551. MT Højgaard A/S v EON Climate and Renewables 2014 [EWHC] 1088 (TCC); 2015 [EWCA] Civ 407; 2017 [UKSC] 59

Design and build contract – minimum lifespan provision taking precedence over specific design requirements agreed upon

The Facts

The employer, EON, accepted the tender of the contractor, MTH, to design and build the generators for two adjacent windfarms in the Solway Firth.

The contract contained a provision regulating the hierarchy of documents, with the contract provisions placed first and the employer’s requirements, including its technical requirements, placed fourth.

The employer’s technical requirements required the contractor to prepare a detailed design of the foundations in accordance with the prevailing industry standard (“J101”) formulated by Det Norske Veritas (DNV), an independent classification and certification agency.

The same clause provided:

The design of the foundations shall ensure a life time of 20 years in every aspect without planned replacement. The choice of structure, materials, corrosion protection system operation and inspection program shall be made accordingly.”

A further provision stated: “All parts of the works, except wear parts and consumables shall be designed for a minimum service life of 20 years.”

The contractor designed the foundations: steel piles driven into the seabed with steel sleaves placed over them. The space between the outer sleave and the pile was filled with grout.

Shortly after construction, the foundations failed with the sleaves slipping down over the piles.

It was discovered that a component of the J101 specification was erroneous which led to the under design of the foundations.

The parties agreed to carry out remedial works to the value of approximately €26m and to refer the question of liability to the court.

Findings

After an 8 day trial, Edwards-Stuart J in the Technology and Construction Court, found in favour of the employer.

Relying on a passage in the 8th edition of Hudson (repeated in the current, 12th edition) and Canadian cases, he held that the contractor had warranted a minimum lifespan. This was not inconsistent with the specified design regimen (J101) because J101 was only a minimum requirement.

The Court of Appeal, per Jackson LJ (Patten and Underhill LJJ concurring), thought otherwise.

In a convincing analysis, Jackson LJ pointed out that the contractor had employed the design standard expressly required by the contract. There was therefore a conflict between this obligation and the undertaking to provide a design with a minimum life of 20 years.

He quoted Lord Collins in Re Sigma Corp (UKSC) 2009:

In complex documents of the kind in issue, there are bound to be ambiguities, infelicities and inconsistencies. An over-literal interpretation of one provision without regard to the whole may distort or frustrate commercial purpose.”

An illuminating passage in Jackson LJ’s judgment is:

In essence, a court seeking to construe the contract between EON and MTH must postulate a reasonable person (X) having all the knowledge available to those two parties. The Court must consider what (X) would have understood [by the specific provisions]. This is an iterative process, which involves checking each of the rival meanings against the other contractual provisions and investigating its commercial consequences. The Court must accept that there are likely to be ambiguities and inconstencies within the documents [my emphasis]. It must not allow itself to be led astray by those ambiguities and inconsistencies. Approaching matters in that way the Court must determine whether or not clause 8.1 of the contract conditions in conjunction with TR paragraph 3.2.2.2 (2) required MTH not only to comply with J101 but also to achieve a result, namely, foundations with a service life of 20 years.”

Jackson LJ concluded as follows:

A reasonable person in the position of EON and MTH would know that the normal standard required in the construction of offshore windfarms was compliance with J101 and that such compliance was expected by not absolutely guaranteed, to produce a life of 20 years. If one adopts an iterative approach to the construction of TR paragraphs 3.2.2.2 (2) and 3b 5(1) it does not make sense to regard them as overriding all over provisions of the contract and converting it into one with a guarantee of 20 years life. Put another way, there is an inconsistency between TR paragraph 3.2.2.2 (2) and 3b 5 (1) on the one hand and all the other contractual provisions on the other hand. The Court must not be led astray by that inconsistency.”

The UKSC, Lord Neuberger (Lords Mance, Clarke, Sumption and Hodge concurring) preferred and restored the judge at first instance.

Commentary

At one level, the outcome in the Court of Appeal is more realistic. It recognizes that there are inconsistencies in complex, multi authored contracts such as this. The default position where there is no fault on either side is that a loss lies where it falls. In a case such as this, there was no sound reason to prefer one of the conflicting provisions over the other.

On another level, the case illustrates the hazards of litigation: among the finest judges in the world there was stark disagreement and the outcome in the Court of Appeal could easily have been the last word on the dispute.

550. MSC Depots (Pty) Ltd v WK Construction (Pty) Ltd, Wynford’s Civil and Development CC 2011 (2) SA 417 (ECP); [2011] ZA SCA 115

Contractor cannot be in breach of clause 15.3 of the JBCC on grounds of defective performance where it is not given the opportunity to remedy such defective performance.

The Facts

The Plaintiff shipping company contracted the Defendant paving contractor to provide paving for a container depot.

The contract was on an unidentified version of the JBCC 2000 Principal Building Contract.

In issue was the effect of clause 15.3 which provided as follows: “On being given possession of the site, the contractor shall commence the works within the period stated in the schedule and proceed with due skill, diligence, regularity and expedition and bring the works to … [final completion in terms of 26.0 (15.3.4)]

When the works had reached an advanced state of completion, deflections in the paving appeared.

Both the employer and contractor engaged independent structural engineers who provided reports identifying defects in the design.

Notwithstanding this, the employer caused an instruction to be given by the principal agent to desist from continuing remedial work which had begun.

Also, the employer failed to pay the latest payment certificate.

The contractor issued a notice of cancellation based on four grounds, including failure to pay and preventing the principal agent from exercising his independent judgment, the latter ground provided for in clause 38.1.7.

The employer claimed that the notice of cancellation was repudiatory and cancelled itself based on a breach of clause 15.3.

Findings

Judge Dayalin Chetty gave absolution from the instance on the employer’s claim for damages based on two grounds: it had failed to provide sufficient evidence of defective performance and it was precluded from relying on clause 15.3 where the contractor was not given the opportunity of remedy in defects.

He held that clause 15.3 had to be read with clause 17 giving the principal agent the power to issue instructions to remedy defects.

The judge’s decision was confirmed by the SCA (per in Mpati P, Brand, Lewis, Snyders and Majiedt JJA, concurring).

Commentary

This is an important case, defining as it does the scope of clause 15.3.

The clause appears to be designed to deal with two situations: firstly, where the contractor simply stops working, and secondly, where it has demonstrated incompetence or incapacity to carry out the works with due diligence and skill.

549. Gard Shipping AS v Clearlake Shipping PTE LTD (the MT “Zaliv Baikal”) [2017] EWHC 1091 (Comm)

Voyage charterparty – construction of lay time provisions.

The Facts

The vessel was chartered for one voyage from one safe port Ust-Luga to one or two safe port(s) “UK Cont North Spain – Hamburg Range”.

The charterparty was later revised to include a second voyage from Ust-Luga or St Petersburg to the same discharge range as the first voyage.

The charterparty contained the following clause:

AC11. Notwithstanding any term of this charter to the contrary, charterers shall have the liberty, at any stage of the voyage, of instructing the vessel to stop and wait for orders for max 3 days at a safe place within the range as agreed. In particular and without prejudice to the generality of the aforegoing, charterers shall be entitled to instruct the vessel not to tender NOR on arrival at or off any port or place or to delay arriving at any port or place until charterers give the order to do so. Time to count as used lay time or time on demurrage, if vessel is on demurrage. And all bunkers consumed to be for charterers account.

After first 5 days waiting for orders / discharge instructions at sea vessel to be considered as being used for storage, and, unless otherwise agreed, following increase of demurrage rate to apply.

Days 6 – 15 DEMM rate plus $5,000.

Days 16 – 26 DEMM rate plus $10,000.

Days 26 – 35 DEMM rate plus $15,000.

Prior to expiration of 35 days period charterers to inform owners if they require more time to use vessel as storage, and new rates to be mutually agreed.

Latest on 35th day of such waiting. Such a waiting time to be compensated at rates agreed above and payable together with freight against owners separate invoice.

Charterers option to order ship to wait at an offshore position provided they give final destination and expected cargo delivery window, in which case the above increase in rates not to apply.

In case where final destination or cargo delivery window changes, then increase of rates to apply as per this clause.

The final leg of the second voyage was from Kalundborg to Rotterdam.

The vessel completed her passage to Rotterdam at 22h30 on 26 January 2016. NOR was tendered at 22h50 on 26 January 2016.

Charterers did not give any discharge instructions until the afternoon of 31 March 2016 which meant that the vessel waited at Rotterdam for a total of 64.7083 days.

Owners claimed $976,731 for escalated demurrage and bunkers consumed.

Findings

Owners argued that, on these facts, where charterers allowed notice or readiness to be given but withheld discharge instructions for their own commercial purposes, they were hit by clause AC11 which provided for escalated demurrage.

Sir Jeremy Cooke held that they were not so hit but were liable for ordinary demurrage. This was the plain meaning of the provisions of AC11 read in the context of the entire charterparty and no term could be implied to contradict such meaning.

Commentary

The judge’s conclusion is not self-evidently right.

As the charterers were given the right to order the Master not to tender notice of readiness by clause AC11, a strong argument could be made out that the parties impliedly agreed that, in every case, charterers would make use of such right where they intended to use the vessel for storage. Allowing notice of readiness to be given and withholding discharge orders are practically contradictory positions.

398. Gard Marine & Energy Ltd v China National Chartering Co Ltd & others (the “Ocean Victory”) [2013] EWHC 2199 (Comm) ;[2015] EWCA Civ 16; [2017] UKSC 35

Safe port warranty – port of Kashima affected simultaneously with long waves and a force 9 gale – running aground and breaking up – charterers not in breach of safe port warranty

The Facts

The vessel, a Capesize Bulk Carrier, was ordered on a time charter trip on an amended NYPE form to carry iron ore from Saldahna Bay to Kashima.

The vessel was on demise charter for 10 years which provided that the vessel was to be deployed only between “good and safe ports”. A time charter followed for a minimum of 5 months, maximum 7 months via “safe anchorage(s), safe berth(s), safe port(s) on an amended NYPE form.  Last in the chain was the time charter trip via safe port(s), safe anchorage(s) South Africa, mentioned above.

During the course of discharge at the Raw Materials Quay at Kashima, cargo operations were stopped by heavy rain. The weather reports warned of high seas, heavy rain, gales and storm surge.

At the same time there were “long” waves (waves with long amplitude) moving in from the Pacific causing swell and the danger of collision against the quay. To make allowance for this, additional mooring lines were ordered for the vessel.

Another Capesize Bulk Carrier was berthed at the same quay. The possibility was considered that both vessels might leave their berths to seek shelter in the open sea.

Leaving for the open sea entailed sailing north along 2 intersecting fairways and passing in close proximity to a breakwater. This subjected vessels to the danger of being swept towards the breakwater by the prevailing head wind.

In the rolling and pitching, 2 mooring lines broke. The other mooring lines were chafing on the side of the vessel.  The Master had the lines reset, greased the side of the vessel and ordered 2 tugs to hold the vessel against the berth. Faced with the Scylla of the swell and the Charybdis of negotiating the dangerous passage out to open sea, the Master’s preference was to remain in port.

A misunderstanding then arose between the Port Authorities and the Master. The Port Authorities mistakenly thought that the Master had requested the services of a pilot to navigate the vessel out to sea (pilotage was optional).  When the pilot arrived on board, the Master mistakenly thought that his presence signified an order from the Port Authorities to leave.

The vessel left the berth accompanied by 4 tugs which were released at various stages along the passage of the 2 fairways. The pilot on board disembarked onto the last remaining tug at the southern end of the breakwater.  The Master was now on his own, tasked with sailing his vessel along the length of the 2-mile breakwater out into the open sea.

In negotiating the passage, the vessel lost steerage and went aground against the breakwater. The crew was airlifted to safety.

The Proceedings

The P&I Club of the owners and demise charterers brought an action for damages against the time charterers who joined the hybrid voyage/time charterer, last in line, as a third party.

The main issue in a trial which lasted 17 days was the safety of the port.

Findings

After reviewing all the leading safe port authorities, Teare J concluded that the port was unsafe because it had no early warning system in respect of the onset of long waves. An early warning system was in place to warn vessels to leave for the open sea in the event of a typhoon.

He found that the Master was negligent in the choice of navigational aids deployed in leaving the port (the Master had used a GPS instead of the accepted parallel indexing method). This, however, did not lead to situational unawareness and was not causative of the casualty.

Teare J accepted the evidence of the owners’ navigation expert that ordinary seamanship and navigation could not ensure a safe exit from the port in the prevailing weather conditions.

He found that the coincidence of long waves and a northerly gale, though rare, was not unforeseeable and did not therefore qualify as an abnormal circumstance.

In the appeal which was heard before Longmore, Gloster and Underhill LJJ, the judge’s finding that it was unsafe for the vessel to remain in port was accepted.

In a combined judgment handed down by Longmore LJ, it was found that the judge had incorrectly rejected the meteorological evidence led by the charterers that the storm in question was of unprecedented intensity.

Also the evidence reflected that the combination of long waves making it necessary for the vessel to leave port for the open sea and the presence of a northerly gale which made it unsafe for a Capesize vessel to leave the port, was so unusual as to qualify as an abnormal circumstance saving the port from a finding of unsafety.

The Court of Appeal also decided two side issues, unnecessary in view of the main finding: the effect of having joint insurance on the question of liability inter se, and whether charterers responsible for damage to the vessel itself, were entitled to the benefit of limitation under international convention.

Following the Evia 2 they held that it was nonsensical that the demise charterers should remain liable to the owners for breach of the safe port warranty having been placed under the obligation to insure the vessel for the joint benefit of the owners and the charterers.

The UKSC confirmed the CA on the safe port issue for the reasons given by Longmore LJ.

Longmore LJ had also held, following the CMA Djakarta, that, in any event, charterers who were responsible for damage to the vessel itself were not entitled to the benefits of the 1976 Convention on Limitation of Liability for Maritime Claims. The UKSC agreed.

They split however on the other academic question, whether demise charterers who took out joint insurance with head owners could be liable to head owners for damage caused by time charterers for which demise charterers would, in the ordinary course, be liable to head owners.

Following Longmore LJ, Lords Mance, Toulson and Hodge agreed that it would be nonsensical to hold demise charterers liable in principle to head owners where they had agreed to take out joint insurance. Lords Clarke and Sumption thought otherwise. Their reasoning was based partly on the wording of the Barecon 89 charter itself and the notion that insurance was traditionally considered res inter alios acta in determining the wrongdoer’s liability. They also thought the possibility that the insurance might fail, should play a role in the interpretation of the contract.

Commentary

The test in the Eastern City (A port will not be safe unless, in the relevant period of time, the particular ship can reach it, use it and return from it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship…) was formulated on facts where foreseeable weather conditions led to the casualty and a finding that the port in question was unsafe.

The UKSC, following the lead of Lord Roskill in the Evia 2, has effectively adopted reasonable foreseeability (as opposed to foreseeability per se) as the rationale for holding charterers liable for breach of the safe port warranty.

This suggests that those cases which held the charterers liable for hidden temporary dangers involving physical aspects of the port, Houston City, Carnival and even the Mary Lou, were wrongly decided.

548. Albacora SRL v Westcott & Laurance Line Ltd (the “Maltasian”) [1966] 2 Lloyd’s Rep 53

Hague rules – parties agree to ship fish on an unrefrigerated vessel – ship-owner not liable.

The Facts

Fresh salted fish was shipped from Glasgow to Genoa.

On outturn, the fish was found to be damaged simply because it was too hot at the time of the year chosen. Neither the shipper nor the vessel realized this.

Cargo sought to hold the vessel liable under Article III r2: “The carrier shall properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried”.

Findings

A unanimous House of Lords found no breach of duty on the part of the vessel.

Further, because the parties had agreed to use an unrefrigerated vessel, the cargo was damaged by inherent vice within the meaning of Article IV r2(m).

547. CMA CGM SA v Classica Shipping Co. Ltd (the CMA Djakarta) [2004] 1 Lloyds Rep 460

Limitation – damage to vessel caused by charterers not subject to Convention on the Limitation of Liability for Maritime Claims, 1976.

The Facts

By charter party on an amended NYPE form, owners chartered their container vessel to the charterers.

During the currency of the charter party, there was an explosion and fire on the vessel causing substantial damage to the vessel and the cargo.

Owners claimed damages from the charterers in the sum of USD 26M.

Findings

Arbitrators found in favour of the owners. David Steel J upheld the arbitrators and followed Thomas J in the Aegean Sea, holding that, to qualify for limitation, charterers had to have been acting qua owners.

Longmore LJ, Waller and Neuberger LJJ concurring, found that the ordinary wording of the Convention meant that the charterers were generally entitled to limitation and that their right was not qualified by having to act as owners.

Charterers could not succeed, however, because the damage to the vessel was not the damage envisaged by the Convention which was, generally speaking, damaged caused by the vessel itself and not damage to the vessel itself.

546. Teekay Tankers Ltd v STX Offshore And Shipbuilding Co. Ltd [2017] EWHC 253 (Comm)

Contract formation – agreement to agree not enforceable – shipbuilding contracts.

