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Federal Court of Australia - Full Court Decisions |
Last Updated: 10 August 2004
FEDERAL COURT OF AUSTRALIA
El Greco (Australia) Pty Ltd v Mediterranean Shipping Co SA
ADMIRALTY AND MARITIME LAW – carriage of goods by sea
– Hague-Visby Rules – Australian COGSA Art 3 Rules 3, 4 and 8
– method for assessing
value of cargo – where no ‘commodity
exchange price’ or ‘current market price’ – where
‘normal
value’ of goods at destination not
determined.
ADMIRALTY AND MARITIME LAW – limitation of
liability – bill of lading – how to treat posters and prints
enumerated as ‘pieces’
– whether an enumeration of packages or
units – whether contractual limitation applies.
STATUTORY
INTERPRETATION – construction of Carriage of Goods by Sea Act
1991 (Cth), Art 4 Rule 5(c) – meaning of ‘enumeration of
packages or units’ – meaning of ‘as packed’.
Admiralty Act 1988 (Cth) ss 4, 9, 12 and 13
Carriage of Goods
by Sea Act 1936 (USA)
Carriage of Goods by Sea Act 1991 (Cth) ss 7, 8 and 10, Schedule 1A, Art 3 rr 3, 4 and 8, Art 4 r 5
Carriage of Goods by Water Act 1970 (Canada)
Harter Act 1893
(USA)
Sea Carriage of Goods Act 1924 (Cth)
Sea-Carriage
Documents Act 1996 (Qld) s 6
International Convention for the
Unification of Certain Rules of Law Relating to Bills of Lading, 25 August
1924 (the Hague Rules)
International Convention for the Unification of
Certain Rules of Law Relating to Bills of Lading, 25 August 1924, as amended
by the Protocol of 23 February 1968 and the Protocol (SDR Protocol) of 21
December 1979 (the Hague-Visby
Rules)
Vienna Convention on the Law of
Treaties, Vienna, 23 May 1969 Arts 31, 32 and 33
Anticosti
Shipping Co v Viateur St. Amand [1959] SCR 372; [1959] 1 Lloyd’s Rep
352 considered
Applicant A v Minister for Immigration & Ethnic Affairs [1997] HCA 4; (1997) 190 CLR 225 applied
Australasian United Steam Navigation Co Ltd v Hiskens [1914] HCA 56; (1914) 18 CLR
646 referred to
Bekol BV v Terracina Shipping Corporation 13 July
1988 QBD, unreported discussed
Binladen BSB Landscaping v M.V.
‘Nedlloyd Rotterdam’ 759 F.2d 1006 (2nd CCA, 1985)
considered
Chan v Minister for Immigration and Ethnic Affairs [1989] HCA 62; (1989)
169 CLR 379 referred to
Chapman Marine Pty Ltd v Wilhelmsen Lines A/S
[1999] FCA 178 referred to
Chellaram & Co Ltd v China Ocean
Shipping Co [1989] 1 Lloyd’s Rep 413 referred to
Chicago, Milwaukee & St Paul Railway Co v McCaull-Dinsmore Co 253
US 97 (1920) referred to
Dessert Service Inc v M/V MSC Jamie/Rafaela
219 F.Supp. 2d 504 (S.D.N.Y., 2002) referred to
Effort Shipping Co Ltd v Linden Management SA [1998] UKHL 1; [1998] AC 605 referred
to
Falconbridge Nickel Mines Ltd v Chimo Shipping Ltd [1974] SCR 933;
[1973] 2 Lloyd’s Rep 469 considered
Franke v CIC General Insurance Ltd (‘The "Coral"’)
(1994) 33 NSWLR 373 discussed
Hunter Douglas Australia Pty Ltd v Perma
Blinds [1969] HCA 27; (1969) 122 CLR 49 followed
Leather’s Best Inc v The ‘Mormaclynx’ 451 F.2d 800 (2nd CCA, 1971); [1971] 2 Lloyd’s Rep 476 discussed
M.B. Pyramid Sound N.V. v Briese Schiffahrts G.M.B.H. and Co. (‘The "Ines"’) [1995] 2 Lloyds Rep 144 discussed
Matsushita Electric Corp of America v SS Aegis Spirit 414 F. Supp 894
(1976) considered
Mitsui & Co Ltd v American Export Lines 636
F.2d 807 (2nd CCA, 1981) considered
Nathan Trotter v Delta
Steamship Lines [1985] AMC 2783 referred to
O’Hanlan v Great Western Railway (1865) 6 B & S 484
cited
Patrick v Russo-British Grain Export Company Limited [1927] 2 KB
535 discussed
Royal Typewriter Co v M.V. ‘Kulmerland’ 483 F.2d 645
(2nd CCA, 1973), [1973] 2 Lloyd’s Rep 428
discussed
Sept Isles Express Inc v Clement Tremblay [1964] Ex CR 213
cited
Spencer v Commonwealth of Australia [1907] HCA 70; (1907) 5 CLR 418 followed
Standard Electrica SA v Hamburg Sudamerikanische Dampfschiffahrts -
Gesellschaft 375 F.2d 943 (2nd CCA, 1967)
discussed
Studebaker Distributors Ltd v Charlton Steam Shipping Company
Ltd [1938] 1 KB 459 considered
The ‘River Gurara’
[1996] 2 Lloyd’s Rep 53 discussed
The ‘River
Gurara’ (Owners of Cargo Lately Laden on Board) v Nigerian National
Shipping Line Ltd [1998] QB 610 discussed
Benedict on Admiralty,
7th edn, looseleaf, Vol 2A CH II "Basic Cargo Damage Law:
Historical Background"
L Brown (ed.), The New Shorter Oxford English Dictionary, Clarendon Press, Oxford, 1993
Colinvaux, R, The Carriage of Goods by Sea Act, 1924, Stevens &
Sons Limited, London, 1954
Davies, M and Dickey A Shipping Law
(3rd Edn Thomson LBC 2004)
De Gursey "The ‘Container
Clause’ in Article 4(5) of the 1968 Protocol to the Hague Rules", (1970) 2
JoML&C 131
Diamond, A "The Hague-Visby Rules", [1978] LMCLQ
225
B A Garner (ed.), Black’s Law Dictionary, 6th
ed., West Publishing Co., St Paul, 1996 Gaskell, N Bills of Lading: Law and
Contracts, LLP, London, 2000
Grönfors, K, ed, Six Lectures on
the Hague Rules, Scandinavian University Books, Gottenburg, 1967
Knauth,
A The American Law of Ocean Bills of Lading, 4th edn, American
Maritime Cases, Baltimore, 1953
McGregor, H McGregor on Damages,
17th edn, Sweet & Maxwell, London, 2003
Mocatta, A, et
al., Scrutton on Charterparties and Bills of Lading, 18th edn,
Sweet & Maxwell, London, 1974
Mustill, M "Carriage of Goods by Sea Act
1971", Arkiv for Sjorett vol ii issue 4/5, Oslo, 1972
Rodière,
R Traité Général de Droit Maritime Vol
2
Robinson, G Robinson on Admiralty, Hornbook Series,
West Publishing Co, St Paul Minn., 1939
Schmeltzer and Peavey "Prospects and
Problems of the Container Revolution" (1970) 1 JoML&C
203
Schoenbaum, T Admiralty and Maritime Law, 3rd edn,
Hornbrook Series, West Group, St Paul, Minn 2001
Selvig, E Unit
Limitation of Carrier’s Liability: The Hague-Visby Rules Art. IV
(5): A Study in Comparative Maritime Law, Oslo University Press, Oslo, Sir
Isaac Pitman & Sons, London, 1960
Sturley, M The Legislative History
of the Carriage of Goods by Sea Act CMI
Temperley, R et al. Carriage
of Goods by Sea Act 1924, 3rd edn, Stevens & Sons
Limited, London, 1927
Tetley, W Marine Cargo Claims, 3rd
edn, Bleis, Montreal, 1988
Tetley, W Marine Cargo Claims, Internet edn
Comité Maritime International 2000 The Travaux Préparatoires
of the International Convention for the Unification of Certain Rules of Law
Relating to Bills of
Lading of 25 August 1924, and the Protocols of 23 February
1968 and 21 December 1979
Treitel, G H "The Legal Status of Straight
Bills of Lading", 119 LQR 608
Treitel, G H Carver on Bills of
Lading, 1st edn, Sweet & Maxwell, London, 2001
Sir Guenter Treitel and F M B Reynolds (eds.) Carver on Bills of
Lading, 1st ed., LBC Information Services, Sydney,
2001
EL
GRECO (AUSTRALIA) PTY LIMITED AND JOHN THEODORAKOPOULOS V MEDITERRANEAN SHIPPING
CO SA
Q 116 OF 2003
BLACK CJ, BEAUMONT & ALLSOP
JJ
10 AUGUST 2004
SYDNEY (HEARD IN BRISBANE)
ON APPEAL FROM A SINGLE JUDGE
OF THE FEDERAL COURT OF AUSTRALIA
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BETWEEN:
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EL GRECO (AUSTRALIA) PTY LIMITED
FIRST APPELLANT/FIRST CROSS-RESPONDENT JOHN THEODORAKOPOULOS SECOND APPELLANT/SECOND CROSS-RESPONDENT |
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AND:
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MEDITERRANEAN SHIPPING CO SA
RESPONDENT/CROSS APPELLANT |
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DATE OF ORDER:
|
|
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WHERE MADE:
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THE COURT ORDERS THAT:
1. The cross-appeal be allowed.
2. The cross-respondents pay the cross-appellant’s costs of the cross-appeal.
3. The appeal be dismissed.
4. The appellants pay the respondent’s costs of the appeal.
5. The orders of the Court made on 17 July 2003 be set aside, except the order as to costs.
6. The parties file, within 7 days, a minute of order which is agreed between them to provide for judgment for the second appellant based on the application of Article 4 rules 5(a) and (c) of Schedule 1A to the Carriage of Goods by Sea Act 1991 (Cth) on the basis of there being only one package or unit, that being the container, in substitution for the orders made on 17 July 2003, and which have been set aside; and failing any such agreement, the cross-appellant and cross-respondents file and serve within 14 days forms of order which they contend dispose of the matter.
7. Otherwise, stand the matter over to a date to be fixed for the making of final orders and any argument in connection therewith.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF
AUSTRALIA
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BETWEEN:
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EL GRECO (AUSTRALIA) PTY LIMITED
FIRST APPELLANT/FIRST CROSS-RESPONDENT JOHN THEODORAKOPOULOS SECOND APPELLANT/SECOND CROSS-RESPONDENT |
|
AND:
|
MEDITERRANEAN SHIPPING CO SA
RESPONDENT/CROSS APPELLANT |
|
JUDGES:
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BLACK CJ, BEAUMONT AND ALLSOP JJ
|
|
DATE:
|
10 AUGUST 2004
|
|
PLACE:
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SYDNEY (HEARD IN BRISBANE)
|
REASONS FOR JUDGMENT
BLACK CJ:
1 I agree with Allsop J, for the reasons he gives, that the appeal should be dismissed and that the cross-appeal should be allowed. I agree the orders should be made as proposed by Allsop J.
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I certify that the preceding one (1) numbered paragraph is a true copy of
the Reasons for Judgment herein of the Honourable Chief
Justice Black.
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Associate:
Dated: 10 August 2004
ON APPEAL FROM A SINGLE JUDGE OF THE
FEDERAL COURT OF AUSTRALIA
|
AND:
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REASONS FOR JUDGMENT
BEAUMONT J:
INTRODUCTION
2 Appeal, and cross-appeal from orders of a Judge of this Court, in a maritime matter, in which judgment was entered for the second appellant (and first cross-respondent) in the sum of $63,570 plus interest. In the appeal, the appellants seek to increase substantially the amount of the judgment; whereas the cross-appellant (the respondent in the appeal) seeks to reduce the amount of the judgment entered.
3 I have had the benefit of reading, in draft, the reasons of Allsop J which outline the background facts. These reasons will first address the issues arising in the appeal itself. I will then return to the cross-appeal.
THE APPEAL ON THE VALUE OF THE GOODS
4 In order to understand the issues arising in the appeal, reference should first be made to the explication of the background given in Allsop J’s reasons.
5 By their notice of appeal, the appellants contend, in summary, that:
• Judgment should have been found for Mr Theodorakopoulos in the sum of $883,390, plus interest, in accordance with Article 4 Rule 5(b) of the Amended Rules.
• It should have been held that the price agreed between Mr Petrogiannakis (a director of the first appellant) and Mr Theodorakopoulos at arms’ length established the relevant market value of the goods, or evidence of the current market value of the goods in Greece at the time and place the goods ought to have been delivered.
• Her Honour should not have given ‘critical importance’ to the evidence of Mr Cocks, called by the respondent as an expert witness, in determining the value of the goods. Alternatively, if Mr Cocks’ evidence was to be accepted and given critical importance, damages should have been assessed at $390,000, plus interest.
• As mentioned, the appellants have also appealed against the costs order made by her Honour. I will return to this part of the appeal later.
HER HONOUR’S OUTLINE OF THE EVIDENCE DESCRIBING BACKGROUND MATERIAL
6 Some of the factual background to the appeal has been outlined in the preliminary observations made by Allsop J in dealing with the cross-appeal. It will, however, assist if further reference is made to her Honour’s outline of the evidence describing that background, as follows:
• No detail of the negotiations between Mr Carl and Mr Petrogiannakis was provided. Mr Carl’s prices ($250,000 for land and buildings and $150,000 for the business) were paid. This sum included a significant quantity of prints and posters, although they were not identified in the contract. Their quantity was unknown to Mr Petrogiannakis, who arranged at some point for an inventory to be taken.
• Mr Petrogiannakis said that he and his wife commenced operating the poster business after payment of the deposit. It was not clear whether they sold any of the stock prior to negotiating for the sale to Mr Theodorakopoulos. Mr Petrogiannakis said that they sold ‘quite a few’ of the prints and posters in this period, but could not indicate any figure. The records had been lost. (Reference was made to the two fires at the premises in June and September 1999). There was no evidence in respect of the number of posters lost or damaged, what proportion of the total they represented, or how their value was assessed.
• Mr Petrogiannakis had known Mr Theodorakopoulos since about 1988. At some time after Mr Petrogiannakis had (in 1999) purchased the poster business, he spoke to Mr Theodorakopoulos at the office of a solicitor whom they had both consulted. Mr Petrogiannakis knew that Mr Theodorakopoulos had sold his commercial properties and was returning to Greece. Mr Petrogiannakis told Mr Theodorakopoulos about his acquisition of the poster business. Mr Theodorakopoulos expressed some interest and later visited its premises in Brisbane.
• The negotiations between Mr Petrogiannakis and Mr Theodorakopoulos appear to have taken place over a short period, some three days. Initially, Mr Petrogiannakis sought $18 per poster or print. The negotiations concluded with Mr Theodorakopoulos’ agreement to buy all of the stock for $956,545. Evidence differed as to how this was made up. Mr Petrogiannakis said that the price for the majority of the posters was $7.00, and $5.00 for those which Mr Theodorakopoulos was not particularly keen to buy. Apparently, there was a substantial number of the latter. Mr Theodorakopoulos said that the prices agreed were $7.00 for the larger, and $5.00 for the smaller posters.
• Mr Petrogiannakis had no idea of the value of the stock when he purchased the business. Mr Theodorakopoulos also had none when negotiating with Mr Petrogiannakis. Mr Petrogiannakis said that, after he acquired the business, he obtained catalogues, finding that the value of the posters far exceeded what he had paid for them ‘and indeed, they were worth a lot more than was later sought’. (Her Honour commented:
‘If this view was reached at an early point it was without the benefit of an inventory and description of the posters and prints, which ranged over a wide number of subjects. No catalogue or price list was produced in evidence.’)
• Mr Theodorakopoulos said that he made some inquiries about the amount for which the posters and prints might be sold, claiming that it was a condition of his agreement with Mr Petrogiannakis that Mr Theodorakopoulos ‘could sell the posters and prints at a profit’.
• Mr Theodorakopoulos also made inquiries (in Greece) of gypsies who sold through stalls at flea markets. He told them ‘he had posters with different subjects, but he was not specific’. They ‘indicated that he would be able to sell them’.
• Mr Theodorakopoulos’ inquiries ‘were also said to have revealed that the total cost of the larger posters would be AUD$9.25 each, after the cost of lamination and payment of local taxes’.
• Mr Theodorakopoulos said that ‘he found that the posters could sell in Greece for AUD$25 retail’ and he ‘decided that he would sell them for AUD$20 each’. (Her Honour noted that the source of this advice and how such an opinion was reached ‘was not gone into’.) Later, Mr Theodorakopoulos added that he did not intend to sell them all at once, but a few at a time. ‘In the meantime, he intended to store them in the basement of his brother’s house’.
• Mr Theodorakopoulos communicated further with Mr Petrogiannakis (‘presumably confirming his purchase’). An invoice or invoices later issued. (Her Honour observed: ‘Two invoices, dated 10 December 1999, varying slightly in their contents, were produced in evidence. Mr Petrogiannakis did not explain how this came about. The fact of the multiple invoices and the dates when they in fact issued did not ultimately assume importance to the other issues in the proceedings. Their relevance appears to be limited to ... Mr Petrogiannakis’ ... credit’.)
• Mr Theodorakopoulos also provided an irrevocable letter of guarantee to El Greco (Australia) Pty Limited (‘El Greco’). Mr Petrogiannakis said that its purpose was to enable El Greco to sue for any outstanding monies in Greece.
• The person who undertook the inventory for the sale to Mr Theodorakopoulos (Mr Schmidt), amalgamated and packed any loose posters or prints in paper. Many, if not most, were still packed and covered in paper, as they had been when delivered to the Brisbane premises.
• The shipping documents identify some 200,945 posters and prints. (However, the appellants conceded at trial that this overstated the correct figure ‘by about 70,000’.)
• The respondent’s marine surveyor (Mr Pavlidis) described the cargo he inspected at Aigion ‘as consisting of approximately 2,000 packages’.
HER HONOUR’S CONCLUSIONS ON THE VALUE OF THE GOODS
7 The primary Judge noted that the appellants ‘have not produced any evidence as to the value of the posters’; and that they relied only upon the sale to Mr Theodorakopoulos as evidence of their market value. For their part, the respondents submitted that the circumstances surrounding the transaction, and other evidence of value, show the contract price to be unexplained and unreliable.
THE PRIMARY JUDGE’S FINDINGS OF FACT
8 Her Honour made the following findings:
• There was no explanation as to how either the purchase price or the price paid to Mr Carl was ‘calculated or assessed’. No catalogues or any other documentation showing prices were produced, and no reason provided for their non-production. No evidence was given to explain the basis of the insurance settlements after the fires (at [41]).
• In view of the paucity of evidence, and because of the unsatisfactory view taken of Mr Petrogiannakis as a witness (examples of which were then given), his evidence as to the contract price having some basis in value would not be accepted without other evidence to support it (at [41]).
• Mr Theodorakopoulos was ‘a more direct and responsive witness’, but his evidence as to the inquiries made should not be acted upon ‘without some other evidence to support it and none was offered’. It was not that his conversation with the gypsies was ‘necessarily ... far-fetched’ (and an aspect of his assessment of the costing of the prints and posters found support in the evidence of Mr Cocks), but ‘[b]y itself it [was] not, however, sufficient to give his evidence as to value much weight’. Further, it was ‘difficult to accept that a businessman would agree to pay almost AUS$1M on the basis of a few cursory inquiries’ (at [44]).
• If Mr Petrogiannakis paid $150,000 and then received about $1.2 million in total, and if Mr Theodorakopoulos was going to sell the stock for twice what he had paid, the order of profit ‘necessitates explanation’. The support of other evidence from the appellants was required, and it was not given.
• The only other evidence was given by Mr Cocks, a witness having no connection with these proceedings. Her Honour could ‘see no basis for not accepting his evidence’. He had sold posters and prints, wholesale and retail for some years. He had dealt with Mr Carl, who had the licence to print and sell some of the posters in question.
• Mr Carl had dealt with both local and overseas suppliers and was familiar with their price lists.
• The subject posters and prints included (mainly) animal and landscape scenes, especially Australian ones; still lifes; old advertisements of well-known brands; vintage and classic cars; motor bikes, especially Harley Davidsons; former pop and movie stars.
• Mr Cocks said that in 1994 he was paying about $2.00 per poster (including freight cost) for imported posters. His wholesale (resale) price then was $3.00, although a retailer might sell a laminated poster for $10.00 to $15.00. For Mr Carl’s posters, such as those listed in the inventory, when purchasing in larger numbers, he would have paid $1.75 for a large poster and 95 cents for a small one.
• Mr Cocks said that Mr Carl did not publish much stock after 1994, so that most of his own stock was quite old. A lot of other stock was supplied from overseas (some of it up to 15 years old).
• Mr Cocks, who was familiar with a large number of the prints and posters, ‘considered that in September 1999 and 2000 there would have been little demand for them. He could not have sold them and he would not have purchased them. Whilst he may have purchased some of the posters from overseas sources at an earlier time, he was not buying them in 1999’.
• Mr Cocks said that, generally speaking, posters do not increase in value, contrary to Mr Petrogiannakis’ assertion: ‘Rather they go out of fashion. Some posters continue to sell, but most do not. He would be very surprised if he was able to sell twenty per cent of the posters listed. Much of it would have to be disposed of. If he had to buy the stock as a whole he would pay no more than $40,000 for it’.
9 Her Honour next (at [50]) summarised ‘the effect’ of Mr Cocks’ evidence as follows:
‘... [A] wholesaler might be able to sell something less than twenty per cent of the total of 130,945 posters and prints. Eighteen percent of that figure is 23,570. The cost to a wholesaler might be $40,000 and they might expect to make a profit of $1.00 for each poster or print, $23,750. The value to a wholesaler might be taken as $63,750.’
10 (The primary Judge also noted that a retailer would make a greater profit, over a period of time, selling at an average of $12.00 per print after paying for lamination. However, in her view, neither of the appellants could be regarded as retailers.)
THE PRIMARY JUDGE’S APPLICATION OF LEGAL PRINCIPLES
11 Her Honour next turned to the application of the Amended Rules.
12 (It will be recalled that Article 4 Rule 5(b) of the Amended Rules provides that –
‘(b) The total amount recoverable shall be calculated by reference to the value of such goods at the place and time at which the goods are discharged from the ship in accordance with the contract ... .
The value of the goods shall be fixed according to the commodity exchange price, or, if there be no such price, according to the current market price, or if there no be commodity exchange price or current market price, by reference to the normal value of goods of the same kind and quality.’ (Emphasis added).)
13 The primary Judge noted that the appellants had objected to Mr Cocks’ evidence as irrelevant since Rule 5(b) ‘requires value to be assessed according to the market value of the goods at their intended destination. If this is so, the [appellants’] reliance upon the contract price of $956,545 would also appear to be misplaced’.
14 Her Honour then held that, even if that price were acceptable, it was ‘not evidence of market value in Greece’.
15 The primary Judge noted that Mr Theodorakopoulos’ evidence that he might be able to sell the goods in Greece ‘cannot be relied upon as evidence of value. Without more, it cannot establish their value, assuming for present purposes there is some such market’.
16 Her Honour said (at [52]):
‘Article 4 r 5(b) does permit that the value of the goods be fixed by reference to the "normal" value of the goods, where there is no current market price. This would appear to allow for assessment by the most appropriate method available. It has been suggested that the rule lays down only a prima facie measure and that the rule does not permit the case of others where the circumstances require (see A Diamond QC ‘The Hague-Visby Rules’ in (1978) LMCLQ 241 at 248).’
17 (In his paper, Mr Diamond had said (at 248):
‘As to the construction of Rule 5(b), it is possible to argue that it excludes all claims not based on the value of the goods at the time of delivery. This result would be so far-reaching that it cannot be right in the absence of express words of limitation. It seems that [its] purpose is to harmonise the rules as to measure of damages in all contracting States. What it does is to lay down a prima facie measure of damages. Where there are special circumstances making it inappropriate to apply the prima facie measure, then the rule does not prevent damages calculated in other ways ... .’ (Emphasis added.)
Mr Diamond did not, however, attempt to define, or even describe, his perception of ‘special circumstances’ in this context. But it is apparent that he was not suggesting that the measure was at large or for an assessment by reference to the ‘most appropriate method’.)
18 Her Honour then (at [53]) said that the absence of a market at the destination has often arisen in contracts of carriage, citing O’Hanlan v Great Western Railway (1865) 6 B & S 484, where, the primary Judge said, it was held that ‘one should take into account the cost price, the expenses which the seller would incur, and allow for a reasonable profit’.
19 (In O’Hanlan, goods sent by the defendant’s railway from Leeds to Neath were lost. Blackburn J said (at 491):
‘... [S]etting aside all special damage the natural and fair measure of damages is the value of the goods at the place and time at which they ought to have been delivered to the owner. Now the value of the goods at the place of delivery must be the market price, if there is a market there for such goods: if there is not, either from the smallness of the place or the scarceness of the particular goods, the value at the place and time of delivery would have to be ascertained as a fact by the jury, taking into consideration various matters, including, in addition to the cost price and expenses of transit, the reasonable profits of the importer, which are adjusted by what is called the higgling and bargaining of the market.’)
20 Her Honour continued (at [53]):
‘That is not the only method of assessment. Resale may be another: [Patrick] v Russo-British Grain Export Company Limited [1927] 2 KB 535. In the present case, the evidence permits only an assessment of the value of the goods in Australia. It would, in any event, appear to be the more appropriate, given that the claim is brought on behalf of the owner of the goods.’ (Emphasis added.)
21 (In The Russo-British Case, the buyers (merchants) bought Russian wheat of a specific description for delivery on a named date, and before that date resold the wheat to a third party at a profit. The sellers failed to deliver. On that date, and subsequently, there was no market for Russian wheat of that description. The sellers knew, at the time of sale, that the buyers were buying for resale. It was held that the buyers were entitled to damages as to the difference between the contract price and the resale price.
22 Salter J said (at 538):
‘Where a seller of goods fails to deliver, he should pay to the buyer the value of the goods at the time when they should have been delivered. This is the normal measure of damages. It is the measure prescribed by the first branch of the rule in Hadley v. Baxendale [(1854) 9 Ex. 341], and enacted in s. 51 of the Sale of Goods Act, 1893. If at the date of the breach there is an open market for goods of that kind, then the market price is obviously the value to the buyer. If there is no market the value must be otherwise ascertained, and a resale price may be some evidence of such value. But it is clear that loss of profit on resale can never be recovered unless the buyer can bring himself within the second branch of the rule and can show special circumstances and a right to special damages such as is reserved by s. 54 of the Sale of Goods Act, 1893.’)
23 The primary Judge agreed (at [54]) that, as a general rule, the price obtained on a sale between two people in business, at a date close to the valuation date, is ‘the best evidence of value’. However, her Honour added (at [54]):
‘That does not, however, require it to be applied where the contract price in question has no apparent basis in market prices or valuations. The transaction between Mr Petrogiannakis and Mr Theodorakopoulos, and the method by which they ascertained a price, could not be regarded as very business-like, or as usual in business, except perhaps a business of the most speculative kind. No confidence can be placed in the contract price as reflecting market value without evidence to support it. The purchase price paid to Mr Carl might have proved a useful guide. It would not support a subsequent sale price, within twelve months, of nearly $1M. I would not accept at face value Mr Petrogiannakis’ suggestion that Mr Carl sold at an undervalue. However, the two payments made by the insurers after the fires suggest that the value of the goods was higher. To give weight to them, as supporting the later price agreed between Mr Petrogiannakis and Mr Theodorakopoulos would require further explanation as to the basis upon which those payments were calculated. This was not provided.’
