Tales from Australia on Limitation of Liability under a Contract of Carriage for Damaged Goods in Poralu Marine Australia Pty Ltd v MV Dijksgracht [2022] FCA 1038

This is an interesting case where the booking note contract is governed by Dutch law. The booking note contract provided that the carrier’s liability shall not exceed £100 per package. However, the break bulk goods were loaded on board the ship Dijksgracht at the Port of Cork in Ireland. The consignee was Poralu Marine Australia Pty Ltd (Poralu), who intended to install the 23 pontoons (described in documentation as ‘breakwater units’) and 11 pallets of cargo at the Royal Geelong Yacht Club, Australia.

On 13 February 2020, the cargo was discharged at Geelong. Three pontoons were found to be damaged. Poralu alleged that the pontoons were in sound condition when they were loaded on board the ship, and the damaged must have happened when it was carried on board that ship. Poralu’s claim was based on a breach of bailment and/or negligence by the shipowner, Scheepvaartonderneming Dijksgracht CV, a company incorporated in The Netherlands. When it commenced an action in rem against the ship, Scheepvaartonderneming Dijksgracht CV, SpliethoffTransport BV, another Dutch company, and Rederij Dijksgracht, a Dutch company that claims to be the owner of the vessel, all entered appearances in the in rem proceeding. Poralu commenced an action in personam against Spliethoff Transport (First Defendant) and Scheepvaartonderneming Dijksgracht CV (Second Defendant and owner of the vessel), although recently, there was a recent substitution by Rederij Dijksgracht (as Second Defendant).

It was argued for the defence that the contract of carriage was “subject to” the terms and conditions of the First Defendant’s Spliethoff Transport’s booking note form. That document applied the Law of the Netherlands (see Clause 10). Further, the Hague Rules were also incorporated, with the limit of liability of the carrier set at £100 per package. These booking note terms and conditions were to be incorporated into a sea waybill.

By contrast, Poralu (the consignee) argued that no contract of carriage was concluded on the terms of the booking note. No notice of such terms was given to the consignee. More importantly, at all material times, the cargo was covered by a bill of lading. The contract of carriage contained a term for the issuing of a bill of lading rather than a sea waybill. It was argued that Irish law is applicable by force of law under Sections 30 and 34 of the Merchant Shipping (Liability of Shipowners and others) Act, 1996 of Ireland. Therefore the limitation of liability of £100 per package contained in the booking note is null and void under Irish law, see Article 3(8).

At the Federal Court of Australia (New South Wales District Registry), Stewart J rejected Poralu’s contention that the booking note could not form the basis of the contract of carriage on the basis that it was not signed. His Lordship held that there was no need for a contract of carriage to be signed. Even if there was place for the signature, there was no requirement for it to be signed.

The contract of carriage was concluded with the booking note, and there was no way that the recap terms have contractual force and overrode this. There are several reasons for this. First, the override clause in the booking note ensured that it prevailed over the sea waybill. Second the booking note preceded the shipment of cargo, whereas the sea waybill was only issued long after the shipment of the cargo. Third, there was an opportunity for the parties to vary the contract of carriage and record it in a bill of lading, but the parties did not take advantage of this. Fourth, neither party contended that the sea waybill was a variation of the original contract. Therefore, neither the bill of lading, nor the sea waybill embody or evidence the contract of carriage, but only served as a receipt for the cargo.

This case provides a unique example of the contract of carriage being found in the booking note. As the booking note contained a choice of law clause for Dutch Law, whether that law applied compulsorily at the load port. According to two Dutch law experts testifying in the case, Prof Smeele and Dr Eckoldt, Dutch law would apply to a contract of carriage ‘covered by’ a bill of lading, or any similar document of title. There are several points to note at this stage. First, a sea waybill was not a document of title similar to a bill of lading. Second, even if no bill of lading was demanded or issued, the contract of carriage had to be ‘covered by’ a bill of lading or other similar document of title. Note that English law provides some elucidation in this matter. A contract of carriage can be ‘covered by’ a bill of lading even if no bill of lading was ever issued, see Kyokuyo Co Ltd v AP Møller-Maersk A/S (The Maersk Tangier) [2018] EWCA Civ 778 ; [2018] 2 Lloyd’s Rep 59. However, under Dutch law, this point had not yet been decided and it was uncertain whether The Maersk Tangier case would be followed. Dr Eckholdt took the view that if the shipper did not demand a bill of lading, and the carrier instead issues a sea waybill, the contract of carriage is not ‘covered by’ a bill of lading or similar document of title.

