This dispute arose out of the partial loss of and damage to a consignment of 34 new excavators carried on the Kapitan Petko Voivoda from Korea to Türkiye in 2000. Klipriver Shipping Ltd (the defendant) was the charterer of the vessel. The cargo was carried pursuant to a charterparty between Daewoo Heavy Industries Ltd (the plaintiff) and the defendant. It was agreed that carriage would be 'under deck only'. The charterparty between the plaintiff and the defendant incorporated Conline terms which contained a general paramount clause, the effect of which was that the Hague Rules as enacted in Türkiye applied. The bill of lading issued by or on behalf of the defendant also included Conline terms.

Two issues arose in the Commercial Court: first, whether deck stowage was a breach of the terms of the charterparty and the bill of lading; second, if so, whether the defendant was precluded by reason of the unauthorised deck carriage from relying on the limitation provisions or other defences provided by the Hague Rules. The Commercial Court answered the first question in the affirmative and concluded that the defendant was not precluded from relying on the limitation provisions provided by the Hague Rules because of the unauthorised deck carriage.

The question in this appeal was whether a sea carrier who carried cargo on deck in breach of a contract of carriage which was governed by the Hague Rules could take advantage of art 4.5 of the Hague Rules to limit its liability for loss or damage.

The plaintiff submitted that the obligation to carry cargo under deck has the same importance as the obligation not to deviate and the obligation to store in a contractual warehouse. Therefore, as a matter of construction, it could not have been the intention of the parties to apply the Hague Rules limitation to such a serious breach. The plaintiff specifically relied on Wibau Maschinenfabric Hartman SA v Mackinnon Mackenzie Co (The Chanda) [1989] 2 Lloyd's Rep 494. The question in that case was whether shipment on deck disentitled the shipowner from relying on art 4.5 of the Hague Rules. It was held in that case that 'clauses which are clearly intended to protect the shipowner provided he honours his contractual obligation to stow goods under deck do not apply if he is in breach of that obligation'. The limitation clause should fall within this category.

The defendant argued that there was no English authority for treating stowage on deck as being equivalent to deviation. Neither the plaintiff's submissions nor The Chanda gave any force to the critical phrase 'in any event' in art 4.5 of the Hague Rules. The 'no deck stowage' obligation was not more important than other obligations of the carrier such as to provide a seaworthy ship or to exercise due diligence to make the vessel seaworthy under art 3.1 of the Hague/Hague-Visby Rules​. It had been held in Parsons Co v CV Scheepvaartonderneming (The Happy Ranger) [2002] 2 Lloyd's Rep 357 that the words 'in any event' in art 4.5 of the Hague Rules meant what they said. They were unlimited in scope and there was no reason for giving them anything other than their natural meaning. Therefore, liability for failure to carry under deck should be no different. The Court of Appeal in Kenya Railways v Antares Co Pte Ltd (The Antares) [1987] 1 Lloyd's Rep 424 also held that the time limit of one year contained in art 3.6 of the Hague Rules applied to a claim for failure to carry under deck. Thus, the package limit in art 4.5 was not inherently different.

Held: Appeal dismissed.

The cargo owners can derive no benefit from the supposed principle stated in the deviation cases or, indeed, the warehouse cases. The duty of the Court is merely to construe the contract which the parties have made.

The plaintiff contended that the phrase 'in any event' meant no more than 'notwithstanding the foregoing'. Since the rule foregoing art 4.5 is art 4.4, which disapplies the strict common law rule about deviation, it seems that the plaintiff's construction does not advance the argument.

The Antares and The Happy Ranger are particularly relevant. It was held in The Antares that a shipowner who carried cargo on deck in breach of contract could rely on art 3.6 of the Hague-Visby Rules, which provides that 'the carrier and the ship shall in any event be discharged from all liability whatsoever in respect of the goods, unless suit is brought within one year'. The words 'in any event' should not have a different meaning in art 4.5 of the Hague Rules than they had in art 3.6 of the Hague-Visby Rules. The Happy Ranger was a case where art 4.5 of the Hague Rules was held to apply where there had been a breach of the seaworthiness obligation contained in art 3.1 of the Rules. Although the obligation to carry under deck was an extremely important obligation, it could not be said that it was 'overriding' in the same sense as the seaworthiness obligation.

It is also important to remember that the Commercial Court's decision was that the defendant in the present case would be unlikely to be able to rely on the defences provided by art 4.2 of the Hague Rules, but that it would depend on the facts. The reason for this answer was that, although there has been a breach of contract by shipment of cargo on deck, the loss would probably be caused by that breach of contract and the claimant would therefore be able to recover. If goods are shipped on deck in breach of contract and are also insufficiently packed with the result that they are lost, the shipment on deck is at any rate a cause of the loss. If they had been shipped in the holds, as they should have been, the insufficiency of packing is unlikely to have mattered and art 4.2.n of the Hague Rules could not be relied upon. The same will apply to an exception of jettison whether stated as such in the contract or pursuant to art 4.2.l of the Hague Rules. It is likely that the cargo shipped on deck would be the cargo to be jettisoned; if it had been loaded under deck it would probably not have been the cargo that was jettisoned.

Therefore, The Chanda should not be followed because the words 'in any event' were never addressed and the supposed repugnancy of art 4.5 of the Hague Rules cannot be justified as a matter of construction.