Vinnlustodin HF & Anor v Sea Tank Shipping AS

Article IV r.5 of the Hague Rules limits liability by reference to a physical package or shipment unit. The word “unit” does not mean a unit of measurement or a customary freight unit and therefore does not apply to true bulk cargo. Contractual incorporation of Article IV cannot alter that construction. The Hague Rules must be interpreted purposively, having regard to their international character and, where appropriate, foreign decisions and the travaux préparatoires. The later Hague-Visby Rules do not change the meaning of the earlier provision. Where a charterparty provides only for the privileges and immunities in Article IV, provisions that are factually inapplicable to bulk cargo remain inapplicable. Article IX was not incorporated where the charterparty referred only to specified provisions of the Carriage of Goods by Sea Act 1924 and Article IV of its Schedule.

The claim concerned damage to fishoil carried in bulk under a tanker charterparty. The charterparty incorporated the carrier’s privileges, rights and immunities under sections 2 and 5 of the Carriage of Goods by Sea Act 1924 and Article IV of its Schedule, including Article IV r.5 of the Hague Rules. The carrier accepted liability in principle but argued that its liability could be limited to £100 per metric tonne of damaged cargo.

The parties agreed that the Commercial Court should determine the preliminary limitation issue despite an arbitration clause. The questions were whether Article IV r.5 could apply to bulk cargo and, if so, whether the proposed tonnage-based calculation produced the applicable limit.

1. Construction of the charterparty. The incorporation clause entitled the carrier to rely only on the privileges, rights and immunities provided by Article IV where they applied. It did not require every provision of Article IV to be given effect to a bulk cargo. Article IV r.2(n), concerning insufficiency of packing, was an example of a provision inapplicable to unpacked cargo.
2. Meaning of “unit”. Article IV r.5 had to be construed according to ordinary statutory and convention-construction principles, with a broad and purposive approach appropriate to an international convention. The juxtaposition of “package” and “unit”, together with the use of “quantity” and “weight” elsewhere in the Rules, indicated that “unit” meant a physical shipment unit, such as an unpackaged car, boiler or other individual article. It did not mean a unit of measurement or freight.
3. The travaux préparatoires supported that conclusion. The words “or unit” were introduced to cover articles shipped without packaging. Bulk cargoes were not in contemplation, and the earlier proposals based on weight or volume had been abandoned.
4. The Hague-Visby Rules could not determine the meaning of the Hague Rules. Their separate kilogramme limitation confirmed that “per unit” did not itself mean a weight-based limit. The relevant Canadian, Australian and New Zealand authorities and the weight of commentary supported the physical-shipment-unit construction.
5. There was consequently no Article IV r.5 limitation for the bulk fishoil. Even on the alternative freight-unit analysis, the lump-sum freight would not produce the lower limitation claimed by the carrier. Article IX was not incorporated by the charterparty and its gold clause was inapplicable.
6. The claimants were entitled to a declaration. Costs followed the event, with the parties to agree the form of order.