UK: Copper, Crooks, Conversion and Hedging - A Cautionary Tale

Last Updated: 19 July 2007

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.


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 of the Rules extended beyond discharge from the vessel, the carrier could have limited liability for misdelivery, as the words "in any event" in Art IV, r. 5 were suffi ciently wide. Thus the position would be distinguishable from the principle in Motis (where it was held that a carrier cannot exclude liability for misdelivery against forged B/Ls).


With the value of copper increasing and the goods still in the container terminal in Shanghai, the traders claimed they had been holding open hedging positions on the cargo: thus, if it was now to be considered lost to them, they would have to pay the difference between the original purchase price and the market value to close their hedging positions. So, the traders claimed, they should be awarded damages as at the date of conversion (when the holder of the fraudulent B/L obtained the delivery order) plus their hedging losses.

This was the first ever case where the English Court had to rule on the recoverability of a trader’s hedging losses against a carrier. Previous cases (Gebruder Metelmann -v- NBR (London) Ltd [1984] 1 Lloyd’s Rep. 614 and Addax -v- Arcadia Petroleum [2000] 1 Lloyd’s Rep 493) involved such claims advanced by one trader against another and were held to have been foreseeable.

But this argument failed in this case. The Judge held that in order for these costs to be recoverable, they had to be foreseeable at the time of conversion. On the basis of the parties’ expert evidence, the Judge held that a containership operator would not have foreseen the existence of such arrangements, given the wide variety of cargoes carried on container vessels (query: whether the position would be the same in relation to bulk carrier or tanker operators).

However, using the Court’s discretion under the Torts (Interference with Goods) Act 1977, the Judge awarded damages equal to the value of the goods on the date of judgment i.e. he awarded the amount which would have enabled the traders to go into the market and buy replacement cargo. He held that, in view of the uncertainty about whether the cargo would be released in Shanghai, it was reasonable for the traders to wait before seeking replacement cargo. As a result, the traders would have no "hedging losses", other than the modest cost of keeping open their hedging positions (which was held to be unrecoverable).

The cautionary tale

The decision may well have wider implications.

Many container line operators’ standard B/L terms contain provisions to the effect that custody of the goods after discharge is solely at the merchant’s risk. Although the wording of Art. IV r. 5 is wide enough to extend package limits to misdelivery, the limitation may not apply post discharge if the carrier has specifi cally sought to exclude all liability post discharge under the B/L.

The hedging point may be of concern to traders. If, in this case, the price of copper had dropped, the Judge would presumably have awarded the price at the time of judgment or, if higher, the value as at the date of conversion. If the traders had closed their hedging positions between those dates, when the price was higher, the difference in value would have bee

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions