10.01  ‘Ships are different …’. The ‘difference’ addressed in the articles which bear that title¹ is the privilege afforded to a shipowner (and others) in certain circumstances to limit liability arising out of a single occurrence in accordance with the tonnage of his ship. In all of the jurisdictions covered in this work, this can be achieved either by way of defence (binding only on the parties to the particular action) or by way of action for a decree (to ‘bind the world’),² which may or may not (depending on the law of the country in question and/or the decision of the Judge in the particular case) require the constitution of a limitation fund.

10.02  As well as being tendentious, limitation is a difficult and broad subject. This chapter is confined to what might be termed ‘plain vanilla’ limitation; in other words, to limitation regimes arising from or akin to the well-known Conventions of 1957 and 1976, although brief mention is also made of the Athens Convention, because of the potential for overlap with the 1976 Convention.

(p. 243) 10.03  But these are not the only conventions concerned with the limitation of shipowners’ liability—and nor are they the only ones to which effect is given by the Merchant Shipping Act 1995 (MSA). For example, claims arising in relation to oil pollution³ are governed by the provisions of the International Convention on Civil Liability for Oil Pollution Damage 1992, which came into force on 30 May 1996; the MSA gives effect to that Convention in Chapter III. Claims relating to hazardous and noxious substances are governed by the provisions of the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea 1996, contained in sch 5A to the MSA. The International Convention on the Carriage of Passengers and their Luggage 1974 (the Athens Convention) is enacted by s 183 and sch 6 of the MSA.⁴

10.04  In addition to the provisions relating to limitation of liability, s 186 of the MSA provides, subject to certain conditions, for a total exclusion of liability for Crown ships and owners of United Kingdom ships⁵ for loss or damage to property by reason of fire on board the ship⁶ and for loss or damage to gold, silver, watches, jewels, or precious stones on board the ship by reason of theft, robbery, or other dishonest conduct if their nature and value were not declared at the time of shipment. This provision, too, is mentioned in passing in order to draw attention to its existence, but is not considered further.

10.05  It is a common characteristic of limitation regimes that they provide some opportunity for the party claiming against the shipowner to have the limits of liability disapplied in the case at hand. This is known as ‘breaking limit’. Under the 1957 Convention and its predecessor regimes, whilst the limits of liability were relatively low, breaking limit was—if not commonplace—certainly a practical proposition in a significant number of cases, not least because the burden lay on the party claiming the right to limit to prove his entitlement to do so. In the 1976 Convention, by contrast, both the limits and the bar to breaking limit were raised significantly;⁷ the burden of proof, moreover, was reversed, such that in all but (p. 244) the most egregious cases (scuttling and suicide, for example), there is no realistic prospect of breaking limit.⁸

10.06  As a result of these changes, the focus of enquiry in limitation cases has moved away from breaking limit to issues such as whether the particular claim is one in respect of which the right to limit arises at all, and questions of jurisdiction. This tendency was exacerbated by the coming into force⁹ of the 1996 Protocol to the 1976 Convention, which raised the limits of liability still further in the countries which apply it and, in effect, created a third general limitation regime in widespread international use. The attractions of forum shopping are lent further impetus by the considerable variation in the national implementation of the 1976/1996 regimes, in that countries may decide for themselves whether to implement certain provisions, such as the application of the Convention to cleanup liabilities under art 2.1(d). The 1996 Protocol limits were increased again in 2012 with effect from 8 June 2015 (the ‘2012 uplift’). It is yet to be seen whether the now greater difference between the 1976 Convention limits and the 2012 uplift will exacerbate these issues.

10.07  One consequence of this shift of attention is that the wording of the 1976 Convention has come under a scrutiny which its framers can never have thought it would have to bear. It is not unfair to say that it has been creaking under the strain.

10.10  The procedural nature of the right to limit, being a matter for the lex fori alone, has considerable relevance when matters of jurisdiction are considered—particularly forum conveniens and anti-suit injunctions, but also the question of related actions for the purpose of the EU Brussels I Regulations and their cousins.¹²

10.11  In The Bramley Moore, Lord Denning MR observed of the shipowner’s right to limit his liability in respect of certain claims, ‘there is not much justice in this rule; but limitation of liability is not a matter of justice. It is a rule of public policy which has its origins in history and its justification in convenience’.¹³

10.13  The Merchant Shipping Act 1894 introduced the notion of limiting the owner’s liability in respect of loss of life or personal injury or damage to property occurring without his actual fault or privity in accordance with the tonnage, rather than the value, of his ship.¹⁷

10.14  The drive for international uniformity which marked the opening decades of the twentieth century led, in the case of limitation, to the Limitation Convention of 1924. Its attempt to impose s 503 of the Merchant Shipping Act 1894 internationally and without seeking any compromise with continental approaches to limitation probably marked it out for failure, and it was not widely adopted.

10.15  Three decades later, the 1957 Limitation Convention achieved wider acceptance.¹⁸ It endorsed limitation based on the tonnage (rather than value) of the ship, and extended rights of limitation to charterers, managers, operators, masters and crew members, and their servants or agents. As with s 503 and the 1924 Convention, the right to limit would be defeated if the party claiming the right to limit could not show that the relevant loss occurred without his ‘actual fault or privity’.¹⁹

10.16  On 1 December 1986, the Convention on the Limitation of Liability for Maritime Claims 1976 (the 1976 Convention, also known as the London Convention) entered into force.²⁰ The limitation amounts were subsequently increased by an amending Protocol of 1996, which entered into force on 13 May 2004.²¹ The higher limitation amounts apply to incidents occurring on or after that date. From (p. 247) 8 June 2015, higher limits apply where the 1996 Protocol is in force as a result of the 2012 uplift agreed by the Legal Committee of the International Maritime Organization (IMO) at its 99th Session in 2012.²²

10.17  The 1976 Convention introduced significant changes to the limitation of liability regime with a view to increasing the fund available, extending the classes of claim in respect of which the shipowner could limit, and ensuring that the right to limit was almost indisputable.²³ In that last regard, whereas under the 1924 and 1957 Conventions the onus lay on the party seeking to limit his liability to prove the absence of ‘fault or privity’ on his part, under the 1976 Convention the entitlement to limit arises as of right unless the claimant proves that the person liable is guilty of deliberate or reckless conduct.

10.18  There is a regime specific to the limitation of liability for passenger claims. Unlike the other limitation regimes touched on above,²⁴ the Convention Relating to the Carriage of Passengers and their Luggage by Sea 1974 (the Athens Convention), which came into force internationally on 28 April 1987, overlaps with the ground covered by the 1976 Convention.

10.19  Since 1974, three Protocols to the Athens Convention have been agreed, two of which have entered into force. The 1976 Protocol²⁵ made the Special Drawing Right (SDR) the relevant unit of account for the purpose of calculating the limitation amount. The 1990 Protocol adopted on 29 March 1990 did not enter into force and has now been superseded by the 2002 Protocol. The 2002 Protocol raised the limits of liability²⁶ significantly and introduced both a strict liability regime and a requirement for compulsory insurance. The 2002 Protocol finally entered into force twelve months after being accepted by ten States on 23 April 2014. In those jurisdictions where the 2002 Protocol has been adopted, the Convention has been renamed the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea 2002 (the Athens Convention 2002).

10.20  The regulation of the overlap between the Athens and the 1976 Conventions differs from country to country. The solution in UK law is discussed in para 10.25 below.

10.21  The 1976 Convention was enacted into UK law by s 185 of the MSA, which gives the force of law to those provisions of the 1976 Convention that are set out in sch 7 to the Act. On 17 July 1998, the UK gave effect to the 1996 Protocol²⁷ and denounced the 1976 Convention.²⁸ The 2012 uplift has automatically come into force in the UK as from 8 June 2015 by virtue of the tacit acceptance mechanism.²⁹

10.22  Art 9(1) of the 1996 Protocol provides that as between parties to the 1996 Protocol, the 1976 Convention and the 1996 Protocol are to be read and interpreted as one single instrument. Thus, the text of the 1976 Convention forms part of the 1996 Protocol. However, the practical effect of the denunciation is that the UK owes no treaty obligations to countries that are party to the 1976 Convention but not the 1996 Protocol. This is primarily of relevance to jurisdictional issues and the effect of the constitution of a limitation fund.³⁰

10.23  The United Kingdom made certain reservations pursuant to art 15 of the Convention and so not all of the provisions of the 1976 Convention are reproduced in sch 7; where whole paragraphs have been omitted, the remaining provisions are renumbered.

10.24  The Athens Convention 2002, first given effect in its original form in the United Kingdom by s 14 of the Merchant Shipping Act 1979, is now incorporated into the law of the United Kingdom by s 183 of the MSA.³¹

10.25  In order to resolve any conflict between cases falling within both the 1976 Convention and the Athens Convention, the United Kingdom has exercised its right under art 15.3bis of the 1996 Protocol to apply national law to regulate the system of liability to be applied to claims for loss of life or personal injury to passengers of a ship. So far as seagoing ships are concerned, it is the Athens Convention which applies.³² In the very limited sphere of non-seagoing ships, art 7 of the 1976 Convention continues to apply.

