Introduction

In the recent case Kyokuyo Co Ltd v AP Moller - Maersk A/S (t/a Maersk Line) [2017] EWHC 654, the English Commercial Court considered a number of issues relating to the package or unit limitation, the use of waybill instead of bill of lading and the purpose of enumeration of products.  This case is noteworthy as the Court clarified certain fundamental definitions, including “contract of carriage”, “package and unit” and “as packed”, all of which are essential terms under the Hague-Visby Rules.

Facts

Three “Super Freezer” cargoes (Containers A, B and C) of frozen tuna were delivered from Spain to Japan. Container A consisted of tuna loins and bags of tuna, while Containers B and C consisted solely of tuna loins. The claimant company Kyokuyo Co. Ltd. (the “Claimant”) claimed that the tuna in all three containers had been damaged through raised temperatures during carriage and rough handling by the defendant carrier Maersk Line (the “Defendant”).  The Defendant prepared a draft bill of lading but it was not issued.  Instead, sea waybills were issued in order to avoid delay in delivery. It is undisputed that the Defendant’s liability was governed by the sea waybills.  

Judgment

Issues

The following issues were discussed by the Court at length:

1.       Whether the Defendant’s liability was limited pursuant to the Hague Rules, or whether it was limited pursuant to the Hague-Visby Rules; and

2.       Whether the frozen tuna within the cargos could be considered “packages or units” for the purposes of limitation, or if the individual pieces of tuna could be considered “packages or units”. And whether it is necessary to look at what is enumerated in the sea waybills.

Decision

The first issue aroused due to the ambiguous drafting of the waybill which provided that “liability limited pursuant to… the Hague Rules or… [the Hague-Visby Rules]…” The difference between the two rules is that the monetary limits of liability were £100 “per package or unit” in the Hague Rules and, in the Hague-Visby Rules, the greater of 666.67 units of account “per package or unit” or 2 units of account “per kilogramme of gross weight of the goods lost or damaged”.  By operation of the Carriage of Goods by Sea Act 1971, the Hague-Visby Rules will apply compulsorily to the Claimant’s claim in contract.  

Issue 1

The Court first looked at the meaning of article I(b) of the Hague-Visby Rules. Article I(b) provides that “contract of carriage” applies only to “contracts of carriage covered by a bill of lading or any similar document of title, in so far as each document relates to the carriage of goods by sea…” Since sea waybills are not “similar document of title”, the Court considered the correct question to ask is whether sea waybills are “covered by a bill of lading”. Although no bill of lading had been issued, the basis of decision in the prior authorities had been that, whether a contract of carriage was “covered by a bill of lading” for present purposes was defined by whether, when concluded, the contract had provided for a bill of lading to be issued.

Following the case of Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB 402, the Court held that article I(b) is also satisfied where the terms of a contract of carriage require a bill of lading to be issued but no bill of lading was in fact issued. It also does not matter whether a bill of lading was insisted upon.

In the present case, it is undisputed that the contract of carriage requires a bill of lading to be issued although the parties have agreed to issue the sea waybills instead of the bill of lading. As such, the sea waybills satisfy article I(b) of the Hague-Visby Rules and therefore the Hague-Visby Rules applies in determining the Defendant’s liability.

Issue 2

Article IV, rule 5(a) of the Hague-Visby Rules expressly stated that the carrier’s liability is limited to an amount of not exceeding 666.67 units of account “per package or unit” or 2 units of account “per kilo of gross weight of the goods lost or damaged”, whichever is higher.   The Court considered the question whether the cargos could be considered “packages or units” for the purposes of limitation, or if the individual pieces of tuna could be considered “packages or units”.  

In answering the question, the Court followed the case of The River Gurara [1998] QB 610 and held that if the cargo as in fact transported is packaged, the limit of liability for that cargo applies per package, even if what has been packaged would have been suitable for transportation without that packaging.  If cargo as in fact transported was not packaged, but was made up of identifiably separate items of transportable cargo, those items were “units”.  As such, each frozen tuna loin as a separate “unit” attracts a separate limit of 666.67 units of account; and the limit of liability in respect of damage to the bagged tuna is the greater of 666.67 units of account and (2 x W) units of account, where W is the gross weight in kg of the bagged tuna damaged.

Another thrust of the case concerns article IV, rule 5(c) of the Hague-Visby Rules, which contains the following:

“Where a container, pallet or similar article of transport is used to consolidate 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 or unit.”

Article IV, rule 5(c) of the Hague-Visby Rules includes the notion of “…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 sea waybills in the present case, in enumerating the number of tunas within Container A, stated that “one container said to contain 206 frozen Bluefin tuna loins”.

The Court noted that where a cargo is containerised, the container is deemed to be the only relevant “package or unit” unless there is a sufficient enumeration in the bill of lading. In the case of El Greco (Australia) Pty Ltd v Mediterranean Shipping Co S.A. [2004] 2 Lloyd’s Rep 537, It was held that a bill of lading saying that “one container with 100 car engine parts packed inside” is a sufficient enumeration but “one container said to contain 100 car engine parts” is not. However, in the present case, the Court held that so far as the language of enumeration is consistent with the truth (namely that the enumerated frozen loins were “as packed” individual articles of cargo) i.e. a statement identifying and putting a number on the items that do in fact comprise the cargo, then it would suffice. Accordingly, the Court held that the “packages or units” of the cargo as packed were the individual frozen loins as identified and enumerated in the sea waybills.   

Conclusion

This case clarified a number of issues applicable to most containerised cargoes.  In passing, the Hague Visby Rules will apply if the contract of carriage requires a bill of lading to be issued; the notion of “package or unit” applies to each individual tuna loins and not of the number of cargoes; and that as long as the items within the cargo are correctly stated, then it would be sufficient to fall under article IV, rule 5(c) of the Hague Visby Rules as being enumerated in the bill of lading.  For the carriers, if they wish to limit their liability as much as possible, care must be taken in describing the contents of the cargoes in the bill of lading.  Perhaps the best practice is to describe the goods by reference to their “weight” instead of “package or units” as the “weight” generally attracts a lessor limitation (2 units of account per kg) than “package or unit” (666.67 units of account per package or unit).     

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.