Enumeration breakdown-Court of Appeals examines what constitutes a 'unit' under Hague-Visby Rules

17 October 2018

Facts

The recent Court of Appeals case Kyokuyo Co Ltd v AP Moller - Maersk A/S concerned the enumeration of units for the limitation of containerized cargo.(1)

The claim arose following damage to a cargo of frozen bluefin tuna packed into three refrigerated containers, which had occurred during carriage by Maersk from Cartagena to Japan. The individual items of tuna were not wrapped, packaged or consolidated.

Each of the containers was shipped pursuant to Maersk's standard terms and conditions of carriage, which contained an implied term that the shippers were entitled to demand that Maersk issue bills of lading.

As a result of delays to three of the 12 containers (and a desire to avoid further delays), no bills of lading were issued for the three containers. Instead, it was agreed that sea waybills would be issued, which stated as follows: "1 container said to contain [520/206/500] PCS FROZEN BLUEFIN TUNA LOINS".

On discharge, the claimant alleged that the tuna had been damaged by high temperatures during carriage or rough handling during repacking into a replacement container. It therefore claimed approximately £860,000.

As the Hague-Visby Rules do not automatically apply to waybills, Maersk argued that the Article IV.5 limits did not apply and that it could therefore rely on the contractual limit set out in its terms and conditions of £100 per package in line with the rules. This would have limited the claim to approximately £2,000.

Decision

The Court of Appeal was asked to determine the following issues relating to package limitation:
Ø  whether the Hague-Visby Rules are compulsorily applicable if a bill of lading is not issued (or whether the waybill terms that applied to the lower Maersk terms limit would apply as a matter of contract);

Ø  what constitutes a 'unit' under the rules; and
Ø  what enumeration of cargo is required under Article IV.5(c) of the rules.

In dismissing Maersk's appeal, the court held as follows:

Ø  The Hague-Visby Rules are compulsorily applicable to any contract of carriage which expressly or impliedly provides the shipper with a right to demand the issue of a bill of lading, whether or not that right is exercised and whether or not additional carriage documents (eg, a waybill in this case) are eventually issued.

Ø  As per Vinnlustodin HF and Another v Sea Tank Shipping AS, a 'unit' is any physical item which is not packaged up.(2) There is no additional requirement that the item must have been capable of shipment in break bulk (as argued by Maersk). On the facts of the case, the individual pieces of tuna were therefore 'units'. The only relevant question, therefore, is whether individual physical items have been packaged together. If so, the individual items are not units, but instead form part of a single package. If not, each physical item is a 'unit'. Containers do not constitute a 'package' considering the Court of Appeal's decision in The River Gurara.(3)

Ø  Any description of cargo which states the number of items inside a container that are units or packages will be sufficient enumeration for the purposes of Article IV.5(c).

The court refused to follow the Australian decision in El Greco v Mediterranean Shipping that the Hague-Visby Rules require it to be clear from the face of a bill of lading not only how many items are in a container, but also whether those items have been packaged together. The waybills in Kyokuyo, therefore, were considered to have accurately enumerated the number of units in the container.