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England and Wales Court of Appeal (Civil Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> CMA CGM S.A. v Classica Shipping Co Ltd. [2004] EWCA Civ 114 (12 February 2004) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2004/114.html Cite as: [2004] 1 All ER (Comm) 865, [2004] 1 Lloyd's Rep 460, [2004] 1 LLR 460, [2004] EWCA Civ 114 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
COMMERCIAL COURT (MR JUSTICE DAVID STEEL)
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE LONGMORE
and
LORD JUSTICE NEUBERGER
____________________
CMA CGM S.A. |
Appellant |
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- and - |
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CLASSICA SHIPPING Co Ltd |
Respondent |
____________________
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
(instructed by Ince & Co) for the Appellant
IAIN MILLIGAN Esq QC and MICHAEL COBURN Esq
(instructed by Holman Fenwick & Willan) for the Respondent
____________________
Crown Copyright ©
Lord Justice Longmore:
On 10th July 1999 the container ship CMA DJAKARTA (ex CLASSICA) suffered an explosion and her voyage had to be abandoned; the explosion was attributable to two containers containing bleaching powder. The shipowners asserted (and arbitrators have held) that the shipment of the containers constituted a breach of lines 45 – 47 of a time charterparty on the New York Produce Exchange form of 9th April 1999 which provided that the vessel was to be employed in carrying lawful containerised merchandise
"excluding any goods of a dangerous injurious flammable or corrosive nature".
The arbitrators decided that the charterers were liable to the owners in damages for the cost of repair to the vessel in the sum of US $26,624,022; they also made consequential declaratory awards.
"Article 1. Persons entitled to limit liability
1. Shipowners and salvors, as hereinafter defined, may limit their liability in accordance with the rules of this Convention for claims set out in Article 2.
2. The term "shipowner" shall mean the owner, charterer, manager or operator of a seagoing ship.
3. . . . . . .
4. If any claims set out in Article 2 are made against any person for whose act, neglect or default the shipowner or salvor is responsible, such person shall be entitled to avail himself of the limitation of liability provided for in this Convention.
5. In this Convention the liability of a shipowner shall include liability in an action brought against the vessel herself.
Article 2. Claims subject to limitation
1. Subject to Articles 3 and 4 the following claims, whatever the basis of liability may be, shall be subject to limitation of liability:
(a) claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation) occurring on board or in direct connexion with the operation of the ship or with salvage operations, and consequential loss resulting therefrom;
(b) . . . . . . .
(c) claims in respect of other loss resulting from infringement of rights other than contractual rights, occurring in direct connexion with the operation of the ship or salvage operations;
(d) claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship;
(e) claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship;
(f) claims of a person other than the person liable in respect of measures taken in order to avert or minimize loss for which the person liable may limit his liability in accordance with this Convention, and further loss caused by such measures.
2. Claims set out in paragraph 1 shall be subject to limitation of liability even if brought by way of recourse or for indemnity under a contract or otherwise. However, claims set out under paragraph 1(d), (e) and (f) shall not be subject to limitation of liability to the extent that they relate to remuneration under a contract with the person liable.
Article 3. Claims excepted from limitation
The rules of this Convention shall not apply to:
(a) claims for salvage or contribution in general average.
. . . . . . ."
The main part of the owner's claim is the cost of repair of the ship. It was this claim which resulted in the award of $26,624,032.00; it includes $4,702,441.80 paid for salvage services rendered to the ship. There were, however, other claims made by the shipowners; these were claims to be indemnified in respect of (1) their liability to contribute to general average and (2) their liability to the cargo owners for loss or damage to cargo. We were informed that a limitation fund had been established by the charterers in France. The question, therefore, is whether the shipowners, together with other claimants, are obliged to look only to that fund for compensation.
