CJC’s Jacqueline Zalapa, Richard Hickey, Debo Fletcher and Dimitris Kroustallis represented the successful container carrier, Maersk A/S, against a claim brought by a consignee, Stournaras Stylianos Monoprosopi Epe, after it learned that it had been defrauded by the shippers who (i) shipped worthless cement bricks rather than the contractually agreed copper scrap; and (ii) also misdeclared the weights of the containers.

The judgment can be read in its entirety here - https://www.bailii.org/ew/cases/EWHC/Comm/2024/2494.html and is a rare example of the English Courts addressing the role of Verified Gross Mass weights when issuing of bills of lading.

The judgment does not alter the effect of any of the carrier’s usual exclusions and limitations on a bill of lading. Neither does it create any new duty in tort or otherwise. The Judge decided that Maersk had no notice of the fraud committed by the shipper against the consignee. The judgment goes on to make a non-binding suggestion that where a carrier does have notice of fraud committed by a shipper then it ought not to issue an un-claused bill of lading.

Facts

In 2019, the Claimants entered in to x22 contracts for the purchase of scrap copper to be shipped from Dubai to Greece. However, the sellers/shippers stuffed the containers with worthless cement blocks instead of scrap metal. The actual weight of each container was significantly below the shipper’s declared weights inserted on the face of the bills of lading issued by the carrier.

Upon discharge of the containers, the Claimants discovered the fraud. But they had already paid substantial amounts to the shippers. Whilst the Claimants obtained a judgment in their favour in Dubai, the judgment was unenforceable because neither the shippers nor any attachable assets could not be traced. The Claimants then turned to the carrier for recovery and issued High Court proceedings initially alleging a claim over USD 1 million (by the time of the trial, several claims had been stuck out or withdrawn, reducing the amount claimed to about USD 500,000).

Dispute

The Claimants’ case turned on the SOLAS Verified Gross Mass system, under which the weight of almost all containers must now be checked and certified before carriage to cut down on misdeclarations.

At the port of loading, containers are (generally) weighed by the container terminal operators, and thereafter VGM weights are uploaded on to carriers’ systems. The VGM SOLAS system is focused on safety, in particular with a view to avoiding stow collapses caused by overweight containers.

The Claimants’ argument, in essence, was that the carrier knew or should have known that there was a significant discrepancy between the declared weights and the VGM figures and should have alerted the consignees and/or refused to issue bills of lading showing the declared weights. In response, the carrier denied that it knew of the discrepancy, or that it was under any such obligation.

Judgment

The judgment dealt in detail with the carrier’s systems operated at the time of the incident, and with the carrier’s witness evidence on this point, and must be understood in that context. However, for the sake of concision, the judgment can be summarised as follows.

            Claim 1 – breach of Article 3 Rule 3(c) of the Hague Rules

Here the Claimants argued that the Carrier was in breach of the following provision in that it knew or ought to have known that the cargo was not in good order and condition:

3. After receiving the goods into his charge the carrier or the master or agent of the carrier shall, on demand of the shipper, issue to the shipper a bill of lading showing among other things:

[…]

(c) The apparent order and condition of the goods.

Provided that no carrier, master or agent of the carrier shall be bound to state or show in the bill of lading any marks, number, quantity, or weight which he has reasonable ground for suspecting not accurately to represent the goods actually received, or which he has had no reasonable means of checking.

This claim failed because, in summary, at the relevant time, the Court found that the carrier did not have systems in place to cross-check declared and VGM weights. Nor was it under any obligation to put such a system in place, in circumstances where the Claimant had not established that there was a general appreciation amongst carriers of the risk of this type of fraud.

            Claim 2 – misstatement

The Claimants also argued that the carrier was liable for negligent misstatement. The basis for this plea was an argument that the bills of lading contained an implied representation that the carrier did not have reasonable grounds for suspecting that the declared weights were inaccurate.

The judge had little hesitation in accepting the carrier’s argument that Article 3 Rule 3 of the Hague Rules left no room for the implication of such a term. The Claimant also came up against the fact that the Carrier’s terms and statement on the face of the contracts of carriage made quite clear that it made no representations as to the weight of cargo shipped.

            Claim 3 – duty of care

Finally, the Claimant argued that the Carrier was under a duty of care to take reasonable steps not to issue a clean bill of lading if it had reasonable grounds for knowing or suspecting that the particulars provided by the shippers were fraudulent. The Claimant accepted that this was a novel duty without direct supporting authority.

The well-known Caparo v Dickman tripartite test for determining new duties of care requires that:

1. Damage must be foreseeable;

2. There must be proximity; and

3. Imposing a duty of care must be fair and reasonable.

Applying those factors, the judge found that there was no evidence that the carrier had any reason in 2019 to consider that shippers would provide fraudulent data to them so as to make it necessary to cross-check weights against VGM data. The duty of care claim failed.

Does this judgment have any effect on any of the carrier’s usual exclusions and limitations on a bill of lading or create any new duty in tort?

Put simply, the answer is no. Much depends on a detailed analysis of the information available to, and the systems of, particular carriers. The judgment does not alter the effect of any of the carrier’s usual exclusions and limitations on a bill of lading. Neither does it create any new duty in tort or otherwise. The Judge decided that Maersk had no notice of the fraud committed by the shipper against the consignee.

The judgment makes a non-binding suggestion that where a carrier does have notice of fraud committed by a shipper then it ought not to issue an un-claused bill of lading. This non-binding suggestion was made in response to the Art. 3 Rule 3 argument where the Claimant contended that if a carrier is aware of a substantial discrepancy between declared and actual weights, the example given being a container said to contain 10,000 kg of copper but actually weighing 2,000 kg, it ought to clause the bill of lading accordingly or otherwise draw attention to the fact.

Conclusion

Whilst the judgment will be welcomed by carriers, it is important to bear in mind that the same decision might not be reached in another case involving carriage in 2024 or later. Many carriers have in the last few years started to implement VGM cross-checks, and now often fine shippers in the event of discrepancies over certain pre-defined levels, for example 3,000 kgs. Understanding of this type of fraud has arguably increased since 2019 and will further increase as a result of this judgment.

Whilst no new law has been created as a result of this judgment, a prudent carrier may wish to consider the following issues in light of the introduction of the VGM cross-checks implemented over the course of the last few years:

1. Is it feasible and/or sensible for carriers to state VGM figures provided to them by terminals on the fronts of bills of lading, so as to enable consignees to see these alongside the declared weights, whilst bearing in mind that it is generally for shippers to fill out draft bills?

2. Would adopting the approach at [1] constructively alert consignees to substantial weight discrepancies so as to defeat any novel duty of care argument that may be run against a carrier in the future?

3. Should carriers now seek to amend their general contractual terms to exclude liability for claims of this sort, to the extent permitted and, if so, how?

4. What, if any, cross-checks are carriers now carrying out on declared weights versus VGM weights? Are these reasonably adequate in terms of spotting substantial discrepancies? If not, do they need to be amended?

5. What steps do carriers take when spotting a discrepancy? Whilst many carriers now impose weight discrepancy charges, this is insufficient protection from potential claims from consignees so might they need to consider more proactive steps such as refusing to issue or clausing the bills of lading?

It would be prudent for carriers to try to guard against future claims of this sort by reviewing their standard terms and systems and making such changes as are necessary.

For questions or inquiries about this judgment, please contact Jacqueline Zalapa (Jacqueline@cjclaw.com).