Dairy Containers Ltd v The Ship "Tasman Discoverer"

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
IN ADMIRALTY
AD No. 35/00
ADMIRALTY ACTION IN REM AND IN PERSONAM

BETWEEN DAIRY CONTAINERS LTD, MORIAH CO LTD and POSTEEL
Plaintiffs

AND THE SHIP "TASMAN DISCOVERER"
First Defendant

AND TASMAN ORIENT LINE CV
Second Defendant

Date of hearing: 3 July 2001

Judgment: 27 July 2001

Counsel: Philip Rzepecky for plaintiffs
Tom Broadmore for defendants

JUDGMENT OF WILLIAMS J

Solicitors:

McElroys, DX CP 20526,Auckland, for plaintiffs

Jordan Smith & Davies, DX CP 20525, Auckland, for defendants

Copy for:

T J Broadmore, P 0 Box 168 Wellington

[1] The point in issue in this proceeding is whether the package limitation in the Hague Rules was introduced into the contract represented by the bill of lading between these parties and, if so, to what extent and what is its effect on reducing the admitted liability of the second defendant, Tasman Orient, to the plaintiff, Dairy Containers Limited, or whether a contractual formulation expressed similarly to the package limitation applies. There is no New Zealand authority on the topic.

[2] The agreed statement of facts showed that on 11 November 1999, the plaintiff, Posteel, entered into a contract for the carriage of what the bill of lading described as "70 coils, said to be: 70 coils of electrolytic tin plates in a variety of sizes", as evidenced by bill of lading TASU BU 005507 from Busan, Korea, to Tauranga, on the first defendant "Tasman Discoverer". During the voyage, some of the coils were damaged as a result of sea water ingress. Tasman Orient accepted liability for the damage. Some of the coils were salvaged but 55 were sold as scrap. After salvage recovery, the agreed net claim by Dairy Containers was $613,667.25.

[3] The parties agreed that Tasman Orient's liability to Dairy Containers was governed by cl 6(B)(b)(i) of the bill of lading, pursuant to which, Dairy Containers contended, the applicable package limit was 55 times the present value in gold of £100 sterling in 1924: if that contention be accepted, the effect of inflation means that Dairy Containers' claim is less than 55 times the package limitation. Tasman Orient, however, contended the effect of cl 6(B)(b)(i) meant its liability was restricted to any form of legal tender of the United Kingdom amounting to £100 sterling per package or unit: if accepted, that meant Tasman Orient would discharge its liability to Dairy Containers by paying it £5500.00 sterling in United Kingdom bank notes, ie £100 sterling for each of the 55 damaged coils. The critical question is accordingly whether cl 6(B)(b)(i) is effective to contract out of the package limitation in the Hague Rules

[4] The bill of lading was a tackle to wharf bearer bill. On the front, the acceptance clause included "limitation of carriers liability", incorporated the terms on the reverse and provided that on presentation of the endorsed bill, those terms would bind Tasman Orient and the holder as if the contract had been made between them.

[5] Clause 6 of the bill is one of those principally in issue in this case. It relates to combined transport - ie the clause applies when the "Place of Acceptance and/or the Place of Delivery are indicated on the face" - cl 6(A) setting out the applicable rules where the stage of the transport where the damage occurred is unknown, and cl 6(B), the rules when the stage is known. The latter applies in this instance and the relevant parts of cl 6 read:

6(B) ... If, in case of Combined Transport, the stage of transport where the loss of or damage to the Goods occurred is known, the liability of the Carrier in respect of such loss or damage shall be determined:

(a) by the provisions contained in any international convention or national law,

(b) Where no international convention or national law would apply by virtue of (a) above:

(i) By the Hague Rules contained in the International Convention for the Unification of Certain Rules relating to the Bills of Lading dated 25 August 1924 (hereinafter called the Hague Rules), if the loss or damage is proved to have occurred at sea or on inland waterways; for the purpose of this sub-paragraph the limitation of liability under the Hague Rules shall be deemed to be £100 Sterling, lawful money of the United Kingdom per package or unit and references in the Hague Rules, to carriage by sea, shall be deemed to include references to carriage by inland waterways and the Hague Rules shall be construed accordingly; or

 (c) By the provisions of cl 6(A) in case where the provisions of paragraphs (a) and (b) above do not apply.