The Facts

Teekay Tankers Ltd, incorporated in the Marshall Islands and listed on the New York Stock Exchange, a subsidiary of Teekay Corp, operate a fleet of oil tankers from Vancouver.

Teekay contracted with STX, Korea to build 16 aframax tankers.

The first 4 vessels were purchased on completed contracts. The remaining 12 were purchased in terms that gave Teekay an option of purchasing on predetermined conditions save for delivery dates.

The clause which gave rise to the despute read as follows:

4.1. Delivery dates for each of the optional vessels shall be mutually agreed upon at the time of Teekay’s declaration of the relevant option.

4.2. But STX will make best efforts to have a delivery within 2016 for each of the first optional vessels, within 2017 for the each of the second optional vessels and within 2017 for each of the third optional vessels.”

Findings

In a trial, Walker J found that the delivery dates were an essential term upon which there was no agreement.

Best efforts” qualified the putative obligation to agree and not an obligation objectively ascertainable.

Commentary

The tension between dates “to be mutually agreed upon” and “best efforts” to deliver was decided by Walker J in favour of the absence of agreement.

Walker J referred to Little v Courage Ltd where Lord Millet said as follows: “an undertaking to use one’s best endeavours to obtain planning permission for an export license is sufficiently certain and is capable of being enforced. An undertaking to use one’s best endeavours to agree, however, is no different from an undertaking to agree, to try to agree or to negotiate with a view to reaching agreement; all are equally uncertain and incapable of giving rise to an enforceable legal obligation.”

545. El Greco (Australia) (Pty) Ltd v Mediterranean Shipping Co SA (the “MSC Melbourne”) [2004] 2 Lloyds Rep 537

Hague Visby Rules – substantial quantity of individual prints and posters packed in a container – not “units” for purposes of limitation

The Facts

A cargo of posters and prints were loaded on board the vessel at Port Botany, Sydney in a 20 foot general purpose container. The vessel sailed for Antwerp where the container was transshipped onto the Aquitania bound for Piraeus. From Piraeus the container was transported by road to Aigion.

When packed into the container, the goods had been made up into approximately 2000 packages. The container was carried under a non-negotiable through Bill of Lading.

The description of the cargo on the face of the Bill was “said to contain: 200945 pieces, posters and prints – No. of pkgs.: 1.”

Clause 21 of the Bill of Lading read: “where the goods have been packed into containers or on behalf of the merchant, it is expressly agreed, that each container shall constitute one package for the purpose of application of limitation of the carrier’s liability.”

The Claimant alleged that the goods were damaged on arrival.

Findings

The judge at first instance found that the goods had been damaged by seawater during the voyage and that the carrier was liable.

The judge at first instance found that clause 21 was void as it offended Art.III rule 8.

She found the actual damages suffered to be AUS $ 63 570 which she awarded to the Claimant on the basis that limitation was to be calculated on the basis of 200945 units being enumerated on the face of the Bill of Lading.

Claimant appealed with regard to the extent of the damages fixed by the judge. The carrier cross appealed on 2 bases: clause 21 was not void and, in any event there was no proper enumeration of the packages/units in the container.

Allsop J, Black CJ concurring, and Beaumont J, dissenting upheld the cross appeal on the basis that there had been no proper enumeration of units on the face of the Bill of Lading.

To arrive at his conclusion, Allsop J made extensive reference to Sturley, The Legislative History of the Carriage of Goods by Sea Act and Professor Berlingieri and the Comite Maritime International (CMI), travaux préparatoires of the Hague Rules and the protocols of February 23, 1968 and December 21, 1979.

On the approach to the interpretation of the Hague Visby Rules as enacted in Australia, Allsop J referred to Lord Diplock in Fothergill v Monach Airlines Ltd as follows:

The language of that convention that has been adopted at the International Conference to express the common intention of the majority of the States represented there is meant to be understood in the same sense by the Courts of those States which ratify or accede to the Convention. Their national styles of legislative draftsmanship will vary considerably as between one another. So will the approach of their judiciaries to the interpretation of written laws and to the extent which recourse maybe had to travaux préparatoires, doctrine and jurisprudence as extraneous aids to the interpretation of the legislative text.

The language of an International Convention has not been chosen by an English parliamentary draftsman. It is neither couched in the Conventional English Legislative Idiom nor designed to be construed exclusively by English judges. It is addressed to a much wider and more varied judicial audience than is an Act of Parliament that deals with purely domestic Laws. It should be interpreted as Lord Wilberforce put it … “unconstrained by technical rules of English Law, or by English Legal Precedent, but on broad principles of general acceptation”.

