On 15 February 2022 Contented Cow Co, Melbourne, Australia, contracts to sell to Shenzhen Provisions Inc., Shenzhen, China, 5,000 tins of its best quality, lactose-free milk powder on FCA Melbourne terms (Incoterms, 2020).

On 24 February, Contented Cow Co informed Shenzhen Provisions that the goods are ready to be shipped. In accordance with the contract of sale, Shenzhen Provisions transfers the payment to Contented Cow's account at the Bank of Melbourne.

Contented Cow Co packed the goods into five containers supplied by China Line Shipping (CLS) and the containers are shipped aboard the CLS vessel Navigator at the Port of Melbourne on 2 March 2021. A Bill of lading is issued the same day, which records the shipment of five containers containing powdered milk.

The journey to Shenzhen is an eventful one. While passing off the coast of Papua New Guinea (PNG), the ship is hijacked by a small band of well-armed independence fighters from the island of Bougainville. The pirates commandeer the Navigator and force the captain and crew to sail to Kieta Port, on the Eastern coast of Bougainville. There the crew are forced to unload valuable cargo, including containers of grain, canned meat products and two containers of milk powder shipped by Contented Cow Co. The armed fighters hold the ship and its crew captive for three weeks, during which time the ship's Captain was forced to file false reports that the ship had docked to make necessary repairs. When the armed fighters finally leave the ship, they warn the captain and crew to leave PNG and not report the incident.

A fearful captain was careful not to report the hi-jacking until after the ship with its crew had safely arrived in Shenzhen, just over three weeks late. The Shenzhen Maritime Police finally receive a report of the incident on 5 April 2021. A copy of the report is sent to PNG Maritime Police in Port Moresby (capital of PNG), but no other action is taken. Finally, the remaining three containers of powdered milk are released to Shenzhen Provisions, over six weeks later than the expected date of arrival.

Shenzhen Provisions is most disappointed. The milk was to be supplied to local hospitals under a Government contract at very favourable terms. The hospital managers were so angry with the delay they refuse to buy anything from Shenzhen Provisions ever again. In addition, due to (largely unfounded) fears over imports being contaminated with Covid-19, the demand for imported food products has dropped. Shenzhen Provisions can only sell the 3 remaining containers of powdered milk to alternative customers at a large discount (below cost) and has lost all profits.

As the shipment of powdered milk has departed from an Australian Port, destined for an overseas Port under a Bill of Lading, you can assume that the Australian modified version of the Hague Visby Rules applies to the contract of carriage.

1. With reference to the Modified Hague Visby Rules, discuss whether the carrier, CLS, is liable for the loss and delay of the powdered milk containers. Your answer should include consideration of whether the carrier may rely on any defences in an action against it. [6 Marks]

2. Regardless of your answer to A, what is the maximum amount of compensation the carrier would be liable to pay for the loss of and/or delay in the arrival of goods under the Hague Visby Rules? [2 Marks]

3. Discuss whether it would make a difference if the number of tins (5,000) had been included in the Bill of Lading.[2 Marks]