AP Moller-Maersk A/S (t/a Maersk Line) v Kyokuyo Ltd

In my judgment, where, as in the present case, the contract of carriage at its inception provides for the issue of a bill of lading on demand, the contract of carriage is “covered by a bill of lading” within the meaning of Article I(b) of the Hague-Visby Rules. Furthermore, since, as is common ground, the contract provided by implication for the issue of such a bill of lading on demand, the requirements of section 1(4) of the 1971 Act are clearly satisfied.

It is no answer that no bill of lading was ever in fact issued. Devlin J in Pyrene v Scindia [1954] 2 QB 402, where, because the fire tender was damaged during loading and never carried on the ship, it was deleted from the bill of lading, rejected any suggestion that the Hague Rules would only be incorporated in the contract of carriage if a bill of lading was issued. At 419-420 he said:

“The next contention on behalf of the plaintiffs is that the rules are incorporated in the contract of carriage only if a bill of lading is issued. The basis for this is in the definition of article 1 (b) of "contract of carriage"; I have already quoted it, and it "applies only to contracts of carriage covered by a bill of lading." The use of the word "covered" recognizes the fact that the contract of carriage is always concluded before the bill of lading, which evidences its terms, is actually issued. When parties enter into a contract of carriage in the expectation that a bill of lading will be issued to cover it, they enter into it upon those terms which they know or expect the bill of lading to contain. Those terms must be in force from the inception of the contract; if it were otherwise the bill of lading would not evidence the contract but would be a variation of it. Moreover, it would be absurd to suppose that the parties intend the terms of the contract to be changed when the bill of lading is issued: for the issue of the bill of lading does not necessarily mark any stage in the development of the contract; often it is not issued till after the ship has sailed, and if there is pressure of office work on the ship's agent it may be delayed several days. In my judgment, whenever a contract of carriage is concluded, and it is contemplated that a bill of lading will, in due course, be issued in respect of it, that contract is from its creation "covered" by a bill of lading, and is therefore from its inception a contract of carriage within the meaning of the rules and to which the rules apply. There is no English decision on this point; but I accept and follow without hesitation the reasoning of Lord President Clyde in Harland & Wolff Ltd v Burns & Laird Lines Ltd 1931 S.C. 722.”

Furthermore, despite the submissions to the contrary of Ms Masters QC, the decisions of the Court of Appeal in The Happy Ranger and of the Court of Appeal and the House of Lords in The Rafaela S proceed on the basis that the principle enunciated by Devlin J is equally applicable to Article I(b) of the Hague-Visby Rules. Thus, The Happy Ranger [2002] EWCA Civ 694; [2002] 2 Lloyd’s Rep 357 concerned a contract for the carriage by sea of three reactors from Italy to Saudi Arabia, one of which was damaged during loading. The contract of carriage incorporated a specimen bill of lading but at the time the damage occurred no bill had been issued. The bills of lading eventually issued for the two undamaged reactors and the repaired reactor which had been damaged were on different terms to those of the specimen bill. The judge at first instance accepted on the basis of Pyrene v Scindia that the fact that no bill of lading had been issued was not conclusive, but distinguished that principle on the basis that the parties had only ever intended the contract of carriage to be governed by the terms of the specimen form of bill. Since that was always the contract of carriage and its terms were fully set out, the judge considered that the cargo interests were not entitled to demand at or after shipment a bill of lading setting forth the terms of the contract.

That decision was reversed by the Court of Appeal. The principal judgment was given by Tuckey LJ (with whom Aldous LJ agreed). At [24]-[25], Tuckey LJ held:

“24…It does not seem to me that the Rules are concerned with whether the bill of lading contains terms which have been previously agreed or not. It is the fact that it is issued or that its issue is contemplated which matters. As it was put in one of the cases “the bill of lading is the bedrock on which the mandatory code is founded” [a reference to what Bingham LJ said in The Captain Gregos [1990] 1 Lloyd’s Rep 310 at 317-8]. If a bill of lading is or is to be issued the contract is “covered” by it or “provides for its issue” within the definitions of article I(b) and section 1(4) of the 1971 Act.

25.

It follows that I think the [Hague-Visby] Rules applied compulsorily to the contract of carriage and that the judge’s conclusion on this issue was wrong.”

Although Rix LJ dissented on another point not relevant to the present question at [41] he agreed with this analysis:

“…the contract of carriage itself contemplates the issue of a bill of lading and provides in advance for its form and the provisions to be contained in it. Therefore, for the reasons set out by my Lord in regard to the…issue…it is hard to see why the question regarding the effect of the incorporation of clause 3 [of the specimen bill] should provide an answer otherwise than in favour of the compulsory application of the Hague-Visby Rules (the “Rules”).”

