructions”), and that Owners should have claused the bills of lading or not issued them at all.
The High Court also allowed Owners’ counterclaim against Consignees, for an indemnity for losses arising from Shippers’ failure to ensure that the Cargo description was accurate.
Case note contributed by Sheridan Steiger, LLM (International Trade and Commercial Law), LLB (Hons), BA (Hons), Solicitor of England & Wales, and International Contributor to DMC’s Case Notes
Background
Consignees, as buyers, entered into three contracts (“Contracts”) for the purchase of copper scrap from Shippers, as sellers. The Contracts provided for payment for the Cargo to be made against shipping documents, which included the bills of lading.
Shippers engaged Owners to carry the containers from Jebel Ali to Piraeus, and provided Owners with Instructions that included Shippers’ declaration as to the gross (and tare) weight of each container, along with a declaration that the Cargo was copper scrap.
It was not disputed by the parties at trial that, at the time the containers were received by Owners, they had already been stuffed and sealed. Nor was it alleged that Owners had any knowledge of the cargo in the containers.
The International Convention for the Safety of Life at Sea (“SOLAS”) requires a container’s weight to be verified, and this is referred to as the “Verified Gross Mass” or “VGM”, comprising the net cargo weight together with the tare weight of the containers in which it was packed. The weight of the goods shipped may then be calculated by subtracting the tare weight from the VGM.
In accordance with SOLAS, the containers were weighed at the loading terminal in Jebel Ali. The VGM certificates issued showed the weights of the containers to be 30-40% of the weight declared in the Instructions.
Owners issued straight bills of lading to Consignees using the weights declared in the Instructions. This triggered payments from Consignees to Shippers in the sum of USD459,031.
Upon discharge in Piraeus, the containers were weighed and the VGM figures were confirmed as accurate. Therefore, the weights stated on the bills of lading were wrong. When opened, the containers were found not to contain copper scrap, but worthless cement blocks.
Consignees alleged that Owners’ failure to clause the bills of lading or make known the discrepant VGM weights led to them being defrauded.
Owners gave evidence that they had no system in place when these containers were shipped to compare the weights declared by Shippers with the weights established pursuant to the VGM requirements.
Consignees made three principal arguments for the Court to consider:
(1) Owners were in breach of Article III 3(c) of the Hague Rules, which required Owners to carry out an assessment of the “apparent order and condition of the goods”. The weight discrepancy between the VGM certificate and the Instructions should have led Owners to doubt the order and condition of the goods.
(2) Notwithstanding the bills of lading included printed wording stating “weight unknown”, Owners knew or should have known that the weights declared by Shippers were wrong and negligently misstated the weights in the bills of lading they issued.
(3) Owners owed a duty of care to take reasonable steps not to issue bills of lading that a reasonably competent carrier would know or suspect to be fraudulent.
Owners counterclaimed for an indemnity for all losses arising from Shippers providing inaccurate cargo information.
Judgment
Claim
Having dealt with the background, material facts and the witness evidence provided by the parties, the Judge found that Owners had no procedure at the time of the shipment to check declared cargo weights against weights certified during the VGM process.
The Judge also went on to note that Owners had no reason to suspect that a shipper would provide fraudulent data nor that the weights were required to be verified.
Turning to the three arguments made by the Consignee:
(1) Apparent Order and Condition
The Judge first reviewed the case law surrounding what is meant by the ‘apparent order and condition’ of a cargo and whether it includes the weight of that cargo. Referring to The “Tai Prize” (fn. 1), the Judge noted that the English Courts have previously held that ‘apparent order and condition’ refers to the cargo’s “external condition”, and is an assessment based on a reasonable examination.
None of the case law referred to addressed the issue of cargo stuffed into containers, and the Judge held that the “weight of a container [is] not apparent from an inspection of the external condition”.
Whilst the Judge agreed that Owners could have cross-checked the weights set out in the Instructions with the VGM weights, he did not consider that they should have done so.
The bills of lading that were issued were in accordance with the Instructions and, as a result, Owners were entitled to rely upon the printed terms that provided, “…No representation is made…as to the weight…of the Goods and [Owners] shall be under no responsibility whatsoever in respect of such description or particulars…”.
(2) Negligent Misstatement
The Judge held that the Owners had made no negligent misstatement when issuing the bills of lading because the printed term referred to in issue (1) above clearly stated that the cargo information provided on the bills of lading was made with no representation as to the weight of the cargo and without any assumption of responsibility by Owners.
Accordingly, Article III 3 of the Hague Rules did not allow a party to imply any representation as to the cargo described on a bill of lading.
(3) Duty of Care
The Judge accepted that if a consignee under a straight bill of lading were able to show that the carrier knew (or ought to have known) of a substantial discrepancy between the declared weight received from the shippers and the VGM certified weight, then the carrier ought not to issue bills of lading or ought properly to clause any bills of lading issued.
Further, the Judge also accepted that the carrier might reasonably assume that the bills of lading were being used as an instrument of fraud and have implied a duty of care on the carrier not to assist with any such fraud.
However, the Judge noted that, at the time of shipping, Owners had no reason to consider that Shippers would provide fraudulent data and that they should check the weights declared by Shippers against the VGM certified weights.
Accordingly, the Judge held that Owners were under no duty to Consignees, and that there had been no breach.
Counterclaim
Having determined that Consignees’ claim failed on all three bases, the Judge next considered Owners’ counterclaim, for an unpaid Maersk invoice, cargo destruction costs and container demurrage.
The Judge allowed Owners’ claim for an indemnity to cover any losses arising from Shippers’ breach of warranty as to the accuracy of the information stated on the bills of lading.
Consignees were, therefore, held jointly and severally liable as a result of the warranty and indemnity terms (fn.2) and the broad definition of “Merchant”, which included a consignee, found in the printed terms of the bills of lading.
Comment
This judgment usefully sets out the existing authorities on the meaning of the phrase ‘apparent order and condition’ of the cargo described in a bill of lading.
In a decision that will be welcomed by Owners, the Judge went on to find that a reasonable examination of a container will generally only require an assessment of its external condition, and so does not require a verification of its weight.
Further, the Judge recognised that there may be occasions when a carrier will owe a duty of care when issuing a bill of lading, but he confined it to situations where the carrier knows there is a substantial discrepancy between the shipper’s declared weight and the VGM certified weight.
Footnote 1: The “Tai Prize” [2021] 2 Lloyd’s Rep 36, [2021] EWCA Civ 87
Footnote 2:
Clause 14.3 provides that "… the Shipper warrants to the Carrier that the particulars relating to the Goods as set out o the reverse thereof have been checked by the Shipper on receipt of this bill of lading and that such particulars, and any other particulars furnished by or on behalf of the Shipper, are adequate and correct …"
Clause 15.2 provides that "… the Merchant shall be liable for and shall indemnify the Carrier against all loss, damage, delay, fines, attorneys fees, and/or expenses arising from any breach of any of the warranties in clause 14.3 or elsewhere in this bill of lading and from any other cause whatsoever in connection with the Goods for which the Carrier is not responsible …"
