Copper, Crooks, Conversion and Hedging - A Cautionary Tale

By Electra Panayotopoulos and Alex Moulsdale

In Trafi gura Beheer BV & Anor -v- Mediterranean Shipping Company ([2007] EWHC 944 (Comm)) Aikens J considered several undecided issues of law as well as decided cases such as the Happy Ranger ([2002] 2 LLR 357) and Motis Exports Ltd -v- Dampskibsellskabet AF and AKTS Svendborg ([1991] 1 LLR 837).

Judgment was handed down on 26 April 2007, and though the case involved a rather special set of facts it is nevertheless of great potential significance for carriers and traders alike.

The facts

The Claimant trading company shipped a cargo of copper from South Africa to China, to be delivered to its wholly owned subsidiary for onward trade. The containerised goods were shipped on board a vessel operated by the Defendant carrier, and the cargo was discharged in Shanghai without incident. The dispute arose when someone else presented a fraudulent B/L to the carrier's agent in Shanghai and obtained a delivery order for the cargo: the fraudulent nature of the B/L was discovered quickly and the holder of it was prevented from taking physical possession of the goods. Thus the cargo remained in the customs compound in Shanghai, pending local determination of a dispute with the holder of the fraudulent B/L.

The holder of the genuine B/L started proceedings in England against the carrier, claiming breach of contract and conversion. The issues before the Judge included (a) whether the limitation provisions of the Hague/Hague-Visby Rules afforded the carrier any protection and (b) whether the Claimant was entitled to recover "hedging losses" incurred as a result of hedging the cargo.

Limitation

The B/L sought to limit the period of responsibility of the carrier (in the graphic phrase) "tackle-to-tackle", with risk thereafter passing to the "merchant". It also limited liability "in any event" to the Hague or Hague-Visby Rules limit, whichever applied.

Though these provisions may not have been effective to exclude liability completely for events after discharge (it was common ground that the goods were discharged to the carrier's container terminal and were therefore still in its custody), the Court held that the clause was effective in limiting the temporal scope of the Rules. As a result, it was ineffective to cover events arising post discharge.

However, by reference to the decisions in the Happy Ranger and the Kapitan Petko Voivoda, ([2003] 2 LLR 1), the Judge commented obiter that, had the temporal scope...