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
CARGO DAMAGED ON SEA VOYAGE: BILL OF LADING: PACKAGE LIMITATION OF £100 STERLING LAWFUL MONEY OF THE UK: HAGUE RULES CONTRACTUALLY INCORPORATED INTO B/L IN ENTIRETY: ART.IV RULE 5 AND ART.IX ESTABLISH PACKAGE LIMIT AS VALUE OF £100 STERLING IN GOLD AS AT 1924: B/L GIVES PRECEDENCE TO HAGUE RULES IN EVENT OF CONFLICT WITH B/L TERMS: ART III RULE 8 TO SAME EFFECT: CONFLICT BETWEEN B/L PACKAGE LIMIT AND HAGUE RULES PACKAGE LIMIT: HAGUE RULES LIMIT PREVAILS
Where a) cargo was carried under a bill of lading into which the Hague Rules, as contained in the International Convention for the Unification of Certain Rules relating to Bills of Lading of 25 August 1924, were incorporated as a matter of contract in their entirety and b) the bill of lading itself contained a clause giving primacy to the Hague Rules in the event of conflict between the terms of the B/L and the Rules, the package limitation set out in Articles IV Rule 5 and Article IX of the Hague Rules prevailed over a bill of lading term that deemed the limitation of liability under the Hague Rules to be "£100 sterling, lawful money of the United Kingdom per package or unit". In these circumstances, the package limitation to be applied was that set out in Article IV Rule 5 and Article IX, namely the value of the gold which £100 sterling would have bought in 1924, in accordance with the Coinage Act 1870 of the UK.
DMC Category Rating: Confirmed
The consignment was carried under a bill of lading which contained the
following relevant provisions:
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
After analysing the judgments in the case of The "Rosa S"  2 LLR 574 and in Brown Boveri (Australia) v. Baltic Shipping Co  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.
The case is currently under appeal.
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