June 27, 2018

‘The Maersk Tangier’ – Breakthrough decision on limitation of liability for containerised cargoes

For the first time in English law, in Kyokuyo Co Ltd v A.P Moeller-Maersk A/S [2018] EWCA Civ 778, a significant judgment for the container trade was passed on by the Court of Appeal clarifying that the meaning of a ‘unit’ under Hague and Hague Visby Rules is the individual piece of cargo and not a container itself.

Claim details and Commercial Court judgment

The underlying claim was in respect of a consignment of frozen tuna loins which was carried in three reefer containers by Maersk Line from Spain to Japan under three non-negotiable sea waybills. The cargo arrived in damaged condition and the receivers held Maersk liable as the carrier and they commenced legal proceedings in the English Commercial court.

The Commercial court was asked to consider two issues: 1) Does package/unit limitation apply as per Article IV Rule 5 of Hague or Hague Visby Rules, and if so, 2) how is such package/unit limitation calculated.

Judge Andrew Baker J held in favour of the receivers and determined that 1) it is the Hague-Visby Rules that apply despite the fact that a Bill of Lading was not issued – the contract of carriage between the parties provided for bills of lading to be issued and that was sufficient for the Hague-Visby Rules to apply, hence the limits of liability under Article IV Rule 5 were applicable. Further, the judge established that 2) each tuna loin should be considered as a separate ‘unit’ as they were transported as independent items.

Maersk Line appealed.

The Court of Appeal decision

The main issues Maersk asked the Court of Appeal to consider were:

1) Was liability limited pursuant to the Hague or Hague-Visby Rules?
2) For the purpose of limitation under the Hague or the Hague-Visby Rules, were the relevant packages/ units the containers or the individual pieces of tuna?

1) Was liability limited pursuant to the Hague or Hague-Visby Rules?

For which set of Rules to apply, the primary issue was whether the contract of carriage was covered by a bill of lading under the definition of Article I(b) of the Hague-Visby Rules. Maersk argued that sea waybills were issued instead of bills of lading and therefore the Hague Rules should apply contractually by virtue of Maersk terms. However, the Court of Appeal rejected this argument and upheld the judgment of the Commercial Court that the Hague-Visby Rules applied. The shipment originated from Spain who is a contracting state to the Hague-Visby Rules which was sufficient to satisfy Article I(b) of the Rules and in absence of any contractual variation, waiver or estoppel, the Hague-Visby Rules should apply. The fact that only sea waybills were issued was found irrelevant. In principle, the shipper had the right to demand a bill of lading under the contract of carriage, and even if another document was issued for the actual transportation, the Hague-Visby Rules still apply.

2) How is the applicable limit of liability calculated under Hague-Visby Rules?

Article IV (5) of the Hague-Visby Rules reads: ‘’…the number of packages or units enumerated in the bill of lading as packed … shall be deemed the number of packages or units…’.

The question was whether the tuna loins had been enumerated in such a manner to satisfy sufficiently Article IV (5).

The only relevant authority was the Australian decision in El Greco v Mediterranean Shipping [2004] 2 Lloyd’s Rep 537 where the court had held that individual pieces would only constitute ‘units’ only if the description on the face of the bill not only stated the number of packages or units, but also how they had been packed i.e. whether they were in packages or as separate loose items in the container.

Maersk contested the findings of the Commercial Court that each tuna piece should be considered a ‘unit’. They said that a tuna piece would have been a ‘unit’ had it been shipped break bulk without packaging. Maersk argued that the ‘unit’ for the purpose of the limitation should be each container.

The Court of Appeal considered El Greco, however they agreed only partly with that decision. They concluded that Article IV (5) simply requires the bill of lading to describe the number of packages/ units inside the containers but it is not necessary to use specific words to describe how the items are packed. A requirement for specific packing description was deemed technical and uncommercial.

In this case, since the sea waybills accurately enumerated the number of pieces of tuna, this was sufficient so that each piece was capable of being a ‘unit’ for the purposes of Article IV (5).

Notably, the Court of Appeal went on to confirm that the definition of the ‘unit’ would have been the same should the Hague Rules were applicable i.e. the individual tuna loins would be ‘units’ under either the Hague or Hague-Visby Rules.

Comments:

This decision is the first and only guidance under English law on package limitation for containerised cargoes and there are a few points to take:

– If the contract of carriage provides for a shipper’s right to demand the issue of a bill of lading, regardless of whether a bill was actually issued or not, the Hague-Visby Rules compulsory apply (where cargo origin is from a contracting state to Hague Visby Rules).
– It is not necessary that the manner of packaging is described in the bill of lading for the pieces of cargo to be deemed as units.
– The container was not considered to be a ‘unit’ of cargo for the purpose of limitation of liability under the Hague or Hague Visby Rules but the definition of the ‘unit’ will apply to the number of pieces inside the container.

Kallina Gougouli
Tel: +44 (0) 20 73750002
kallina.gougouli@pacifics.co.uk

www.pacifics.co.uk

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