At the arbitration the charterers accepted that, once the arbitrators decided that the owners' losses were attributable to the charterers' breach of charterparty, the decision of Thomas J in The Aegean Sea precluded them from relying on any right to limit their liability. This was because their acts or omissions in relation to the shipment of the cargo were acts or omissions done in their capacity as charterers not as (or qua) shipowners. On appeal, David Steel J recorded the rival contentions before him in the following way:-
(1) Charterers alleged that as time charterers they came within the category of persons entitled to limit their liability as prescribed by Article 1 of the Convention and that all the claims fell within the category of qualifying claims within Article 2;
(2) Owners asserted that the entitlement to limit was restricted to those persons identified in Article 1 (2) whose liability for the qualifying claim arose qua owner and not otherwise; on the facts of this case no part of the claim against the charterers arose from the role of the charterers qua owner.
With due respect to David Steel J and Thomas J, who are both extremely well versed in this area of law, I venture to think that they have started from the wrong point. Now that Merchant Shipping Act limitation is governed by an international convention which is, in its own words, incorporated into United Kingdom law, the task of any court is to construe the Convention as it stands without any English law preconceptions. It has been said on many occasions, in reliance on the dicta of Lord Macmillan relating to the Hague Rules in Stag Line Ltd v Foscolo, Mango & Co Ltd [1932] AC 328, 350, that the interpretation of international conventions must not be controlled by domestic principles but by reference to broad and generally acceptable principles of construction, see James Buchanan & Co Ltd v Babco Forwarding & Shipping (UK) Ltd [1978] AC 141, 152 D-E, Fothergill v Monarch Airlines Ltd [1981] AC 251, 272E, 282A and 293C, and Morris v KLM Royal Dutch Airlines [2002] 2 AC 628, 656 para. 78.
"ARTICLE 31
General rule of interpretation
1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes:
(a) any agreement relating to the treaty which was made between all the parties in connexion with the conclusion of the treaty;
(b) any instrument which was made by one or more parties in connexion with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.
ARTICLE 32
Supplementary means of interpretation
Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:
(a) leaves the meaning ambiguous or obscure; or
(b) leads to a result which is manifestly absurd or unreasonable."
As I read these provisions, the duty of a court is to ascertain the ordinary meaning of the words used, not just in their context but also in the light of the evident object and purpose of the convention. The court may then, in order to confirm that ordinary meaning, have recourse to what may be called the travaux preparatoires and the circumstances of the conclusion of the convention. I would, for my part, regard the existence and terms of a previous international convention (even if not made between all the same parties) as one of the circumstances which are part of a conclusion of a new convention but recourse to such earlier convention can only be made once the ordinary meaning has been ascertained. Such recourse may confirm that ordinary meaning. It may also sometimes determine that meaning but only when the ordinary meaning makes the convention ambiguous or obscure or when such ordinary meaning leads to a manifestly absurd or unreasonable result.
Neither owners nor charterers relied on any special context. As to object and purpose the parties agreed:-
(a) that the general purpose of owners, charterers, managers and operators being able to limit their liability was to encourage the provision of international trade by way of sea-carriage;
(b) that the main object and purpose of the 1976 Convention was to provide for limits which were higher than those previously available in return for making it more difficult to "break" the limit, to use the colloquial phrase. Before 1976, any person, arguing in the United Kingdom that the limit should not apply, only needed to show "actual fault or privity" on the part of the party relying on the limit. Under the 1976 Convention the (now higher) limit is to apply unless it can be shown that the loss resulted from the personal act or omission of the party relying on the limit "committed with intent to cause such loss or recklessly with the knowledge that such loss would probably result". It is thus particularly difficult to break the limit, but the amount available for compensation is higher than it was previously;
(c) one of the other objects of the Convention was to enable salvors to claim that their liability could be limited in the same way as owners and charterers; this reverses the Tojo Maru [1972] AC 242.
It is not in my view possible to ascertain with certainty any object or purpose of the 1976 Convention beyond this common ground, although the somewhat broader views of the judge, expressed when he was Mr David Steel QC are, as always, well worth reading in this context ("Ships are different", [1995] LMCLQ 490). It is then necessary to ascertain the ordinary meaning of the words used.
It is important not to compartmentalise the approach to the Convention; it must be interpreted as a whole but one inevitably has to start at the beginning.