10.26  Australia has given effect to the 1996 Protocol and the 2012 uplift in the Limitation of Liability for Maritime Claims Act 1989 which came into force on 1 June 1991, as amended by the International Maritime Conventions Legislation Amendment Act 2001³³ and the Limitation of Liability for Maritime Claims Amendment Act 2015.³⁴ The 1989 Act repealed the provisions giving effect to the 1957 Convention which, in 1979, had been enacted as a schedule to the Navigation Act 1912 by virtue of the Navigation Amendment Act 1979 (the 1979 Act). The provisions of the Navigation Act were the first Australian statutory provisions relating to limitation of liability for shipowners. Limitation of liability in respect of government ships was introduced in 1958 but for non-government ships, the provisions in force in relation to limitation of liability continued, until 1979, to be those contained in the Merchant Shipping Act 1894 (Imp). Australia denounced the 1976 Convention on 21 May 2013.³⁵

10.27  The application of the statutory provisions relating to limitation of liability in Australia is complicated by the original imperial legislation which remained in force in Australia until 1979, and by its application both to the Commonwealth of Australia and to the individual States and Territories. In Kirmani v Captain Cook Cruises Pty Ltd (No 1),³⁶ the High Court of Australia held that s 104(3) of the Navigation Act 1912 was effective to repeal Part VIII of the Merchant Shipping Act 1894 as part of Australian law, be it federal or state.³⁷ Despite argument to the contrary, the Full Court of the Supreme Court of South Australia has affirmed that the 1979 Act also repealed the provisions of the Merchant Shipping (Liability of Shipowners and Others) Act 1900 (UK).³⁸ If still in force, that section would have enabled the State of South Australia to limit its liability to a significantly lower amount than that provided for under the 1976 Convention. In delivering the judgment of the court, Doyle CJ held that, even if he were wrong in his primary conclusion, the enactment of the 1976 Convention was inconsistent with the continued operation of the 1900 Act regardless of whether one applied the test of implied repeal, of repugnancy, or of inconsistency for the purposes of s 109 of the Australian Constitution.³⁹ The enactment of the 1976 Convention indicated an intention to cover the field in the sense of providing a single scheme for (p. 250) shipowners to limit liability, subject only to the exceptions which Parliament itself has permitted.⁴⁰

10.28  Australia has not acceded to the Athens Convention.

10.29  Canada is not party to the 1976 Convention but signed the 1996 Protocol on 9 September 1997. Canada has, however, given the force of law to the 1976 Convention, as amended by the 1996 Protocol, with some modifications, through the Marine Liability Act.⁴¹ For the purposes of the application of the 1976 Convention, Canada is deemed to be a State Party.⁴²

10.30  Canada has also implemented the Athens Convention in the Marine Liability Act without acceding to it, but has not implemented the 2002 Protocol. Section 35 of the Marine Liability Act enacts the Athens Convention and the 1990 Protocol.⁴³ An extended definition of ship, to include any vessel or craft designed, used, or capable of being used solely or partly for navigation (but excluding an air cushion vessel), is provided for in s 36(1)(a). The definition of ‘contract of carriage’ is also extended to embrace any contract of ‘carriage by water’.⁴⁴ In addition, s 36(2) makes explicit that art 19 of the Convention, which provides that the Athens Convention does not modify the rights or duties provided for in international conventions relating to the limitation of liability of owners of seagoing ships, applies to the owners of all ships whether seagoing or not.

10.31  Hong Kong acceded to the 1976 Convention in 1993, and the 1996 Protocol in 2015. Subject to certain modifications, which are discussed below, the Merchant Shipping (Limitation of Shipowners Liability) Ordinance gives the force of law to the provisions of the Convention as set out in sch 2.⁴⁵ However, as at 1 September 2015, Hong Kong has not incorporated the 2012 uplift into domestic law.

10.32  Hong Kong has acceded to the Athens Convention and to the 1976 Protocol. Subject to certain modifications,⁴⁶ the Athens Convention is given the force of (p. 251) law pursuant to s 3 of the Merchant Shipping (Limitation of Shipowners Liability) Ordinance.

10.33  Although it did not accede to that Convention until 1994, New Zealand enacted legislation broadly consistent with the 1976 Convention in 1987. It entered into force on 1 August 1987. That legislation was re-enacted as Part VII of the Maritime Transport Act 1994 (the 1994 Act). In giving effect to the 1976 Convention, the New Zealand Parliament adopted the technique of paraphrasing the Convention in the text of the Statute. The result was that there were inconsistencies between the Convention text and the legislation. However, since the enactment of the Maritime Transport Amendment Act 2013,⁴⁷ New Zealand has adopted the 1976 Convention as amended by the 1996 Protocol in its entirety, subject to a small number of changes.

10.34  The limitation provisions in the 1994 Act include the 2012 uplift limits for passenger liabilities and personal injuries generally. New Zealand has made significant changes to the common law relating to claims for personal injuries or death. All such claims were abolished in 1974 and a compulsory statutory compensation scheme was enacted which applies to New Zealand residents and visitors alike.⁴⁸ Section 95 provides that where a person on board a ship is killed or injured through the fault of two or more ships, the liability of the owners is joint and several. The section expressly preserves the right of the owners to rely on any defence that might otherwise be available or to limit their liability.⁴⁹

10.35  New Zealand has not acceded to the Athens Convention nor enacted any legislation giving effect to it.

10.36  Singapore did not accede to the 1976 Convention until 24 January 2005. Effect is given to the provisions of that Convention in Part VIII of the Merchant Shipping Act 1995 (Chapter 179) as a result of the passage of the Merchant Shipping (Amendment) Act 2004. The amending provisions apply to any occurrence which took place after 1 May 2005. Any occurrence prior to that date remains governed by the provisions of the 1957 Convention as implemented in Singapore by the previous Part VIII of the Merchant Shipping Act 1995.⁵⁰

10.37  Singapore has not acceded to the Athens Convention, nor given effect to its provisions in domestic legislation.

10.38  South Africa is not a party to any of the international Conventions relating to the limitation of liability for maritime claims, including the Athens Convention. The limitation regime is provided by s 261 of the Merchant Shipping Act 57 of 1951, which provides for ‘tonnage limitation’. Section 261(1) permits the owner of a ship to limit for specified claims caused without the shipowner’s ‘actual fault or privity’. Section 263(2) extends the right to limit to ‘any charterer, and any person interested in or in possession of such ship, and a manager or operator of such ship.’

10.39  South Africa has, by virtue of s 8 of the Admiralty Jurisdiction Regulation Act 105 of 1983, preserved the jurisdiction that existed in South Africa immediately before the commencement of the Act. Thus, English law relating to limitation of liability as at 1983 will apply in respect of claims falling within this jurisdiction to the extent that it is not inconsistent with limitation provisions of the Merchant Shipping Act 1951.⁵¹

The liability of a shipowner includes liability in an action brought against the vessel herself.⁵³

10.41  Despite the reference to ‘seagoing ships’ in the definition of ‘shipowner’ in art 1(2), the provisions of the MSA extend the application of the 1976 Convention beyond seagoing ships: firstly, the right to limit liability applies to any ship ‘whether seagoing or not’;⁵⁴ secondly, a ‘ship’ is defined to include references to any structure (whether completed or in the course of completion) launched and intended for use in navigation as a ship or part of a ship;⁵⁵ and thirdly, although art 15(5) provides that the Convention shall not apply to ‘aircushion vehicles’, this provision has not (p. 253) been enacted in sch 7 to the MSA and therefore does not have the force of law in the United Kingdom.⁵⁶

10.42  The term ‘shipowner’ is defined in art 1(2) to mean the owner, charterer, manager, or operator of a seagoing ship. Despite this apparently straightforward definition, there can be considerable scope for debate whether a particular party does or does not fall within it.

10.44  The approach to the interpretation of art 1 taken by the Court of Appeal was thus to apply the ‘broad and generally acceptable principles of construction’ required when interpreting international conventions.⁶² As limitation of liability in English law is governed by an international convention incorporated into United Kingdom law, the task of any court was to construe the Convention without any English law preconceptions.⁶³ The effect of the decision is that a charterer’s ability to limit will depend on the type of claim that is brought against him rather than the capacity in which he was acting when his liability was incurred.

10.45  Do the words ‘charterer … of a seagoing ship’ afford the right to limit to a ‘slot charterer’ (who is neither a charterer nor an operator of the whole ship but only of part of the ship)? Griggs, Williams, and Farr observe that all the other parties referred to in art 1(2) have an interest in the whole ship and the limit of their liability is calculated by reference to the tonnage of the whole ship; there is no provision which allows a slot charterer to limit his liability proportionately to the amount of space which he has chartered.⁶⁴ In The CMA Djakarta,⁶⁵ the Court of Appeal preferred to leave for another day the question of whether ‘charterer’ means the charterer of the ship as a whole or charterer of part of the ship. A literal reading of the words ‘of a … ship’ apart, there seems no very compelling reason why it should not mean the latter. As Longmore LJ observed, the Court had already held in The Tychy ⁶⁶ that the word ‘charterer’ included a ‘slot charterer’ in the context of the Arrest of Seagoing Ships Convention 1952. It would seem absurd that a charterer of the whole ship should be able to limit his liability in respect of particular damage but to deny that right to a charterer of part of the ship in respect of precisely the same damage—and it is correspondingly difficult to see how a purposive construction of the article should require that conclusion.

10.46  There is as yet no authority as to the content of the word ‘manager’ or the circumstances in which such a person might be able to limit its liability. Could, for example, an independent crewing agent limit its liability where its negligent employment of an incompetent officer led to an accident? It has been suggested⁶⁷ that if the word ‘manager’ in art 1(2) is restricted to one who is involved in the operation of the ship, the crewing agent would probably not be covered, and nor would it fall within the scope of cover provided for in art 1(4)—for the reason that, as an independent contractor, it would not be one ‘for whose act, neglect or default’ the shipowner is vicariously responsible. It is submitted that neither of these propositions is necessarily correct.⁶⁸

10.47  Some elucidation of the first point has been provided by the Full Federal Court of Australia (albeit in the context of the phrase ‘operated by’ as used in the now repealed s 10 of the Navigation Act 1912 (Cth)), to the effect that the ordinary meaning should be given to the word without infusing it with qualifying notions based on ownership.⁶⁹ This approach is consistent with that advocated in The CMA Djakarta.⁷⁰ The Full Court held that the word encompasses notions of a real, substantial, and direct role in the management and control of the commercial, technical, and crewing operations of the ship. Although the context in that case differed from that of the 1976 Convention, it is submitted that the Australian court’s approach is applicable in this connection also, ie, to give the word its ordinary English meaning, influenced by the maritime context of the interrelated practical responsibilities involved in the management and control of a ship.⁷¹ Thus the outcome of the issue will vary from case to case, depending on the intimacy of the connection between the particular ‘manager’ and the vessel herself.

10.48  The term ‘salvor’ is defined in art 1(3) to mean any person rendering services in direct connexion with salvage operations which include operations relating to wreck removal,⁷² removal, and destruction of cargo,⁷³ and measures taken by third parties to avert or minimize loss.⁷⁴

10.49  Art 1(4) extends the right to limit liability to ‘any person for whose act, neglect or default the shipowner or salvor is responsible’, an extension of uncertain scope. Whilst it seems plain enough that it extends to a shipowner’s servants, however unlikely it might be that such individuals could be the target of litigation,⁷⁵ its application beyond that limited sphere is more difficult—not least because there may not be precise overlap between on the one hand ‘responsibility’ for another’s ‘act, neglect or default’ under art 1(4) and, on the other, what the general law would regard as vicarious liability. Indeed, even in the context of a shipowner’s employees, the liability of the employer may be personal rather than vicarious,⁷⁶ but it would be surprising if a negligent chief officer could not limit his liability in circumstances in which his employer could, simply because the liability of the employer was categorized as direct rather than vicarious.

