This article was co-authored by Sam Butler, Trainee Solicitor, London.
In November 2022, the Admiralty Court was asked to consider whether a charterer was able to limit its liability to the vessel owner under the Convention on Limitation of Liability for Maritime Claims 1976. Due to the number of issues considered, the judgment is a welcome clarification and restatement of the law.
On 14 July 2012, whilst transiting the Atlantic Ocean en route from South Carolina to Antwerp, an explosion occurred in the cargo hold of the MSC Flaminia resulting in a large fire.
Tragically, several crew members were injured, and three lost their lives. Hundreds of containers were destroyed, and extensive damage was caused to the ship. The explosion was found to have been caused by auto-polymerisation of the contents of one or more of three tank containers laden with 80% divinylbenzene (DVB).
The Admiralty Court was asked to determine whether the claimant's (MSC) tonnage limitation claim fell within the Amended Convention on Limitation of Liability for Maritime Claims 1976 (LLMC).
2.1(a) Claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation), occurring on board or in direct connexion with the operation of the ship or with salvage operations, and consequential loss resulting therefrom:
2.1(e) Claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship.
2.1(f) Claims of a person other than the person liable in respect of measures taken in order to avert or minimize loss for which the person liable may limit his liability in accordance with this convention, and further loss caused by such measures.
MSC sought to limit its liability pursuant to Article 2.1(a) of the LLMC. Conti argued that unless the claim passed on liability for a loss originally suffered by an ‘outsider’ - i.e. someone other than a shipowner or person for whose act, neglect or default a shipowner was responsible which was not the case here - it would not fall within Article 2.1 of LLMC.
MSC contended that a claim for damages to compensate an owner for damage to the ship was a claim in respect of consequential loss resulting from damage to cargo if damage to cargo was a cause of the damage to the ship. MSC argued that the claim should therefore be limited in accordance with Article 2.1(a).
In The ‘CMA Djakarta’ , the Court of Appeal held that Article 2.1(a) only covered claims in respect of loss of or damage to property other than the ship itself.
It was held in this case that Conti’s claim against MSC could not be limited in this way because it was a claim for damage to the ship and consequential losses arising from that damage, rather than a claim for loss of or damage to property (other than the ship itself) .
In the alternative, MSC claimed that costs incurred by Conti relating to the removal or destruction of cargo waste ought to be limited pursuant to Article 2.1(e). It was held that this did not fall within Article 2.1(e).
In addition, MSC argued that the costs incurred in disposing of the firefighting water ought to be limited pursuant to Article 2.1(f). Again, it was held that this claim could not be limited under the LLMC because it was not distinct from the other category of claims in respect of the loss of or damage to the ship.
The MSC Flaminia provides helpful guidance on the right of a carrier to limit liability for claims. Limitation issues are an important consideration for parties and their insurers, especially in the aftermath of large casualties such as the MSC Flaminia.
Mr Justice Andrew Baker noted that decisions relating to the limitation of liability are very rare and this decision is the first occasion since CMA Djakarta in 2004 that the English High Court has had to consider a claim by a charterer regarding its ability to limit its liability under the LLMC to the owner. The judgment is therefore a welcome clarification and restatement of the law.