Trafigura Beheer BV v Mediterranean Shipping Company SA
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lord Justice Lloyd,Lord Justice Tuckey |
| Judgment Date | 27 July 2007 |
| Neutral Citation | [2007] EWCA Civ 794 |
| Docket Number | Case No: 2007 0997 A3 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 July 2007 |
[2007] EWCA Civ 794
Lord Justice Tuckey
Lord Justice Longmore and
Lord Justice Lloyd
Case No: 2007 0997 A3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (COMMERCIAL COURT)
Hon Mr Justice Aikens
Luke Parsons Q.C. and Chirag Karia (instructed by Messrs Hill Dickinson LLP) for the Appellant
Dominic Kendrick Q.C. and Charles Holroyd (instructed by Reed Smith Richards Butler LLP) for the Respondents
Hearing dates: 4th, 5th July 2007
Judgement
Introduction
This is a case in which cargo-owners have sued shipowners for conversion and breach of contract in relation to a consignment of copper stowed in 18 containers shipped at Durban for delivery in Shanghai. Fraudsters arranged to create and present a false bill of lading against which the shipowners gave a delivery order entitling the fraudsters to delivery from the Hudong Container Terminal warehouse, in which the goods had been stored after arrival. Customs at Shanghai will not permit cargo to be taken out of the container terminal in the port without payment of customs duty and VAT and production of a delivery order stating that payment has been so made. The fraudsters have paid the customs duty and their delivery order has been endorsed by Customs to that effect. Only a day later the cargo-owners presented their (genuine) bill of lading and the shipowners were able to ensure that delivery to the fraudster did not take place. Although the shipowners gave another delivery order to the cargo-owners, that delivery order has not been stamped with any record of duty having been paid and the cargo-owners cannot therefore obtain delivery from the warehouse. This impasse has continued and still exists. In these circumstances the cargo-owners have sued the shipowners and have obtained an order from Aikens J ordering the shipowner to deliver the cargo or pay the full value of the cargo. From that order the shipowners now appeal contending that their liability is only a limited one. This depends on whether the shipowners' liability is governed by the Hague Rules or the Hague-Visby Rules or the terms contained in the bill of lading.
The facts are fully and lucidly set out by the judge in his judgment [2007] EWHC 944 (Comm), [2007] 2 All ER (Comm) 149. All that I need to add is that the cargo was discharged in Shanghai on 23rd October 2005, that it was on 24th October 2005 that the shipowners gave the fraudsters the first delivery order and on 25th October 2005 that the cargo-owners presented the true bill of lading against which the shipowners were unable to deliver the goods. The cargo-owners do not say that the shipowners were themselves negligent in any way although they point out that the judge found employees of the ship's agents in Durban were likely to have been parties to the fraud; conversely the shipowners have never alleged that there were any steps which the cargo-owners could or should have taken to mitigate their loss.
In these circumstances the judge isolated five issues:—
(1) On the true construction of clause 1(a) of the bill of lading terms, do the Hague Rules (“HR”) or the Hague-Visby Rules (“HVR”) apply to the bill of lading contract? If the HVR apply do they do so by contract or the force of law?
(2) On the true construction of the bill of lading terms, in particular clauses 4, 7 and 22, do the HR or the HVR apply to the period after the cargo had been discharged from the ship but whilst the containers remained in the container terminal to the order of the shipowners (“the post-discharge period”)?
(3) If the HR, alternatively HVR, do apply to the post-discharge period, then, on the true construction of Article IV(5) of the HR or the HVR (whichever is applicable), are the shipowners entitled to limit their monetary liability for conversion of the cargo during the post-discharge period? If so, to what amount?
(4) If the HR, alternatively HVR, do not apply to the post-discharge period, then does clause 22 of the bill of lading exclude or limit any monetary liability of the shipowners if they convert the cargo during the post-discharge period?
(5) If the HR, alternatively HVR, do not apply to the post-discharge period and the shipowners cannot exclude or limit their monetary liability for conversion of the cargo by virtue of the terms of the bill of lading, then what is the proper measure of damages for conversion of the cargo on the facts of this case? In particular: (a) are the cargo-owners entitled to claim damages based on the value of the cargo at the time of judgment or is that claim limited to the value of the cargo at the time of conversion (ie, 24th or 25th October 2005); and (b) are the cargo-owners entitled to recover, in addition to the value of the cargo, any of their “hedging losses”?
