Sea Tank Shipping AS v Vinnlustodin HF Vatryggingafelag Islands FH

In Article IV rule 5 of the Hague Rules, ‘unit’ means an identifiable physical item of cargo or shipping unit, including an unpackaged item. It does not mean a unit of measurement, freight unit or customary freight unit. The package-or-unit limitation therefore does not apply to bulk cargo. The meaning is determined from the Rules’ text and context. The travaux préparatoires may confirm that meaning under the applicable treaty-interpretation principles, but cannot be used to strain clear language merely because limitation would be commercially desirable. A charterparty clause granting the carrier the like privileges and immunities of Article IV does not alter that construction. Market expectations cannot do so either.

Sea Tank Shipping AS, the disponent owner of the vessel, carried bulk fish oil for Vinnlustodin HF under a charterparty incorporating Article IV of the Schedule to the Carriage of Goods by Sea Act 1924. After cargo damage, the owner accepted liability in principle but claimed a limitation of £54,730.90 under Article IV rule 5. The respondents disputed that entitlement.

The parties agreed that the Commercial Court should determine the preliminary issue. Sir Jeremy Cooke held that the word ‘unit’ meant a physical shipping unit and that the limitation did not apply to bulk cargo: [2016] EWHC 2514 (Comm). The appeal concerned the meaning of ‘unit’, the effect of the charterparty incorporation clause, and whether limitation could in any event be calculated by reference to cargo weight.

Lord Justice Flaux delivered the judgment of the court. Lord Justice Richards and Lady Justice Gloster agreed. The appeal was dismissed.

1. Meaning of ‘unit’. In the context of Article IV rule 5 of the Hague Rules, ‘unit’ means a physical item of cargo or shipping unit. It is synonymous in context with a piece of cargo which is not a package. It does not mean a unit of measurement or a freight unit. The juxtaposition of ‘package’ and ‘unit’, and the contrast in Article III rule 3(b) between packages or pieces and quantity or weight, supported that construction.
2. Bulk cargo. Article IV rule 5 does not apply to bulk cargo. The inclusive definition of goods in Article I does not make every provision applicable to every type of cargo. The exception for insufficiency of packing in Article IV rule 2(n) illustrated the point.
3. Treaty interpretation. The court applied the approach stated in Gard Marine and Energy Ltd v China National Chartering Co Ltd (The Ocean Victory) [2017] UKSC 35 and CMA CGM S.A. v Classica Shipping Co Ltd (The CMA Djakarta) [2004] EWCA Civ 114. The ordinary meaning of the Convention text was to be read in context and in light of its object and purpose. The travaux préparatoires could be used to confirm that meaning. They clearly showed that weight, volume and freight limitations had been abandoned, and that ‘unit’ had been added for unpackaged items such as cars and boilers.
4. Other materials. The United States Carriage of Goods by Sea Act 1936 and the Hague-Visby Rules could not alter the meaning of the earlier Hague Rules. The English and Commonwealth authorities and the preponderance of academic commentary supported the physical-shipping-unit construction.
5. Charterparty clause 26. The clause granting the owner the like privileges, rights and immunities of Article IV gave equivalent protection only where Article IV applied. It did not write every provision into the charterparty with a different meaning or convert ‘unit’ into a measurement unit. Alleged market expectations could not change the clear meaning of the Rule. A carefully drafted deeming provision might have produced a different contractual result, but none existed.
6. Alternative factual ground. Even if ‘unit’ could mean a measurement unit, the owner could not establish a metric-ton limitation. The charterparty did not describe the cargo actually shipped in metric tons, the bill of lading was not the owner’s contract of carriage, and a kilogram-based calculation would exceed the claim. The limitation defence therefore failed in any event.

• Court of Appeal (Civil Division) The appeal against the Commercial Court order was dismissed: [2018] EWCA Civ 276.
• Queen’s Bench Division, Commercial Court Sir Jeremy Cooke held that the owner was not entitled to limit liability for the bulk cargo under Article IV rule 5: [2016] EWHC 2514 (Comm).