El Greco v. MSC

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El Greco (Australia) Pty Limited & Anor v. Mediterranean Shipping Co. SA
Australia: Federal Court of Australia: Black CJ, Beaumont & Allsop JJ.: 10 August 2004
BW Rayment QC & MG McHugh, instructed by Phillips Fox, for El Greco
A Sullivan QC & GJ Diehm, instructed by Blake Dawson Waldron, for Mediterranean Shipping

In this case, a majority of the Federal Court of Australia held that a statement in a bill of lading that a container was said to contain a number of "pieces posters and prints" was not an effective enumeration of the contents "as packed in such article of transport" under Article IV Rule 5(c) of the Hague-Visby Rules. In consequence, the container was to be regarded as the package or unit for limitation purposes.

DMC Category Rating: Developed

This case note is contributed by Drew James a partner in the firm of Ebsworth & Ebsworth in Sydney. Ebsworth & Ebsworth Lawyers are the International Contributors for Australia to the website.

The plaintiffs, El Greco, were the buyer and seller of a shipment of posters and prints stowed in a container and carried from Sydney to Piraeus under a bill of lading issued by the defendant shipping line, Mediterranean Shipping. On arrival in Piraeus, the posters and prints were found to be heavily damaged by seawater. The cargo insurer indemnified the plaintiffs and sued the defendant exercising its right of subrogation. The cargo insurers had paid out A$883,390 and had sought to recover that amount as representing the market value of the posters and prints which had been damaged. The defendant took issue with the amount claimed and at trial, based upon the evidence given by an independent witness, the primary judge was only prepared to accept the wholesale value of the posters and prints as being A$63,570 and entered judgment in that amount in favour of the plaintiffs. In doing so, the judge relied upon evidence as to the value of the goods in Australia, as opposed to their value in Greece.

A more important issue in the case however concerned limitation under the Hague-Visby Rules, Article IV Rule 5. The defendant argued that it was entitled to limit its liability to 2SDR’s per kilogram of the cargo carried, because it said that there was only one package for the purposes of the Hague-Visby Rules, Article IV Rule 5(a). In that regard, the bill issued by the defendant described the goods as "1 x 2Oft FCL/FCL GENERAL PURPOSE CONTAINER SAID TO CONTAIN 200945 PIECES POSTERS AND PRINTS". In the column headed "No. of Pkgs." was inserted the number 1 and at the bottom of that column, as the "Total Number of Packages" was also inserted the number 1.

Clause 21 of the bill stated that "Where the goods have been packed into containers by or on behalf of the Merchant, it is expressly agreed, that each container shall constitute 1 package for the purpose of application of limitation of the Carrier’s liability".

It was common ground that the 200,945 pieces were placed into "approximately" 2,000 packages for shipment although there was no reference to those 2,000 or so packages in the bill.

The primary judge, Kiefel J., held that although the bill contained a clause defining the container itself to be the package for the purposes of limitation, that clause was rendered void by Article III Rule 7 of the Hague-Visby Rules because it was an attempt by the carrier to lessen its liability. Kiefel J concluded that the bill of lading enumerated 200,945 "units", being the individual unpackaged posters and prints. In her opinion, the enumeration of the individual pieces meant that the container was not to be regarded as the "package or unit" for the purposes of Article IV, Rule 5(a)1.

The plaintiffs appealed Kiefel J.’s decision as the value of the goods and the defendant cross-appealed the decision that there were 200,945 "units" for limitation purposes.

On appeal to the Full Court of the Federal Court of Australia, the Court concluded that the judge at first instance had fallen into error in not determining the value of the goods lost or damaged by reference to their value at the port of discharge, as required under Article IV Rule 5(b) 1.

As regards the limitation point, a majority of the Court also overturned the judgment at first instance. In so doing, the majority accepted that clause 21 would not be effective to gainsay the existence of an enumeration of the packages or units in the bill.

The majority judgment was given by Allsop J,, with whom Black CJ. agreed. In Allsop J.’s opinion, the evident purpose of Article IV Rule 5(c) 1 was to make the enumeration in the bill effective – hence the "deeming" as referred to in the Rules. There was 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. In his opinion, "enumeration" meant the setting out of numbers (in words or numbers) on the face of the bill. If the carrier issued a bill in which there was an enumeration (whether it was because it was obliged to do so by Article III Rule 32, or not), Article IV Rule 5(c) in that respect was satisfied. Article IV Rule 5(c) was not a provision dealing with binding representations; it concerned the form of a bill and the identification on it of the number of packages or units. The enumeration would not bind the carrier under Article III Rule 43 where the proviso to Article III Rule 3 applied. However, the enumeration would still stand for limitation purposes under Article IV Rule 5(c) in order that questions of freight and insurance could be based upon it. Thus, to see whether there has been an enumeration, one looked to the bill to find numbers.

