Kyokuyo v AP Møller-Maersk - trading as Maersk Line
Kyokuyo Co Ltd v AP Møller-Maersk A/S, trading as “Maersk Line”
English High Court – Commercial Court: Mr Justice Andrew Baker:  EWHC 654 (Comm): 29 March 2017
Robert Thomas QC and Benjamin Coffer, instructed by Clyde & Co LLP, for Kyokuyu Co Ltd;
Sara Masters QC and Daniel Bovensiepen, instructed by Messrs Bentley Stokes & Lowless, for AP Møller-Maersk A/S.
LIMITATION OF LIABILITY UNDER HAGUE/HAGUE-VISBY RULES: WHETHER LIMITATION APPLIED TO EACH SEPARATE PACKAGE/UNIT DAMAGED OR TO TOTAL NUMBER OF PACKAGES/UNITS
The phrase “package or unit” had the same meaning in both the Hague Rules and the Hague-Visby Rules. In containerised transport, it demands a consideration of the actual contents of the container. Looking through the notionally transparent walls of the container, in this case each individual frozen tuna loin constituted a unit of cargo. Regarding the limitation of liability, a separate limit of 666.67 units of account applied to each frozen loin.
This note has been contributed by Pak Hei Li, LLB (University of Hong Kong), LLM (Maritime Law) (University College London).
Kyokuyo was the receiver of three container loads of frozen tuna, which were shipped from Spain to Japan by Maersk Line. The three containers were labelled as Container A, Container B and Container C. Container A was discharged and delivered to Kyokuyo at the port of Yokohama, whereas Container B and Container C were carried by road from the port of discharge – Yokohama – and delivered to Kyokuyo at another place.
The three containers were loaded with frozen Bluefin tuna loins, each weighing at least c.20 kg (and up to c.75 kg). In addition, one container was also loaded with bags of frozen Bluefin tuna parts, each bag weighing 20kg c.10 per cent. The frozen loins and bags of tuna parts were stuffed into the containers as individual items of cargo without further packaging. Container A contained 206 frozen loins and bags of frozen tuna parts (the number of which was stated as 460 in the draft bill of lading); Container B contained 520 frozen loins and Container C contained 500 frozen loins.
Although a draft bill of lading was prepared, in the end no bill of lading was issued for the three containers. Instead, to avoid delay in delivery, both Kyokuyo and Maersk Line agreed to the issue of sea waybills, one of which was issued for each container.
Kyokuyo alleged that the tuna as delivered to it was damaged through raised temperatures during carriage and claimed that the damage should be valued for the purposes of compensation at c.¥121 million (c.GBP858,000). It was common ground that Maersk Line’s liability (if any) was governed by its standard terms and conditions of carriage at that time. Disputes arose as to whether the Hague Rules or the Hague-Visby Rules applied and as to how the monetary limits of liability under the applicable Rules should operate.
Hence, four preliminary issues were ordered to be tried:
(1) whether liability was limited pursuant to Article IV, rule 5 of the Hague Rules or Article IV, rule 5 of the Hague-Visby Rules (whether applicable compulsorily or contractually) (“the First Issue”);
(2) whether limitation fell to be calculated by reference to the cargo in all three containers collectively, or whether limitation should be calculated by separate treatment of the cargo in each container individually (“the Second Issue”);
(3) if liability was limited pursuant to Article IV rule 5 of the Hague Rules, whether the relevant packages or units were the containers or the individual pieces of tuna; (“the Third Issue”) and
(4) if liability were limited pursuant to Article IV rule 5 of the Hague-Visby Rules, whether the containers were deemed to be the relevant package or unit for the purposes of Article IV rule 5(a), or whether the individual pieces of tuna were the relevant packages or units (“the Fourth Issue”).
Section 1(4) of the Carriage of Goods by Sea Act 1971 (the Hague-Visby Rules) provides:
“Subject to subsection (6) below, nothing in this section shall be taken as applying anything in the Rules to any contract for the carriage of goods by sea, unless the contract expressly or by implication provides for the issue of a bill of lading or any similar document of title.”
Article I(b) of the Hague Rules and the Hague-Visby Rules provides:
““Contract of carriage” applies only to contracts of carriage covered by a bill of lading or any similar document of title, in so far as each document relates to the carriage of goods by sea”.
Article IV, rule 5 of the Hague Rules provides:
“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”.
Article IV, rule 5 of the Hague-Visby Rules provides:
“(a) 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 …
(c) 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 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.”
For the First Issue, the court held that both Article I(b) and section 1(4) of the Carriage of Goods by Sea Act 1971 are satisfied so long as the terms of the contract of carriage require a bill of lading to be issued. Where that is the case, it does not matter that no bill of lading was in fact issued. Similarly, both provisions still apply if – as here - the parties agree to issue sea waybills instead of bills of lading. As such, liability was limited by Article IV rule 5 of the Hague-Visby Rules, which applied in this case with the force of law, since the cargo had been loaded in Spain, a country that has adopted the Hague-Visby Rules. However, in relation to the damage to tuna in Container B and Container C, the damage might in fact have arisen out of the final stage of transit, after completion of discharge at Yokohama in Japan. If that were the case, liability would be limited by clause 7.2(c) of the Maersk Terms to 2 SDRs per kg gross weight of the tuna thus damaged.
The Court then proceeded to consider the Third Issue. In deciding whether the relevant packages or units were the containers or the individual pieces of tuna, the Court held that the focus should be on the cargo as in fact transported. Any given item of cargo cannot be both packaged and unitised cargo, but the entire cargo can be a mix of both. If cargo as in fact transported is made up of identifiably separate items of transportable cargo, those items are “units”. For containers, the container walls are deemed transparent for the purpose of Article IV rule 5. In other words, one should imagine looking through the container walls to see what cargo was stuffed in it. Applying these principles in this case, the cargo in question included: 1) individual frozen tuna loins, transportable and stuffed “as is” and 2) bags of tuna. Hence the cargo was a mixed cargo of “packages” (each bag being one package) and “units” (each tuna loin being one unit). In determining whether or not a ‘unit’ was such for the purposes of these limitations provisions, there was no need to consider how that unit would have been shipped, had it not been containerised.
For the purposes of Article IV rule 5, the court concluded that, for Container A, the cargo comprised 206 “units”, where each frozen tuna loan constituted a separate “unit”, and 460 (the number alleged by Kyokuyo) “packages”, where each bag of frozen tuna parts constituted a separate “package”. For the same reasons, Container B contained 520 “units”, and Container C 500 “units”.
For the Fourth Issue, the court held that “package or unit” must have the same meaning in Article IV rule 5(a) of the Hague-Visby Rules as it has in Article IV rule 5 of the Hague Rules. The court first dealt with the bags of tuna in Container A, of which the sea waybill made no mention. Rule 5(c) applied and the container was deemed to be the only relevant package or unit. Hence, liability should be limited to 666.67 units of account. For the tuna loins, they were identified and enumerated in the waybills as the cargo. By operation of Article IV rule 5(c) of the Hague-Visby Rules, the tuna loins were the “units” for the purpose of Article IV rule 5(a). The court was satisfied that the language of enumeration was consistent with the truth that the frozen loins were packed as individual articles of cargo.
Finally, the court dealt with the Second Issue. The court held that the natural meaning of the statement that liability for cargo shipped as packages or units is limited to an amount per package or unit, is that there is a separate limit for each package or unit. Therefore, under Article IV rule 5 of the Hague-Visby Rules, the meaning and effect of the “package or unit” limit of liability was that Maersk Line was liable for up to 666.67 units of account for each frozen tuna loin, considered separately. Regarding the bagged tuna in Container A, the limit of liability was the greater of 666.67 units of account (the container being the unit) and (2 x W) units of account, where W was the gross weight in kilogrammes of the bagged tuna damaged.