QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
||
B e f o r e :
Sitting as a Judge of the High Court
____________________
Vinnlustodin HF Vatryggingaffelag Islands HF |
Claimants |
|
- and - |
||
Sea Tank Shipping AS (formerly known as TANK INVEST AS) |
Defendant |
____________________
Mr Charles Debattista (instructed by Winter Scott LLP) for the Defendant
Hearing dates: 5th and 6th October 2016
____________________
Crown Copyright ©
Sir Jeremy Cooke:
Introduction
The undisputed facts
1) The dispute arises out of damage to a cargo of fishoil which was carried on board the tanker "AQASIA" pursuant to a charterparty contained in and/or evidenced by a 'Fixing Note' dated Reykjavik 23 August 2013 ("the Charterparty").2) The Charterparty provided for the carriage of 2,000 tons of fishoil in bulk, 5% more or less in Charterers' option, from the Westmans Islands and Faskrudsfjordur in Iceland to Stokmarknes, Averoy and Stavanger in Norway on board the tanker "West Stream" or a substitute, for freight of "Nok 817,500, - lumpsum".
3) The Fixing Note provided that the Charterparty was to be on the "London Form". The London Form is an old tanker voyage charter form, which has been replaced in common usage by Intertankvoy 76. The London form charter provides:
"… 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 …"4) By clause 26, the Charterparty thus incorporated Article IV of the schedule to the Carriage of Goods by Sea Act 1924. The schedule to the 1924 Act contains the Hague Rules. Article IV r.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 ...."5) The Fixing Note also incorporated ten rider clauses numbered 25 to 35 which included terms providing that the contract would be "governed by the Laws of the United Kingdom" (clause 27) and that disputes would be resolved by arbitration in London (clause 28).
6) The Defendant nominated the tanker "Aqasia" ('the Vessel') to perform the Charterparty in substitution for "West Stream". The Defendant was the disponent owner of the vessel and was not party to the contract contained in or evidenced by the Bill of Lading signed by the Master.
7) On 6 September 2013, the Vessel loaded 2,056,926 kgs of the First Claimant's fishoil in bulk at Faskrudsfjordur and Vestmannaeyjar. About 550,000 kgs was loaded into tanks 1P, 2P and 5S. This parcel is referred to by Mr Sharma as 'the Subject Cargo'.
8) The Master (or his agent) signed a Congenbill bill of lading acknowledging shipment of the cargo in apparent good order and condition. The bill recorded the shipper's description of the goods as "Icelandic Fishoil in bulk - 2.056.926 kgs".
9) The bill of lading issued by the Owners, not the Defendant, named the First Claimant as the shipper of the cargo. It is common ground that it is the Charterparty which contains and/or evidences the contract of carriage between the First Claimant and the Defendant.
10) After loading the cargo, the vessel sailed to Lovund in Norway and there loaded a further cargo of fishoil. Part of this further cargo was loaded into tanks 1P, 2P and 5S. This caused it to become commingled with the Subject Cargo.
11) On arrival at the discharge port(s), 547,309 kg / 547.309 mt of the Subject Cargo was found to have suffered damage.
12) The First Claimant claims damages from the Defendant in respect of losses which it has suffered as the owner of the Subject Cargo and/or the party at whose risk the Subject Cargo was at the time the damage occurred. The First Claimant's claim is for US$367,836, together with interest and costs.
13) The Second Claimant was the insurer of the cargo. The Second Claimant has been joined in these proceedings out of an abundance of caution, in case it be alleged that title to sue has somehow passed from the First Claimant to the Second Claimant by virtue of the insurance of the cargo.
14) The Defendant accepts in principle that it is liable for the damage to the cargo but argues that it is entitled to limit its liability to the sum of £54,730.90 (i.e. to £100 per mt of cargo damaged) pursuant to Article IV r.5.
15) The parties agreed that, notwithstanding the arbitration agreement in the Charterparty, the Commercial Court should have jurisdiction to determine an agreed preliminary "Limitation Issue": namely whether the Defendant is entitled to limit its liability to £54,730.90.
The issues in dispute
1) Is Article IV r.5 of the Hague Rules capable in principle of applying to bulk cargo?and2) if so, is the applicable limitation figure £54,730.90 as the Defendant contends?
