A consignment of 726 packages consisting of machinery and parts was imported from Bremen (West Germany) to Karachi by the consignee, Bengal Fibre Co Ltd. The consignment was carried on the SS Rose Bank under a bill of lading issued by the defendant carrier. The consignment was insured with the plaintiff. On arrival, the consignee informed the local agent of the defendant that on examining the consignment it had found that 8 packages were in a badly damaged condition and that it had not taken delivery of the damaged packages. A joint survey was held, but only as to the external condition of the packages, as it was not feasible to open them and repack them at the port. The consignee then made a request for a joint survey of the consignment at its factory premises, which was rejected by the defendant on the ground that the goods had been removed from the port premises and that on such removal the defendant's liability ceased. The consignee went ahead with its own survey and its surveyors found 17 more packages to have been damaged. Subsequent to this survey, the consignee, after an abortive correspondence with the local agent of the defendant, settled its claim with the plaintiff insurers and executed a letter of subrogation in the plaintiff's favour.

The defendant denied liability altogether. The damage to the 8 packages was attributed to defective or inadequate packing. In the alternative, it contended that its liability under the terms of the bill of lading was confined to GBP 100 per package or the net invoice cost of the damaged and/or the missing parts of the machinery, whichever was less.

Held: Judgment for the plaintiff in the quantum calculated below.

In so far as the 8 packages which were surveyed at the port are concerned, there is no dispute that they were damaged. In so far as the remaining packages are concerned, even according to the report of the consignee's surveyors they were externally sound at the port. Therefore, the 17 packages which were found externally damaged at the factory premises must have been damaged subsequent to their removal from port premises and the defendant cannot, therefore, be held responsible for the damage to these 17 packages. As regards the 8 packages which were found to be externally damaged, the defendant has not proven that the damage was on account of defective or inadequate packing. It is difficult to believe that out of such a large consignment only 8 packages were inadequately packed, as there is no complaint in relation to the rest. The responsibility for damage to the 8 packages which were examined at the port is squarely on the defendant.

The Clause Paramount in the bill of lading makes applicable to the parties the law giving effect to the Hague Rules at the port of loading and in its absence the Carriage of Goods by Sea Act 1924 (UK). That there is a law giving effect to the Convention at the port of loading, namely, Bremen, West Germany is not disputed. Even otherwise, at least for the purpose of the present argument, we can safely rely on art 4.5 of the Hague Rules, which has been, in identical terms, incorporated both in German as well as UK laws.

Counsel for the plaintiff argued that under art 4.5 of the Hague Rules, the liability provided for, ie GBP 100 per package, cannot be reduced by any agreement between the parties. He therefore went on to argue that in respect of every damaged package, irrespective of the actual loss being less than GBP 100, the plaintiff was entitled to the maximum provided in art 4.5 ie GBP 100 per package, and that in so far as cl 24 of the bill of lading purported to reduce this maximum, it was inconsistent with law applicable, namely, UK law or alternatively German law and, therefore, of no effect.

This argument is untenable for more than one reason. The first paragraph of art 4.5 expressly provides that the liability of the carrier for loss or damage to the goods will not exceed GBP 100 per package. In other words the paragraph clearly envisages loss of an amount less than the equivalent to GBP 100. Paragraph 3 of art 4.5 no doubt mentions that the carrier and shipper may by an agreement fix liability for a sum other than GBP 100, but it shall not be less than GBP 100. Article 4.5 must be read as a whole and in consonance with the general principles of the law relating to damages. It is not the intention of this paragraph to make the carrier liable for a loss not occasioned to the shipper. Actual loss must precede liability and the compensation or liability cannot exceed what the law regards as actual loss. The consequence otherwise would be that the missing or damaged article may be of a very insignificant value and its deprivation would entitle the shipper to compensation several times larger than the actual loss, ie the cost of the missing or damaged article. There is no conflict between cl 24 of the bill of lading and art 4.5. Paragraph 1 of art 4.5 itself envisages liability of less than GBP 100 and para 3 is to be read as an embargo on the carrier not to reduce its liability to less than GBP 100 if the loss occasioned to the shipper exceeds this sum, and not as entitling the shipper to receive more than its actual loss.

In relation to those packages, the damaged or the missing parts of which exceeded in value GBP 100, the plaintiff admitted that it would only be entitled to a maximum of GBP 100 per package but went on to argue that GBP 100 must be taken as the equivalent to its gold value as provided for in art 9 of the Hague Rules as in force in the United Kingdom. In the present case, the bill of lading expressly provides that the law in force at the port of loading, here West Germany, is applicable. Germany adopted the Hague Rules on 1 January 1940. Paragraph 1 of art 9 of the Hague Rules undoubtedly provides that monetary units stated in the Hague Rules are to be taken to be gold value and, therefore, GBP 100 stated in art 4.5 must also be taken as gold value. But para 2 of art 9 provides that those Contracting States in which pound sterling is not a monetary unit reserve themselves the right of translating the sums so indicated in pound sterling into terms of their own monetary system in round figures. Germany has fixed the equivalent to GBP 100 stated in art 4.5 at DEM 1,250. The law applicable according to the bill of lading is clearly the law of the port of loading, ie West Germany, according to which GBP 100 in art 4.5 is to be read as DEM 1,250.