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05 December 2018
The recent Court of Appeal decision in Vinnlustodin HF v Sea Tank Shipping AS (the Aqasia) concerned a £367,839 claim by charterers against disponent owners in respect of contaminated fish oil in bulk carried on board a tanker.(1) The charterparty provided for the carriage of fish oil in bulk from Iceland to Norway and provided for lumpsum freight. The charterparty also specifically incorporated Article IV(5) of the Hague Rules.
The owners accepted liability for the damaged cargo but argued that they were entitled to limit their liability to £54,730.90 by relying on the limitation amount per package or unit under Article IV(5), namely £100 per tonne. The owners claimed that the parties had clearly intended Article IV(5) to apply to a bulk cargo, having incorporated it into a charterparty where bulk cargo was the only type of cargo contemplated.
The matter was referred to the court. For the purposes of Article IV(5), it was agreed that the definition of a 'package' could not apply to bulk cargoes, so the question for the court was whether the definition of a 'unit' could apply.
At first instance, Sir Jeremy Cooke held that the owners could not limit their liability, as Article IV(5) does not apply to bulk or liquid cargoes as they are neither packaged nor unitised. He held that a 'unit' meant a physical unit for shipment and not a unit of measurement, such as a metric tonne. In any event, he added that even if the latter interpretation was wrong, 'unit' must then refer to 'freight unit'. As the charterparty provided for lumpsum freight (ie, freight is paid irrespective of the cargo quantity), the limit could not apply to bulk cargoes. The owners appealed.
The main issue considered by the Court of Appeal was whether a 'unit' in Article IV(5) of the Hague Rules refers to:
In rejecting the owners' appeal, the Court of Appeal upheld the first-instance decision and found that the word 'unit' in Article IV(5) of the Hague Rules meant a physical item of cargo, not a unit of measurement for the following reasons:
In light of the court's interpretation of Article IV, it did not matter what the parties intended when they incorporated it into the charterparty. In order to limit liability for bulk or liquid cargoes in these circumstances, the owners should have:
This case confirms that Article IV(5) of the Hague Rules does not apply to bulk and liquid cargoes and therefore a carrier cannot limit liability for such cargoes under said rules – an issue which has been lacking direct authority for over 90 years.
For further information on this topic please contact Baptiste Weijburg or Helene A Sironneau at Wikborg Rein by telephone (+65 6438 4498) or email (firstname.lastname@example.org or email@example.com). The Wikborg Rein website can be accessed at www.wr.no.
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