In The Rafaela S, four containers of printing machinery were carried from South Africa to Felixstowe where they were transhipped onto another vessel and carried on to Boston. During the on-carriage to Boston, the goods were damaged. The defendant issued a straight bill of lading, naming the claimant as consignee and stated to be non-negotiable, for the carriage from South Africa to Felixstowe but no bill of lading was issued in respect of the on-carriage. If one had been, it would have been a straight bill of lading as well. The principal issue before the Court of Appeal and the House of Lords was as to the status of straight bills of lading. Both appellate courts held (contrary to the conclusion of the arbitrators and the judge at first instance) that a straight bill of lading was a “bill of lading” within the meaning of Article I(b) of the Hague-Visby Rules and section 1(4) of the 1971 Act. In the Court of Appeal, it was accepted that the Rules still applied to the on-carriage, notwithstanding that no bill of lading was ever issued for that leg, applying The Happy Ranger. As Rix LJ put it at [27]:

“I conclude that although MSC was contracted to arrange on-carriage to Boston, it was not contracted to carry the machinery to Boston until it entered into a new arrangement at some stage, the details of which are not reported, to on-carry the goods from Felixstowe. That was a separate contract of carriage, which entitled the shipper to demand a bill of lading and therefore, subject to the straight bill of lading issue, meant that the contract was "covered by a bill of lading" for the purposes of article I of the Hague or Hague-Visby Rules: see Parsons Corporation v. C V Scheepvaartonderneming "The Happy Ranger" [2002] 2 Lloyd's Rep 357.”

In the House of Lords, this point was effectively common ground so it was dealt with briefly by Lord Bingham of Cornhill at [2] of his speech:

“The good[s] were trans-shipped and loaded on a different vessel at Felixstowe. It is agreed that the shipper (and seller) of the goods, Coniston International Machinery Limited of Liverpool, could have required the issue of a document to record or evidence the contract for the onward carriage of the goods from Felixstowe to Boston; that any document so issued would, for all purposes relevant to this appeal, have been in the same form as that issued for the first leg of the carriage; and that nothing turns on the lack of a document. It is convenient to speak as if a document had been issued in the form the document would have taken had it been issued. It is no longer necessary to review two questions (whether there was one contract of carriage or two, and whether Felixstowe was a port of shipment in the UK) which exercised the arbitrators and the lower courts.”

It follows that the submission by Ms Masters QC, that the judge’s conclusion that the Hague-Visby Rules apply compulsorily where, as here the contract of carriage provides that the cargo interests have a right to the issue of a bill of lading on demand and shipment is from a contracting state, was in some way contrary to the decision of the Court of Appeal and the House of Lords in The Rafaela S, is misconceived. Both appellate Courts clearly proceeded on the basis that it was sufficient that the cargo interests could have called for the issue of a bill of lading, even if none was in fact issued. Furthermore, both The Happy Ranger and The Rafaela S proceed on the basis that the principle enunciated in Pyrene v Scindia in relation to Article I(b) of the Hague Rules is equally applicable to Article I(b) of the Hague-Visby Rules.

As Mr Thomas QC pointed out, none of the text books suggests that, in this regard, any distinction or difference of interpretation is to be drawn between Article I(b) of the Hague Rules and Article I(b) of the Hague-Visby Rules. He referred the Court in particular to [9-106] of the 4^th edition of Carver on Bills of Lading by Sir Guenter Treitel QC and Professor Francis Reynolds QC dealing with the words “covered by a bill of lading” in both sets of Rules in the same terms. Likewise, the 23^rd edition of Scrutton on Charterparties at [14-031] cites both Pyrene v Scindia and The Happy Ranger in support of the principle that where the contract of carriage provides that the shipper is entitled to a bill of lading on demand, the Hague-Visby Rules will apply even though no bill of lading is ever demanded or issued.

Whilst as the judge acknowledged, none of the English and Commonwealth decisions which follow and apply the principle of Pyrene v Scindia is concerned with the factual situation which arose here, namely the issue of sea waybills rather than bills of lading, equally there is nothing in those authorities which supports the appellant’s suggestion that a different result should be reached under the Hague-Visby Rules merely because some other form of documentation was in fact issued. In my judgment, in circumstances where the appellant expressly eschews any case of variation or waiver or estoppel, the fact that sea waybills were issued can make no difference to the correct analysis. Because the contract of carriage entitled the respondent to ask for the issue of a bill of lading on demand, the contract of carriage was from its inception one which was “covered by a bill of lading” within the meaning of Article I(b) of the Hague-Visby Rules and a contract which “by implication provides for the issue of the bill of lading” within the meaning of section 1(4) of the 1971 Act.