The approach to construction of the Charter and Article IV
"First, it is legitimate when construing the Rules to have regard to their objects as disclosed by the travaux préparatoires of the Convention. Second, particular respect should be paid to decisions of other jurisdictions in respect of the meaning of the Rules, for the stated object of the Convention was the unification of the domestic laws of the Contracting States relating to Bills of Lading."
The language of Article IV r.5
1) The Defendant focussed on the use of the word "goods" in Article IV r.5 and the definition of that word in Article I of the Rules:"'Goods' includes goods, wares, merchandises, and articles of every kind whatsoever, except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried."It was submitted that the verb "includes"; the noun "merchandises"; the adjectival phrase "of every kind whatsoever"; and the express and narrow exception made for live animals and deck cargo showed that the word "goods" in Article IV r.5 was intended to be as broad as possible.2) It was submitted that the Hague Rules, taken as a whole, pointed towards the inclusion of bulk goods rather than towards their exclusion. Thus, Article III r.3 reads as follows in relevant part:
"3. After receiving the goods into his charge, the carrier, or the master or agent of the carrier, shall, on demand of the shipper, issue to the shipper a bill of lading showing among other things –(b) Either the number of packages or pieces, or the quantity, or weight, as the case may be, as furnished in writing by the shipper;…Provided that no carrier, master or agent of the carrier shall be bound to state or show in the bill of lading any marks, number, quantity, or weight which he has reasonable ground for suspecting not accurately to represent the goods actually received, or which he has had no reasonable means of checking." [Emphasis added]Had the intention been, as suggested by the Claimants in the context of Article IV r.5 of the Rules, to exclude bulk cargoes by using the phrase "package or unit" in that Article, then there would have been no mention in Article III r.3 of "quantity, or weight", both of which words are consistent both with commodities shipped in bulk and with the word "unit" in Article IV r.5.3) The same point was said to apply to Article III r.5 which reads as follows:
"The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment of the marks, number, quantity, and weight, as furnished by him, and the shipper shall indemnify the carrier against all loss, damages, and expenses arising or resulting from inaccuracies in such particulars. …" [Emphasis added]4) It was submitted that it was difficult to see why bulk goods would be excepted from the limitation established in Article IV r.5, but not from the total exclusion of liability in Article IV r.2. That Article, reads in relevant part:
"2. Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from –(m) Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality, or vice of the goods." [Emphasis added]It was said that if "wastage in bulk" was envisaged in Article IV .2 then it had also to be included in Article IV r.5. The phrase "wastage in bulk" meant that bulk goods were included when it came to excluding liability. It would be difficult as a matter of principle to justify why bulk goods should then not take the benefit of limitation of liability.5) Furthermore, given the title of Article IV, namely "Rights and Immunities"; given the inclusive definition of "goods" in Article I (b); and given the terms of Article II, it was submitted that it was difficult to see how it could be said that the legislative intention behind the Hague Rules was to exclude bulk goods from Article IV Rule 5. Article II reads as follows:
"subject to the provisions of Article VI, under every contract of carriage of goods by sea the carrier, in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the responsibilities and liabilities, and entitled to the rights and immunities hereinafter set forth."As "Rights and Immunities" were explicitly set forth in Article IV, if the intention was to exclude a particular part of those rights and immunities from their application to goods shipped in bulk, one would have expected that to have been done in much clearer terms. To base such an exclusion on the two words "or unit", was to place far too heavy a burden on one slender phrase.
The Hague-Visby Rules
"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 666.67 units of account per package or unit or 2 units of account per kilogramme of gross weight of the goods lost or damaged, whichever is the higher." [Emphasis added]
"… Where a container, pallet or similar article of transport is used to consolidate goods, the number of packages or units enumerated in the bill of lading as packed in such article of transport shall be deemed the number of packages or units for the purpose of this paragraph as far as these packages or units are concerned. Except as aforesaid such article of transport shall be considered the package or unit …"
The word "unit" in the phrase "packages or units" must signify a physical item of cargo: otherwise, it would be meaningless to speak of the "the number of packages or units enumerated in the bill of lading as packed in such article of transport".