24 The primary Judge turned next to limitation and other issues, concluding her reasons thus (at [74]):
‘There will be judgment for the second applicant in a sum to be assessed. I have assessed $63,570 as the value of the goods to a wholesaler and this would appear to me an appropriate measure with respect to the interests of the Trust.’
THE APPELLANTS’ FIRST GROUND OF APPEAL
25 On behalf of the appellants, two alternative submissions are made. For its part, the respondent has filed a notice of contention. It will be convenient to consider each in turn.
26 It is first submitted by the appellant that the testimony at trial disclosed that there was a proper basis in the evidence for the transaction, and unless there was an express finding that the transaction was not at arms’ length (and there was no such finding), then in accordance with the settled principles of valuation, the amount of damages is the recent sale price.
27 For this purpose, the appellants rely upon observations of Gleeson CJ in Franke v CIC General Insurance Ltd (‘The "Coral"’) 33 NSWLR 373. There, the seller of a dredge sought indemnity under an unvalued policy of marine insurance, following its total loss in the course of the insured voyage from Brisbane to India under tow. It was held by a majority of the Court of Appeal of the Supreme Court of New South Wales (Gleeson CJ, Sheller JA, Kirby JA dissenting) that the appropriate method of calculating the value of the vessel (so as to ascertain the insured’s entitlement under the policy), was to take the sale price and deduct from it the cost of having it towed, and the cost of insurance.
28 Gleeson CJ stated (at 376 – 377) the principles relevant to the ascertainment of value in that case, to the following effect.
• In its ordinary meaning, ‘value’ is exchange value; that is, the price in cash or kind which would be obtained in an arms’ length dealing between a willing but not anxious seller and a willing but not anxious buyer (citing Spencer v Commonwealth of Australia [1907] HCA 70; (1907) 5 CLR 418 at 431).
• Ordinarily, the best evidence of value is the price obtained on an arms’ length sale at a time close to the date of valuation where no material change in circumstances has occurred.
• At least implied in a statement of value is an assumption as to time, location and the conditions of the hypothetical sale by reference to which the exchange value is measured. For example, ‘a statement about the value of a barrel of oil, if divorced from any context, is meaningless. On the other hand, a statement that the current market value of oil is X dollars per barrel FOB Rotterdam conveys a precise meaning’.
29 As indicated, Gleeson CJ referred to Spencer’s Case (at 431), a case concerned with the value of land. Griffith CJ also mentioned that in the case of chattels it is often, although not always, easy to ascertain the value (at 431):
‘In order that any article may have an exchange value, there must be presupposed a person willing to give the article in exchange for money and another willing to give money in exchange for the article. When there is a large or considerable number of articles of the same kind which are the subject of daily or frequent sale and purchase, the value of the articles is taken to be their current price. Thus, in the Sale of Goods Act, the measure of damages for wrongful refusal to deliver goods is to be ascertained with reference to "the market or current price of the goods." The foundation of this doctrine is that a man desiring to sell such articles can readily find a purchaser at a price which is fairly certain, and conversely that a man desiring to buy can find a seller at about the same price. But these considerations are not necessarily equally applicable to land.’
30 Counsel for the appellants then challenged her Honour’s conclusion (at [44]) (already mentioned) that she –
‘... would not be inclined to act upon [Mr Theodorakopoulos’] evidence as to the enquiries he made without some other evidence to support it and none was offered. It is not that I consider his conversation with gypsies necessarily to be far-fetched, and there is an aspect of his assessment of the costing of the prints and posters which finds support in the evidence of Mr [Cocks]. By itself it is not, however, sufficient to give his evidence as to value much weight. Further, it is difficult to accept that a businessman would agree to pay almost AUS$1M on the basis of a few cursory enquiries.’
31 The appellants submit that the evidence described by her Honour should, where there is no finding that the sale was not at arms’ length, be accepted. Moreover, the argument runs, further evidence to support the transaction was available: the full price of $956,545 was declared to the authorities in Greece; customs duties were paid there; and Mr Theodorakopoulos had the money in his bank account.
THE RESPONDENT’S NOTICE OF CONTENTION
32 The respondent advances two contentions in answer to the appellants’ first ground of appeal. The contentions are:
‘1. ... [H]er Honour erred by failing to find that the evidence of Mr Cocks, accepted by her Honour, was evidence of:
(a) current market price in Greece as at April 2000; or
(b) alternatively, normal value in Greece as at April 2000,
for the purposes of Article 4 Rule 5(b) of the Hague-Visby Rules.
2. ... [H]er Honour ought to have found, on the evidence before her, that:
(a) the current market price in Greece as at April 2000;
(b) alternatively, the normal value in Greece as at April 2000,
of the posters was $63,570.’
CONCLUSIONS ON THE APPELLANTS’ FIRST GROUND OF APPEAL
33 As mentioned, Rule 5(b) states that the total amount recoverable shall be calculated ‘by reference to the value of such goods at the place and time at which the goods are discharged ...’, that is to say, in Greece on 12 April 2000.
34 However, as has been seen, her Honour directly ascertained the value of the goods by picking up –
‘[t]he effect of Mr Cocks’ evidence ... that a wholesaler might be able to sell something less than twenty per cent ... [that is] 23,570 [posters and prints]. The cost to a wholesaler might be $40,000 and they might expect to make a profit of $1.00 for each poster or print, $23,570. The value to a wholesaler might be taken as $63,570.’
35 By adopting Mr Cocks’ evidence, the primary Judge was proceeding, as she said, upon the basis that the relevant inquiry was to ascertain the value in Australia, not Greece. In my opinion, her Honour departed from the mandatory direction of Rule 5(b), which requires, in terms, that a valuation at the place of discharge be undertaken.
36 It is true, as her Honour noted, that Mr Diamond has suggested that Rule 5(b) might be departed from in ‘special circumstances’. However, no authority for this proposition exists and it appears to contradict the plain language of the Rule. In any event, it is not apparent why the present circumstances should, for the purposes of applying Rule 5(b), be described as ‘special’. There was, as has been seen, some evidence (admittedly discounted by the Judge) of Greek wholesale prices at the time. But, it does not follow from the discounting of such evidence that there was no relevant material available for making a judgment of value in accordance with the provisions of the Rule.
37 In my opinion, even if it were permissible to imply into Rule 5(b) a ‘special circumstance’ exception, no such exception existed here. It follows, in my view, that the Rule applied here.
38 It will be recalled that Rule 5(b) provided for three kinds of valuation (that is to say, in Greece and in April 2000), viz:
1. According to the ‘commodity exchange price’. (There was apparently no evidence of this.)
2. If, as here, no commodity exchange price – according to the ‘current market’ price. (It will be remembered that in Spencer’s Case, Griffith CJ observed (at 431) that ‘[w]hen there is a large or considerable number of articles of the same kind which are the subject of daily or frequent sale and purchase, the value of the articles is taken to be their current price’. Again, there was apparently no evidence of this.)
3. If, as here, there be no commodity exchange or current market price – by reference to the normal value of goods of the same kind or quality.
39 The Rules do not define ‘normal’ value. One of the definitions of ‘normal’ offered by the New Shorter Oxford English Dictionary (1993) is: ‘regular, usual, typical; ordinary, conventional’.
40 The notion of a supposed ‘normal’ transaction for valuation purposes was, it seems, described by Isaacs J in Spencer’s Case as follows (at 441):
‘To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.’ (Emphasis added.)
41 Considerations of the kind mentioned by Isaacs J could have been relied on here to justify rejection of the sale price on the basis that neither the seller nor the purchaser had any relevant trade experience and could not be expected to be cognisant of all circumstances which might affect the value of the posters and prints.
42 As has been seen, her Honour proceeded (at [52]) to make an assessment of ‘normal’ value ‘by the most appropriate method available’. If, as mentioned, this had involved an assessment of information in Greece, no difficulty would have arisen here. However, it does appear that the Judge fixed her valuation by reference to Mr Cocks’ appraisal of the Australian situation.
43 At the same time, in our assessment of her Honour’s approach, we need to be reminded of the observations of Lord Hobhouse in Secretary of State of Foreign Affairs v Charlesworth Pilling & Co. [1901] AC 373 (at 391):
‘... [I]n all valuations, judicial or other, there must be room for inferences and inclinations of opinion which, being more or less conjectural, are difficult to reduce to exact reasoning or to explain to others. Everyone who has gone through the process is aware of this lack of demonstrative proof in his own mind, and knows that every expert witness called before him has had his own set of conjectures, of more or less weight according to his experience and personal sagacity. In such an inquiry as the present, relating to subjects abounding with uncertainties and on which there is little experience, there is more than ordinary room for such guesswork; and it would be very unfair to require an exact exposition of reasons for the conclusions arrived at.’
44 Yet, bearing these observations in mind, it appears that her Honour focused her attention exclusively on Mr Cocks’ views of the position in Australia, contrary to the provisions of Rule 5(b), taking the view (at [53]) that there was ‘no market at the destination’. However, as mentioned, there was some evidence of a market in Greece, even if it needed to be discounted.
45 Reference was made by the primary Judge to O’Hanlan’s Case, which, as has been seen, held (at common law) that in the absence of a current market price, normal value was a jury question; and to The Russo-British Case, where the special rule in Hadley v Baxendale was applied under the Sale of Goods Act. It is not clear how these common law principles could have applied, at least in any precise sense, to Rule 5(b). As Mr Diamond observed, this Rule was intended to harmonise the approach taken by many countries. But, as mentioned, the primary Judge proceeded to say (at [53]):
‘In the present case, the evidence permits only an assessment of the value of the goods in Australia. It would, in any event, appear to be the more appropriate, given that the claim is brought on behalf of the owner of the goods.’
46 For the reasons previously given, I cannot accept this approach. It is, with respect, contrary to the direction of the Rule where at least some evidence of ‘normal’ value in Greece should have been available in the evidence.
47 At the same time, I agree with her Honour’s conclusion that she was not bound, as the appellants argue, to equate the price paid under the contract between Mr Petrogiannakis and Mr Theodorakopoulos with the ‘normal’ value of the goods. For one thing, in accordance with the observations made in Spencer by Isaacs J, Mr Petrogiannakis and Mr Theodorakopoulos were not sufficiently cognisant of the market conditions. Secondly, the principles stated in The "Coral" were propounded as prima facie only, that is, ‘ordinarily’. Thirdly, the contract price was relevant only to value in Australia, not Greece. (In The "Coral", value was to be ascertained in Brisbane.)
48 Before proceeding to deal with the consequences to follow from these conclusions, it will be recalled that, in connection with this ground, the appellants also advance an alternative case; that is to say, they contend that they should have ‘restitutio in integrum’ by being put back into the position in which they would have been if the respondent had not been in breach of the bill of lading.
49 For this purpose, the appellants rely upon the decision of Clarke J in M.B. Pyramid Sound N.V. v Briese Schiffahrts G.M.B.H. and Co. (‘The "Ines"’) [1995] 2 Lloyds Rep 144, where at 157 – 159, it was necessary to assess the current market value of goods.
50 Clarke J said (at 158):
‘... [T]he plaintiffs will be most fairly compensated in this case if they receive by way of damages the net amount which they would have received from their buyers and no more. If they recover any more they will receive more than restitutio in integrum and if they recover less they will not be properly recompensed for the defendants’ breach of contract. If that is correct they are entitled to recover the amount they would have received, namely U.S.$4.15 for each of the 247,660 telephones.’
51 Several points should be made here. First, Clarke J was not purporting to apply Rule 5(b). Secondly, the ‘restitution’ doctrine has no place in the Amended Rules. Thirdly, this argument was never advanced at the trial.
52 Accordingly, in my opinion, the appellants’ restitution argument cannot succeed. As mentioned, I will return later to the consequences of my conclusion.
THE APPELLANTS’ SECOND GROUND OF APPEAL
53 The appellants alternatively submit that the figure of $S3.00 wholesale price mentioned by Mr Cocks gives ‘a truer evidence of value’ than that accepted by her Honour.
54 In developing this argument, the appellants submit the following:
• In arriving at the figure of $63,570, her Honour found (at [50]) (as has been mentioned):
‘The effect of Mr Cocks’ evidence is that a wholesaler might be able to sell something less than twenty percent of the total of 130,945 posters and prints. Eighteen percent of that figure is 23,570. The cost to a wholesaler might be $40,000 and they might expect to make a profit of $1.00 for each poster or print, $23,570. The value to a wholesaler might be taken as $63,570.’
• That may well be the effect. However, what he said (in his evidence), if he was buying the posters, was:
‘... if I had to take the whole lot, well, it’s very hard to say but, I mean, I just can’t imagine paying more than $40,000. I know I’d have to dump so many of them – so, just at a guess, I’d say probably about $40,000, and that is maximum.’
• This was from a witness who (in his evidence) had said moments before –
‘I certainly wouldn’t have bought any at any price.’
• Mr Cocks also said (in evidence):
‘I’d be amazed if I could sell 20 percent of these posters, to be honest. I’d be stunned. That is being generous.’
• It can only be from this evidence that her Honour finds the wholesaler might be able to sell fewer than 20 per cent of them. Her Honour’s judgment also stated (at [48]):
‘Mr Cocks said that he was paying about $2.00 for imported posters in 1994. That included freight cost. His wholesale resale price was $3.00.’
• It is submitted that the finding ‘... they might expect to make a profit of $1.00 for each poster’ is based on this evidence.
• If one did not have regard to the recent sale price, to allow $3.00 per poster must be a far more satisfactory indication of value than ‘accepting a guess’ at a value of $40,000 from someone who did not want them at any price, given that prices are a product of supply and demand. Mr Theodorakopoulos, on the other hand, was a ready, willing and able purchaser.
55 Although the respondent now argues, by virtue of evidence to be mentioned below, that Mr Cocks was ‘a purchaser in the international market’, it is clear from her Honour’s reasons that she focused exclusively upon the Australian market and, in that connection only, the primary Judge relied upon the evidence of Mr Cocks.
56 In support of its submission that Mr Cocks had access to international price lists from international suppliers, which were applicable around the world, the respondent relies upon the following evidence from Mr Cocks.
57 He bought supplies for his business (in 1999 and 2000) ‘from a company called Pyramid Posters that supplies internationally – throughout the world’. He also ‘referred’ to ‘Portal Publications, G B Posters, Impact Posters in the States, Angel Graphics Posters in the States, Image International which is in the UK, Anabass ...’, stating ‘there’s quite a few publishers throughout the world ... and we buy from numerous [publishers] ... ’. He went on to explain that Portal was an American company; and G B was an United Kingdom company, first named ‘Athena’, and later ‘Cartel’. He said that these overseas companies sent him price lists of prints: ‘They have an international price list. Whether it’s Australia or whoever buys them, that’s set for the world’. He went on to say that he believed that some of Mr Carl’s posters were from Athena or Portal.
58 He then gave this evidence:
‘The prices in this industry haven’t changed dramatically from 1994 to 1999. Most of the companies overseas would be paying pretty much the same price. At that stage, in 1994, up until 1999 the most we would pay for a poster – imported – would have been $2. As a general rule, it was around about the $1.50/$1.60 mark.
And was there any discount if you bought a bulk ---?---No.
---posters?---International price list is an international price list. To justify a shipment you needed to bring in probably between 5000 and 10,000 posters, I suppose, as a gauge. You couldn’t justify it if you only bought in several because the shipping costs would be so high. So they didn’t need to give you an incentive to buy volume. You just bought whatever you – you’d always bought in packs. You had to buy a pack. Posters come in pack lots of 100.
Yes?---Pretty well all over the world. So if you bought 100 of a title, that was sufficient. And you’d get the standard price. I never inquired about – maybe there was if I had asked for 10,000 of a title, or 5000. So I can’t quite comment there. But if I ordered between 100 and 1000 posters, the standard – the price was pretty well standard; didn’t change.
Price was pretty well standard at ---?---That I paid, yes. Well, regardless of what I ordered.
Yes. And you mentioned the freight component, and on top of the $2 or so you paid for the posters---?---That’s landed.
That’s landed including---?---Yes.
---inclusive of freight?---When I say $2, the whole thing landed to me – there’s no way I would want to pay more than $2 for those posters. It would be less if anything, really, yes.’
59 It thus appears that this evidence is primarily directed at normal value in Australia. Her Honour so interpreted it (at [48] and [53]). On the approach taken by the primary Judge, ‘the evidence permits only an assessment of the value of the goods in Australia’ (at [53]) (emphasis added).
60 Whether it is possible, from Mr Cocks’ evidence about his international dealings, to infer information that might be relevant to an assessment of the normal (that is, wholesale) value of these goods in Greece in April 2000, was not the subject of any finding, or inference drawn, by her Honour on the approach, in principle, which she took. In those circumstances, since this remains an area of contention between the parties, it will be necessary to consider what orders should now be made. I shall return to this, after considering the respondent’s notice of contention.
THE RESPONDENT’S FIRST CONTENTION
61 It will be recalled that, here, the respondent contends that her Honour erred by failing to find that Mr Cocks’ evidence was, for the purposes of Rule 5(b), current market price in Greece as at April 2000; or, alternatively, normal value in Greece then.
62 As mentioned, the notion of ‘current market price’, suggests a degree of regularity which, in respect of Greece, could not, in my view, be inferred from Mr Cocks’ testimony.
63 Moreover, in my opinion, whilst Mr Cocks did speak generally of the position internationally, he did not give evidence in any specific way concerning the ‘normal value’ of these goods in Greece.
THE RESPONDENT’S SECOND CONTENTION
64 In its second contention, the respondent claims, first, that her Honour ought to have found that the current market price of the posters in Greece at the time was $63,570.
65 As has been said, there was, in my view, no evidence of transactions sufficient to warrant the description of a ‘current market’.
66 Then the respondent says that, on the evidence, the primary Judge ought to have found that the normal value in Greece was $63,570. Again, in my view, the general, ‘international’ evidence of Mr Cocks was not sufficiently specific about the situation in Greece.
CONCLUSIONS ON THE APPEAL
67 It follows from the foregoing that because the primary Judge did not, as Rule 5(b) directed, assess ‘normal value’ in Greece as at April 2000, the question is whether this Full Court should, ourselves, attempt to do so on the evidentiary material available. If the issue were straight forward, there would be merit in that attempt. It would save costs and shorten the disposition of the matter.
68 However, it is apparent from a description of the background to the sale transaction and from the absence of witnesses that might have been called, that the matter was not straightforward, and that a trial Judge must have a significant advantage over an appellate court in fixing a valuation, insofar as facts are concerned. I emphasise that my only reason for propounding any appellate intervention is because, in my view, the primary Judge departed from the dictates of Rule 5(b).
69 Accordingly, on the appeal, I propose that the matter be remitted to the primary Judge to determine the normal value of the goods in Greece as at April 2000. I would direct, with a view to minimising expense, that no further evidence may be given on this remitter. In the circumstances, there should be no order for the costs of the appeal. It is not necessary to consider the specific submissions made on the appeal against the costs order made by the primary Judge, since I propose that this order be set aside. However, the costs at first instance, including the costs of the remitter, should abide the judgment of the primary Judge.
PROPOSED ORDERS ON THE APPEAL
70 I propose that the following orders should be made on the appeal:
1. The appeal be allowed.
2. The orders made by the primary Judge on 17 July 2003 be set aside.
3. The matter be remitted to the primary Judge for determination of the issues arising on the appeal in accordance with the above reasons.
4. The costs at first instance, including the costs of the remitter, to abide the judgment of the primary Judge.
5. No order be made for the costs of the appeal.
THE CROSS-APPEAL
71 As the analysis by Allsop J indicates, the circumstances of the present case do not appear to be governed by any square authority. Moreover, the earlier history of the limitation provision, fully discussed by Allsop J, does not appear to resolve the present issue.
72 The primary Judge placed reliance upon a passage in Mr Diamond’s article (at 241). That reference is, in my view, important, and should be cited fully:
‘I would suggest that in the Visby amendment "unit" is to be construed as referring to an individual article or piece of goods which is not a "package."
Let me apply this to three different categories of cargo.
First category: goods which are shipped as packages or as individual articles or pieces. When dealing with goods in this category (as for example, an unboxed tractor or a case of machinery), it will not normally matter whether the shipment is a "unit" (as in the case of the tractor) or a "package" (the case of machinery). So long as the weight of each is known, there is no difficulty in ascertaining whether the limit is 10,000 francs or a limit based on weight.
...
Second category: true bulk cargo (whether bulk solids, such as grain, or bulk liquids, such as oil). Here I would say that there is no "package" or "unit" as the shipping unit and freight unit concepts would seem to be irrelevant under the amended Rules. I conclude that the only limit ought to be one based on weight.
Third category: goods which occupy an intermediate position between goods shipped as articles or pieces and true bulk cargo. Most timber cargoes fall into this category. So do bagged cargoes. Usually there will be no difficulty in ascertaining the weight of the lost cargo. The bill of lading may state the weight. If it acknowledges the cubic capacity of the cargo, as for example, the number of "standards" of a timber cargo, it should normally be possible to calculate the equivalent weight. It is tempting, therefore, to conclude that timber and bagged cargoes should be treated in the same way as true bulk cargoes. The difficulty, however, is that each piece of timber or each bag of cocoa or sugar may constitute a separate "package" or "unit" so that a higher limit may be applicable. I submit that this question ought to be answered by reference to the bill of lading. If the bill acknowledges a number of pieces of timber or a number of bags of cocoa, the latter conclusion would seem to be plainly correct. If not, I would conclude that the limit ought to be based on weight.’ (Emphasis added.)
73 I agree with Mr Diamond’s suggestion.
74 In turning to consider the specific question of ‘container limits’, Mr Diamond said (at 242):
‘The general intention of Rule 5(c) is two-fold; first, that the parties to the contract of carriage are given an option whether to treat the container or each of the parcels stuffed therein as the relevant "package or unit" for limitation purposes; second, that in order to see how the option has been exercised one must look to see "the number enumerated" on the face of the bill of lading.
There are, in theory, three possibilities, viz:-
(i) No enumeration of the contents of the container (e.g. "1 container containing machinery"). In this event the "article of transport," the container, is the package or unit. The result is that the limitation figure will be either 10,000 francs or 30 francs per kilo of the goods lost or damaged, whichever is the higher. ...
(ii) An exhaustive enumeration (e.g. "1 container containing 500 cases of machinery"). In this event each of the 500 cases will attract a separate limit of 10,000 francs.
(iii) A partial enumeration (e.g. "1 container containing 10 cases of machinery and general merchandise"). In this event each of the 10 cases will attract a separate limit of 10,000 francs and, for the remaining goods and the container, the limit will be that referred to in (i) above."
75 In my opinion, the present case presents as an ‘exhaustive enumeration’ in the above sense.
76 In his consideration of the ‘general intention’ of Rule 5(c), Mr Diamond referred (at 242) to the explanation of the proposed limitation amendments given in February 1968 by the Chair of the drafting committee responsible for the container clause which was as follows:
‘"It is for the shipper and the carrier to decide whether they want the particular container to be treated as the package for the purpose of limitation of weight, or whether they want the smaller packages or units in it to be so treated; and no doubt when the latter alternative is taken ... a higher rate of freight will be payable .... What is essential is that into whoever’s hands the bill of lading may come, the hands of the consignee, of the banker who finances the transaction, or of the insurer, it will appear on the face of the bill of lading whether the package for purposes of maximum liability is the container or the individual packages inside the container .... What we want to do is to leave open to the shipping industry, the shippers and the shipowners, to decide as a matter of business whether they want to get "per container rates" in which case the container will be treated as the package, or the ordinary freight rates in which (case) the traditional packages within it will be treated as individual packages .... Under this paragraph all you will have to do is to look at the bill of lading and see, does it contain any figures of the numbers of packages other than the containers themselves ....
"The clause is drafted in this way, because you may get in a bill of lading a variety of descriptions of goods in a container. You may get the simple one where it says a container "said to contain" so many packages, or "containing" so many packages, say 20 packages. You look at the bill of lading, you see the figure 20, and you know that each of those 20 packages is a unit for the purpose of calculating the maximum.
"It may be, on the other hand – and this is the normal form of bill of lading in the case of the European short sea trades at the moment – one container "said to contain" general merchandise. There is only one figure on the bill of lading, therefore the container is the package for the purpose of calculating the maximum. But you may get the mixed case – and we are providing for the future and we want to deal with all cases – where the bill of lading says one container containing four crates of typewriters and general merchandise. Well, what is to be done then? The answer is provided by paragraph (iv). You look at the bill of lading and you see that there is the figure 4 relating to the crates of typewriters. Each of those crates of typewriters is a unit for the purpose of calculating the maximum. You look at the bill of lading and you see that there is also general merchandise without any figure in front of it, and then the clause says the container with the general merchandise is to be treated as another package ...." ( Emphasis added.)
77 In my view, both this historical context, and the text of Article 4 Rule 5(c), support Mr Diamond’s suggestion of the ‘general intention’ of Rule 5(c); but, as Mr Diamond then said (at 242), the application of the provision still raises many ‘difficult’ problems. Two of these difficulties were next addressed by Mr Diamond. In my opinion, they are in point here.
78 Mr Diamond says (at 243):
‘If the bill of lading states "1 container said to contain 500 cases," does this constitute a sufficient enumeration of the 500 cases? An acknowledgement so phrased does not seem to create estoppel under art. III, r. 4. But the wording of Rule 5(c) speaks simply of the number of packages enumerated in the bill; not of a binding or conclusive enumeration. There seems no reason why the parties to the contract of carriage should not opt to treat each case as the relevant "package or unit" on the assumption that each such case has been shipped but without binding themselves to the number of cases. I therefore submit that "said to contain 500 cases" is a sufficient enumeration and that in this example, each case will attract a separate limit of 10,000 francs.’
79 I agree.
80 The other difficulty is addressed by Mr Diamond as follows (at 243):
‘What if the number stated in the bill is incorrect? Rule 5(c) appears to state that the "number enumerated in the bill" is conclusive for limitation purposes. But it would be curious if it were to be held that an enumeration is binding for limitation purposes when it is not binding for the purposes of liability. Suppose a bill describes a container as "said to contain 500 cases;" suppose, after a total loss has occurred, it is found that 25 of those cases were never shipped; in such a case I submit that both liability and also limitation should be based on a figure of 475 packages or units; see the words "as far as these packages or units are concerned." I submit that Rule 5(c) must be applied only to those "enumerated" packages for which there is liability.’
