In the Commercial Court, Mr Justice David Steel upheld the award. In reliance on Thomas J’s reasoning and judgment in The ‘Aegean Sea’, he held that the 1976 Convention did not entitle a charterer to limit its liability as against the shipowner, for a claim which arose when the charterer was not acting "as owner" - in this case the loading of cargo. He did, however, give the charterer leave to appeal to the Court of Appeal.

Steel J decided the right to limit under Art.1 did not apply to ‘charterers’ in general, but only when they undertook an ‘owner’s role. He added that even if a time-charterer, as ‘disponent owner’, was acting in a quasi-owner capacity, the right did not apply as against claims by the actual shipowner arising out of the voyage.

He relied on The ‘Aegean Sea’ as authority for the proposition that while the charterer was "to be treated as a shipowner and entitled to limit for the claims brought against him when he acts as shipowner," the1976 Convention did not, in the absence of any express contrary provision, apply in relation to claims by the actual owner, or to claims which had arisen when the charterer was not acting "as if it were the owner". If that had been the intention, there would have been a provision to that effect. He accordingly found in owner’s favour.

Judgment on appeal
In a judgment with which his colleagues agreed, Lord Justice Longmore took as his starting point the proper construction of the 1976 Convention. Both Steel J and Thomas J had based their decisions on an examination of the UK legislative history of limitation, which - he said - was "to start from the wrong point". Now that limitation under the UK Merchant Shipping Act was governed by an international convention incorporated into English law, the courts must construe the 1976 Convention "as it stands" without any English law preconceptions. He cited the dicta of Lord Macmillan in Stag Line v Foscolo, Mango & Co [1932] AC 328 at p 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", advice which the House of Lords had subsequently followed in a number of more recent cases.

For guidance as to what these principles should be, Longmore LJ turned to the 1969 Vienna Convention on the Law of Treaties, which entered into force in the UK in 1980. The general rule of interpretation in Art.31 requires a treaty to be construed "in good faith" in accordance with the "ordinary meaning" to be given to its terms, having regard to their context and the treaty’s object and purpose. The "context" includes the circumstances of any agreement or instrument agreed by the parties in connection with the treaty.

Art. 32 sets out supplementary aids to interpretation, including reference to the travaux préparatoires and other background information to clarify wording which is ambiguous, or would produce a "manifestly obscure or unreasonable result."

Applying these guidelines to the 1976 Convention, he said both parties agreed that its general purpose was to enable owners, charterers, managers and operators to limit their liability, with the object of encouraging international trade by sea. Its principal object was to increase the existing limits, but to make them harder to "break". It also added salvors to the categories of persons entitled to limit.

Ordinary meaning - Article 1.
The appeal judge said he could not be sure about any further "objects" of the Convention, so he turned to the "ordinary meaning" of the words. Article 1 gave two categories the right to limit - shipowners and salvors. Secondly, it defined "shipowner" as "the owner, charterer, manager or operator of a seagoing ship". This had led both Thomas and Steel JJ (mistakenly, in his opinion) to conclude that a charterer could only limit his liability when he was acting as owner, that was to say - in the management or operation of the vessel. Steel J had concluded that this did not include failure to prevent the loading of a dangerous cargo under a time-charter "so the right to limit did not arise."

Longmore LJ rejected this "gloss" on the word "charterer". The wording could not, of itself, mean that a charterer had to be acting as a shipowner before he could limit his liability. "To ask whether charterers are acting as owners ... is almost a meaningless question since it is almost impossible to say whether stowing the cargo is or is not an act of a kind normally performed by an owner." This "doubtful ambit" could only be removed if "charterer" was construed as if it meant "demise" or "bareboat" charterer, who would provide the master and crew and manage the vessel, unlike an ordinary time-charterer. But it would be "too bold" a step to assume this meaning in a modern international convention.

A further problem with the judges’ construction was that although (as the owner had conceded) a charterer can limit his liability when sued by a cargo owner for loss or damage, it would make no sense to say he only had this right when acting as if he were the shipowner. If "charterer" cannot be simply construed as "qua (acting as if a) shipowner" in an action by cargo interests, said Longmore LJ, it could not be given such a meaning merely because the claim is by the shipowner rather than the cargo owner.

He ruled that "charterer" in Art.1 should be given its ordinary meaning, which did not include the "qua owner" gloss, but probably did extend to slot charterers. Unlike the Steel and Thomas JJ., he did not find the terms of the predecessor 1957 Convention gave any assistance in interpretation.

Claims within Article 2
Longmore LJ agreed with both Steel and Thomas JJ. that the Convention excluded damage to the ship itself.

Article 2.1(a) extends the limitation right to claims for loss of life or personal injury; and for "loss of or damage to property": first, occurring on board; and secondly "occurring ... in direct connection with the operation of the ship".

Having analysed the subsequent articles of the Convention and cited Thomas J’s dicta in The ‘Aegean Sea’ (at p. 49), the appeal judge agreed with Steel and Thomas JJ that a claim for the loss of the vessel (total in the case of The ‘Aegean Sea’, extensive repair in the present case) did not come within the "ordinary meaning" of Art.2.1(a).

In both cases the loss was not "loss of property ... occurring ... in direct connection with the operation of the ship". "It is the operation of the very ship that must cause the loss of property; the ship cannot be the object of the wrong" (per Thomas J). "The property damaged cannot be the very same thing the operation of which caused the damage" (per Steel J).

Longmore LJ went on to hold that the part of Classica’s claim relating to salvage expenses was correctly included as a loss resulting from the breach of contract, and so CMA CGM could not rely on any limit. The same applied to any contribution to general average. This would result from the damage to the vessel and did not fall within Art.2.1(a). The owner had conceded that the charterer could limit its liability in claims against it by cargo owners. These resulted from loss "occurring on board the ship", and there was no difference in principle if such claims were routed through the shipowner. In view of his construction of Art.2.1(a), Longmore LJ held that the charterer could limit its liability "in this respect only".

Conclusions
The appeal court concluded that, in principle, the charterer’s appeal would fail except to the extent that it would be entitled to limit its liability to indemnify the owner for liability for cargo claims "to the extent that that liability is discharged by the shipowner in a sum exceeding the appropriate limit."

This decision, said Longmore LJ, meant that "a charterer’s ability to limit would depend on the type of claim brought against him rather than the capacity in which he was acting when his liability occurred". He rejected the accusation that this construction of the 1976 Convention was "less certain and straightforward" than trying to ascertain the capacity in which the charterer was acting. The analysis of a claim was a familiar task for charterers, insurers, and their legal advisers, and no more complicated than deciding the issue of "capacity".

Classica was awarded 25% of its costs. Leave to appeal to the House of Lords was refused.