The principles enshrined in the Vienna Convention were considered to be the “broad principles of general acceptation”: CMA CGM SA v Classica Shipping Co. Ltd.

Allsop J referred to an American decision, one of a number, Binladen BSB, which held that live plants packed loose in a container were not “units” for the purposes of limitation.

Although Allsop J agreed with the judge at first instance that clause 21 was void, he found that there had been no proper enumeration of units on the bill of lading and therefore that the default position, that the container was to be seen as the package, applied.

He said as follows:

Before the advent of containerization it followed from the practical everyday business of shipping goods that packages or units were as packed or as stowed. Shippers did not approach a carrier with loose bottles, loose posters or the like and ask it to carry them as they might do so with a car, a boiler or some article capable of being shipped as such, unless they were also requesting that the carrier make the goods up for transport prior to carriage. Thus, as I said earlier, before the advent of containerization, it was unlikely “except in the context of a debate about whether cargo was really bulk cargo or numerous pieces, or articles, or units of cargo” that there would arise for debate the question whether “unit” meant any article of cargo, however small and however unsuitable for transportation without being made up for transport or as to whether it meant an article of cargo suitable for carriage as such.”

He held further that:

An enumeration on the face of the bill of a number of pieces of cargo that could be packed in a variety of ways and therefore not showing the packages or units as packed, that is, how or in what number they are packed, will not be an enumeration called for by Art. IV rule 5(c).”

Accordingly the description of the cargo as 200945 “pieces, posters and prints” did not qualify as an enumeration of units for the purposes of The Hague Visby Rules.

Allsop J also dealt with, in passing, the question of a mistaken enumeration. In this regard he favoured the approach of Diamond QC in his famous article on The Hague Visby Rules that rule 5(c) only applies to the packages or units enumerated for which there is liability. – Diamond QC “The Hague Visby Rules [1978] LMCLQ 225.

544. Kyokuyo Ltd v AP Møller – Maersk A/S t/a “Maersk Line” [2017] EWHC 654 (Comm)

Hague/Hague Visby Rules – limitation as applied to containerized frozen fish.

The Facts

Twelve containers of frozen tuna were shipped on Maersk Tangier on 24 November 2012.

The vessel sailed from Cartagena, Spain to Yokohama. En route, at Valencia, nine of the twelve containers were transshipped onto Maersk Emden.

The three remaining containers A, B and C were transshipped onto Maersk Eindhoven which left Valencia only a month later.

At Barcelona, container C was de-stuffed, its contents re-stuffed into a Replacement Container and shipped on Maersk Tangier.

Container B and the Replacement Container were carried by road from Yokohama to Shimizu.

All twelve containers were shipped pursuant to the Maersk terms containing an implied term entitling shippers to demand that Bills of Lading be issued by Maersk Line.

Maersk Line issued a draft Bill of Lading to the Claimant who was named in the draft bill as the consignee.

No Bills of Lading were issued for the three containers in question.

To avoid delay, Maersk Line agreed to issue three sea waybills, one for each of the containers, A, B and Replacement Container, to the Claimant.

Container A contained 206 frozen tuna loins and 460 bags of tuna parts. The frozen loins were enumerated on the sea waybill but the bags were not.

Container B and the Replacement Container contained 520 and 500 frozen loins respectively, both quantities enumerated on the relevant sea waybills.

On arrival in Japan, the tuna in all three containers was found to be damaged.

Findings

The matter was decided on documents.

It was unclear who the parties to the underlying contract were. In any event, by virtue of section 2(1)(b) of COGSA, 1992, Claimant, as the recipient of the waybills, became a party to the contract.

Preliminary issues were ordered to be tried:

First issue: which a set of rules applied, Hague or Hague Visby;

Second Issue: was limitation to be applied to all three containers collectively or to each container individually;

Third issue: if Hague Rules applied, were the containers to be regarded as the package/unit or the individual pieces of tuna stuffed inside them.

Although not explicitly stated in the judgment, it appeared to be common cause that English Law applied.

On the first issue, Andrew Baker J held that section 1(2) of COGSA 1971 read with the Hague Visby Rules themselves, Art.I(b), 1(e), Art. II and Art.X(b), the Hague Visby Rules applied.