81 Again, I agree.
82 Support for the foregoing approach may also be found by Sir Guenter Treitel and F M B Reynolds in Carver on Bills of Lading, 1st ed., 2001 (at 529):
‘In contrast to the decision on the Hague Rules in The River Gurara ..., it is clear that the Hague-Visby Rules specifically adopt the description of the goods in the bill of lading as the way of solving this question. Hence in order to determine whether the container is the package or unit it is necessary to see whether there has been an "enumeration" of its contents in the bill of lading. Thus if the bill of lading states "One container containing general merchandise", there is no enumeration and the container and its contents are themselves the package. If the statement is "One container containing 400 personal computers", the packages or units so enumerated are the packages or units for limitation purposes (and the container itself, if it is provided by the shipper, is presumably an extra package or unit).’ (Emphasis added.)
83 I agree.
84 Carver proceeds to analyse the difficulty arising if the ‘enumeration’ is ‘wrong’ (at 530):
‘If the enumeration is wrong, the liability must be calculated up to the maximum enumerated only; though if less goods are shipped than are enumerated, the enumeration should only apply to what was actually shipped. The question then arises as to whether phrases such as "stc" ("said to contain") or "FCL" ("Full Container Load") and the like are to be regarded as negativing any enumeration. It seems likely that they are not. They simply mean that the carrier does not admit the contents, with the result that should a dispute arise the claimant must prove what was shipped. They do however put the carrier on notice as to what is alleged to be inside the container, with the result that he can calculate his possible risk exposure.’
85 In Applicant A v Minister for Immigration & Ethnic Affairs [1997] HCA 4; (1997) 190 CLR 225, Gummow J said (of the task of construing an international convention) (at 277):
‘Regard primarily is to be had to the ordinary meaning of the terms used therein, albeit in their context and in the light of the object and purpose of the Convention. Recourse may also be had to the preparatory work for the treaty and the circumstances of its conclusion, whether to confirm the meaning derived by the above means or to determine a meaning so as to avoid obscurity, ambiguity or manifestly absurd or unreasonable results. However, as McHugh J demonstrates by the analysis of the subject in his reasons for judgment, with which I agree, it is important to appreciate the primacy to be given to the text of the treaty.’
See also per McHugh J at 253 – 255.
86 I turn then to the text of Rule 5(c).
87 The prefatory words of Rule 5(c) – ‘[w]here a container ... is used to consolidate goods’ – are obviously satisfied. Consideration is next given to the words that follow, namely, ‘the number of packages or units enumerated in the Bill of Lading’.
88 The word ‘unit’ used here has, in my view, its ordinary dictionary definition of an individual thing regarded as single and complete, especially for the purposes of calculation; each of the (smallest) separate groups into which a complex whole may be analysed (The New Shorter Oxford English Dictionary, L Brown (ed.), 1993).
89 The description of goods in the bill of lading was:
‘200,945 pieces
posters and prints’.
90 Notwithstanding the statement in the bill of ‘1’ as the ‘no. of pkgs.’, and of ‘1’ as the ‘Total Number of Packages’, the reference to this number of ‘pieces’ was, in my opinion, an enumeration of 200,945 ‘units’ for the purposes of the initial provision of Rule 5(c); that is, a statement (i.e. enumeration) of ‘the number of packages or units enumerated in the [bill]’. In principle, such an enumeration may be seen as an equivalent of Carver’s example: ‘One container containing 400 personal computers’. In other words, I would construe the reference to ‘1’ in the bill as a reference to the ‘package’ being (an extra) package (being the container), but I would also construe, as both Carver and Mr Diamond suggest, the description of the goods in this bill to mean 200,945 pieces (consisting of posters and prints). Each ‘piece’ could, I think, fairly be described as a ‘unit’.
91 It is then necessary to consider the words that follow in Rule 5(c), that is, the phrase ‘as packed’.
92 The application of this phrase also supports, in my opinion, the approach of Carver and of Mr Diamond in the related area of the consequences of an overstatement of the number of units stated in the bill. It will be recalled that Carver stated (at 530) that ‘if less goods are shipped than are enumerated, the enumeration should only apply to what was actually shipped’. (Emphasis added.)
93 In using the phrase ‘as packed’, the Rule is, in my view, picking up the ordinary dictionary definition of ‘as’ in this kind of context, that is to say – in the manner, or to the extent in which – the goods were actually ‘packed’, that is, again picking up the dictionary meaning of this word – to put together into a pack or package, or compactly into a receptacle, especially for transport (etc.). Likewise, the dictionary defines ‘package’ to mean: ‘A bundle of things packed up or tied up together; especially one of small or moderate size, as an item of luggage; a packet, a parcel’. (See The New Shorter Oxford English Dictionary.)
94 Subject to the operation (if any) of the provisos ‘as packed in such [container]’ and ‘as far as these packages or units are concerned’, Rule 5(c) stipulates that, the number of packages or units enumerated in the document ‘shall be deemed the number of packages or units ...’. (Emphasis added.)
95 In this context ‘deems’ has, in my opinion, its usual flexible statutory meaning, that is to say: 1. ‘To treat (a thing) as being something it is not, or as having certain qualities that it does not have ... . 2. To consider, think, judge or esteem’ (Black’s Law Dictionary, 6th ed., Bryan A Garner (ed.), 1996).
96 As Windeyer J has explained (in Hunter Douglas Australia Pty Ltd v Perma Blinds [1969] HCA 27; (1969) 122 CLR 49 (at 65)):
‘[T]he verb deem ... can be used in statutory definitions to extend the denotation of the defined term to things it would not in ordinary parlance denote .... But that the word can be used in that way and for [the] purpose [of reducing verbiage] does not mean that whenever it is used it has that effect. After all, to deem means simply to judge or reach a conclusion about something.’
97 Windeyer J continued (at 65):
‘The words "deem" and "deemed" when used in a statute thus simply state the effect or meaning which some matter or thing has – the way in which it is to be adjudged. This need not import artificiality or fiction. It may be simply the statement of an indisputable conclusion, as if for example one were to say that on attaining the age of twenty-one years a man is deemed to be of full age and no longer an infant.’
98 His Honour added (at 67):
‘There is no presumption, still less any rule, that wherever the word "deemed" appears in a statute it demonstrates a "fiction" or some abnormality of terminology. Sometimes it does. Often it does not. Much depends upon the context in which the word appears ... .’
99 In my opinion, the context here indicates that the ‘deeming’ provision requires that a conclusion is to be drawn, or a judgment is to be made, that the number of units enumerated in the document is, for limitation purposes, the number of units ‘as packed’ in the container.
100 It is common ground that the 200,945 pieces were placed into ‘approximately’ 2,000 packages for shipment. (The determination of the exact number of packages may be decided on the remitter.) Applying the foregoing reasoning, whilst there was, by way of an overstatement, an enumeration of 200,945 ‘units’ in the bill, what was ‘actually shipped’ (i.e. ‘as packed’) were ‘approximately’ 2,000 packages. By virtue of the Rule’s ‘deeming’ provision, for limitation purposes, the number of units is to be treated as 2,000 (the approximation given in evidence) if this (as appears) remains common ground; if, on the other hand, the number of packages becomes contentious, this issue will need to be determined on remitter.
101 To this extent, and subject to consideration of the cross-appellant’s reliance on cl 21 of the bill, I would vary her Honour’s judgment.
The operation, if any, of clause 21
102 There remains for consideration the operation of cl 21 of the bill.
103 It will be recalled that cl 21 states that where (as here) goods have been packed into a container, ‘it is expressly agreed, that [such] container shall constitute one package for [limitation of liability purposes]’.
104 It will also be remembered that by Article 3 Rule 8 of the Amended Rules, it is provided, inter alia, that any clause ‘lessening’ the carrier from liability for loss to goods ‘otherwise than as provided [by these rules] shall be null and void and of no effect’.
105 As has been seen, in my opinion, by the application of the Amended Rules, specifically Article 4 Rule 5(c), the cross-appellant’s liability is limited to approximately 2,000 packages. However, (assuming that cl 21 was not intended to increase the carrier’s liability by treating the container as an extra package), cl 21 purports to limit liability to one container, plainly a lesser liability. It must follow, in my view, that cl 21 is of no effect here.
ORDERS PROPOSED ON THE CROSS-APPEAL
106 It follows that, on the cross-appeal, I would vary the judgment below to the extent mentioned. Given the outcome, no order should be made for the costs of the cross-appeal.
107 Accordingly, I propose the following orders on the cross-appeal:
1. Cross-appeal allowed in part.
2. Order that, upon the remitter of the matter to the primary Judge, it be declared that for the purposes of the application of the limitation provisions of Article 4 Rule 5(c) of the Amended Rules, the number of units shall be deemed to be 2,000, or such other number of packages as the primary Judge may then find in accordance with these reasons.
3. Make no order for the costs
of the cross-appeal.
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I certify that the preceding one hundred and six (106) numbered paragraphs
are a true copy of the Reasons for Judgment herein of the
Honourable Justice
Beaumont.
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Associate:
Dated: 10 August 2004
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IN THE FEDERAL COURT OF AUSTRALIA
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QUEENSLAND DISTRICT REGISTRY
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Q 116 OF 2003
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ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF
AUSTRALIA
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BETWEEN:
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EL GRECO (AUSTRALIA) PTY LIMITED
FIRST APPELLANT/FIRST CROSS-RESPONDENT JOHN THEODORAKOPOULOS SECOND APPELLANT/SECOND CROSS-RESPONDENT |
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AND:
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MEDITERRANEAN SHIPPING CO SA
RESPONDENT/CROSS APPELLANT |
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JUDGES:
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BLACK CJ, BEAUMONT AND ALLSOP JJ
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DATE:
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10 AUGUST 2004
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PLACE:
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SYDNEY (HEARD IN BRISBANE)
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REASONS FOR JUDGMENT
ALLSOP J
108 Index
Introduction and Issues [109]-[120]
Jurisdiction [121]-[122]
The Commercial Background [123]-[130]
The Carriage [131]-[132]
Other Matters not in Dispute [133]-[134]
The Relevant Parts of the Amended Rules [135]-[138]
The Approach to the Construction of the Amended Rules [139]-[148]
My Views in Summary as to the Disposition of the Matter [149]-[153]
The History and Context of Article IV rule 5 of the Hague Rules
and the Hague-Visby Rules [154]-[225]
The background to the 1920s conferences [155]-[165]
The 1920s conferences [166]-[193]
The implementation of the Hague Rules [194]-[205]
The 1960s conferences [206]-[225]
Judicial Approach to the Hague Rules and Cognate Legislation [226]-[244]
The Cross-Appeal [245]-[311]
The approach of the primary judge [246]-[247]
The submissions of the parties [248]-[255]
The disposition of the cross-appeal [256]-[310
The Appeal [311]-[318]
Orders [319]
Introduction and Issues
109 Before the Court are an appeal and a cross-appeal from orders of a Judge of this Court in which judgment was ordered to be entered for the second appellant in the sum of $63,570 plus pre-judgment interest from 17 April 2000 until the date of the orders, 17 July 2003, plus costs up to 28 November 2002. The second appellant was ordered to pay the respondent’s costs from 28 November 2002 onwards.
110 The action was for damage sustained by a cargo of posters and prints loaded on board the MSC Melbourne at Port Botany, Sydney. The goods were shipped (on behalf of the named shipper, the first appellant) in one twenty foot general purpose container. The Melbourne sailed from Port Botany for Antwerp in February 2000 (not on 12 December 1999). On 26 March 2000 the container was discharged in Antwerp for transhipment to Greece and on 29 March 2000 it was loaded on board the Aquitania bound for Piraeus. The Aquitania arrived in Piraeus on 7 April and a few days later the container was unloaded and transported by road to its ultimate destination, Aigion, where it arrived on 17 April 2000.
111 When packed into the container the goods had been made up into about 2,000 packages. The container was carried by the respondent under a non-negotiable received for shipment through bill of lading issued by the agent of the respondent and dated 16 February 2000. The bill named the first appellant as shipper, the second appellant as consignee and a maritime agency in Piraeus as the party to notify. Given its importance to the resolution of the issues before the Court, a copy of the face of the bill is annexed to these reasons.
112 Of particular relevance to the disposition of the appeal and cross-appeal is the description of what was said to be within the container. As can be seen from the description of the cargo on the face of the bill, the container was said to contain:
200945 pieces
posters and prints
113 As can also be seen from the face of the annexed bill, the column entitled "No. of Pkgs" contained the number "1". Further, the face of the bill contained the following clause above the signature box:
RECEIVED FOR SHIPMENT in apparent external good order and condition the containers, other packages or units bearing marks and/or numbers indicated in the "Carrier’s Receipt" above, said to contain the quantity of goods, weights and measurements indicated in the "Particulars furnished by the "Shipper" above which particulars have not been checked or varified [sic] by the Carrier. Such particulars are for Shipper’s and Consignee’s use only and are not part of the bill of lading terms and are not binding on the carrier.
114 Clause 21 of the bill (on the back of the bill) included the following:
Where the goods have been packed into containers by 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.
115 The word "Merchant" was defined on the back of the bill to include the shipper and consignee.
116 The primary judge found that the goods were damaged by seawater during the voyage and that the respondent carrier was liable for that damage. Those findings were not challenged by the respondent on the appeal or cross-appeal. The primary judge rejected the argument of the respondent that its liability under the package limitation in Article 4 rule 5 of the Amended Hague Rules, being contained in Schedule 1A to the Carriage of Goods by Sea Act 1991 (Cth) (to which I will refer, respectively, as the "Amended Rules" and "Australian COGSA") should be assessed by reference to the one container. (The Amended Rules in this respect are relevantly identical to Article IV rule 5 of the Hague-Visby Rules.) The primary judge also found clause 21 to be null and void and of no effect by reason of the operation of Article 3 rule 8 of the Amended Rules, which rule is relevantly identical to Article III rule 8 of the Hague-Visby Rules. Her Honour, however, rejected the evidence of the appellants as to the value of the goods and found them to be worth $63,570 and not the sum near $1,000,000 contended for by the appellants. (All dollar figures in these reasons, unless stated otherwise, are references to Australian dollars.) The costs order made by her Honour reflected an offer to settle made by the respondent carrier well above the judgment sum awarded.
117 The appeal by the appellants and the notice of contention of the respondent raise important questions, including in particular:
(a) whether Article 4 rule 5(b) of the Amended Rules (relevantly identical to Article IV rule 5(b) of the Hague-Visby Rules) insofar as it provides for calculation of the amount recoverable by reference to value at the place and time of discharge is mandatorily applicable, or is only a prima facie approach (the primary judge having come to the value of $63,750 by reference to the value of the goods in Australia not Piraeus, the port of discharge); and (b) whether the primary judge was entitled, as a matter of law, or of fact in this case, to disregard as unreliable the price struck between the principals for the sale of the goods in question as evidence of value of the goods in Greece.
118 The cross-appeal by the respondent also raises important questions, including in particular:
(a) the meaning of the phrase "packages or units" and the word "units" in Article 4 rule 5 of the Amended Rules and in particular in Article 4 rule 5(c) (relevantly identical to Article IV rule 5(c) of the Hague-Visby Rules); and (b) the meaning of the word "enumerated" in Article 4 rule 5(c) of the Amended Rules, (and in Article IV rule 5(c) of the Hague-Visby Rules).
119 For reasons that will become apparent, the posing of the question in [118(a)] above in terms of the meaning of the phrase "packages or units" or the word "units" is not entirely satisfactory. It is adequate, however, for present purposes of identifying issues.
120 The essence of the cross-appeal was that the primary judge erred in concluding that the contents of the box under "Description of Goods", and in particular the words and numbers "200945 pieces posters and prints", amounted to an enumeration of units, in particular in the context of the whole of the face of the bill, or in the context of the whole of the face of the bill together with clause 21 on the back of the bill.
Jurisdiction
121 The Admiralty Act 1988 (Cth) provides for the conferral of jurisdiction on the Federal Court of Australia, and for the investing of jurisdiction in State and territory courts, in matters of Admiralty and maritime jurisdiction in wide and comprehensive terms: see ss 4, 9, 12 and 13 of the Admiralty Act, ss 76 (ii) and (iii) of the Australian Constitution and, generally, Owners of the Ship ‘Shin Kobe Maru’ v Empire Shipping Co Inc [1994] HCA 54; (1994) 181 CLR 404, 423-26 (in the High Court); [1992] FCA 476; (1992) 38 FCR 227, 234-35, 245-47 (in the Full Court of the Federal Court); and [1991] FCA 499; (1991) 32 FCR 78, 100-111 (in the reasons of Gummow J, at first instance). One aspect of that jurisdiction conferred on this Court is the quelling of controversies concerned with damage to cargo carried by sea: ss 4(3)(e) and 9 of the Admiralty Act.
122 Also, the disposition of the controversy here involves a matter arising under a law of the Commonwealth Parliament for the purposes of s 39B(1A)(c) of the Judiciary Act 1903 (Cth), being the ascertainment of the parties’ rights and liabilities arising under Article 4 rule 5 of the Amended Rules, which Amended Rules have the force of law in Australia in respect of the carriage in question by reason of the combined effect of ss 7, 8 and 10 of Australian COGSA.
The Commercial Background
123 The commercial background to the claim is not without its curiosities. That said, it needs to be appreciated at the outset that the respondent made no claim of fraud, fraudulent collusion or sham on the part of the appellants or anyone connected with them, and that the respondent accepts that as between buyer and seller there was a contract for the sale of posters and prints for a price of $956,545, such posters and prints being those contained in the container in question, numbering some 130,945 (it being agreed between the parties at first instance and on appeal that the face of the bill overstated the numbers of prints and posters by some 70,000). Thus, it was accepted that had the goods arrived in good condition, the buyer, Mr Theodorakapoulos, would have been contractually obliged to pay the sale price of $956,545. A real contract was entered.
124 In early 1999, a director of the first appellant, Mr Petrogiannakis, negotiated for the purchase of land in Brisbane and a business thereon from a Mr Carl. Mr Carl conducted a business on the land of selling posters and prints, wholesale and retail. Two contracts were drawn up: one for the sale of land (the price being $250,000), and the other for the sale of the business (the price being $150,000). The purchaser originally identified in the contracts was the first appellant; but its name was crossed out and the name Aphrodite Petrogiannakis (Mr Petrogiannakis’ wife) was inserted "as trustee for the Posters Business Trust". There was no evidence of the negotiations between Mr Carl and Mr Petrogiannakis except that Mr Petrogiannakis said that Mr Carl indicated, as his reason for needing to sell, that he was expecting to be sent to prison. Given the view the primary judge took of Mr Petrogiannakis’ lack of credit, little weight can be ascribed to this evidence as to Mr Carl’s fears for his future, and, by inference, whether he was prepared to sell at a reduced price.
125 Mr Petrogiannakis was not able to say in evidence how many posters were sold in trading; his records had been lost. There had been two fires at the premises after he purchased the land and business, which fires had damaged stock. The fires resulted in payments by insurers of $170,000 and $122,000; but, as the primary judge noted, how many posters were destroyed or damaged, what proportion of the total stock that they represented, what their value was and how their value was assessed were subjects that were not gone into in evidence.
126 At some point in 1999, Mr Petrogiannakis negotiated the sale of all the remaining posters and prints to the second appellant, Mr Theodorakopoulos, whom Mr Petrogiannakis had known for about eleven years. Mr Theodorakopoulos had sold assets in Australia some time earlier, had (about a year prior) returned to Greece, and was returning once again to Greece after a visit to Australia. The negotiations concluded with Mr Theodorakopoulos agreeing to buy all stock for $956,545. There was some confusion in the evidence as to how this sum was made up. Mr Theodorakopoulos said that the agreement to purchase was conditional on satisfying himself that he could sell the goods at a profit in Greece. The primary judge appeared to accept this.
127 The primary judge found that Mr Petrogiannakis had no idea of the value of the stock when he purchased the business and that Mr Theodorakopoulos had none when he was negotiating with Mr Petrogiannakis.
128 Upon his return to Greece, Mr Theodorakopoulos made some enquiries of a like business and also made some enquiries of gypsies who sold goods at flea markets. He apparently confirmed the purchase.
129 The first appellant issued two invoices, both dated 10 December 1999. Each was issued to Mr Theodorakopoulos; one was CIF, which identified 80,256 posters for $456,545 and 120,689 prints for $500,000 (totalling $956,545); the other was expressed to be CIF-COD which identified "posters-prints as per list" for $589,680 and "prints-posters as per list" for $500,000 (totalling $1,089,680 less a discount of $133,135 leaving $956,545).
130 A list of posters and prints (presumably the list referred to in the second invoice) was prepared by a Mr Schmidt. At the time of the transaction many posters and prints were still packaged as they had been at the time of the original purchase of the business from Mr Carl. It is unclear how many posters and prints were sold to Mr Theodorakopoulos, though it was accepted at the hearing and on appeal that the bill overstated the number by about 70,000. The posters and prints were packed into about 2,000 packages within the container.
The Carriage
131 Much of the primary judge’s reasons, and a good part of the trial, concerned the contested issues of what damage occurred, and the cause of its occurrence. Her Honour concluded that the posters and prints in the container were damaged by seawater in circumstances for which the respondent carrier was responsible. No appeal is brought in relation to this aspect of the matter.
132 The goods were damaged beyond any possibility of salvage.
Other Matters Not in Issue
133 The bill was a non-negotiable bill, sometimes referred to as a "straight" bill. The primary judge characterised the bill as a sea waybill under the Sea-Carriage Documents Act 1996 (Qld) (the Qld S-CD Act). The Qld S-CD Act was one of the uniform pieces of state and territory legislation passed between 1996 and 1998 replacing and reforming earlier legislation in a similar way that the Carriage of Goods by Sea Act 1992 (UK) replaced and reformed the Bills of Lading Act 1855 (UK). When made applicable to a suit in federal jurisdiction by s 79 of the Judiciary Act (whether the suit be in the Federal Court of Australia or a state or territory court) the Qld S-CD Act is applicable as a surrogate federal law. It is unnecessary to consider whether the bill was better described as a non-negotiable bill of lading (as to which see generally: The ‘Happy Ranger’ [2002] 2 Lloyd’s Rep 357; The ‘Rafaela S’ [2003] 2 Lloyd’s Rep 113; Voss v APL Co Pte Ltd [2002] 2 Lloyd’s Rep 707; (2002) 4 SLR 481; BHP Trading Asia Ltd v Oceaname Shipping Ltd (1996) 67 FCR 211; and G H Treitel, "The Legal Status of Straight Bills of Lading" 119 LQR 608) or as a sea waybill. The Amended Rules, by Article 1, apply to "sea carriage documents" as defined, which definition includes negotiable and non-negotiable bills:
(g) "Sea carriage document" means:
(i) a bill of lading; or
(ii) a negotiable document of title that is similar to a bill of lading and that contains or evidences a contract of carriage of goods by sea; or
(iii) a bill of lading that, by law, is not negotiable; or
(iv) a non-negotiable document (including a consignment note and a document of the kind known a sea waybill or the kind known as a ship’s delivery order) that either contains or evidences a contract of carriage of goods by sea.
(The Qld S-CD Act, on the other hand, defines "bill of lading" in terms of documents that can be transferred by endorsement or delivery.)
134 The title to sue of the appellants was put in issue at the trial. The primary judge ordered that judgment be entered for the second appellant, Mr Theodorakopoulos, who was the purchaser and consignee. There was evidence that he rejected the goods. The primary judge, in reliance on s 6 of the Qld S-CD Act, found that the second appellant could exercise the rights of suit statutorily passed to him, on behalf of the "Posters Business Trust" which entity (for want of a better expression) might be seen (at least after rejection) to be the owner. There was no appeal on this question and so there is no need to consider the application of s 6 of the Qld S-CD Act, in particular in the context of rejection of the goods. The width of the operation of s 6 of Qld S-CD Act (and like State and territory Acts) makes resort to implications such as dealt with in Brandt v Liverpool, Brazil and River Plate Steam Navigation Co Ltd [1924] 1 KB 575, 589 unnecessary.
The Relevant Parts of the Amended Rules
135 Various parts of the Amended Rules are relevant to the issues for determination on the appeal and cross-appeal. The Amended Rules are found in Schedule 1A to Australian COGSA as an amended form of the Hague-Visby Rules which are found in Schedule 1. The various amendments which broadly incorporate certain aspects of the Hamburg Rules, were made, and Schedule 1A was inserted, by regulations made in 1998, as authorised by s 7(2) of Australian COGSA, which enabled the Act to be amended by regulation. Notwithstanding the hybrid nature of the Amended Rules, the issues raised on the appeal and cross-appeal concerning the Amended Rules and in particular Article 4 rule 5 are matters of general application to the Hague-Visby Rules. The relevant parts of the Amended Rules are in the following terms (the excisions and emendations reflecting the changes from Schedule 1 (the Hague-Visby Rules) to the Amended Rules):
Article 3
...
3. After receiving the goods into his charge the carrier or the master or agent of the carrier shall, on demand of the shipper, issue to the shipper abill of ladingsea carriage document showing among other things –
(a) The leading marks necessary for identification of the goods as the same are furnished in writing by the shipper before the loading of such goods starts, provided such marks are stamped or otherwise shown clearly upon the goods if uncovered, or on the cases or coverings in which such goods are contained, in such a manner as should ordinarily remain legible until the end of the voyage. (b) Either the number of packages or pieces, or the quantity, or weight, as the case may be, as furnished in writing by the shipper. (c) The apparent order and condition of the goods.
Provided that no carrier, master or agent of the carrier shall be bound to
state or show in the bill of lading sea carriage
document any marks, number, quantity, or weight which he has reasonable
ground for suspecting not accurately to represent the goods actually
received,
or which he has had no reasonable means of checking.
4. Such a bill of lading sea carriage document
shall be prima facie evidence of the receipt by the carrier of the goods as
therein described in accordance with paragraph 3(a),
(b) and (c). However,
proof to the contrary shall not be admissible when the bill of
lading in the case of a negotiable sea carriage document that
has been transferred to a third party acting in good faith.
...
8. Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to, or in connexion with, goods arising from negligence, fault, or failure in the duties and obligations provided in this article or lessening such liability otherwise than as provided in these Rulesthis convention, shall be null and void and of no effect. A benefit of insurance in favour of the carrier or similar clause shall be deemed to be a clause relieving the carrier from liability.
Article 4
...
5.
(a) Unless the nature and value of such goods have been declared by the shipper before shipment and inserted in thebill of ladingsea carriage document, 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.
(b) The total amount recoverable shall be calculated by reference to the value of such goods at the place and time at which the goods are discharged from the ship in accordance with the contract or should have been so discharged.
The value of the goods shall be fixed according to the commodity exchange price, or, if there be no such price, according to the current market price, or, if there be no commodity exchange price or current market price, by reference to the normal value of goods of the same kind and quality.
(c) Where a container, pallet or similar article of transport is used to consolidate goods, the number of packages or units enumerated in theBill of Ladingsea carriage document 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.
(d) The unit of account mentioned in this Article is the Special Drawing Right as defined by the International Monetary Fund. The amounts mentioned in sub-paragraph (a) of this paragraph shall be converted into national currency on the basis of the value of that currency on a date to be determined by the law of the court seized of the case.
...
136 Article 3 rule 3 of the Amended Rules (save for the substitution of the phrase "sea carriage document" for the phrase "bill of lading" and some changes to punctuation) is identical to Article III rule 3 of the Hague Rules, being unchanged by the 1968 Protocol creating the Hague-Visby Rules.
137 Likewise, Article 3 rule 8 of the Amended Rules (save for similar changes) is identical to the Hague Rules, being unchanged by the 1968 Protocol.
