Limitation in court again: the Hague-Visby rules and containerised cargo

Surprisingly, there are still some seemingly common questions in relation to containerised cargoes and the application of Hague-Visby package limitation on which no English law precedent exists. This, and the fact that it was his first shipping judgment as a newly appointed High Court Judge, gave Mr Justice Andrew Baker every opportunity to provide some novel analysis in the "MAERSK TANGIER" [2017] EWHC 654 (Comm).

The claimants were the receivers of three containers stuffed with frozen tuna loins (each weighing between 20 and 75 kgs approx.) and bags of frozen tuna parts, under three separate sea waybills for each container. Bentleys acted for the carrier, Maersk.

Each waybill described the cargo as “1 container said to contain [no] pcs frozen bluefin tuna”, referring to the number of frozen tuna loins, and giving the total weight of the cargo. The tuna was allegedly delivered damaged. The Court was asked to consider a number of points as preliminary issues. These concerned questions as to whether the Hague or Hague-Visby Rules applied. Then, in either case, whether the material package or unit for limitation purposes was the container or the individual tuna loins (or bags), and whether the “per package or unit” limit was to be aggregated across all the containers.

At first sight there was a straightforward answer to the question of which regime applied. On their own terms, the Hague-Visby Rules only apply compulsorily by virtue of the Carriage of Goods by Sea Act 1971 ("COGSA 1971") to contracts of carriage covered by a bill of lading. In order to avoid possible delay the parties had made a deliberate decision in this case not to follow the original arrangement whereby bills of lading would be issued but, instead, use waybills. The prevalent view is that waybills are deliberately different from and used instead of bills of lading, and it was common ground that for the purposes of COGSA 1971 the waybills were not "similar documents of title".

For the Judge, however, this was not the end of the story. He found that the mere fact that a bill of lading had not been issued could be disregarded. His reasoning was that under Section 1 (4) of COGSA 1971 the contract of carriage could be treated as one which provided "expressly or by implication… for the issue of a bill of lading".

By this route, the contract of carriage was “covered by a bill of lading” within the meaning of the Hague-Visby Rules and these rules applied compulsorily. The fact that, after the contract was entered into, the parties agreed for something other than a bill of lading to be issued was immaterial.

It is an interesting analysis but not one entirely without precedent.

It is an interesting analysis but not one entirely without precedent, albeit it extends the logic of previous authorities on this point. Previously, this reasoning has been confined to situations where it was originally contemplated by the parties that bills of lading would be issued, but in the event there never was a bill of lading. However, there has been no previous case concerned with the situation where waybills are issued instead of bills of lading.

The classic previous example is found in Pyrene v Scindia [1954] 2 QB 402. The cargo in that case was damaged during loading and so never shipped. It has to be said, though, that the present case is something of a leap forward where the Judge held that contracts evidenced by sea waybills were nevertheless covered by bills of lading for the purposes of COGSA 1971.

It has to be said, though, that the present case is something of a leap forward.

The applicable limitation regime was, therefore, found to be that in the Hague-Visby Rules Article IV rule 5 (the exception being where it could be proven that damage occurred after the completion of sea carriage, where a contractual limit of 2 SDRs per kilogramme expressly applied).

There was already authority that, for the purposes of the Hague Rules, where cargo is containerised the "package or unit" is not necessarily the container itself (see the Court of Appeal decision in the "RIVER GURARA" [1998] QB 610 ). That case decides that the description in the bill of lading or other carriage document is not conclusive as to the number of packages; the actual contents of the container as stuffed will be determinative. No question arose as to what constituted a "unit".

In particular, therefore, there was no previous authority deciding whether it is a necessary characteristic of a "package or unit" that it could have been shipped "as is" if not containerised, so that something is a "unit" rather than contained in a "package" even though it needs to be packed in a container. It would have been Maersk's case that the frozen tuna pieces could not have been shipped other than in the containers.

Under the Hague Rules, the case raised an interesting question as to the application and effect of a long and detailed judgment by the Australian Federal Court in El Greco (Australia) Pty Ltd v Mediterranean Shipping Co SA [2004] 2 Lloyd's Rep 537.

The Judge first considered the position under the Hague Rules. The bags of frozen tuna parts all qualified as a Hague Rules "package". The more difficult issue was the frozen tuna loins. After much discussion of previous case law, his Lordship concluded that each tuna loin was a "unit" and that:

There is no source in the language or purpose of Article IV, rule 5 for a special, added, rule calling for a focus not upon the cargo as shipped, but upon how (if at all) the cargo could have been shipped if not containerised

Under the Hague-Visby Rules, the issues were slightly different. The Judge found that the definition of "package or unit" was the same under Article IV rule 5(a) of both the Hague-Visby and Hague Rules.

Article IV rule 5(c) of the Hague-Visby Rules, however, provides that, for containerised cargo:

…the number of packages or units enumerated in the bill of lading as packed in [the container] shall be deemed the number of packages or units…as far as these packages or units are concerned.

Failing this the relevant unit is the container itself.

Since the bags of tuna were not mentioned in the waybills, Article IV rule 5(c) meant that the package or unit was the container itself as far as these bags were concerned.

Conversely, for the frozen tuna loins, the number of pieces of which were mentioned on the face of the waybills, the issue was whether the language in the waybills had to specify how the enumerated items were packed, whether loose or in packaging, so as to identify the "packages or units … as packed".

The Judge held that the individual loins were sufficiently identified and enumerated to be the relevant "packages or units", since the language of the waybills was consistent with the truth (namely that the enumerated frozen loins were "as packed", individual articles or "units" of cargo without packaging).

His Lordship then went on to discuss how to apply the limit in circumstances where some (but not all) units were damaged and the extent of the damage varied between units. His conclusion was that the limits were to be applied to each separate package or unit individually, so that Maersk were liable for up to 666.67 units of account for each frozen tuna loin, considered separately. This is in contrast to calculating an aggregate limit of liability for all the packages in each container, or all the damaged units. Similarly, if the weight-based limit of the Hague-Visby Rules applied to the bagged tuna parts, that would have to be applied to each package separately.

There is one very practical point that emerges from Baker, J.'s analysis. It will be in the carrier's interest to try to obtain a detailed survey attesting to the extent of damage to each individual package or unit of cargo, for the purposes of proving the lowest possible limit of liability.

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