What is a package or unit for limitation purposes under Hague Visby Rules?

Issue

The Court of Appeal has in its judgment dated 17 April 2018 upheld last year’s Commercial Court decision to the effect that the enumeration of containerised units/pieces of cargo in a bill of lading, without detailing the manner of packing, will enable limitation to bite upon such enumeration, rather than the container being treated as the package or unit for limitation purposes. In so deciding, the decision of the Federal Court of Australia in The “El Greco”[2004] 2 Lloyd’s Rep. 357 on the point has been discredited.      

Facts

The claim concerned the carriage from Spain to Japan on board “Maersk Tangier” of a cargo of frozen tuna loins and bagged tuna parts in 3 containers. The cargo was stuffed into the containers without additional wrapping, packaging or consolidation. It arrived at its destination in damaged condition due to raised temperatures and rough handling in carriage, resulting in a claim against Maersk of £858,000. 

The cargo booking had contemplated that bills of lading would be issued, but they never were, and the consignments were instead covered by three sea waybills which described the cargo as “1 Container said to contain [520/206/500] pieces frozen Bluefin Tuna Loins”.

There were two key issues. The first was whether the Hague Visby Rules (HVR) covered the carriage compulsorily (it being intended that bills of lading would be issued in a contracting state), or if the waybill terms applying the lower Maersk terms limit would apply as a matter of contract. The second issue, and the main debate, was whether the limitation was referable to the number of tuna loins referred to, or as Maersk contended, the limit per package or unit (under HVR being the higher of 666.67 SDR’s per package or unit, or 2SDR’s per kilo) was referable to the container only. The focus turned on the meaning of Art IV rule 5(c) which provides:

“Where a container, pallet, or similar article of transport is used to consolidate goods, the number of packages or units enumerated in the bill of lading as packed in such  article of transport shall be deemed the number of packages or units…”

Relying on The “El Greco” (which concerned a bill of lading referring to a container of 200,945 posters and prints, but which failed to mention they were consolidated into 2000 packages) Maersk contended that, in order for limitation to bite on the enumerated pieces of cargo, the description needed to make some reference to how those pieces were packed or consolidated. They argued an HVR requirement to sufficiently enumerate the packages or units “as packed” — to state not only the number of packages or units but how they had been packed into the container, whether as separate items or consolidated packages i.e. here, to state that the tuna loins were individual unpacked items of cargo.   

Court of Appeal decision

In relation to the lack of bills of lading, the Court held that HVR applied nonetheless, given the contractual intention to issue bills of lading and/or for cargo interests’ entitlement to demand bills of lading: the authorities were clear: Pyrene v Scindia [1954] 2 QB 402, The “Happy Ranger”[ 2002] EWCA Civ. 694.

Regarding the relevant unit/package issue, the Court held that Maersk’s approach was not the intention behind Art IV rule 5(c), nor was it commercially attractive. It would for example lead to anomalous outcomes depending on very minor descriptive differences e.g. “one container with 100 car engine parts packed inside” (which would on Maersk’s reasoning be effective to apply limitation to each of the 100 units) and “one container said to contain 100 engine parts” (which would instead result in the container being deemed to be the unit). Nuances of language were irrelevant, and the words “as packed” were intended to be descriptive, not imposing requirements explaining the packing or otherwise. 

Comment

The decision reinforces the approach of the Courts (as recently illustrated in The “Aqasia” [2018] EWCA 276 which adjudged that package/unit limitation under Art IV rule 5 of the Hague Rules does not apply to bulk or liquid cargoes) not to strain interpretation of fairly well-understood provisions, leading to unintended or uncommercial results. As the Court noted in reference to the HVR drafting committee’s comments, the whole point of the container clause was to see whether the container is the package, or whether the packages in it are, and that:

 “all you have to do is to look at the bill of lading and see, does it contain any figures of the numbers of packages other than the containers themselves…it leaves to the shipper and the carrier to make their own bargain as to whether they want the higher maximum on the internal package basis and the higher freight, or the lower freight on the basis of the container and its contents being the package. Anyone looking at the bill of lading can tell which option has been exercised……”   

This clarification has disposed of semantic debates encouraged by “El Greco”, and makes it clear to carriers that if they issue bills of lading, or terms that incorporate HVR contractually, any enumeration of contents will likely scupper any prospect of arguing that the container is the unit for the purposes of HVR Art IV rule 5.