The answers which the judge gave to these questions were:—
(1) HVR as a matter of contract;
(2) No;
(3) Inapplicable, but the HVR limit;
(4) No;
(5) (a) Value at time of judgment and (b) no.
Issue One: Hague Rules v Hague-Visby Rules?
The bill of lading relevantly provides:—
“(a) For all trades, except for goods shipped to and from the United States of America, this B/L shall be subject to the 1924 Hague Rules with the express exclusion of Article IX, or, if compulsorily applicable, subject to the 1968 Protocol (Hague –Visby) or any compulsory legislation based on the Hague Rules and/or the said Protocols. Where Hague-Visby or similar legislation is compulsorily applicable, the Hague-Visby 1979 Protocol (“SDR” Protocol) shall also apply whether or not mandatory.”
Thus for the voyage from Durban in South Africa to Shanghai in China at least the 1924 Hague Rules will apply. The question is whether for that trade the Hague-Visby Rules (or as they are called in the clause “the 1968 Protocol”) apply. They will only apply if:—
(1) they are “compulsorily applicable”; or
(2) there is “compulsory legislation” based on Hague-Visby Rules.
Since the Hague-Visby Rules are part of directly enacted statute law in the United Kingdom in respect of carriage from any Contracting State (Carriage of Goods by Sea Act 1971) and they are also part of directly enacted statute law of the Republic of South Africa in respect of carriage from South Africa (Carriage of Goods by Sea Act 1986), a commercial man might not be surprised to be told that the contract of carriage contained in the bill of lading issued by or on behalf of the shipowners was subject to the Hague-Visby Rules. Unfortunately it is not as simple as that.
Mr Parsons QC for the shipowners fastens on the words “compulsorily” and “compulsory” and submits that the Hague-Visby Rules can only apply if it is “compulsory” to apply them. It can only be “compulsory” to apply the Rules if it is a relevant law that “compels” that application. The only possible laws to which it is necessary (or indeed possible) to look are the law which governs the contract of carriage (English law by virtue of clause 2(a) of the bill of lading) or the lex fori (the law of the place in which the litigation is taking place, also (here) English law). He then says that as a matter of substantive English law the Hague-Visby Rules only apply if:—
(a) the bill of lading is issued in a “contracting State”; or
(b) the carriage is from a “contracting State”; or
(c) the contract contained in or evidenced by the bill of lading provides that the Hague-Visby Rules are to govern the contract.
He then submits that none of these conditions are satisfied because (1) although South Africa has enacted the Hague-Visby Rules it has never signed the 1968 Protocol and is, therefore, not a “contracting State” and (2) the bill of lading has not provided that the Hague-Visby Rules are to govern the contract but only that they are to govern the contract if compulsorily applicable which, as a matter of English law, they are not.
The material provisions of the English Carriage of Goods by Sea Act 1971 as amended are:—
“1.(1) In this Act, “the Rules” means the International Convention of certain rules of law relating to bills of lading signed at Brussels on 25 August 1924, as amended by the Protocol signed at Brussels on 23 February 1968 and by the Protocol signed at Brussels on 21 December 1979.
(2) The provisions of the Rules, as set out in the Schedule to this Act, shall have the force of law.
…….
(6) Without prejudice to Article X(c) of the Rules, the Rules shall have the force of law in relation to–
(a) any bill of lading if the contract contained in or evidenced by it expressly provides that the Rules shall govern the contract,
………..
Schedule. The Hague Rules as amended by the Brussels Protocol 1968.
…………..
Article X
The provisions of these Rules shall apply to every bill of lading relating to the carriage of goods between ports in two different States if
(a) the bill of lading is issued in a contracting State; or
(b) the carriage is from a contracting State; or
(c) the contract contained in or evidenced by the bill of lading provides that these Rules or legislation of any State giving effect to them are to govern the contract
whatever may be the nationality of the ship, the carrier, the shipper, the consignee, or any other interested person.”
Mr Kendrick QC for the cargo-owners accepts that South Africa is not a “contracting State” and that neither Article X(a) nor X(b) can apply. He submits however that the words “compulsorily applicable” indicated that the Hague-Visby Rules were intended...
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