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English law
Limitation of liability for unauthorised deck stowage - An update

An article in Gard News issue No. 1681 reported on the English Commercial Court decision in the KAPITAN PETKO VOIVODA case,2 dealing with limitation of liability in cases of unauthorised deck stowage. The claimant cargo interests issued an appeal against the decision of the Commercial Court, and the Court of Appeal has recently issued its decision.3

The facts
The facts are noted in the earlier article, but in summary a consignment of excavators was shipped from South Korea to Turkey. The contract of carriage provided that the excavators were to be shipped below deck, but at an intermediate port some excavators were re-stowed on deck. During the voyage, damage was suffered by some of the excavators on deck and others were lost overboard. It was accepted that the loss and damage arose as a result of the units being stowed on deck and defendant shipowners and charterers sought to limit their liability in accordance with the Hague Rules.

Commercial Court decision
Langley J, hearing the case in the first instance, distinguished the CHANDA decision4 on the basis that the judge in that case had given insufficient weight to the words “in any event” as they appeared in the Hague Rules Article IV Rule 5. The relevant part of the rule reads as follows: “Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection 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” (emphasis added).

1 “Limitation of liability for unauthorised deck stowage – Life after the CHANDA”.
2  Daewoo Heavy Industries Ltd and Another v. Kilpriver Shipping Ltd and Another [2002] EWHC 1306 (Comm); LMLN 0583 dated 8th August 2002.
3  [2003] 2 Lloyd’s Rep. 1.
4  [1989] 2 Lloyd’s Rep. 494.

Langley J held that the words were clear, and that the carrier and ship were entitled to limit liability regardless of the seriousness of the breach of the contract of carriage.

The appeal
Cargo interests appealed the decision of the Commercial Court, arguing that if the defendants were entitled to rely on the limitation clause, the particular limitation clause in issue would in effect be a clause excluding liability completely – the claimants argued that it was the Hague Rules as enacted in Turkey that were to govern the contract of carriage, and the appropriate limit of liability in those rules was 100,000 Turkish Lira per package. The equivalent USD figure would be approximately USD 0.08 per package. Defendant charterers (somewhat generously!) suggested that GBP 100 per package would be the correct figure for limitation.

The Court of Appeal was not impressed with cargo interests’ argument, and pointed out that it was open to shippers to declare the value of the goods prior to shipment, or to negotiate an increased limitation figure prior to entering into the contract of carriage.

The Court of Appeal upheld the decision of the Commercial Court and held that the defendant shipowners and charterers were indeed entitled to rely on the limitation clause contained within the Hague Rules, even though the carriage of the excavators on deck was a clear and acknowledged breach of the contract of carriage.

It should be noted that the Court of Appeal, and indeed the Commercial Court before them, were considering only a preliminary issue as to whether the limitation clause would apply. The courts have not considered any other aspect of the case, nor other potential defences available to the defendants. The court also did not issue any decision in respect of what the correct limitation figure may be. As a guide, and for information purposes only, the result of the case may be that a claim for some USD 785,000 plus interest may result in liability of GBP 3,400 (USD 5,500) if the correct limitation figure is GBP 100 per package, or even as little as USD 2.72 if claimants’ view is accepted and the Turkish limitation figure should in fact apply.

Any comments to this article can be e-mailed to the Gard News Editorial Team.

Gard News is published quarterly by Gard Services AS, Arendal, Norway.