TT Talk - Just what is a Hague Rules package?

Iain Sharples from the Clubs office in Sydney reports on a recent case in which the Australian Federal Court had to consider the perennially contentious issue of what constitutes a package under the Hague-Visby rules. The case arose under the Australian Carriage of Goods by Sea Act 1991, which broadly incorporates the Hague-Visby rules into Australian law. customer's letter of credit requirements, the need for accurate descriptions, and the desire to reduce potential exposure to liability claims in the event of an accident. If these competing demands cannot be resolved, the Club's advice is that you should try to ensure that the buck does not stop with you: make sure that whenever possible the details recorded on your house bill are identical to those of the ocean bill. You should check the draft ocean bill of lading thoroughly before agreeing it with the shipping line.

The dispute was about a cargo of posters that had been exported from Australia in a container and suffered damage during the voyage. The bill of lading recorded the cargo as one container said to contain more than 200,000 pieces posters and prints. The cargo insurer claimed against the carrier under subrogation for what it alleged was the value of the cargo.

The Hague-Visby rules give two alternative methods for calculating the maximum amount of the sea carriers liability, one based on weight, the other on the number of packages and whichever is the higher applies. The two calculations resulted in wildly different amounts as often arises in these cases. The important point for the court to consider was how many 'packages' had been shipped.

At first instance the court decided that the number of packages for the purposes of limitation under the Hague-Visby rules was the number of pieces recorded on the face of the bill. This meant that the carrier was unable to limit its liability. However, it was able to reduce the amount of compensation by successfully arguing that the value of the cargo at the time of the loss was significantly below the level that was claimed by the cargo insurer.

The cargo insurer appealed this point and the shipping line appealed the package limitation argument.

The appeal court held that the number of pieces recorded on the bill was not the number of packages for the purposes of limitation. The court's view was that the term as packed used in article IV rule 5(c) was important. The recording of the number of pieces did not identify how those pieces were packed - such as the number of cartons, bundles or pallets for example. Included on the face of the bill of lading was a column headed 'number of packages' and this recorded the number of packages as one. In addition there was a note at the foot of this column recording the total number of packages as one; the shipping line also argued that a clause on the reverse of the bill of lading stating the container was to be considered a package was also relevant. The court decided that the carrier could base his liability on the weight of the cargo packed in the container, rather than use the much higher figure based on the number of individual items.

This decision may well be appealed by the cargo interests but in the meantime shipping lines and NVOCs should note the significant reduction in exposure that proper completion of the face of the bill of lading can provide. Bills of lading should always be accurate but you must also consider how the number of packages, particularly in shipper packed containers, should be represented. NVOCs in particular are often caught between the sometimes competing demands of the

If there is a difference in the way the number of packages is recorded on the various bills of lading there could be a significant shortfall between an NVOC's liability to its customer and the amount it can recover from the next carrier up the chain, whether that this the shipping line or the NVOC's co-loader. Apart from anything else, members of the TT Club will jeopardise their cover if they allow such discrepancies to arise. You could therefore be faced with a triple whammy: increased liability to the customer, a shortfall in the recovery from the sub-contractor and no compensation from the Club either.

Read the full decision of El Greco (Australia) & Anor v. Mediterranean Shipping Co. SA

Staff Author

TT Club