At the end of the maritime cargo claim, in which the right claimant has established a claim against the right defendant, on the grounds of haven proven its loss was caused by a breach by the carrier of a term in their contract of carriage or of an obligation owed by the carrier to the claimant in tort or bailment, the claimant will succeed. The carrier will, of course, have fought the claimant all the way: contesting the claimant’s title to sue; claiming that it is not the claimant’s contractual carrier; disputing evidence of loss; denying a breach of any duty owed towards the claimant. If none of these counter- attacks works, however, there are a few remaining routes out of liability or, at any rate, out of as much recovery as the claimant would like. The carrier could extinguish the claim, either by arguing that the claim has been time barred or by pleading one of the exceptions to liability allowed by the Hague–Visby Rules. If neither of those escape routes are available, the carrier could limit its liability through the so- called package and unit limitation imposed by the Rules, a privilege of which the claimant could deprive the carrier through one of two means, i.e., either deviation or by proving that the damage was caused intentionally by the carrier.
Escape routes and limitations should logically come after having established liability. From a more practical perspective, however, it frequently makes sense to examine the facts going to the time bar, exceptions and limitation as soon as the dispute hits the desk.
The matters previously discussed in our other write ups which touch on title to sue, proof of loss and liability are obviously crucial: whether the bottom line looks attractive, however, whether anything much at all can be recovered if liability is established, makes it easier to decide whether it is worth pursuing the claim vigorously – or settling it. The escape routes as mentioned will be examined below;
a. The One-Year Time Bar
Cargo claims under the Hague–Visby Rules, however, must be brought within one year of the delivery of the goods or of the date on which the goods should have been delivered. It is crucial to ensure, at a very early stage of the claim, whether the time bar has lapsed and, if it has, to see whether agreement can be reached with the carrier to extend or waive the time bar.
b. Exceptions to Liability
Some of these exceptions are quite typical of any contracts of carriage, whether covered by a bill of lading or by a charterparty and whether or not governed by the Hague–Visby Rules: acts of God, acts of war, strikes or lockouts etc. Others, however, are quite particular to the Rules and are part of the patchwork compromise between the interests of cargo and carrier arrived at in the Hague–Visby Rules.
c. Quantification and Limitation of Loss
If neither the time bar nor Article IV rule 2 provides the carrier with an escape route from liability, the claimant’s next task is to quantify its loss. If the parties have agreed that loss, in what is commonly called an ad valorem box in the bill of lading is applicable, then the issue of quantum is resolved, at any rate prima facie.
In effect, the claimant’s loss has been liquidated in advance and the cargo claimant is tied to that declared value as the sum of its loss. In order to guard against inflated valuations, however, the presumption raised by the ad valorem declaration is not conclusive against the carrier, who can, therefore, prove that the goods shipped were worth less than the valuation.
Moreover, if the carrier can prove that the shipper knowingly mis- stated the value of the goods, then the carrier is simply not liable at all, according to Article IV rule 5(h).
On the other hand, if the value of the claimant’s loss has not been agreed beforehand, or if the valuation has been set aside by the carrier, then there are two stages to be gone through under the Hague–Visby Rules, the first being the usual process of quantification of damages for breach of contract and the second being the limitation of those damages.
– First, the basic objective here, as with any award in damages, is to place the claimant, through damages, in the position in which it would have been had the contract been performed, i.e. had the goods arrived in a sound condition. In the context of a contract of carriage, this translates into the following formula: the claimant is entitled to the difference between the market value of the goods had they arrived in sound condition and their value in the condition in which they actually arrived.
– Second, once that sum is arrived at, the damages need to be limited by the so- called “package/unit limitation” contained in Article IV rule 5(a)(c) and (d). The basic principle is that liability is limited to the higher of the following two quantities, either 666.67 special drawing rights of the International Monetary Fund per package or unit or two special drawing rights per kilogramme of gross weight of the goods lost or damaged. It is important to point out that Article IV rule 5(a) does not provide two formulae, one for goods in units or packages and the other for commodities shipped in bulk. The single formula has two alternatives, both of which need to be worked out whatever the cargo – and the applicable limit is the higher of the two.
– Goods Consolidated in a Container or Pallet: where goods are consolidated in a container, pallet or such like and the bill of lading quantifies the goods as, say, “one container said to contain 10,000 pairs of shoes”, then the multiplier for the purpose of the package/unit limitation in Article IV rule 5(a) is 10,000 rather than one.
The effect of “said to contain” clauses has already been covered: the evidential force of the bill of lading is emasculated in the sense that no binding photograph exists as to what was shipped. If a cargo claim has reached the stage of quantification, however, this must mean that the claimant has overcome the resulting evidential difficulties by actually proving what was shipped, through tally sheets, alternative exchanges between the parties, oral evidence etc.: the carrier will, as it were, have failed in its attempt to qualify the statement as to quantity on the bill of lading. Having failed in that attempt, the carrier does not get a second bite at the cherry: the claimant having proved that 10,000 pairs of shoes were in fact shipped, the carrier cannot now use one as the enumerator for limitation purposes.
Finally on limitation, it is important to emphasise that the limitation amounts here described relate to claims brought on bills of lading for the carriage of goods by sea.
d. Breaking Limitation
Limitation of liability is, of course, not something the claimant gladly accepts: it does mean that he may well be left with an uncovered exposure to loss which may or may not be covered by a cargo insurance policy on the goods. The claimant’s instinct, at this late stage of the cargo claim is to break or “bust” limitation and there are two recognised means of doing so.
- First, Article IV rule 5(e) states that liability cannot be limited where the damage to the goods results from an act or omission of the carrier done with intent to cause damage or recklessly and with knowledge that damage would probably result. The critical point here is proof of intent, a difficult and, in the context of civil liability, an unusual thing for English lawyers to concern themselves with in quantifying damages: and this may be why the article has been somewhat under- utilised in our litigation.
- A far more traditional method of breaking limitation is to prove that the carrier has deviated from the contract voyage.
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