TT Talk - Legal eagle: how to measure bulk

TT Talk - Legal eagle: how to measure bulk

Approaching a century after the Hague Rules were established (in 1924), it may at last be clear what is meant by “unit”.

Factual background
A charterparty for the carriage of fish oil in bulk from Iceland to Norway incorporated Hague Rules Article IV.  On arrival at the discharge port, a quarter of the cargo was found damaged by co-mingling, and the charterer claimed under the terms of the charterparty for the full value of US$367,836 for the damaged cargo from the ship owner. 

The owner accepted liability in principle, but sought to limit its liability to £54,730.90, calculated on £100 per metric tonne, by relying on the limitation amount “per package or unit” under Article IV Rule 5.

Arguments raised
The owner claimed before the Commercial Court at first instance that it was the clear intention of the parties to apply the Hague Rules limitation. It was agreed that “package” could not apply to bulk cargoes, and that there was therefore no entitlement to limit on this basis. However, the question for the court was whether “unit” could apply.

The Commercial Court held that “unit” meant a physical unit for shipment and not a unit of measurement, such as a metric tonne. In reaching this conclusion, the court was influenced by the fact that “unit” was used in Rule 5 in the same context as “package”. On this basis, the ship owner was therefore not entitled to limit its liability under the charterparty.

The Court of Appeal held, as a preliminary issue, that the Commercial Court’s analysis of the meaning of “unit” was correct.  The court did not find comparisons with Hague-Visby or US COGSA useful, on the basis that both these wordings differed from the Hague Rules. The court was more impressed with the travaux prėparatoires to the Hague Rules, which tended to support the charterers’ position.  Specifically, these suggested that “unit” had been inserted into Rule 5, almost as an afterthought, to take in items which, although unpackaged, were still recognisable as units - for example: cars and boilers.

In the final analysis, further consideration as to what the intentions of the parties to the charterparty might have been stood no chance in the face of what the court found to be the proper construction of Article IV.

This judgment provides clarity, and perhaps even closure, to a debate which is supposed to have run for almost one hundred years about the meaning of “unit” at Article IV Rule 5 of the Hague Rules.

Tank Shipping AS v Vinnludtodin HF and Vatryggingaffelag Islands (the ‘Aqasia’)
[2018] EWCA Civ 276

While the case identified above concerned consideration of the limitation applicable to bulk cargoes, it is worthy of note that added weight has now been given to issues of enumeration of “units” for containerised cargo. An English Commercial Court decision was reported in May last year and the Court of Appeal has upheld the first instance decision.

As noted previously, this case represents a significant clarification of the definition of “unit” under both the Hague Rules and Hague-Visby Rules in English law. Interestingly, a very similarly composed appeal bench found the reasoning in ‘Aqasia’ of assistance.

The simple enumeration of items or pieces of cargo is now clearly sufficient to constitute “units” regardless of any lack of packaging. Authority and certainty have therefore now been added to this important judgment on the application of Hague-Visby Rules and package enumeration.

Kyokuyo Co Ltd v AP Møller-Maersk t/a Maersk Line (“Maersk Tangier”)
[2018] EWCA Civ 778

We hope that you have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.
We look forward to hearing from you.

Peregrine Storrs-Fox
Risk Management Director, TT Club

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