Sea Tank Shipping as (formerly known as Tank Invest as) v Vinnlustodin HF and another; The Aqasia
| Jurisdiction | England & Wales |
| Judge | Lord Justice Flaux,Lord Justice Richards,Lady Justice Gloster |
| Judgment Date | 22 February 2018 |
| Neutral Citation | [2018] EWCA Civ 276 |
| Date | 22 February 2018 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2016/4382 |
[2018] EWCA Civ 276
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION, COMMERCIAL COURT
Sir Jeremy Cooke sitting as a Judge of the High Court
CL/2016/000070; [2016] EWHC 2514 (Comm)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Gloster
Lord Justice David Richards
and
Lord Justice Flaux
Case No: A3/2016/4382
Mr Charles Debattista (instructed by Winter Scott LLP) for the Appellant
Mr Lionel Persey QC & Mr Benjamin Coffer (instructed by Clyde & Co LLP) for the Respondents
Hearing date: Thursday 18 January 2018
Introduction
The appellant appeals with the leave of Gross LJ against the Order of Sir Jeremy Cooke (sitting as a High Court Judge in the Commercial Court) dated 3 November 2016, declaring that the appellant is not entitled to limit its liability to the respondents for damage to cargo carried on its vessel to the sum of £54,730.90. The appeal raises for decision the long-standing debate as to the meaning of “unit” in Article IV rule 5 of the Hague Rules and, specifically, whether “unit” refers to a physical item of cargo or shipping unit as the respondents contend or is a reference to a unit of measurement as used by the parties to denominate or quantify the cargo in the contract of carriage and is thus capable of applying to bulk or liquid cargo, as the appellant contends.
Factual background
The facts are and were not in dispute and can be summarised as follows. The dispute arises out of damage to a cargo of fish oil in bulk carried on board the tanker AQASIA pursuant to a charterparty between the appellant as owner and the first respondent as charterer contained in or evidenced by a Fixing Note dated 23 August 2013. The charterparty provided for the carriage of 2,000 tons of fish oil in bulk (5% more or less in charterer's option) from Iceland to Norway on board the vessel WEST STREAM for a lumpsum freight of Nok 817,500. The appellant subsequently nominated the AQASIA, of which it was the disponent owner, as the substitute performing vessel.
The Fixing Note provided that the charterparty was to be on the “London Form”, an old tanker voyage charter form, replaced in common usage by the Intertankvoy 76 form. The London Form provides inter alia as follows:
“26. – The Owners in all matters arising under this Contract shall also be entitled to the like privileges and rights and immunities as are contained in Sections 2 and 5 of the Carriage of Goods by Sea Act 1924 and in Article IV of the Schedule thereto …”
The charterparty thus incorporated Article IV of the Schedule to the 1924 Act which contains the Hague Rules. Article IV rule 5 provides:
“… Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with goods in an amount exceeding 100l per package or unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading ….”
The Fixing Note also incorporated various rider clauses including terms providing for the charterparty to be governed by English law and for disputes to be resolved by London arbitration.
On 6 September 2013, the vessel loaded a cargo of 2,056,926 kg of the first respondent's fish oil in bulk at two Icelandic ports. About 550,000 kg of the cargo (“the subject cargo”) was loaded in tanks 1P, 2P and 5S. The Master (or his agent) signed a Congen bill of lading acknowledging shipment of the cargo in apparent good order and condition. The first respondent was named as the shipper of the cargo. The bill recorded the shipper's description of the cargo as “Icelandic Fishoil in bulk-2,056,926kgs”. The appellant, as disponent owner of the vessel, was not party to the contract of carriage contained in or evidenced by the bill of lading, which was with the head owners. It was common ground that it was the charterparty which contained or evidenced the contract of carriage between the parties to the present proceedings.
After loading, the vessel proceeded to Lovund in Norway and loaded another cargo of fish oil, some of which was loaded in tanks 1P, 2P and 5S and thus became comingled with the subject cargo. On arrival at the discharge port(s), 547.309 metric tons (547,309 kg) of the subject cargo was found to have suffered damage.