10.50  The significance of this difficulty should not be exaggerated, of course. It seems unlikely that the draftsmen of the 1976 Convention could have intended that the application of art 1(4) should turn upon precisely how the liability in question was viewed by its governing law. But if a broader construction is to be given to art 1(4), what are its limits? Is it enough, for example, that a party should have been instrumental in bringing about a state of affairs in respect of which both he and the shipowner have attracted civil liability? If so, then the independent repairer whose ‘act, neglect or default’ resulted in the vessel’s unseaworthiness and, consequently, damage to cargo would (assuming liability against it could be established) be able to limit its liability; this seems as surprising a result as the chief officer who could not limit his liability in the previous example.

10.51  The solution, it is submitted, is to focus on the wording of art 1(4) and its requirement that the shipowner be responsible for the ‘act, neglect or default’ of the other party, rather than its consequences,⁷⁷ thus eschewing enquiry into whether the employer’s responsibility is categorized under domestic law as direct or vicarious. In the result, the chief officer⁷⁸ ought to be able to limit, while the independent repairer could not.

10.52  Unlike the position under s 3(1) of the 1958 Merchant Shipping (Liability of Shipowners and Others) Act,⁷⁹ which gave effect to the 1957 Convention, (p. 257) a mortgagee in possession does not have the right to limit under the MSA. That is not to say, however, that a mortgagee might not in a given situation be, for example, an ‘operator’ of the ship.

10.53  Art 1(6) of the 1976 Convention entitles an insurer to the benefits of the Convention ‘to the same extent’ as the assured himself. Griggs, Williams, and Farr suggest that the terms of art 1(6) of the 1976 Convention may have inadvertently cut down the liability insurer’s rights, in that if the insurer is afforded the right to limit (only) ‘to the same extent’ as the assured, then he may not be entitled to rely on those provisions of the policy or of the Marine Insurance Act 1906 that would otherwise restrict or remove his liability to the assured,⁸⁰ such that he had to meet the third party’s claim in full if the assured had forfeited his right to limit liability. Griggs, Williams, and Farr themselves point out a solution to this apparent problem in the provision of s 1(1) of the Third Parties (Rights Against Insurers) Act 1930 that:

… his (the assured’s) rights against the insurer under the contract in respect of the liability shall, notwithstanding anything in any Act or rule of law to the contrary, be transferred to and vest in the third party to whom the liability was so incurred.

They argue that only those limited rights which the assured has against the insurer under the liability policy are transferred to the third party under the 1930 Act. In other words, the 1930 Act defines the liability of the insurer to the third party and art 1(6) of the 1976 Convention only comes into play when that liability has been determined.⁸¹ Without dissenting from this ‘solution’, it is submitted that the problem is somewhat contrived; the evident purpose of art 1(6) is to extend and not to restrict insurers’ rights.

10.54  Australia has not made any reservations under art 15(2) of the 1976 Convention relating to non-seagoing ships. This is significant, given the observation of Gibbs CJ in Kirmani v Captain Cook Cruises Pty Ltd that ‘no authority is needed for the proposition that a ship which is used entirely within the limits of internal waters, and never goes to sea, is not a seagoing ship’.⁸² Thus, the construction placed by the (p. 258) High Court of Australia on the definition of ‘shipowner’ in art 1 of the Convention means that vessels used only on internal waters are unable to limit their liability. Australia does not apply the provisions of the 1976 Convention to the ships of the naval, military, or air forces of a foreign country.⁸³

10.55  The Marine Liability Act expands the class of persons who may limit their liability by including ‘any person who has an interest in or possession of a ship from and including its launching’.⁸⁴ Thus, there are two Canadian modifications to the Convention, the person ‘in possession of’ and the person with ‘an interest in’ the ship. The meaning of ‘in possession’ was considered by the Federal Court in Bayside Towing v Canadian Pacific Railway Co,⁸⁵ which held that a tug owner could not be said to be in possession of the tow during towage on the basis of the so-called ‘flotilla principle’ or by reference to the public policy rationale for limitation of liability. ‘An interest in’ the ship may include the holder of a share in a ship or a mortgagee and even, in the Canadian context, the holder of a maritime lien who is deemed to carry a proprietary interest⁸⁶ (although it is not easy to conceive of circumstances in which a lienee could have any liability which it would wish to limit).

10.56  Canada has deleted the reference to ‘seagoing’ in the definition of ‘ship’ and defines ‘carriage’ with reference to ‘water’ rather than ‘sea’.⁸⁷ The effect is to extend the application of the Convention to all navigable waters.

10.57  Hong Kong has expanded the definition of ‘ship’ to include any air-cushion vehicle designed to operate in or over water while so operating and any structure (whether completed or in the course of completion) launched and intended for use in navigation as a ship.⁸⁸ It also extends the right to limit to any ship, whether seagoing or not.⁸⁹ The meaning of the word ‘shipowner’ has a correspondingly broader meaning than in art 1(2) of the Convention.⁹⁰

10.58  Prior to the implementation of the 1996 Protocol in New Zealand, the definition of ‘owner’ in the 1994 Act differed somewhat from the definition in the 1976 Convention. ‘Owner’:(p. 259)

1. (a)  means every person who owns the ship or has any interest in the ownership of the ship;

2. (b)  in any case where the ship has been chartered, means the charterer;

3. (c)  in any case where the owner or charterer is not responsible for the navigation and management of the ship, includes every person who is responsible for the navigation and management of the ship.⁹¹

10.59  An attempt to argue that this section excluded time and voyage charterers from the right to limit liability, contrary to the accepted position in English law as to the interpretation of ‘charterer’ in the 1976 Convention, was rejected in Tasman Orient Line CV v Alliance Group Ltd, where the Court refused to narrow the definition of ‘owner’ for the purposes of the New Zealand Act and held that ‘owner’ includes time charterers and sub-time charterers, at least in relation to claims brought by cargo owners against the sub-time charterer as carrier.⁹² Although the decision was based squarely on the reasoning of Steel J at first instance in The CMA Djakarta,⁹³ subsequently reversed by the Court of Appeal,⁹⁴ the New Zealand Court’s ruling in Tasman Orient Line was closer in spirit to and not inconsistent with the Court of Appeal’s. There was no reason to suppose, therefore, that the law of New Zealand required a charterer to be acting qua owner in order to invoke limitation. This would seemingly have been resolved now in favour of the English position, as s 84 of the 1994 Act now simply incorporates the definitions in the 1976 Convention, other than with respect to the meaning of ‘ship’. As the court expressly left open the question of whether the sub-time charterer would have been entitled to maintain its right to limit in the event of a claim brought against it by the registered owner of the vessel, it now seems more likely that the decision in The CMA Djakarta will be followed, so that it will be unlikely that it could.⁹⁵

It is clear that there is no requirement that the relevant ‘ship’ be seagoing, but the definition would not appear to extend the benefits of limitation to hovercraft.⁹⁶(p. 260) In Birkenfeld v Yachting New Zealand Inc,⁹⁷ the Court of Appeal held that a rigid inflatable boat (RIB) was a ‘ship’ for the purposes of s 84.

10.61  Section 136(3) of the 1995 Act extends the provisions of the Convention to non-seagoing ships.⁹⁸

10.62  Section 261 of the 1951 Act provides that ‘the owner of a ship’ is entitled to limit liability and s 2 defines ‘owner’ to mean any person to whom a ship or a share in a ship belongs. Section 261(2) extends the application of sub-s (1) to ‘owners, builders or other persons interested in any ship built at any port or place in the Republic, from and including the launching of such ship until the registration thereof …’. Section 263(2) provides further that ‘owner’ includes ‘any charterer, any person interested in or in possession of such ship, and a manager or operator of such ship’. Thus, unlike the provisions of the MSA currently applicable in the United Kingdom, the master and crew are excluded from the limitation provisions; conversely, the South African regime permits a mortgagee in possession to limit.

10.63  It is not necessary that the ship be registered in South Africa and the provisions of s 261(1) apply ‘from and including the launching of such a ship until the registration thereof’—as well as thereafter.⁹⁹ A ‘ship’ is defined in s 2 of the 1951 Act to mean ‘any vessel used for transportation or for any other purpose on or under the surface of the water’ and a ‘vessel’ is defined as including ‘any ship, or any boat, small vessel or other description of a vessel used or designed to be used in navigation, but excludes any dynamically supported craft’. This definition is narrower than that contained in s 1(1) of the Admiralty Jurisdiction Regulation Act 105 of 1983 which confers jurisdiction on the Admiralty Court in relation to claims for limitation of liability, so that not all ships within the jurisdiction of the Admiralty Court enjoy the right to limit derived from the 1951 Act.¹⁰⁰

10.64  Art 2 lists the claims which may be subject to limitation of liability under the Convention, provided that the basis for the particular claim is not exempt under art 3 and provided that the claim has not arisen due to conduct barring limitation (p. 261) within the meaning of art 4. It provides that the claims listed may be subject to limitation ‘whatever the basis of liability may be’. Thus, for example, claims in the nature of indemnity under a contract, for breach of statutory duty, or for contribution under the Civil Liability (Contribution) Act 1978 (or equivalent) can all be the subject of limitation.

10.65  Art 2(1)(a) contemplates four types of claims:

1. (1)  claims in respect of loss of life or personal injury occurring on board or in direct connexion with the operation of the ship;

2. (2)  claims in respect of loss or damage to property occurring on board the ship;

3. (3)  claims in respect of loss of or damage to property (including damage to harbour works, basins and waterways, and aids to navigation) occurring in direct connexion with the operation of the ship. This category caters for cases of collision with another ship or structure;

4. (4)  claims in respect of loss of or damage to property occurring in direct connexion with salvage operations,

and consequential loss resulting therefrom.