Two matters are immediately noticeable. First, two classes of persons are accorded the right to limit, shipowners and salvors; secondly the word "shipowner" is defined and is said to mean "the owner, charterer, manager or operator of a seagoing ship". This dichotomy was relied upon by both Thomas J and David Steel J by way of assisting them to their conclusion that a charterer could only limit his liability when he was acting as if he were a shipowner or, in other words, if he was acting in the management or operation of the vessel. Failure to prevent the loading of a dangerous cargo was then said by David Steel J not to be an act of managing or operating a ship under time charter so that the right to limit could not arise. To my mind this places a gloss on the word "charterer" which is by no means apparent from the words used. Of course, the dichotomy relied on exists but the mere fact that "charterer" is part of the definition of the word "shipowner" cannot of itself mean that a charterer (an expression otherwise unqualified) has to be acting as if he were a shipowner before he can limit his liability. To my mind the ordinary meaning of the word "charterer" connotes a charterer acting in his capacity as such not a charterer acting in some other capacity. The judge's construction is, moreover, liable to give rise to, at any rate, two difficulties.
"If the appellants [viz the charterers] are unsuccessful in making good their wider case that any charterer can limit liability under the convention in respect of any qualifying claim, including a claim brought against them in their capacity as charterers, I would not want to be regarded as necessarily having accepted the validity of this concession."
Yet, as I have said, the concession must be right and, once the word "charterer" cannot be construed as qua shipowner in an action brought by a cargo-owner, I do not consider that it can be so construed merely because the claimant is not the cargo-owner but the shipowner.
"founded on a fault in the operation of that ship and on the defendant's responsibility for that fault vis-a-vis the claimant."
This formulation explains how it is that, if one were to regard stowage of the cargo or shipment of a dangerous cargo as part of the "operation of the ship", the charterer can limit his liability to the cargo-owner. But if stowage or permitting the shipment of a dangerous cargo is part of the operation of the ship vis-a-vis the cargo-owner, why is it not equally part of the operation of the ship vis-a-vis the shipowner? If it is, then the charterer should be able, on Mr Milligan's argument, to limit in any event.
Neither party invited us to look at the travaux preparatoires. They had invited the judge to do so but he got no assistance from them. He did, however, get some assistance from the terms of the 1957 Convention which was the Convention which, for the first time, extended the right to limit to a "charterer". Article 6 of this Convention provides:-
"(1) In this Convention the liability of the shipowner includes the liability of the ship herself.
(2) Subject to § (3) of this Article, the provisions of this Convention shall apply to the charterer, manager and operator of the ship, and to the master, members of the crew and other servants of the owner, charterer, manager or operator acting in the course of their employment, in the same way as they apply to an owner himself, Provided that the total limits of liability of the owner and all such other persons in respect of personal claims and property claims arising on a distinct occasion shall not exceed the amounts determined in accordance with Article 3 of this Convention.
(3) When actions are brought against the master or against members of the crew such persons may limit their liability even if the occurrence which gives rise to the claims resulted from the actual fault or privity of one or more of such persons. If, however, the master or member of the crew is at the same time the owner, co-owner, charterer, manager or operator of the ship the provisions of this paragraph shall only apply where the act, neglect or default in question is an act, neglect or default committed by the person in question in his capacity as master or as member of the crew of the ship."
The judge regarded it as significant that it was said that the provisions of the Convention should apply to the charterer (and indeed the manager, master and crew operator) of the ship
"in the same way as they apply to an owner himself".
The judge said that this phraseology strongly suggested to him that the relevant charterer had to be exposed to one or more of the prescribed claims "in a setting analogous to that which would usually implead an owner". While I can follow the train of thought, I think that the judge's conclusion puts an excessive weight on the quoted phrase. If it was intended to have the significance that the judge thought it had, one would have thought that would have been made clear in the United Kingdom statute enacting the Convention but section 3 of the Merchant Shipping Act 1958 merely provided:-
"The persons whose liability in connection with a ship is excluded or limited by Part VIII of the Merchant Shipping Act 1894, shall include any charterer and any person interested in or in possession of the ship, and, in particular, any manager or operator of the ship."
