The 'Maersk Tangier' - Package Limitation for Containerised Cargoes under the Hague-Visby Rules

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The judgment of Andrew Baker J in Kyokuyo Co Ltd v A.P. Moller - Maersk A/S (the Maersk Tangier) [2017] EWHC 654 (Comm) discusses several important issues in respect of limitation of liability for containerised cargoes under the Hague-Visby Rules.

Facts

Twelve reefer containers carrying frozen tuna loins were received by Maersk Line (“Maersk”) at Cartagena (Spain) for carriage by sea to Yokohama (Japan) pursuant to contracts of carriage incorporating Maersk’s terms and an implied term entitling the shippers to demand bills of lading from Maersk.

On receipt of the cargo, Maersk issued a draft straight consigned bill of lading covering the details for the carriage of the twelve containers. The containers were then shipped on the “Maersk Tangier” but nine of the containers were transshipped on to the “Maersk Emden” while, after about a month's delay, the remaining three containers were carried to Japan on other Maersk vessels. So far as these three containers it was agreed that three non-negotiable waybills would be issued instead of bills of lading to prevent further delays. Upon delivery the consignee alleged that the cargo in these containers was damaged and held Maersk responsible for that damage.

The Court was asked to consider a number of issues relevant to the sum payable by Maersk if held liable for the damage to the cargo. The first was whether any such liability should be subject to package limitation as calculated in accordance with Article IV Rule 5 of the Hague or Hague Visby Rules. The second was how to calculate package limitation, that is by reference to the containers as individual “units”, or if the cargo was sufficiently enumerated in the waybills; or if package limitation should be calculated by reference to the cargo in all three containers collectively, or by separate treatment of the cargo in each container individually.

Statutory applicability of the Hague-Visby Rules

Which Rules applied was complicated by a number of factors – principally whether, because bills of lading were not required, and therefore, were not issued, contractually the Hague Visby Rules applied to the contracts of carriage. If so the Hague Visby Rules applied by force of law¹ so that the higher Hague Visby package limits applied.

Maersk’s position was that their terms applied the Hague Visby Rules only if these Rules applied to the contracts of carriage compulsorily, which they did not because:

(a) To do so it was necessary for Article 1(b) of the Rules to apply;
(b) Which requires the contracts of carriage to be “… covered by a bill of lading or any similar document of title …”; and
(c) By agreement, non-negotiable waybills were issued and thus that the contract of carriage was covered by a different kind of transport document.

As such on  Maerk's terms the Hague Rules applied with a significantly lower package limitation.

The Judge, however, agreed with the claimants that all that was needed to satisfy Article 1(b) was that when concluded the contracts of carriage provided for bills of lading to be issued². The claimants relied on several English and common law cases where the Hague Visby Rules applied when a contract of carriage was concluded between the parties but a bill of lading was never issued (e.g. Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB 402).

Accordingly the higher Hague Visby Rules package limitation applied³.

Calculation of Package Limitation

(a) Meaning of ‘unit’ in the Hague and Hague-Visby Rules

The claimants argued that the individual frozen tuna loins were ‘units’ because they were stuffed in the containers individually. Maersk said that ‘unit’ in accordance with the Hague Rules means any item that can be loaded on a vessel “as is” if not in containers, and since they were not packaged or consolidated the tuna loins could not be so loaded “as is”. The tuna loins were not, therefore, “units” for the purpose of package limitation.

In deciding this issue Mr Justice Andrew Baker rejected both (i) the argument, as he was bound to do, that the containers could be the relevant units ( see "Containerised Cargo - What Is A Package?"), and (ii) that there was any rule focusing on how the cargo could have been shipped if not containerised. He decided that a “unit” for the purpose of package limitation is determined by reference to the characteristics of the cargo as stuffed into the container – that is as if “the container walls are transparent under the gaze of Article IV rule 5”.

(b) Enumeration in accordance with Article IV Rule 5(c) of the Hague-Visby Rules

Article IV Rule 5(c) of the Hague-Visby Rules provides that “…the number of packages or units enumerated in the bill of lading as packed…shall be deemed the number of packages or units for the purpose of this paragraph…”. The issue was, therefore, if all or any of the individual pieces of tuna, in the form of “packages or units”, were enumerated “as packed” for the purposes of Article IV Rule 5(c).

Here, the Court held that Article IV Rule 5(c) does not require enumeration of the cargo “as packed”, just the number of packages or units inside the container to be accurately stated on the bill of lading (or, in this case, the waybills).

The Judge considered the Federal Court of Australia case El Greco (Australia) Pty Ltd v Mediterranean Shipping Co S.A. [2004] 2 Lloyd’s Rep 537⁴, where the majority held that the bill of lading must contain information not only about the number of items stuffed in the container but also whether these have been packed together. However, he did not consider the latter requirement – an enumeration of the cargo “as packed” – necessary, and decided that the bill of lading need only accurately state the number of ‘packages or units’ carried within the container. Since the waybills accurately described the number of packages and units, e.g. 206, 520, and 500 frozen tuna loins, contained in the reefer containers, the enumeration required by Article IV Rule 5(c) of the Hague-Visby Rules was met.

(c) Guidance on how to calculate limits

The Court also clarified that when the Hague-Visby Rules apply, each separate ‘unit’ would be subject to a limitation of 666.67 units of account. The packages though would be subject to the greater of 666.67 units of account per package, or two units of account per kilogram of gross weight of the goods lost or damaged. When the Hague Rules apply instead, each ‘unit’ and/or ‘package’ would be subject to a limitation of £100.

As such any unused balance in respect of one unit or package could not be carried over to another unit or package to increase the limitation sum applicable to that unit or package, because package limitation is not an aggregate limit of liability.

Comments

• The Judge ruled that although sea waybills were issued instead of bills of lading, the Hague-Visby Rules will still apply compulsorily pursuant to the Carriage of Goods by Sea Act 1971 as the contract was still “covered by” a bill of lading.

• It is sufficient for the physical items of cargo to be listed or enumerated, and not necessarily stipulated in the bill of lading “as packed”, as long as they are accurately documented for the purposes of the Hague-Visby Rules.

• Cargo limits should be calculated as per unit, not collectively across the containers, and the balance cannot be carried over, reflecting the actual damage suffered.

• It was held that in the Hague and Hague-Visby Rules a ‘unit’ would be every article within the container identifiable as a separate article for transportation.

• Mr Justice Andrew Baker differed with the majority in Federal Court of Australia’s decision in El Greco, and decided that it is sufficient for the physical items of cargo to be listed or enumerated, and not necessarily set out item by item, in the bill of lading “as packed” as long as they are accurately documented for the purposes of the Hague-Visby Rules.

• The Court also clarified how to apply the limits of liability under the Hague and Hague-Visby Rules.

 

¹COGSA 1971 s1(2) “The provisions of the Rules, as set out in the Schedule to this Act, shall have the force of law.”

²COGSA 1971 s1(4) “(…) nothing in this section shall be taken as applying anything in the Rules to any contract for the carriage of goods by sea, unless the contract expressly or by implication provides for the issue of a bill of lading or any similar document of title.”

³So far as the carriage to which the Rules applied. Maersk had agreed to carry two of the three containers from the discharge port to destination by road.   

⁴Referred to in the decision in the Aqasia, discussed in "No Hague Rule Limitation for Loss or Damage to Bulk Cargo - The Aqasia" 

Article by Miguel Caballero