10.66  There are two possible meanings which could be ascribed to the phrase ‘and consequential loss resulting therefrom’.¹⁰¹ They could relate to further loss (or damage) resulting from, eg, the loss of property (such as bunkers), such as pollution of beaches and resulting clean-up costs;¹⁰² alternatively, they may be confined to ‘consequential loss’ in the narrow sense, ie, losses caused to the property owner consequential upon the loss of or damage to his property, such as loss of profits.¹⁰³

10.67  The point is a significant one. Consider, for example, a claim by an owner against a charterer for breach of a safe port warranty, which breach results in the holing of a bunker tank and loss of bunker oil which in turn causes environmental damage. It is not possible for the charterer to limit in relation to the damage to the ship itself (p. 262) (see para 10.70 below), and there is clearly no need for him to do so in relation to the loss of his own oil; but can the charterer limit his liability in respect of the owner’s claim to be indemnified against his liability to the littoral State (or other public or private interests) for environmental damage? The answer is that he may do so only if (i) the environmental damage is ‘[a]‌ damage to property …[b] occurring … in direct connection with the operation of the ship’,¹⁰⁴ or (ii) if the environmental damage (or the owner’s liability in respect of it) is ‘consequential loss arising from’ the ‘loss of … property’ (ie the bunker) from the ship.

10.68  The view was expressed in the previous edition of this work that the narrower construction was to be preferred on the basis that, although particular weight should not be attached to s 168 of the 1995 Act, the absence of the words ‘or damage’ and the difficulty of applying any notion of ‘consequential loss’ (in the wider sense) to loss of life (to which the phrase also applies) tip the scales in favour of the narrow reading of the words.

10.69  The contrary view was, however, preferred by Finkelstein J in the Federal Court of Australia when considering whether a claim for pure economic loss was within the meaning of consequential loss.¹⁰⁵ Relying primarily on obiter remarks in the decision of Thomas J, referred to above, and The Breydon Merchant, Finkelstein J also expressed reservation as to the construction advocated above, both on the basis that the UK and some continental jurisdictions are familiar with economic claims arising out of the loss of life, and that it is ‘impermissible to base a construction of the Article … by looking at [it] with a grammar in one hand and a dictionary in the other’.¹⁰⁶ Despite having commenced the task of construction by analysing the context of the Convention and the purpose and object for which it was made, the reasons advanced by Finkelstein J with respect fail to engage with the point that the context of the adoption of Art 2 in 1976 was such that a claim for economic loss not contingent on damage to property is most unlikely to have even been contemplated,¹⁰⁷ and was certainly not referred to in the travaux préparatoires. Further, The Breydon Merchant does not in terms support a claim for pure economic loss. Although correctly decided, the decision should be confined to its facts, in that it deals with the diminution in value of cargo, not property more generally. The basis of the right to recovery was not stated in that case to be pure economic loss, but the diminution in the value of cargo which has historically been the measure of damage in a claim for damage to cargo. For these reasons, it is contended that the (p. 263) narrower view remains preferable. There was no opportunity for the Full Federal Court to consider the judgment at first instance as no appeal was filed.

10.70  The claims in respect of which an owner or charterer can limit do not include claims for loss or damage to the ship relied on to calculate the limit; that is because the property damaged cannot be the same as the thing whose operation caused the damage. The ‘property’ envisaged in art 2(1) must be the property of a third party either on board or external to the vessel.¹⁰⁸ It is submitted that it can extend to the littoral environment, being property of a public (if not private) nature.

10.71  Where salvage services have been rendered to a vessel resulting in salvors obtaining a lien upon the cargo for their reward, the amount due to the salvors by cargo owners in respect of each parcel is damage to that cargo within the meaning of the Convention, and a claim for damages against the shipowner brought by cargo owners falls within art 2(1)(a).¹⁰⁹ However, a claim for amounts paid to salve the very ship relied on to calculate the limit cannot be within art 2(1)(a). Such a claim is one for consequential loss resulting from the damage to the ship and cannot be brought within art 2(1)(a) or (f) (ie, claims in respect of steps taken to minimize loss).¹¹⁰

10.72  The same principle applies to a shipowner’s claim to be indemnified against liability to contribute in general average. Any contribution made by the shipowner will be made as a result of the damage to the vessel and does not therefore fall within art 2(1)(a).¹¹¹

10.73  Art 2(1)(b) permits liability for claims in respect of loss resulting from delay in the carriage by sea of cargo, passengers, or their luggage to be limited.

10.74  Art 2(1)(c) permits the limitation of liability for 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. In Australia, this has also been held to include claims for pure economic loss.¹¹²

(p. 264) 10.75  Art 2(1)(d) confers the right to limit on 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. This article is, however, of no application in the United Kingdom.¹¹³

10.76  Art 2(1)(e) allows claims in respect of the removal, destruction, or rendering harmless of the cargo of the ship to be limited.

10.77  Art 2(1)(f) permits limitation in relation to 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. The Breydon Merchant ¹¹⁴ provides a useful illustration—and illumination—of this wording. In that case the shipowner sought to limit in respect of a claim by cargo owners to recover amounts paid in salvage by way of damages for breach of contract. Sheen J found that if the salvors had not been engaged, the ship and cargo would have suffered further loss and damage. The cargo owners’ claim was thus one by a person other than the person liable in respect of measures taken to avert or minimize loss; it was therefore a claim in respect of which the shipowners could limit their liability.

Thus the claim in The Breydon Merchant was within art 2(2) as well as art 2(1)(a) and (f).¹¹⁵ The combined effect of ss 2(1)(f) and 2(2) can be summarized as follows.

1. (1)  The loss in respect of which the measures to avert or minimize are taken must be one in respect of which the right to limit liability arises.

2. (2)  The claim must be in respect of either (a) expenses incurred by persons other than the shipowner (the person liable) to avert or minimize loss, or (b) further loss caused by the taking of such measures.

3. (3)  Where the claim is brought by a third party by virtue of a contract with the shipowner (the person liable) to carry out such measures, that claim is not subject to limitation.

10.79  Art 11(1) provides that any fund constituted pursuant to the provisions of the Convention ‘shall be available only for the payment of claims in respect of which (p. 265) limitation of liability can be invoked’. The claims for which liability can be invoked, as provided for in art 2, relate to claims under the substantive law. Limitation cannot therefore be invoked against an order for costs.¹¹⁶

10.80  As in the United Kingdom, art 2(1)(d) (wreck removal) does not apply in Australia; nor does art 2(1)(e) (cargo removal/clear-up).¹¹⁷

10.81  In Newcastle Port Corporation v Pevitt & Ors,¹¹⁸ Palmer J of the Supreme Court of New South Wales held that a limitation fund established under art 11 of the 1976 Convention is exclusive of any legal costs which may be incurred in establishing a claim against that fund.¹¹⁹ This conclusion was directly contrary to that reached by Newman AJ in the same court in Noferi v Smithers.¹²⁰ However, in the latter case it appears that there was no dispute between the parties that the limitation fund included the costs of the proceedings, and it is submitted that Palmer J was right not to follow it. In reaching his decision, Palmer J adverted to the apparent anomaly created where shipowners’ liabilities for legal costs will be left at large, which could be considered inconsistent with the purposes of the 1976 Convention. The Judge noted that the Convention recognizes in art 14 that it could only go so far in limiting claims against shipowners. Calculation of the limits of compensation payable to claimants could be made uniform no matter what national jurisdiction determined those claims. However, the procedures for determining whether or not the claims were established and how they were to be dealt with could not be made uniform without invasive domestic procedural law which would be contentious, inconvenient, and unnecessary.¹²¹

10.82  In contrast to the position in the United Kingdom where unlimited liability for wreck removal has been retained, claims for such expenses in Canada are subject to limitation, and art 2(1)(d) of the 1976 Convention is included in the Marine Liability Act.¹²²

10.83  The Supreme Court of Canada considered the meaning of the phrase ‘in direct connection with the operation of the ship’ within the context of art 2(1)(a) of the 1976 Convention in Isen v Simms,¹²³ although the case arose under the provisions (p. 266) of the now repealed Canada Shipping Act 1985. The plaintiff had sustained an injury to his eye from the bungie cord that was being used to secure a boat’s engine cover immediately following the use of the boat on a lake. The Supreme Court overturned the decision of the Full Federal Court¹²⁴ upholding the owner’s right to limit, preferring the view of the dissenting Judge that the fact that the accident involved a boat did not transform the matter into a maritime matter and was therefore not a matter within the jurisdiction of federal Canadian maritime law. Adopting the reasoning of Décary J in the court below, Rothstein J, with whom the other members of the court agreed, said: ‘Nothing has happened on water which could be said to be directly or even indirectly related to the accident. There is no issue as to the seaworthiness of the ship, the issue at best being one as to the roadworthiness of a boat being prepared on land for road transportation.’¹²⁵

10.84  The decision of the Supreme Court highlights the importance in Canadian law of determining whether the general grant of maritime jurisdiction to the Federal Court, as prescribed in s 22(2) of the Federal Courts Act, has been properly invoked. Once a particular claim is found to fall within the enumerated headings, there is necessarily substantive maritime law to support the claim.¹²⁶ The test for determining whether the subject matter under consideration was one of maritime law was stated by the Supreme Court in Monk Corp v Island Fertilizers Ltd  ¹²⁷ to be that the subject matter is ‘so integrally connected to maritime matters as to be legitimate Canadian maritime law within federal competence’. In Siemens Canada Ltd v JD Irving Ltd,¹²⁸ Siemens unsuccessfully appealed the finding of Heneghan J that a claim for damage sustained to two rotors that fell off a barge into the waters of Saint John Harbour during loading fell within the court’s jurisdiction and was therefore subject to limitation under the Marine Liability Act.

10.85  Art 2(1)(d) does not apply in Hong Kong unless an order has been made by the Chief Executive establishing a fund to compensate harbour or conservancy authorities for the reduction in the amount recoverable by them consequent upon the application of art 2(1)(d).¹²⁹

10.86  Section 86 of the 1994 Act, which previously made provision for the types of claims which may be subject to limitation, now merely makes clear that limitation of liability under the 1976 Convention applies in respect of each distinct occasion (p. 267) without regard to liability arising on any other occasion, and ‘applies, subject to subsection (4) of this section, whether the liability arises at common law or under any other enactment, and notwithstanding anything in any other enactment’.¹³⁰ This sub-section maintains the clarity that existed before the 1996 Protocol was implemented in New Zealand that claims of the kind contemplated by art 2(2), being those brought by way of recourse, or for an indemnity under a contract, or otherwise, are subject to limitation.