[6] Clause 8 is also relevant. It contains general clauses. Cl 8(2) reads:

"(2) If any provision of this Bill of Lading is held to be repugnant to any extent to any international convention or national law which is applicable to this Bill of Lading by virtue of Clauses 6 and 7 and sub-clause (1) above or otherwise, such provision shall be null and void to that extent but no further."

[7] It is also pertinent to note that cl 3 provided that nothing in the bill of lading was to deprive Tasman Orient "of any statutory protection or exemption or limitation of liability authorised by any applicable laws…". The Hague Rules are also referred to in cl 7 which requires the carriers' liability in port-to-port shipment to be determined either by national law applicable under cl 6(B) or in default "by the Hague Rules as referred to in paragraph (B)(b)(i) of cl 6", and in cl 18 which made the Hague Rules inapplicable to live animal carriage. Clause 29 provided for claims under the bill of lading to be determined at the carriers' option in New Zealand and according to New Zealand law if shipment was to or from this country.

[8] Additional points sensibly agreed by experienced counsel included:

[a] that Korean law applies no compulsory liability regime to the contract of carriage;

[b] that New Zealand law is applicable;

[c] that this was a port-to-port shipment with cl 7 applying (although this was not agreed, Mr Broadmore for Tasman Orient conceded it made no difference).

[9] The Hague Rules arose out of the massive growth of international sea trade during the 19th century. That, in its turn, led to carriers inserting exculpatory clauses in bills of lading to reduce their liability. Ultimately, they achieved near-immunity from any head of liability for cargo. That, in its turn, led to legislative intervention, first in the United States of America which passed the Harter Act in 1893. It cut down freedom of contract by invalidating bill of lading clauses which gave carriers wider exemptions than those in the Act irrespective of whether the ship was United States owned or trading to or from ports in the United States or whether there was a causal connection between unseaworthiness and cargo damage. Many countries in the then British Empire followed suit, including New Zealand's Shipping and Seamen Act 1903. Civil law countries did not follow but, partly because of massive damage to the merchant fleet in World War I, and proposed imperial legislation based on the Harter Act, the Comité Maritime International adopted draft model rules in 1921 which were later adopted at an international conference convened at the Hague that year and recommended the adoption of a set of rules based on the Harter Act for voluntary inclusion in Bills of Lading. After further revision at conferences in Brussels in 1922 and 1923, they were adopted at a conference in Brussels in 1924 and became the International Convention for the Unification of Certain Rules relating to Bills of Lading 1924, commonly called the Hague Rules. Many countries in the British Empire and elsewhere passed legislation adopting the Hague Rules soon afterwards. The USA adopted the Hague Rules in its Carriage of Goods by Sea Act 1936, and in 1940, New Zealand passed the Sea Carriage of Goods Act. In 1963, there was a conference which addressed problems in the Hague Rules, particularly relating to the package limitation and its monetary value, and an amending draft called the Visby Rules was discussed. This resulted in a protocol to the Hague Rules being signed in 1968, the resultant document being the Hague-Visby Rules. Because many countries thought the Hague and Hague-Visby rules favoured carriers, they developed a new regime which was adopted at the Convention on the Carriage of Goods by Sea at Hamburg in 1978, the Hamburg Rules, which are thought to be more favourable to cargo. The Hamburg Rules came into force in 1992 (White, Australian Maritime Law, 2nd ed, 2000, p 62-5, Davies & Dickey Shipping Law, 2 d ed 1995, p 241-243). The Amended Hague Rules comprise the Fifth Schedule to the Maritime Transport Act 1994 and have the force of law in New Zealand pursuant to s 209. 

[10] The relevant provisions of the English translation of the Hague Rules are:

[a] Art III, r 8, the clause paramount, which reads:

"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 and otherwise than as provided in this convention, shall be null and void and of no effect. A benefit of insurance in favour of the carrier or similar clause shall be deemed to be a clause relieving the carrier from liability."

