The appellant was an insurance company which had issued an insurance policy covering 213 bales of second-hand clothing imported into Pakistan by the consignee. The clothes were stuffed into two containers and carried under a bill of lading. On taking delivery in Karachi, the clearing agent of the consignee noticed that two bales had short-landed and Karachi Port Trust issued a short-landing certificate. The respondent carrier denied liability on the basis that the seals on the containers were intact on arrival and when opened by the surveyor. It said that the shipper had stuffed the goods in the containers in its own premises and had sealed them. The particulars in the bill of lading were inserted as declared by the shipper. The respondent denied that it was aware of the nature, number, value, quantity or quality of the goods. It argued that, having discharged the sealed containers in the same order and condition in which they were received at the port of shipment, it was not liable for the shortage of two bales which in fact were out-turned under nil marks.

The Small Causes Court found for the appellant. This decision was reversed on appeal to the High Court: see American President Lines Ltd v EFUI Co Ltd 1990 PLD 156 (CMI1659). Leave to appeal was granted to the appellant to consider the question whether under the bill of lading the carrier was required to deliver two containers or 213 bales of second-hand clothing.

The main issue for the Supreme Court was whether a carrier which carries the cargo in containers under a bill of lading giving the number of containers loaded and also the particulars of cargo stuffed in them with qualifying remarks like CY/CFS and STC is bound to deliver only the number of containers as shown in the bill of lading or the cargo as described in the bill of lading contained in the container.

Held: Appeal dismissed.

This case is governed by the United States Carriage of Goods by Sea Act 1936 (COGSA) which with minor modification is identical to the Hague Rules which were enacted as the Carriage of Goods by Sea Act 1924 (UK) and the Carriage of Goods by Sea Act 1925 in the Indian sub-continent, which is now applicable to Pakistan. The Brussels Protocol 1968, known as the Visby Rules, amended the Hague Rules and has attempted to provide a determinative solution for the container problem and perhaps relieve the courts of embarrassing situations in which they were required to offer a solution by interpretation for a revolutionary situation which was new and perhaps not contemplated when the Hague Rules were framed. However, the difficulty still persists as the Visby Rules are yet to find legislative enactment by several countries. Britain has already incorporated it in its Carriage of Goods by Sea Act 1971. The US and Pakistan have not.

After reviewing the dictionary definitions and relevant judgments, it seems that a 'package' may mean any object, article, thing, item, piece, bale, bundle, commodity or good, in any size, shape, weight, which has been wrapped, clothed, covered, cased or packed (not necessarily enclosed entirely), tied or contained so as to constitute a distinct and separate entity or unit for the purposes of loading, stocking, piling, stuffing, stowing or keeping in a container or hold irrespective of sufficiency of packing. This meaning does not solve the issue involved, namely whether each container was the package, or each bale stuffed in the container should be treated as the package. As a container encasing huge machinery, bales, bundles, cartons and all such other items enumerated above can be called packages, its applicability and determination depends upon the facts and circumstances of each case. It cannot be ignored that the word 'package' occurs in a statute which regulates the carriage of goods by sea providing the rights, liabilities, immunities, limitations and duties of a carrier, shipper and consignee. It has, therefore, to be understood against this background and not in complete isolation. A carrier is to deliver what it has undertaken to carry. The determination of this liability is related to all such provisions which apply from the first step the parties take for transportation of cargo and continues until delivery.

If the qualifying remarks CY/CFS and STC in this case are treated to form part of the carriage contract then in effect they relieve the carrier from its responsibilities, duties and obligations provided by s 3, COGSA (art 3, Hague Rules) and come into conflict with art 3.8 of the Hague Rules. Such an interpretation will strain the clear language of art 3.8 and ignores other provisions of this article. It would be rather anomalous that, on the one hand, a carrier has the option not to enter the particulars declared by the shipper in the bill of lading which it reasonably suspects it to be incorrect; and, on the other hand, does not have the option to make notations to show its complete ignorance and doubt about their correctness and accuracy. The law has given a choice to the carrier to enter the particulars declared by the shipper or not to enter them and further protects the carrier by making the shipper liable for compensation for misrepresentation. Taking into consideration the commercial nature of the bill of lading which is a negotiable document it is necessary that where COGSA or the Hague Rules as enacted, apply, they must be followed.

Therefore, if the number of packages and nature of the goods are mentioned in the bill of lading, then the words 'said to contain' or 'particulars furnished by the shipper', 'CY/CY' and similar notations will not permit the carrier to dispute the prima facie character of the bill of lading issued in the prescribed manner. In such a case if the particulars and number of packages contained in the container are mentioned in the bill of lading, the carrier is prima facie liable to discharge a container containing the goods mentioned in the bill of lading subject to rebuttal. And each package in the container shall be treated as a package. Where a carrier has entered in a bill of lading the number of containers only without giving particulars of the goods stowed in it, the carrier will be liable to discharge one container irrespective of the goods stuffed in it. The container shall be treated as one package. In cases where the goods have been stuffed by the shipper and the carrier is not associated with the stuffing and is not aware of the contents but accepts the declaration of the shipper as to particulars and number of goods to be correct and mentions it in the bill of lading, the liability of the carrier would be not to deliver one container only but the goods contained in it as described in the bill of lading. This interpretation is consonant with the letter and spirit of COGSA and the Hague Rules. On this issue Courts have faced difficultly in interpreting the Hague Rules. However, in view of its amendment by the Visby Rules it seems clear that it has now been clarified and declared in positive terms. Therefore, this interpretation finds support from the opinion and resolution of the international commercial and shipping communities as well.

A bill of lading with notations like CY/CY, CFS or SLC is prima facie evidence as provided by law but its rebuttal by the carrier becomes easier and the burden becomes much lighter than in other cases. Such or similar notations on the bill of lading have gained currency and their meaning is well understood in shipping, commercial and banking circles to mean that the carrier was not associated with the stuffing of the container which was exclusively done by the shipper. On the face of such bill of lading the carrier need not prove these facts unless rebutted. It has only to establish that such sealed container was properly and carefully loaded, handled, stowed, carried, kept, cared for and discharged. The burden will then shift to the shipper to prove that the number of packages or goods as shown in the bill of lading were stuffed in it. Without such proof the claim for loss or damage cannot succeed. Where the bill of lading is in respect of a container without describing the goods contained in it, the words 'apparent order and condition' will refer to the apparent condition of the container. In the present case the bill of lading was marked with notations CY/CY, STC, which prima facie established that the containers were stuffed exclusively by the shipper. The respondent carrier has proved by cogent evidence that the containers were discharged at Karachi with seals intact. They have further, by evidence in rebuttal, proved that they have discharged their duties as carriers properly. The appellant has not produced any evidence in rebuttal to prove the number and condition of bales stuffed in the containers.