Clause paramount and package limitation

This was a cargo damage dispute in which the various cargo interests looked to recover either the Hague Rules limit or the Hague Visby Rules limit, depending on which was the most advantageous according to the weight of the damaged cargo.

The bills of lading included a clause paramount, which included the opening words ‘The Hague Rules […] as enacted in the country of shipment shall apply to this contract […]’. 

However, the parties had agreed that the claims would be subject to English law and jurisdiction. This resulted in the statutory application of the Carriage of Goods by Sea Act 1971 and consequently the Hague-Visby Rules given that the carriage was from a contracting state.

Shipowners admitted liability for the cargo damage and paid the Hague-Visby Rules package limit. However, cargo interests argued that the contractual clause paramount enabled them to recover the higher Hague Rules limit where this provided for a greater recovery for a particular cargo. It meant, for example, that under one of the bills of lading, four of the packages would attract the Hague Rules limit and the other two packages the Hague-Visby Rules limit. The cargo claimants accepted that the Hague-Visby Rules applied as a matter of statute, but they sought to argue that the parties had agreed to increase compensation to the higher Hague Rules limit as a result of the bills of lading’s clause paramount.

The court’s starting point was the wording of the clause paramount and whether it incorporated the Hague Rules or the Hague-Visby Rules. The judge, Mr Justice Males, was attracted to shipowners’ argument that this particular clause was capable of referring to the Hague-Visby Rules. He noted too that the Hague-Visby Rules ‘are in fact an amended version of the Hague Rules’. However, he found he was constrained by past authorities, particularly the Happy Ranger decision, which had concluded that the wording of similar clauses was not sufficient to incorporate the Hague Visby Rules: ‘Even if not strictly binding, these [authorities] are highly persuasive statements and I should follow them, supported to some degree as they are by the charterparty cases [also referred to]’.  Accordingly, he concluded that this clause paramount was a contractual agreement to incorporate the Hague Rules.

Yet this did not lead to a favourable conclusion for cargo interests.  The judge was not convinced that this clause paramount represented agreement between the parties to increase the limit of liability. He accepted that in theory the parties were free to make such agreements, but he found no clear agreement in this case. The parties had agreed to English law and thereby to the compulsory application of the Hague-Visby Rules. He considered that it would be a surprising result if the higher Hague Rules limit came in ‘by a side wind’ as a result of the clause paramount: this ‘pick and mix’ approach of two different regimes ‘seems a surprising thing for rational business people to wish to agree’.  He also referred back to the rather odd effect whereby the packages under one Bill of Lading would be subject to two regimes – and this reinforced his view that cargo interests’ arguments were uncommercial.

The judge’s conclusion on this issue meant that the correct conversion date of the Hague Rules gold value was no longer relevant. Nevertheless, he considered the parties’ submissions and concluded that the time at which the Hague Rules gold value is to be converted into national currency is the date of delivery (or the date when the goods ought to have been delivered), not the date of judgment.