[b] The package limitation is in Art IV, r 5, which reads:

 "Neither 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 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."

[c] Also relevant is Art IX, which 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 port of discharge of the goods concerned."

[11] There was no declaration of value in this case.

[12] The result is that the package limit is effectively £100 sterling gold value, that is to say, the quantity of gold which was the equivalent of £100 sterling or the gold content of that amount when the Hague Rules were adopted in 1924. The gold content of £100 sterling at that date was then defined for England by the Coinage Act 1870 (UK). The question is whether the effect of cl 6(B)(b)(i) entitles Tasman Orient to limit its liability to 55 times £100 sterling in legal tender of the United Kingdom or whether the package limitation is 55 times that arising out of the Art IV r 5 and Art IX of the Hague Rules as judicially construed. 

[13] For Dairy Containers, Mr Rzepecky submitted that the Hague Rules applied because of the contractual terms not because of any international treaty or compulsorily applicable national law, and accordingly the matter was one of contractual interpretation. Any uncertainty or ambiguity was to be construed against Tasman Orient, the drafter of the bill of lading, under the contra proferentem rule. The document was to be construed as a whole as an aid to interpretation (Colinvaux Carvers Carriage by Sea 13th ed (1982) Vol 1 para 870 p 663). He submitted that since the clause omitted reference to the precise nature of the currency or other reduced liability regimes on which Tasman Orient relied and since Tasman Orient drafted the bill including references to the Hague Rules, those rules should be regarded as incorporated into the bill of lading. He submitted that the bill's attempt to reduce Tasman Orient's liability below that imposed by the Hague Rules was contrary to Art III, r 8 and was.accordingly void unless it increased the carrier's liability under Art IV r 5 (Carver (supra) para 531 p 376 and cases there cited). Further, cll 6 and 7 apply the Hague Rules to the contract so cl 8(2) should be read as meaning that cl 6(B)(b)(i) applies but the words "lawful money of the United Kingdom" have no effect on the application of Art IV, r 5 of the Hague Rules which, together with Art IX, are expressly incorporated in the bill. He submitted that Tasman Orient could not argue that the wording of cl 6(B)(b)(i) was paramount to the Hague Rules, having regard to Art III, r 8 and cl 8(2). 

[14] For Tasman Orient, Mr Broadmore submitted that "lawful money of the United Kingdom" meant any legal tender in that country - a submission with which Mr Rzepecky did not disagree - so that, the bill of lading requiring payment of "£100 sterling lawful money of the United Kingdom per package or unit", Tasman Orient could discharge its legal liability by paying or tendering the sum of £5500 in bank notes (or gold sovereigns) to Dairy Containers.

[15] Mr Broadmore submitted that the Hague-Visby Rules did not apply because Art X was not satisfied. That provides that the "provisions of this Convention shall apply to all bills of lading issued in any of the contracting States" and the bill does not contain a clause paramount. He submitted that cl 6 provided for a range of alternative liability regimes and that cl 6(B)(b)(i) referred to the Hague Rules as in the Convention not as in any national law. He submitted that cl 6(B)(b)(i) incorporated the entire Hague Rules into the bill of lading subject to the terms and express changes in limitation and carriage by inland waterways, drawing attention to the concluding words of the clause requiring that the "Hague Rules shall be construed accordingly". He submitted that parties are contractually competent to incorporate other documents into contracts so that where the Hague Rules are applicable contractually, an amendment to the package limitation can apply. References to Hague Rules, he submitted, were merely a convenient drafting device adopted to suit Tasman Orient.

[16] He submitted that cl 8(2) was irrelevant because it dealt only with repugnance by virtue of international convention or national laws applicable under cll 6 and 7 and cl 6(B)(b)(i) was intended to apply where no such conventions or laws applied. The reference to international convention and national laws in cl 8(2) was to those specified in cl 6(B)(a). Pursuant to cl 6(B), he submitted that the carrier's liability was determined by international convention or national law if that applied, by the Hague Rules if no international convention or national law applied and the loss occurred at sea - this case - or in inland waterways and by cl 6(A) in any other instance.