138 Article 4 rule 5 of the Amended Rules embodies (save for similar changes) Article IV rule 5 of the Hague-Visby Rules, as amended in 1968.
The Approach to the Construction of the Amended Rules
139 Australian domestic statute law has given, with certain amendments, an international convention the force of law in Australia relevantly over a controversy such as this. That convention is more fully described as (a) the International Convention for the unification of certain rules of law relating to bills of lading done at Brussels on 25 August 1924 (the "Hague Rules"), (b) the Protocol done at Brussels on 23 February 1968 to amend the Hague Rules (the "1968 Protocol"), and (c) the Protocol done at Brussels on 21 December 1979 amending the Hague Rules as amended by the 1968 Protocol (the "1979 Protocol" or the "SDR Protocol".)
140 Together this convention and these two protocols are what has been and what will be referred to in these reasons as the Hague-Visby Rules.
141 The amendments made to the Hague-Visby Rules do not change the underlying character of the Amended Rules as based on an international convention.
142 Subject to any contrary intention revealed by the domestic statute making an international instrument part of domestic law, the ascertainment of the meaning of, and obligations within, an international instrument that is made part of domestic law is to be ascertained by giving primacy to the text of the international instrument, but also by considering the context, objects and purposes of the instrument: Applicant A v Minister for Immigration and Ethnic Affairs [1997] HCA 4; (1997) 190 CLR 225, 230 (per Brennan CJ, agreeing with McHugh J), 240 (per Dawson J), 251-56 (per McHugh J), 277 (per Gummow J, also agreeing with McHugh J); and Morrison v Peacock [2002] HCA 44, 192 ALR 173 at [16] (per Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ). The manner of interpreting the international instrument is one which is more liberal than that ordinarily adopted by a court construing exclusively domestic legislation; it is undertaken in a manner unconstrained by technical local rules or precedent, but on broad principles of general acceptation: Stag Line Ltd v Foscolo Mango & Co Ltd [1932] AC 328, 350; James Buchanan & Co Ltd v Babco Forwarding & Shipping (UK) Ltd [1978] AC 141, 152; Fothergill v Monarch Airlines Ltd [1980] UKHL 6; [1981] AC 251, 281-2, 285, 293; Morris v KLM Royal Dutch Airlines [2002] UKHL 7; [2002] 2 AC 628, 656 at [78]; Shipping Corporation of India Ltd v Gamlen Chemical Co (Australasia) Pty Ltd [1980] HCA 51; (1980) 147 CLR 142, 159; Chan v Minister for Immigration and Ethnic Affairs [1989] HCA 62; (1989) 169 CLR 379, 412-3; Applicant A at 255; Great China Metal Industries Co Ltd v Malaysian International Shipping Corporation, Berhad [1998] HCA 65, 196 CLR 161 [19]-[24]; and Morrison v Peacock at [16].
143 The reasons for this approach were described by Lord Diplock in Fothergill, supra at 281-2, 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 all 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 to which recourse may be 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 law. It should be interpreted, as Lord Wilberforce put it in James Buchanan & Co. Ltd. v Babco Forwarding & Shipping (U.K.) Ltd. [1978] A.C. 141, 152, "unconstrained by technical rules of English law, or by English legal precedent, but on broad principles of general acceptation."
144 The need for a broad or liberal construction is reinforced by the matters which can be taken into account under Articles 31 and 32 of the Vienna Convention on the Law of Treaties (the "Vienna Convention") in accordance with which Australian courts interpret treaties: Koowarta v Bjelke-Petersen [1982] HCA 27; (1982) 153 CLR 168, 265; Commonwealth v Tasmania [1983] HCA 21; (1983) 158 CLR 1, 93, 177; and Applicant A at 251-2, 255 and 277. The Vienna Convention is an authoritative statement of customary international law: Victrawl Pty Ltd v Telstra Corporation Ltd [1995] HCA 51; (1995) 183 CLR 595, 622. The principles enshrined in the Vienna Convention can be seen to be the "broad principles of general acceptation" referred to earlier: see CMA CGM S.A. v Classica Shipping Co Ltd [2004] EWCA Civ 114; [2004] 1 Lloyd’s Rep 460 at [10]. The word "treaty" is defined in the Vienna Convention as an international agreement concluded between States in written form and governed by international law, whether in one or more instruments and whatever its particular designation. The Hague-Visby Rules fall within that notion.
145 In the task of construing the relevant parts of the Amended Rules it will be necessary to have regard to the preparatory work of the Hague Rules and 1968 Protocol. In that respect, this Court and all courts owe a considerable debt of gratitude to Professor Sturley for his monumental three volume work, The Legislative History of the Carriage of Goods by Sea Act and to Professor Berlingieri and the Comité Maritime International ("CMI") for the production of the volume entitled Travaux Préparatoires of the Hague Rules and the Protocols of 23 February 1968 and 21 December 1979, (the latter of which works I will henceforth refer to as the "CMI Travaux").
146 The legitimacy of the examination of the preparatory work is made clear by Article 32 of the Vienna Convention. An understanding of the circumstances of the conclusion of the convention or protocol in question is not reached merely by reading, literally, the text of either the convention or protocol or what was said and written by delegates at the various meetings and conferences leading up to the making of the relevant instrument. The relevant legal, practical and jurisprudential context and history must be understood in order that the compromises inherent in these international agreements be appreciated. Further, care must be taken not to accept too literally or overwhelmingly any particular words by one delegate (however eminent he or she may be or have been) without understanding the context of such words in the whole of the preparatory work and in the circumstances of the conclusion of the relevant agreement: cf Applicant A at 231 and 254-56; and Fothergill v Monarch Airlines at 276, 278 and 294. In the end, to the extent there were compromises, it was the text of the agreement that embodied such compromises.
147 Further, just as the historical legal context is relevant to the understanding of the meaning of a domestic statute under municipal law: Newcastle City Council v GIO General Limited [1997] HCA 53; (1997) 191 CLR 85, 112; CIC Insurance Limited v Bankstown Football Club Limited [1997] HCA 2; (1995) 187 CLR 384, 408; and Network Ten Pty Limited v TCN Channel Nine Pty Limited [2004] HCA 14, 205 ALR 1, 59 IPR 1 at [11], so it is relevant, within the boundaries of the Vienna Convention, to understanding the context and compromises behind international agreements. This is especially so when those meeting to discuss the issues can be seen to be expert people involved in an industry or profession (perhaps of succeeding generations) grappling with similar or identical issues in similar commercial and legal circumstances.
148 Finally, to the extent that there exist persuasive and considered authorities in jurisdictions administering cognate laws based on internationally adopted conventions, it is appropriate to give weight to such decisions in order to strive for international uniformity: cf Riverstone Meat Co Pty Ltd v Lancashire Shipping Co Ltd (The’ Muncaster Castle’) [1961] AC 807, 840 and 869; Brown Boveri (Aust) Pty Ltd v Baltic Shipping Co (1989) 15 NSWLR 448, 453, 468; and Effort Shipping Co Ltd v Linden Management SA [1998] UKHL 1; [1998] AC 605, 615.
My Views in Summary as to the Disposition of the Matter
149 Logically, the cross-appeal should be dealt with first. This is especially so given the view which I have reached that the cross-appeal should succeed. The cross-appellant has not sought an order as a consequence of the cross-appeal that judgment be entered for it as defendant. Rather, its primary argument on the cross-appeal was that its liability should be limited by reference to Article 4 rule 5 on the basis that there was one package or unit, that being the container. I am of the view that that is the correct conclusion, though not on the basis of all the arguments propounded by the cross-appellant.
150 I have had the considerable advantage of reading the reasons of Beaumont J in draft. I disagree with him in respect of one aspect of the cross-appeal, which is of importance, that being the meaning of the word "units" in rule 5(c). For the reasons which I express hereafter I do not think that the parties enumerated 200,945 units on the sea carriage document for the purposes of Article 4 rule 5(c). That conclusion derives in part from my reading of the sea carriage document and in part from my view that the enumeration in the sea carriage document or in the bill contemplated by the Amended Rules and the Hague-Visby Rules, respectively, is of the packages or units as they are packed in the container, that the relevant phrase to understand and construe in rule 5(c) is the phrase "packages or units... as packed", and that this phrase and consequently the word "units" does not extend to mean any itemised individual articles of cargo said to be within the container. For that reason, and reading the sea carriage document here, there was in my view no enumeration of packages or units as packed in the container beyond the identification of the container as one package; thus, the last sentence of rule 5(c) applied.
151 I would allow the cross-appeal and limit the recovery of the applicants to an application of Article 4 rule 5(a) using one package or unit.
152 In the light of my views as to the operation of Article IV rule 5 of the Hague-Visby Rules, of the importance of the question and of the arguments of the cross-appellant, it is appropriate to outline in some detail the history of the development of the Hague Rules and the Hague-Visby Rules, in particular in respect of Article IV rule 5 and Article IV rule 5(c). This is especially so since the first of the two arguments of the cross-appellant on the cross-appeal (which first argument I do not accept) was that the 1968 Protocol brought about the capacity of the parties to the bill, by freedom of contract, to agree what was and what was not the contractually agreed "enumeration" for the purposes of the operation of rule 5(c), irrespective of what was in fact stated on the bill by way of enumeration.
153 Unfortunately, the outline of the history of the development of the Hague Rules and the Hague-Visby Rules inevitably adds greatly to the length of these reasons.
The History and Context of Article IV rule 5 of the Hague Rules and Hague-Visby Rules.
154 One must begin with the compromises in the Hague Rules of 1924, their genesis and nature. This is especially so having regard to a central argument of the cross-appellant that "enumerated" in Article 4 rule 5(c) of the Amended Rules means as contractually agreed to be enumerated or as enumerated by binding contract as evidenced from the whole of the bill of lading.
The background to the 1920s conferences
155 The tensions which led up to the attempt in the 1920s to bring international uniformity and balance to the carriage of goods by sea under bills of lading are well known: Great China Metal Industries Co Ltd v Malaysian International Shipping Corporation, Berhad at [10] to [18]; R Colinvaux The Carriage of Goods by Sea Act, 1924, Stevens & Sons Limited, London, [1949] UKHL 1; 1954, Ch 1; R Temperley and J Rowlatt, Carriage of Goods by Sea Act, 1924, 3rd edn, Stevens & Sons Limited, London, 1927, pp 1-4; A Knauth, The American Law of Ocean Bills of Lading, 4th edn, American Maritime Cases, Baltimore, 1953, pp 115-131; Benedict on Admiralty, 7th edn, looseleaf, Vol 2A Ch II "Basic Cargo Damage Law: Historical Background"; the CMI Travaux pp 16ff; E Selvig, Unit Limitation of Carrier’s Liability: The Hague-Visby Rules Art. IV (5): A Study in Comparative Maritime Law, Oslo University Press, Oslo, Sir Isaac Pitman & Sons, London, [1949] UKHL 1; 1960, Ch 1 (a shorter and updated article based on this work "Unit Limitation and Alternative Types of Limitation of Carriers Liability" is to be found in K Grönfors ed, Six Lectures on the Hague Rules, Scandinavian University Books, Gottenburg, 1967, p 105; I will refer in these reasons to the book as "Selvig op cit"); the scholarly and helpful article by Mr Diamond QC "The Hague-Visby Rules" [1978] LMCLQ 225 (to which all parties made reference before us); and Mr Mustill QC (as he then was) "Carriage of Goods by Sea Act 1971" Arkiv for Sjorett vol ii issue 4/5, Oslo, 1972 pp 684-87.
156 In the late nineteenth century and early twentieth century, English contract law recognised the freedom of parties by agreement to govern their respective rights and obligations to the contract of carriage evidenced by the bill of lading. The legal position under English law by 1921 was described by the Imperial Shipping Committee, in its report of February 1921, as follows (see Colinvaux op cit p1):
There is nothing in English law to stop [a shipowner] from contracting out of the whole or any part of his liability, and, by a practice which has gradually extended since about 1880, British shipowners do habitually in their bills of lading contract themselves out of their common law liability to a large extent.
157 From at least 1870, the federal courts of the United States (including the Supreme Court) held that clauses in bills of lading which exempted the shipowner from the consequences of its own or its servant’s negligence were void, as contrary to public policy. Some state courts followed the federal courts, though others, in particular the courts of New York, followed the English law reflecting an adherence to the primacy of freedom of contract. Discussions of the need for uniformity were given impetus by the formation, in 1873, of the International Law Association (the "ILA"). The rapid growth in international carriage by sea in the second half of the nineteenth century spawned disparate jurisprudence of English, Continental and American courts, in particular as to the nature of the carrier’s obligations, and the propriety and efficacy of clauses exonerating carriers from their general law responsibilities. There was a recognition, nevertheless, by many merchants, shipowners, underwriters and lawyers of the need for uniformity and compromise in order to achieve a balance between the shipper and carrier, not least to retain confidence in the bill of lading as an accepted instrument of international trade. In 1882, at its Liverpool conference, the ILA prepared a draft model bill of lading (which became known as the Conference form) and which became available for general use. The Conference form was based on a compromise which was later reflected in the Hague Rules: the carrier was to be liable for negligence "in all matters relating to the ordinary course of the voyage", that is in respect of the care and dealing with cargo, but was not to be liable for "accidents of navigation" even though attributable to the negligence of master or crew. Also in the Conference form and reflected later in the Hague Rules were the introduction of the obligation to exercise due diligence to make the ship seaworthy (rather than warranting seaworthiness), a [sterling]100 package limitation in the absence of a higher declaration and the listing of nominated exceptions to liability, including fire: Sturley op cit vol 1 p 4; and CMI Travaux pp 16-17. The terms of the package limitation in the Conference form excepted liability for undeclared goods "which are above the value of [sterling]100 per package": see Colinvaux op cit p 5. The Conference form was by no means used universally.
158 The work of the ILA and the CMI (formed in 1897) continued into the twentieth century: CMI Travaux pp 16-18 and Knauth op cit pp 119-120. Meanwhile, trading (shipper) nations began to regulate, by compulsory law, the international carriage of goods: the Harter Act 1893 in the United States, the Sea-Carriage of Goods Act 1904 (Cth) in Australia, the Shipping and Seamen Act 1903 in New Zealand and the Water Carriage of Goods Act 1910 in Canada. This legislation was not uniform.
159 The impetus for these national pieces of legislation can be seen in the following extract of the opinion of the United States Supreme Court in The ‘Delaware’ 161 US 459, 471-73 (1896) delivered by Brown J, in discussing the Harter Act:
The act was an outgrowth of attempts, made in recent years, to limit, as far as possible, the liability of the vessel and her owners, by inserting in bills of lading stipulations against losses arising from unseaworthiness, bad stowage and negligence in navigation, and other forms of liability which have been held by the courts of England, if not of this country, to be valid as contracts and to be respected even when they exempted the ship from the consequences of her own negligence. As decisions were made by the courts from time to time, holding the vessel for non-excepted liabilities, new clauses were inserted in the bills of lading to meet these decisions until the common law responsibility of carriers by sea had been frittered away to such an extent that several of the leading commercial associations, both in this country and in England, had taken the subject in hand and suggested amendments to the maritime law in line with those embodied in the Harter Act. The exigencies which led to the passage of the act are graphically set forth in a petition addressed [in 1890] by the Glasgow Corn Trade Association to the Marquis of Salisbury and embodied in a report of the Committee on Interstate and Foreign Commerce of the House of Representatives. As a part of the history of the times, this is a proper subject of consideration. American Net & Twine Co v Worthington 141 U.S. 468, 474.
"That, taking advantage of [their] practical monopoly, the owners of the steamship lines combined to adopt clauses in their bills of lading, very seriously and unduly limiting their obligations as carriers of the goods, and refuse to accept consignments for carriage on any other terms than those dictated by themselves.
"That this policy has been gradually extended by the steamship owners until at the present time their bills of lading are so unreasonable and unjust in their terms as to exempt them from almost every conceivable risk and responsibility as carriers of goods.
"For example, many of these bills of lading provide, in addition to the usual and reasonable exceptions, that the carriers shall not be liable for loss or damage occasioned by negligence of the master, pilot, stevedores, crew or others in their employment; not for bad stowage; nor for defect or insufficiency of the hull, machinery or fittings of a vessel, whether occurring before or after receiving the goods on board; nor for the admission of water into the vessel by any cause, and whether for the purpose of extinguishing fire or for any other purpose, and whether occurring previously or subsequently to the vessel’s sailing; nor for the differences between the quality, marks or brands of flour or other goods shipped and those of the goods actually found to be on board of the steamer (the marks, numbers or description in the bill of lading notwithstanding); nor for loss of weight; nor for detention, delay or deviation.
"Such bills of lading also frequently exempt the carrier from any claim not intimated before delivery of the goods, and at the same time provide that the master porterage of the goods on arrival of the steamer shall be done by the steamship owners or their agents at the expense and risk of the receivers, so that the receivers have no opportunity before the delivery of their goods of ascertaining whether they are damaged or not, or how or in what part of the hold they may have been stowed.
"That bills of lading have thus become so lengthened, complex and involved, that in the ordinary course of business it is almost impossible for shippers of goods to read or check their various conditions, even if objections would be listened to, and the hardship is aggravated by the fact that new and more stringent conditions are constantly being added by the shipowners to provide for new questions or claims that have arisen.
"That a striking illustration of this is the fact that recently a clause has been added to certain steamship forms of bill of lading actually giving the shipowners a right of lien over, and the right to sell the goods entrusted to them for carriage, not only for the freight upon the goods themselves, but for all debts due, either by the shippers, or the consignees of such goods, to the carriers or their agents, though these debts may have arisen on contracts unconnected with the carriage of such goods. The effect of this clause is to render the bill of lading, which has been of such essential service on account of its negotiable character in promoting the commercial prosperity of Great Britain, a document unfit for negotiation."
160 See also The ‘Southwark’ 191 US 1, 6-7 (1903), and the discussion by Isaacs J in Australasian United Steam Navigation Co Ltd v Hiskens [1914] HCA 56; (1914) 18 CLR 646, 670-71.
161 The Canadian Act of 1910 also exempted carriers from liability for undisclosed goods "for a greater amount than one hundred dollars per package", s 8 of the Canadian Act being in the following terms:
The ship, the owner, charterer, master or agent shall not be liable for loss or damage to or in connection with goods for a greater amount than one hundred dollars per package, unless a higher value is stated in the bill of lading or other shipping document, nor for any loss or damage whatever if the nature or value of such goods has been falsely stated by the shipper, unless such false statement has been made by inadvertence or error. The declaration by the shipper as to the nature and value of the goods shall not be considered as binding or conclusive on the ship, her owner, charterer, master or agent.
[emphasis added]
162 The Harter Act and the Australian and New Zealand Acts had no such provision.
163 Notwithstanding that the Harter Act made it illegal for shipowners to contract out of their responsibilities provided for by the Act, the American courts upheld clauses in bills limiting liability with respect to any package, weight or volume units to a certain amount such as $100 per package: Calderon v Atlas Steamship Co 170 US 272 (1898) and, see generally, G Robinson, Robinson on Admiralty, Hornbook Series, West Publishing Co, St Paul Minn., 1939, pp 540-43. The High Court followed this approach in Australasian United Steam Navigation Co Ltd v Hiskens at 659-60 and 678-79 in dealing with the Australian 1904 Act. English authorities dealing with the Harter Act followed the United States jurisprudence: Anthony Hordern & Sons Ltd v Commonwealth and Dominion Line Ltd [1917] 2 KB 420, 425-26. The validity of such clauses was recognised by courts of most countries: Selvig op cit p 24 and Sturley op cit vol 1 pp 280-81 and 285-87.
164 After the Great War, the Imperial Shipping Committee issued a report on shipowners’ limitation of liability in bills of lading, which marked a recognition of the need for change. It included the following recommendation to use the Canadian legislation as a model for legislation throughout the Empire (see CMI Travaux p 19):
31. Conclusion and Recommendations. As the result of the considerations outlined above under the three heads we have come unanimously to the following conclusion:
That there should be uniform legislation throughout the Empire on the lines of the existing Acts dealing with shipowners’ liability, but based more precisely on the Canadian Water Carriage of Goods Act, 1910, subject to certain further provisions with regard to:
(i) exceptional cases in which goods should be allowed to be carried by shipowners at owner’s risk;
(ii) the precise definition of the physical limits to the shipowner’s liability; (iii) the fixing of maximum values of packages up to which shipowners should be liable to pay.
32. We make the Canadian Water Carriage of Goods Act, and not the Harter Act which it closely resembles, the basis of our recommendation because it embodies the latest experience. It was passed in 1910 whereas the Australian Sea Carriage of Goods Act was passed in 1904 and the New Zealand Shipping and Seamen Act, certain sections of which deal with shipowners’ liability, was passed in 1903. The Harter Act was passed in 1893.
165 The Imperial Shipping Committee recommended the adoption of the Canadian package limitation, being s 8 of the Canadian Act set out above: CMI Travaux p 20.
The 1920s conferences
166 In May 1921, a Conference of the Maritime Law Committee of the ILA was held in London. A report on bills of lading was approved, which remitted to a drafting sub-committee the preparation of a code to reflect what was discussed in London in May. The draft so prepared was examined by the International Chamber of Commerce and other interested parties in 1921 and then was presented to the Conference of the ILA held from 30 August to 3 September 1921 at the Hague, where it was considered by the Maritime Law Committee of the ILA: Sturley op cit vol 1 pp 91 ff and CMI Travaux p 30.
167 The report of the Maritime Law Committee of the ILA contained a general discussion of the problems being considered, and included the following questions (see Sturley op cit vol 1 pp 93-100):
Question 1 – Whether the freedom of contract on the part of the shipowner with regard to carriage of goods by sea should be absolute or should be limited by legislation?
...
Question 2 – Whether legislative control should be exercised
(a) to secure for the shipper an express acknowledgment of receipt of goods shipped;
(b) to secure the statement of the contract of affreightment in uniform terms as to all or part of the subject-matter;
(c) or in plain terms which define simply and explicitly the risks accepted by the shipowner and shipper respectively?
...
Question 3 – Whether the shipowner should be at liberty to exclude by the contract of affreightment liability on his part for loss or damage (a) generally, or (b) to a limited extent?
168 The report of the Maritime Law Committee of the ILA stated the following about limitation of liability (see Sturley op cit vol 1p 97):
With regard to limitation of liability in respect of pecuniary amount, the Committee discussed the proposals of the Imperial Shipping Committee. It was pointed out that if the international uniformity desired by many interested parties is to be obtained, the fixing of maxima for trades or industries, or otherwise sectionally by a Committee of the kind suggested in that Report, is not likely to be practicable. The object to be obtained was thought to be that of securing increased diligence and vigilance, and members were of opinion that a standard compulsory maximum of liability per package, with liberty to cargo owners to stipulate for larger security if they so desired, would probably secure this object as well as a more elaborate process.
169 The draft Code prepared by the drafting sub-committee submitted to the Hague Conference in late August and early September 1921 contained the following articles (Sturley op cit vol 1 pp 101-105):
Article III
...
3. The carrier, master or agent of the carrier shall on the demand of the shipper issue a bill of lading showing, amongst other things -
(a) The marks necessary for identification of the goods as the same are furnished in writing by the shipper, provided such marks are stamped or otherwise shown clearly upon the goods, or on the cases or coverings in which such goods are contained, in such a manner as will remain legible until the end of the voyage.
(b) The number of packages or pieces.
(c) The quantity, weight, or measurement, as the case may be, as furnished in writing by the shipper.
(d) The apparent order and condition of the goods.
Article IV
...
4. Neither the carrier nor the ship shall be responsible in any event for loss or damage to or in connection with goods for an amount greater than [sterling] per package, or [sterling] per cubic foot, or [sterling] per cwt. (as declared by the shipper and inserted in the contract of carriage, whichever shall be the least) of the goods carried unless the nature and value of such goods have been declared by the shipper and inserted in the bill of lading. The declaration by the shipper as to the nature and value of any goods declared shall be primâ facie evidence, but shall not be binding or conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier and the shipper another maximum amount than mentioned in this paragraph may be fixed, provided that such maximum shall not be less than the figures above named.
[emphasis added]
It is to be noted that there was no reference to "units".
170 At the Hague Conference in August and September 1921, an early suggestion by shipowner interests was that the draft of Article IV rule 4 be amended to remove a mandatory amount and to leave the amount to the agreement of the parties – "as declared by the shipper and inserted in the contract of carriage": Sturley op cit vol 1 p 264. This was strenuously opposed by cargo interests on the basis that shipowners would insert a low sum in the bill. A mandatory sum was needed, it was said, to avoid the rules of responsibility being a "farce": Sturley op cit vol 1 pp 264-5. The cargo interests also strongly opposed a rule that provided for liability being the least of various alternative limitations which included one based on weight, thereby disadvantaging shippers of expensive, but not bulky, cargo: Sturley op cit vol 1 p 270.
171 The cargo interests were adamant that a mandatory and liberal package limitation was essential to reach agreement. The Hague conference almost broke down on the issue of limitation of liability: Selvig op cit pp 25-6 and Sturley op cit vol 1 pp 290-91 and 296 ff.
172 As ultimately agreed in Brussels in 1924, Article III rule 3 was refined from the draft Code prepared by the drafting sub-committee to its final form as follows:
3. After receiving the goods into his charge the carrier or the master or agent of the carrier shall, on demand of the shipper, issue to the shipper a bill of lading showing among other things – (a) The leading marks necessary for identification of the goods as the same are furnished in writing by the shipper before the loading of such goods starts, provided such marks are stamped or otherwise shown clearly upon the goods if uncovered, or on the cases or coverings in which such goods are contained, in such a manner as should ordinarily remain legible until the end of the voyage. (b) Either the number of packages or pieces, or the quantity, or weight, as the case may be, as furnished in writing by the shipper. (c) The apparent order and condition of the goods.
173 The Hague Rules in 1924 in Article III rule 3(b) used the expressions "packages or pieces" (de colis, ou de pièces). This phrase was brought to the Hague Conference in 1921. No discussion took place on the meaning of "pieces" in August or September 1921.
174 On the other hand, the provisions of Article IV rule 4 (of the original draft) and Article IV rule 5 (as it became by 1924) were the subject of significant discussion in 1921, 1922 and 1923. As I have said above, the first text submitted to the 1921 Conference did not contain the word "unit".
175 At the Hague Conference in August and September 1921, discussion took place as to bulk cargo and the need for weight to be considered or included and the need for something more than the word "package": Sturley op cit vol 1 pp 289-90 and CMI Travaux pp 456-57. On Thursday 1 September 1921, there was agreement during discussion as to (the then) Article IV rule 4, relevantly as follows (see Sturley op cit vol 1 p 307):
..."₤100, or the equivalent in other countries at the current rate of exchange, per package, unless the nature and value of such goods have been declared by the shipper before the goods are shipped and have been inserted in the bill of lading." ..."The declaration of the shipper as to the nature and value of any goods declared shall be primâ facie evidence, but shall not be binding or conclusive on the carrier." ... "By agreement between the carrier, master or agent of the carrier and the shipper another maximum amount than mentioned in this paragraph may be fixed, provided that such maximum shall not be less than the figures above named."
