No limitation of liability for bulk cargo under the Hague Rules

Vinnlustodin HF v Sea Tank Shipping AS [2016] EWHC 2514 (Comm) (The Aqasia)


The defendant transported 2,000 tons of fishoil from Iceland to Norway on board the tanker “Aqasia.” On arrival at the discharge port(s), it was discovered that some tanks of fishoil had been damaged along the way.

The fishoil was carried pursuant to a charpterparty that incorporated Article IV Rule 5 of the Hague Rules. The Rule 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 £100 per package or unit.”

The judge acknowledged that the word “unit” is commonly used to refer both to individual physical objects as well as units of measurement. The defendant argued that both definitions should apply to the Hague Rules. It said that as the cargo was described in the charterparty as “2,000 tons of cargo in fishoil in bulk,” a limit of £100 per ton of fishoil was appropriate. The claimants argued in the alternative that “unit” in this context could only mean physical objects, or a combination of physical items bundled together, thus excluding fishoil in bulk from the limitation.

The defendant submitted that the Hague Rules, insofar as they were written into the charterparty, had to be interpreted in the context of what each party contemplated when the charterparty was concluded. The parties’ intention, it was argued, must have been for Article IV to apply to bulk cargo, as this was the only type of cargo being transported and the parties had agreed that the defendant would have the privileges, rights and immunities afforded by Article VI.

The judge, however, did not accept that the meaning of the Rules could be changed to fit the nature of the contract of carriage. Turning to the legislative history of the Hague Rules, which were enacted in 1924, he pointed to clear evidence to suggest that the word “unit” had first been included in the Rules to cover unpackaged items, such as cars or boilers. The drafting committee did not appear to have even discussed cargoes in bulk or the introduction of limits of liability based on weight or volume. Moreover, the judge found, the committee could not have intended a limitation for bulk cargo of £100 per unit, as the value of such cargoes at that time could never have approached this figure. Crude oil, for instance, was US$1.43 per barrel in 1924.

While there was no English authority that directly touched on this point, the judge did consider a number of cases from around the world, including New Zealand Railways v Progressive Engineering Company Ltd [1968] NZLR 1053, where the judge said:

“[A] package imports the notion of articles packed together…A unit on the other hand, imports something which is a separate thing, such as a single manufactured article, though of course any single article, if accepted for transport as a separate article, would be a unit.”

A key issue with the defendant’s submission that “unit” could mean both objects and units of measurement was that the word would be given different meanings for different types of cargo. If a package was described on the bill of lading with a specified weight, there would be no clear way of knowing which limitation amount applied (i.e. whether “unit” would denote the package itself, or the measurement of its weight).

For these reasons, the judge was confident that “unit” could only be read as applying to physical objects shipped singly or grouped together, and not to cargo in bulk. The defendants, therefore, were not entitled to rely on the Hague Rules to limit their liability for the damaged fishoil.

Pauline Barratt, partner at Fee Langstone, says that although the Hague Rules are seldom referred to these days, The Aqasia has some relevance to Hague-Visby Rules cases. Those Rules provide for two different methods of calculating liability – one by the number of packages or units, and one by weight. The judge in The Aqasia commented that the word “unit” in the Hague-Visby Rules referred to a physical item. It follows that the limitation for bulk cargoes must be calculated by weight only.