[17] As an alternative, he submitted that if cl 8(2) were held to refer to the Hague Rules, then the reference must be to those rules as modified by cl6(B)(b)(i) because the repugnancy could only be to international conventions or national laws applicable by virtue of cl 6 and 7, that is to say, to the extent or in the way that they are applied by those clauses and because cl 6(B)(b)(i) makes the modified form of the Hague Rules applicable.

[18] Mr Broadmore submitted that the wording of the package limitation was the same as in the "Gold Clause Agreement", correctly titled the British Maritime Law Association Agreement of August 1, 1950, which was designed to resolve doubts as to the meaning of "£100" in Art IV, r 5 of the Hague Rules and which, by Art IX, was to be taken as "gold value". Mr Broadmore submitted that although there were difficulties over the interpretation of those terms (Colinvaux Carvers Carriage by Sea, 12th ed 1971, vol 2 App 6, para 1663 ff, p 1350 ff and Mocatta et al, Scrutton on Charterparties and Bills of Lading, 18th ed 1974 App VII, p 528 ff: because of the passage of the Carriage of Goods by Sea Act 1971 (UK) the discussion is not repeated in later editions: Gaskell Asariotis & Baatz "Bills of Lading: Law of Contracts" (2000) paras 16.31, 16.32 pp 511-512) there was no suggestion that the phrase "£100 sterling lawful money of the United Kingdom" did not entitle carriers to settle claims for that amount in bank notes. The problem was that where the Hague Rules applied compulsorily, the Gold Clause Agreement might be seen as infringing Art III, r 8.

[19] Both counsel referred to two decisions on the question in point.

[20] In The "Rosa S" [1988] 2 Ll.L.R 574, the claim was for loss arising from damage to cargo carried pursuant to a bill of lading which incorporated the Hague Rules. The consignee claimed damages contending that Art IV, r 5 must be read with the first sentence of Art IX so that £100 sterling in the former meant £100 sterling gold value, that being the value of that quantity of gold. The carrier argued that the limit in the bill was "pound sterling 100 per package or unit" in the currency of the day or its equivalent in the currency of Kenya, the country where delivery should have been effected, arguing that Art IV r 5 should be construed without reference to Art IX and that if gold value was to be taken into account, it was the quantity of gold £100 sterling would have bought. In that case, as in this, the carrier's liability was admitted and no value of the goods had been declared. Finding for the consignee, Hobhouse J, after referring to the Hague Rules, held (at 576) that the limit of the carrier's liability under the bill of lading was to be ascertained solely by reference to the provisions of the 1924 Convention. After summarising the parties' arguments, the learned Judge made what he described as a preliminary observation in the following passage (at 577):

"The Court in the present case is concerned to construe a contract, the contract contained in this bill of lading. The parties to this bill of lading have chosen to refer to the provisions of an international Convention. International Conventions are agreements between states not between private individuals, nor as a matter of English law do they of themselves have any legal effect in English law unless made law by some statute."

[21] The learned Judge observed that the Hague Rules were not incorporated into English law but were statutorily incorporated into bills of lading under the Carriage of Goods by Sea Act 1924 (UK). After discussing problems arising out of the Gold Clause Agreement, the learned Judge again said (at 578) that "what the parties have chosen to refer to in their contract is not any domestic legislation but instead the provisions of an international Convention".

[22] The learned Judge's "second preliminary observation" was to the following effect (at 578):

" ... where a bill of lading is to have effect subject to the provisions of another document the parties must be taken to have intended to give effect to those provisions as contractual provisions between themselves and not as provisions having some separate or different validity and effect. (See Dobell v Rossmore Steamship Co [1895] 2 QB 408 and Adamastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd [1958] 1 Lloyd's Rep 73; [1959] AC 133.) The provisions which have no relevance to the contract between the parties to the bill of lading are not incorporated; the construction of the provisions must be a construction which is to be given to them as contractual provisions."