Moreover the phrase relied on by the judge has no counterpart in the provisions of the 1976 Convention.
"the same result has been achieved by different drafting and retaining the charterer within the categorization "shipowner". This points to the view that the charterer is to be treated as a shipowner and entitled to limit for the claims brought against him when he acts as a shipowner."
I have already said that I cannot regard the fact that the charterer is placed into the "category" of shipowner in Article 1(2) as, of itself, entitling one to give a specially restricted meaning to the word "charterer". In the result, I do not myself gain any assistance from the terms of the 1957 Convention.
The matter does not, of course, conclude at this stage of the inquiry because it is still necessary to ascertain whether a claim for damage to the ship by reference to which a charterer seeks to limit his liability is a claim which falls within Article 2. There is the further question whether the charterers can limit their liability for any of the other claims brought by the shipowners, but the shipowners' main claim is for the cost of the extensive repairs required by the vessel. So the question here is whether a claim for loss or damage to the vessel by reference to which a charterer seeks to limit his liability is a claim which falls within Article 2.
The relevant provision is Article 2.1 (a). This article extends the right to limit firstly to claims in respect of loss of life or personal injury and secondly to claims in respect of "loss of or damage to property occurring on board". This latter phrase is not apposite to include loss of or damage to the ship itself since neither the loss of a ship nor damage to a ship can be said to be loss or damage to property on board; property on board means something on the ship and not the ship itself. The third category of claim is a claim in respect of loss of or damage to property
"occurring . . . in direct connexion with the operation of the ship."
These Articles are important in the context of a shipowner claiming against a charterer. They are set out in detail in The Aegean Sea by Thomas J and can be summarised by saying that Article 9.1 provides for the claims against (a) the persons mentioned in Article 1.2 (viz. owner, charterer, manager or operator) to be aggregated if they arose on distinct occasions; likewise for claims against (b) the owner of a ship rendering salvage services and a salvor operating from that ship and (c) a salvor not operating from a ship. Article 9(2) then deals with passenger claims. Article 10 provides that liability can be limited without the creation of a fund. Article 11 then provides for the constitution of a limitation fund when that is, in fact, done; it provides for separate funds for the "shipowner" category of those entitled to limit and the "salvor" categories (and for passenger claims) by providing:-
"A fund constituted by one of the persons mentioned in paragraph 1(a), (b) or (c) or paragraph 2 of Article 9 or his insurer shall be deemed constituted by all persons mentioned in paragraphs 1(a), (b) or (c) or paragraph 2 respectively."
Thus through the references to Article 9.1 (a) all those persons designated as shipowners in Article 1.2 of the Convention are brought together as a single unit for the constitution of the fund. Thomas J said this (page 49):-
"In my view the combined effect of these articles is important. As there is provision for a fund for those categorized as shipowners and that fund is to cover both charterers and owners, it is difficult to see how charterers can claim the benefit of limitation through that fund where a claim is brought against them by owners. Owners are entitled to the benefit of limitation for a claim by charterers as that claim is being brought by charterers not when performing a role in the operations of the ship or when undertaking the responsibility of a shipowner, but in a different capacity, usually through their interest in the cargo being carried."
While I entirely agree with this passage from The Aegean Sea, the considerations advanced by the judge to my mind more effectively support a conclusion that the claims in respect of which an owner or a charterer can limit do not include claims for loss or damage to the ship relied on to calculate the limit rather than a conclusion that a charterer can only limit in respect of operations he does qua owner.
"it is the operation of the very ship that must cause the loss of property; the ship cannot be the object of the wrong."
Similarly in the present case (which is a case of extensive repair rather than total loss) David Steel J upheld the shipowners' argument that the vessel cannot be both the victim and the perpetrator and that the "property" envisaged in the Article must be the property of a third party either on board the vessel (eg cargo) or external to the vessel, for example an SBM. He said (para. 52):-
"The property damaged cannot be the very same thing as the operation of which caused the damage."
