Mediterranean Shipping Company SA v Trafigura Beheer BV & Anor

A bill of lading which incorporates the Hague-Visby Rules only where they are compulsorily applicable does not incorporate them merely because the port of shipment has enacted equivalent legislation. Compulsion must arise under the proper law of the contract, or incidentally under the law of the forum.

The Hague Rules govern the terms of the carrier’s service between loading and discharge. They do not govern a post-discharge period unless the parties clearly extend them. A general exclusion or package-limitation clause will not protect a carrier against misdelivery without clear words covering the fundamental obligation to deliver only against a genuine original bill of lading. For conversion, the cargo’s value at judgment may be the fair measure, but interest on its earlier invoice value must not duplicate that compensation.

The cargo-owners shipped copper from Durban to Shanghai under a negotiable bill of lading. Fraudsters presented a false bill of lading and obtained a delivery order. Although delivery was stopped after the genuine bill was presented, the cargo remained in the terminal because the genuine delivery order lacked the customs endorsement obtained by the fraudsters.

Aikens J ordered the shipowners to deliver the cargo or pay its full value: [2007] EWHC 944 (Comm); [2007] 2 All ER (Comm) 149. The shipowners appealed, contending that the Hague Rules or Hague-Visby Rules, or the bill’s contractual terms, limited their liability. The central issues were the applicable regime, its temporal scope after discharge, the efficacy of the contractual limitations, and the proper measure of damages for conversion.

1. The appeal was dismissed, subject to a minor variation deleting the award of interest on the cargo’s invoice value. The Hague Rules, rather than the Hague-Visby Rules, governed the contractual carriage.
2. A clause making the Hague-Visby Rules applicable only if compulsorily applicable required compulsion under the proper law of the contract. The fact that South Africa had enacted the Rules did not suffice, because it was not a contracting State and the bill did not identify legislation of a particular State as governing the contract. The possibility that a forum might itself mandate the Rules was incidental and did not create contractual compulsion.
3. The Hague Rules define the terms on which the carrier’s carriage service is performed, rather than its whole contractual service. Their ordinary period ends on discharge. Clauses 4 and 7 showed that the parties had not extended the Rules to the post-discharge custody of the containers. Accordingly, the Hague package limitation did not apply during that period.
4. The broad post-discharge exclusions in clauses 4 and 7 did not excuse misdelivery. Delivery against a genuine original bill of lading was a fundamental contractual obligation. Clause 22 did not clearly refer to misdelivery and was not apt to limit liability for its breach. The court therefore upheld the shipowners’ liability in conversion and contract.
5. The cargo-owners could fairly recover the cargo’s value at the date of the first-instance judgment. They had not caused the continuing inability to obtain the cargo, and on payment the shipowners would acquire title and could realise its current value. The increase in value was alternatively recoverable as consequential loss under section 3(2)(b) of the 1977 Act. However, interest on the invoice value for the same period would duplicate the compensation provided by the judgment-date valuation and was deleted.

• Court of Appeal (Civil Division) — dismissed the shipowners’ appeal, subject to deleting the award of interest on the invoice value: [2007] EWCA Civ 794.
• High Court of Justice, Queen’s Bench Division (Commercial Court) — Aikens J ordered delivery of the cargo or payment of its full value: [2007] EWHC 944 (Comm); [2007] 2 All ER (Comm) 149.