[emphasis added]
176 On the following day, 2 September 1921, just before approval was given to the final form of the 1921 Rules, the Chairman of the Conference, the Rt Hon Sir Henry Duke, identified a drafting amendment that had been made overnight to Article IV rule 4 to introduce the words "or unit". He said (Sturley op cit vol 1 p 322):
Now there is a slight alteration made to which I call your attention – "₤100 per package or unit" . As you know, there are goods as to which the Code will apply which are not described as per package, and the matter was raised yesterday, and upon consideration the Committee thought that by adding the words "or unit" the intent would be made clear – ...
(This passage is omitted from the CMI Travaux at p 467.)
177 The goods which "are not described as per package", but to which the Code was intended to apply and which were "raised yesterday", as referred to by Sir Henry Duke, can be seen to be there referred to in Sturley op cit vol 1 pp 286 and 292 and CMI Travaux pp 454-55 and 458: a car, and a boiler of 20 tons. The discussion on 1 September assumed such articles were covered by the limitation, though not packaged in any way. They were articles of cargo, shipped as such. From an examination of the record of 1 September 1921 (Sturley op cit vol 1 pp 277-314 and CMI Travaux pp 450-67) the reference by Sir Henry Duke to the "matter" raised the previous day as to "goods as to which the Code will apply which are not described as per package" and so covered by the word "unit" appears to be to items shipped as single units and not packaged in any way. This apparent intention of the introduction of the words "or unit" would have the words fulfilling a function not necessarily directly connected to the word "pieces" in Article III rule 3. In Article III rule 3 the aim was (if the carrier could check the cargo) to require the carrier to issue a bill showing the cargo – the packages or pieces – in a manner which would be binding to a degree. Here, in Article IV rule 4 (at this stage, later to become rule 5) a word was chosen to widen the notion of package to refer to, apparently, articles of cargo, shipped as such, to be subject to a limitation, as if they were individual packages.
178 By 1921 the word "package" had been dealt with in decisions: Whaite v Lancashire and Yorkshire Railway Co (1874) LR 9 Ex 67. The extent of packing required to enable something to be called a package was not easy to identify by terminological means, as is made clear by the many United States cases debating the point: T Schoenbaum, Admiralty and Maritime Law, 3rd edn, Hornbook Series, West Group, St Paul Minn., 2001, pp 634-641 and W Tetley, Marine Cargo Claims, 3rd edn, Bleis, Montreal, 1988, pp 882-85. The point is live in the United States because (as described later) Congress in legislating to apply the Hague Rules did not use the word "unit" in the phrase "package or unit", but used the expression "customary freight unit"; thus, in the United States, no simple expression "unit" extended the notion of "package" to unboxed items which were be shipped as whole units, as for example a car or a boiler: see Studebaker Distributors Ltd v Charlton Steam Shipping Company Ltd [1938] 1 KB 459. Criticism of such sterile debate about wrapping and the like can also be seen in the passages from R Rodière, Traité Général de Droit Maritime, Vol 2, p 302, cited by Ritchie J in Falconbridge Nickel Mines Ltd v Chimo Shipping Ltd [1974] SCR 933, [1973] 2 Lloyd’s Rep 469 at SCR p 952 (in translation). For a recent example of the debate about extent of wrapping necessary for a package under US COGSA see, in this Court, the decision of Emmett J in Chapman Marine Pty Ltd v Wilhelmsen Lines A/S [1999] FCA 178; 1999 AMC 1221. Thus, one can see a purpose in placing the words "or unit" to widen and clarify the concept of "package" to avoid debate about extent of wrapping and the like.
179 The text of Article IV rule 4 adopted on 3 September 1921 was as follows (Sturley op cit vol 1 p 339 and CMI Travaux pp 799-800):
Neither the carrier nor the ship shall be responsible in any event for loss or damage to or in connection with goods in an amount beyond ₤100 per package or unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before the goods are shipped and have been inserted in the bill of lading.
By agreement between the carrier, master or agent of the carrier and the shipper another maximum amount than mentioned in this paragraph may be fixed, provided that such maximum shall not be less than the figure above named.
The declaration by the shipper as to the nature and value of any goods declared shall be primâ facie evidence, but shall not be binding or conclusive on the carrier.
180 The Hague Rules of September 1921 were the subject of discussion amongst shipowning interests at the International Shipping Conference held in London from 23 to 25 November 1921: see the report of the conference in Sturley op cit vol 2 pp 167 ff. One of the matters discussed was what some saw as the generosity of the ₤100 limit: Sturley op cit vol 2 pp 223 and 233. However, as Professor Sturley said (Sturley op cit vol 1 p 11), whilst the shipowning interests continued to express the argument for freedom of contract, they were willing to accept the Hague Rules of 1921 to avoid widespread (and likely disparate) domestic legislation in countries around the world.
181 The Hague Rules of September 1921 were the subject of discussion at the ILA’s next conference in August 1922. The conference received reports on reception of the 1921 Rules and a report of the Maritime Law Committee on its work since 3 September 1921. It was noted that the 1921 Rules had been adopted by a number of steamship companies: see Sturley op cit vol 2 pp 247-48. Some cargo interests, however, were reported as not being happy with the September 1921 Rules. One of the complaints of some cargo interests was the inadequacy of the ₤100 limit: Sturley op cit vol 1 p 12.
182 It is plain from the material available that hard, and at times acrimonious, bargaining took place in the Hague Conference in August and September 1921. One of the issues still to be settled, from at least some shipowner nations’ perspectives and, indeed, from those of some cargo interests, was the amount of the limit. The essence of what was required in this respect by cargo interests was a limitation amount of a reasonable sum which could not be varied by contractual arrangements. Experience had taught them (as the Imperial Shipping Committee had recognised, and as Brown J in the United States Supreme Court and Isaacs J in the High Court of Australia had both plainly stated, though both only echoing the feelings of the international commercial shipper community) that freedom of contract in bills of lading gave shipowners wide freedoms, including the capacity to insert low limitation amounts. The force of the cargo interests’ demands for this sine qua non of agreement almost brought the attempts in August and September 1921 to reach international agreement to an end.
183 Unfettered freedom of contract is what brought worldwide maritime interests to the negotiating table from 1921. The fundamental demand of cargo interests was a reasonable regime which was not subject to the purity of freedom of contract.
184 On 10 and 11 October 1922 the CMI met at a conference in London: Sturley op cit vol 2 pp 267 ff and CMI Travaux pp 468 ff. There was reference in discussion (by shipowning interests) to the generosity of the ₤100 sum: Sturley op cit vol 2 pp 370-71, 414-5 and CMI Travaux pp 468, 469; and there was reference to the earlier attempt to have the limitation as a multiple of freight: Sturley op cit vol 2 p 398 and CMI Travaux pp 469. Some stated that the wording of Article IV rule 4 and the ₤100 limit should be left to the diplomatic conference: Sturley op cit vol 2 p 465 and CMI Travaux p 470. Others said that the matter had been settled. There was a rehearsing by cargo interests of the clear bargain that they saw had been made at the 1921 Hague Conference to set a reasonable limit that could not be "bargained" away in effect by insertion of terms in bills of lading: Sturley op cit vol 2 p 479-80 and CMI Travaux p 471. It was agreed that there would be no direct recommendation or representation to the coming diplomatic conference about Article IV rule 4 of the 1921 Hague Conference Rules (which had, because of other changes at an earlier place in the latest CMI draft, become Article IV rule 5). By the end of this conference, a draft was ready for diplomatic consideration.
185 In October 1922, shortly after the CMI Conference on 10 and 11 October in London, the Diplomatic Conference opened in Brussels. A sub-committee chaired by Judge Hough, the distinguished United States Admiralty judge, considered the draft of the Hague Rules incorporating the changes after the CMI conference earlier in the month. The sub-committee (sous-commission) met on 19, 20, 21 and 23 October 1922. Nothing of relevance concerning Article III rule 3 was discussed. The CMI had recommended the merging of paragraphs (b) and (c) in the 1921 Rule into a paragraph (b), which became the form of the 1924 agreement.
186 Article IV rule 5 (previously rule 4), the package limitation, was discussed. The amount was discussed; $100 was suggested: CMI Travaux pp 474-76. The Swedish delegate raised the question of bulk cargo: CMI Travaux p 477; and there were statements that bulk cargo was not a package (though bulk cargo, such as grain, was often transported in bags).
187 After the sub-committee had met, there were three plenary sessions on 23, 24 and 25 October 1922. At the third of those sessions (called the Seventh Plenary Session), on 25 October 1922, there was discussion of Article IV rule 5. Another attempt was made to reduce ₤100 to $100. Discussion took place as to the rate of exchange and the timing of that conversion. In discussing the working of Article IV rule 5, Judge Hough, the senior United States delegate, who had chaired the sub-committee, said the following about the workings of the declaration of value and freight rates (see Sturley op cit vol 1 p 372 and CMI Travaux pp 481-2):
In order that the other delegates may comprehend the situation, please let me offer a personal explanation. Regarding my colleague’s statement on the effect of this provision under the laws of the United States and under maritime commercial practices, I am in agreement with him. However, I was also prepared to accept this provision and I am still prepared to accept it for the following reason: This provision only applies when the declared value is greater than ₤100 per piece or item, and in such a case the rules allow the carrier to stipulate the freight charge that suits him. Taking into account the insistence of the shippers and the great influence they bring to bear, and considering also the ability of the shipowners to demand whatever freight-charges they like, I have to say (and I regret that my opinion is different from that of my esteemed colleague) that today it has become quite normal for the carrier to accept a higher declaration of value and, in consequence, to charge the freight rate that he wants. The bill of lading has become, in a way, a sort of insurance policy with an agreed value. I know that this is not a perfect analogy, but the idea is the same. It is for this reason that I am prepared to support the proposed text.
[emphasis added]
188 Though these remarks were directed to the commercial and legal working of the clause, the understanding of this highly experienced Admiralty judge that the ₤100 was "per piece or item" gives an insight into his views that "per package or unit" was referring to articles of cargo. Although, set in a practical shipping context, it is not clear that Judge Hough was going beyond a reference to items, which might be seen as shipping units – items that were to be shipped unboxed. There was no demur to the remarks of Judge Hough. As has been mentioned, however, the United States legislated in 1936 on a quite different basis of the purpose of the words "or unit".
189 The phrase "package or unit" (colis ou unité) was retained without any direct discussion as to the meaning of each word or the phrase.
190 The 1922 Conference adopted the following text of Article IV rule 5 as a draft convention (see Sturley op cit vol 1 p 375 and CMI Travaux p 486):
Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with goods in an amount exceeding 100 pounds sterling per package or unit or the equivalent of that sum in other currency unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading.
This declaration if inserted in the bill of lading shall constitute a presumption in the absence of proof to the contrary [prima facie evidence], which the carrier will be free to offer.
By agreement between the carrier, master, or agent of the carrier and the shipper another maximum amount than that mentioned in this paragraph may be fixed, provided that such maximum shall not be less than the figure above named.
The rate of exchange shall be taken to be the rate ruling on the day of the arrival of the ship at the port of discharge of the goods concerned.
191 It was recognised that finality had not been reached. From 6 to 9 October 1923, an expanded sub-committee met in Brussels. Certain drafting changes were made. One important change that was made concerned the exchange value of the monetary units. Article IX – "the gold clause" – was introduced. There was also discussion of the ₤100 being a limit of indemnity, not an agreed value for payment. There was no discussion of the phrase "package or unit".
192 In August 1924, the conference reconvened for the official act of concluding the convention and opening it for signature.
193 The final form of Article IV rule 5 was as follows:
Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with goods in an amount exceeding [sterling]100 per package or unit, or the equivalent of that sum in other currency unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading.
This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be binding or conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier and the shipper another maximum amount than that mentioned in this paragraph may be fixed, provided that such maximum shall not be less than the figures above named.
Neither the carrier nor the ship shall be responsible in any event for loss or damage to, or in connection with, goods if the nature or value thereof has been knowingly misstated by the shipper in the bill of lading.
The implementation of the Hague Rules
194 After 1924, some divergence of view in different countries occurred in the application and meaning of the word "unit". In 1936, the United States Carriage of Goods by Sea Act (US COGSA) was passed. It did not use the bare word "unit"; it used the phrase "customary freight unit". Section 4(5) stated, relevantly, the following:
5. 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 transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading shall be prima facie evidence, but shall not be conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier, and the shipper another maximum amount than that mentioned in this paragraph may be fixed: Provided, That such maximum shall not be less than the figure above named. In no event shall the carrier be liable for more than the amount of damage actually sustained.
[emphasis added]
195 A memorandum issued by the State Department in 1937 expressed the view that the textual variations from the Hague Rules were intended to clarify provisions in the Hague Rules which may be uncertain: Knauth op cit pp 130-31. A similar conclusion can be gleaned from the terms of ratification by the United States: see Colinvaux op cit p 175 ftnt 34 and p 180.
196 By this United States usage, a mandatory limit applied to bulk cargo: see generally G H Treitel and FMB Reynolds, Carver on Bills of Lading, 1st edn, Sweet & Maxwell, London, 2001, pp 527-28 and A Mocatta, M Mustill, S Boyd, Scrutton on Charterparties and Bills of Lading, 18th edn, Sweet & Maxwell, London, 1974, pp 442-3.
197 Some legislation, such as the Sea Carriage of Goods Act 1924 (Cth) and the Carriage of Goods by Sea Act 1924 (UK) simply adopted the wording of the Hague Rules. See also Selvig, op cit p 35 ftnt 2. Other national legislation slightly varied the wording: for example "package or other unit" in Scandinavia: Selvig, op cit pp 34-5.
198 There was discussion after 1924 by English, Scandinavian, German and French writers as to whether "package or unit" covered bulk cargo: Selvig, op cit pp 39-40.
199 The view that the word "unit" meant freight unit was rejected in Canada: Sept Isles Express Inc v Clement Tremblay [1964] Ex CR 213 and Anticosti Shipping Co v Viateur St. Amand [1959] SCR 372; [1959] 1 Lloyd’s Rep 352. (As to later cases, see also Falconbridge Nickel Mines v Chimo Shipping and NS Tractors v Tarros Gage 1986 AMC 2050.)
200 The view that "unit" meant article of cargo was supported by the dictum of Goddard J (as he then was) in Studebaker Distributors Ltd v Charlton Steam Shipping Company Ltd [1938] 1 KB 459. There, dealing with a clause limiting damages to $250 "per package" in connection with the carriage of unboxed automobiles, Goddard J said (at 467):
The goods are expressly stated to be unboxed, and the case was argued before me by both parties, who doubtless want a decision on what are known to be the actual facts, on the footing that the cars were put on board without any covering, or, to state it in another way, just as they came from the works. I confess I do not see how I can hold that there is any package to which the clause can refer. "Package" must indicate something packed. It is obvious that this clause cannot refer to all cargoes that may be shipped under the bill of lading; for instance, on a shipment of grain it could apply to grain shipped in sacks, but could not, in my opinion, possibly apply to a shipment in bulk. If the shipowners desire that it should refer to any individual piece of cargo, it would not be difficult to use appropriate words, as, for instance, "package or unit," to use the language of the Hague Rules.
[emphasis added]
201 If "unit" is not to mean freight unit, there may be a difference between "unit" as a shipping unit – even if not packaged, such as the car in Studebaker, or casks of wine in French decisions: Selvig, op cit pp 46-7, and "unit" simply as an article, however small or otherwise unsuitable for carriage by sea individually, such as for example a plant, or a bottle, absent some mechanism or attendant apparatus to make such items up for transport.
202 European jurisprudence appeared to view the meaning of "unit" as a shipping unit. Temperley, op cit, in rejecting the application of Article IV rule 5 to bulk cargo said at 78-80:
A difficulty has been thought to arise in connection with bulk cargoes. It has been suggested that the word "unit" in Article IV., Rule 5, might apply to the whole of a homogeneous cargo in bulk or to a parcel of bulk cargo, such as a hold or part of a hold of coal or coke, so that the absurd position would arise that a cargo owner could not recover more than 100l. for loss or damage even of the whole of the cargo or parcel unless the nature and value of the goods had been declared before shipment and inserted in the bill of lading. Each of the following alternative views of the proper construction of the term "unit" in the phrase "package or unit" appears to dispose of this suggestion.
1. The word "unit" connotes one of a number of things [See "unit" in the Concise Oxford Dictionary, or Webster’s New International Dictionary] rather than a thing standing by itself, and with reference to goods carried by ship, it does not seem appropriate to describe the whole of a cargo or parcel of cargo in bulk. Further, the natural interpretation of the word "unit" in the phrase "package or unit" appears to be that it has been added in order to cover parts of a cargo similar in a general way to a package, but not strictly included in that term, which properly implies something packed up or made up for portability and would therefore not include such a thing as a log of wood or a bar of metal. The word "unit" has, it is suggested, been added in order to embrace such things and not to extend the scope of the Rule to bulk cargoes or parts thereof. Moreover, the whole purpose of Rule 5, which is directed against excessive claims for things of undisclosed abnormal value, supports this limited interpretation of the word. 2. An alternative view for which there is much to be said is that, inasmuch as the term "unit" is commonly used to mean a standard of measure or enumeration, or one of a series of things split up either physically or notionally for the purpose of enumeration or measurement, the phrase "package or unit" here used must refer back to the particulars of enumeration or measurement which must be shown on the bill of lading as provided by Article III., Rule 3 (b),i.e., "the number of packages or pieces, or the quantity or weight." On this view a consignment described as "1,000 quarters of grain in bulk" would be composed of 1,000 units of measure. In practice, of course, the maximum liability of 100l. per unit would in such cases never be reached. This supports the view that the whole clause was primarily aimed at preventing excessive claims in respect of small packages of great value.
With a view to disposing of any doubt as to what is a "unit" in coal bills of lading, the Documentary Committee of the Chamber of Shipping have agreed with the British Coal Exporters’ Federation to insert in the appropriate place in their forms the words "the unit under Article IV. (5) being the ton." This expedient is no doubt valid, although the Rule does not expressly authorise the parties to agree their unit under the Rule, but only to agree a maximum sum per unit not less than 100l. gold value.
203 In Anticosti the Canadian Supreme Court said at SCR p 376, at Lloyd’s Rep p 358:
The word ‘unit’ would, I think, normally apply only to a shipping unit, that is, a unit of goods; the word ‘package’ and the context generally seem so to limit it. But there has been suggested and in some cases the Rule specifies the unit of the charge for freight. Neither the bill of lading nor the evidence here throws any light on the freight rate unit. There seems to have been only a flat charge of 48.00 dols. plus 3.00 dols. wharfage fee; there is no indication, for example, of a rate based on tonnage or any other weight quantity. The weight of the truck is shown, but to assume that the charge is calculated on a rate for 100 lb. would bring a fractional figure which is most unlikely to represent the actual basis. The sum of 500.00 dols. would scarcely be taken as a fair limitation of the value of the average 100 lb. weight of freight; in this case the amount would be the product of 102.16 units at 500.00 dols. each, or 51,000.00 dols. which seems disproportionate to any policy estimate to be attributed to the Rule. And the absence itself of any reasonable ground for extending the word to that type of measure, with the other considerations, excludes its application here.
We are left, then, to take the unit as being that of the article. That this may produce anomalies is indisputable, but the Rule does not seem to permit qualification."
[emphasis added]
204 Thus the two notions of "unit", as a "shipping unit", being an article or thing capable of being, in a practical sense (and before containerisation) shipped (for instance a tractor, or cask or sack), and as a "unit of cargo" being an identifiable article or thing whether or not it was in a form able to be shipped or in a form recognised as suitable to be viewed as a shipping unit, such as a watch, a bottle or a plant, can both be seen to be open (and sometimes barely differentiated in words used in discussion) as the meaning of "unit" in Article IV rule 5. The term "unit" was thus ambiguous.
205 In days before containerisation, few difficulties would, however, arise in concrete cases, at least as long as it was physically possible to regard separately the items or articles of cargo in question, since goods would ordinarily be packaged, arranged or "unitised" to facilitate carriage. Difficulties would only arise with respect to cargo where the differentiation of the cargo into articles or parts could only be done (in a sense abstractly) for example wood or cordage: Selvig op cit pp 51-52.
The 1960s conferences
206 The introduction from the 1950s of containerised sea carriage began to create new issues. First, the container itself could be recognised as a package, or it could be viewed in a sense as part of the ship. Secondly, the encompassing protection of the large metal box allowed cargo to be placed into the containers in a state of preparation for carriage which would not necessarily have been seen as appropriate packaging or preparation for carriage as general cargo in the absence of a container. Thirdly, the question arose as to whether the packages or units were what was in fact within the container (itself able to be seen as a package) or what was said on the face of the bill to be within the container. See generally, Schmeltzer and Peavy "Prospects and Problems of the Container Revolution" (1970) 1 JoML&C 203, and the discussion in Mitsui & Co Ltd v American Export Lines 636 F. 2d 807, 816 ff (2nd CCA, 1981).
207 After the Second World War the CMI initially considered two problems with the 1924 Rules: their scope of application (Article X) and the gold clause (Article IX). A sub-committee reported to the CMI Conference in 1959 in Rijeka. The conference instructed the sub-committee to examine other possible amendments to the 1924 rules.
208 At the next CMI Conference in 1963, in Stockholm, the report of the Committee on Bills of Lading Clauses included the following (CMI Travaux pp 515-6):
(c) Package and unit.
As was bound to happen the Sub-Committee found that its agreement on the 10,000 Poincaŕe francs was in some respects linked with the question of the definition of "package and unit".
In order to obtain greater clarity of meaning of the expression "package or unit" the following possible solutions were examined.
1. Only "package" as a general rule and as a subsidiary "freight unit" to cover bulk cargoes; 2. Only "freight unit"; 3. "Actual freight unit" as a general rule and as a subsidiary "customary freight unit" in lumpsum cases; 4. Only "shipping unit"; 5. Only "trade unit"’ 6. Only "weight/volume unit"; the limitation amount should apply to a certain rate per ton or per 40 cubic feet whichever produces the higher limitation figure.
The Sub-Committee examined this problem very carefully and discussed each of the suggested solutions. As a result of its investigations, however, the majority of the Sub-Committee found that no better basis for the limitation amount than the "package or unit" exists and that no general definition of the said words to cover every contingency can be made. The majority felt that no serious problems have arisen regarding the construction of the words "package or unit" in those Contracting States who have adopted the text of the Convention without any alteration on this particular point.
(It is to be noted that the possible solutions did not contain an alternative expressed by reference to individual pieces of cargo.)
209 There were six main alterations to the Hague Rules proposed in 1963: the package and unit limitation, the "Himalaya clause" problem, what voyages were covered by the Rules, the conclusive effect of the bill, the one year time bar, and due diligence: Diamond op cit pp 228-231.
210 At this point, most energy concerning the package and unit limitation was directed to modernising the [sterling]100 limit, this no longer being a liberal amount; nor was there international uniformity. The 1963 conference recommended the following changes to Article IV rule 5 (CMI Travaux p 844):
Article 2
S1. In Article 4 of the Convention the first sub-paragraph of paragraph 5 is deleted and replaced by the following:
"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 the equivalent of 10,000 francs per package or unit, each franc consisting of 65,5 milligrams of gold of millesimal fineness 900, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the Bill of Lading’.
S 2. In Article 4, paragraph 5 shall be added the following:
"The date of conversion of the sum awarded into national currencies shall be regulated in accordance with the law of the court seized of the case".
211 The draft of the various amendments agreed on in 1963 were submitted to a diplomatic conference in Brussels in May 1967. The above amendments met opposition. The Norwegian delegate identified the problem and suggested weight as the criterion for limitation (CMI Travaux p 70):
The second proposal is in regard to the so-called unit limitation. This is a point where international unity has never been achieved. The unit limitation rule has been interpreted differently in the different contracting States, not only by the judiciaries of those States but even by the legislators. Therefore, the unity aimed at has not been achieved and there is no harm in looking for a better solution. We believe that a better solution is to be found because the unit limitation in itself, apart from the fact that international unity has not been achieved, is not a good one. Since the unit limitation was introduced as a novelty in the Hague Rules, we now have other conventions on the transport of goods by rail, road and air. In all these conventions the simple kilogram limitation has been adopted. We believe that the time has come when maritime transport should join the other industries. There is no longer any reason for this maritime peculiarity. It is not even a good one – that is, it is not universal. It would be a pity if we now proceeded to a revision of the Hague Rules, a task which is undertaken only at intervals of 20 or 30 years, but did not correct these two flaws in the present Rules.
212 In 1967, Professor Van Ryn (who had chaired the sub-committee in 1963) as chairman of the relevant working party in 1967, reported as follows (CMI Travaux pp 524-25):
The work of the CMI had a second objective, and this was to give more clarity to the expression "per package or unit".
The report concluded as follows: The Commission has examined this problem very carefully and discussed each of the solutions proposed. At any rate, by way of result of the investigations, the majority of the Commission arrived at the conclusion that the best basis of limitation was "package or unit", and that no general definition of these words could cover every possible case. The majority were of the view that no serious problem has arisen in regard to the meaning to be attached to the words "package or unit" in the contracting States which have adopted the text of the Convention without modification on this particular point.
It is for this reason that the Draft Protocol contains no amendment on this matter.
However, it has become increasingly clear that the 1924 solution based on limitation of liability per package or unit is no longer satisfactory.
It has in any case always been imperfect, because in certain cases it leads to unacceptable results, while in others it provides no definite solution.
1) Liability limited per "package or unit" becomes derisory in the case of machinery or heavy engineering products such as locomotives and electrical transformers for example.
2) In the case of bulk cargoes it has been necessary to have recourse to some form of fiction and consider every ton or every item as separate units or packages, according to whether the freight is calculated per ton or per item.
The imperfect 1924 solution is becoming more and more cumbersome in view of present transport trends, both from the technical and legal point of view.
213 Thereafter, much consideration was given to replacing "package or unit" with weight. After it was clear that the phrase "package or unit" would remain, the position of containers was addressed. Over the previous decade, containers had, of course, begun to assume great importance in international trade. The Government of the United Kingdom put forward a proposal which was the subject of significant discussion (CMI Travaux p 541):
Amendment submitted by the Government of the United Kingdom
It is proposed that the following should be substituted for paragraph 1 of Article 2:
"1. In article 4 of the Convention the first sub-paragraph of paragraph 5 shall be deleted and replaced by the following:
"Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with goods in an amount exceeding the equivalent of Frcs. 10,000 per package or unit or Frcs. 30 per kilo of gross weight of the goods lost or damaged, whichever is the higher unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. A franc means a unit consisting of 65.5 milligrams of gold of millesimal fineness 900".
214 The American delegation was anxious not to have containers or pallets or similar articles of transport used to consolidate cargo considered packages at all for the limit. The US Government stated (CMI Travaux pp 549-50):
The United States, however, could not support limits of liability similar to those suggested in the United Kingdom proposal (Document No. 1, dated 5 October 1967) unless such limits were coupled with a provision that would preclude the possibility of containers, pallets or similar articles of transport used to consolidate cargo, being considered packages for purposes of the application of the limit in Article 4(5) of the Convention.