The Travaux Préparatoires
"Following Fothergill v Monarch Airlines Ltd., [1980] 2 Lloyd's Rep 295; [1981] AC 251, I would be quite prepared, in an appropriate case involving truly feasible alternative interpretations of a convention, to allow the evidence contained in the travaux preparatoires to be determinative of the question of construction. But that is only possible where the Court is satisfied that the travaux préparatoires clearly and indisputably point to a definite legal intention: see Fothergill v Monarch Airlines Ltd., per Lord Wilberforce, at p. 202 col. 1; p.278C. Only a bull's eye counts. Nothing less will do."
"neither the carrier nor the ship shall be responsible in any event for loss or damage to or in connection with goods for an amount greater than £ to a package or £ per cubic foot or £ per cwt (as declared by the shipper and inserted in the contract of carriage, whichever shall be the least (of the goods carried), unless the nature and value of such goods have been declared by the shipper and inserted in the bill of lading …"
"As you know, there are goods to which the Code will apply which are not described as per package, and the matter was raised yesterday, and upon consideration the Committee thought that by adding the words "or unit" the intent would be made clear". There had been discussion the previous day of such items as a car and a boiler, as well as bags of silk or bags of wheat. Cargoes in bulk did not however feature in the discussion.
"… The goods which "are not described as per package", but to which the Code was intended to apply and which were "raised yesterday", as referred to by Sir Henry Duke, can be seen to be there referred to in Sturley, vol. 1 pp. 286 and 292 and C.M.I. Travaux, pp. 454-455 and 458: a car, and a boiler of 20 tons. The discussion on Sept. 1 assumed such articles were covered by the limitation, though not packaged in any way. They were articles of cargo, shipped as such. From an examination of the record of Sept. 1, 1921 (Sturley, vol. 1 pp. 277-314 and C.M.I. Travaux, pp. 450-467) the reference by Sir Henry Duke to the "matter" raised the previous day as to "goods as to which the Code will apply which are not described as per package" and so covered by the word "unit" appears to be to items shipped as single units and not packaged in any way ..." This apparent intention of the introduction of the words "or unit" would have the words fulfilling a function not necessarily directly connected to the word "pieces" in Art III r3. In Art.III r3 the aim was (if the carrier could check the cargo) to require the carrier to issue a bill showing the cargo- the packages or pieces- in a manner which would be binding to a degree. Here in Art IV r4 [later r5] a word was chosen to widen the notion of package to refer to, apparently, articles of cargo, shipped as such, to be subject to a limitation, as if they were individual packages."
It has, I think, never been suggested that the intention behind the drafting committee's addition of the words "or unit" was somehow to introduce (or reintroduce) limits of liability based on weight or volume and it was accepted by Mr Debattista for the Defendant that the objective in mind was to cover unpackaged items for shipment. It is clear that although the concepts of weight and volume were discussed initially, they were abandoned and were never resurrected, whether by the introduction of the word unit or otherwise.
"… The terms of art. IV, r. 5 of the Hague Rules were negotiated and agreed upon as a package limitation […] The addition of the words "or unit" can be seen to have been intended to clarify the rule by making unnecessary any debate in individual cases about the extent and nature of wrapping and the like, so that individual articles capable of being carried without packaging - boilers, cars and the like, and which could be seen as units of cargo as shipped - would be covered. This approach involves a rejection of the notion that "or unit" was inserted to cover bulk cargo by reference to freight unit, as in U.S. COGSA. The weight of judicial and other views that I have earlier referred to makes this a safe conclusion …"
The United States Carriage of Goods by Sea Act
The Travaux Préparatoires to the Hague-Visby Rules
"The second proposal is in regard to the so-called unit limitation. This is a point where international unity has never been achieved. The unit limitation rule has been interpreted differently in the contracting states, not only by the judiciaries of those states but even by the legislators. Therefore, the unity aimed at has not been achieved and there is no harm in looking for a better solution. We believe that a better solution is to be found because the unit limitation in itself, apart from the fact that international unity has not been achieved, is not a good one. Since the unit limitation was introduced as a novelty in the Hague Rules we now have other conventions on the transport of goods by rail, road and air. In all these conventions the simple kilogramme limitation has been adopted. We believe that the time has come when maritime transport should join the other industries. There is no longer any reason for this maritime peculiarity."
