A claim was brought in respect of a shipment of corn from Louisiana to Aqaba on board the Limnos. Dera Commercial Establishment Standard Chartered Plc (the defendant) was the lawful holder of the bill of lading. Serena Navigation Ltd (the plaintiff) was the carrier. The bill of lading incorporated the Hague-Visby Rules. The assumed facts were that on arrival at Aqaba, a small amount of wetting damage was discovered in the holds, primarily holds 2 and 3. The damage was apparently caused by leakages through the vessel's hatch covers. The quantity of wet damaged cargo (7 or 12 mt) was segregated and disposed of. A further quantity of cargo (up to 250 mt) in holds 2 and 3 suffered an increased number of broken kernels because it had to be discharged by bulldozers. The total cargo physically damaged was around 262 mt. There was no issue that this 'conceded tonnage' would fall within the contested definition of 'goods lost or damaged' which was the subject matter of this preliminary issue. However, as a condition of allowing any discharge of the cargo from holds 2 and 3, the authorities required that the whole of the cargo be fumigated and treated with chemicals and transferred to pre-fumigated and disinfected silos. This resulted in the reduction of the value of the total cargo of 43,998.66 mt. The defendant claimed: (a) the market value at the date of delivery of the 12 mt of wet-damaged cargo which was not delivered; and (b) the various other losses and expenses, which totalled around USD 1.55 million.

The central issue of this case was the interpretation of art 4.5.a of the Hague-Visby Rules. The plaintiff's case was that in calculating the limit of liability under art 4.5.a of the Hague-Visby Rules, gross weight was the applicable test, and loss of the goods was by reference to the gross weight of the goods physically damaged. Hence, if that was right, the limit would be, at 2 Special Drawing Rights (SDRs) per kg, 14,000 SDRs (7 mt) or 24,000 SDRs (12 mt) or up to 52,400 SDRs (12 + 250 mt). The defendant asserted that the limit was applicable by reference to the whole cargo of 43,999.86 mt, which would more than cover the entirety of the sum claimed. The defendant submitted that since 'loss and damage' also includes economic loss, as a matter of consistency, the words 'lost or damaged goods' must carry a similar meaning. The plaintiff, in contrast, submitted that the losses suffered, including economic and consequential losses, should be limited by reference to the weight of the goods physically damaged.

The parties disputed the following issues.

The first issue related to the words of the Hague-Visby Rules. The plaintiff's case was straightforward. 'Goods lost or damaged' meant goods physically lost or physically damaged. The defendant submitted that 'lost or damaged' should be construed in accordance with the presumption of consistency with other parts of the Hague-Visby Rules. Although the defendant acknowledged that the words 'lost or damaged' did not appear, what did appear was 'loss or damage', and so the construction of 'lost or damaged' must be consistent with: first, the words 'loss or damage' in arts 3.6, 3.8, and 4.1 of the Hague-Visby Rules, all of which included economic loss/damage; and second, the words in the first part of art 4.5.a 'any loss or damage to or in connection with the goods'. Hence, either the words 'lost or damaged goods' must be interpreted in accordance with the second point above, so that they meant goods in respect of which the loss and damage were suffered, or damaged goods must include 'economically damaged' goods.

The second issue related to the loss caused by delay. The plaintiff submitted that there was a claim for economic loss due to delay if it otherwise qualified within the Hague-Visby Rules. Thus, although there might be no obligation in relation to expeditious carriage, the breach of one or more of the obligations in art 3.1 of the Hague-Visby Rules might, in certain circumstances, lead, and lead alone, to economic loss by virtue of delay. Therefore, on the face of it, a claim which was wholly in respect of economic loss did fall within the first part of art 4.5.a, namely, 'neither the carrier nor the ship shall in any event be or become liable for any loss or damage to, or in connection with, the goods', but there was then no limit - such claim was not limited to the weight of damaged goods because there were no damaged goods. The defendant, however, submitted that this was unsatisfactory. The defendant's construction meant that the economic loss claim was limited by the weight of the goods affected by economic loss. The plaintiff's construction, however, meant that halfway through the clause the reader would then find that, although it would appear that a limit to such loss was to be imposed by reference to gross weight, yet since the gross weight was limited to 'damaged goods', and there were none, there was to be no limit. However, in the Hamburg Rules, there was a limit in respect of delay claims. This could be said on the one hand to amount to an unexpectedly generous approach towards cargo owners, and on the other hand to result in a somewhat eccentric situation in which there was no signpost for those with delay claims to appreciate that the limit did not apply to them.

