Australia: English and Australian courts diverge on Hague-Visby package limitation

Last Updated: 7 June 2018
Article by Andrew Tulloch

In brief - El Greco decision still stands in Australia, but for how long?

The England and Wales Court of Appeal in Møller-Maersk A/S (t/a Maersk Line) v Kyokuyo Ltd [2018] EWCA Civ 778 has upheld the first instance judgment on the interpretation of package limitation provisions in Article IV of the Hague-Visby Rules. Interestingly, the leading judgment of Lord Justice Flaux involves a critical examination of the Australian Federal Court decision in El Greco v Mediterranean Shipping Company [2004] 2 Lloyd's Rep 537.

In June 2017, we reported on the first instance decision in Kyokuyo Co Ltd v A P Møller-Maersk A/S [2017] EWHC 654 (Comm) in our article Package Limitation Reconsidered.

Cargo of frozen Bluefin tuna loins shipped under sea waybills by agreement after being placed in replacement container

Kyokuyo was the receiver of three containers loaded with frozen tuna that had been shipped from Spain to Japan. The cargo consisted of frozen Bluefin tuna loins, each weighing between 25kg and 75kg and some bags of Bluefin tuna pieces each weighing about 20kg. During shipment, an alarm triggered on one of the three containers and that cargo was discharged and repacked into a replacement container.

Although draft bills of lading were prepared covering 11 containers which described the cargo as "11 containers said to contain 5,782 PCS FROZEN BLUEFIN TUNA LOINS", and a second draft referred to "1 container said to contain 666 PCS, 206 PCS FROZEN BLUEFIN TUNA LOINS, 460 BAGS FROZEN BLUEFIN TUNA OTHER PARTS", no bill of lading was ever issued. Instead, by agreement, the cargo was shipped under sea waybills. The Bluefin loins in the replacement container were delivered, having suffered temperature damage.

A loss of the equivalent of approximately AU$1.5 million was claimed.

Application of Hague-Visby Rules

The Hague-Visby Rules are expressed to apply only where there is a contract of carriage covered by a bill of lading.

If the Hague-Visby Rules applied to the contract of carriage, then Article IV Rule 5(a) provides:

Unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading, neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the goods in an amount exceeding 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, whichever is the higher.

Article IV Rule 5(c) provides:

Where a container ... 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.

Judgment in the High Court

At first instance, Justice Andrew Baker found that the fact that a bill of lading had not actually been issued did not prevent carriage from being subject to the Hague-Visby Rules as there was an entitlement to demand issue of a bill of lading such that the carriage contract was a contract "covered by" a bill of lading.

He then went on to find that the individual frozen tuna loins were the "packages or units" as packed in the containers and, as they were enumerated in the waybills, they were the relevant "units" for the purposes of Article IV Rule 5(a).

Court of Appeal upholds judgment on issue of limitation and application of Hague-Visby Rules for waybills

Lord Justice Flaux, with support from Lady Justice Gloster, agreed with the trial judge that the Hague-Visby Rules applied even though waybills were issued rather than bills of lading that could have been required by the shipper. Reliance in support was placed on the decision in Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB 402.

The Court then examined the limitation issue and closely analysed the decision of the Full Court of the Federal Court of Australia in El Greco.

The Court found that the words "the number of packages or units enumerated" mean no more than the specifying of the number of packages or units in words or numbers. No further description was needed.

Secondly, the words "as packed" in Article IV Rule 5 are simply descriptive stating that the number of items have been packed in the container.

Notably, the Court disagreed with Allsop J in El Greco who concluded that "enumeration ... as packed" required some additional statement as to how the packages or units were packed in the container. (In El Greco it was found that there was only one package or unit when the bill of lading had described the container "said to contain 200,945 pieces posters and prints".)

The Court noted the criticisms that had been made of the decision of the majority in El Greco by academic commentators both in the UK and in Australia, and considered the criticism was justified such that the English courts should not follow the approach of the majority in El Greco.

Accordingly, the Court held that the trial judge was correct to hold that each loin was a separate "unit" for limitation under Article IV Rule 5(c) of the Hague-Visby Rules.

Although unnecessary to decide, the Court also noted that if the Hague Rules had applied, "unit" could include "piece" that is either incapable of being packaged or is not in fact packaged.

Impact of English court's decision in Australia

While El Greco stands at present as representing the law in Australia, the impact of this English decision is likely to be felt and it seems only a matter of time before an Australian court is provided again with an opportunity to reconsider the issue.

Clearly from the standpoint of international comity, a consistent interpretation of the Hague-Visby limitation is desirable. The El Greco decision may well be confined by its own somewhat unusual factual situation where the enumeration of pieces loaded in the container was incorrect and there was no mention on the bill of lading of the fact that the various pieces of posters and prints were in fact bundled into a number of bundles.

Given a choice between the stand adopted in the recent decision in England and that in the Federal Court in El Greco, the current Australian position is unlikely to stand the test of time.

As noted in our previous analysis of the High Court decision, under Australian law the issue of whether the Hague-Visby Rules applied compulsorily to the carriage may not have arisen. This is because under the modified Hague-Visby Rules in place in Australia, a contract of carriage is not confined to bills of lading or similar documents of title but extends to sea carriage documents, arguably catching sea waybills.

Andrew Tulloch
Marine insurance
Colin Biggers & Paisley

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