[23] Turning to the Convention, the learned Judge initially held that (at 578): "It seems to me clear beyond argument that the first sentence of Art IX is intended to qualify the reference to £100 sterling in Art IV, r 5", that being the only purpose of its inclusion and that those words were "clearly intended to have the effect of expressing the sterling figure as a gold value figure". That created no uncertainty whether in 1924 or at the date of the bill because United Kingdom statutes defined the gold content of the pound sterling and therefore the gold value which contractually limited the carrier's liability. After referring to a passage in the leading judgment in the House of Lords in Feist v Société Intercommunale Belge de Électricité [1934] AC 161,172, that a gold clause is "not a reference to the mode of payment but to the measure of the company's obligation", Hobhouse J held (at 579) that the "gold clause if it is to be effective ... must be a gold value clause not merely a gold payment clause" and that "the function of Art IV, r 5 is to provide the measure of the limit of liability of the carrier. The first sentence of Art IX expressly refers to gold value". The learned Judge continued by observing (at 580) that the references in the Convention to "gold value" and "monetary units" refer to "monetary gold" and it is the "value of that quantity and fineness of gold that is the measure of value". As he put it (ibid) the "gold value referred to is the gold value of sterling", and that (at 581) "what was being referred to in Art IV, r 5, was the gold value of the pound sterling, not its nominal or paper value". The purpose of the gold clause in Art IX of the Convention was (at 581) to "provide a single and constant measure of value by reference to gold not a fluctuating value".

[24] The learned Judge drew support from the fact that essentially similar decisions had been reached in a number of European and Commonwealth cases.

[25] They including the decision at first instance in Brown Boveri (Australia) Pty Ltd v Baltic Shipping Co (31/7/86 SC NSW Admiralty Division BC8600800 Yeldham J). That was a claim for loss arising from damage to a number of cases of electrical machinery shipped from Genoa to Sydney under a bill of lading which incorporated the Hague Rules. Pursuant to Art IV r 5, the carrier claimed not to be liable for more than $A200 per package or unit, the equivalent to £100 per package or unit. After considering the terms of the Convention and the texts to which this judgment has referred, the learned Judge held (at p 8) that Art IV r 5 and Art IX should be construed as "dealing with the measure of the carrier's liability and not with the mode of discharging it", regarding Art IX as governing Art IV r 5 and that (at 9) "the effect of Art IX on Art IV r 5 must be that the latter should be read as though the words 'gold value' followed after 100 pounds" before concluding, again in reliance on some of the Commonwealth authority to which Hobhouse J had referred, that (p 8):

The meaning of the two Articles, when read together, is that the limitation amount shall be the current market value of the quantity of gold which was the equivalent of 100 pounds sterling in 1924. At that date the gold content of 100 pounds sterling or 100 sovereigns was specified under the Coinage Act 1870 (Imp), s3 and the first schedule. In construing the requirement for "gold value" similar considerations would apply as in the case of a contractual requirement to similar effect.

[26] Brown Boveri was unsuccessfully appealed. In a decision delivered some seven months after that in The "Rosa S" (Brown Boveri (Australia) Pty Ltd v Baltic Shipping Co (1989) 93 ALR 171) the New South Wales Court of Appeal followed that decision and upheld the judgment at first instance. Describing the result at first instance as "apparently unusual" and "distinctly odd" Kirby P (as he then was) first stressed that in the interpretation of the Hague Rules as incorporated in international bills of lading the correct approach was to give the contract (at 174) a "construction which brings the results of litigation upon them in Australia into harmony with the results reached elsewhere", relying on authority in the House of Lords and on The "Rosa S".

[27] Partly by reference to the drafting of the 1924 Convention and partly by reference to history, Kirby P reached the view that Art IV, r 5 and Art IX were linked and held (at 180):

"Some work must be found for the opening words of Art 9 to do. The ‘monetary unit' referred to in the first sentence of Art 9 clearly refers to the monetary unit of 'the pound sterling', as the succeeding sentence indicates. The reference to 'pounds sterling' is to be found in Art 4, r 5. Therefore, the relationship between Art 9 and Art 4, r 5 is established. The two must be read together." 