The third issue related to the time of discharge or delivery. The plaintiff submitted that art 4.5.a of the Hague-Visby Rules should be construed so that the limit was by reference to the gross weight of the goods lost or damaged as at the date of discharge/delivery. Given that the plaintiff submitted that this meant physical damage, it fixed the limit by reference to the physical damage (of course including any physical damage as yet unascertained, though previously incurred) as and when they left the custody of the carrier: liability for subsequent consequential (economic) loss would continue, but always subject to the limit which would already have fructified. The results were that first, no further physical damage to the goods would be relevant; and second, the limit would be unaffected by continuing economic loss. According to the plaintiff, these results made sense, by fixing the limit once and for all, rather than by reference to what the plaintiff described in this case as a 'cascade' of economic or other claims, as the months go by, each of which was said to increase the limit. If this was right, it was a helpful guide to the construction of the disputed words. The plaintiff's submissions were as follows:

First, the date of discharge/delivery was the date when the owner's liability as the carrier and/or bailee ceased. The plaintiff referred to arts 1.e, 2, and 3.2 of the Hague-Visby Rules to prove this argument.

Second, the cause of action accrued to the cargo owner as at discharge/delivery, and the time bar, by reference to the requirement that 'suit is brought within one year of ... delivery' was triggered.

Third, the requirement for the giving of notice of loss and damage in art 3.6 was again tied to delivery (or, in the case of loss and damage which is not apparent, within three days thereafter), such that absence of such notice raised a prima facie case of good delivery.

Fourth, assessment of the value of the goods was made 'at the place and time at which the goods are discharged from the ship' by virtue of art 4.5.b of the Hague-Visby Rules.

The defendant submitted that unlike the specific cross-reference to the place and time of discharge with regard to the assessment of the value of the goods in art 4.5.b, there was no reference in art 4.5.a to the time of delivery/discharge as being the time when it was to be ascertained whether the goods were lost or damaged. On any basis, so long as the defendant's claim related to a breach of obligation by the plaintiff prior to delivery, loss, whether physical or economic, arising after discharge/delivery was (if otherwise recoverable at common law as sufficiently proximate) claimable against the plaintiff. If loss continued to accrue for many months, the time bar might bar a claim, as it was based upon one year from delivery, but that was wholly unlikely to occur, and so long as there had been a sufficient notice giving the general nature of such loss or damage in accordance with art 3.6 of the Hague-Visby Rules the claim could continue to increase after delivery, and there was no reason why the limit could not do so concomitantly.

Held: Judgment in favour of the plaintiff.

The Court first considered the question of the evident object and purpose of the Hague-Visby Rules.

The first matter of common ground was that, whatever the proper construction of the controversial words 'goods lost or damaged' in art 4.5.a of the Hague-Visby Rules, the limit to be applied is by reference only to that part of the cargo which could be so described, as opposed to the whole cargo. The second matter of common ground was that economic loss and damage is recoverable by a cargo owner within the Hague-Visby Rules. Thus, a claim in respect of loss or damage, to include economic loss, may form the basis of notice, and is subject to the time bar in art 3.6, and liability for loss or damage to or in connection with goods (including economic loss) cannot by reason of art 3.8 be excluded (but could be excluded where it arose or resulted from unseaworthiness, by reference to art 4.1).

The Court was not persuaded by the defendant's submission that 'lost or damaged goods' should necessarily be construed in the same way as 'loss or damage'. The expression 'lost or damaged goods' referred to two categories of goods, goods that are lost in the sense of vanished, gone, disappeared, destroyed, and goods that are damaged, in the sense of not being lost, but surviving in damaged form. The two expressions in this context do not carry the same meaning, and so the defendant's attempt to construe the latter by reference to the former fails. It is not possible to describe the undamaged goods in this case as 'economically damaged'. Their value may have been affected. There may be depression with respect to their price. The goods may be depreciated. But they cannot sensibly be described as damaged.

The plaintiff's submissions should be accepted. If therefore it is an appropriate question to ask whether goods are 'economically damaged', this must be tested as at the time of discharge/delivery. The 'economic damage' would have to be assessed as at that date, by reference to whether the goods had then depreciated, and whether there was then a likelihood that some money might need to be spent in relation to them. This would, of course, be a different measure of damage from that which is sought in this case, which is the actual, consequential economic loss. It might then mean that there would be contention as to whether a notice within art 3.6 giving the general nature of such loss or damage can be, or has been given, when what will eventually be claimed will bear little relationship with the economic damage as assessed at the time of discharge.

The Court rejected the suggestion that this, or any, claim for consequential loss was a claim in respect of economically damaged goods. All the loss or damage incurred after discharge is 'loss or damage in connection with the goods' within the first part of art 4.5.a. The goods in question are the goods which are damaged while in the plaintiff's custody in connection with which other loss (partly in respect of other, undamaged, goods) is suffered. In those circumstances, the reference in the last part of art 4.5.a is to those same 'goods lost or damaged'. Therefore, what is permitted in art 4.5.a is a claim in respect of (lost or) damaged goods, and a claim for loss or damage in connection with those (lost or) damaged goods, but in the second part of the clause the weight of those (lost or) damaged goods is then taken as the limit.

The Court did not consider that to have an entitlement to claim economic losses, but one which is limited by reference to the weight of the physical damage caused while the goods are in the custody of the carrier, is inappropriate or contrary to good commercial sense.