Containerised Cargo - What Is A Package?

April 2005

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Whilst in most disputes relating to general or break bulk cargoes the question as to what constitutes a "package" for limitation purposes is rather a straight forward question. However, in today's world of containerisation this raises the question of what is a package where a container is involved; is this the container itself or the number of shipping units therein?

Under English law, the question of what is a package was discussed in The River Gurara1 by the Court of Appeal. However this dealt with the position under Article IV Rule 5 of The Hague Rules which states that the carrier's liability is restricted to £100 "per package or unit" The facts of this case are as follows:

Following an engine breakdown the vessel was lost on a voyage from Africa to Europe. The Hague Rules applied to this carriage. The bill of lading contained a provision stating that where the container was not packed by the carrier, the container was to be the package or unit for limitation purposes. Also, the bill of lading descriptions were qualified with the words "said to contain".

The Court of Appeal, with Lord Justice Phillips giving the lead judgment, held as follows:

Notwithstanding the inclusion of the term "said to contain" it was the individual cartons in the container and not the container that was the package. Clauses in bills of lading stating that the container is the package are ineffective as they are ruled out by Article III Rule 8. (Article III Rule 8 strikes out any provision in the contract which seeks to reduce the liability as set out in the Hague Rules).

It was held by the Court of Appeal that with a view to package limitation the description in the bill of lading was not decisive; it was felt that were it to be otherwise the carrier would effectively be able to "sneak around" the limits that The Hague Rules sets out. Under the Hague Rules, what was important was what the shipper could show to have been loaded, and with regard to package limitation, qualifications such as "said to contain" and "weight and contents unknown" did not have any affect.

While the end result was the same, i.e. the carrier was only entitled to limit up to the amount of each package in the container, the approach taken by Phillips in the Court of Appeal was unusual in that he held the description in the bill of lading not to be determinative. Whereas Lord Justice Hirst who gave the dissenting judgment in the Court of Appeal, and Mr. Justice Colman who gave the judgment at First Instance, held that whilst the words "said to contain" and "weight, quantity, quality unknown" did not affect the description of the cargo in the bill of lading, with regard to package limitation, the number of packages enumerated in the bill of lading would still be important. Hence according to Colman J and the dissenting Hirst LJ, where the contents were described by words which made it unclear whether the contents were separately packed for transportation then the container would be the package. For example, if the bill of lading stated "one container said to contain televisions", then the container would be the package for limitation purposes. However, if the bill of lading stated "one container said to contain 200 televisions", it is likely that the limitation figure would be applied to 200 packages.

Under the approach espoused by Phillips and Mummery LLJ, however, it would be possible where the bill of lading stated one container said to contain televisions, that the shipper would be entitled to adduce evidence to prove the number of separate televisions that were in fact loaded on the container and attempt to peg his package limitation thereto. This is an unsatisfactory situation for two reasons. Firstly, it does not sit well with the provisions in the Hague Visby Rules. The Hague Visby Rules (which increases the Hague Rules package/unit limit considerably) states at Article IV Rule 5 (c) that;

"where a container, pallet or similar article of transport is used to consolidate the 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 for the purpose of this paragraph as far as these packages or units are concerned. Except as aforesaid such article of transport shall be considered the package of unit".

It is therefore the number of packages enumerated in the bill of lading that should be determinative. And, secondly because due to the need to adduce evidence in support of the number of individual packages loaded in the container, the resolution of container claims is going to be more prolonged, costly and labour intensive.

The position under the Hague Visby Rules has not been looked at by the English Courts, however the Federal Court of Australia was asked to look at this in the El Greco2.

The bill of lading described the cargo as "One 20' container said to contain 200,945 pieces of posters and prints". Despite the bill of lading noting the individual number of pots of paint and posters, it was acknowledged by both parties that the items had been in fact shipped in around 2,000 packs in the container, but no mention of these 2,000 packs was made in the bill of lading. The majority of the Court said that the numeration in the bill did not relate to packages, as posters and prints were not packages. Packages by their very nature involve some level of packing and the individual items enumerated in the bill of lading were not in fact packed, hence the package for limitation purposes would be the container.

The decision of the Court was not unanimous however. Mr. Justice Beaumont felt that the actual way that the posters were packed, rather than the enumeration was important. In other words he felt that there were 2,000 packages for limitation purposes, and his logic was as follows. The Hague Visby Rules state "the number of packages or units enumerated in the bill of lading as packed in such article of transport should be deemed to be the number of packages or units". He focused on the words "as packed" in such article of transport, and reasoned that the intention of the Rules was to limit liability on the number of packages in the manner in which they were packed in the container, i.e. the actual way in which they were packed and not the way in which they were enumerated in the bill of lading. Fortunately, Mr. Justice Beaumont was in the minority.

This decision serves to highlight how even the apparently clear Hague Visby Article IV Rule 5 (c) provision can still cause confusion.

The position under US law was discussed in an earlier Sea Venture article (Vol.20, page 66) from which it would appear that the courts are favouring the relevant freight unit as the "package" for limitation purposes.

1. [1998] 1 Lloyds Rep. 225 

2. El Greco (Australia) Pty Ltd v Mediterranean Shipping Co SA [2004] FCAFC 202