A consignment of copper cathodes stowed in 18 containers was shipped from Durban, South Africa to Shanghai, China. Fraudsters presented a false bill of lading against which the shipowners gave a delivery order entitling the fraudsters to delivery from the container terminal. The fraudsters paid the customs duty and their delivery order was endorsed accordingly. When the cargo-owners presented the true bill of lading a day later, the fraud was revealed. The shipowners arranged that the container terminal did not release the goods to the fraudsters. However, the cargo-owners could not take delivery of the goods because their delivery order has not been stamped with any record of duty having been paid as required by the customs rules in Shanghai. Litigation commenced in the Maritime Court of Shanghai between the fraudsters, the shipowners and their agents over the ownership of the cargo.

The cargo-owners issued a claim form in the Commercial Court of the High Court in London against the shipowners for delivery up of the cargo or damages from the shipowners for the conversion of the cargo. The judge considered five issues. Issues 1 to 3 were related to the Hague/Hague-Visby Rules (HR/HRV), and issues 4 and 5 were tangentially related:

(1) On the true construction of clause 1(a) of the bill of lading terms, do the HR or the 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 cls 4, 7 and 22, do the HR or the HVR also 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 MSC ('the post-discharge period')?

(3) If the HR, alternatively HVR, do apply to the post-discharge period, then, on the true construction of art 4.5 of the HR or the HVR (whichever is applicable), is MSC entitled to limit its 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 cl 22 exclude or limit any monetary liability of MSC if it converts the cargo during the post-discharge period?

(5) If the HR, alternatively HVR, do not apply to the post-discharge period and MSC cannot exclude or limit its 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 by MSC on the facts of this case? In particular: (a) is the claimant 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; and (b) is the claimant entitled to recover, in addition to the value of the cargo, any of its 'hedging losses'?

Held:

1) On the true construction of cl1(a) of the bill of lading, the Hague-Visby Rules applied as a matter of contract.

2) On the true construction of the bill of lading terms, the Hague-Visby Rules did not apply to the period after discharge but whilst the cargo was still in the custody of the shipowners, that is during the post-discharge period.

3) Had the parties agreed that the Hague-Visby Rules continued to apply after discharge, the shipowners could have relied on art 4.5 of the Hague-Visby Rules to limit liability to 720,816 SDRs.

4) Clause 22 of the bill of lading did not exclude or limit any monetary liability of the shipowners for conversion of the cargo during the post-discharge period.

5) On the facts of the case, the claimant was entitled to the value of the goods at the date of the judgment. However, hedging costs were not recoverable.