Posted: 28/10/2024
A recent decision of the Commercial Court in Stournaras Stylianos Monoprosopi EPE v Maersk A/S [2024] EWHC 2494 (Comm) concerned a fraudulent sale in which 22 containers alleged to contain scrap copper wire in fact contained worthless concrete blocks.
A quarter of a billion containers are shipped around the globe annually. Container shipping provides a unique opportunity for goods to be misdescribed by the shipper, as containers are typically pre-packed and sealed before coming into the custody of the ocean carrier, meaning the master’s inspection of the goods is often confined to the container’s external characteristics.
Containership bills of lading frequently contain qualifying words, such as ‘particulars furnished by shipper’ or ‘said to contain’ in order to protect the carrier from liability to the consignee. Goods may be misdescribed by a shipper for one reason or another, for example, to reduce the cost of shipping dangerous goods or to facilitate a fraudulent sale.
The claimant, a Greek scrap metal dealer, had entered into three contracts for the purchase of copper scrap from a UAE based shipper. Maersk was engaged to transport the goods from Jebel Ali to Piraeus where the goods were delivered on 26 December 2019. After the fraud was discovered, the claimant obtained default judgment against the shipper in Dubai but, as the shipper was nowhere to be found, the judgment could not be enforced.
The claimant turned its attention to Maersk, which had issued three clean bills of lading showing the cargo weight information provided by the shipper, apparently in accordance with the contracts of sale, even though this information was untrue. The claimant also contended that Maersk ought to have known the weights were mis-described, as it was in receipt of other certificates recording the actual weights of the containers as independently determined by DP World.
These certificates set out the verified gross mass (VGM) of the containers to enable Maersk to comply with its obligations under SOLAS and ensure the containers were safely stowed. The VGM data was displayed on Maersk’s ‘Global Customer Services System’ but appeared on a different screen to the data received from the shipper. A comparison between the shipper’s declared weights and the VGM data would have identified that the actual weight of the containers was only 30-40% of the weight of the goods declared by the shipper. However, no such comparison was in fact made by Maersk and there was nobody employed by Maersk routinely responsible for making such comparisons.
Two of the bills were issued on 26 November 2019 and the third was undated. The shipper presented the claimant with the first and second bills on 26 November 2019. In reliance on those bills of lading, the claimant made payments totalling US$459,031 in respect of the balance of the sale price under the first and second contracts. The following morning, the claimant gained access to Maersk’s online portal where a ‘documents’ tab recorded the contents of the bills, including the shipper’s declared weights, and a ‘containers’ tab recorded the VGM data. Upon discovering the discrepancy with the container weights, the claimant immediately raised the issue with Maersk, which took no action. The claimant obtained a printed copy of the third bill from the portal before Maersk removed it, but never received an original third bill from the shipper.
The bills did not contain any assertion that the weight of the containers was in accordance with the shipper’s description. Rather, they were on Maersk’s standard form, which stated ‘particulars furnished by shipper’ on the front and contained the following clause 14.2 on the reverse: ‘… No representation is made by the Carrier as to the weight, contents, measure, quantity, quality, description, condition, marks, numbers or value of the Goods and the Carrier shall be under no responsibility whatsoever in respect of such description or particulars …’
The bills also gave effect to articles 1 – 8 of the Hague Rules by way of an express term.
The claimant contended before the Commercial Court that Maersk was in breach of article III rule 3 of the Hague Rules for issuing unclaused bills of lading, when it ought to have known that the cargo was not in good order and condition. Article III rule 3 obliges the carrier, on demand of the shipper, to issue a bill of lading showing inter alia the weight and apparent order and condition of the goods, as furnished in writing by the shipper, unless the carrier has reasonable grounds for suspecting those details to be inaccurate or has no reasonable means of checking.
The claimant acknowledged that it is only the shipper who is entitled to demand such a bill of lading under article III rule 3. However, once a bill is issued, the claimant contended that the duty owed to the shipper became enforceable at the suit of the consignee following the statutory transfer of the rights of suit effected by the Carriage of Goods by Sea Act 1992. The bills in question were straight bills, naming only the claimant as consignee.
Lionel Persey KC, sitting as a judge of the High Court, found that if Maersk was in breach of article III rule 3 then the claimant would be entitled to bring a claim, as the wording of COGSA 1992 was wide enough to transfer all such rights to the consignee.
However, the judge found against the claimant on the facts. Although Maersk had the data available in 2019, there was apparently no evidence that at that time Maersk had any reason to consider that shippers would provide fraudulent data.
The claimant brought alternative claims in tort, including a claim in negligent mis-statement, which the judge had no hesitation in rejecting. Any suggestion that Maersk had made mis-statements in the bills was clearly refuted by the wording ‘particulars furnished by shipper’ on the front along with clause 14.2 on the reverse. It is unlikely to have helped the claimant that it also maintained a plea in deceit right up until service of its closing submissions. The judge was clear that ‘[t]here was no basis for the making of such a plea in any of the written evidence before me… The plea should never have been made.’
Finally, the claimant contended for the existence of a novel duty in the tort of negligence, namely to take reasonable care to not issue a clean bill of lading that included, without qualification, shipper’s particulars that a competent carrier would know or suspect on reasonable grounds to be fraudulent.
Following the leading House of Lords’ decision in Caparo Industries plc v Dickman [1990] 2 AC 605, it was trite law that the question of whether a new tortious duty ought to arise involved a tripartite assessment of: (i) foreseeability of harm; (ii) the proximity between the parties; and (iii) whether it was reasonable to impose a duty in all the circumstances. It was furthermore clear that, beyond the established categories of cases, the law should proceed incrementally and by analogy with existing precedent.
It being already recognised that carriers owe consignees a duty in respect of their own misrepresentations in bills of lading, the claimant contended that a duty to prevent others from using the bill as an instrument of fraud, once the carrier is on notice of that fraud, was a natural and incremental extension of that duty.
Interestingly, the judge found such a duty to exist:
‘I consider that where a consignee under a straight bill of lading can establish that the carrier knew or ought to have known when issuing the bill that there was a substantial discrepancy between the shipper declared weights and the actual verified weights it has a strong case that the carrier ought not to issue an unclaused bill or ought not to have issued a bill at all. It seems to me that such a discrepancy would give rise to an assumption on the part of the carrier that the proposed bill was being used as an instrument of fraud. In such circumstances, it would in my judgment be fair, just and reasonable to impose a duty of care upon the carrier, owed to the named consignee, to ensure that its bills are not used as an instrument of fraud, once they have been put on notice of that fraud.’
However, this alternative claim likewise failed on the facts, as there was apparently no evidence that Maersk had any reason to consider in 2019 that shippers would provide fraudulent data.
The leading decision of the Court of Appeal in The Tai Prize [2021] EWCA Civ 87 establishes that the information provided by the shipper for insertion in the bills of lading constitutes merely an invitation to the master to make a representation of fact in accordance with his own assessment of the apparent condition of the cargo. In this regard, the Commercial Court’s obiter findings, to the effect that article III rule 3 of the Hague Rules is enforceable at the suit of the consignee, along with the creation of a new duty in tort, may have future implications for the ocean carrier’s assessment of the apparent order and condition of containerised goods. It may no longer be acceptable to simply state ‘particulars furnished by shipper.’
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