10.87  Section 136 of the 1995 Act provides that ‘the provisions of the Convention, other than paragraph 1(d) and (e) of Art 2 of the Convention, shall have the force of law in Singapore’. Thus claims relating to wreck removal or to the removal and destruction of cargo on the ship, cannot be subject to limitation of liability in Singapore.

10.88  The claims for which liability may be limited are those arising on any single occasion¹³¹ in respect of:

1. (1)  loss of life or personal injury to any person;

2. (2)  loss of or damage to any property or rights of any kind, whether movable or immovable.¹³²

10.89  It is a peculiar feature of the South African provision that there is no reference to the claim having to arise ‘on board’ or ‘in the navigation or management’ of a ship. The section therefore includes loss of life, personal injury, or property damage occurring ashore. Section 263 extends the application of the Part to ‘any person (other than the owner) who is responsible for the fault of the ship’ and to any person who is for the time being responsible for the navigation and management of the ship. A reading of the Part as a whole would therefore suggest that there must be some connection between the navigation and management of the ship and the claim itself.

10.90  Art 3 provides that the rules of the Convention do not apply to:

1. (1)  claims for salvage or contribution in general average;

2. (2)  claims for oil pollution damage within the meaning of the International Convention on Civil Liability for Oil Pollution Damage dated 29 November 1969 or of any amendment or Protocol thereto which is in force. As noted above (para 10.03, footnote 3) the 1969 Convention is of limited application, (p. 268) applying only to the discharge of oil from ships actually carrying oil in bulk as cargo.¹³³ Thus other types of pollution claims resulting, for example, from the discharge of bunker fuel from a bulk carrier, are capable of being the subject of limitation if they result in damage to property.

3. (3)  claims subject to any international convention or national legislation governing or prohibiting limitation of liability for nuclear damage;¹³⁴

4. (4)  claims against the shipowner of a nuclear ship for nuclear damage;

5. (5)  claims by servants of the shipowner or salvor whose duties are connected with the ship or the salvage operations, including claims of their heirs, dependants, or other persons entitled to make such claims, if under the law governing the contract of service between the shipowner or salvor and such servants the shipowner or salvor is not entitled to limit his liability in respect to such claims, or if he is by such law only permitted to limit his liability to an amount greater than that provided for in art 6.

In the UK, such a provision is contained in s 185(4) of the MSA.

10.91  In The Breydon Merchant,¹³⁵ cargo owners brought a claim against the owners of the vessel for damages for breach of the contract of carriage. They contended that the vessel had been unseaworthy at the commencement of the voyage and, as a result, she suffered a serious engine room fire and had required salvage services. Consequently the cargo owners would be obliged to pay the salvors their due proportion of the salvage reward. The shipowners had claimed a decree limiting their liability. The issue between the parties was whether the cargo owners’ claim was a claim in respect of which the shipowners were entitled to limit their liability, arising as it did from the necessary provision and performance of salvage services. Sheen J held that the cargo owners’ claim was in respect of loss of or damage to property occurring on board the vessel and consequential loss resulting therefrom. The cargo owners were not making, nor of course could they make, a claim for salvage against the shipowners: they were claiming damages for breach of contract. As such, their claim was neither in whole nor in part a claim for salvage and art 3(1) was of no application.

10.92  Art 3(e) of the 1976 Convention prevents a shipowner or salvor from seeking to limit claims by their employees, or the employees’ heirs or dependants, if the law of the jurisdiction so provides. Section 93 of the Navigation Act 2012 does so provide.

10.93  Canada has not made any alteration to the provisions of art 3 of the 1976 Convention.

10.94  Those claims which are expressed to be excluded from the ambit of the Convention by art 3 are similarly excluded under the Hong Kong legislation. Further, the Merchant Shipping (Limitation of Shipowners Liability) Ordinance 1997 makes express that the matters referred to in art 3(b) and (c) are those claims in respect of any liability incurred under s 6 of the Merchant Shipping (Liability and Compensation for Oil Pollution) Ordinance (Cap 414) and claims made pursuant to ss 3 or 4 of the Nuclear Material (Liability for Carriage) Ordinance (Cap 479).¹³⁶

10.95  Section 7 of the Control of Exemption Clauses Ordinance (Cap 71) prevents an employer from ‘restrict[ing] his liability for death or personal injury resulting from negligence’. In Fong Yau Hei v Gammon Construction Ltd, it was held that although the legislation was not specifically directed at art 3(e) of the Convention, the general policy as enshrined in s 7 was sufficient for the purpose of manifesting the requisite intention of excluding the operation of the Convention in relation to claims by employees.¹³⁷

10.96  The exception in art 3(e) of the 1976 Convention for claims by employees under contracts of service, although included in the Convention as incorporated into the 1994 Act, is of limited effect, as the rights of employees arising out of personal injury claims are specifically covered by the Accident Compensation Act 2001. That Act is expressed not to be limited or affected by s 86 and so claims by employees fall outside the ambit of the 1994 Act altogether.

10.97  Claims for wreck removal brought by harbour authorities or the Minister for Transport are excluded from limitation.¹³⁸

10.98  Singapore has not made any amendments to the provisions of the Convention relating to exemption from the right to limit.

10.99  There is nothing in the South African legislation which makes any provision for exemptions from the right to limit.

10.101  The test for establishing conduct which would bar limitation is very stringent and is far more difficult to satisfy than that of the 1957 Convention, pursuant to which the owner of a seagoing ship could limit his liability ‘unless the occurrence giving rise to the claim resulted from the actual fault or privity of the owner’. The stricter test of the 1976 Convention was a quid pro quo for shipowners agreeing to a higher limit of liability in exchange for an almost indisputable right to limit their liability. Indeed, in Schiffahrtsgesellschaft Ms ‘Merkur Sky’ mbH & Co KG v Ms Leerort NTH Schiffahrts GmbH & Co KG (The Leerort),¹³⁹ the Master of the Rolls observed that Counsel had been unable to point to any collision case in any jurisdiction where the right to limit under the 1976 Convention had been successfully challenged.¹⁴⁰

As the Master of the Rolls commented in The Leerort,¹⁴¹ the limitation provisions in relation to merchant shipping provide an even greater protection than those in relation to carriage by air, in that only the personal act or omission of a shipowner (or person included within that category) can defeat the right to limit. In the vast majority of cases, it is unlikely to be possible to satisfy the test, which requires firstly the relevant act to have been committed by an individual, whose act may be seen as that of the owner (usually a company), and secondly that it be sufficiently egregious.

10.103  As to the first question, this is traditionally taken to require identification of the ‘directing mind and will’ of the company,¹⁴² although as Lord Hoffmann pointed (p. 271) out in Meridian Global Funds Management (Asia) Ltd v Securities Commission,¹⁴³ this rule of attribution is really a matter of interpretation or construction of the particular substantive rule at issue in the case at hand, rather than one of metaphysics.¹⁴⁴ For the purposes of an attempt to break the limit, it is necessary to identify the individual who is the directing mind and will of the shipowning company for the purpose of the particular aspect of operating the ship which is the subject of the claim,¹⁴⁵ or in other words, the individual(s) within the company hierarchy with duties corresponding with those to be expected of an individual owner and whose (in)actions can be attributed to the company.¹⁴⁶

10.104  The next stage of the enquiry is to establish that the act was done ‘recklessly and with knowledge that such loss would probably result’. Short of (attempted) suicide, scuttling, or a deliberate attempt to ram another vessel (by the vessel’s owner or ‘directing mind’), this is almost impossible to establish. That is because, as the Court of Appeal held in The Leerort, this wording ‘requires foresight of the very loss that actually occurs, not merely of the type of loss that occurs’.¹⁴⁷ In that case, it had been argued that the words ‘such loss’ meant loss of the type suffered and that to identify the type of loss, it was necessary to refer back to the various types of loss set out in art 2. Thus the claims advanced for collision damage were in respect of ‘loss of or damage to property’, so that the only foresight required to defeat the right to limit was the likelihood of loss of or damage to property. However, Lord Phillips MR considered that such an argument ran counter to the clear meaning of the wording of art 4 and that the words ‘such loss’ clearly referred back to the loss that had actually resulted and was the subject matter of the claim in which the right to limit was asserted.¹⁴⁸ Consequently, where the loss in respect of which a claim is made resulted from a collision between ship A and ship B, the owners of ship A, or of the cargo in ship A, will only defeat the right to limit liability of the owner of ship B if they can prove that the owner of ship B intended that it should collide with ship A (or perhaps intended that it should collide with another ship) or acted recklessly with the knowledge that it was likely so to collide.¹⁴⁹

10.105  The construction placed on the wording of art 4 by the English Court of Appeal in The Leerort is consistent with the approach taken in Australia with regard to (p. 272) similar wording in the Marine Pollution Act 1987 (NSW), which implemented the International Convention for the Prevention of Pollution from Ships 1973. In Morrison v Peacock & Roslyndale Shipping Co Pty Limited,¹⁵⁰ the New South Wales Court of Appeal held that the phrase ‘recklessly and with knowledge that damage would probably result’ in s 8(3) required actual advertence to the risk of damage by the owner or master involved; it was not material to inquire what a prudent person would consider might happen.¹⁵¹ The Court accepted the reasoning applied to the same phrase in art 25 of the Warsaw Convention by the English Court of Appeal in Goldman v Thai Airways International Ltd,¹⁵² where Eveleigh LJ held that ‘… it is not sufficient to show that he deliberately broke a regulation, even one which is designed for safety, unless it is also shown that he had knowledge that injury would probably result’. The same approach is likely to be taken by Australian courts in relation to the identical wording contained in the Limitation of Liability for Maritime Claims Act 1989.

10.106  The approach of the Canadian Courts echoes that of the English in their approach to the identification of persons whose acts are to be attributed to the shipowning company. In The Rhone v The Peter A B Widener,¹⁵³ the Supreme Court of Canada considered a claim for limitation by Great Lakes Towing, the owner of two tugs, the master of which had been found to have negligently caused a collision between The Rhone, which was moored in Montreal Harbour, and The Widener, a dumb barge under tow. In considering the 1957 Convention, the Court held that there was no ‘actual fault or privity’ on the part of Great Lakes as the negligent tugmaster was not part of the ‘directing mind and will’ of the company. He exercised no ‘decision-making authority on matters of corporate policy’ and, despite his functions as ‘troubleshooter’ and trainer of new tugmasters and his paperwork responsibilities, he remained basically a ‘port captain’ subject to supervision and direction.

