This was an appeal against earlier orders of Clarke J, Colman J, Walker J, and Rix J (see CMI2329). In June 1994, the barge BOS 400 was under towage from Pointe Noire, Congo, to Cape Town, South Africa. The towline parted in stormy conditions as the vessels were approaching Cape Town, and the BOS 400 was driven ashore. The towage contract between the owners of the barge, Bouygues (the claimants), and the charterers of the tug, the Tigr, Ultisol (the charterers), contained an exclusive jurisdiction clause referring all disputes arising out of the contract to the English courts. The claimants started proceedings on the merits against the charterers, Caspian, the owners of the Tigr, and Portnet, the South African port authority who gave the permission to proceed with the towage in stormy weather, both in South Africa and England.

There were different liability regimes in South Africa and England. The LLMC 1956 applied in South Africa, and the LLMC 1976 was enacted in England. It was agreed that the South African regime was more favourable for the claimants.

On 2 February 1996, Clarke J granted an injunction to the charterers restraining the claimants from continuing the proceedings in South Africa. This decision was based on the exclusive jurisdiction clause in the contract between the claimants and the charterers. On 23 May 1997, Walker J refused to discharge the injunction granted by Clarke J and refused to stay in the English proceedings. The same injunction was not granted to the tug owners in parallel proceedings by Morison J. Colman J, in turn, refused applications by Portnet to set aside third party notices granted to the owners and the charterers to join Portnet in the English actions. On 30 April 1997, Rix J granted declarations to the tug owners and the charterers that they were entitled to limit their liability in the quantum of the fund the charterers constituted under the LLMC 1976 as applied in England.

The parties appealed against the orders of Rix J.

Held: Appeals dismissed.

Jurisdictional point

Sir John Knox held that there was no logical obstacle to making a limitation order on a hypothetical basis: ie, on the basis that if the defendants were found liable, their liability would have been limited under the LLMC 1976.

Neither the Merchant Shipping Act 1995 (UK), nor the LLMC 1976 provide an express solution to this issue. Under art 13 of the LLMC 1976, the constitution of the limitation fund gives the shipowner benefits, such as a bar on other actions against the shipowner, and the release of the arrested ship or other property. With reference to Polish Steam Ship Co (CMI2223), the claimants argued that the limitation fund, when constituted, is not ‘actually available’ within the meaning of art 13.3 of the LLMC 1976 until a limitation decree is granted. If it were possible to obtain a limitation decree before the shipowner’s liability is established or admitted, the benefits under art 13 of the LLMC 1976 would not be available for the shipowner even though the limitation decree was obtained. Thus, the LLMC 1976 requires liability to be established or admitted before the limitation decree is granted.

Sir John Knox did not accept this argument. He concluded that Polish Steam Ship Co only states that until both liability is established and a limitation decree granted, the mechanism for protecting shipowners entitled to limit their liability does not become operational. Sir Knox emphasised that there is nothing extraordinary in this position, and 'no one suggests that a shipowner gets the benefit of the bar on other actions and the release of arrested ships provided for by art. 13.1 and 13.2 until a limitation decree has been granted but it is common practice to constitute the limitation fund well before that decree'.

Sir John Knox agreed with the other arguments made by Rix J in support of his decision. In particular, art 1.7 of the LLMC 1976 stipulates that ‘the act of invoking limitation of liability shall not constitute an admission of liability’. This demonstrates that a limitation action can be commenced before liability is established. Another argument was that the Rules of Court make it mandatory for a limitation decree to be granted within a very short period of time if there appears to be no defence to the limitation claim.

Misrepresentation claim

The claimants argued that their claim for misrepresentation against the charterers and the tug owners was not covered by art 2.1.a of the LLMC 1976:

the following claims, whatever the basis of liability may be, shall be subject to limitation of liability:

(a) claims in respect of loss of life or personal injury or loss of or damage to property ... occurring on board or in direct connection with the operation of the ship or with salvage operations and consequential loss resulting therefrom.

The claimants argued that two elements must be present for limitation to be available: the claims must be in respect of loss of life or personal injury or loss of or damage to property, and the claims must be in direct connection with the operation of the ship. Sir John Knox stated that the second alleged requirement disregards the 'clear grammatical structure' of the relevant sentence. The phrase 'in direct connection with the operation of the ship' governs the words 'loss or personal injury or loss of or damage to the property', and not the word 'claims'.

The loss or damage relied upon by the claimants is the same which is claimed under their negligence claims made against the tug owners, and under the misrepresentation, negligence, and breach of contract claims against the charterers. Therefore, the loss occurred in direct connection with the operation of the tug, and their claims are covered by art 2.1 of the LLMC 1976.

This conclusion was supported by the opening phrase in art 2.1, which is 'whatever the basis of liability may be'. This wording points to the irrelevance of the particular cause of action pleaded. Thus, it supports the conclusion that the loss or damage and not the claims should be found to occur in direct connection with the operation of the ship.

Stay of limitation proceedings

Sir John Knox stated that this question should be approached from a different standpoint. When the issue of a stay of proceedings was being considered by Rix J, the earlier anti-suit injunction imposed by Clarke J was still in place. Thus, it was not before Rix J that the substantive liability issues would be decided in South Africa. On that basis, the claimants submitted that England was forum non conveniens. The limitation actions should more suitably be tried in South Africa together with the proceedings on the merits. This was in the interests of all parties and advanced the ends of justice. As far as the charterers were concerned, the claimants argued that the charterers could assert in South Africa their claim for breach of the exclusive jurisdiction clause in the towage contract, and therefore limit their liability on the basis of the LLMC 1976.

It was not clear what the South African courts' attitude would be to a claim by the tug owners to limit their liability under the LLMC 1976. Therefore, it was doubtful whether the limitation decree made by Rix J was of any practical significance. In turn, it was contended by the tug owners that they were entitled to contractually limit their liability via the Himalaya clause in the towage contract. Thus, the limitation decree was of particular relevance to them.

Taking into account the argument made by the tug owners, Sir John Knox concluded that the limitation decree was an issue separate from the proceedings on the merits. The shipowner was entitled to apply for a limitation decree, and this right could not be prevented from being exercised. Therefore, Rix J reached the correct conclusion on this point, even though the background for his decision was different.