To decide whether the contract was “covered by a Bill of Lading” for the purposes of the definition of a contract of carriage in Art.1(b), Baker J referred to a number of authorities, most importantly, Pyrene v Scindia, where Devlin J said as follows:

Wherever a contract of carriage is concluded, and it is contemplated that a Bill of Lading, in due course, be issued in respect of it, that contract is from its creation “covered” by a Bill of Lading, and is therefore from its inception a contract of carriage within the meaning of the rules and to which the rules apply.”

The fact that, in this case, sea waybills were issued, did not affect matters because the sea waybills were not variations of the original contract/s of carriage: the original contract was still “covered” by Bills of Lading.

The third issue, whether the individual pieces of tuna were packages or units or whether the containers were, vis à vis the Hague Rules, was considered before the second issue.

Baker J referred to the River Gurara as authority for the proposition that when the shipper has described individual packages or units within a container, it is not permissible for the shipowner to stipulate that the container itself will be the package or unit as this would offend Art. III rule 8 even though the carrier was unable to verify the contents of the container.

That the River Gurara was decided under the Hague Rules was immaterial because the packages and units for both sets of rules are the same.

Although the frozen tuna loins, stuffed into the containers, as is, could not be called “packages” they were “units” in terms of both the Hague and the Hague Visby Rules.

As the tuna loins were enumerated on the sea waybills, the package limitation applied to each loin as a unit.

Because of the bags of tuna parts were not enumerated, damage to them was limited by reference to the container as the package.

With regard to the second issue, Baker J held that the inquiry was misconceived, the package limitation applied directly to each unit, and damage to each unit had to be considered individually. It was not permissible to aggregate the potential limitation per container, or containers, by multiplying the number of units and to extract a value for the damage as a percentage value of the contents of the container or containers.

Commentary

Even though cargo owners did not take the point, it is arguable that the issuing of the sea waybills did constitute a variation of the original contract, so eliminating the application of the Hague and /or the Hague Visby Rules – despite Art III rule 8.

The judgment is in line with the trend of protecting cargo interests, which was one of the objectives of the Convention which gave rise to the Hague Rules.

543. The River Gurara [1998] 1 Lloyd’s Rep 225

Hague Rules – containers are not “packages” for the purposes of limitation – parties’ agreement to treat containers as packages hit by Art.III rule 8.

The Facts

The vessel sank off the coast of Portugal with loss of life and total loss of cargo.

Clause 9 (B) of the Bills of Lading provided:

Shipper packed containers

If a container has not been packed or filled by or on behalf the carrier …(B) notwithstanding any provision of Law to the contrary, the container shall be considered a package or unit even though it has been used to consolidate the goods the number of packages of units constituting which have been enumerated on the face hereof as having been packed therein by or on behalf of the merchant and the liability of the carrier (if any) shall be calculated accordingly.

Findings

Colman J held that as a matter of interpretation, the containers were not “packages” and the parties could not agree to make them so.

He followed American decisions which applied the Hague-Visby amendments to USA COGSA, despite the fact that USA COGSA had not been amended in line with Hague- Visby i.e. he held that when the Bills of Lading did not enumerate the packages on the bill of lading, the containers were to be treated as packages.

The majority of the Court of Appeal, Phillips and Mummery LJJ, held that Art.III rule 3 was determinative – carriers are not bound to record details which they have no means of checking – therefore the onus is on cargo to prove the packages in a container.

Qualifying cargo/shipper’s description by “said to contain” did not affect presumption in Art.III rule 4 – this finding was contrary to a concession made by Counsel for cargo viz that the onus remained on cargo to prove the packages in the situation where the packages were enumerated but qualified by “STC”.

Hirst LJ – despite the objections to the American approach- – would have followed Colman J exactly on this point in the interests of international uniformity.

Commentary

Phillips LJ relied on the approached followed by Leggatt J in Bekol BV v Terracina Shipping Corporation (July 13, 1988, unreported) where Leggatt J referred to the Oxford English definition of “package”: “a bundle of things packed up, whether in a box or receptacle, or merely compactly tied up – A huge metal container stuffed with goods which will normally themselves be made up in individual packages is not naturally described as a package.

Phllips LJ also referred to a dictum of an American Judge, Judge Beeks: “Bills of lading, though, are hardly appropriate vehicles for such expressions of mutual intent [ the intent of the parties with regards to the question of what the packages were to be] because their contractual terms are commonly the product of unilateral draftsmanship by the carrier incorporating largely self-serving provisions.