Similarly, the approach in The Leerort ¹⁵⁴ was affirmed by the Supreme Court of Canada in Peracomo Inc v Telus Communications Co,¹⁵⁵ a case in which the owner of a fishing vessel cut a fibre-optic submarine cable that had become tangled in the vessel’s fishing gear. The Supreme Court found that the owner had acted recklessly when cutting the cable, consulting no charts nor making any enquiries as to the nature and use of the cable, but that since he believed that the cable had been abandoned, ‘he did not actually know that his actions would probably result in damaging someone’s property who would then have to repair it’.¹⁵⁶

10.107  The approach of the Hong Kong courts is consistent with the English approach.¹⁵⁷

10.108  In New Zealand it has been held that where the party seeking to limit liability is a corporation, it must be shown that the functions of the person responsible for the damage were such that they ought to be attributed to the company as if they were its own.¹⁵⁸

10.109  There are two conflicting first instance decisions in New Zealand which should be noted, which whilst referring to the now repealed s 85(2) of the Maritime Transport Act 1994, remain relevant given that s 85(2) simply reproduced art 4 without alteration. In Nelson Pine Industries Ltd v Seatrans New Zealand Ltd (The Pembroke) ¹⁵⁹ the court was concerned with whether Seatrans could rely on the limitation provisions of the Hague-Visby Rules, in light of art IVbis which provides that ‘a servant or agent shall not be entitled to avail himself of [the defences and limits of liability] if it is proved that the damage resulted from an act or omission of the servant or agent done with intent to cause damage or recklessly and with knowledge that damage would probably result’, in circumstances where a machinery cargo was stowed on deck in breach of contract. The Judge concluded that the carrier, and in particular the master, its agent, knew that damage to some of the machinery was probable and recklessly proceeded to stow the open top containers on deck.¹⁶⁰ His Honour went on to hold that, in order to be prevented from relying on the package limitation provisions in the Hague-Visby Rules, the recklessness and knowledge required to be shown was that of the master, not that of the carrier’s management. In the later decision of Tasman Orient Line CV v Alliance Group Ltd,¹⁶¹ the Tasman Pioneer grounded as a consequence of errors of navigation on the part of her master. Williams J was obliged to consider whether the master’s actions were to be attributed to Tasman Orient, the sub-time charterer. He concluded that Tasman Orient had no reason to suspect that ship and cargo would not proceed uneventfully to their destination under the control of those employed by the owner or the managers. Accordingly, s 85(2) did not operate to defeat Tasman Orient’s claim to be entitled to a decree limiting its liability. The Judge expressly declined to follow the decision in The Pembroke, preferring the English and Australian authorities on art 4 of the 1976 Convention.¹⁶² Having regard to the desirability of uniformity in (p. 274) the construction of international conventions by domestic courts (and because it is plainly correct), it is suggested that Williams J’s is the approach to be followed. In a subsequent first instance decision, that was indeed the approach that was followed, although no reference was made to The Pembroke.¹⁶³

10.110  The English approach to the construction of art 4 of the 1976 Convention would appear to be accepted in Singapore. As regards the construction of the similar wording of art 25 of the Warsaw Convention, the English decision in Goldman v Thai Airways International Ltd  ¹⁶⁴ has been endorsed by the Court of Appeal and has been followed subsequently.¹⁶⁵

In Atlantic Harvesters of Namibia v Unterweser Reederei (The St Padarn),¹⁶⁸ it was held that there was no valid reason for the similar South African provisions not to be construed in accordance with the English authorities on the subject.

10.112  The limits applicable in the different jurisdictions considered in this book are set out in the tables below.(p. 275)

10.113 

(p. 276) 10.114 

10.115 

(p. 277) 10.116  The limitation amounts, for claims other than those relating to passengers, are set out in art 6(1) which was amended by the 1996 Protocol and then further by the 2012 uplift. It distinguished between personal injury claims and property damage claims, with the limits for the former being significantly higher.

This phrase has become a focus of attention in limitation cases as claimants seek to identify the ‘concatenation’ of errors that lead to a particular casualty, and thereby to increase the size of the limitation fund.¹⁶⁹

10.118  Early judicial consideration of the phrase is found in The Schwan,¹⁷⁰ where the master manoeuvred her in a river so that she collided with two different vessels. Each collision was avoidable had the master not acted negligently and the first collision was determined not to have been the cause of the second, despite the short time interval between the two. Lord Esher MR said that in such a case, the ship could not limit its liability to one fund but was liable to each of the two plaintiffs to the full extent of her statutory liability on the basis that, ‘It is not the time which is the substantial thing; but whether both are the result of the same act of want of seamanship’.¹⁷¹

10.119  The Federal Court of Australia gave detailed consideration to the phrase in The APL Sydney.¹⁷² On13 December 2008 the APL Sydney was ordered to anchor in Port Phillip Bay to await the allocation of a berth before unloading in Melbourne. A gale was blowing and the ship dragged its anchor and ruptured a gas pipeline lying on the bottom of Port Phillip Bay, which was used to transport gas from a refinery on one side of the Bay to factories on the other side of the Bay. The factory owners brought claims in the Federal Court for their losses. The shipowner claimed its rights to limit and constituted a fund in the Federal Court. The claimants argued that there had in fact been four distinct occasions which had caused the loss and thus contended that the fund established was inadequate. The evidence was that the pipeline had stayed intact for 35 minutes and there were three subsequent manoeuvres of the ship using her engine that may have caused new loss or damage. After a trial lasting four weeks, during which the minutiae of the ship’s movements and the master’s actions were explored in detail, Rares J found that there were two distinct occasions that occurred in direct connection (p. 278) with the operation of the APL Sydney that gave rise to the claims for loss of or damage to property and consequential loss resulting therefrom within the meaning of Arts 2(1)(a) and 6(1) of the Convention. The first occasion comprised the events that preceded the actual occasion of the anchor fouling the pipeline (at 15:44 –15:45) when he found that the Master should have weighed anchor and sailed clear despite the contrary instructions of harbour control to await a pilot. The second comprised a chain of events leading to and immediately following the rupture of the pipeline (at 16:20 –16:21) after the windlass had failed, the pilot re-boarded, and the ship’s engines were put ahead on the basis that the dragging anchor would be clear.¹⁷³ However, the anchor was not clear, with the result that the pipeline then ruptured.

10.120  The APL Sydney is an illustration of the complicated preliminary skirmishes in which parties may need to engage simply to establish the size of the fund available even before embarking upon a trial of the action—and this is despite the relative simplicity of the text of Art 6(1).¹⁷⁵ It is perhaps also noteworthy that a significant basis of the decision of Finkelstein J in an earlier interlocutory skirmish involving the same incident,¹⁷⁶ was said to be the need to avoid technical interpretation (in favour of a ‘bona fide’ interpretation) of Art 2. It is respectfully submitted that the technicality which attends the judgment of Rares J, although somewhat in line with the view expressed above regarding the proper interpretation of Art 2, may suffer from the vice which concerned Finkelstein J, in that in this case, the language of Art 6 has been strained far beyond its intended meaning.

(p. 279) 10.121  Art 6(2) is known as the ‘spill-over’ provision, the effect of which is to allow personal injury claimants access both to the loss of life and personal injury fund available under art 6(1)(a) and, where that fund is insufficient to pay those claims in full, to the property fund available under art 6(1)(b) even when there are no property claims; if there are property claims, then the unpaid balance of personal injury claims ranks rateably with them.

10.122  The tonnage figure referred to in the Convention is the gross tonnage, ascertained in accordance with Annex 1 of the International Convention on Tonnage Measurement of Ships.¹⁷⁷

10.123  For States who are members of the International Monetary Fund, the unit of account by reference to which the limitation amount is calculated is the Special Drawing Right (SDR). The monetary liability is determined on the basis of the units of account established or calculated at the relevant liability level and converted into SDR. The value of 1 SDR is calculated daily from the market values of a basket of major currencies and is used to fix the comparative values of other national currencies.¹⁷⁸ Use of the SDR as the unit of account alleviates the previous problem of divergence in national exchange rates. Under the 1957 Convention, the limitation amount was calculated in Poincaré francs, which in turn were converted into the local currency. Under the 1976 Convention, there is a different non-SDR formula for those States who are not members of the IMF which allows conversion into gold and then into the national currency. The underlying requirement is to approximate the real value to the SDR formula.

10.124  In towage cases, the relevant vessel for limitation purposes will be the one(s) held to have been at fault,¹⁷⁹ generally (although not invariably) the tug, even where tug and tow are in the same ownership.¹⁸⁰ This is so even where the towage is conducted on BIMCO Towhire or Towcon terms; clause 18 of both forms provides for a ‘knock-for-knock’ arrangement which, regardless of where fault actually lies, shifts any liability to a third party to the owners of the tug in cases where the loss to the third party is caused by reason of contact with the tug, and to the owners of the tow in cases where the loss to the third party is caused by reason of contact with the tow. In Smit International (Deutschland) GmbH v Joseph Mobius Bau-Gesellschaft GmbH & Co (The Janus),¹⁸¹ the claimant’s tug was towing the defendant’s barge when the barge struck a vessel owned by a (p. 280) third party, allegedly due to the negligence of the master of the tug. Morison J rejected an argument that because of the terms of clause 18 the tow rather than the tug should be treated as the ship by reference to which liability should be limited. His decision has been criticized,¹⁸² but it is respectfully submitted that it is correct.

10.125  Where a salvor is seeking to limit, the fund should be calculated by reference to the tonnage of the vessel in relation to which causative negligence is proved. Where the negligent salvor is ‘not operating from any ship’ or is ‘operating solely on the ship to, or in respect of which he is rendering salvage services’, the limit of his liability will be calculated on the basis of a deemed tonnage of 1500 tons.¹⁸³ Whilst this may be simple enough to operate in a straightforward salvage operation, as Brice points out,¹⁸⁴ larger-scale and more complex operations are likely to present particular challenges in the context of limitation of liability. It is respectfully submitted that the thrust of his conclusion¹⁸⁵ is correct, ie, that the proper approach— consistent with that in towage cases—is to consider each of the salvage units at fault; if they are several, then the limitation fund will be increased by the ‘fund’ of each such unit.