Ms Masters QC submitted that Pyrene v Scindia and The Happy Ranger were intended to provide only a limited qualification to the fundamental principle that there is a bill of lading in existence, as the “bedrock” on which the Hague-Visby Rules are founded, to deal with the particular situation where the goods are damaged during the loading process, so never actually shipped. However, in my judgment, there is nothing in the authorities which limits the principle that, where the contract of carriage contemplates that a bill of lading will be issued on demand, the contract is “covered by a bill of lading” and “by implication provides for the issue of a bill of lading” from inception, to the particular situation of damage during loading. The principle is of much wider application, as The Rafaela S demonstrates.

Ms Masters QC also submitted that the critical distinction between all the earlier authorities (English and Commonwealth) and the present case is that in none of the other cases had sea waybills been issued by agreement between the parties. However, in my judgment the fact that for expediency, to avoid further delay, the parties agreed that sea waybills would be issued cannot alter the position. Since there was no variation or waiver or estoppel the contract remained one which was covered by a bill of lading and which by implication provided for the issue of a bill of lading, even after the sea waybills were issued. The email from the appellant of 28 January 2013 referred to at [8] above appears to proceed on the basis that issue of bills of lading in Japan was not required, presumably because there was no on-sale which required a negotiable document of title. If that position had changed and the respondent had chosen to effect an on-sale for which bill(s) of lading might have been required, the respondent could in fact still have demanded a bill or bills of lading, even after the sea waybills were issued.

I was unimpressed by Ms Masters QC’s remaining submissions as to why this Court should reach a different result from that reached in Pyrene v Scindia, The Happy Ranger and The Rafaela S. She submitted first that the French text of the Convention, which in the case of the Hague Rules is the only authoritative version: see per Devlin J in Pyrene v Scindia at p 421, and which is of equal authenticity to the English version in the case of the Hague-Visby Rules, used the words “constaté par un connaissement” which means “noted” or “recorded” by a bill of lading. She submitted that this provided strong support for her submission that the bill of lading must be in existence.

In my judgment, that submission has to be approached with considerable caution. The appellant has adduced no evidence of French law or of any other system of law which uses the French text of either Convention to support the proposition that the French text is interpreted as requiring that a bill of lading be actually issued. Without any such evidence, I would not be prepared to conclude that the French text compelled such a conclusion. In any event, this submission cannot detract from the fact that the principle of Pyrene v Scindia has been applied to the Hague-Visby Rules by the Court of Appeal in The Happy Ranger and The Rafaela S and by the House of Lords in the latter case, in decisions which are either binding on this Court or, even if the relevant passages in the judgments were obiter, we should follow unless we consider them to be wrong, which I do not.

In support of her contention that the issue of the sea waybills meant that the contract of carriage was not “covered by a bill of lading”, Ms Masters QC gave the example of the converse situation, where, at the time the contract of carriage was made, the parties agreed that the shipper had no right to demand a bill of lading, but then subsequently agreed that a bill of lading would be issued. She made the point that, at inception, neither Article 1(b) nor section 1(4) of the 1971 Act would be satisfied, but she submitted that surely once the bill of lading had been issued, the contract of carriage was throughout covered by a bill of lading. She criticised the judge’s analysis of this argument at [53] of the judgment that, where the bill of lading was subsequently issued without obligation, section 1(4) of the 1971 Act would indeed preclude the Rules from having the force of law and that it would only be where there was a variation of the contract, so as to impose an obligation on the carrier to issue a bill of lading on demand, that section 1(4) of the 1971 Act would be satisfied.

In my judgment, the criticism of this analysis is unwarranted. The factual scenario posited seems to me if not entirely fanciful, extremely unlikely to occur. It is difficult to imagine in what circumstances the parties would expressly agree that the shipper was not entitled to a bill of lading, but the carrier would gratuitously then issue one subsequently. The subsequent issue of a bill of lading would surely only happen where the contract of carriage originally made was expressly varied, so as to provide that the shipper was entitled to the issue of a bill of lading after all, in which case, as the judge said, there would be no problem with the application of section 1(4) of the 1971 Act. There is nothing illogical in this analysis and, even if there were, the criticism made by Ms Masters QC does not overcome a fundamental problem with her argument on Issue 1. This is that, on the authorities, until the moment when the sea waybills were issued, the cargo interests were entitled to a bill of lading on demand, so that the requirements of Article I(b) and section 1(4) were satisfied and yet, on the appellant’s case, that was all changed by the issue of the sea waybills, even though it is accepted that there was no variation of the contract or waiver or estoppel. As a matter of contractual analysis, the argument is simply unsustainable.

