The appellant carried two bales of raw medicine from Hong Kong to Penang. One of the bales was lost in transit. The respondent filed a claim against the appellant for the value of the lost bale, which was HKD 5,170.90. The appellant admitted its liability but disagreed with the amount to be paid. The bill of lading was subject to the Hague Rules. Clause 7 of the bill of lading provided that the 'owners of the vessel will not be accountable for money, documents, gold ... above the value of HKD 300, unless the bill of lading be signed therefor with the nature and value therein expressed at the time of shipment and extra freight in respect of same agreed upon and paid … '. The appellant therefore claimed that its liability was limited to HKD 300. The first instance Court held that cl 7 of the bill of lading was null and void because it contradicted the Hague Rules. Therefore, the appellant should be liable for the full invoice value of the lost bale. The appellant appealed.

Held: Appeal allowed.

Article 3.8 of the Hague Rules provides that any 'clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to, or in connexion with, goods arising from negligence, fault, or failure in the duties and obligations provided in this Article or lessening such liability otherwise than as provided in this Convention, shall be null and void and of no effect'. In addition, art 4.5 of the Hague Rules provides that '[n]either the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connexion with goods in an amount exceeding 100 pounds sterling 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'.

The Court held that the GBP 100 in art 4.5 of the Hague Rules is irreducible. The HKD 300 amount that was contained in cl 7 of the bill of lading is clearly much less than GBP 100. The first instance Court was right to hold that cl 7 was repugnant to the Hague Rules and was null and void. However, the repugnancy is only to the extent of cl 7, and the Hague Rules are still to be applied. Therefore, if the real value of the goods did not exceed GBP 100, the respondent was entitled to recover the real value of the goods. On the contrary, if the real value of the goods was above GBP 100 and the respondent desired to claim more than GBP 100, the respondent had to either agree with the appellant to fix a higher maximum or declare the nature and value of the goods and have it inserted in the bill of lading. However, the respondent failed to do either of these things in this case. Therefore, the respondent was only entitled to recover GBP 100 in gold value.