I agree with both Thomas J and David Steel J in this respect and conclude that the ordinary meaning of Article 2.1 (a) does not extend the right to limit to a claim for damage to the vessel by reference to the tonnage of which limitation is to be calculated.
Recourse can be had to supplementary means of interpretation to confirm the ordinary meaning or to determine the meaning when the ordinary meaning leaves the matter ambiguous or obscure or leads to a manifestly absurd or unreasonable result. The result of giving the words their ordinary meaning is not absurd or unreasonable, nor is there ambiguity or obscurity. David Steel J did consider the wording of the (previous) 1957 Convention and held that his conclusion derived support from Article 1 of that Convention which drew an express distinction between "the ship" and "other property". I have already said that the terms of a previous convention are part of the "circumstances" of the later convention's conclusions for the purpose of Article 32 of the Vienna Convention. Recourse may therefore be had to Article 1 of the 1957 Convention. It is, if anything, even clearer than the 1976 Convention on this point. The fact that it is "even clearer" does not, however, cause me to doubt the proposition that damage to the ship itself is not within Article 2.1 (a) of the 1976 Convention. Indeed, it serves to confirm the proposition since any intention to change the previous agreement so that damage to the ship itself would be subject to limitation would have been made much more explicitly.
The eighth item in the shipowners' claim for the cost of repair resulting from breach of the charterparty provision excluding the carriage of dangerous cargoes was the amount which they had to pay to salvors for salvage services rendered to the vessel. Charterers argued that the amount of such salvage remuneration was not the cost of repairing the damage to the ship but a free-standing claim which fell within Article 2.1 (a) or 2.1 (f) of the Convention and did not constitute a claim for salvage within the excluding provisions of Article 3. If, however, a claim for loss of or damage to the ship is not itself a claim within Article 2.1 (a), a claim for amounts paid to salve the ship cannot be within Article 2.1 (a) since it is not a claim in respect of loss or damage to property within the Article for the reasons given above. It may be that a claim to recover the cost incurred of salving a vessel is best understood as a claim for consequential loss resulting from the damage to the ship; but a claim for that consequential loss is still a claim in respect of damage to the ship and it cannot be brought within Article 2.1 (a) or 2.1 (f). In these circumstances it is not necessary to decide whether the right to limit is also excluded by Article 3 although I see no reason to dissent from Thomas J's view (page 55) that it is not. The claim to be indemnified in respect of the salvors' claim against the shipowners is, therefore, correctly included in the shipowners' claim as loss resulting from the charterers' breach of contract and the charterers cannot rely on any limit.
The same principle must apply to the shipowners' claim to be indemnified against their liability to contribute in general average. Any contribution made by the shipowners will be made as a result of the damage to the vessel and does not, therefore, fall within Article 2.1 (a).
The arbitrators have awarded an indemnity in respect of any cargo claims for which owners are liable. Since it was the charterers who issued the relevant bills of lading to cargo-owners, the primary liability must be that of the charterers who (the shipowners concede) will be able to limit their liability because the claims made by cargo-owners are claims in respect of loss of or damage to property occurring on board the vessel within Article 2.1 (a) of the Convention. Cargo-owners have, however, sued the shipowners in tort and it is this liability which the shipowners, if such tortious liability is established, wish to pass on to charterers; to the extent that such tortious claims are brought in (or governed by the law of ) countries which have ratified the 1976 Convention no difficulty arises because the cargo claim will be regarded as one claim against the fund. But not all the claims have been brought in such countries and one claim, in particular, has been brought in the United States which is not a party to the Convention. There is, therefore, a possibility that the shipowners may be held fully liable in respect of some cargo claims and it is, apparently, so real a possibility that both parties have asked us to decide whether, if shipowners seek to pass on that liability to charterers, charterers can limit their liability.
It therefore follows that, in principle, the charterers' appeal will fail except to the extent that they will be entitled to limit their liability to indemnify the shipowners for the shipowners' own liability for cargo claims, to the extent that that liability is discharged by shipowners in a sum exceeding the appropriate limit. A declaration to that effect can be made.
Lord Justice Neuberger:
Lord Justice Waller: