Serena Navigation Ltd and another v Dera Commercial Establishment and another (The "Limnos")
| Jurisdiction | England & Wales |
| Judge | Mr Justice Burton : |
| Judgment Date | 15 May 2008 |
| Neutral Citation | [2008] EWHC 1036 (Comm) |
| Docket Number | Case No: 2006 FOLIO 833 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 15 May 2008 |
[2008] EWHC 1036 (Comm)
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand,
London, WC2A 2LL
Before : Mr Justice Burton
Case No: 2006 FOLIO 833
Mr Simon Rainey QC and Miss Ruth Hosking (instructed by Holman Fenwick & Willan) for the First Claimant
Mr Lawrence Akka and Miss Angharad Parry (instructed by Barlow Lyde & Gilbert LLP) for the First Defendant
Hearing dates: 28 and 29 April 2008
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This has been the hearing of a preliminary issue ordered by Christopher Clarke J, at a case management conference of proceedings in which a counterclaim has been brought by the First Defendant Dera Commercial Establishment (the Cargo Owner) against Serena Navigation Ltd (the Owner/Carrier). For the purpose of this preliminary issue all that is necessary to set out, so far as the context of the proceedings is concerned, is that the counterclaim is brought in respect of a shipment of US corn from Louisiana to Aqaba, on the Limnos. The Cargo Owner is the lawful holder of the bill of lading, to which the Carrier was party. None of the terms of the bill of lading is relevant, save that it incorporates the Hague-Visby Rules.
The pleadings have been carried forward since the case management conference, both by amendment and otherwise, but it is common ground that the facts as now set out in the pleadings as they stand before me are to be assumed for the purposes of the determination of the preliminary issue. Save for the fact that there was some limited wet-damage to the cargo, for reasons which the Carrier does not accept would render it in breach of contract, all of the facts which are assumed for the purposes of this hearing will be in issue. But the context in which this preliminary issue has been ordered is that, if the interpretation of the Hague-Visby Rules for which the Cargo Owner contends is correct, then its claim is very substantial, while, if the Carrier's interpretation is the correct one, then the claim, even if the Carrier were liable, would be very small. I have been greatly assisted by Counsel, Mr Rainey QC and Miss Hosking for the Carrier and Mr Akka and Miss Parry for the Cargo Owner, in their submissions in respect of a point which, notwithstanding the regular international use of the Hague-Visby Rules, has not, it seems, been the subject of consideration by any court.
The assumed facts are that on arrival at Aqaba, after a passage through very heavy weather, a small amount of wetting damage was discovered in the holds, primarily holds 2 and 3, but also, it is alleged, to a limited extent, holds 5 and 8, apparently caused by leakages through the vessel's hatch covers. The quantity of wet damaged cargo (said variously to be 7 or 12 metric tons (“tons”)) was segregated and disposed of, though there is, by amendment, an issue (assumed in favour of the Cargo Owner, as above) as to whether some wet damaged kernels were not segregated, and were discharged along with the apparently sound cargo. In addition, there is a further amended allegation that up to 250 tons of cargo in holds 2 and 3 had to be discharged by bulldozers, and, as a result, suffered an increased number of broken kernels. The quantity said to have been physically damaged prior to or at the time of the discharge of the cargo from the vessel at Aqaba is thus 7/12/>250 tons, and there is no issue (subject to proof hereafter) that this “conceded tonnage” would fall within the contested definition of “goods lost or damaged” which is the subject matter of this preliminary issue, as I shall explain.
The following further factual assumptions are applied for the purposes of the preliminary issue:
i) As a condition of allowing any discharge of the cargo from holds 2 and 3, Jordan Silos and Supply General Co (as recommended by the Jordanian Ministry of Agriculture) required that the whole of that cargo be fumigated and treated with chemicals and transferred to pre-fumigated and disinfected silos.
ii) In order to carry out the required fumigation and treatment, the cargo had to be moved within the silos, and, as a result, the number of broken kernels within the cargo increased, resulting in a depreciation in value of the cargo amounting to US $362,142.
iii) The whole of the cargo as a result acquired a reputation in the market as a distressed cargo, and its sound arrived market price was depressed as a result by US $13 per ton: thus the total cargo of 43,998.66 tons (less the 12 tons damaged) was reduced in value by US $13 per ton, namely a loss of US$ 571,842.26.
iv) A range of other expenses and liabilities were incurred by the Cargo Owner in relation to the fumigation, segregation and silo storage of the cargo, as set out in paragraph 16(v) to (xi) of the Amended Defence and Counterclaim of the First Defendant.
The Cargo Owner's case is summarised as follows in paragraph 28 of that pleading:
“28. By reason of the matters alleged above, Dera has suffered loss and damage and has been put to expense.
Particulars
(a) Dera claims the market value at the date of delivery of the quantity of cargo which was not delivered, namely US$ 1,742.40 [the 12 tons]
(b) Dera claims the losses/expenses referred to in paragraph 16 above, which losses/expenses were caused by the matters complained of, or alternatively were incurred in reasonable mitigation of the loss which would otherwise have been incurred, namely the loss of the whole cargo.”
So far as (b) is concerned, the total loss claimed, in the light of the assumptions set out in (i) to (iv) of paragraph 4 above, is just short of US $1.55m exclusive of interest.
The relevant Article of the Hague-Visby Rules, which has been the subject of the dispute before me, is Article IV Rule 5(a), which I cite below (as amended by the substitution of Special Drawing Rights for “Units of account” as originally provided):
“5(a) Unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading, neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the goods in an amount exceeding 666.77 [Special Drawing Rights] per package or unit or 2 [Special Drawing Rights] per kilogram of gross weight of the goods lost or damaged, whichever is the higher.”
The Carrier's case is that the limit of liability under Article IV.5(a) where, as here, gross weight is the applicable test, and loss of the goods is not in issue, is by reference to the gross weight of the goods physically damaged – in this case the conceded tonnage. Hence, if that be right, the limit will be, at 2SDRs per kilo, 14,000 SDRs (7 tons) or 24,000 SDRs (12 tons) or up to 52,400 SDRs (the 12+ 250 tons). The Cargo Owner asserts that the limit is applicable by reference to the whole cargo of 43,999.86 tons, which would more than cover the entirety of the sum claimed.
Common Ground
There were some areas of common ground as to the legal background to the issue before me. The first related to the approach to construction of the Rule. Both sides drew my attention to the seminal passages in the authorities: the words of Lord Macmillan in Stag Line Ltd v Foscolo, Mango & Co Ltd [1932] AC 328 at 350, of Longmore LJ in CMA CGM SA v Classica Shipping Co Ltd [2004] 1 Lloyds Rep 460 at 463–4 (making express reference to Articles 31 and 32 of the 1969 Vienna Convention on the Law of Treaties, to which the United Kingdom is a party), and of Lord Steyn, both in Jindal Iron & Steel Co Ltd & Others v Islamic Solidarity Shipping Co (Jordan) Inc (The Jordan II) [2005] 1 Lloyds Rep 57 at 64 and, in relation to travaux préparatoires, in The Giannis NK [1998] AC 605 at 623. From these passages the proposition can be drawn that what the court is seeking to do is to deduce the ordinary meaning of the words used (especially per Longmore LJ at 464), by reference to broad and generally acceptable principles of construction rather than a rigid domestic approach, and without English law preconceptions (Lord Macmillan at 350 and Longmore LJ at 463): and consistently with the evident object and purpose of the Convention or international rule in question, as to which regard may be had to travaux préparatoires (per Longmore LJ at 464), which, however, will only be determinative of the question of construction if they amount to a “bull's-eye” (per Lord Steyn in The Giannis NK in 623F).
I have endeavoured, with the assistance of the parties, to apply that approach in this judgment. As for any other assistance to questions of construction, Mr Akka did not, before me, although Mr Rainey QC in his skeleton asserted that he thought that he might (and was ready to deal with it), rely on any contra proferentem approach. However, he rested a good deal of his argument, as will be seen, on the well established canon of construction articulated in relation to commercial contracts by Lord Diplock in The Antaios [1985] 1 AC 191 at 200–201, namely that “if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense”. Notwithstanding that this canon was prescribed for the purpose of construing commercial contracts, Mr Rainey QC did not suggest that it was not also an available tool with regard to the construction of an international rule applicable in, and incorporated into, commercial transactions.
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