For all these reasons I consider that the judge was correct to conclude that the Hague-Visby Rules had the force of law in the present case under section 1(2) of the 1971 Act. As the judge said at [56] of his judgment, it does not follow that liability is limited by Article IV rule 5 of the Hague-Visby Rules, because the appellant may have assumed greater liability or because damage occurred after the sea transit, so that the appellant can limit by reference to the Maersk Terms. Those are not matters within the scope of the appeal so that it is not necessary to deal with them.

The issue which did arise during the course of argument was what might be described as the “gateway” into the Hague-Visby Rules. This raises two points. First, Article X(b) of the Rules (the relevant provision here because carriage was from Spain, a contracting state) by its terms refers only to: “every bill of lading relating to the carriage of goods between ports in two different States if: (b) the carriage is from a port in a contracting State”. Ms Masters QC submitted that this provision could not be applied where no bill of lading was ever in fact issued.

The second point was that Article IV rule 5(c) of the Hague-Visby Rules provides that: “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”. Ms Masters QC submitted that this provision of the Rules could not apply where there was no bill of lading in which the number of packages or units were enumerated, but only sea waybills to which Article IV rule 5 did not apply.

It is fair to say that neither of these matters was argued on behalf of the appellant at the trial. As the judge recorded at [121] of his judgment in relation to the issue whether, for the purposes of Article IV rule 5(c), it was relevant to look at what was enumerated in the draft bill of lading or only relevant to look at what was enumerated in the waybills, the judge said: “By agreement it is only relevant to look at the waybills”. From that passage, it is clear that, before the judge, Ms Masters QC was not arguing that, for the purposes of Article IV rule 5(c), the answer should be neither, because there were no bills of lading. The Article X(b) point was simply not argued at all.

In the circumstances, I have considerable doubts whether it should be open to the appellant to run these points at all. However, in any event, I consider that they are misconceived. The starting point in my view is section 1(4) of the 1971 Act. Although this is expressed in negative terms: “nothing in this section shall be taken as applying anything in the Rules”, the clear intention is that where the contract of carriage “expressly or by implication provides for the issue of a bill of lading or any similar document of title”, as the contract does in the present case, the Hague-Visby Rules will apply to that contract and will have the force of law pursuant to section 1(2). I agree with Mr Thomas QC that section 1(4) would be superfluous if, as Ms Masters QC contends, the issue of a bill of lading were a prerequisite to the application of the Hague-Visby Rules.

Therefore one has to approach the provisions of the Hague-Visby Rules themselves on the basis that, because the requirements of section 1(4) of the 1971 Act (and for that matter of Article I(b)) are satisfied, it is intended that the Hague-Visby Rules should have the force of law in a case such as the present. If Article X(b) and Article IV rule 5(c) were interpreted literally as Ms Masters QC contends, that would clearly frustrate that intention and achieve a result flatly contrary to the decision of the Court of Appeal in The Happy Ranger that, where the requirements of Article I(b) and section 1(4) of the 1971 Act are satisfied, the Hague-Visby Rules apply compulsorily to the contract of carriage even though a bill of lading has not been issued, provided that one was contemplated (see per Tuckey LJ at [24]-[25]).

In my judgment, the solution to any apparent conundrum is that these Articles should be given a purposive construction, so as to give effect to the clear intention that the Hague-Visby Rules apply compulsorily to the contract of carriage. Specifically, the references in Article X to “bill of lading” should be read as “contract of carriage which is covered by a bill of lading or similar document of title”, giving effect to the case law on the meaning of “covered by a bill of lading” in Article I(b). Some support for this purposive approach to Article X is to be found in the article The Hague-Visby Rules by Mr Anthony Diamond QC in (1978) 2 LMCLQ 225 at 261 and in the textbooks Scrutton on Charterparties 23^rd edition [14-010] to [14-012] and Aikens on Bills of Lading 2^nd edition (2015) [10.23].