10.126  The limits of liability relating to hovercraft are contained in art 6 of the Hovercraft (Civil Liability) Order 1986.¹⁸⁶

10.129  Simple though it may appear, this provision is not without its difficulties. Although its operation is straightforward enough, for example, in the case of cross claims between the owners of colliding ships, what of the case where one of the claims falls outside the terms of the Convention, but the other falls within it? The net effect of applying the letter of the article, ie, setting the claims off against each other in full before applying the terms of the Convention, would be to deprive the party with the claim within the Convention of some or all of his entitlement to limit. Consider, for example, a claim for salvage (clearly outside the terms of the Convention: art 3(a)) worth USD100,000, and a USD250,000 cross claim for damage said to have been caused by negligence on the salvor’s part,¹⁸⁹ in respect of which the salvor would (absent art 5) be able to limit his liability to USD50,000. If the claims were netted off without regard to limitation, the salvor will lose his remuneration and have to pay USD50,000 to the aggrieved property owner; if limitation were taken into account first, however, he would at least recover (on these figures) half his remuneration.

10.130  It is submitted once again that Brice¹⁹⁰ is correct that the solution is to be found in the stipulation in art 5 itself that limitation will be applied ‘to the balance’. Limitation could only be applied ‘to the balance’ if ‘the balance’ was a claim in respect of which limitation is available under the terms of the Convention. If the numbers set out in the example above were reversed, such that the salvor’s award exceeded that amount of the property owner’s (unlimited) counterclaim, there could be no question that the balance of that claim could be the subject of limitation—yet that is precisely what art 5 appears to prescribe. The necessary implication, therefore, is that art 5 operates only where both (or all) the claims in question are within art 2 of the Convention.

10.131  Australia is a party to the 1996 Protocol and so the limits of liability are the same as in the United Kingdom. Legislation has been enacted to provide for the 2012 uplift.¹⁹¹

10.132  The calculation of tonnage is made in accordance with Annex 1 to the International Convention on Tonnage Measurement of Ships 1969, which entered into force in (p. 282) Australia on 21 August 1982. It is given legislative effect by Marine Order 19 (Tonnage measurement) 2014, made under ss 153 and 340 of the Navigation Act 2012.

10.133  Although not a party to the 1976 Convention, Canada has enacted legislation which provides for the same level of limitation of liability as provided for in the 1996 Protocol and 2012 uplift except in relation to vessels of less than 300 gross tonnes. Vessels of less than 300 gross tonnes have a liability limit for passengers, or persons carried on board otherwise than as passengers, equal to the greater of 2,000,000 SDRs or 175,000 SDRs multiplied by the number of passengers the ship is authorized to carry (or the number of persons on board if no authorization is required under the Canadian Shipping Act 2001).¹⁹² A limit of C$1 million exists in relation to other personal injury or death claims and C$500,000 in relation to all other claims.

10.134  In a case involving a collision between a moored vessel and a dumb barge under tow by a flotilla of four tugs, the Supreme Court of Canada held that, for the purpose of determining the appropriate unit of limitation, only the tonnage of the ‘wrongdoing mass’, in that case the lead tug from which the tugmaster negligently directed the flotilla, was to be taken into account, rather than the aggregate tonnage of both tugs belonging to the party seeking to limit.¹⁹³ In Bayside Towing v Canadian Pacific Railway Co,¹⁹⁴ a loaded dumb barge towed by a tug collided with a bridge causing C$5 million worth of damage. The tonnage of the tug produced a limitation fund of C$500,000. The tug and the barge were in separate ownership. It was argued that, although the real ownership was separate, the tug could also be said to be the ‘shipowner’ for the tow since the tug owners were ‘in possession of’ the barge during the tow and thus the combined tonnage should be used to determine the amount of the fund. Gibson J rejected this argument and applied the decision in The Rhone ¹⁹⁵ in calculating liability on the basis of the tug (as the wrongdoing mass) alone. Thus in Canada, as in England, the flotilla principle, whereby aggregate tonnage is used to calculate the limitation fund, applies only when there is commonality both of ownership and of causative negligence.

10.135  Hong Kong has adopted the 1996 Protocol but as at 1 September 2015, has not applied the 2012 uplift limit. Although s 28 of the Merchant Shipping (Limitation of Shipowners Liability) Ordinance 1997 now provides that the Chief Executive in (p. 283) Council may by order implement any protocol to the 1976 Convention which may apply to Hong Kong from time to time, no indication has been given of whether the power will be exercised. In the implementation of the 1996 Protocol, Hong Kong removed the special provision for the limitation amounts which applied to ships with a tonnage of less than 300 tons.¹⁹⁶

10.136  The tonnage of a ship is required to be calculated in accordance with the order made by the Chief Executive, and such order must, so far as is practicable, give effect to the regulations in Annex 1 of the International Convention on Tonnage Measurement of Ships 1969.¹⁹⁷

10.137  As a result of the implementation of the 1996 Protocol, an unusual circumstance arises where there is a limitation amount of 46,666 SDRs per passenger under the Athens Convention, and 175,000 SDRs per passenger under the 1996 Protocol. Unlike the position in the United Kingdom, discussed above at para 10.25, no clear provision has been made to separate out how and which limitation regime applies. Section 23 of the Merchant Shipping (Limitation of Shipowners Liability) Ordinance 1997, situated in Part III (which deals with the LLMC), expressly provides that ‘nothing in this Part relieves a person of any liability imposed on him under Part II’. Section 11, situated in Part II (which deals with the Athens Convention), provides that ‘nothing in this Part affects the operation of Part III’.

10.138  New Zealand has adopted the 1996 Protocol and the 2012 uplift so its limitation amounts accord with those in Australia, no special provision for ships under 300 tons having been made since the 1996 Protocol was adopted.¹⁹⁸

10.139  New Zealand implements the International Convention on Tonnage Measurement of Ships 1969 by force of the Maritime Rules Part 48: Tonnage Measurement.¹⁹⁹ Where the tonnage of a ship is unable to be ascertained to calculate the limitation fund, the Director of Maritime New Zealand, New Zealand’s maritime regulator, may receive a direction from the court to estimate the tonnage of the ship, and that estimate is taken to be the gross tonnage.²⁰⁰

10.140  Singapore has not adopted the 1996 Protocol but has made special provision for ships with a tonnage of less than 300 tons.²⁰¹ It also modifies the amounts in respect of ‘harbour craft’ and provides that the aggregate amounts in art 6(1) are replaced by the sum insured under compulsory insurance against third party risks.²⁰²

10.141  For the purposes of the limitation fund, the tonnage of a ship is determined in accordance with the provisions in the Merchant Shipping (Tonnage) Regulations,²⁰³ which implement the International Convention on Tonnage Measurement of Ships 1969.²⁰⁴

10.142  The 1997 amendment to s 261 of the 1951 Act introduced Special Drawing Rights for expressing the relevant limitation amounts. Where claims are brought in respect of loss of life or personal injury, the aggregate amount for which the owner is liable is 206.67 SDR per ton.²⁰⁵ Claims in respect of loss or damage to property are limited to 66.67 SDR per ton.²⁰⁶ Where claims are brought for both loss of life or personal injury and for damage to property, the aggregate amount for which the owner is liable is 206.67 SDR per ton but the former have priority to the extent of an aggregate amount of 140 SDR per ton. In relation to the balance of the fund, the unsatisfied portion of the loss of life or personal injury claims rank pari passu with the property claims.²⁰⁷

10.143  The International Convention on Tonnage Measurement of Ships 1969 was given the force of law in s 356bis of the 1951 Act and is used to calculate a ship’s gross register tonnage for the purpose of limitation of liability.²⁰⁸ However, calculation of a ship’s gross tonnage for the purposes of the limitation amount under South African law will yield a lower tonnage. This is because s 262(2) of the 1951 Act excludes from such tonnage ‘any space occupied by seamen or apprentice-officers and appropriated to their use which has been certified by a surveyor to comply in all respects with the requirements of this Act’.

10.144  Difficulties can arise in practice from the reservation provisions in the Convention. Art 15(1) provides that the 1976 Convention applies whenever a person entitled (p. 285) to limit liability seeks to do so before the court of a State which is party to the Convention, or seeks the release of a ship or other property from arrest or the discharge of security within the jurisdiction of a State party. However, art 15(1) further provides that a State party is entitled by its domestic legislation to exclude either wholly or partially from the application of the Convention any person who would otherwise be entitled to limitation if such person is not habitually resident or does not have its principal place of business in a State party at the time when the right to limit is invoked. Similarly, any State party may exclude a ship if it does not fly the flag of a State party at the time when the right to limit is invoked or its release from arrest is sought. The United Kingdom has not made such a reservation.

10.145  Art 15(2) entitles a State party to make specific regulation in its national law in relation to the limit of liability of non-seagoing ships. Thus, a State party may regulate by specific provisions of national law the system of limitation of liability to apply to vessels which are according to the law of that State intended for navigation on inland waterways. In the United Kingdom, this right has been exercised and limitation is available to non-seagoing ships.

10.146  Art 15(2) also permits a State party to regulate by national law the system of limitation to be applied to vessels of less than 300 tons. Art 6 provides that there is a single minimum limitation fund for all ships not exceeding 2,000 tons,²⁰⁹ ie, the fund is the same for ships of ten tons as it is for ones of 2,000 tons. The reservation in art 15(2) enables a party to make special provisions in relation to vessels of less than 300 tons. If it does, the fund available for compensation may be substantially below the levels specified in art 6. These provisions are of no relevance to passenger claims since, by virtue of art 7, limitation in respect of this type of claim is not regulated by the tonnage of the ship but is calculated by reference to the number of passengers which the ship is certified to carry. In the United Kingdom, there is a minimum level of limitation for ships of less than 300 tons in respect of all claims covered by art 6.²¹⁰

10.147  Art 15(3) allows a State party to make specific national regulations in relation to the right of limitation where no nationals of other States are involved. In other words, it would be possible for a State to have its own limitation regime in respect of purely domestic accidents involving only nationals of that State. The United Kingdom has not exercised this right and so the 1976 Convention applies regardless of the nationality of those involved.

10.148  Art 15(4) provides that a party shall not apply the Convention to ships constructed for or adapted to and engaged in drilling, when that State has by its national legislation established a higher limit of liability than that set out in the 1976 Convention (p. 286) or when the State is party to an international convention regulating liability in respect of such ships. No reservation has been made by the United Kingdom in this respect, and it follows that the provisions of the 1976 Convention apply to drilling ships provided they satisfy the definition of ‘ship’.

