Nelson Pine Industries Ltd (Nelson Pine), the plaintiff, claimed damages from Seatrans New Zealand Ltd (Seatrans), the defendant, due to corrosion of a roller chain packed in an open-top container during sea transport from Bremerhaven, Germany, to Nelson, New Zealand, on the Pembroke in 1990. Seatrans acted as the New Zealand agent and legal representative of the master and owner or charterer of the Pembroke, responsible for handling claims for cargo damage under s 11 of the Sea Carriage of Goods Act 1940 (NZ).

In October 1989, Nelson Pine purchased a new press for its MDF fiberboard plant from Eduard Kusters GmbH of Hanover, worth nearly NZD 12 million. The purchase included about 4 km of precision roller chains. The shipping arrangements from Bremerhaven to Nelson were made through a series of agents, culminating in a contract with Svendborg Maritime APS, a Danish firm, to carry the goods by sea. The contract was documented by a liner booking note, which was comprised of a single sheet of paper plus a rider sheet. The liner booking note's cl 15 explicitly stated that all cargo should be loaded below deck, but this requirement was not included in the liner bill of lading. Additionally, cl 19 indicated that containers may be transported either above or below deck without prior notice to the merchant, and at the merchant’s own risk.

During a stop at Sao Francisco do Sul to pick up additional cargo, some of Nelson Pine’s cargo was unloaded and subsequently stored on deck, which exposed it to severe weather conditions, including hurricanes. This exposure led to the corrosion of the roller chains.

The legal issues in this case revolved around the proper stowage of the cargo under the contract and the application of limitation rules in the Hague Rules or the Hague-Visby Rules. The case discussed whether the damage to the cargo, resulting from its storage on deck contrary to the terms of the carriage contract, allowed the plaintiff to claim full damages or whether the carrier could limit its liability under the Rules.

Held: Judgment for the plaintiff.

The damage to the roller chain carried in an open-top container on the Pembroke was due to improper stowage on deck, contrary to the specific contractual requirement that it be stowed under deck. Although the carrier, and in particular the master and its agent knew that damage to some of the machinery was probable, they 'recklessly' proceeded to stow the open-top containers on deck. Clause 19 of the bill was deemed irrelevant to the case, as it pertained exclusively to waterproof containers. Given that the container in question was an open-top container, it did not fall within the scope of this clause.

The Court addressed the applicability of the Hague-Visby Rules instead of the Hague Rules, based on cl 2 of the bill, which stated that where the Hague-Visby Rules apply compulsorily, they became the governing legislation. The defendant argued that under German law the Hague-Visby Rules were compulsorily applicable. However, due to the ambiguity and the absence of direct German case law on this issue, the Court was reluctant to form a definitive opinion. Nevertheless, it was noted that if it were necessary to decide, there would be no satisfactory evidence to prove the compulsory applicability of the Hague-Visby Rules under German law for this shipment. The Court held that the carrier could not rely on the package limitation clauses in the Hague Rules, even if the Hague-Visby Rules were accepted as compulsorily applying, due to the carrier’s breach of the express terms of the contract regarding under-deck carriage. The Court lastly evaluated 'reckless stowage on deck', concluding that even if it was wrong about the inapplicability of the Hague-Visby Rules as compulsory law, the carrier would, regardless, not avail of the limitations based on art 4.5.e. This rule specifically states that the carrier cannot limit liability if the damage resulted from an act or omission done with intent to cause damage or recklessly with knowledge that damage would likely result. The Court noted that the carrier acted recklessly in stowing the cargo in an open-top container on deck, knowing the probable risk of damage during the expected rough sea conditions.

Nelson Pine was awarded full damages amounting to NZD 258,771.61 as calculated based on the extent of the corrosion and the cost of remediation, including the procurement of additional chains to mitigate the damage. The Court also ruled that Nelson Pine was entitled to costs.