In an important judgment clarifying the construction and application of the limit of a carrier’s liability under Article IV(5)(a) of the Hague-Visby Rules (the HVR), the Commercial Court (declining to follow an earlier controversial decision in The “LIMNOS” ) held that the limit of liability is to be calculated by reference to the weight of goods which have suffered both physical and/or economic loss.
The claim arose out of the grounding of the THORCO LINEAGE in June 2018 whilst carrying 10,287.07 MT of a bulk cargo of zine calcine owned by the claimant. The vessel suffered extensive damage and salvors were engaged to re-float and tow the vessel for repairs.
As a result of the casualty, approximately 764.07 MT (or around 7.43%) of the cargo was lost or physically damaged. The claimant claimed from the defendant carrier nearly US$8.5 million in respect of its liability to salvors, physical loss and/or damage to the cargo, on-shipment costs and costs incurred in arranging the salvage sale/disposal of the physically damaged cargo.
If the defendant’s liability was limited to the physically damaged cargo, the claimant’s claim would be limited to 1,528,140 SDR (approx. US$2.05 million). Alternatively, if liability was limited by reference to both physically and economically damaged cargo, the claims would be limited to 20,574,140 SDR (approx. US$27.5 million).
Article IV(5)(a) of the HVR provides that:
The claimant submitted that the words “goods lost or damaged” in Article IV(5)(a) HVR referred to goods lost or damaged physically and economically damaged, and that the whole of the cargo had suffered economic damage because the claimant had incurred a liability to salvors and on-shipment costs in connection with the goods.
Alternatively, the claimant submitted that the salvors’ maritime lien on the cargo for salvage remuneration damaged the claimant’s proprietary or possessory title in the cargo such that the salved cargo (9,523 MT) was damaged. Either approach would result in a limit which exceeded the claimant’s total claim.
The Commercial Court found in the claimant’s favour, accepting that goods carried by sea may be damaged physically and economically and that, in this case, the value of the salved goods had diminished on arrival due to the salvage charges and on-shipment charges incurred as a result of the defendant’s breach. The claimant’s claim for both its liability to salvors and on-shipment costs could therefore be limited by reference to the weight of the whole cargo.
While it was not necessary for the court to determine the claimant’s alternative argument, the court indicated that the imposition of a maritime lien on the claimant’s proprietary or possessory interest in the cargo would be sufficient for the salved cargo to be damaged for the purposes of Article IV(5)(a) of the HVR (at least in respect of the salvage charges).
By declining to follow the 2008 decision in The LIMNOS, the Commercial Court has provided welcome clarification for cargo owners regarding the extent to which limitation under the HVR can be applied to cargoes suffering economic as well as physical damage.