TT Talk - Legal eagle: packages & contracts


TT Talk - Legal eagle: packages & contracts

Recent caselaw suggests that English courts will lean towards the selecting interpretations on limits of liability that favour a claimant. Unwelcome to the carrier community, so worth considering how best to describe goods on carriage documents.

Factual background
Three containers were shipped from Spain to Japan, stuffed with unwrapped tuna loins.  The consignee claimed for damage to the cargo as a result of raised temperatures and/or rough handling during re-stuffing into a replacement container.

The contracts of carriage initially contemplated issue of bills of lading, and draft bills of lading were in fact drawn up.  The containers were delayed at a transshipment port in Spain, one was de-stuffed and replaced and two were re-routed by road after discharge in Japan.  To avoid further delays, the carrier and the consignee agreed to issue waybills instead of bills of lading.  The loins, around 1,500 in all, were enumerated on the waybills.

Applicable law
Following the Rafaela S ([2005] 2 AC 423), it was argued that, because waybills and not bills of lading had been issued, the Hague-Visby Rules did not apply by force of law.  The judge in the English Commercial Court held, following Pyrene Co Ltd v Scindia Navigation Co Ltd ([1954] 2 QB 402) that it was sufficient that it was contemplated that bills of lading would be issued in due course, and that the Hague-Visby Rules therefore did apply compulsorily.

What is a package?
Once it was decided that Hague-Visby applied, the defendant carrier argued that the tuna loins were not units for the purposes of package limitation, because they could not have been shipped breakbulk without further packaging.  The Judge found this irrelevant.  On the facts of this case, the loins had not been packaged together, and each one was therefore a unit.  (There was already precedent (The River Gurara ([1998] 1 Lloyd’s Rep 225)) to the effect that the container itself is not (necessarily) a single package in these circumstances.)

The defendant’s argument that the bill of lading must specify that the enumerated items were ‘packages or units’ was also unsuccessful.  The judge said that nothing more is required than a true statement, putting a number on, the items that comprise the cargo.  This partially overturns an Australian case, Greco v Mediterranean Shipping ([2004] 2 Lloyd’s Rep 537), which had previous persuasive authority.

The judge therefore held that the defendant was liable for Hague-Visby limitation of up to SDR 666.67 for each tuna loin.

The financial implications of this preliminary decision were considerable.  The carrier’s conditions, which would have applied if Hague-Visby had not applied, contemplated package limitation of £100.  Limitation calculated on the basis of the preliminary decision approached £1 million.

Conclusion
This case breaks new ground in clarifying the approach to package enumeration in respect of containerised cargoes.  It also follows a trend, which started with the Rafaela S, towards the compulsory application of the Hague-Visby Rules where a means can be found to do this.  Some commentators have, however, expressed surprise that the argument was not raised that the decision to issue waybills constituted a variation in the original contractual intention to issue bills of lading, thereby preventing the automatic application of Hague-Visby.

“This follows a trend towards the compulsory application of the Hague-Visby Rules where a means can be found to do this”

Kyokuyo Co Ltd v AP Møller-Maersk AS (the ‘Maersk Tangier’)
[2017] EWHC 654 (Comm)

We hope that you have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.
 
We look forward to hearing from you.


Peregrine Storrs-Fox
Risk Management Director, TT Club

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