This was an appeal from the order of Andrew Baker J sitting in the Commercial Court, whereby he determined a series of issues in favour of the plaintiff/respondent (Kyokuyo Co Ltd v AP Møller-Maersk A/S, Trading as ‘Maersk Line’ [2017] EWHC 654 (Comm) (CMI13)).

Kyokuyo Ltd was the receiver of three container loads of frozen tuna shipped at Cartagena, Spain for carriage by the defendant (Maersk Line) to Yokohama, Japan. The three containers (referred to in the judgment as Container A, Container B and the Replacement Container) were discharged in Yokohama on different dates in February and March 2013. The contents of Container C had been restuffed into the Replacement Container in Barcelona after a possible malfunction of Container C’s refrigeration equipment. Container A was discharged to the claimant at Yokohama on or about 15 February 2013. Container B was discharged at Yokohama on or about 22 February 2013, carried by road to Shimizu and delivered to the claimant on 27 March 2013. The Replacement Container was discharged at Yokohama on or about 1 March 2013 and delivered to the claimant at Shimizu on 5 March 2013.

The three containers contained frozen bluefin tuna loins weighing between 20 kg and 75 kg each and bags of frozen tuna parts, each bag weighing around 20 kg. The frozen loins were stuffed into the containers as individual items of cargo without any additional packaging. The bags were stuffed into the containers as individual bags. Container A contained a mixture of frozen loins and bags (206 loins and 460 bags). Container B and the Replacement Container contained frozen loins (520 and 500 respectively).

The claimant alleged the tuna as delivered was damaged by raised temperatures and/or rough handling during restuffing into the Replacement Container. The claimant said the damage should be valued at GBP 858,000 in aggregate.

The parties agreed that Maersk Line’s liability (if any) was governed by its standard terms and conditions of carriage (the Maersk Terms) but disagreed which set of rules applied - the Hague-Visby Rules or the Hague Rules. The contract was for carriage to and discharge at Yokohama of 12 ‘super freezer’ containers. Maersk Line drew up and provided Kyokuyo with a draft, straight consigned bill of lading naming Caladeros del Mediterraneo SL as shipper and the claimant as consignee. No bill of lading was issued for any of the containers. In order to avoid delay in delivery, the claimant requested Maersk Line (who agreed) to issue sea waybills. The sea waybill for Container A made no mention of the bagged tuna parts but stated a total weight of 18,740kg for the 206 tuna loins whereas the draft bill of lading had stated the weight for 666 items.

At first instance, his Honour held that:

1. The Hague-Visby Rules apply where there is a contract of carriage covered by a bill of lading or similar document of title. Art 10 provides that the Hague-Visby Rules apply to cases where carriage is from a port in a contracting state. Here, carriage was from Spain which is a contracting state. Following the approach adopted by and since Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 1 Lloyd’s Rep 321 (CMI2100), art 1.b is satisfied where the terms of carriage require a bill of lading to be issued but no bill of lading is in fact issued. It is immaterial that no bill of lading was insisted upon. Liability is limited by art 4.5 of the Hague-Visby Rules which applied by the force of law except to Container B and the Replacement Container if Maersk Line proves the damage arose out of the final stage of transport after completion of the containers’ discharge at Yokohama. In which case liability is limited by cl 7.2(c) of the Maersk Terms.
2. If the Hague-Visby Rules apply (which they do), except for damage shown by Maersk to have occurred at the final stage of transit after discharge at Yokohama, each frozen loin as a separate unit attracts a separate limit of 666.67 units of account, and the limit of liability in respect of damage to the bagged tuna is the greater of 666.7 units of account and (2xW) units of account, where W is the gross weight in kg of the bagged tuna damaged. If the Hague Rules had applied (which they do not) each frozen loin as a separate unit would have attracted a separate limit of GBP 100, and each bag of bagged tuna in Container A as a separate package would also have attracted a separate limit of GBP 100.
3. The possible reading of art 4.5 of the Hague Rules for containerised cargo that is, by definition, packaged cargo, the containers being the only relevant packages was authoritatively rejected by The River Guara [1998] 1 Lloyd’s Rep 225. The focus in El Greco (Australia) Pty Ltd v Mediterranean Shipping Co SA [2004] Lloyd’s Rep 537 (CMI1) on the word ‘units’ is on how the cargo was made up for stuffing into the container, not on how it might have had to be prepared for shipment without containerisation. Any given item of cargo cannot be both a package and unitised cargo. However, the cargo can be a mix of both packages and units. If liability had been limited by art 4.5 of the Hague Rules each frozen tuna loin would have been considered a separate unit and each bag (for the bagged tuna in Container A) would have been considered a separate package.
4. (a) By agreement it was only relevant to look at the waybills, not what was contained in the draft bill of lading. (b) Under art 4.5.a and 4.5.c of the Hague-Visby Rules each frozen tuna loin was a separate ‘package or unit’, since they were identified and enumerated in the waybills as being the cargo and the language of the enumeration was consistent with the truth. As regards the bagged tuna in Container A, the waybill made no mention of the bags of tuna. Thus there was only one ‘package or unit’, namely the container.

