The judgment in this case was overruled by the New Zealand Court of Appeal on 17 June 2002. To access a note of that decison, click here

DMC/S&T/15/01
Dairy Containers Ltd v. Tasman Orient Line, the "Tasman Discoverer"
High Court of New Zealand: Williams J.: July 2001

Facts
The claimants, Dairy Containers Ltd, were the consignees of a consignment of coils of electrolytic tin plate shipped in November 1999 from Busan, Korea, to Tauranga in New Zealand on board the Tasman Discoverer, a ship operating in the service of the defendants, Tasman Orient Line. On arrival in Tauranga, the coils were found to be damaged by sea water and the majority of them were sold as scrap. After deduction of salvage, the net claim of Dairy Containers amounted to NZ$613,667. Tasman Orient accepted liability for the damage but maintained that they could limit their liability to the sum of £100 per package or unit, in the total amount of £5,500.

The consignment was carried under a bill of lading which contained the following relevant provisions:
Clause 6(B)(b)(i):
Where no international convention or national law would apply [mandatorily], the liability of the Carrier for loss of or damage to the goods shall be determined:
(i) By the Hague Rules contained in the International Convention for the Unification of Certain Rules relating to Bills of Lading dated 25 August 1924 (hereinafter called the Hague Rules), if the loss or damage is proved to have occurred at sea…..; for the purpose of this sub-paragraph the limitation of liability under the Hague Rules shall be deemed to be £100 sterling, lawful money of the United Kingdom per package or unit…. and the Hague Rules shall be construed accordingly:"
Clause 8:
If any provision of this Bill of Lading is held to be repugnant to any extent to any international convention or national law which is applicable to this Bill of Lading by virtue of Clauses 6….. such provision shall be null and void to that extent but no further."

The case was governed by New Zealand law. It was common ground that there was no international convention or national law mandatorily applicable to the bill of lading.

The relevant provisions of the Hague Rules were Article III Rule 8, which reads:
" 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 connection with, goods arising from negligence, fault, or failure in the duties and obligations provided in this article or lessening such liability and otherwise than as provided in this convention, shall be null and void and of no effect……"
Article IV, Rule 5, which reads:
"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 per package or unit, or the equivalent of that sum in other currency unless……."
and Article IX which reads:
"The monetary units mentioned in this convention are to be taken to be gold value."

Judgment
The question for the court was whether the effect of Clause 6(B)(b)(i) entitles Tasman Orient to limit its liability to 55 times £100 sterling in legal tender of the United Kingdom or whether the package limitation is 55 times that arising out of Articles IV Rule 5 and IX of the Hague Rules as judicially construed.

After analysing the judgments in the case of The "Rosa S" [1988] 2 LLR 574 and in Brown Boveri (Australia) v. Baltic Shipping Co [1989] 93 ALR 171, Williams J. held that the result of these two Articles is ‘that the package limit is effectively £100 sterling gold value, that is to say, the quantity of gold which was the equivalent of £100 sterling or the gold content of that amount when the Hague Rules were adopted in 1924. The gold content of £100 sterling at that date was then defined for England by the Coinage Act 1870 (UK). ….In particular, the court accepts that these two Articles combined lead to the conclusion that they are a measure of Tasman Orient’s obligation, not an indication as mode of payment. The view which the court has just expressed as to the construction of Article IV Rule 5 and Article IX provides….. an objective external standard to the carrier’s limitation.’ He quoted with approval from the judgment of the court of appeal in the Brown Boveri case to the effect that "the first sentence of Article IX was inserted to achieve stability and to avoid the effect of erosion of sterling’s value by inflation so that the limit of liability of £100 sterling was added to by a qualification that the amount of the sterling was not simply to be £100 sterling; it was to be the value of the gold which £100 sterling would then buy." The court then continued ‘When that construction is adopted…. it demonstrates a stark difference between the limitation of liability in Clause 6(B)(b)(i) and that in the Articles.’

In the present case, the parties had ‘by contract incorporated the Hague Rules into the bill subject to the limitation of liability under Clause 6(B)(b)(i) to "£100 sterling lawful money of the United Kingdom per package or unit." However….. the effect of Clause 8(2) is to nullify the package limitation in Clause 6(B)(b)(i) to the extent that it may be in conflict with or repugnant to the Hague Rules or, to put it another way, the Hague Rules are given contractual primacy over the terms of the bill of lading. Further, the Hague Rules being incorporated in their entirety into the bill, the clause paramount in Article III Rule 8 confirms that to be the result. It follows that if there be any inconsistency between the phrase "£100 sterling lawful money of the United Kingdom per package or unit in Clause 6(B)(b)(i) and the phrase "£100 per package or unit or the equivalent sum in other currency" in Article IV Rule 5, the latter supervenes and the former is nullified.’

In the court’s view, the effect of including the words "sterling lawful money of the United Kingdom" in Clause 6(B)(b)(i) was merely to clarify the currency of the liability limitation, to avoid the possibility of confusion with other national currencies denominated in pounds. It was also perhaps included ‘to indicate the manner in which formal tender of the amount of the carrier’s liability is to be made, if tender be required.’

A further reason for the court reaching the view it did was ‘the unlikelihood of the parties agreeing that recovery should now be limited to a sum set 77 years ago. That unlikelihood is demonstrated by comparing the possible results in this case, £5500 against NZ$613,667. It is highly improbable in a business transaction involving the importation of valuable goods by sea that the importer who became a party to the contract only by negotiating the bill of lading…….would have agreed to run the risk of being able to recover only a few per cent of the value of its loss in the event of damage.’

Judgment was given accordingly in favour of Dairy Containers Ltd.