The authorities
"… The goods are expressly stated to be unboxed, and the case was argued before me by both parties, who doubtless want a decision on what are known to be the actual facts, on the footing that the cars were put on board without any covering, or, to state it in another way, just as they came from the works. I confess I do not see how I can hold that there is any package to which the clause can refer. "Package" must indicate something packed. It is obvious that this clause cannot refer to all cargoes that may be shipped under the bill of lading; for instance, on a shipment of grain it could apply to grain shipped in sacks, but could not, in my opinion, possibly apply to a shipment in bulk. If the shipowners desire that it should refer to any individual piece of cargo, it would not be difficult to use appropriate words, as, for instance, "package or unit," to use the language of the Hague Rules …"
"… There is no relevant "package" for an undivided part of a bulk cargo, and there is a long-standing debate as to the proper meaning of "unit". The view put forward by the defendants, which receives some support from Scrutton on Charterparties (18th ed.) pp. 441-443, is that for a bulk cargo the "freight unit" or "customary freight unit" should be adopted. This contention only avails the defendants if that unit can be identified in the present case as one tonne. The bills of lading do not do so. The weight is expressed in kilos, both in print and in type. There is no evidence that the customary freight unit is one metric tonne. I reject this contention, therefore, as being unsupported by, or contrary to, the evidence before me ..."
"The meaning of the word "unit" as it occurs in the phrase 'package or unit' in Rule 5 has given me very great difficulty but I am now satisfied that no substantial assistance can be obtained from the U.S. cases because of the clear difference in the wording of the Rules and such authorities as exist in this country and in England appear to me to bear out the statement of Mr Justice Rand that the word in this context means a shipping unit, that is a unit of goods."
"…
The word unit connotes one of a number of things rather than a thing standing by itself, and with reference to goods carried by ship, it does not seem appropriate to describe the whole of a cargo or parcel of cargo in bulk. Further, the natural interpretation of the word "unit" in the phrase "package or unit" appears to be that it has been added in order to cover parts of a cargo similar in a general way to a package, but not strictly included in that term which properly implies something packed up or made up for portability and would therefore not include such a thing as a log of wood or a bar of metal. The word "unit" has, it is suggested, been added in order to embrace such things and not to extend the scope of the Rule to bulk cargoes or parts thereof. Moreover, the whole purpose of Rule 5, which is directed against excessive claims for things of undisclosed abnormal value, supports this limited interpretation of the word.
The learned authors of this work then refer to "an alternative view for which there is much to be said" and which they describe as follows:
… inasmuch as the term "unit" is commonly used to mean a standard of measure or enumeration, or one of a series of things split up either physically or notionally for the purpose of enumeration or measurement, the phrase "package or unit" here used must refer back to the particulars of enumeration or measurement which must be shown on the bill of lading as provided by Article III Rule 3 …
It is clear, however, that the authors prefer the former view. This interpretation is further borne out by the note to be found in Halsbury's Laws of England, 3rd ed., vol. 35 at p. 535 where the learned editors observed in a cryptic note speaking of the word "unit" as used in the Rule: "… which latter term is no doubt apt to indicate an unboxed vehicle."
The textbooks/commentaries
Application on a per unit basis
"What is a unit? The alternatives are (a) the 'freight unit', i.e. the unit of measurement applied to calculate the freight, or (b) the 'shipping unit', i.e. the physical unit as received by the carrier from the shipper. The 'freight unit' has been authoritatively rejected in Canada in favour of the 'shipping unit' at least so far as concerns individual articles such as automobiles not shipped in packages, and there is some authority in England for adopting this approach. But if the 'shipping unit' solution is adopted, it is not easy to see why the Rule treats 'package' as an alternative to 'unit', since 'shipping unit' would include a package. Furthermore the concept of the 'shipping unit', unlike the 'freight unit', is not at all appropriate when applied to bulk cargo: a possible solution is to apply the 'shipping unit' to individual articles not in packages and the 'freight unit' to bulk cargo."
Conclusion