Maersk Line appealed on three grounds.

1. The judge was wrong to conclude that liability was limited by art 4.5 of the Hague-Visby Rules and should have held that the contract was ‘covered’ by sea waybills so the Hague Rules applied contractually.
2. On the basis that liability was limited pursuant to art 4.5 of the Hague Rules, the judge was wrong to conclude that each tuna loin was a unit, as the true meaning of ‘unit’ is an item that can be shipped ‘as is’ break bulk without the need for packaging.
3. The judge was wrong to hold that, for the purposes of art 4.5.c of the Hague-Visby Rules, there was sufficient enumeration of the packages or units ‘as packed’.

Held: The appeal was dismissed. Where a contract of carriage at its inception provides for the issue of a bill of lading on demand, the contract is ‘covered’ by a bill of lading within the meaning of art 1.b of the Hague-Visby Rules. It is no answer that no bill of lading was ever in fact issued.

During the course of argument, the appellant raised two points regarding the non-issuance of the bill of lading. First, that art 10.b of the Hague-Visby Rules (the gateway provision) could not apply where no bill of lading was ever in fact issued. Second, art 4.5.c which provides that the number of packages enumerated on the bill of lading ‘shall be deemed the number of packages or units’ could not apply where only sea waybills were issued. In dismissing both arguments, Flaux LJ said that to interpret these articles literally would frustrate the intention of the Carriage of Goods by Sea Act 1971 (UK), which gives the Hague-Visby Rules the force of law. The solution to such a conundrum is that these articles should be given a purposive construction to give effect to the clear intention that the Hague-Visby Rules apply compulsorily to the contract of carriage.

Andrew Baker J was correct in deciding not to follow the approach of the majority in El Greco. The academic criticisms of that decision are justified. Therefore, 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 art 4.5.c.

Despite Flaux LJ’s finding that the Hague-Visby Rules do apply, nevertheless, he dealt with the further issue of whether the individual pieces of tuna or the containers were the relevant package or unit. In his Honour’s judgment, there is nothing to justify the gloss the appellant sought to place upon art 4.5; that is, 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. The analysis by the Court of Appeal in The Aqasia (CMI123) is inconsistent with this gloss being applicable. The definition of ‘unit’ provided in The Aqasia is sufficiently wide to encompass the frozen tuna loins stuffed in the containers. The gloss the appellant sought to apply to the meaning of ‘unit’ is objectionable because it seeks to revive the discredited ‘functional economics’ test. Further, the fact that the appellant’s case would require expert evidence to determine whether or not the tuna loins could have been loaded without further packaging in the refrigerated hold of a break bulk vessel highlights that is an artificial and uncommercial approach. The Court should not adopt such an approach unless constrained by the words of art 4.5 of the Hague Rules or by authority. It is constrained by neither and the appeal in relation to this issue is dismissed.