Likewise, in my judgment, where, as here, the requirements of Article I(b) and section 1(4) of the 1971 Act are satisfied, the reference to enumeration in the bill of lading in Article IV rule 5(c) must be read as encompassing any other document which contains the enumeration which would have been in the bill of lading if such a bill had been issued, here the sea waybills.

This purposive approach to the provisions is also supported by the decision of the House of Lords in Adamastos Shipping v Anglo-Saxon Petroleum [1959] AC 133. That case concerned a tanker charterparty which incorporated a typed Paramount Clause which provided: “This bill of lading shall have effect subject to the Carriage of Goods by Sea Act of the United States 1936 [“USCOGSA” which enacted the Hague Rules, with certain amendments, in the United States] which shall be deemed to be incorporated herein, and nothing herein contained shall be deemed a surrender by the carrier of any of its rights or immunities or an increase of any of its responsibilities under said Act.”

The House of Lords held that the words “this bill of lading” should be read in their context as if they were “this charterparty” in order to give effect to the intention to incorporate USCOGSA into the charterparty and that the words in section 5 of the Act (corresponding to Article V of the Hague Rules), that the provisions of the Act should not be applicable to charterparties, must be rejected as meaningless (see in particular per Viscount Simonds at pp 153-4).

The House also held, by a majority, that notwithstanding the limitations as to the applicability of USCOGSA, the material provisions of the Act should be interpreted as affecting the rights and liabilities of the parties in connection with non-cargo carrying voyages and voyages other than to and from United States ports. The majority also held that “loss and damage” in section 4 of the Act relating to the carriers’ immunities from liability (corresponding to Article IV rule 1 and rule 2 of the Hague Rules) should be interpreted in context as encompassing not only physical loss of and damage to cargo, but the financial loss suffered by the charterers in only being able to complete fewer voyages than they would have done but for the owners’ breach of charterparty (see in particular per Viscount Simonds at pp 155-7).

It is fair to note that the majority of the Court of Appeal in The Happy Ranger rejected the appellants’ submission, by way of extension of the Adamastos principle, that it was not necessary to consider whether the contract of carriage in that case fell within Article I(b) of the Hague-Visby Rules, because clause 3 of the specimen bill of lading, the Paramount Clause, applied the Hague or Hague-Visby Rules applicable in the country of shipment, so that the Hague-Visby Rules governed carriage in trades where they applied, which they did in that case because it was a shipment from Italy.

However, in his rejection of that argument at [19] Tuckey LJ did recognise in terms that the scope of Article X must be subject to Article I(b). He said:

“The Rules do not define or even refer to trades but I am prepared to accept that they include voyages or carriage of cargoes within the scope of article X. This article applies “to every bill of lading relating to the carriage of goods” so to this extent it is compulsory but whilst the issue of a bill of lading is a necessary condition of the application of the Rules, it is not in itself sufficient. The scope of article X must be subject to article I(b) so if this contract is not one which is covered by a bill of lading or similar document of title the Rules, including article X, do not apply. If they do not apply they are obviously not compulsory. I do not think it is permissible to manipulate the wording of clause 3 to delete the words “apply compulsorily””.

It seems to me implicit in this passage that if article I(b) does apply, as in the present case, so that the contract of carriage is covered by a bill of lading and (as Tuckey LJ goes on to hold at [24]-[25]), the requirements of section 1(4) of the 1971 Act are satisfied, so that the Hague-Visby Rules apply compulsorily, Article X must be interpreted so as to give effect to Article I(b) and section 1(4) of the 1971 Act.

In all the circumstances, I consider that the appeal should be dismissed in relation to Issue 1, on the basis that the Hague-Visby Rules apply compulsorily and have the force of law in the present case. The provisions of Article X and Article IV rule 5(c) must be interpreted in a manner which gives effect to that compulsory application and does not frustrate it. I would add that, if I had concluded that Article IV rule 5(c) could not apply to the enumeration in the sea waybills, I would have been prepared to conclude that it could apply to the draft bill of lading, without any manipulation of language. Of course that conclusion is not one for which the appellant ever appears to have contended, no doubt because it might entail having to accept that limitation under Article IV rule 5(c) in respect of the bags of frozen tuna parts should be on the basis of each bag being a “package”, as opposed to being able to limit by reference to the container, because the sea waybill for the Replacement Container omitted any reference to the bags. It is no answer to that point to say that the respondent is pursuing a claim against the appellant for omission of the bags from the sea waybill, as that claim might or might not succeed.

Given my conclusion that the Hague-Visby Rules apply compulsorily in the present case, it is not necessary to consider the point raised by the respondent in (1) of the Respondent’s Notice that if they did not apply compulsorily, they were contractually applicable in respect of two of the containers by virtue of clause 6.2(b) of the Maersk Terms.

Given my conclusion that the Hague-Visby Rules are compulsorily applicable in the present case, it seems appropriate to turn next to Issue 3, which is whether for the purposes of limitation under Article IV rule 5(c), the individual tuna loins were each a “unit” or the containers were the “packages or units”.

In considering this question, the correct starting point is the language of the provision itself. It seems to me that two aspects of the wording point clearly to the correctness of the analysis adopted by the judge. First, the words: “the number of packages or units enumerated” mean no more than the specifying of the number of packages or units in words or numbers. “Enumeration” does not as a matter of language entail some further description in the bill of lading as to how the packages or units are actually packed in the container.

Second, the words “as packed” are simply descriptive, in the sense that they are stating no more than that the enumerated number of items have been packed in the container. That is really all that the judge meant at [90] of his judgment. He was making the point that “as packed” was doing no more than describing that the enumerated number of packages or units had been packed in the container. That analysis does not in fact depend on any impermissible re-ordering of the words. As the judge indicated at [98] of his judgment, this is essentially what Allsop J himself was saying at [282] of El Greco, when he said:

“The words “as packed in such article of transport” are not a proviso; rather, they are a part of the rule’s description of what is to be enumerated in the bill or sea carriage document: the packages or units as packed.”

However, at [284], Allsop J went on to conclude that “enumeration…as packed” did require some additional statement as to how the packages or units were packed in the container:

“Thus, one needs to be able to identify on the bill (or sea carriage document for the Amended Rules) the enumeration of packages or units as packed. The bill must make that clear. There needs to be an identification of packages or units (for transport) as packed. Thus, to use and modify the words of Mr. Justice Colman in The River Gurara: the bill must use words which make clear the number of packages or units separately packed for transportation (as packed). If it is not clear from the face of the bill what numbers of packages or units are packed as such by some words (perhaps by the natural meaning of the language describing the item) such that one cannot tell how many packages or units were packed as such in the container or other article of transport, there will only be one package or unit – the container or other article of transport. An enumeration on the face of the bill of a number of pieces of cargo that could be packed in a variety of ways and thereby not showing the packages or units as packed – that is, how or in what number they are packed, will not be an enumeration called for by art. IV, r. 5(c).”

In my judgment, contrary to that analysis, the words “enumeration…as packed” simply do not justify the additional requirement for which the appellant contends, that the bill of lading (or here the waybill) has to go on to specify how the packages and units have been packed in the container. The conclusion that “enumeration” means no more than specification in words or figures of the number of packages or units and that the words “as packed” are no more than descriptive, is strongly supported by the French text of Article IV rule 5(c) which simply refers to enumeration of the number of packages or units “being included” in the container. It is impossible to read the additional requirement for which the appellant contends out of those words any more than it is out of “as packed”. If Article IV rule 5(c) was requiring that the bill of lading state how the packages or units were actually packed in the container, I would have expected it to say so in clear terms in both the English and French texts.

As I have indicated, both parties relied on what Diplock LJ said in the travaux préparatoires. The Court of Appeal in The Aqasia (at [34] to [38] of my judgment) dealt with the circumstances in which the Court can look at travaux préparatoires, namely primarily to confirm the meaning of words in either set of Rules which the Court has concluded is the clear meaning of the words.

Of particular relevance to the present issue, Diplock LJ said this about the compromise on the wording of what became Article IV rule 5(c) which was reached by the drafting committee:

“The whole point of the container clause [Article IV rule 5(c)] …to enable anyone who looks at a bill of lading, relating to transport by container, pallet, or other similar method of grouping goods, to see whether the container is the package for the limitation clause, or whether the packages in it are. Under this paragraph all you will have to do is to look at the bill of lading and see, does it contain any figures of the numbers of packages other than the containers themselves. So with any bill of lading which goes into anyone’s hands it is possible at once to see whether it is the container which is the unit for the purposes of calculating the maximum liability – we are only dealing with maximum here – or whether it is any of the packages within it.

