The plaintiff, Dairy Containers Ltd, claimed NZD 613,667.25 from the defendant, Tasman Orient Line CV, for loss or damage to 55 coils of electrolytic tin plates which were damaged by sea water while being carried on board the defendant's vessel, the Tasman Discoverer.

The defendant admitted liability but challenged the quantum of loss based on limitation.

There was no mandatory liability regime applicable to this contract of carriage because the bill of lading was issued in South Korea. However, under cl 6(B)(b)(i) of the bill of lading, the International Convention for the Unification of Certain Rules relating to the Bills of Lading dated 25 August 1924 (the Hague Rules) were incorporated, but the limitation of liability was specified to be '£100 Sterling, lawful money of the United Kingdom per package or unit'. This was in contrast to arts 4.5 and art 9 of the Hague Rules which limit liability based on the gold value of £100 sterling per package or unit as specified in the Hague Rules. Clause 6(B)(b)(i) of the bill of lading also provided for the scope of the Hague Rules to be extended to inland waterways.

The key issue was whether the defendant was liable for the nominal value of GBP 100 in paper currency per package or unit, or for the gold value of £100 sterling per package or unit as specified in the Hague Rules. The former interpretation would essentially limit the defendant's liability to GBP 5,500.00 but the latter interpretation would allow the plaintiff to recover its losses in full.

The trial judge held in favour of the plaintiff but the Court of Appeal reversed the decision in favour of the defendant (see CMI623). The plaintiff appealed to the Privy Council.

Held: Appeal dismissed. The defendant was liable for the nominal value of GBP 100 in paper currency per package or unit and was thus able to limit its liability to GBP 5,500.00.

The Privy Council held that it was clear from the wording of cl 6(B)(b)(i) that the parties had intended to incorporate a modified version of the Hague Rules.

First, the Hague Rules were not compulsorily applicable because the bill of lading was issued in South Korea and South Korean law did not apply a mandatory regime such as the Hague Rules to contracts of carriage.

Second, a modified version of the Hague Rules was agreed because the scope under cl 6(B)(b)(i) was extended to carriage in inland waterways and because the package limitation was amended to '£100 Sterling, lawful money of the United Kingdom'. This fixed a specific, stand-alone limitation of liability written in terms of national currency, without any reference to gold value, which essentially nullified the link between art 4.5 and art 9 of the Hague Rules. Art 3.8 of the Hague Rules was also not applicable to void the new limitation regime under cl 6(B)(b)(i) because the Hague Rules were not compulsorily applicable in the first place and the parties had agreed to a modified version of the Hague Rules in the contract.