The object of such a provision would be to prevent palletized, containerized and other consolidated cargo from being treated less favourably in terms of limits of liability that these cargoes were treated prior to the advent of containerization or even now if these cargoes were not containerized or palletized. For example, a typewriter or television set valued at US $300 and weighing 20 kg would, if not containerized or palletized, be subject to a limitation of liability of 10,000 F.P. (US $662) under the British proposal. ...
215 The United States proposed a proviso in the following terms (CMI Travaux p 550):
...provided that a container, pallet or similar article of transport equipment used for consolidating cargo shall not be deemed to be a ‘package’ within the meaning of this paragraph.
(The phraseology of this proposal can be seen in the opening words of the final form of Article IV rule 5(c).)
216 The drafting committee on this topic (which contained Professor Van Ryn, and Lord Justice Diplock, as chairman) then considered the matter. Professor Van Ryn reported to the Sixth Plenary Session on 21 February 1968 as follows (CMI Travaux pp 550-53):
The first question to be resolved was whether it is appropriate completely to replace the present system in effect by a system of limitation of liability based solely on weight. To this question, the committee, after a lengthy discussion, replied negatively by a vote of 16 to 4 with 5 abstentions. In the end, every body agreed to admit implicitly that the committee marked its preference to replace the system of the 1924 Convention "limitation to [sterling]100 per package or unit" by what is called a mixed or alternative system: that is, this system will provide for a double limitation based on a fixed sum per unit or package, on the one hand, or a fixed sum per kilogram of gross weight of the lost or damaged goods.
It was this mixed system which, during our discussions of last May, was suggested by the Norwegian delegation. It was in this direction that the work of the committee proceeded and the crucial question, of course, is to know what would be the amounts acceptable for this double limitation.
Various proposals were made, in particular concerning the limitation per package or per unit. We dealt mainly with an amount of 10,000 Poincaré francs per package or unit. Another proposal was made to increase the amount to 125,000 francs. But after a discussion, this suggestion was rejected by a vote of 12 to 7 with 6 abstentions. It was then the limitation of 10,000 francs that has been adopted for the limitation per package or unit.
The second part of the option, the limitation based on gross weight of the goods lost or damaged, was less controversial and finally we opted – almost unanimously – for the amount of 30 Poincaré francs per kilogram of gross weight of the goods lost or damages.
...
The second new question that the committee had to study is a difficulty raised by the well-known problem of the shipment of containers.
We had to determine whether we had to consider a container, in other words, the container and the contents, as one package only or one unit only.
The United States delegation emphasized in a note submitted to the committee, the shocking consequences that would result from such a concept. For instance, in the case of typewriters worth $300 that weigh 20 kilograms, if these machines were placed in a container it could be considered with its contents as one unit or one package only.
Everybody recognized the shocking character of these consequences. A text was prepared to avoid them, and it was only finalized thanks to the persevering efforts of the drafting committee chaired by Lord Justice Diplock. This text has then been adopted, it is the one that appears in the next to last paragraph of the document that has been handed to you. The system established by this text is the following: the shipper will be able to declare in the bill of lading the packages or the units packed in the container, and if he opts for this option each package or each unit packed in the container will be deemed to be one package or one distinct unit as far as the limitation of liability is concerned. But if, to the contrary, the shipper does not opt for this option, the container will be deemed to be one package only, In practical terms, it goes without saying that the option will apply in each case depending on what the shipper chooses in keeping with his interests. The solution that will be adopted will naturally translate into a different freight rate. In this way, the shipper will always have the option to avoid the shocking consequences which have been criticized.
[emphasis added]
217 On the same day, Mr Loeff, from the Netherlands, put forward what he saw as a difficulty for carriers, which is redolent of the problem in this case. He said (CMI Travaux p 557):
...on behalf of the Netherlands Delegation I would very much like to say something about the so-called container clause. This clause was drafted because the American Delegation, as Mr Van Ryn said, argued that in the case of many packages being in a container, the carrier would, on a unit basis, be less liable than if those packages were not shipped in a container but separately. But now the proposed container clause has gone, in our opinion, too far the other way, namely that for every package in the container there will be a maximum of liability of Frcs. 10,000. Say, for instance, there are 500 typewriters in a container, more or less packed in wrappers, the liability of the carrier would be up to 500 times 10,000 Frcs., that is, Frcs. 5,000,000. That really cannot be the intention, because those typewriters, if there had been no container, would have been shipped, say, a dozen together in one wooden case, and the maximum liability would be Frcs. 10,000. But no shipper would present 500 packages separately because that would cost him much too much freight, namely a minimum freight for each package. Therefore the Netherlands delegation is of the opinion that the container clause, as it is now worded, will result in considerable ambiguity of interpretation: what is a container – what is a similar article of transport – what is a unit? Therefore, we recommend that this clause be taken back and re-considered by the committee, or otherwise the Netherlands Delegation anyway would vote against it. Thank you Mr President.
[emphasis added]
218 M. de Bresson from France echoed this dissatisfaction in the following terms: (CMI Travaux pp 557-58)
... during the general debate on article 2(1), the French delegation expressed the wish that the work of the conference would result, in the field of limitations of liability, in a system that would modernize the present Convention and would adapt to the evolution of international transport.
The French delegation does not think that the text that has been submitted to us today meets this objective concerning an essential point in modern maritime transport, that is the issue of containers. Indeed, the text that has been submitted proposes to consider a container either, if the elements of shipment are enumerated, as various elements or, to the contrary, if these elements are not enumerated in the bill of lading, as one single unit. This system obligates the shippers and carriers in practice to know the contents of the container in advance and obligates them also to declare the contents in the bill of lading.
219 The French proposed volume, rather than package, unit or weight.
220 On the same day, 21 February 1968, Lord Justice Diplock said the following (CMI Travaux p 561):
Secondly, a word about the container clause. This was one which caused the greatest possible difficulties with us and the greatest amount of discussion in the drafting committee over which I had the honour to preside. Let me say at once the clause in its present form is not the clause as I personally would have wished to have it, that is as my nation would have wished to have it. It may well be that it is not in the exact form that any other nation would wish to have it, but it was a compromise solution which it seemed to us and to the Commission as a whole was one which could attract the support of all the countries.
221 The United States’ delegate on the drafting Committee, Mr Schmeltzer then reiterated the difficulty of reaching a compromise (CMI Travaux p 561):
First I would subscribe wholeheartedly to the comments made by Lord Justice Diplock. Nobody who was not at the meeting of the drafting committee can realise how difficult it was to hammer our [sic: out] a compromise.
222 Mr Loeff then stated the following about the container clause (CMI Travaux p 563):
Mr Chairman, I should like to say a few words on the container clause, not to open a discussion, but just to put on record here, to the Plenary Session, what, as far as I know, is the general opinion of everybody who took part in the discussion on the container clause.
The fact is that the container clause envisages three possibilities. The first is that the bill of lading does not give any enumeration of what is contained in the container. The second possibility is that the bill of lading gives a complete enumeration of the contents of the containers, and the third possibility is that the bill of lading says for instance the contents are 10 cases of spare motor parts and further general merchandise.
Now I think everybody agrees, and I only say this to put it on record here, everybody agrees that the container clause covers those three possibilities and we think that is clear from the words "as far as these packages or units are concerned".
223 In the face of various proposed amendments to the text prepared by the drafting committee, Lord Justice Diplock, as chairman of the drafting committee, in a passage heavily relied upon by the cross-appellant, said the following at the Seventh Plenary Session on 22 February 1968 just before a vote was taken (CMI Travaux pp 570-72):
Next we had to consider the special problem of containers because it is mainly the problem of containers which has made it essential to turn over from a simple package basis to include a weight basis as well.
Now there are many intractable problems about containers but so far as this clause is concerned, there was only one quite simple problem. A container is a package which may contain other packages. It may contain for example 100 crates of various kinds of merchandise. The problem is where you have a container which contains inside it other traditional packages or units, is the liability going to be calculated upon the container as the package, which would almost certainly involve the weight basis, or is to be calculated on the individual packages within the container as if they were stowed in the traditional way in the hold?
Now the answer to that is a very simple answer. It is for the shipper and the carrier to decide whether they want the particular container to be treated as the package for the purpose of limitation of weight, or whether they want the smaller packages or units in it to be so treated; and no doubt when the latter alternative is taken, that is to say the individual packages are to be treated as separate units, a higher rate of freight will be payable than when the container is to be the unit – a higher rate of freight because the maximum liability, may itself be higher.
A very simple answer then: it is for the parties to the contract of carriage to decide what shall be the unit. Shall it be the container or shall it be any traditional units inside? What is essential is that into whoever’s hands the bill of lading may come, the hands of the consignee, of the banker who finances the transaction, or of the insurer, it will appear on the face of the bill of lading whether the package for purpose of maximum liability is the container, or the individual packages inside the container. No doubt, as I say, the freight rates will be different according to which is chosen. That is a matter of commercial judgement for the shipper and carrier to make, and it is as I understand it the desire both of shippers, and of carriers, and of container operators that they should have the option, to decide between themselves which shall be the package so that the rate may be so determined. This is the view for example of the British shippers and carriers whom I have of course consulted on this. It is also true as I understand of American carriers. If I may read a further passage from the letter from Sealand which Mr Schmeltzer quoted yesterday, this makes it quite clear. They say this "It would be a simple matter to establish a definition since a container is an instrument of transportation service and not a package" – that is where the container is being used by the shipowner as part of a hold – and then it goes on "except when the container is used as a package such as in the case of bulk liquids, or" – and these are the important words – "per container rates where the underlying carrier assumes no responsibility for the contents or methods of stowing within the container". So what we want to do is to leave open to the shipping industry, the shippers and the ship owners, to decide as a matter of business whether they want to get "per container rates" in which case the container will be treated as the package, or the ordinary freight rates in which the traditional packages within it will be treated as individual packages.
Now there are a number of ways in which one could give them that liberty of choice and give it in such a form that it will appear to anyone who sees the bill of lading which contract they have chosen. That is the whole point of the container clause which is paragraph (iv) of the Committee’s draft to enable anyone who looks at a bill of lading, relating to transport by container, pallet, or other similar method of grouping goods, to see whether the container is the package for the limitation clause, or whether the packages in it are. Under this paragraph all you will have to do is to look at the bill of lading and see, does it contain any figures of the numbers of packages other than the containers themselves. So with any bill of lading which goes into anyone’s hands it is possible at once to see whether it is the container which is the unit for the purposes of calculating the maximum liability - we are only dealing with maximum here – or whether it is any of the packages within it.
The clause is drafted in this way, because you may get in a bill of lading a variety of descriptions of goods in a container. You may get the simple one where it says a container "said to contain" so many packages, or "containing" so many packages, say 20 packages. You look at the bill of lading, you see the figure 20, and you know that each of those 20 packages is a unit for the purpose of calculating the maximum.
It may be, on the other hand – and this is the normal form of bill of lading in the case of the European short sea trades at the moment – one container "said to contain" general merchandise. There is only one figure on the bill of lading, therefore the container is the package for the purpose of calculating the maximum. But you may get the mixed case – and we are providing for the future and we want to deal with all cases – where the bill of lading says one container containing four crates of typewriters and general merchandise. Well, what is to be done then? The answer is provided by paragraph (iv). You look at the bill of lading and you see that there is the figure 4 relating to the crates of typewriters. Each of those crates of typewriters is a unit for the purpose of calculating the maximum. You look at the bill of lading and you see that there is also general merchandise without any figure in front of it, and then the clause says the container with the general merchandise, is to be treated as an other package. So this is a perfectly simple way of seeing from the bill of lading what the maximum liability of the shipper is for the goods. And it has this advantage – and this is essential in anything we are trying to do for commerce – that it leaves it to the shipper and the carrier to make their own bargain as to whether they want the higher maximum on the internal package basis and the higher freight, or the lower freight on the basis of the container and its contents being the package. Anyone looking at the bill of lading can tell which option has been exercised in respect of which goods in the container.
Now, that is the purpose of the container clause. One might have drafted it in a variety of different ways. We did discuss a number of possible drafts in the committee in order to get the effect which I have endeavoured to explain to you, and this was the compromise draft which was acceptable to all of us who were on the committee. And I would venture to suggest to you, because we had great difficulty in arriving at it, that even if you do not think the style of drafting is lapidary, you should accept it as long as it is pretty clear what the intent is, and I venture to say that the intention is what I have described to you.
That, then, is the basis of the clause. And you notice that each of the four paragraphs is closely interrelated. The whole clause is a package deal. The second and the third paragraphs deal with what I repeat is the ordinary case, because the maximum only applies in a very small minority of losses. These paragraphs deal with the ordinary case where the shipper is liable up to the value of the goods, and that will cover somewhere between 80 and 90 per cent of all goods shipped. Paragraph (i) deals with the maximum liability per unit of freight, whether those units are traditional packages either stowed separately or stowed within a container and enumerated in the bill of lading or are the container themselves. And paragraph (iv) deals with the way in which on looking at a bill of lading you can be sure which maximum, that of a container itself or a single package or that of all or any individual packages within a container, has been selected by the carrier and the shipper as a matter of commercial bargain between them.
Now, I have stressed the interrelation of those four clauses for this reason: there are a number of amendments which have been put forward suggesting alterations in one or other of the clauses, and in particular there is the amendment on which you will shortly be voting, of providing a top limit to the weight limitation – what has been called "the ceiling". It has been suggested by some speakers that there is no ceiling in the rules in the event of a total disaster. I would just remind you of this, that under the 1957 convention as to limitation of liability there is always the global limitation based upon the tonnage of the ship, and article 8 of the Hague Rules provides that nothing shall affect the rights and obligations of the carrier under any statute at the time being in force relating to the limitation of the liability of owners’ sea going vessels. So you have got in addition the disaster limitation under the 1957 convention.
...
Secondly, we are dealing with the shipper’s container in which all the goods are those of the shipper. So far as he is concerned there is the bargain which he can make which I have already described, depending on whether he wants to get the freight rates for which the container will be a single package or whether he wants the maximum recovery for each package of goods inside, in which case the number of such packages will appear in the bill of lading.
[emphasis added]
(Paragraph (iv) of the draft under discussion became Article IV rule 5(c) and paragraph (i) became Article IV rule 5(a) – see the texts of these paragraphs at CMI Travaux pp 580-81.)
224 Voting then took place.
225 A number of things can be said about these discussions on 21 and 22 February 1968. First, it is not entirely clear that what Lord Justice Diplock said about the freedom to change freight rates was the agreed view of the drafting committee: De Gurse "The ‘Container Clause’ in Article 4(5) of the 1968 Protocol to the Hague Rules", (1970) 2 JoML&C 131, 139-41. Secondly, in Lord Justice Diplock’s speech immediately prior to voting, the references to "unit" were not to individual articles or pieces of cargo within packages. What was discussed by Lord Justice Diplock was, in effect, the choice that could be made by the parties in container trade between the container or the packages inside. Lord Justice Diplock treated "unit" as eiusdem generis with package, hence his references to the "traditional packages or units". He clearly referred to units as shipping or packing units. Thirdly, the freedom of the parties to identify the package or unit for the application of the limitation and a consequential capacity to charge differential freight rates can be seen to give a flexible role to the contractual freedom of the parties, subject always, of course, to the carrier’s obligations under Article III rule 3, where the carrier has the reasonable means of checking the contents of the container. Fourthly, the discussion about the freedom to be given to the parties was not expressed to cut across the operation of Article III rule 3 or Article III rule 8. Fifthly, some discussion did advert to the possibility of individual items of cargo (eg typewriters) creating huge limits if they were individually the subject of the limit: see Mr Loeff’s comments, above. However, even these discussions were on the basis that these typewriters would be wrapped and packed individually in the container. Also Lord Justice Diplock’s speech, reflecting the views of the drafting committee, clearly viewed the unit as a shipping or packing unit. Sixthly, the clause was a compromise, and was an attempt to deal in a practical and flexible way in adjusting the relative interests of shipper and carrier, via a capacity to deal with matters affecting the operation of the limitation by what was on the face of the bill, by, in effect, agreement as to the form of that document, subject to Article III rule 3 and Article III rule 8.
Judicial Approach to the Hague Rules and Cognate Legislation
226 It is instructive to examine in a little more detail how courts dealt with the issue of containers, packages and units under the Hague Rules and US COGSA, both before and after 1968. These approaches illuminate, to a degree, the attempted solution and the search for simplicity in the 1968 Protocol.
227 The role of Article III rule 3 of the Hague Rules should not be ignored as part of this background. By Article III rule 3 the carrier was obliged (if demand was made by the shipper) to issue a bill showing, amongst other things, the "number of packages or pieces, or the quantity, or weight, as the case may be, as furnished in writing by the shipper", but only, relevantly, if the carrier "has had a reasonable means of checking" same.
228 Notwithstanding that Article IV rule 5 of the Hague Rules did not expressly direct itself to the bill, courts had recourse to the face of the bill to identify the packages or units in a containerised shipment for the purpose of Article IV rule 5. The Cour de Cassation so held in 1965: Tetley, Marine Cargo Claims, (3rd edn) p 641 ftnt 7 and p 643 ftnt 18. Some courts in applying Article IV rule 5 permitted recourse not only to the face of the bill, but also to associated shipping documents: Tetley op cit p 643 and Vegas Compania Anonima Venezolana 720 F.2d 629 (11th CCA, 1983).
229 Thus, if the bill of lading only referred to the container without identifying packages, the limit was in respect of one package: Rosenbruch v American Export Isbrandtsen Lines Inc 543 F.2d 967 (2nd CCA, 1976); and Binladen BSB Landscaping v M.V. ‘Nedlloyd Rotterdam’ 759 F.2d 1006 (2nd CCA, 1985). This was so irrespective of how many packages there may in fact have been inside the container. On the other hand, if the bill referred to the container and its contents by reference to a number of packages contained (or said to be contained (s.t.c.) if packed otherwise than by the carrier) the packages within, generally as identified on the bill, were the packages (though the plaintiff had to prove its loss): see the decisions of the French Courts referred to by Tetley op cit pp 641 ftnt 7 and 643 ftnt 18 and of the Dutch courts referred to by Colman J in the The ‘River Gurara’ [1996] 2 Lloyd’s Rep 53, 61; Standard Electrica SA v Hamburg Sudamerikanische Dampfschiffahrts - Gesellschaft 375 F.2d 943 (2nd CCA, 1967) where 9 pallets were packages, not the boxes thereon, the pallets being identified as the packages on the bill; Leather’s Best Inc v The ‘Mormaclynx’ 451 F.2d 800 (2nd CCA, 1971), [1971] 2 Lloyd’s Rep 476 where "1 container stc 99 bales of leather" was found to be 99 packages; Chellaram & Co Ltd v China Ocean Shipping Co [1989] 1 Lloyd’s Rep 413 (Carruthers J, New South Wales Supreme Court) "1 Container ... shipper’s load count & seal said to contain 900 CTNS. Blank cassette tapes." was 900 packages; The ‘Tindefjell’ [1973] 2 Lloyd’s Rep 253 (Collier J, Federal Court of Canada) "1 container containing [number] cartons of shoes" was the number of cartons identified; Haverkate v Toronto Harbour Commissioners (1986) 30 DLR (4th) 125 (Rosenberg J – Ontario High Court of Justice) "1 x 40’ cont. ... said to contain 417 packages personal effects" was 417 packages.
230 For a time in the United States, a "functional economics test" was employed, linking the new technology and methods of containers to past practices. In Royal Typewriter Co v M.V. ‘Kulmerland’ 483 F.2d 645 (2nd CCA, 1973), [1973] 2 Lloyd’s Rep 428, the United States Court of Appeals for the Second Circuit said at 431:
...the first question in any container case is whether the contents of the container could have feasibly been shipped overseas in the individual packages or cartons in which they were packed by the shipper. Here it is plain that they could not feasibly have been shipped in those individual cartons; adding machines are a delicate product – their little cardboard cartons, stapled and paper-taped, had never been shipped as such; in the days before containers they were shipped in wooden crates or cases containing 12 to 24 each. The metal containers in which the cartons were shipped in lots of 350 per container are essentially to be likened to the wooden crates or cases of days past; the use of the metal container of convenience to shipper and carrier alike was selected by the shipper and used without carrier objection. This court, in a different factual context in Nichimen Co v M V Farland, 462 F. 2d 319, 334 (2d Cir. 1972), referred to Black’s Law Dictionary 1262 (4th ed. 1951), which defines a package as a "bundle put up for transportation or commercial handling ... a thing in form suitable for transportation or handling." Until the adding machine cartons were packed in the container in question they were not suitable for ocean transportation or handling.
If the goods inside the container were not in a suitable form for breakbulk shipment the container was the package: see the explanation of the test in Matsushita Electric Corp of America v SS Aegis Spirit 414 F.Supp 894, 902 (1976), per Judge Beeks. The Court in Kulmerland explained Leather’s Best by noting that "bales" could have been shipped individually. It should be noted also that the bill in Kulmerland simply stated: "1 Container said to contain machinery"; thus, the case could have been decided on the lack of identification of any packages, other than the container: Mitsui & Co Ltd v American Export Lines 636 F.2d 807, 817 (2nd CCA, 1981).
231 The functional economics test was heavily criticised, and swiftly abandoned, in the United States, including by the Second Circuit Court of Appeals where the test had originated: Matsushita v SS Aegis Spirit and Mitsui v American Export Lines; Monica Textile Corp v SS Tana 952 F. 2d 636 (2nd CCA, 1991).
232 This rejection of the functional economics test reflected, in part, a predilection of United States courts to treat containers, at least those supplied by the carrier, as part of the ship: Matsushita v SS Aegis Spirit at 907, where Judge Beeks referred to them as detachable stowage compartments. Further, and importantly for one of the arguments of the cross-appellant and cross-respondents in this case, the Court of Appeals in Mitsui v American Export Lines recognised the inappropriateness in modern usage (especially in circumstances where the shipper provides its own container) of expecting the shipper to pack or unitise cargo within the container in the same way it would have done so in a by-gone era before the use of containers. The Court said at 818:
As the lower courts and commentators recognized, the clear holding of Leather’s Best was that carrier-furnished containers whose contents are fully disclosed are not COGSA packages. Under the functional economics test, however, many such containers would be COGSA packages, since few shippers would incur the wasteful expense of supplying packaging unnecessary for container shipments simply to avoid having the container deemed the package. (This is especially so since in most cases they would already have fully insured.)
233 (I leave aside the question, which might be posited in defence of the approach in Kulmerland, whether the need to identify a "package" by reference to earlier cargo handling practice may not have been embedded within US COGSA as a matter of statutory construction as the adoption of a word ("package") from the 1924 Hague Rules which was agreed upon over thirty years before the advent of containers. Though, in this respect, see what was said by Judge Beeks in Matsushita v SS Aegis Spirit at 907.)
234 The general international unanimity of the importance of the terms of the bill (or, in some cases, other shipping documents) to the ascertainment of the package (or unit) under Article IV rule 5 of the Hague Rules (notwithstanding the fact that the rule did not in terms make the bill relevant) was broken by the views of a majority of the English Court of Appeal in the appeal from Colman J in River Gurara (Owners of Cargo Lately Laden on Board) v Nigerian National Shipping Line Ltd [1998] QB 610. There, Phillips LJ (as he then was), with whom Mummery LJ agreed, rejected the parties’ capacity under the Hague Rules to agree upon the package by identification in the bill. Rather, Phillips LJ said it was the packages or units that were in fact in, or able to be proved to be in, the container which were the packages. Hirst LJ agreed with Colman J.
235 Before leaving these cases on the Hague Rules and cognate legislation it is appropriate to note one caveat in respect of the above American jurisprudence and one related aspect of the judgments in The ‘River Gurara’. The United States cases concern packages, not units. To the extent (as he did) that Colman J found United States decisions (in particular Leathers’ Best, Matsushita v SS Aegis Spirit, Mitsui v American Export Lines and Binladen BSB) persuasive, it should be recognised that these cases dealt with packages (not units) being described on the face of the bill. Thus, in Binladen BSB, where the bill stated: "Reefer Container said to contain: 7990 live plants", the Court of Appeals for the Second Circuit rejected the cargo interest’s claim that there were as many packages as plants. To be a reference to a package on the bill, it was held that there needed to be a word connoting preparation, in some way, of the goods for transport, for example by use of such words as "packages", "bundles", "cartons" or the like: Binladen BSB at 1013. The Court said that whilst some of the plants had been prepared for transport such that, if properly described in the bill of lading, they could have been treated as packages, there had been no such terminology used in the bill. The consequences of language on the bill being inapt to connote a package can be seen from the following extracts from the Binladen BSB judgment at 1014, 1015 and 1016:
But the word "plant," standing alone in a bill of lading, does not describe an item that has been packaged for transport. Nor can a carrier that has agreed to transport a container described in the bill of lading as filled with a certain number of "live plants" reasonably infer from this description that each plant has been so packaged. Some plants may be simply stowed or stacked without potting, tying, wrapping or other preparation for shipping, in which event they are not individual packages but rather "goods not shipped in packages." Cf. Watermill Export, Inc. v MV "Ponce," supra 506 F. Supp at 617 (loose potatoes shipped in trailers); see also Mitsui & Co, Ltd v American Export Lines, supra, 636 F.2d at 821-22 (stacks of ingots). Indeed, the testimony of Ramirez, the owner of the nursery and the person who loaded the Houston container, amply documents that some plants can be transported without packaging, or packaged singly or in groups of up to 25 or more. According to the bills of lading in the present case, which constitute the agreements between the parties, each of the "plants," as so described, cannot be viewed as an individual COGSA package. This case is therefore analogous to Sperry Rand Corp. v Norddeutscher Lloyd, 1973 A.M.C. 1392, 1398-99 (S.D.N.Y.), in which Judge Lumbard was confronted with a bill of lading that listed the "number and kind of packages" as "1 container" and described the contents as 9,500 electric shavers. Although it was shown at trial that there were actually 190 cartons packed with 50 shavers each, Judge Lumbard correctly refused to hold the cartons (and the shavers) to be packages under COGSA and instead held the container to be the package.
...
Upon balancing these conflicting considerations we are satisfied, notwithstanding our traditional reluctance to treat a container as a COGSA package, that the terms of the bill of lading should govern; if the bill of lading lists the container as a package and fails to describe objects that can reasonably be understood from the description as being packages, the container must be deemed a COGSA package. This rule not only accords with the 1968 Brussels Protocol, supra, but has the virtue of certainty. As we have noted, "only when the meaning of package is predictable will the parties concerned know when there is a need to place the risk of additional loss on one or the other accordingly." Aluminios Pozuelo, Ltd v SS Navigator, supra, 407 F.2d at 156.
When a bill of lading specifies the number of containers but does not reveal the number of packages, inside, the only certain figure known to both parties is the number of containers being shipped. In such event the carrier cannot be charged with knowledge of whether the container is filled with packages, with unpackaged goods, or with some combination. The carrier should not be expected to assume the risk inherent in such uncertainty facing liability that might vary by orders of magnitude depending on the exact packaging of goods inside a sealed container, even though this information was not revealed to it by the bill of lading.
