The 'Maersk Tangier' - A Milestone for the Definition of Unit

May 2018

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The decision of the Court of Appeal in Kyokuyo Co Ltd v A.P. Moller - Maersk A/S (the Maersk Tangier) [2018] EWCA Civ 778 upheld the judgment of the Commercial Court, which for the first time for the purposes of English law defined the meaning of 'unit' in the context of the Hague and Hague-Visby Rules.

The judgment of the High Court

A consignment of frozen tuna loins was carried in three reefer containers from Spain to Japan for which three non-negotiable waybills were issued by Maersk Line as carrier. The cargo arrived in damaged condition and Maersk was held liable by the receivers.

The cargo interests commenced legal proceedings against Maersk, and in the Commercial Court Andrew Baker J was asked to consider: (a) whether any liability should be subject to package or unit limitation as calculated in accordance with Article IV Rule 5 of the Hague or Hague Visby Rules; and (b) how to calculate such package or unit limitation.

The Commercial Court held that the Hague-Visby Rules compulsorily applied as all that was required to satisfy Article 1(b) so as to make the Rules applicable was that, when concluded, the contracts of carriage provided for bills of lading to be issued. Consequently, the package limitation established therein was also applicable.

The Commercial Court established that in this instance each tuna loin was an individual unit or package as they were identifiable as a separate article for transportation. The waybills were also compliant with Article IV Rule 5(c) of the Hague-Visby Rules as it was not necessary to enumerate the cargo “as packed” but was sufficient to simply state the number of packages or units inside the container accurately on the bill of lading.

The appeal

The Court of Appeal was asked by Maersk to consider:

  • Is liability limited pursuant to Article IV rule 5 of the Hague Rules or pursuant to Article IV rule 5 of the Hague-Visby Rules (whether applicable compulsorily or contractually)?
  • If liability is limited pursuant to Article IV rule 5 of the Hague-Visby Rules, are the containers deemed to be the relevant package or unit for the purposes of Article IV rule 5(c), or are the individual pieces of tuna “packages or units” enumerated in the relevant document as packed in each container for the purposes of Article IV rule 5(c)?
  • If liability is limited pursuant to Article IV rule 5 of the Hague Rules, are the relevant packages or units the containers or the individual pieces of tuna?

Flaux LJ delivered the leading judgment from the Court of Appeal, the conclusions of which were agreed by Gloster LJ. 

a) Which set of Rules applied? Were the Hague-Visby Rules compulsorily applicable?

Maersk argued that the Hague Rules should have applied to the contract because sea waybills were issued, instead of bills of lading, and the Hague Rules applied contractually by virtue of Maersk’s terms. 

The Court of Appeal upheld the judgment of the Commercial Court and, therefore, agreed that the Hague-Visby Rules applied. Although a bill of lading was not finally issued, and a waybill provided in its place, the terms of the contract provided for a bill of lading to be issued.  This was sufficient to satisfy Article 1(b) of the Rules that, absent any contractual variation or waiver and/or estoppel, the Hague-Visby Rules would compulsorily apply.

b) How is the package and/or unit limitation calculated under the Hague-Visby Rules?

Maersk argued that the judge was wrong to hold that each frozen tuna loin was a “unit”. A tuna piece would only constitute a unit if these pieces could have been shipped “as is” break bulk without packaging. Maersk claimed that each container should constitute a “package or unit”. 

Further, Maersk contended that the Commercial Court had been incorrect to conclude that all that was required by Article IV Rule 5(c) for a bill of lading to be “enumerated” was that the number of units in the container should be correctly stated. Maersk argued that the judge’s decision was wrong and relied on the decision of the Australian Courts in El Greco1 to the effect that individual pieces would only constitute “units” if it was clearly indicated on the bill whether they were in packages or loose inside the container.

The Court of Appeal confirmed that bills of lading should accurately describe the number of packages or units inside the container, but did not need to use specific words or describe the cargo item by item or “as packed”. The Court considered that to impose any additional or technical requirement to describe how the cargo was packed would give rise to uncertainty and could ultimately lead to uncommercial results.

In this particular case, the Court of Appeal considered that the waybills were compliant as they enumerated the number of pieces of tuna, which were capable of being ‘units’, inside each container.

c) The Hague Rules position

Although the Court of Appeal had confirmed that the Hague-Visby Rules applied, the Court set out some comments on the position as to the relevant “package” under the Hague Rules.  The Court upheld the comments of the Commercial Court that the Hague Rules do not require any consideration of how the cargo could have been shipped if not containerised.  The decision confirmed that the definition of “unit” for the Hague and Hague-Visby Rules should be the same, and the tuna loins would have been “units” under either set of Rules.

Comments

There are a number of points to be taken from the judgment:

  • The Court of Appeal confirmed that if the contract of carriage provides the shipper with the right to demand a bill of lading, regardless of whether such right is exercised, the Hague-Visby Rules compulsorily apply.
  • The pieces of cargo do not need to be suitable for shipment as breakbulk to be deemed ‘units’, as no particular packaging is required. 
  • The English Courts departed from the views of the Federal Court of Australia in El Greco1 and decided that the requirements of Article IV.5(c) will be met by indicating the number of pieces inside the container.

1El Greco (Australia) Pty Ltd v Mediterranean Shipping Co S.A. [2004] 2 Lloyd’s Rep 537

 

Article by Miguel Caballero

Claims Executive

Americas Syndicate