Consumers Glass Co Ltd (the plaintiff) claimed for the loss at sea of a bottle-making machine which was being carried on board the Austral Endurance, owned and operated by Farrell Lines Inc (the defendant), on a voyage from New York to Sydney. When the machine was placed on the vessel it was not stowed under deck but on the open deck of the ship. The defendant argued that it was stowed in this location because of the dimensions of the machine. It was too big to put into a standard metal container. On 17 July 1977, the flat rack which contained the plaintiff's machine, together with some other containers which were being carried on deck, were lost overboard. The defendant admitted this fact.

The only issue of substance in the litigation was whether the defendant was entitled to limit its liability to CAD 500 as pleaded in the statement of defence. That figure of CAD 500 found its origins in the Carriage of Goods by Water Act RSC c 15, which incorporated the Hague Rules.

It was the plaintiff's position that the defendant was deprived of the privilege to limit its liability in that fashion for three reasons. First, it was alleged that there was an oral agreement that the machine would be stowed under deck. Secondly, it was submitted on behalf of the plaintiff that the stowage of the machine on deck was a fundamental breach depriving the defendant of the privilege of limiting its liability. Thirdly, the machine in its support case could not be considered as a 'package' within the meaning of that term as used in the Hague Rules.

Held: Action dismissed.

According to the evidence, there was no oral agreement that the machine would be stowed under deck.

The bill of lading was a short form bill incorporating by reference a long-form bill, which provided: 'The shipper represents that the goods covered by this bill of lading need not be stowed under the deck and it is agreed that it is proper to and they may be stowed on deck unless the shipper informs the carrier in writing before delivery of the goods to the carrier that under deck stowage is required.' Therefore, there was an express agreement permitting the carrier to stow on deck.

The plaintiff further submitted that even if the incorporation by reference were to be permitted in the face of objection to its inconvenience, in any event, it was ineffectual because it was rendered void by the Hague Rules. The plaintiff referred to arts 1.c, 3.2 and 3.8 of the Hague Rules. The plaintiff submitted that the effect of art 3.2 was to require the carrier to stow the machine under the deck. Therefore, the abovementioned wording of the bill of lading was void by art 3.8 of the Hague Rules.

The Court held that art 1.c of the Hague Rules was not relevant in this case. Article 3.2 did not necessarily require stowage below deck. Consequently, the carrier was entitled to limit its liability to CAD 500 in accordance with the Hague Rules. According to the nature of the machine and the description given to it in the bill of lading, 'one crate of glass-forming machinery', the machine was the type of goods to which the term 'package' applied.