Ireland purports to give effect to the Hague-Visby Rules, ie by force of law, through the Merchant Shipping (Liability of Shipowners and Others) Act 1996. The 1996 Act was adopted on 14 December 1996, and came into force in Ireland on 6 February 1997. However, answers given by relevant Ministers of the Irish Government were worryingly fascinating. They considered signature of the Visby Protocols in question to be insufficient and were merely a step in the process of ratification. Expression of a mere consent to be bound is not provided for in the Vienna Convention on the Law of Treaties, or in the Protocols. Surprisingly therefore, Ireland is not a Contracting State to the Visby Protocol or the SDR Protocol. Ireland had not completed all the formalities to become bound by the convention as it had not executed the prescribed formalities under International Law. Therefore, the Hague-Visby Rules do not apply compulsorily under Dutch Law.

The next logical matter to consider is whether the Australian version of the Hague Rules under the Sea-Carriage Documents Act 1997 (NSW) was applicable to the contract of carriage instead, as the port of discharge for the goods was Australia. This statute provided for a Special Drawing Rights (SDR) based limitation of liability, and not £100 per package. Under the Australian version of the Rules, there is provision for application of the Rules when there is a carriage of goods from ports outside Australia to ports in Australia, see Art.10(2). Australia had briefly toyed with the implementation of the Hamburg Rules which were considered to be more shipper friendly. However, after industry consultation, its implementation did not go ahead as most of Australia’s major trading partners were applying the Hague Rules and Hague-Visby Rules. However, there were also concerns that the focus of the Hague Rules and Hague-Visby Rules were a ‘country of export’ oriented set of rules. Australian Importers were concerned that they would be subjected to unfavourable regimes applicable at the load port. Therefore, the Australian version of the Rules were also made applicable to imported goods.

However, the contract of carriage in this case was contained in a booking note. For the purpose of arrangements between the parties, the booking note (which was usually a feature in liner shipping), was a charterparty within the meaning of the 1997 Australian legislation. I suppose this stems from the fact that a booking note is usually used to book container space on board a liner ship and is typically referred to in the maritime industry as a ‘space charterparty’, ie a species of voyage charterparty. The Australian legislation goes on to say that did not apply to charterparties.

In conclusion, the limitation sum contained in the booking note, ie £100 (GBP) sterling lawful money of the United Kingdom per package or unit, under Dutch law was applicable. Therefore, any statutory limit of liability based on 666.67 units of account (SDR) was not applicable, either through Irish Law or Australian Law. The Court also took the view that the £100 (GBP) sterling was not to be calculated as the value of gold in 1924 per package. This means that the Court in Australia has chosen not to follow The Rosa S [1988] 2 Lloyd's Rep. 574 per Hobhouse J in using the value of gold, but has rather chose the value of Sterling.

Thank you for reading IMSML Website Article 22/2022

Stay tuned for the next IMSML Website Article 23/2022:

Further Tales from Orin Energy Investments Ltd v The Owners of The Ship Or Vessel MT ‘Cavalier’ [2022] MLJU 673 (High Court, Kuala Lumpur) per Azlan Sulaiman JC on The Effectiveness of Incorporation Clauses in Bills of Lading.

Signing-off for today,

Dr Irwin Ooi Ui Joo, LL.B(Hons.); LL.M (Cardiff); Ph.D (Cardiff); CMILT

Professor of Maritime and Transport Law

Head of the Centre for Advocacy and Dispute Resolution

Faculty of Law

Universiti Teknologi MARA Shah Alam

Selangor, Malaysia

3 November 2022

Note that I am the corresponding author for the IMSML Website Articles. My official email address is: uijoo310@uitm.edu.my