

There has been a new judgment1 relating to metals fraud: this time, containers of copper turned out to contain concrete blocks. The English Commercial Court held that on the facts, the purchasers of the copper could not claim damages from the owner of the vessel, Maersk, for issuing clean bills of lading in circumstances where the containers’ actual weight was much less than their declared weight. However, consignees who find themselves the victims of fraud were not left entirely without hope.
The Claimant agreed with the Shippers to purchase three consignments of copper wire scrap in containers from Dubai. Upon arrival in Piraeus, the containers were found to contain worthless concrete blocks. The Claimant obtained default judgment against the Shippers in Dubai – but the Shippers had disappeared and so they could not enforce it.
The Claimant then brought a claim in the English Courts against the vessel owner, Maersk. Maersk had issued three clean bills of lading (the Bills) in respect of the cargo. The Claimant argued that Maersk knew or ought to have known that the containers weighed far less than the Shippers had stated in their shipping instructions and so ought to have claused the Bills, or not issued them at all.
Maersk received shipping instructions from the Shippers in November 2019 with declarations as to the weight of each container. In late November 2019, the sealed containers were then presented to Maersk for shipment.
The weight of containers that a carrier is to carry must be verified. This is referred to as the “Verified Gross Mass” or “VGM” of a container. The independently issued VGM certificates recorded the actual weights of the containers before the Bills were issued and showed that they were only 30-40% of the Shippers’ declared weights. Nevertheless, Maersk issued clean bills, stating the Shippers’ declared weights, with the Claimant as the named consignee.
Maersk’s evidence was that at the time, it did not have a system in place to cross-check the VGM weights with the Shippers’ declared weights. That system was not set up until 2020.
The Claimant put its case in three ways:
The Claimants’ claims all failed.
Article III rule 3(c) Hague Rules
The shipper has a right to demand a bill of lading with an Article III rule 3(c) declaration. Once a demand is made, the carrier is obliged to include it and has a contractual duty both to perform a reasonable check of the apparent order and condition of the goods prior to making the declaration, and to make an accurate declaration. The Claimant argued that these contractual duties are in place in part to protect the consignee and are enforceable by them. Significantly, the Court agreed that if Maersk had been in breach of its contractual duties, the Claimant would have been entitled to claim against Maersk. However, here, the Court decided there was no breach.
As to whether Maersk had failed to comply with its duty to perform a reasonable check of the apparent order and condition of the goods, the Court held that the carrier is not entitled to ignore clear evidence that the goods contained inside the containers are in poor condition. None of the previous cases to which the Court was referred concerned cargo that was stuffed into containers – but each case did confirm that a statement as to the good order and condition of the cargo refers to its external condition, as would be apparent from a reasonable examination. Clear evidence that the contents are not in good condition would be, for example, if a reefer of fish gave off the smell of rotting. Weight would not be apparent from an inspection of its external condition.
The Court agreed that if the carrier was aware of a discrepancy such as containers said to contain 10,000kg of copper only weighing 2,000kg, it was plain that something serious had gone wrong with the contents and the bill of lading ought to draw attention to this fact. However, at the time of the fraud, the VGM was used purely for safety purposes and there was no appreciation of the risk of fraud. The fact that Maersk could have collated and cross-checked the evidence of weights did not mean that it should have done.
Negligent misstatement
The Claimant relied on an implied representation that Maersk had no actual knowledge of facts or matters that would lead it to have reasonable grounds for suspecting that the Shippers’ particulars did not accurately represent the goods. It relied on this proviso in Article III rule 3 of the Hague Rules:
“… 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 …”
The Court agreed with Maersk that the proviso did not leave room for the implication of any representation by the carrier as to the particulars of the cargo.
Duty of care
The Claimant argued that once a carrier is put on notice of fraud, it has a duty to prevent others from using the bill of lading as an instrument of fraud.
The Court held that where a consignee under a straight bill 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 issue a bill at all. Such a discrepancy would give rise to an assumption on the part of the carrier that the bill was being used as an instrument of fraud. The Court held that, “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, here the Claimant’s case failed on the facts.
The fact that cargo is in sealed containers necessarily limits what carriers can assess in terms of its order and condition, but this decision makes clear that they nevertheless carry some responsibility. It also confirms the consignee’s right to enforce the Article III rule 3(c) obligations against a carrier.
Significantly, it also recognises that where a carrier knows there is a substantial discrepancy between the declared and verified weights of a containerised cargo, there is a duty not to issue an unclaused bill of lading because the carrier is then on notice of a potential fraud. Here, Maersk did not have the requisite knowledge – but that might not have been the outcome had the fraud occurred after it changed its weight verification system.
Cases of fraud, particularly in relation to metals, remain disturbingly common; this decision suggests that the victims of fraud should consider whether there is scope for a claim against the carrier particularly where, as here, the fraudster has disappeared.
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