10.149  Art 15(5) specifies that the Convention will not apply to air cushion vessels or floating platforms constructed for the purpose of exploring or exploiting the natural resources of the seabed or the subsoil. Although not framed as such, it has been treated as optional by the United Kingdom and does not appear in the Act. The application of the 1976 Convention to hovercraft is governed by the Hovercraft (Civil Liability) Order 1986.²¹¹

10.150  As noted in para 10.06 above, now that the limits provided for in the Convention are for practical purposes unbreakable, rather more attention is now paid than perhaps once it was to whether the claim is one in respect of which limitation can be invoked at all. That factor, coupled with the much higher limits available under the 1996 Protocol, which is in force in the United Kingdom and in fifty-one other countries, has also resulted in close attention being paid to questions of the Court’s jurisdiction to entertain limitation proceedings at all.

10.151  The Convention does not on its face purport to deal with jurisdiction. However, two of its provisions in particular (arts 10 and 11) have been widely understood to impact on this issue, although precisely what that impact might be remains a matter of debate. The focus of that debate is whether those provisions are to be construed narrowly, so as to prevent a limitation action other than by way of response to proceedings brought to enforce a claim subject to limitation, or more widely, such that the Court’s jurisdiction is unaffected by them. The latter construction is presently in the ascendancy, at any rate in the English courts.²¹²

10.152  It is not necessary to admit liability before invoking the right to limit.²¹³

(p. 287) 10.153  Under the 1976 Convention, the right to limit liability can be invoked either without constituting a limitation fund under art 10, or after constituting such a fund under art 11. The Convention distinguishes between those two methods of invoking limitation and treats them differently. As there is no general jurisdiction provision in the Convention stating where the right of limitation must be invoked, a party may seek to limit its liability in any Contracting State which has personal jurisdiction over the defendant.²¹⁴

The correctness of this was unsuccessfully challenged in the Court of Appeal for Gibraltar, which was expressly invited not to follow the reasoning in the English Court of Appeal supporting this position.²¹⁹ The basis for the alternate construction (p. 288) was said to lie in the need for Art 10.1 to be construed responsively, having regard to Arts 10.3 and 11.²²⁰ The Court followed the position in England, holding that the construction of Art 10.1 was clear, particularly where the option not to include the second sentence in national law had been taken up, and that art 11 could not cut down the otherwise clear meaning.²²¹

10.155  It follows that there is nothing in the Convention or in the MSA to require a person who wishes to limit his liability to wait until a claimant has started proceedings before invoking his right to limit.²²² That suggests in turn that the regime under art 10 (in permitting limitation to be invoked in the absence of liability proceedings) may differ from that under art 11, if Colman J’s understanding of that article in The ICL Vikraman is correct—namely that a limitation fund can only be constituted in a jurisdiction in which liability proceedings have been commenced.²²³ However, it is submitted that there is no difference, for the reason that the common assumption in The ICL Vikraman, that art 11.1 restricts the constitution of a fund to jurisdictions in which liability claims have been brought, was misplaced: art 11.1 is by its terms permissive and does not purport to permit a party claiming a right to limit to bring his claim only in a jurisdiction in which he has been sued.

10.157  In deciding that limitation proceedings could be commenced under art 10 even in the absence of liability proceedings in the same jurisdiction, the Court of Appeal in The Western Regent expressly left open the issue whether art 11 applies only to jurisdictions in which legal proceedings have already been instituted by a claimant, or whether it includes those in which limitation proceedings have been commenced; in other words, whether a party seeking the right to limit must commence (p. 289) a limitation action and then constitute his fund in the same jurisdiction.²²⁴ On the one hand, it is arguably stretching the natural meaning of the language of art 11 to include limitation proceedings within the phrase ‘legal proceedings … in respect of claims subject to limitation’, particularly if in fact no claims have yet been brought against the party claiming the right to limit; on the other:

1. (1)  that expression differs from and is wider than the expression used in Article 10,²²⁵ ‘action … to enforce a claim subject to limitation’, and the wider language used in art 11 is apt to include limitation proceedings; and

2. (2)  there is nothing in art 11 which stipulates that a fund can only be constituted in such a jurisdiction.

However, as Clarke LJ pointed out at paras 28–29 of his judgment in The Western Regent, the broader construction of art 11 was not contended for in The ICL Vikraman (see the account of the arguments advanced at paras 18–42 of Colman J’s judgment), in which the issue was whether an arbitration amounted to ‘legal proceedings’ for the purposes of art 11(1) (which Colman J answered in the affirmative). That said, Colman J’s view may derive some support from the decision of the Dutch Supreme Court in The Sherbro,²²⁹ in which it was held that the appointment of a court expert was a ‘legal proceeding’—without which it appears to have been of the view that a fund could not have been constituted under art 11.

10.158  The existence of proceedings in another jurisdiction is relevant in two procedural settings: (i) where the Court is considering an anti-suit injunction (which by definition can arise only in cases falling outside the ambit of the Brussels I Regulations²³⁰ or the Brussels and Lugano Conventions), and (ii) where an application is made to stay proceedings under arts 29 or 30 of the ‘recast’ Brussels I Regulation (1215/2012) (arts 27 or 28 of the Brussels I Regulation 44/2001 and the Lugano II Convention; arts 21 and 22 of the Brussels and Lugano Conventions).

10.159  The approach of the courts in the former situation, born of the procedural nature of the right to limit, is in general one of tolerance towards the prosecution of liability proceedings in other jurisdictions in which issues of limitation will also be decided, irrespective of whether the applicable limitation regime in the foreign jurisdiction is the same as that applicable here.²³¹ In The Western Regent, Clarke LJ in refusing the grant of an anti-suit injunction was clear that ‘… the English court should leave the court in Texas to decide what effect to give to the decree granted in this action’.²³²

10.160  For the purposes of the European jurisdiction regimes, a limitation action does not involve the same cause et objet as liability proceedings; however, the two sets of proceedings may—depending on the facts—be ‘related actions’ within the meaning of art 30 of the ‘recast’ Brussels I Regulation (1215/2012) (art 28 of 44/2001 and the Lugano II Convention; art 22 of the Brussels and Lugano I Conventions).²³³

10.161  A distinction must be made between invoking limitation as a right, in order to obtain a general decree of limitation, binding on all the world, and its invocation as a defence or counterclaim for a restricted decree, in which case only the parties to those proceedings will be bound.²³⁴ The expectation is that a general decree will be sought only in separate, free-standing proceedings, which is why a counterclaim for a general decree of limitation may only be made with the permission of the (p. 291) Court.²³⁵ It is therefore used as a counterclaim principally where there will be a single (major) claimant against the party seeking to limit.

10.162  A limitation claim must be commenced in the Admiralty Court²³⁶ by the issue of a limitation claim form.²³⁷ PD61 §10.1 provides that the claim form must be in form ADM15, accompanied by a declaration setting out the facts on which the claimant relies, stating the names and addresses (if known) of all persons who, to the knowledge of the claimant, have claims against him in respect of the occurrence to which the claim relates (other than named defendants) and verified by a statement of truth; the claimant and at least one defendant must be named in the claim form but all other defendants may be described.²³⁸

10.163  The claim form must be served on all named defendants and any other defendant who requests service, and may be served on any other defendant.²³⁹

10.164  CPR 61.11(5) provides that the claim form may not be served out of the jurisdiction unless:

1. (1)  the claim falls within s 22(2)(a),(b), or (c) of the Senior Courts Act (SCA) 1981 (in other words, a collision claim involving a defendant whose habitual residence or place of business is in England or Wales, or where the cause of action arose in England or Wales, or where an action arising out of the same incident or series of incidents is proceeding in the court or has been heard and determined by the court);

2. (2)  the defendant has submitted to or agreed to submit to the jurisdiction of the court; or

3. (3)  the Admiralty Court has jurisdiction over the claim under any applicable Convention; and

the court grants permission in accordance with s IV of Part 6.

10.165  In The ICL Vikraman,²⁴⁰ Colman J held that the 1976 Convention was an ‘applicable Convention’ for the purposes of CPR 61.11(5)(c), that the institution of ‘legal proceedings’ within the jurisdiction entitled the shipowners to constitute a limitation fund in the UK under art 11, and that once a limitation fund had been so constituted, (p. 292) the court had jurisdiction to grant permission to serve the claim form out of the jurisdiction. There are, as Colman J recognized,²⁴¹ difficulties with CPR 61.11(5) and the requirement for permission for service out; those difficulties arise in cases where the court has jurisdiction under art 9 of the ‘recast’ Brussels I Regulation (1215/2012)²⁴² (art 7 of the Brussels I Regulation 44/2001 and the Lugano II Convention; art 6A of the Brussels and Lugano I Conventions).²⁴³ That is because under CPR 6.33 no permission is required in such cases for service of the Claim Form out of the jurisdiction. Until this anomaly has been ironed out by the framers of the Rules, the safe course will be to seek permission, which ought to be granted ‘on the nod’.

10.166  An acknowledgement of service is not required²⁴⁴ unless a defendant wishes to dispute jurisdiction, or argue that the court should not exercise jurisdiction, in which case an acknowledgement of service²⁴⁵ must be filed within fourteen days of service (or where the claim form is served out of the jurisdiction, within the time specified in rule 6.35).²⁴⁶

10.167  A defendant who files an acknowledgement of service under para (7)(b) will be treated as having accepted the court’s jurisdiction unless he brings his Part 11 application within fourteen days after filing the acknowledgement of service.²⁴⁷

10.168  Alternatively, a defendant must file a defence or a notice admitting the right of the claimant to limit liability within twenty-eight days of service.²⁴⁸ Failure to do so will mean that the claimant has to apply for a general decree of limitation under CPR 61.11(12).

10.169  Where one or more named defendants admit the right to limit, the claimant may apply for a restricted limitation decree²⁴⁹ and the court will issue a (p. 293) decree²⁵⁰ limiting liability only against those defendants.²⁵¹ A restricted limitation decree may also be obtained against any named defendant who fails to file a defence within the time specified for so doing.²⁵² It is not necessary to advertise a restricted limitation decree but a copy must be served on any defendant to whom it applies.²⁵³