[28] The learned President went on, again by reference to historical and economic texts, to take the view (at 182) that Art IX was part of the then contemporary movement by the international community to achieve or retain monetary stability and that the opening words of Art IX and the reference to £100 sterling were to be construed against that background.

[29] Then, turning to the submission that the gold value in Art IV, r 5 meant the current gold equivalent of £100 sterling, the learned Judge took the view that such an interpretation would (at 183) "effectively deny the utility of a reference to a single, 'gold value’ " and would "tie the fate of recovery under the limitation exclusively to the international value of the pound sterling", because:

"The whole point of adopting a 'gold value' would therefore seem to have been to accept an objective external standard. Such a standard would not exist if, in lieu of the 'gold value', the determining variable was the pound sterling."

[30] The learned President then turned to consider an argument advanced by the appellant somewhat similar to that advanced by Mr Broadmore in this case and which he saw as having "great force". It was to the effect that if "gold value" was imported into Art IV, r 5, the shipper was entitled to recover £100 sterling in gold value at the breach but it was for the carrier to decide whether it would pay that amount or the "equivalent of that sum in other currency". Counsel had pointed out that markedly different results might occur in actions in England on an English contract where there was no entitlement to the equivalent in other currency by comparison with actions elsewhere. So, the appellant contended, it could meet its debt by electing not to provide the equivalent but proffering £l00 sterling for each of the damaged units or paying the gold value of £100 sterling at contemporary prices leaving the respondent to arrange the "equivalent of that sum in other currency". Kirby P was unpersuaded on the basis that, although courts have jurisdiction to give judgments in foreign currency (at 184), "the Court's duty is to express a judgment in the currency which best expresses the loss of the party which has sued" but that (at 185) "each country is entitled to expect that ... a debt for civil wrong will be settled in the currency of that country, at least if a party entitled to sue there so claims". Accordingly the shipper could not be required to accept payment in pounds sterling in Australia, particularly if the payment was intended to be in English bank notes, not legal tender in that country.

[31] The learned Judge described the result (at 185) as one reached "without any great enthusiasm" and as "in many ways artificial, unexpected and unsatisfactory", and calling for legislative reform, but he derived support from the need for international comity and the numerous decisions referred to in The "Rosa S" and since that decision was delivered. He concluded the judgment by observing (at 187):

"A further reason for adopting the construction proposed is rarely, if ever, stated. Yet it possibly arises from the original purpose of resorting to a gold value, viz to ensure an objective, external referent apart from the '£100 sterling'. Like other currencies, sterling is liable to inflationary depreciation. I refer to the manifest injustice of holding the recovery of a shipper to £100 sterling today where this was what was required (with reference to 'gold value') in 1924. In that year £100 per package or unit was a very substantial sum. Today it is a negligible amount. The contrast can be shown by considering the goods and services which could have been purchased for £100 in 1924 and those which can be purchased for that sum today. They are the goods and services which the shipper will need in order to replace the lost or damaged goods, the subject of the application of the Hague Rules. This would not be the first nor last time in which an injustice would be done by the corrosive effects of inflation. It is only a partial satisfaction to avoid that result by construing Art 4, r 5 together with Art 9 to require (at least where conversion to another currency is necessary) that there be tendered the equivalent of £100 gold pounds for each package or unit. The interpretation has the merit of avoiding or at least reducing the apparent injustice which the appellant's argument could work. I acknowledge at once that such 'injustice' may be in the eye of the beholder. The parties can agree differently. The shipper can declare added value. Insurance can then be arranged on a premise of recovery beyond £100. But the notion, in the inflationary times through which we have lived since 1924, that the recovery was intended to be £100 sterling, whatever that sum might be worth in a foreign country having jurisdiction whose resident accepted the rules seems less likely. Especially is this so because the convention, establishing the rules, took the pains to incorporate the objective standard of 'gold value' and did not leave the limitation to be expressed in sterling pounds only, which is what, effectively, the appellant's argument would provide."

