There was 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. 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, but the appellant subsequently nominated the Aqasia 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. Clause 26 of the charterparty entitled the owners to the like privileges and rights and immunities as contained in ss 2 and 5 of COGSA 1924 and in art 4 of its schedule (ie the Hague Rules). Art 4.5 of the Hague Rules limits liability for damage to goods to GBP 100 per package or unit.

Of the approximately 550,000 kg of oil that was loaded in the Aqasia’s tanks 1P, 2P and 5S, 547,309 metric tons (547,309 kg) was found to have suffered damage when it reached its discharge port in Norway. The appellant accepted liability in principle for the damage to the subject cargo, but contended that it was entitled to limit its liability to GBP 54,730.90 (ie GBP 100 per metric ton of cargo damaged) under art 4.5 of the Hague Rules, which was contested by the respondents. In the first instance Court, the Judge held that the word unit, under art 4.5, meant a physical unit for shipment and did not apply to bulk cargo (see Vinnlustodin HF and Vatryggingaffelag Islands HF v Sea Tank Shipping AS (CMI25)).

Two issues formed the subject of the appeal application. First, whether the judge failed to give effect to the clearly expressed intention of the parties to the charterparty that the appellant should be entitled to limit its liability in respect of this bulk cargo pursuant to art 4.5. Second, whether the judge erred in concluding that the limitation of liability in art 4.5 did not apply to bulk cargo in a number of respects.

Held: Appeal dismissed. The meaning of ‘unit’ was a physical item of cargo or shipping unit and not a unit of measurement or a freight unit.

First, the word ‘package’ clearly referred to a physical item and the use of the words ‘package’ and ‘unit’ together and in the same context pointed strongly to both words being concerned with physical items rather than units of measurement on the noscitur a sociis principle .

Second, ‘package or unit’ both related to physical items of cargo and was borne out by art 3.3.b. Although art 3.3.b used ‘packages or pieces’ rather than ‘package or unit’, it was clearly referring to individual physical items of cargo, in contradistinction to the weight or quantity of cargo which was seen as different and specified accordingly. Furthermore, a ‘unit’ could be regarded as synonymous with a ‘piece’ in the context of the Hague Rules as they were both descriptive of a physical item of cargo which was not a ‘package’.

Third, the definition of ‘goods’ in art 1 was not of assistance in construing art 4.5. Merely because the definition of ‘goods’ was wide, it did not follow that every provision in the Hague Rules applied to every type of goods. Therefore, the definition of ‘goods’ could not assist in determining the meaning of the completely different word ‘unit’ in a different provision of the Hague Rules.

Fourth, an obvious problem was created if ‘unit’ in art 4.5 did not just refer to a unit of measurement for all purposes, but also referred to unpackaged physical items for shipment as the word was given different meanings for different types of cargo. For unpackaged items such as cars, where the bill of lading not only specified the number of ‘units’ in the sense of the number of cars but also their weight, which of the two was to be taken to be the ‘unit’ for limitation purposes, in the absence of any guidance in the Hague Rules themselves? Furthermore, more than one unit of measurement could be used to describe the cargo in the context of bulk cargoes as well. For example, volume and weight, or, as in the present case, different units of weight such as metric tons in the charterparty and kilograms in the bill of lading.

The value of bulk cargoes in the 1920s explained why no one considered it necessary to insert any limitation provision in art 4.5 applicable to bulk cargo. At the time when the Hague Rules were adopted, the price of bulk cargoes which were being shipped was such that the limitation provisions, borne out by the travaux préparatoires, would not have been seen as relevant. If. on its true construction, art 4.5 did not apply to bulk cargo, it was not permissible to strain the language of the provision to make it apply to bulk cargo, however desirable that might be.

If the appellant were able to point to a substantial body of authority in a number of foreign jurisdictions or other material demonstrating that the construction which it sought to place on ‘unit’ in art 4.5 was the generally accepted construction, then that would have given the court pause for thought. However, it could not. Rather, the construction of ‘unit’ as a physical item or shipping unit was the one accepted by courts in other Common Law jurisdictions and favoured by the majority of academic commentators and textbooks. This construction was also clearly confirmed by the travaux préparatoires for the Hague Rules, which demonstrate clearly a number of matters which confirmed that the meaning of ‘unit’ was a physical item of cargo or shipping unit and not a unit of measurement. Section 4.5 of the United States Carriage of Goods by Sea Act 1936 (US COGSA), which was similar but not identical to art 4.5, used the wording ‘in an amount exceeding $500 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit’ in lieu of ‘in an amount exceeding 100 pounds sterling per package or unit’. The United States Department of Trade, in a memorandum dated 5 June 1937, described the difference as ‘intended primarily to clarify provisions in the Convention which may be of uncertain meaning thereby avoiding expensive litigation in the United States for purposes of interpretation’. However, this view could not possibly lead to a construction of the original art 4.5 to interpret ‘unit’ as a freight unit, let alone a customary freight unit. Hence, the US COGSA was of no assistance as to the meaning of ‘unit’ in art 4.5.

There was no previous English authority directly on the point in the context of the Hague Rules. However, such dicta as there were proceeded on the basis that a ‘unit’ in art 4.5 meant a physical item of cargo rather than a unit of measurement.

Accordingly, art 4.5 would not ordinarily apply to bulk cargos.

Article 4.5 should also not be construed as applying to bulk cargoes for this case as a special case. Clause 26 mentioned that the appellant would 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’, with ‘the like privileges and rights and immunities’ suggesting that the shipowner would have the same or equivalent privileges, rights and immunities as if the Hague Rules applied to the carriage. However, the meaning of the art 4.5 and the word ‘unit’ in it could not change because of the nature of the contract of carriage.

There was an insuperable difficulty in relying on the fixing note to limit its liability under art 4.5. There was no description in the charterparty of the cargo as shipped. The bill of lading was the only document issued in respect of the cargo actually shipped and it described the cargo as weighing 2,056,926 kilograms. The appellant would not be a party to the contract of carriage contained in or evidenced by the bill and limitation by reference to kilograms of cargo shipped would produce a sum higher than the amount claimed. Therefore, the appellant’s attempt to limit its liability under art 4.5 failed on the facts.