…

So this is a perfectly simple way of seeing from the bill of lading what the maximum liability of the shipper is for the goods. And it has this advantage – and this is essential in anything we are trying to do for commerce – that it leaves it to the shipper and the carrier to make their own bargain as to whether they want the higher maximum on the internal package basis and the higher freight, or the lower freight on the basis of the container and its contents being the package. Anyone looking at the bill of lading can tell which option has been exercised in respect of which goods in the container.” (my underlining)

Contrary to Ms Masters QC’s submissions, I do not consider that Diplock LJ was contemplating that before the packages or units of cargo could be the relevant packages or units for limitation purposes, the “enumeration” in the bill of lading had to include a description of how the items were actually packed in the container. Indeed, the underlined words are flatly contrary to any such suggestion. What he was contemplating was that, if the bill of lading stated the numbers of packages and units and not just the number of containers, then it would be obvious from the face of the bill that the shipper was trying to limit liability on the higher per package or unit of cargo basis and the carrier could adjust its freight rates to take account of that. Accordingly, this part of the travaux préparatoires seems to me to support the construction of Article IV rule 5(c) which I consider is the correct one.

I also agree with Mr Thomas QC that the appellant’s construction has the potential to create uncertainty and lead to fine distinctions dependent on the precise language used, as Allsop J himself recognised at [287]. Andrew Baker J correctly regarded this as anomalous at [100] of his judgment. When the Court asked Ms Masters QC during the course of argument what additional wording on the waybills she contended would have been sufficient to satisfy the appellant’s construction of “as packed”, she said something like: “separately packed” or “as separate units” or “unpacked”. The idea that, before the cargo interests could limit by reference to the number of frozen loins, they would have to include such anodyne or general wording which really, as a matter of common sense, did not tell the appellant more than it knew already from the information it had as set out in the draft bill of lading and waybills, simply demonstrates how unrealistic and uncommercial the appellant’s approach is.

It is also right to point out that the approach of the majority in El Greco has received some criticism from academic commentators both here and in Australia. In a case note on the case in the Lloyd’s Maritime and Commercial Law Quarterly (2005) LMCLQ 1, Professor Francis Reynolds QC identifies the uncertainties to which the approach of the majority gives rise:

“The difficulty here is that the requirement for the enumeration of units “as packed” (which of course applies to packages also: “packages…as packed”) seems as indecisive as the notion of “unit” standing alone, since the word “packed” can in normal speech apply to quite small unpackaged items (for example, a toothbrush may be packed in a suitcase); and to go further comes close to requiring the unit to be packaged (an interpretation specifically denied). The court of course knew that the goods were in packages, but not all goods need be (for example, some sorts of timber shipment). It is difficult to see that the words “as packed” were actually intended to bear the (imprecise) significance attributed to them. On the basis of the judgment, it seems difficult to say more than that what is needed is some indication in the bill of lading that the item concerned is intended to rank as a unit for limitation purposes: in the absence of this the default provision will apply and the container will be the package. It is in fact the default clause which saves the technique employed. It seems therefore that there may still be a need for a working definition of “unit” which excludes items too small or of too low value, and yet not apt to be part of a bulk cargo, from ranking for the limitation sum.”

The same criticism appears at [9-269] of Carver on Bills of Lading 4^th edition (unsurprisingly since Professor Reynolds is one of the authors). I have already referred to the passage at [10.331] of Aikens on Bills of Lading 2^nd edition which highlights the fine differences in meaning depending on the wording used, to which the majority approach would give rise, although it is fair to say the authors prefer the majority approach to that of Beaumont J.

There is more trenchant criticism of the majority approach by Pierre-Jean Bordahandy of the University of Queensland in [2004] 6 JIML 477. He refers to the French text of Article IV rule 5(c), to which I have already referred, and expresses the view that, in failing to refer to the French text, the Federal Court erred in its interpretation of the Hague-Visby Rules.

In my judgment, these criticisms of the majority judgment in El Greco are justified and like the judge, I consider that the English courts should not follow the approach of the majority in that case. It seems to me that that approach places an impermissible gloss on Article IV rule 5(c) which is simply not justified by the wording of the provision. Accordingly, I consider that the judge was correct in the conclusion he reached that there was sufficient enumeration of the frozen tuna loins in the waybills that each loin was a separate “unit” for the purposes of limitation under Article IV rule 5(c). It follows that the appeal must be dismissed in relation to Issue 3.

In the circumstances, it is not necessary to consider the alternative ways in which the respondent put its case on this Issue in its Respondent’s Notice, about which I say no more.

This Issue would only arise if, contrary to my conclusion on Issue 1, the Hague Rules rather than the Hague-Visby Rules applied. Therefore, in one sense, the Issue is academic, but since it was fully argued I will deal with it.