[32] Hope JA, with whom McHugh JA concurred, held (at 191) that the "£100 sterling referred to in Art IV, r 5 is the value of the gold that that amount of pounds would buy" and that the first sentence of Art IX was inserted to achieve stability and to avoid the effect of erosion of sterling's value by inflation so that the limit of liability of £100 sterling was added to by (at 192) "a qualification that the amount of the sterling was not simply to be £100 sterling; it was to be the value of the gold which £100 sterling would then buy".

[33] This is a contract case between Dairy Containers, as holder of the bill of lading, and thus a deemed party to the contract, and Tasman Orient. It is axiomatic that, subject of course to any relevant statute, the parties are free to contract on such terms as they wish, including, if they think it appropriate, to incorporate provisions of other documents, such as the Hague Rules - or some of them - into the contract as part of its terms. Indeed, one commentator has advised that in drafting bills of lading for shipments from countries without mandatory applicable law great care should be taken "to write in only Articles I-VIII of the Hague Rules, and then provide separately for a package limitation ... thereby avoiding the 'Gold Clause' trap" (Richardson The Hague and Hague-Visby Rules 4th ed pp 43-44). Another author described the nub of the present issue thus (Toh Admiralty Law & Practice (1998) p 444) :

It is not infrequently the case that where the Hague Rules apply by way of contractual incorporation, there is inconsistency between the package limitation contained in Article IV rule 5 and a specific limitation provision in the bill of lading itself. This inconsistency may be resolved in a number of ways. Where the bill makes it clear that the terms of the bill are subject to the Hague Rules or that the Hague Rules are paramount in application, the Hague Rules limitation applies instead of the contractual limitation which may be struck down by Article III rule 8. If the contractual limitation is expressly said to be governing, the answer is equally straightforward ... In other instances, recourse might be had to Article III rule 8 of the Hague Rules which strikes down any term of the contract of carriage which lessens or relieves the carrier's liability otherwise than as provided by the Hague Rules. Accordingly, a limitation lower than that provided in Article IV rule 5 would be denied effect.

[34] Seen in that light, the parties agreeing that this is a case of combined transport where the stage of transport where the damage to the goods is known but where no international convention or national law applies, they have by contract incorporated the Hague Rules into the bill subject to the limitation of liability under cl 6(B)(b)(i) to "£100 sterling lawful money of the United Kingdom per package or unit". Clause 7 makes it clear that Tasman Orient's liability for this shipment is to be ascertained "by the Hague Rules as referred to in para (B)(b)(i) of cl 6". The effect is that all the Hague Rules are incorporated into Tasman Orient's bill of lading.

[35] However, the Hague Rules being incorporated in the bill by cl 6(B)(b)(i), the effect of cl 8(2) is to nullify the package limitation in cl 6(B)(b)(i) to the extent that it may be in conflict with or repugnant to the Hague Rules or, to put it another way, the Hague Rules are given contractual primacy over the terms of the bill of lading. Further, the Hague Rules being incorporated in their entirety into the bill, the clause paramount in Art III r 8 confirms that to be the result. 

[36] It follows that if there be any inconsistency between the phrase "£100 sterling lawful money of the United Kingdom per package or unit" in cl 6(B)(b)(i) and the phrase "£100 per package or unit or the equivalent of that sum in other currency" in Art IV, r 5, the latter supervenes and the former is nullified.

[37] Two comments arise from that.

[38] The first is that when cl 6(13)(b)(i) deems the carrier's limitation of liability to be "£100 sterling" whilst Art IV, r 5 provides that the carrier is not to be liable for damage "in an amount exceeding £100" the latter must be regarded as stipulating a maximum only. Thus there is no effective difference between them in that respect.

[39] The second is that, in this Court's view, the addition in cl 6(B)(b)(i) of the words "sterling lawful money of the United Kingdom" does no more than make the currency of the liability limitation clear to avoid any possibility that it might be construed as Irish, Kenyan, or any other national currency denominated in pounds, that being reinforced by the phrase "lawful money of the United Kingdom". That latter phrase was perhaps also included to indicate the manner in which formal tender of the amount of the carrier's liability is to be made, if tender be required. Whilst that provision may be inconvenient if the carrier exercises its option to resolve any disputes in New Zealand and in accordance with New Zealand law, that is not the only forum for resolution of disputes under cl 29 and, in any event, the parties are free to make such contractual conditions as they wish. Whilst, if the matter comes to litigation, there is force in Kirby P's comment in Brown Boveri (supra at 184-185) that Court's judgments should be expressed in a currency accessible to the party suffering the losses, so that it can use the funds it receives to repair or replace the damaged goods as a matter of contractual interpretation that cannot be the governing factor.