In this respect, the defendant had argued that there was no "enumeration" for the purposes of Article IV Rule 5(c) of the number of pieces. That argument would be rejected. There was plainly an "enumeration" but the next issue was - an enumeration of what?"

The notion of package involved wrapping. The words "units" 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 reference to articles individually packed as separate articles in the container. Allsop J preferred the latter view.

Giving primacy to the words used, it was important to recognise that Article IV Rule 5(c) provided for the number of packages or units enumerated in the bill of lading "as packed" in the container. The words "as packed" were important. They directed attention to the packing or stuffing of the container, the container being viewed as an article of transport. Thus, one needed to be able to identify on the bill the enumeration of packages or units "as packed". The bill must make that clear. An enumeration on the face of the bill of the number of pieces of cargo that could be packed in a number of ways and not showing the packages or units as packaged, that is, how they were packed and how many there were, was not an enumeration called for by Article IV Rule 5 (c).

Returning then to the face of the bill in this case, under the heading "Description of Goods" one could not tell how the cargo was made up for transport into packages or units or packing. There was no relevant enumeration, because one was not told into how many packages or units the goods had been made up for packing into the container; one was not told how many packages were packed or how many units were packed. The remainder of the face of the document was relevant to the ascertainment of what, if anything, was enumerated. Whilst the document did say under "No. of Pkgs." the number 1, that was best understood as a statement that the container was the package, not that it contained one package. Nevertheless, that part of the document assisted in understanding whether the parties, by saying "200945 PIECES POSTERS AND PRINTS" were intending to enumerate packages or units. Those words standing alone did not identify how and in what number the articles of cargo had been made up into packages or units. The remainder of the face of the document made plain that the statement "200945 PIECES POSTERS AND PRINTS" was not an enumeration of packages or units as packaged.

Accordingly, there was no enumeration in the document for the purpose of Article IV Rule 5(c) of the Hague-Visby Rules. As there was no enumeration, the container as the article of transport was to be considered to be the package or unit. The defendant was entitled to limit its liability to either 666.67 units of account per package of unit or 2 units of account per kilogram of gross weight, whichever was the higher. The weight limit was the higher such that the relevant limitation amount, including interest, was A$38,250.

Beaumont J. dissented on the package limitation point. He did not accept the primary judge’s finding that there were 200,945 "units" for limitation purposes, but rather held that there were "approximately" 2,000 packages for limitation purposes. Notwithstanding the statements in the bill of "1" as both the "No. of pkgs." and the "Total Number of Packages", the reference to the number of "pieces" was an enumeration of 200,945 "units" for the purpose of the initial provision of Rule 5(c), that is, a statement of "the number of packages or units enumerated in the bill".

It was then necessary to consider the words that followed in Rule 5(c), that is, the phrase "as packed". In using the phrase "as packed", the rule was, in Beaumont J’s opinion, 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". 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(3) stipulates that, the number of packages or units enumerated in the document "shall be deemed the number of packages or units".

As it was common ground that the 200,945 pieces were placed into "approximately" 2,000 packages for shipment, there was, by way of an overstatement, an enumeration of 200,945 "units" in the bill. However, what was "actually shipped", that is, "as packed" were approximately 2,000 packages. By virtue of the rules "deeming" provision, for limitation purposes, the number of units was therefore to be treated as 2,000.

1 Article IV Rule 5 reads as follows:

  1. Unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading, neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the goods in an amount exceeding [666.67 units of account] per package or unit or [2 units of account per kilogramme] of gross weight of the goods lost or damaged, whichever is the higher.
  2. 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…..
  3. Where a container, pallet or similar article of transport is used to consolidate goods, the number of packages or units enumerated in the bill of lading as packed in such article of transport shall be deemed the number of packages or units for the purpose of the paragraph as far as these packages or units are concerned. Except as aforesaid such article of transport shall be considered the package or unit.

2 Article III Rule 3 reads as follows:

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 he shipper a bill of lading showing among other things –

  1. the leading marks necessary for identification of the goods, as the same are furnished in writing by the shipper….
  2. Either the number of packages or pieces, or the quantity, or weight, as the case may be, as furnished in writing by the shipper
  3. The apparent order and condition of the goods

Provided that no carrier, master of agent of the carrier shall be bound to state or show in the bill of lading and marks, number, quantity, or weight which he has reasonable grounds for suspecting not accurately to represent the goods actually received, or which he has no reasonable means of checking.

3 Article III Rule 4 reads as follows:

Such a bill of lading 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 has been transferred to a third party acting in good faith.


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