In my judgment, there is nothing in the wording of Article IV rule 5 of the Hague Rules which justifies the gloss which the appellant seeks to place upon it, that where the cargo is stuffed in containers, the cargo interests must be able to show that the cargo could have been shipped “as is” break bulk without additional packaging. Although the Court of Appeal in The Aqasia was not dealing with containerised cargo, I consider that the analysis in that case of what constitutes a “unit” under Article IV rule 5 is inconsistent with this gloss being applicable.

Although the genesis of “unit” in the travaux préparatoires for the Hague Rules may have been to cover large items carried without packaging such as cars and boilers (see [52] of my judgment), it is clear that “unit” has a somewhat wider meaning. As I said at [26]:

“I consider that, in the context of the Rules, a "unit" can be regarded as synonymous with a "piece", they are both descriptive of a physical item of cargo which is not a "package", because, for example, it is incapable of being packaged or is not in fact packaged.”

That definition is clearly wide enough to encompass the frozen tuna loins stuffed in the containers without further packaging. There is simply no warrant for concluding that each cannot be a “unit” within that definition unless hypothetically they could also have been carried break bulk without being packaged in some way.

I also consider that the gloss which the appellant seeks to put upon the meaning of “unit” in the context of containerisation is objectionable because it seeks to revive the now discredited “functional economics” test. The correlation between the appellant’s argument and the “functional economics” test can be seen from the formulation of that test by Oakes CJ in the Court of Appeals for the Second Circuit in Royal Typewriter Co v MV Kulmerland (1973) 483 F.2d 645; [1973] 2 Lloyd’s Rep 428 at 431-2:

“The statutory purpose here leads us to suggest what for want of a better term we will call the functional economics test. In this regard, the first question in any container case is whether the contents of the container could have feasibly been shipped overseas in the individual packages or cartons in which they were packed by the shipper. Here it is plain that they could not . . . When, as here, the shipper's own individual units are not functional or usable for overseas shipment the burden shifts to the shipper to show why the container should not be treated as the 'package.' . . . Absent shipment in a functional packing unit, the burden is on the shipper to show by other evidence that his units are themselves 'packages.' Only then does custom and usage in the trade, the parties' own characterisation or treatment of the items being shipped in supporting documentation or otherwise, and any other factor bearing on the parties' intent become relevant.”

As already noted, the “functional economics” test was heavily criticised by District Judge Beeks in the United States District Court in Seattle in The Aegis Spirit 414 F.Supp 894 at 902; [1977] 1 Lloyd’s Rep 93 at 100-101, quoted by Phillips LJ in The River Gurara [1998] QB 610B-G. As Phillips LJ noted at 621-3, the “functional economics” test was abandoned by United States courts, including the Court of Appeals of the Second Circuit which had propounded the test and was not applied in other jurisdictions.

As Mr Thomas QC points out, in The River Gurara at 624B-C, Phillips LJ expressly endorsed the reasoning of Judge Beeks in The Aegis Spirit. He concluded at 625 that what determined the limit of liability under Article IV rule 5 of the Hague Rules was the number of packages proved to have been loaded in the containers rather than the number of containers. Mummery LJ agreed with Phillips LJ. Hirst LJ dissented, but on the basis that he would have adopted the same approach as Colman J at first instance, who had followed the law as set out in the American authorities after the abandonment of the “functional economics” test. For good measure, I note that the “functional economics” test was also disavowed by the Federal Court of Australia in El Greco. At [230] to [239] of his judgment, Allsop J analyses the development and abandonment of the test in the United States. In my judgment, there is no basis for the revival of the test in the present case.

During the course of argument concerning the appellant’s case on Issue 2, the question arose as to whether these frozen tuna loins could have been loaded, without further packaging or consolidation, in the refrigerated hold of a break bulk vessel. Having seen the photographs of the loins in the containers at discharge, that would seem to be a possibility, but it could not really be determined without some expert evidence. To the extent that the appellant’s case would require such expert evidence about how the cargo could, hypothetically, have been carried in a completely different way, namely not in a container, in a completely different type of vessel, it seems to me that this highlights that this is an artificial and uncommercial approach. The Court should not adopt such an approach unless constrained to do so by the wording of Article IV rule 5 of the Hague Rules or by authority. Since, in my judgment, the Court is constrained by neither, I decline to adopt that approach. I consider that the judge was correct to reject the appellant’s argument on this Issue and that the appeal in relation to it should be dismissed.

For all the above reasons, I consider that the appeal should be dismissed.

I agree.