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Prettys Solicitors Ipswich

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Developments in Package Limitation Under The Hague and Hague-Visby Rules

July 2017

There have been some important recent cases on package limitation under the Hague and Hague-Visby Rules. It is perhaps remarkable that rules that were formulated so many years ago continue to give rise to major issues as to their meaning. For many carriers the ability to limit liability can be crucial especially in situations where otherwise there is no substantive defence to a claim.

The importance of proper enumeration

The proper enumeration (listing of the contents) of containerised goods on a bill of lading is particularly important for shippers if they are faced with a situation where the carrier is seeking to limit its liability “per package or unit” under the Hague-Visby Rules. This issue was highlighted in the recent case of The Maersk Tangier (Kyokuyo Ltd v Maersk Line) which involved the carriage of frozen tuna in containers as separate frozen loins and in bags. In this case, the matter was considered by the judge both under the Hague and Hague-Visby Rules.

As discussed in this case, under the Hague Rules, the per package or unit limit is calculated by reference to the goods as they are proved to have been on loading; bills of lading provide prima facie evidence of this state. By contrast, under the Hague-Visby Rules if there is insufficient enumeration in the bill of lading of the goods, the container is deemed to be the only package or unit (Article IV rule 5(c)). There is no such container-deeming provision in the Hague Rules.

The judge decided that the Hague-Visby Rules were applicable to the carriage. In the case, the waybills (which stood in for bills of lading) described how the frozen loins were stuffed into the containers as individual items of cargo without any wrapping, packaging or consolidation. The bags of frozen tuna parts were stuffed into the containers as individual bags. Container A contained 206 frozen loins and the bags (said by the claimant to number 460), Container B contained 520 loins and Container C contained 500 frozen loins. In terms of description in all of the draft bills of lading/waybills stated the number of frozen loins i.e. 260, 520 and 500 respectively. However, as regards Container A no mention of the bags was made but the total weight (in kgs) was given. Therefore the judge concluded that packages or units of the cargo “as packed” were the individual frozen loins since they were properly identified and enumerated in the waybills. It was irrelevant whether they could (hypothetically) be carried in this form if not containerised. Therefore each frozen loin as a separate unit attracted a separate limit of 666.67 SDRs whereas the container with the bags, which were not properly described in the waybill, constituted the sole package or unit for these purposes i.e. just one lot of 666.67 SDRs - although the gross weight formula in relation to the damaged cargo, if it was the greater, could be used as an alternative calculation.

The judge also considered the matter on the assumption that the Hague Rules applied - which they did not. Relying on The River Gurara, the judge confirmed that the containers could not be the only relevant packages. Instead it was necessary to consider what was actually shipped "through the notionally transparent wall of the three containers". In this case, if the Hague Rules had applied the cargo would have been regarded as a mixed cargo of "packages", with each bag constituting one package and "units" with each loin being one unit since each was identifiable as a separate article for transportation within the container - even if the loins would not have been suitable for transportation "as is" without containerisation.

The approach in The Maersk Tangier is pragmatic given the complex issues that can arise about the proper interpretation of “packages” and “units”. However, with an appeal pending in the case its correctness cannot yet be confirmed. More authoritative guidance on the very practical issues raised in The Maersk Tangier should follow the appeal, which is due to be heard by March 2018.

The case also contains an interesting analysis of whether the Hague-Visby Rules are applicable even if a bill of lading is not actually issued to cover the carriage.

Bulk cargo and package limitation

The Hague-Visby Rules provide a clear limit of liability applicable to damage to bulk cargoes based on the gross weight of the goods in addition to the package or unit limit: 2 SDRs per kilogram of gross weight of the goods lost or damaged. However, the Hague Rules only stipulate a limit of liability “per package or unit”.

Despite the continuing importance of the Hague Rules, it is only in the recent case of The Aqasia that an English court has had the opportunity to consider whether (and if so, how) the limit of liability in the Hague Rules applies to liquid or other bulk cargoes.

The key issue in The Aqasia was whether the limit per “unit” could be a limit per unit of measurement (of the bulk cargo) such as kilogram, bushel or metric tonne rather than a limit by reference to a physical item.

The court took into account the US approach to the meaning of “unit”, which has been held to encompass freight units (i.e. units of measurement). The court also considered the travaux préparatoires of the Hague Rules, which indicated that “unit” was only intended to refer to unpackaged items for shipment (e.g. a boiler, vehicle or generator), not bulk cargoes.

The court ultimately held that “unit” only refers to a physical item and that this limit of liability therefore does not apply to bulk cargoes. The judge said: “I can see nothing in the Hague Rules which lends any support for the argument that the word unit connotes a unit of measurement, in circumstances where the Rules specifically refer to quantity or weight when measurable units are in mind.” This decision suggests that the terms of charterparties and other documents subject to the Hague Rules dealing with bulk or liquid cargoes may need to be addressed if limitation issues are a potential concern.

The dangers of deck carriage

In terms of general principle in order for deck-carried goods to be excluded from the scope of the Hague-Visby Rules (as falling outside the definition of "goods") a two-stage test must be satisfied:

  1. the goods must in fact be carried on deck; and
     
  2. it must be stated in the bill of lading (contract of carriage) that the goods are being carried on deck.

In the Canadian case of De Wolf v Traffic-Tech the shipper contended that, in line with some academic commentary and American case-law, carrying goods on deck without authorisation was such a serious deviation from a carrier’s obligations that it was not entitled to rely on the limitation of liability. The court, however, held, in line with English case-law on the Hague Rules, that given the expansive scope of the limitation of liability provisions, which apply “in any event”, the carrier could, in principle, still rely on them. Therefore, for example, even if a bill of lading does not provide authority for goods to be carried on deck, the limits of liability contained in the Hague-Visby Rules, in principle, might still apply to the goods even though a carrier may be in breach.

This judgment only addressed preliminary objections to the application of the Hague-Visby Rules. It was a question of fact and not a question of law whether the damage to the goods “resulted from an act or omission of the carrier done with intent to cause damage, or recklessly and with knowledge that damage would probably result” (an exception in the Hague-Visby Rules to the limitation provisions).

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