The plaintiff, Berisford Metals Corp, ordered bundles of tin ingots to be carried from Brazil to New York, United States, on the SS Salvador, a vessel owned by AS Ivarans Rederi (the carrier). When the vessel arrived in New York, two of the four containers carrying the tin ingots were empty. The Court below held that the carrier was liable to the plaintiff, but only to the extent of the package limitation. The plaintiff appealed the application of the package limitation.

Held: Appeal allowed. The judgment of the District Court is reversed, and the case is remanded back to the District Court.

The Achilles heel of the carrier's defence was a report by a marine surveyor which squarely placed the blame for the loss on the carrier by stating that '70 missing bundles of tin ingots were never loaded in the two containers'.

The central question was whether a carrier who issues a clean on board bill of lading, erroneously stating that certain goods have been received on board when they have not been so loaded, should be precluded from limiting its liability pursuant to an agreement binding the parties to the terms of Carriage of Goods by Sea Act (COGSA) 46 USC s 1300, and specifically the package limitation in s 1304(5).

The necessity for maintaining the integrity of, and confidence in, bills of lading has been recognised in a line of cases beginning before, and continuing after, the 1936 enactment of COGSA. In Olivier Straw Goods Corp v Osaka Shosen Kaisha 283 US 856 (1931), the Supreme Court held that:

Certainly a breach like the one here, which arose from a failure to ship the cargo at all, with its consequent loss or destruction on land, was no less fundamental than a deviation in the voyage, or than stowage of cargo on deck contrary to agreement, or than misdelivery of goods. In all such circumstances valuation clauses in the bill of lading have been held inoperative to relieve the shipowner.

The result reached in Olivier has been followed steadfastly. The USD 500 package limitation may not be invoked by a carrier who has erroneously issued an on board bill of lading representing that goods were loaded aboard its ship, regardless of whether the carrier acted fraudulently in doing so.

The Olivier ruling represents sound public policy today, as it did in 1931. Whether one likens the carrier's issuance of a false bill of lading with respect to its loading of cargo to a deviation, a breach of warranty, or a representation which it must be estopped to deny, its adverse impact on trade and on reliance on bills as an essential method of facilitating trade is serious. However, the carrier argued that it could be held liable for a misstatement in its bill of lading only if it acted intentionally or fraudulently.

A carrier is not required to open every package received from a shipper and inspect the contents before issuing a bill to the effect that they appear to be in good condition. However, when a carrier makes a representation in a bill of lading with respect to its own conduct, it is properly held to a higher standard since it is reasonably expected to be aware of its own actions, including whether it has loaded cargo.

The carrier, having received 100 bundles of tin ingots from the shipper in Brazil, issued a false bill of lading with respect to its own conduct, warranting that it had loaded 100 bundles on its ship, when in fact it had loaded only 30. The bill of lading, whether or not intentionally false, enabled the shipper to collect from the plaintiff the full purchase price for 100 bundles. If the carrier had disclosed that 70 bundles had not been loaded, the plaintiff would have been entitled to refuse payment, and the loss would have fallen on the seller of the goods as required by the conditions of the sales contract. Therefore, the carrier's misrepresentation amounted to a fundamental breach going to the very essence of its contract, and precluding it from invoking those provisions extending the limitation of liability terms of COGSA s 1304(5) to the period when the goods were on shore.