De Wolf Maritime Safety v Traffic-Tech International - The Zagora
DMC/SandT/17/11
Canada
De Wolf Maritime Safety BV v Traffic-Tech International Inc. (The “Zagora”): Federal Court, Ontario: Madam Justice St-Louis; 2017 FC 23: 11 January 2017
Isabelle Pillet and Matthew Hamerman, instructed by De Man Pillet, for De Wolf Maritime Safety BV;
Jean-Francois Bilodeau and Jordi Montblanch, instructed by Robinson Sheppard Shapiro, for Traffic-tech International Inc.
HAGUE-VISBY RULES: WHETHER CARGO CARRIED ON-DECK UNDECLARED AMOUNTED TO “GOODS” AS DEFINED IN THE RULES: WHETHER A CARRIER COULD RELY ON THE LIMITATION OF LIABILITY FOR DAMAGE TO GOODS CARRIED ON-DECK WITHOUT AUTHORISATION
Summary
Cargo carried on-deck undeclared is still considered as “goods” under the Hague-Visby Rules. Hence, the Hague-Visby Rules still apply in this scenario and the carrier can rely on the limitation of liability as stipulated in Article IV(5)(a).
This note has been contributed by Pak Hei Li, LLB(Hons), PCLL (University of Hong Kong).
Background
De Wolf was the owner and consignee of a shipment which was loaded in a container carried under a bill of lading issued by Traffic-Tech. The bill of lading did not declare that the container containing the shipment was to be carried on-deck. In the evente, the container was so carried and was lost overboard during the voyage.
De Wolf commenced proceedings against Traffic-Tech for damages on the basis that Traffic-Tech had failed to carry its cargo under deck. Traffic-Tech counter-argued that it could limit its liability towards De Wolf to an amount not 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 was the higher, pursuant to Article IV(5)(a) of the Hague-Visby Rules.
The court had to decide two issues. The first issue was whether the undeclared on-deck carriage of the cargo under the Traffic-Tech bill of lading prevented Traffic-Tech from relying on the Hague-Visby Rules. If the answer to the first issue was “no”, then the second issue concerned the limitations applicable to the contract of carriage pursuant to the Hague-Visby Rules.
Judgment
Regarding the first issue, the court held that undeclared on-deck carriage under the Traffic-Tech bill of lading did not prevent Traffic-Tech from relying on the Hague-Visby Rules. This conclusion was reached from two perspectives: as a matter of interpretation and as a matter of authority.
Article I(c) of the Hague-Visby Rules defines “goods” as including “goods, wares, merchandise and articles of every kind whatsoever, except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried”. In view of the definition, a cargo will be excluded from being “goods” only if both of the two conditions are met: 1) the bill of lading on its face states that the goods are carried on deck and 2) the cargo is in fact carried on deck. It was undisputed that the bill of lading in this case did not mention on-deck carriage, and that the goods were carried on deck. Since the first condition was not met, the court held that the cargo fell within the definition of “goods” and was subject to the Hague-Visby Rules.
This construction is also supported by authorities. In Grace Plastics Ltd v Bernd Wesch II [1971] FC 273, the contract stated that the cargo would be shipped under deck but, in fact, some of it was loaded on deck with the shipper’s acquiescence. Since the contract of carriage did not specify on-deck carriage, the Court held that the cargo in that case did not fall within the exception from the definition of “goods”. Hence the Hague Rules applied. Two other cases, St-Simeon Navigation Inc v A Coutier & Fils Limitee [1974] SCR 1176 and Timberwest Forest Ltd v Gearbulk Pool Ltd [2003] BCCA 39, also suggested the court would be reluctant in allowing a cargo to be excluded from the definition of “goods” under the Hague-Visby Rules.
Regarding the second issue, the court held that the limitation of liability provided for in Article IV(5)(a) of the Hague-Visby Rules applied. Article IV(5)(a) states that:
“Unless the nature and value of [the] 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.”
In ascertaining the ordinary meaning of Article IV(5)(a), the court held that the phrase “in any event” clearly meant “in every case”. This view is also supported by the English authority of Daewoo Heavy Industries Ltd et al v Klipriver Shipping Ltd et al [2003] EWCA Civ 451 (The “Kapitan Petko Voivoda”). The English Court of Appeal held in that case that unauthorised on-deck carriage, albeit constituting a breach of contract, did not exclude the limitation of liability provided for in Article IV(5). Similar reasoning was also adopted by the Canadian Court in Grace Plastics.
Hence, despite the unauthorised on-deck carriage, the Hague-Visby Rules applied and Traffic-Tech could invoke the limitation of liability provided for by Article IV(5)(a).
