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The Hague-Visby Rules govern most contracts for the international carriage of goods by sea

The carriage of goods by sea – the legal framework –
By Chris Dann

The carriage of goods by sea – whether domestically or internationally – is governed by a mandatory regime that makes carriers liable for loss or damage regardless of fault in return for a right to limit their liability.

The Carriage of Goods Act 1979 (COGA) applies to all domestic carriage of goods in New Zealand, by whatever mode of transport, as well as ‘incidental services’ to carriage (like packing, stevedoring and storage). The COGA does not apply to international carriage, beginning and ending at the ship’s hook.

Sounds simple? It should be, but the water was muddied by the 2011 case of GVI Logistics Ltd v Goat NZ Ltd. A freight forwarder set the wrong temperature on a reefer container in Auckland. When the cargo arrived in Japan, the cargo (meat) had deteriorated and was rejected.

Despite the action causing the damage occurring in New Zealand, the court held that because no loss of value occurred in New Zealand (i.e. before the start of the ‘international carriage’), the COGA liability limitation (described below) did not apply. The forwarder was therefore responsible for the full quantum of loss (over NZ$100,000).

Where the COGA does apply, it operates as a code – meaning that, unless the loss or damage is intentional, the carrier can only be liable in the manner set out in the COGA.

Who claims from whom?

To simplify the liability regime for the benefit of the ‘contracting party’ (whichever of the consignor or the consignee who entered into the contract for carriage with the ‘contracting carrier’), the COGA makes the contracting carrier liable to the contracting party for any loss or damage that occurs between accepting the goods for carriage and delivery or collection of the goods. It does not matter when, where or how that loss or damage occurred.

The carriage and incidental services might be performed by different people and the COGA deals with that by making each actual carrier (i.e. the person in possession of the goods) liable to the contracting carrier.

The contracting party claims against the contracting carrier, and the contracting carrier claims against the relevant actual carrier.

Many readers will be aware of the default liability limit under the COGA (‘at limited carrier’s risk’) of $2000 per unit of goods. But some may not be aware that there are three other types of contract available for the parties to choose under the COGA:

  • • ‘at owner’s risk’ (no liability for the carrier)
  • • ‘at declared value risk’ (the carrier is liable for the amount stated in the contract)
  • • ‘on declared terms’ (the carrier’s liability depends on the particular agreed terms in the contract, but that contract must be ‘freely negotiated between the parties’).

If the contract doesn’t specify a particular type of contract, it will be deemed to be ‘at limited carrier’s risk’.

The question then becomes, what’s the ‘unit’ (i.e. how many buckets of $2000 are available)? It depends on the type of goods and the circumstances. Broadly, it comes down to how many items were given to the first actual carrier (regardless of how those goods were later repackaged).

In Freightways International Ltd v Alliance Freezing Co (Southland) Ltd, the court held that the (multiple) individual bales of stockinette received by the first actual carrier in Hong Kong (even though not subject to the COGA at that point) constituted the ‘units’ for COGA purposes rather than the (single) container into which those bales were later stuffed.

International carriage

The Hague-Visby Rules (H-V Rules), adopted under an international convention in 1968, govern most contracts for the international carriage of goods by sea. The H-V Rules are part of New Zealand law by virtue of 
section 209 of the Maritime Transport Act 1994. Most of New Zealand’s trading partners have also enacted legislation giving effect to the H-V Rules.

The H-V Rules apply to any contract of international carriage by sea covered by a bill of lading (or similar document of title) or, if New Zealand law applies, a non-negotiable document like a sea waybill that expressly incorporates the H-V Rules. The H-V Rules do not apply to live animals nor to cargo carried on deck under the terms of the contract of carriage.

The principal obligations of the carrier under the H-V Rules are to exercise due diligence to provide a seaworthy ship, and to care for the cargo. The H-V Rules are mandatory (a conflicting provision in a contract of carriage is void and of no effect), but not comprehensive – many issues are left to be dealt with by contract or the general law, and importantly the H-V Rules only apply between loading and discharge from the ship.

Carriers’ liabilities are subject to a set maximum limit on a per-package (approx. NZ$1400) or per kilo (approx. NZ$4.12) basis. The higher of the two alternatives will apply in each instance, meaning that the weight limit will prevail if the package or unit weighs more than about a third of a tonne.

These limits can be increased (but not decreased) by contract.

Liability exclusions

Various exclusions of the carrier’s liability apply. The most contentious liability exclusion is where the loss/damage is caused by the act, neglect or default of the master, mariner, pilot or servants of the carrier in the navigation or management of the ship.

In the 2009 case Tasman Orient Line CV v NZ China Clays Ltd & others, the Supreme Court ruled that the so-called ‘nautical fault’ defence applied when the master of the Tasman Pioneer on a voyage from Auckland to Busan, South Korea, took a short-cut – with disastrous results.

Containerised deck cargo was immersed in seawater, resulting in a claim of over US$3 million. The court said that the motive and purposes of the conduct and the degree of culpability were irrelevant (unless intentional or reckless). The carrier was held to have no liability.

Specialising in transport and logistics, Chris Dann is a partner in the Anthony Harper commercial law firm which has offices in Auckland and Christchurch; for further information, visit www.anthonyharper.co.nz

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