We accordingly hold that, when the bill of lading does not clearly indicate an alternative number of packages the container must be treated as a COGSA package if it is listed as a package on the bill of lading and if the parties have not specified that the shipment is one of "goods not shipped in packages." Maximum damages in such a situation then are $500 per container, irrespective of the contents. Although this rule could drastically reduce the damages available to shippers in some situations, it does not depart from the principle that the limited liability clause in COGSA was designed to "‘set a reasonable figure below which the carrier should not be permitted to limit his liability,’" Mitsui, supra, 636 F.2d at 817 (quoting Leather’s Best, supra 451 F.2d at 815). It simply recognizes that within the constraints of the lower limit on liability set by COGSA, the allocation of risk in shipping is a matter governed by contract, and one best determined by the explicit agreement of the parties. The ability of the shipper and carrier to contract fairly for the division of liability between themselves depends in turn on disclosure of the relevant information about the packaging of the goods being shipped. The shipper retains the power to protect itself by stating in plain terms on the bill of lading the number of COGSA packages being shipped. Any other interpretation would prevent the carrier from accurately assessing its potential liability at the time it contracts to transport the goods.
[emphasis added]
236 These are influential passages for the cross-appeal. They emphasise that under US COGSA it is necessary to identify objects to be reasonably understood to be packages made up for transport. If the same were required of units, it would be necessary to identify the units in which the goods are packed in the container for transport, whether they are packed in the container as articles or in or by crates, ties etc.
237 The passages in Binladen BSB also emphasise that the focus upon the face of the bill permits the parties to have control over the limitation regime: if the shipper wants to have an extended limitation amount it can ensure that the bill identifies the packages in which the goods are packed or arranged, or declare a higher value.
238 The Court in Binladen BSB was of the view that its approach was in accordance with the 1968 Protocol. This view was echoed in Hayes-Leger Associates Inc v M/V Oriental Knight 765 F.2d 1076, 1080 (11th CCA, 1985).
239 (For recent decisions reflecting the approach in Binladen BSB and also reflecting the importance under US COGSA of packaging, see Alternative Glass Supplies v M/V Nomzi 1999 AMC 1080 (SDNY); Orient Overseas Container Line (UK) Ltd v Sea-Land Service Inc (The Sealand Quality) 122 F Supp 2d 481 (SDNY); and American Home Assurance Co v M/V Crowley Ambassador 2003 AMC 510 (SDNY).)
240 Colman J in The ‘River Gurara’, in dealing with the unamended Hague Rules, did not specifically refer to the word "unit"; but his views were clearly intended to apply to both "package" and "unit". His views are contrary to treating unit as meaning an individual article or piece beyond an item described on the bill as shipped as such, or as contained in some described shipping unit. Colman J said the following at 62-3:
For these reasons I have no hesitation in concluding that the construction of art. IV, r. 5 of the Hague Rules which the English Courts should now adopt is that which has been reached by the American, Canadian, Australian, French and Netherlands Courts. The reasoning supporting those judgments shows that the conclusion is consistent not only with the language but also with the policy of the Hague Rules.
I therefore hold that where: (i) separately packed items have been loaded into a container by the shipper or his agents and the carrier has had no opportunity to tally or verify the contents of the container; and (ii) the carrier or his agent signs a bill of lading which, as here, describes under the heading "container No.s" the identification numbers of the various containers received and states under the heading "Number and Kind of Packages; Description of Goods" words such as "1 x 20΄ container stc: 8 cases" of goods there are for the purposes of art. IV, r. 5, eight packages and not one.
Moreover, if the contents of the container are described by words which leave it unclear whether they are separately packed for transportation, the container will be the package and not the individual items.
If the contents of the container are described in the bill of lading as said to contain so many separately packed items which in turn are said to contain a specified number of separately packed items, the number of packages will be the smallest category of separately packed items so described. For example, in the present case, typical of several bills of lading is one (interest 32) which bears the words "1x20’ container STC: 8 pallets STC": 1855 bundles Ghana Makore and Sapele Veneer". The correct approach is clearly to treat the bundles and not the pallets as the packages under art. IV, r. 5. Once the verification principle has been rejected and it is accepted, following the authorities to which I have referred, that it is the intention of the parties as expressed in the bill of lading which is the main determinant of what is to be treated as a package, there is no logical justification for confining consideration as packages, to the larger separately-packed items identified in the bill of lading. The insertion in the bill of lading of the lesser separately-packed items, although they are bound together on pallets or in similar consolidated groups, is a clear indication that those lesser items are to be treated as the unit of measurement for limitation purposes.
[emphasis added]
241 That Colman J’s views applied to both package and unit is clearly revealed by his reference to, and approval of, the judgment of Leggatt J in Bekol BV v Terracina Shipping Corporation 13 July 1988, unreported. Colman J set out the description of that case as follows at p 59:
There was in that case an issue whether shipowners were entitled to limit their liability under art. IV, r. 5 in respect of the loss of nine bundles of timber. The plaintiffs receivers’ argument was that each of the individual pieces of timber within each of the bundles represented a "unit" for the purpose of art. IV, r. 5. The bundles were not enclosed in packing but merely banded with steel straps. The bills of lading described the goods under the heading "Number and kind of packages, description of goods" as "X bundles stc (said to contain) Y pieces". Mr Justice Leggatt held that each bundle was a separate package.
242 In Bekol Leggatt J at p 3 set out the respective arguments:
The plaintiffs contend that the individual pieces of wood represented units within the meaning of the Rule, with the result that the limitation of liability is to $100 per piece of wood. The defendants, on the other hand, contend that those bundles into which the pieces of wood were made up, each constituted a package within the meaning of the Rule. The pieces of meranti were collected together in bundles and secured by means of steel straps as appears most graphically from a photograph put in evidence. Save for the steel straps, there was no other covering upon any of the bundles.
243 Leggatt J then said at p 3:
In my judgment, a piece of meranti such as is the subject of the present dispute, of a quality known as "Select and better", measuring typically two or three inches by four or five inches in cross-section and many feet in length, viewed by itself is a single item and therefore capable when considered in isolation of being called a unit. If pieces of this kind were carried loose, each of them might be said to constitute a unit; but when, as here, a number of pieces are fastened together with steel straps they become a composite shipping unit. In the bills of lading the timber was entered under the heading "Number and kind of packages, description of goods" in the form "x bundles stc (standing for ‘said to contain’) y pieces." The actual number of pieces which made up the gross tonnage in each bundle shipped was of no moment. The Oxford English Dictionary defines "package" as "a bundle of things packed up, whether in a box or receptacle, or merely compactly tied up." It would be difficult to devise a more accurate or apt description of the bundles of wood here in question.
In my judgment, therefore, each bundle was a package or unit of goods within the meaning of Article 4, Rule 5 of the Hague Rules. The limitation of liability to [sterling]100 applies to each of the nine missing bundles, resulting in an award in favour of the plaintiffs under this head of the sum of [sterling]900 instead of the sum of 13,019.56 Dutch florins claimed.
[emphasis added]
244 The following passage in the reasons of Phillips LJ in The ‘River Gurara’ v Nigerian National Shipping Line sets out his Lordship’s reasons for refusing to follow the jurisprudence referred to by Colman J. It illuminates what might be said to be the important consequences of allowing the face of the bill to determine the question. Indeed it is a passage strongly relied upon by the cross-appellant in the cross-appeal to underpin its arguments as to the primacy of the freedom of contract. Phillips LJ said at 624:
While I appreciate the desirability of international uniformity, I am unable to accept that the basis of limitation under the unamended Hague Rules depends upon the agreement of the parties as to what constitute the relevant "packages", as represented by the description of the cargo on the face of the bill of lading. In according to the unamended Hague Rules the same effect as the Protocol the American courts were, in effect, legislating, as was recognised by the remarkable decision of the Second and Eleventh Circuits to apply their interpretation prospectively only. I do not believe that it is an interpretation that can properly be given to the unamended Hague Rules. My reasons echo those of Judge Beeks in The Aegis Spirit [1977] 1 Lloyd’s Rep 93 (1) The Hague Rules limitation provisions were designed to prevent shipowners imposing on shippers unrealistically low limits of liability. If the parties are permitted to agree their own definition of "packages", shipowners will, by applying that definition to containers, succeed in evading the minimum limit of liability that the Hague Rules aimed to secure. The American courts repeatedly held that so-called "boilerplate" clauses in bills of lading, stating that containers were to be deemed to be "packages", were ineffective as being in conflict with the C.O.G.S.A. limit. I find it illogical that they held that shipowners could achieve the same result by ensuring that the number of containers, but not of the packages within them, should appear on the face of the bill of lading. (2) Statements in a bill of lading describing the cargo shipped do not constitute an agreement between the parties as to the identity of that cargo.
The Cross-Appeal
245 It is convenient to consider the cross-appeal first. The terms of the notice of cross-appeal were as follows:
1. The Respondent Cross Appeals from that part of the judgment of [the primary judge] in which her Honour concluded that the container described on the Bill of Lading was not the relevant "package or unit" for the purposes of Article 4 Rule 5 of the Amended Hague-Visby Rules.
Grounds:
1. Her Honour erred by finding that the part of Clause 21 of the Contract of Carriage set out in paragraph 58 of her Honour’s judgment was prohibited by Article 3, Rule 8 of the Amended Hague-Visby Rules.
2. Her Honour erred by not finding that the parties had, by the Contract of Carriage, agreed that what was to constitute the relevant package or unit for the purposes of Article 4 Rule 5 of the Amended Hague-Visby Rules was the Container.
3. Her Honour erred by not finding that for the purposes of Article 4 rule 5 of the Amended Hague-Visby Rules that the number of packages or units had been enumerated in the sea carriage document as the container, being one package or unit.
4. In consequence of Grounds 1, 2 and/or 3, her Honour erred in failing to find that the Respondent’s liability was limited to either 666.67 units of account per package or unit, or 2 units of account per kilogram of gross weight of the goods lost or damaged, whichever was the higher, which in this instance would have been 17,000 units of account, given that 8,500 kilograms were shipped.
The approach of the primary judge
246 The primary judge noted that no attempt was made by the plaintiffs to rely on Article 4 rule 5(a) on the basis that there were, in the container, in fact, about 2,000 packages. Reliance was only placed on rule 5(c), dealing specifically with container carriage. No such attempt was made before us. That approach to the problem properly accords with a view that where "a container, packet or similar article of transport is used to consolidate goods", rule 5(c) alone regulates the assessment of how many packages and units there are for the purposes of limitation.
247 Her Honour construed "unit" as apt to refer to an individual piece of cargo irrespective of whether it was, or was said to be, a package or shipping unit. Her Honour read Article 3 rule 3 and Article 4 rule 5 together. Her Honour drew support from Falconbridge, Studebaker and Mr Diamond’s article to found the conclusion that an enumeration of the pieces or articles of cargo will satisfy the notion of "unit". Her Honour found the bill to enumerate 200,945 units of cargo. Her Honour then concluded that clause 21 of the bill was contrary to Article 3 rule 8, and so null and void.
The submissions of the parties
248 The cross-appellant’s submissions operated at a number of levels. It was said, as is clear from Article 4 rule 5 of the Amended Rules, that the container is clearly able to be the package, (the jurisprudential and policy debates about the container as a part of the ship or as protection for cargo in the nature of packaging having been settled by the compromise of 1968.)
249 It was said that the 1968 Protocol gave the parties freedom to agree contractually on what is, and what is not, the package or unit. Reference was made to the reason of Phillips LJ in River Gurara v Nigerian National Shipping Line and to Lord Justice Diplock’s explanation of the operation of Article IV rule 5 just before the vote at the 1968 Conference. In this context, emphasis was placed on the vigilance shown by courts to keep people to their bargains: Pan Foods Co Importers & Distributors Pty Ltd v ANZ Banking Group Ltd [2000] HCA 20, 74 ALJR 791, 794 [24], and to give effect to the intention of the parties, objectively construed, in their contracts: Wilson v Anderson [2002] HCA 29, 190 ALR 313 at [8] and McCann v Switzerland Insurance Australia Ltd [2000] HCA 65, 203 CLR 579. Thus, it was said, effect should be given to the unfettered contractual intent of the parties reflected not only by the face of the bill, but also by clause 21.
250 It was said that the following aspects of the bill revealed that the parties had plainly agreed that there was one package or unit the container: first there was clause 21; secondly, the enumeration "1" in the column headed "no of Pkgs"; thirdly, what appeared under the heading "Description of Goods" was agreed not to be "part of the bill of lading terms and not binding on the carrier"; and fourthly, the plain intention of the parties to make clear that what was said to be in the container had not been checked by the carrier and was not binding on it, thus making clear that there was no representation or agreement by the carrier as to these matters: The ‘Atlas’ [1996] 1 Lloyd’s Rep 642 and The ‘Mata K’ [1998] 2 Lloyd’s Rep 614.
251 Thus, the cross-appellant asserted that the first error of the primary judge was the failure of her Honour to consider the bill and its agreed terms. So, it was said, a clause such as clause 21, was not contrary to the Amended Rules for the purposes of Article 3 rule 8; rather, it was part of the consensual agreement of the parties for the purposes of and, indeed, contemplated by Article 4 rule 5 (c).
252 The second error asserted was as to the meaning of "unit". The first aspect of this argument was a repetition of the above argument as to the effectiveness of the parties’ capacity to agree. There was evidenced, it was said, a contractual agreement that the container was the package for the purposes of the limitation of liability governed by Article 4 rule 5. The second aspect of the argument of the second asserted error of the primary judge was that the word "unit" did not mean "piece". The cross-appellant’s written argument in this respect, was as follows:
Further, it is, with respect, difficult to conceive why the parties would use the word "pieces" instead of "package" or "unit", if they mean it to designate "package" or "unit". That is particularly so where the form provides, in the column to the left, for the number of packages. As has been submitted, how can the parties be said to have agreed that there are a certain number of "units" when one of them expressly disavows such an agreement in the document?
253 In his address, Mr Sullivan QC, senior counsel for the cross-appellant, developed these submissions by saying that the word "unit" required some form of capacity to be handled; in effect that it was a unit or article capable of being shipped.
254 The cross-respondents emphasised that the argument of the primacy of the binding agreement of the parties as to what were the packages and the purported exclusion of what was under "Description of Goods" made ineffective the long-standing practice of bills carrying "said to contain". "Enumeration", it was submitted by the cross-respondents, was just that, not with the superadded requirement of contractual agreement as to accuracy of enumeration.
255 The cross-respondents relied on the proposition that "unit" means any article or piece of cargo not being a package; reliance was placed on Mr Diamond’s article, Falconbridge and passages from the discussions in the 1960s.
The disposition of the cross-appeal
256 In my view, the cross-appeal should be allowed. I am of the view that the primary judge erred in equating the enumerated pieces posters and prints with "units" for the purpose of Article 4 rule 5(c) of the Amended Rules. I do not, however, accept all of the submissions of the cross-appellant. In particular, I reject the submission that the "enumeration" contemplated by rule 5(c) is the contractually binding enumeration in the manner contended for by the cross-appellant.
257 The first issue on the cross-appeal can be expressed as follows: Must the parties agree to the enumeration as accurate? Or, put another way, are what might be called "said to contain" qualifications by the carrier based on its ignorance of the contents of the shipper-packed container effective to deny the operation of multiple limitations by rule 5(c)? I would answer both those ways of posing the issue, "no".
258 In construing Article 4 rule 5(c) one gives primacy to the words used, setting the rule in its context in the amended convention, with a recognition of its historical context and background, in the manner referred to earlier, and giving weight to interpretations of courts in other countries of cognate provisions. It should also be recognised that the discussions about, and the compromises embodied within, the 1924 Rules and the 1968 Protocol were made by people experienced in the business and law of shipping and trade, and the practical aspects thereof.
259 As discussed earlier, what brought the interests and nations to the bargaining over words in the 1920s was the commercial unfairness of contracts of carriage, sometimes effectively of adhesion, and the fragmentation and diversity of responsive national legislation and jurisprudence. Article IV rule 5 of the Hague Rules was an attempt to mandate a fair, even liberal, minimum liability on the carrier, irrespective of contract, if the carrier had otherwise failed to comply with its obligations. The purity of freedom of contract had led to the problem; it was not the solution.
260 The discussions and compromises of the 1960s leading to the 1968 Protocol reflect an intention, to an extent, to put in the hands of the parties the ability to regulate their relationship. This was not so much a desire to revert to the pre-1924 purity of contract, but to allow for flexibility as a means of enabling a compromise to be reached. Thus, where a container was employed, the parties were left free to "enumerate" in the bill the numbers of packages or units. The question to be answered is whether there has been an "enumeration" of the kind contemplated by Article IV rule 5(c). If there has been, a clause in the bill which provides for a different position will offend Article III rule 8.
261 The evident purpose of Article IV rule 5(c) was to make the enumeration in the bill effective – hence the "deeming". The enumeration would generally be on the face of the bill. That was how the delegates in 1967 and 1968 saw it. If the reader, whether consignee, insurer, banker or other commercial person, looked at the face of the bill, he or she would see the answer: cf Homburg Houtimport BV v Agrosin Private Ltd (The ‘Starsin’) [2003] UK HL 12, [2004] 1 AC 715 [9]-[10], [45]-[47] and [74]-[81]. This simplicity of presentation of the issue was integral to how Lord Justice Diplock described the operation of the clause in his speech in 1968.
262 I see no reason to read into the word "enumeration" in rule 5(c) a requirement, beyond its ordinary meaning of identifying the number, that the enumeration must be contractually agreed to be binding. This was not the freedom to which Lord Justice Diplock was referring in 1968 in his explanation before voting took place. If it had been it would have taken the position back, in a significant way, to 1923. To the United States Government and delegation, which had begun the negotiations with the position that containers and pallets could never be packages, and probably to others, such an approach would, in all likelihood, have been an outrage. It would have meant that a carrier could issue a bill which stated "1 container said to contain 9 packages" with a disclaimer on the bill as to contents and bring about the result that the reference to 9 packages was not contractually binding, and thereby succeed in an argument that there was no enumeration of packages and so the container was the package. It would have meant, effectively, that in "said to contain carriage" – where the shipper packed the container, what was "enumerated" on the bill as the number of packages or units would not be an enumeration for Article IV rule 5(c), and there would be one package, the container, unless the carrier was prepared to agree to the contractually binding nature of the enumeration. Lord Justice Diplock’s speech recognised the operation of rule 5(c) to "said to contain carriage" and does not, in my view, support the proposition that it was intended that the parties be free to enumerate the packages or units, but then contractually agree that that was not an enumeration for the purposes of the rule.
263 In my view, "enumeration" means setting out of numbers (in words or numbers) on the face of the bill. If the carrier issues a bill in which there is an enumeration (whether because it is obliged to do so by Article III rule 3, or not) Article IV rule 5(c), in that respect, will be satisfied.
264 In my view, it would be foreign to the terms of the rule and the history of its development in the twentieth century to superadd a requirement that the enumeration be contractually agreed to be an enumeration or an accurate enumeration (the cross-appellant’s argument encompassing both). The freedom which was discussed in 1968 and which Article IV rule 5(c) contemplates was and is the placing of a relevant enumeration on the bill.
265 Thus, if the bill enumerates packages or units, a provision that says that is not agreed to be "part of the bill of lading terms" or a provision such as clause 21, will not be effective to gainsay the existence of an enumeration. Thus if a bill stated: "1 container, containing 10 packages of [goods]", but contained a provision that such packages are not to be viewed as, or agreed to be, packages for the purposes of Article IV rule 5(c), there would, it seems to me, still be an enumeration of 10 packages. The bill says so. Article IV rule 5(c) so provides. Article III rule 8 would deny effect to the contrary provision. If the carrier does not wish to provide any enumeration, it may (if entitled by Article III rule 3) refuse to enumerate. That is its freedom contemplated by Article IV rule 5(c) and the discussions thereon.
266 None of what I have said, however, denies the legitimate effect of these disclaimers of knowledge of, or representation about, the contents of a container which the carrier has no reasonable means of checking. The clarity of the statements that the information about the contents of the container is unchecked and unknown to the carrier will assist in a conclusion that there is nothing amounting to a "description" envisaged by Article III rules 3 and 4 so as to limit the carrier under either limb of Article III rule 4: The ‘Atlas’, The ‘Mata K’; New Chinese Antimony Co Ltd v Ocean Steamship Co Ltd [1917] 2 KB 664, 669; Attorney-General of Ceylon v Scindia Steam Navigation Co Ltd India [1962] AC 60; and The ‘River Gurara’ v Nigerian National Shipping Line at 625-27 per Phillips LJ.
267 Article IV rule 5(c) is not a provision dealing with binding representations; it concerns the form of a bill, the identification on it (as the shipper demands (if it can) or as the parties agree to place on the bill) of the number of packages or units. The enumeration will not bind the carrier under Article III rule 4 if it is made clear that the carrier does not represent it. However, the enumeration will still stand for limitation purposes under Article IV rule 5(c) in order that questions of freight and insurance can be based upon it. This is how the parties to the compromise in 1968 saw the flexible compromise working. It was to apply to shippers’ as well as to carriers’ containers, but not necessarily such as to bring about a binding representation in both cases.
268 Thus, to see whether there has been an enumeration, one looks to the bill to find numbers.
269 This approach conforms to the approach of Colman J in The ‘River Gurara’. The views of the majority in the Court of Appeal that the position under Article IV rule 5 of the Hague Rules should not be determined by what the parties put on the bill, but rather by what was actually in the container do not detract from the utility of understanding how Colman J approached the question on the hypothesis that the form of the bill was of primary concern, since that approach is now taken up by Article IV rule 5 of the Hague-Visby Rules, and in particular rule 5(c). In The ‘River Gurara’, the containers had been packed by the shippers. The bills were marked "said to contain" and varied as to description of contents. Some identified a number of pallets, crates, cases, cartons, bales and bags. Some further identified what those packages or pallets contained. One bill stated that the container was said to contain 8 pallets said to contain 1855 bundles of veneer. The carrier argued that in each case there was one package (the container) because it could not be bound by the assertions on the bill, not having packed the container and not having had a reasonable opportunity to check the contents (see pp 56-7). The cargo interests argued (using by express analogy the approach of Article IV rule 5(c) of the Hague-Visby rules) that the test was (see p 56):
Where a container is used to consolidate goods and the applicable bill of lading identifies and enumerates the contents of that container, describing them so as to show that they are separately packed, each such item is to be treated as a separate "package" under Article IV rule 5.
The cargo interests said that it did not matter that the bill made clear that the carrier had not checked the contents; rather what was important was what was on the bill.
270 Colman J rejected the carrier’s argument and accepted the argument of the cargo interests. The following passage at p 58 equally reflects the position under the Hague-Visby Rules:
Accordingly, under the scheme prescribed by the Hague Rules a package is no less a package for the purposes of art. IV, r. 5 where the carrier has been unable to verify its existence as such at the time when he received it for shipment. Consequently, the fact that on the face of the bill of lading, words are used by which the carrier disassociates himself from the statement of quantity of packages furnished to him by the shipper goes no further than disqualifying the statement from being prima facie evidence that the stated number of packages were shipped. If the carrier seeks to limit under art. IV, r. 5 the absence of such prima facie evidence does not preclude him from doing so: it merely makes his task more difficult.
271 Colman J then examined the United States, Canadian, Australian (Chellaram), French and Dutch decisions in support of the application of Article IV rule 5 to the packages identified, even where the bill said "said to contain" and "shipper’s load, count and seal" and like expressions. He concluded (with respect, correctly) that there was international uniformity in the use of the face of the bill as the determinative tool for the application of Article IV rule 5 of the Hague Rules, including where the bill made clear that carriage was by a container the contents of which the carrier had not checked. I think that what Phillips LJ said in The ‘River Gurara’ v Nigerian National Shipping Line at 624-25, when transported to the context of rule 5(c), as the cross-appellant seeks to do, overstates the effect of the freedom of the parties contemplated by Lord Justice Diplock in 1968. To give effect to the parties’ capacity to enumerate the packages or units as packed in the container, does not necessarily give them the pure contractual freedom argued for by the cross-appellant and contemplated by Phillips LJ (though in the context of the Hague Rules, not rule 5(c)).
272 This approach also conforms directly with the approach of the United States courts under what might be referred to as the Binladen BSB approach. Although the United States courts give the parties freedom to identify the packages, that freedom was as to the enunciation on the face of the bill as to how many packages were in the container. The United States courts have rejected attempts by the carrier to issue bills enumerating packages on the bill, but nevertheless providing in the bill for the container to be the one package: Monica Textiles Corp v SS Tana at 641-43; Universal Leaf Tobacco v Companhia de Navegacao 993 F.2d 414, 417 (4th CCA, 1993); and All Pacific Trading v Vessel M/V Hanjin Yosu 7 F.3d 1427, 1433 (9th CCA, 1993). The approach in the United States is different in regard to non-container carriage: Nathan Trotter v Delta Steamship Lines 1985 AMC 2783.
273 This approach conforms with the views of academic commentators: see generally M Davies and A Dickey Shipping Law (2nd edn Law Book Co) p 298 and the references at ftnt 412 and (3rd edn Thomson Law Book Co 2004) p 227 and the references at ftnt 479; N Gaskell Bills of Lading: Law and Contracts (LLP, London 2000) p 519; and Sir Guenter Treitel and FMB Reynolds Carver on Bills of Lading (1st edn) pp 529-30.
274 Thus, I reject the first argument of the cross-appellant that there was no "enumeration" for the purposes of Article IV rule 5(c) of the number of pieces.
275 The second issue is: enumeration of what?
276 The notion of package involves wrapping: see the discussion in Chapman Marine Pty Ltd v Wilhemsen Lines AS at [40]-[44]; Schoenbaum, op cit pp 634-41; Tetley, op cit pp 882-85; and for a recent discussion see The ‘Sealand Quality’ at 485-90. The word "units", if looked at in isolation, might be seen as satisfied by reference to any articles, however they might be packed and however unsuitable for carriage as individual items they might be; or it might be seen as satisfied only by a reference to articles individually packed (by which I do not mean "packaged") as separate articles in the container. I favour the latter view. Beaumont J favours the former.
277 The 1924 Rules simply said "per package or unit". Before the advent of containerisation 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 containerisation, 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.
278 The terms of Article IV rule 5 of the Hague Rules were negotiated and agreed upon as a package limitation. Nothing in the negotiations and discussion leading up to 1924 gives any cause to think that what was being proposed was a regime to focus upon the individual pieces or articles of cargo that might be contained within any packages. The addition of the words "or unit" can be seen to have been intended to clarify the rule by making unnecessary any debate in individual cases about the extent and nature of wrapping and the like, so that individual articles capable of being carried without packaging – boilers, cars and the like, and which could be seen as units of cargo as shipped – would be covered. This approach involves a rejection of the notion that "or unit" was inserted to cover bulk cargo by reference to freight unit, as in US COGSA. The weight of judicial and other views that I have earlier referred to makes this a safe conclusion.
279 Nothing in the discussions and negotiations leading up to the 1968 Protocol would lead one to conclude that the revision of wording was directed to providing individual limitation amounts for individual pieces or articles of cargo within packages inside a container. Once again, the question of amount and use of weight were discussed; but now the central role played by containers in the carriage of general cargo was at the forefront of discussion: Was the container naturally viewed as a package? Was it naturally viewed as part of the ship? Was it best to impose a rigid solution? Was it best to concentrate on what was in the container or what the bill said was in the container?