[40] The Court accordingly concludes to this point that there is no effective difference between the limitation of liability in cl 6(B)(b)(i) and that in Art IV, r 5, or that, if there is, Art IV, r 5 supervenes.

[41] The Court accordingly turns to the relevant provisions of the Hague Rules in the light of the way they have been interpreted in disputes similar to this.

[42] For the reasons adopted by the learned Judges in The "Rosa S" and Brown Boveri (and the authorities cited by each), this Court accepts that there is a linkage between Art IV, r 5 and Art DC in the manner described in those cases, and in particular that the first paragraph of Art IX is intended to qualify the reference to £100 in Art IV, r 5, so that the figure in sterling must be taken to be the gold value figure, not a gold payment figure, or, otherwise put, the gold value of £100 sterling in 1924. In particular, the Court accepts that these two Articles combined lead to the conclusion that they are a measure of Tasman Orient's obligation, not an indication as to mode of payment. The view which the Court has just expressed as to the construction of Art IV r 5 and Art IX provides, as Kirby P observed in Brown Boveri, an objective external standard to the carrier's limitation. When that construction is adopted of Art IV r 5 and Art IX it demonstrates a stark difference between the limitation of liability in cl 6(B)(b)(i) and that in the Articles. In the case of conflict, for the reasons already outlined, the bill provides that Art IV r 5 and Art IX supervene. Accordingly the package limitation in cl 6(B)(b)(i) is nullified by cl 8(2).

[43] A further reason for the Court reaching that view also appears from Brown Boveri where Kirby P commented (at 187) as to the unlikelihood of contracting parties agreeing that recovery now should be limited to an amount set 77 years ago. That unlikelihood is demonstrated by comparing the possible results in this case, £5500, against $613,667.25. It is highly improbable in a business transaction involving the importation of valuable goods by sea that the importer who became a party to the contract only by negotiating the bill of lading - a bill it may not previously have seen nor had any part in drafting - would have agreed to run the risk of being able to recover only a few per cent of the value of its loss in the event of damage. Indeed, given that only part of the cargo was damaged, its risk was even greater. The improbability is also demonstrated by the minimal recovery for Dairy Containers if the Court construed the bill in its favour as against the cost to Dairy Containers of purchasing replacement goods.

[44] While this Court also accepts the observations in The "Rosa S" and Brown Boveri that decisions to similar effect in jurisdictions not binding on the Court are persuasive but not compelling, it is nonetheless a reinforcement of this Court's decision that it is able to find that the law of a maritime nation such as New Zealand as to the construction of an international maritime instrument is effectively the same as the law in many other jurisdictions, both common law and civil law, around the world.

[45] For all those reasons, the Court respectfully follows the decisions in The "Rosa S" and Brown Boveri. The problem for Tasman Orient is, as the learned author of the "Hague and Hague-Visby Rules" observed, (supra) in drafting its bill of lading it incorporated the whole of the Hague Rules not merely Arts I-VIII so it fell into the 'Gold Clause' trap by allowing and requiring the Hague Rules to supervene over cl 6(13)(b)(i). 

[46] It follows that Dairy Containers is entitled to succeed and there will accordingly be judgment for the plaintiff, Dairy Containers Limited, against the second defendant, Tasman Orient, for $613,667.25. 

[47] Although there were prayers for interests and costs in the statement of claim, the parties did not address those matters in detail in their submissions. If costs are to be pursued rather than reserved and if the parties are unable to agree, memoranda may be filed with counsel certifying, if they consider it appropriate so to do, that the Court may determine all questions of costs without a further hearing. If memoranda are to be filed, that from the plaintiff is to be filed within 28 days of the date of delivery of this decision, with that from the defendant within 35 days of that date.