A cargo of fish oil (described as '2,000 tons cargo of fishoil in bulk') belonging to the first claimant, Vinnlustodin HF, carried on board the tanker Aqasia belonging to the disponent owner, Sea Tank Shipping AS (the defendant) pursuant to a London Form charterparty (the charterparty), was damaged after being commingled with a further cargo of fish oil on subsequent loading en route to the port of destination. The first claimant was joined by its insurer, Vatryggingaffelag Islands HF (second claimant) (collectively, the claimants) in the claim.

Article 4.5 of the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading 1924 (the Hague Rules), which limits liability for damage to goods to £100 per package or unit, applied to the charterparty which incorporated art 4 of the schedule to the Carriage of Goods by Sea Act 1924 UK (which contained the Hague Rules).

The claimants applied for a declaration that the limitation of liability under art 4.5 of the Hague Rules (hereinafter, art 4.5) did not apply to bulk cargo as the word 'unit' in art 4.5 referred to a physical item. The defendant argued that the word 'unit' in art 4.5 could also refer to a unit of measurement for bulk and liquid cargo. It was accepted that, as a matter of ordinary language, the word 'unit' can either mean individual physical item or object, or a unit of measurement. However, there was no English authority discussing how 'unit' in art 4.5 should be construed.

Held: The claimants were entitled to the declaration.

All submissions made by the defendant to construe the word 'unit' in art 4.5 as including bulk goods were rejected.

1. The defendant submitted that the word 'unit' had to be read in the context of this particular charterparty for liquid cargo. Since the parties agreed that the defendant enjoyed the privileges, rights and immunities under art 4 of the Hague Rules (hereinafter, art 4), all of art 4 (including its reference to 'unit') had to refer to liquid cargo. The judge rejected this submission as art 4 avails the relevant privileges, rights and immunities where applicable. The words 'per package' in art 4.5 do not apply to bulk cargoes. In the same way, the word 'unit' in art 4.5 does not apply to bulk cargoes.
2. The defendant submitted that the word 'unit' was intended to include bulk goods rather than exclude them. The use of the word 'goods' in art 4.5 as defined in art 1 of the Hague Rules was apparently intended to be as broad as possible. The use of the words 'quantity, or weight' in art 3.3 of the Hague Rules (wordings consistent with commodities shipped in bulk) suggests that commodities may have been contemplated when drafting the word 'unit' in art 4.5. If 'wastage in bulk' was envisaged in art 4.2 when excluding carrier liability, the carrier should also take the benefit of limitation of liability under art 4.5. The judge rejected these arguments because, even if it were rational to provide the same limitation of liability for bulk cargoes as for packages, this does not overcome the fact that the wording used in art 4.5 is 'package or unit'.
3. The judge also rejected an attempt by the defendant to use the terms in the Hague-Visby Rules to construe art 4.5 of the Hague Rules.

The Judge accepted the claimant’s submission that the word 'unit' had to be read in context of the phrase as used in art 4.5 (ie 'per package or unit') which, on the principle of noscitur a sociis, suggested that both terms were concerned with physical items rather than abstract units of measurement. The majority of commentaries and textbooks also favoured the construction of 'unit' in art 4.5 as a physical shipment unit.

Hence, the Judge concluded that the word 'unit' in art 4.5 of the Hague Rules is not apt to apply to bulk cargoes. Even if it applied to bulk cargoes, the only legitimate application would be by way of interpreting the word 'unit' as 'freight unit'.

[For the unsuccessful appeal to the England and Wales Court of Appeal, see Sea Tank Shipping AS v Vinnlustodin HF and Vatryggingafelag Islands FH (CMI123).]