280 Elements of the interests of both carriers and shippers can be seen in the resulting compromise. The bill was to be determinative, but by reference to the terms of Article IV rule 5(c). What was on the bill brought about a deemed result, or, alternatively a default regime of the container being the package. Thus, to a degree, the container was able to be viewed as part of the ship, and the shipper had the benefit of more than one limit if there was an enumeration of what was packed in the container (as part of the ship). In the absence of that enumeration, the container was to be viewed not as part of the ship, but as part of the cargo – as a package.
281 Once a compromise appeared to have been reached that it was possible, in some circumstances, for the container to be the package, discussion took place as to the most appropriate draft. Different drafts reflected different interests – one in particular being whether, and in what circumstances, advertised freight rates could be departed from depending on what was disclosed in the bill: De Gurse, op cit pp 139-41. Those different approaches did not hinge on anyone’s desire to propound or to reject a position that the individual piece of cargo within a package should somehow carry a limit. After all, Article IV rule 5(a) always permitted the declaration of nature and value.
282 One must, of course, give primacy to the words and structure of the provision chosen as the international compromise, here Article IV rule 5(c). Even given the more liberal approach to the interpretation of international instruments referred to earlier, the detailed history of the negotiations in the 1920s and 1960s makes clear that the bargaining was over the words to be used. Giving primacy to the words used, it is important to recognise that Article IV rule 5(c) provides for the number of packages or units enumerated in the bill as packed in the container. The words "as packed" are important. They direct attention to the packing or stuffing of the container, the container being viewed as an article of transport. The rule does not refer to the pieces or articles contained within the container; rather to packages or units as packed – that is, as they are packed in the container, viewing the container as the article of transport, and in that sense as part of the ship. It is a mistake, in my view, merely to look at the ordinary meaning of the word "units", divorced from its context and the surrounding words in rule 5(c). The words "as packed in such article of transport" are not a proviso; rather, they are a part of the rule’s description of what is to be enumerated in the bill or sea carriage document: the packages or units as packed.
283 This conforms textually with Article IV rule 5(a). Rule 5(a) deals with goods generally – including break-bulk cargo. It can be seen to be structurally critical to the operation of the whole rule. The phrase "package or unit" is used in rule 5(a) in a context similar to the use of the phrase in 1921 and 1924, which use comprehended articles shipped as such – boilers, cars, railway carriages and the like. The same phrase in rule 5(c) bears the same meaning, reinforced as it is by the words "as packed in such article of transport", though, of course, what can be safely packed in a large metal box may be different from what can be safely packed in the hold of a ship.
284 Thus, one needs to be able to identify on the bill (or sea carriage document for the Amended Rules) the enumeration of packages or units as packed. The bill must make that clear. There needs to be an identification of packages or units (for transport) as packed. Thus, to use and modify the words of Colman J in The ‘River Gurara’: the bill must use words which make clear the number of packages or units separately packed for transportation (as packed). If it is not clear from the face of the bill what numbers of packages or units are packed as such by some words (perhaps by the natural meaning of the language describing the item) such that one cannot tell how many packages or units were packed as such in the container or other article of transport, there will only be one package or unit – the container or other article of transport. 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 thereby 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 Article IV rule 5(c).
285 This is not to introduce a "functional economics test". It is not what is in fact within the container and whether it would be so packed as break-bulk cargo absent the use of a container that is relevant. It is what is stated in the bill.
286 In deciding whether there has been such an enumeration one needs, of course, first, the use of numbers. The words and descriptions otherwise used by the parties will play a role in the understanding what it is that has been enumerated. If numbers are used, and from the words used in the bill, including the description of the cargo, it is not clear whether the articles or pieces of cargo are packed in the container as such, then there will be one package: the container. If, from the words used in the bill, including the description of the cargo, there can be seen to be an enumeration of a number of articles of cargo as packed then there will be that number of units as packed. In that sense "units" means shipping units, which can include unboxed and unpackaged articles if packed in the container as such, and if that is made clear in the bill. This would be so even if the units were small: Leggatt J in Bekol BV. The words in rule 5(c) "packages or units ... as packed" in the container refer to the manifestation of how the cargo is made up for transport and how it is packed in the container. There must be an enumeration in the bill of that.
287 If the bill identifies X packages each containing Y pieces or items of cargo then there will be X packages not Y units enumerated. If the goods are made up into X packages each containing Y smaller packages each containing Z pieces, the better view may be that there are enumerated X x Y packages, even though, in a sense, these packages are within other packages. They still probably answer the description of packages as packed; but there are not Z units. If the bill makes clear that X car engines (as individual units of cargo) are packed into the container then there will be X units as packed in the container enumerated; but if the bill just says 10,000 pieces of engine parts one would not know from the bill whether there were 10, 50, 100 or 1,000 packages, or whether some parts were boxed and some packed as whole units. In that case, there is no enumeration in the bill of the number of packages or units as packed. A car may be packed as a unit. It may be carried completely knocked down in many pieces, ready for assembly. If completely knocked down it would be expected to be packaged or unitised in some way. If the shipper wants multiple unit or package limitations in respect of the knocked down pieces it should do what rule 5(c) requires – enumerate the packages or units as they are packed in the container. If individual pieces or units of cargo are packed as such in the container and if the bill makes that clear the number of pieces will be the number of units, because they are articles of cargo and packed as such and described as packed as such.
288 This view gives a plain and ordinary meaning to the words "packages or units... as packed." It gives a plain and practical meaning to these words in the context of the need for a plain and practical view to be taken of the document in everyday commerce. It gives a meaning to those words which conforms to the original meaning of those words in the Hague Rules. It gives a meaning which conforms textually with the balance of Article IV rule 5, in particular rule 5(a). It conforms with the notion of Article IV rule 5(c) being a package limitation, which accords with the substance of the debate and discussion which occurred in the 1920s and the 1960s. It provides for a degree of international conformity with the approach of United States courts on US COGSA (see Binladen BSB; Hayes-Leger Associates v M/V Oriental Knight; Seguros ‘Illimani’ SA v M V Popi P 929 F.2d 89, 94-5 (2nd CCA, 1991); Monica Textile Corp v SS Tana; and Fishman & Tobin Inc v Tropical Shipping & Construction Co Ltd 240 F.3d 956 (11th CCA, 2001)) and so produces a degree of harmonious application of cognate provisions in international commerce. It conforms with the approach of experienced English judges in this field (Leggatt J in Bekol BV and Colman J and Hirst LJ in The ‘River Gurara’) in their dealing with the Hague Rules (and for this purpose, the views of another highly experienced judge in this field, Phillips LJ, to the contrary of Colman J as to how the Article IV rule 5 of the Hague Rules operates does not undermine the point). It is not disconformable with the views of other courts (including Australian – Chellaram’s case) in dealing with the Hague Rules: see the cases cited by Colman J in The ‘River Gurara’ at 59-62. It conforms with a body of scholarly and judicial views expressed after 1924 that "unit" in the 1924 Rules (which did not contain the words "as packed") meant shipping unit. It reflects the underlying discussion and compromises leading up to the international conventions in 1924 and 1968 in that no party came to those meetings and conferences seeking a limitation on individual pieces of cargo however small or however unsuitable for carriage without in some way being made up therefor. "Unit" was recognised and has been recognised in the cases as an appropriate term in respect of articles of cargo transported as such without the need for packaging. The debates and compromises were not directed to the creation of a limit for pieces of cargo, except to the extent that as units they could be separately carried or as units they were packed or stowed in the container.
289 The cases on "or unit" in the 1924 Rules generally conform, and certainly do not conflict, with this approach. In Studebaker the issue being addressed was whether an unboxed car was a "package" for the purposes of the Harter Act incorporated into the bill. In obiter dicta, Goddard J expressed the view that an unboxed and unpackaged article of the kind before him (a car which could be shipped as such without packaging) would be a unit. There was no occasion for him to consider the difference between an unboxed article as a shipping unit and an identified article not of a kind which would be shipped as such.
290 In Anticosti the plaintiff’s truck was carried by sea. No value was declared on the face of the bill. The truck was held to be the unit. The relevant passage in the reasons of the Supreme Court was set out earlier. The article in question was a shipping unit – a truck which could be, and was, shipped as such. Though there was no occasion to examine the distinction between shipping unit and any piece of cargo, the court did refer to the truck as an article which was a shipping unit and that "unit" meant "only" a shipping unit (see SCR p 376, Lloyds Rep p 358):
the word ‘package’ and the context generally seem so to limit it.
291 In Sept Isles Express Inc v Clement Tremblay a truck, transported as deck cargo, was lost overboard. The bill did not contain a declaration of value. The Canadian Water Carriage of Goods Act 1936 provided for limitation in terms of Article IV rule 5 of the Hague Rules. The appellant cargo interest argued "unit" meant unit of weight, or customary freight unit and not the "unit actually shipped". The argument was in part based on the existence of evidence that the freight had been charged on a weight basis. Kearney J, sitting on appeal in the Exchequer Court of Canada, referred to Studebaker and Anticosti and rejected the argument that "unit" was a freight unit, based on weight. No occasion arose to examine the present distinction between shipping unit and any piece of cargo.
292 In Falconbridge the Supreme Court of Canada once again dealt with Article IV rule 5 of the Hague Rules made applicable by the Carriage of Goods by Water Act 1970. A tractor and a generating set fell off a barge during unloading. The goods had been carried in the hold as two unpackaged articles. The primary judge found each of the truck and the generating set to be a unit. Once again, the issue for decision was whether "unit" meant freight unit. Ritchie J, on behalf of the court, expressed agreement with Anticosti and rejected the US COGSA approach of a meaning of freight rate. In support of this, Ritchie J also referred to the views of the authors of Temperley, op cit (in the 4th edition, 1932) which I have earlier set out (from the 3rd edition). One of the references upon which Ritchie J relied was a reference to Scrutton on Charterparties. In the 16th edition, edited by Sir William McNair and Mr Mocatta (as they then were) the authors said the following as to "unit" in Article IV rule 5 (at 490 ftnt (d)):
‘Unit’ probably means the unit of enumeration or measurement shown in the bill of lading as provided by Art. III, Rule 3(b)...
293 Ritchie J then referred to Studebaker, and after referring to the passage in the reasons of Goddard J which I have earlier set out said (at SCR p 951 and Lloyd’s Rep pp 476-7):
Although it was not necessary for the decision of the case before him, it appears to me that Mr Justice Goddard was clearly indicating his view that the word "unit" as used in the Hague Rules had the meaning of an "individual piece of cargo". It is in any event apparent from the decision in the Studebaker case and in Whaite v Lancashire and Yorkshire Railway Co., (1874) L.R. 9 Ex 67, where the Court was considering the words "parcel or package" as they occur in the Carriers Act, 11 Geo. 4 and 1 Wm. 4, cap. 6861, that the word "package" means articles which are packed or crated and it would seem illogical to me to hold that a shipper who had taken the precaution of crating his goods would be limited to $500, whereas the shipper delivering his goods to the ship "just as they came from the works" and without any wrapping, would be entitled to apply a limitation based upon the freight rate.
294 Whilst there are passages in Falconbridge which refer to individual pieces of cargo, the distinction that is under discussion here was not before the Court. Further, the facts in that case dealt with pieces of cargo (for the purpose of Article III rule 3(b)) which were shipping units in the sense I have discussed.
295 The approach also conforms with that in Cie. Générale Transatlantique c. Cies. The Marine Insurance Co., La Prévoyance, Assurances Générales et autres (1967) 19 Le Droit Maritime Français 23 referred to by Ritchie J in Falconbridge at SCR pp 952-53 (in translation). There, though the court saw a relationship between Article III rule 3 and Article IV rule 5 in dealing with the word "package", it said (see Falconbridge p 953):
Whereas, no doubt, one of the plaintiffs claims that the term "package" implies per se the idea of a limited load, and that a crate weighing 9 tons 500 pounds, or a car, are therefore not to be regarded as packages for the purposes of the rule limiting the liability of a maritime carrier; nonetheless, if such truly was the meaning of the word "package" hundreds of years ago, when porters had to rely on the strength of their shoulders to load bales of goods, the meaning has evolved since the last decades, so that, now that lifting and handling techniques permit loading and unloading of individual loads weighing far beyond what a man could lift, the term "package", at least in the language of persons in the maritime transport business, that is to say in the sense in which it is used in the provision the construction of which we are now dealing with, means not only a small load but any individual specialized load, presented as such to the carrier, and so accepted by him, whatever its weight or volume; ...
[emphasis added]
296 In The ‘River Gurara’ Colman J referred to the decision of Leggatt J in Bekol BV in which case, as I have said, the bill of lading described the goods under the heading "Number and kind of packages, description of goods" as "X bundles stc Y pieces", and Leggatt J held that each bundle (not each piece) was a separate package or unit. Colman J commented as follows (at p 59):
...the conclusion is hardly surprising, but it makes little contribution to the issues before me.
297 It made "little contribution to the issues" in The ‘River Gurara’ because counsel for the cargo interests did not seek to argue that the package limitation should apply to individual pieces within the shipping unit of the bundle. As to this concession, see below.
298 However, the views of Leggatt J and Colman J (and Hirst LJ who agreed with Colman J) were clear – the packages or units were the packages or bundles not the items or pieces of cargo. That is consistent only with "unit" being a shipping or packing unit in the manner I have identified; though, it should be said, this was in the light of the way the argument was put.
299 The ‘River Gurara’ was disposed of as set out at Lloyd’s Rep pp 64-5. Two bills were obscure. Colman J dealt with them as follows (at pp 64-5):
Of the list which I have set out the bills of lading relating to interests 9(b) and 9(d) are obscurely worded as follows under "Number and kind of Packages; Description of Goods" heading.
9(b) "2 x 20' containers said to contain 32 pallets load TSR 10 Akelcrumb (Nigerian natural raw rubber) each weighing 36 x 33.33 kg polythene wrapped bales."
9(d) "4 x 20' containers said to contain 60 pallets load CL 10/20 (Nigerian natural raw rubber) each weighing 36 x 33 kg polythene wrapped bales."
The question that arises is whether this wording sufficiently indicates a mutual intention to treat each bale as a package or indicates that each pallet is to be treated as a package. Each of the pallets appears to be laden with 36 wrapped bales. The issue is simply whether the bill of lading entry is expressed so as to treat the bales as separately packed items or whether the reference to the bales is merely a convenient means of expressing the weight of the pallets.
On balance, I have come to the conclusion that there is just sufficient indication that the bales are to be treated as separate packages, there being 36 on each of the 32 and 60 pallets respectively. In the event the number of packages in relation to each interest is:
9(b): 1152 bales
9(d): 2160 bales
It is conceded before me on behalf of the shippers of timber that, where the bill of lading states the number of bundles and also the number of individual pieces of timber in the bundles, the unit of limitation for the purposes of art. IV, r.5 is the number of bundles and not the number of pieces of timber. However, Mr Russell reserved his client’s position should this matter go further. In the event, the relevant number of packages for limitation purposes is that set out in respect of each interest in the document headed Appendix A annexed to and forming part of this judgment. In relation to certain of the timber cargo there is an issue whether it was carried on deck and, if so, whether the relative shippers consented to such carriage, those matters having direct bearing on the applicability of the Hague Rules’ limitation provisions. That is not an issue which I have been asked to determine on this occasion.
[emphasis added]
300 As can be seen from some of the language used in the earlier cases, the meaning of "unit" has sometimes been expressed simply as an article or piece of cargo. However, in each of those cases the article was one that was unboxed and uncrated, and was the article for shipping.
301 When commentators such as Mr Diamond QC (op cit p 241) express the view that in "the Visby amendment ‘unit’ is to be construed as referring to an individual article or piece of goods which is not a ‘package’", one needs to examine with care what is meant. His discussion of the issue illuminates that he was referring to how the goods are shipped: see Diamond op cit pp 241-42. The three categories of cargo referred to by Mr Diamond included timber pieces which, if enumerated on the bill, stood as units. But Mr Diamond was positing that such articles were shipped, counted and enumerated as such. His three categories were (see p 241):
First category: goods which are shipped as packages or as individual articles or pieces. When dealing with goods in this category (as for example, an unboxed tractor or a case of machinery), it will not normally matter whether the shipment is a "unit" (as in the case of the tractor) or a "package" (the case of machinery). So long as the weight of each is known, there is no difficulty in ascertaining whether the limit is 10,000 francs or a limit based on weight.
...
Second category: true bulk cargo (whether bulk solids, such as grain, or bulk liquids, such as oil). Here I would say that there is no "package" or "unit" as the shipping unit and freight unit concepts would seem to be irrelevant under the amended Rules. I conclude that the only limit ought to be one based on weight.
Third category: goods which occupy an intermediate position between goods shipped as articles or pieces and true bulk cargo. Most timber cargoes fall into this category. So do bagged cargoes. ... It is tempting, therefore, to conclude that timber and bagged cargoes should be treated in the same way as true bulk cargoes. The difficulty, however, is that each piece of timber or each bag of cocoa or sugar may constitute a separate "package" or "unit" so that a higher limit may be applicable. I submit that this question ought to be answered by reference to the bill of lading. If the bill acknowledges a number of pieces of timber or a number of bags of cocoa, the latter conclusion would seem to be plainly correct. If not, I would conclude that the limit ought to be based on weight.
302 As to rule 5(c) Mr Diamond stated (op cit at p 242):
The general intention of Rule 5(c) is two-fold; first, that the parties to the contract of carriage are given an option whether to treat the container or each of the parcels stuffed therein as the relevant "package or unit" for limitation purposes; second, that in order to see how the option has been exercised one must look to see " the number enumerated" on the face of the bill of lading.
303 In the context of the container, Mr Diamond viewed the aim of the clause as dealing with how the bill dealt with how the container was packed – either with packages or units. I do not disagree that separate items packed as such, and described as packed as such, are separate units.
304 The expression of view by Sir Guenter Treitel and Mr Reynolds in Carver on Bills of Lading (1st edn) at pp 527-30 is not directly contrary to the approach which I have identified, and which is in accordance with the views of Leggatt J, Colman J and Hirst LJ (on the hypothesis of the correctness of their approach to the Hague Rules, being, prior to 1998 and the expression of views by Phillips LJ and Mummery LJ, a widely held view in different jurisdictions).
305 Applying the above test to the sea carriage document in question here, the relevant task is to see what the sea carriage document enumerated (if anything) by way of packages or units as packed in the container. The face of the document identified in the second column headed "No. of Pkgs" under the heading "Carrier’s Receipt" the number "1". One way of reading the document is to understand it as saying that the container contains one package said to contain 200,945 pieces posters and prints. If that is the way to read the document, I would conclude that the parties enumerated one package, and not 200,945 units. That conclusion would be in accordance with Bekol BV and The ‘River Gurara’. However, the contents of the clause commencing with the phrase "Received For Shipment" above the signature box, in the context of the clear statements that the shipper had stuffed the container ("shipper’s load stow and count"), is a statement that the container is one package, not that it contains one package.
306 One then turns to the part of the face of the document under the heading "Description of Goods" and one sees that the container is said to contain 200,945 pieces posters and prints. From the evident nature of that description of the cargo one cannot tell how the cargo was made up for transport into packages or units for packing. There is no relevant enumeration, because one is not told into how many packages or units the goods have been made up for packing into the container; one is not told how many packages were packed or how many units were packed.
307 Further, the balance of the face of the document is relevant to the ascertainment of what, if anything, is enumerated. The document did say under "No. of Pkgs", "1". Though, as I have said, when one looks at the balance of the face of the document that is best understood as a statement that the container is the package. Nevertheless, this part of the document assists in understanding whether the parties, by saying "200945 pieces posters and prints", were intending to enumerate packages or units. These words standing alone do not identify, or do not identify with any clarity, how and in what number the articles of cargo have been made up into packages or units. In those circumstances, the balance of the bill assists in understanding what was meant by such enumeration or description as there is. The balance of the face of the document makes plain what, in my view, can otherwise be taken from the enumeration – that it is not an enumeration of packages or units as packed.
308 The statement on the face of the bill was to the effect that according to the shipper there were present in the container over 200,000 pieces of paper or cardboard. The bill did not make clear what number of packages or units as packed there were. The nature of the cargo was such as to be obvious that the bill did not disclose how and in what number such goods had been made up for transport as packed in the container. This was only confirmed by the balance of the face of the bill which tended against any conclusion that the items had been packed as packages or units. Accordingly, there was no enumeration in the document for the purposes of Article 4 Rule 5(c) of the Amended Rules.
309 On this hypothesis, there appears to be no debate but that pursuant to Article 4 rule 5(a) the cross-appellant is entitled to limit its liability to either 666·67 units of account per package or unit or two units of account per kilogram of gross weight, whichever is the higher. On this basis, and calculating the special drawing rights to Australian dollars at the time the goods were discharged and calculating interest on the amounts so calculated being payable from 12 April 2000 until the date of judgment it would appear that the relevant limitation amount is $38,250. Should there be any debate about this matter the parties can put further submissions on the calculation of the limitation amount.
310 It is unnecessary for the disposition of the cross-appeal to consider one of the difficulties identified by Mr Diamond as caused by the focus of rule 5(c) on the terms of the bill – that of inaccuracy in enumeration. It is sufficient to say that the view that I favour is not inconsistent with Mr Diamond’s view that if there is an identification of packages or units as packed which is in excess of the number of packages or units as packed in fact within the container, rule 5(c) only applies to the packages or units enumerated for which there is liability. There may be different permutations and combinations of factual circumstances depending on the terms of a bill and the actual contents of a container. It is unnecessary to deal with circumstances beyond those raised by the terms of the sea carriage document in, and the facts of, this case. It is sufficient to say that this sea carriage document did not enumerate any packages or units as packed in the container.
The Appeal
311 The consequence of the cross-appeal being allowed is that the substance of the appeal must necessarily fail. Also, this conclusion on the cross-appeal undermines the appellant’s complaints as to the costs order.
312 Whilst my views on the cross-appeal dispose of the whole matter, including the appeal, one important aspect of the appeal, which was argued, should be noted. The learned primary judge calculated the appellants’ loss and damage by reference to value in Australia. Her Honour did this in significant part because of the perceived inadequacy of the evidence of value at the port of discharge. Her Honour felt free to use Article 4 rule 5(b) as only a prima facie measure permitting other measures to be used when the circumstances required: see [52] of the primary judge’s reasons. Her Honour relied for this proposition on what Mr Diamond said at op cit p 248. With respect, I do not think that Mr Diamond was expressing a view other than that there could be exceptional cases where the rule contained in Article IV rule 5(b) did not apply. Whether or not that view is correct, there were no exceptional circumstances in this case. On one view of her Honour’s findings, the plaintiffs (appellants here) relied solely on the negotiated "purchase price" as evidence of value in Greece. Much of their argument on appeal was to the same effect, in particular in reliance upon what Gleeson CJ said in Franke v CIC General Insurance Ltd (1994) 33 NSWLR 373, 376. To the extent that her Honour found the sum in the invoice unreliable one view is that there was simply no evidence before her Honour as to the value of the goods in Greece at the time of discharge. Her Honour did not undertake the exercise of analysing the evidence for the purpose of what could be found about value in Greece. Therefore, it may not be clear whether the findings of fact made by her Honour were such as to lead to a conclusion that there should have been judgment for the defendant by reason of the failure to prove any loss, or that there may have been sufficient evidence, the Court doing its best with the material before it, to construct some value of the goods in Greece at the time of discharge. These questions, of course, do not arise on my view of the cross-appeal, nor do they arise in the light of the terms of the cross-appeal.
313 In my view, giving the words of Article 4 rule 5(b) primacy, the total amount recoverable is to be calculated by reference to the value of such goods at the place and time at which the goods were discharged from the ship in accordance with the contract or should have so been discharged. The alternatives as to fixing the value are then set out in the second paragraph of Article 4 rule 5(b).
314 The rule that the amount recoverable is to be assessed by reference to the value of the goods at the port of discharge can be seen to clarify and harmonise by international agreement and convention previously disparate approaches. The English rule appears to have been that the damages in connection with damaged or lost goods carried by sea were to be assessed by reference to the value of the goods at the port of discharge: H McGregor, McGregor on Damages, 17th edn, Sweet & Maxwell, London, 2003, pp 896-924.
315 Mr Rayment QC, who, with Mr M McHugh appeared for the appellants, relied on American authority to the effect that in the final analysis what the plaintiff was entitled to was damages computed on the basis of providing full actual loss to the plaintiffs. In Chicago, Milwaukee & St Paul Railway Co v McCaull-Dinsmore Co 253 US 97, 100 (1920) the United States Supreme Court recognised that the traditional method of "actual loss" is the difference between the fair market value of the goods at the port of destination as shipped and their condition as damaged. There was, however, an exception to this general rule whereby the replacement cost was deemed to be the appropriate measure of damages: Illinois Central Railroad Co v Crail 281 US 57, 64 (1930) where the Supreme Court said that: "The test of market value is at best but a convenient means of getting at the loss suffered. It may be discarded and other more accurate means resorted to if, for special reasons, it is not exact or otherwise not applicable". See generally Dessert Service Inc v M/V MSC Jamie/Rafaela 219 F.Supp. 2d 504 (S.D.N.Y., 2002); W Tetley, Marine Cargo Claims, Internet edn, ch 13 "Measure of Damages" pp 11-19, and W Tetley, Marine Cargo Claims, 3rd edn, pp 319 ff.
316 With respect to the primary judge, I do not see a basis for treating the plain words of Article 4 rule 5(b) as optional. In my view, Article 4 rule 5(b) should have been applied to the facts of this case.
317 (These comments, however, should not be seen as concluding argument, in an appropriate case, as to the question of consequential loss.)
318 Also, I agree with the views expressed by Beaumont J as to the legitimacy of the primary judge’s approach in not accepting the invoice price as reliable evidence of value for Article 4 rule 5(b).
Orders
319 The orders that I would make are:
(a) The cross-appeal be allowed. (b) The cross-respondents pay the cross-appellant’s costs of the cross-appeal. (c) The appeal be dismissed. (d) The appellants pay the respondent’s costs of the appeal. (e) The orders of the Court made on 17 July 2003 be set aside, except to the order as to costs. (f) The parties file, within 7 days, a minute of order which is agreed between them to provide for judgment for the second appellant based on the application of Article 4 rules 5(a) and (c) of Schedule 1A to the Carriage of Goods by Sea Act 1991 (Cth) on the basis of there being only one package or unit, that being the container, in substitution for the orders made on 17 July 2003, and which have been set aside; and failing any such agreement, the cross-appellant and cross-respondents file and serve within 14 days forms of order which they contend dispose of the matter. (g) Otherwise, stand the matter over to a date to be fixed for the making of final orders and any argument in connection therewith.
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I certify that the preceding two hundred and twelve (212) numbered
paragraphs are a true copy of the Reasons for Judgment herein of
the Honourable
Justice Allsop.
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Associate:
Dated: 10 August 2004
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Counsel for the Appellants:
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Mr B W Rayment QC with Mr M G McHugh
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Solicitor for the Appellants:
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Phillips Fox
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Counsel for the Respondent:
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Mr A Sullivan QC with Mr G W Diehm
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Solicitor for the Respondent:
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Blake Dawson Waldron
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Date of Hearing:
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18 and 19 February 2004
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Date of Judgment:
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10 August 2004
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