The first respondent claimed damages from the appellant for the loss it has suffered as owner of the subject cargo, in the sum of US $367,836. The second respondent was the insurer of the cargo, joined to the proceedings out of an abundance of caution, lest title to sue had somehow passed from the first to the second respondent. The appellant accepted liability in principle for the damage to the subject cargo but contended that it was entitled to limit its liability to £54,730.90 (i.e. £100 per metric ton of cargo damaged) under article IV rule 5 of the Hague Rules. This was contested by the respondents.
The parties agreed that, notwithstanding the arbitration clause in the charterparty, the Commercial Court should have jurisdiction to determine the agreed preliminary issue as to whether the appellant was entitled to limit its liability to £54,730.90.
The judgment below
The judge dealt first at [5] to [8] with what was then the appellant's primary case, that when read as a whole as a contractual term of the charterparty, Article IV was clearly intended to apply to a bulk cargo, because the London Form was only for use with bulk or liquid cargoes. All of Article IV had to apply in order to give meaning to the parties' agreement that the appellant was to have the privileges, rights and immunities afforded by Article IV. The judge rejected the submission that the effect of clause 26 was that the words of Article IV were written into the charterparty so that every provision in the Article must be given meaning and effect in the context of the carriage of the bulk cargo contemplated.
The judge held at [5] that: the effect of the words: “the like privileges and rights and immunities as are contained in…Article IV” in clause 26: “must be that the Defendant is entitled to rely on the package or unit limitation only in the same circumstances as it would be entitled to do, if there had been a full incorporation of the Hague Rules”. He went on to hold at [7] that:
“The effect of the clause is to allow the Defendant the like privileges, rights and immunities as are contained in Article IV, where they apply. Although it is true to say that the Charterparty was expressly a charter for the carriage of a bulk cargo of fishoil in a tanker, the Defendant is entitled to rely on no more than what is provided by the limitation in Article IV, so that if the word unit, as used in Article IV, does not apply to bulk cargoes as a matter of construction of the Rules, it cannot change its meaning because of the nature of the contract of carriage. There may be parts of Article IV which are applicable and other parts which are inapplicable. It is accepted that Article IV r.1, 2 and 4 provide protection to the owner but it is self-evident that Article IV r.2(n) which exempts the owner from liability for “insufficiency of packing” cannot apply to a cargo which is not packed. Such a provision, although part of the charter, is inapplicable to the factual situation which obtains in the carriage of a bulk cargo. Similarly, it is accepted that the words “per package” in Article IV r. 5 cannot apply to a bulk cargo, so the determinative issue is whether or not the word “unit” in that Article can do so.”
One of the appellant's grounds of appeal is that the judge was wrong in not accepting the argument as to the correct construction of the charterparty, that it was clearly the intention of the parties that the appellant's liability under the charterparty be limited, although it is fair to say that Mr Debattista for the appellant placed a great deal more emphasis in his appeal skeleton and his oral submissions before this Court on his other ground of appeal as to the true meaning of “unit” in the Hague Rules themselves.
The judge then set out at [10] that it was accepted that, as a matter of ordinary language, the word “unit” is capable of referring to either an individual physical item or a unit of measurement. He referred to the appellant's argument by reference to various provisions in the Hague Rules, that “unit” meant a unit of measurement. I do not set out all those arguments here as they are in large measure the same arguments as Mr Debattista advanced before this Court, which I consider later in this judgment.
At [13], the judge then set out the argument of Mr Lionel Persey QC for the respondents that the context in which the word was used in the phrase “per package or unit” in Article IV rule 5 referred to a physical item or composite of items rather than a unit of measurement. Because a “package” was undoubtedly a physical item, the use of the words together pointed to their both being concerned with physical items rather than abstract units of measurement, on the principle of noscitur a sociis. It was argued that “package” was also used in Article III rule 3(b) which refers to “packages or pieces or the quantity or weight” where “packages or pieces” were referring to physical items of cargo and quantity or weight were seen as different, hence their being specified.
The judge accepted these arguments, saying at [14] to [16]:
“[14] I find these arguments compelling, as have others, since, despite the Defendant's best efforts, as set out above, I can see nothing in the Hague Rules which lends any support for the argument that the word unit connotes a unit of measurement, in circumstances...
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