Brown & Root Inc (the plaintiff) delivered a crate of machinery on 24 December 1974 to the dock in Houston. Young & Co of Houston was the contracting stevedore. The crate was to be loaded onto the M/V Peisander, owned by China Mutual Steam Navigation Co Ltd and operated by Barber Blue Sea Line (the carrier). Unfortunately, the forklift truck operated by the stevedore dropped the crate while transporting it towards the ship's side. The parties agreed that the stevedore was at fault. The parties disagreed on the extent of the stevedore's liability. In the trial Court, except for a concluding demand for full recovery against carrier and stevedore, the attack was entirely on the right of the stevedore to enjoy the USD 500 package limitation under COGSA. On appeal, the plaintiff claimed that the trial Court 'erred in allowing defendants [Carrier and Stevedore] to limit their liability to $500 per package, as defendants failed to meet their burden of establishing the validity of the package limitation' and requested that the 'judgment should be reversed and [Shipper] should be awarded recovery in full ... against all defendants, both jointly and severely [sic]'.

The issue on appeal was whether the USD 500 package limitation provided in COGSA limited the recovery of a shipper against a stevedore when the bill of lading incorporating COGSA expressly stated that 'in no case' will recovery exceed USD 500, but the applicable tariff, obliquely referred to in the bill of lading, established a means to obtain increased liability by payment of a specified additional transportation charge.

Held: Appeal dismissed.

The carrier’s usual bill of lading, which expressly incorporates the typical clause paramount, provides that the bill of lading should have effect subject to the provisions of COGSA, which shall be deemed incorporated, with nothing to be deemed a surrender of any rights or immunities or an increase in liabilities under that Act. This is expressly authorised by s 1312 of COGSA. COGSA provides for a USD 500 per package limitation, unless the nature and value of the goods have been declared by the shipper and inserted in the bill of lading.

The clause paramount establishes three things of great significance in this case. First, it makes COGSA applicable before the goods are loaded on the ship, and at a time when COGSA would not apply its own force. Second, COGSA is 'deemed incorporated' into the bill of lading, and third, nothing in the bill of lading shall be deemed an increase in the carrier's liability under COGSA. More than that, when COGSA applies, it governs and overrules any clause of the bill of lading in conflict with the statute. The plaintiff, recognising the existence and general application of the clause paramount and the express provision of ss 1304(5) of COGSA, nevertheless contends that the USD 500 limitation is not available to the carrier, and hence could not be extended to the stevedore. The plaintiff does this on two principal grounds. First, there is no place on the face of the bill of lading for the insertion of any increased valuation by the plaintiff. Second, and presumably more important, the terms of the carrier’s bill of lading make no provision - indeed seem to assume that there can be none - for the increase in valuation or limitation by simply stating that the responsibility of the carrier shall 'in no case exceed the amount of USD 500 per unit per package'.

Since the Himalaya clause in this case specifically describes the stevedore as a beneficiary, and the tariff expressly affords the opportunity for the shipper to secure an increased valuation by the payment of precisely defined additional freight, on what basis does the plaintiff contend that the USD 500 per package limitation is inapplicable?

Basically, the plaintiff relies on the 'in no case' terminology in cl 18 of the bill of lading. However, even accepting previous courts' treatment of the 'in no case' wording of cl 18, the circumstances of this case do not overcome the prima facie evidence of the opportunity for a choice of rates and valuations, nor do they sustain the plaintiff’s burden 'to prove that such an opportunity did not in fact exist'. First, COGSA is expressly incorporated into the bill of lading, thereby bringing into play s 1304(5). Next, and more significantly, the published tariff, which has the effect of law, very carefully gives the plaintiff a choice of valuations by the choice of precisely definable freight rates. This gives the plaintiff the opportunity to choose between valuations by paying the freight. COGSA does not prescribe that the face of the bill of lading contain a specific space or blank in which the increased valuation is to be inserted, nor does it provide that the carrier rather than the shipper must make the notation. The phrase 'unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading' clearly puts the burden on the plaintiff to make the determination as between value limitations and the making of the declaration. Within the effect and wording of COGSA, the problem is essentially one of contract interpretation. On that approach, the plaintiff argues that in cl 18 of the bill of lading, the 'in no case' wording is so positive that it rules out any possibility of an increased amount, especially since it recites no opportunity for the declaration of an increased valuation.

There are two answers to this literal reading. First, the clause paramount necessarily incorporates s 1304(5) of COGSA, which limits the amount to USD 500, unless the value has been declared by the shipper, and the tariff in the clearest of language affords the opportunity to increase the amount by declaring an increased valuation together with a precisely prescribed formula for the increased freight rate. Even without considering the supremacy of s 1304(5) of COGSA as prohibiting any lesser advantage to the shipper, the language of the bill of lading has at least to be read in the light of that incorporated language and, as such, the 'in no case' wording is little more than an adaptation of the terms of s 1304(5), which speaks of the carrier not being liable 'in any event'. The negative element found 'in no case' has, therefore, its equivalent in s 1304(5) with the words 'neither' and 'any' read together. In the presence of s 1304(5), which is expressly incorporated in the bill of lading, cl 18 can hardly be read as absolutely prohibiting the avoidance of the USD 500 limitation. And the incorporated s 1304(5) prescribes how and what person or party must take action to increase the limitation amount.

But even if the 'in no case wording of cl 18 has to be read rigidly, literally and absolutely, the tariff, construed as it must be in the light of COGSA, and by which the plaintiff and the carrier are alike bound, affords in simple terms an easy, effective opportunity for any shipper to increase loss/damage beyond USD 500 by a declaration of greater value and payment of an additional charge of 5% of the total declared value. As the tariff affords the opportunity and prescribes the manner and the cost, the words 'as provided in said bill of lading' are not to be read as taking back the opportunity for an increased valuation provided by the tariff. Starting with the proposition of the binding character of the tariff, it certainly would not make good commercial sense to read the express grant of an opportunity to obtain increased valuation as existing only if the bill of lading permitted it, or did not prohibit it. At most, these words meant only that the increased valuation should be declared to the carrier by the plaintiff and somehow entered on the face of the bill of lading.

The trial Judge was correct in: (i) upholding the validity and application of the Himalaya clause to the stevedore; (ii) extending to the stevedore the COGSA USD 500 package limitation; (iii) entering judgment against the stevedore in that amount; and (iv) on the stipulation, entering judgment for that sum against the carrier.