This was an appeal from the judgment of Mayo J, who gave judgment against Hecny Shipping Ltd (the carrier) in the sum of USD 216,000 for loss of a cargo of 2,500 cartons of cassette recorders belonging to Wily Products Co Ltd (the cargo owner). This sum was the FOB value of the cargo and freight amounting to USD 30,000.

The carrier appealed on the ground that sum was wrong in relation to the FOB value of the goods.

The goods were received by the carrier for carriage from Hong Kong to Paraguay under five combined transport bills of lading issued by the carrier. The bills of lading contained the statement 'goods … in apparent good order and condition' over the defendant’s signature. Under the column heading 'No. of Pkgs. or Shipping Units' was the statement '500 cartons'. Under the column heading 'Description of Goods & Pkgs.' was the statement '2000 pcs … cassette recorder as per sales confirmation', and under the column heading 'Gross Weight' was the statement '9050 kg'. Above those particulars were the words 'CY/CY ONE (1) x 40' CONTAINER ONLY'. The bills of lading contained a clause paramount incorporating the Hague Rules unless the Hague-Visby Rules applied compulsorily.

The goods were transported by sea to the port of Santos where the cargo was discharged but it was lost before it was delivered to the land transport carrier.

The carrier accepted that it was liable in damages but argued that it was entitled to limit liability under the Hague Rules; or, if the limitation point failed, that the damages should have been assessed by the Court and should not have been based upon the FOB value.

Held: Appeal dismissed.

The carrier argues the Hague Rules govern the relationship of the parties; the cargo owner says the Hague-Visby Rules apply. The carrier argues that the Hague Rules apply because the cargo was lost after discharge and outside the period of 'carriage of goods' as defined by art 1.e of the Hague-Visby Rules; therefore the Hague Rules would be deemed to be incorporated into the bills of lading by the clause paramount.

This point is relevant because art 4.5.c of the Hague-Visby Rules states:

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.

The Hague Rules do not contain such a deeming provision. However, the argument as to which Rules apply is wholly irrelevant as on the face of the bills of lading, the shipper has plainly declared the number of cartons, and this has been incorporated into the bills of lading. The carrier accepted that. There is no relevant limitation of liability in this case which can help the carrier.

Articles 1.e and 2 of the Hague-Visby Rules have been considerably litigated. Article 1.e provides: '"Carriage of goods" covers the period from the time when the goods are loaded on to the time when they are discharged from the ship.' Article 2 provides:

Subject to the provisions of art 4, under every contract of carriage of goods by sea the carrier, in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the responsibilities and liabilities, and entitled to the rights and immunities hereinafter set forth.

On its face, art 1.e defines the period of sea carriage as between loading and discharge. In The Zhi Jiang Kou [1991] 1 Lloyd's Rep 493, Kirby P in the High Court of Australia observed:

art 2 of the Hague Rules does not ... establish a category limited to events arising from loading to discharge, strictly so confined. It also includes custody and care, loading and handling as well as the carriage and discharge of the goods. 'Custody and care' are apt to cover events after the discharge and until delivery of the goods. Any other construction would artificially narrow the operation of the Hague Rules. If there is an ambiguity, I should prefer to adopt the construction which gives the Hague Rules a sensible operation which does not artificially terminate their effect at the ship’s rail.

In Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB 402, 411, (CMI2100) Devlin J said: 'The operation of the Rules is determined by the limits of contract of carriage by sea and not by any limits of time.'

Here, art 1.e does not materially affect art 2. Despite art 1.e the period of 'carriage of goods' by sea envisaged in art 2 should not be strictly construed limiting it to 'events arising from loading to discharge'. Article 2 extends the period beyond discharge. In the situation the parties faced, art 2 is capable of standing on its own. The sea carriage did not terminate after discharge and the Hague-Visby Rules still applied at the time of loss before the goods were handed over to the land carrier.

Articles 10.a and 10.b render the Hague-Visby Rules compulsorily applicable:

The provisions of these Rules shall apply to every bill of lading relating to the carriage of goods between ports in two different States if:

(a) the bill of lading is issued in a contracting State, or

(b) the carriage is from a port in a contracting State.

In this case the bills of lading were issued in Hong Kong which is a contracting State; therefore, the Hague-Visby Rules applied compulsorily.

The carrier submitted that by the words 'said to contain' (STC) in each of the bills of lading it held itself out to be responsible only for the container accepted and not the contents. However, the 500 cartons stated in each bill of lading were enumerated in the bill of lading as packed in the container. There is no requirement in art 4.5.c of the Hague-Visby Rules for the counting, if required at all, to be done by the carrier. Article 4.5.c is a deeming provision. When packages to be shipped are enumerated as packed in a container, the packages are deemed to be the number shipped for the purposes of limitation.