In October 1999, the Tasman Discoverer was carrying a shipment of 70 coils of electrolyte tin plates from Busan, Korea to Tauranga, New Zealand. Of that load, 55 were damaged by seawater during the voyage. The bill of lading governing this transaction specified that issues of liability would, in absence of an applicable international Convention or national law, be determined by the Hague Rules (cl 6(B)(b)(i)), to a maximum value of £100 per package or unit. Under cl 8(2) of the bill of lading, any of its provisions that clashed with the Hague Rules would be deemed null and void. Clauses 6(B), 7, and 8(2) were prima facie consistent with arts 3.8, 4.5, and 9 of the Hague Rules.

In the High Court, Williams J approved Dairy Containers Ltd (the plaintiff)'s argument that £100 per package or unit meant the modern value of £100 in gold, to necessarily allow for shifts in the value of currency. Thus the amount payable was actually NZ$613,667.25. This conclusion contrasted with the defendants' argument that they owed only £5500, or £100 multiplied by the 55 damaged packages (see CMI647).

The second defendant, Tasman Orient Line CV, appealed.

Held: Appeal allowed.

Article 4.5 of the Hague Rules reads as follows:

Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with goods in an amount exceeding £100 per package or unit, or the equivalent of that sum in other currency unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading.

No declaration of the nature mentioned in this article was made by the shipper.

Article 3.8 of the Hague Rules is the clause paramount and serves to invalidate any clauses, covenants, or agreements between parties that exempts the carrier from liability for loss or damage to goods. In the initial High Court ruling, Williams J affirmed the importance of this article and asserted that, since the entirety of the Hague Rules had been incorporated into the bill of lading in cl 6(B)(b)(i), art 3.8 applied and the Hague Rules would take precedence in any case of inconsistency between it and the bill.

Article 9 of the Hague Rules reads:

The monetary units mentioned in this convention are to be taken to be gold value. Those contracting States in which the pound sterling is not a monetary unit reserve to themselves the right of translating the sums indicated in this convention in terms of pound sterling into terms of their own monetary system in round figures. The national laws may reserve to the debtor the right of discharging his debt in national currency according to the rate of exchange prevailing on the day of the arrival of the ship at the point of discharge of the goods concerned.

The Court stated that the purpose of this article in 1924 may have been, in part, to provide a stable measuring stick by which amounts could be calculated during a period of significant economic inflation. Article 9 also predicted that countries not using the pound ordinarily would legislate on the topic to provide greater clarity for themselves. New Zealand did this with the Sea Carriage of Goods Act 1940 (NZ), and ratified the Hague SDR Rules (inclusive of the 1924 Hague Rules and Visby Protocol) in 1995. This changed the 'measuring stick' to special drawing rights.

The UK changed the £100 figure to £400 in 1977 and it was held that art 9 of the Hague Rules expressed the £100 value in art 4.5 as a gold value figure in The 'Rosa S' [1989] QB 419; [1988] 2 Lloyd’s Rep 574 (CMI2232), and Brown Boveri (Australia) Pty Ltd v Baltic Shipping Co (The 'Nadezhda Krupskaya') [1989] 1 Lloyd’s Rep 518 (CA) (CMI668).

The Court then turned to examining the bill of lading in depth. It took into consideration that there was no reference in the bill to £100 as gold value, despite many historical re-evaluations of the Hague Rules' wording, and the preference in a variety of international cases for that reading. The bill instead used the phrase '£100 Sterling, lawful money of the United Kingdom' in cl 6(B)(b)(i) with the express intention to construe the Hague Rules in accordance with that phrase.

Based on that wording, therefore, and its difference from the regular understanding of £100 as gold value, it was apparent that the appellant owed only £100 per package, bringing the total to £5500. This was a simple contract and the parties were empowered to give the rules they incorporated (including the Hague Rules) any meaning they liked.

Clause 6(B)(b)(i) acted as an express limitation on the Hague Rules, including art 3.8, the paramountcy clause. The paramountcy clause would only prevail if the Hague Rules had been imposed compulsorily through statute, which was not the case here with the parties' agreement. Further, a repugnancy to the Hague Rules in the context of the bill of lading here would mean a repugnancy to the rules as modified by the parties under the bill.

[For the subsequent unsuccessful appeal to the Privy Council, see Dairy Containers Ltd v Tasman Orient Line CV (CMI566).]