The Anders Maersk carried two large steam boilers from Baltimore (US) to Hong Kong before the Linjiang transhipped them to Shanghai. The Linjiang encountered adverse weather conditions en route. One boiler broke loose, fell into the sea and sank. The other fell on the deck and was damaged. Ryoden Machinery Co Ltd (the plaintiff) sought to recover these losses from the defendant.

The cargo was shipped under a through bill of lading. The bill of lading named Baltimore as the port of shipment and referred the voyage as from Baltimore to Shanghai. It made no reference to Hong Kong. The bill also incorporated the US Carriage of Goods by Sea Act 1936 (US COGSA) and gave the defendant the right to tranship the cargo should it wish to do so.

The plaintiff argued that the Carriage of Goods by Sea (Hong Kong) Order No 1508 of 1980 (the Hong Kong order) applied because the boilers were transhipped in Hong Kong. The Hong Kong Order incorporated the UK Carriage of Goods by Sea Act 1971 (UK COGSA), which gave effect to the Hague-Visby Rules. The Hague-Visby Rules enable a carrier to limit its cargo liability differently from the US COGSA, entitling the plaintiff to recover higher damages. The plaintiff argued that the shipment of boilers from Hong Kong on the Linjiang came within the scope of art 10.b of the Hague-Visby Rules. The plaintiff relied on Lord Denning and Ackner LJ's judgment in The Morviken [1982] 1 Lloyd's Rep 325 (CA) that the legislature intended to apply the Hague-Visby Rules wherever possible and not permit parties to contract out of the Hague-Visby Rules. The plaintiff advocated for a liberal application of the Hague-Visby Rules, quoting a passage from The Hollandia [1982] 3 WLR 1111, 1116 (HL) (CMI597). The passage contained Lord Macmillan's comment in Stag Line Ltd v Foscolo, Mango and Co Ltd [1932] AC 328, 350 on the Hague Rules that it is 'desirable in the interests of uniformity that their interpretation should not be rigidly controlled by domestic precedents of antecedent date, but rather that the language of the rules should be construed on broad principles of general acceptation'. The passage also stated that: '[the Hague Rules] should be given a purposive rather than a narrow literalistic construction'.

The defendant argued that the plaintiff was bound by the US COGSA limitation of USD 500 per package, and so the total amount claimable for two packages would be USD 1,000. The defendant added that it undertook the transhipment in Hong Kong pursuant to its rights under the bill of lading. According to the UK COGSA, the documentation took paramount importance. The defendant relied on a passage in Mayhew Foods Ltd v Overseas Containers Ltd [1948] 1 Lloyd's Rep 317, 320, which states that 'the rights and liabilities under the [Hague-Visby Rules] attach to a contract'.

The issues were whether the physical situation or documentation should take priority, and whether 'shipment' should include transhipment to trigger the operation of the Hague-Visby Rules.

Held: Application dismissed.

The Judge held that where a shipment is actually a transhipment, the Hague-Visby Rules do not automatically become operative. All the references to shipment in the Hague-Visby Rules were consistent with the shipment being confined to the initial shipment referred to in the bill of lading. Accordingly, the Hague-Visby Rules did not apply to the shipment of these boilers.

It was essential to have regard to the contractual relations between the parties. It was not difficult to envisage the difficulties which would arise if this were not the case. What would the position be if the boilers had been loaded on other cargo which had to be discharged at a port en route? It might be necessary for the boilers to be unloaded for the other cargo to be discharged. Would there be a shipment of the boilers when they were reloaded onto the ship? Unless reference was made to the contract between the parties, there would always be a likelihood that there would be an element of uncertainty. The shipper of the goods might not know the arrangements that the carrier made. It would put the shipper in an invidious position if it could only establish its rights by a subsequent reconstruction of events that took place without its knowledge.