The appellant transported her wooden fishing boat, the Auðunn Lárus GK-28, on the respondent's ship, the Bakkafoss, from Reykjavík to Ísafjörður on 8 June 1999. The respondent's port workers were responsible for hoisting the boat from the sea directly onto a container platform. The appellant was not present. The boat suffered damage. When the damage occurred, the appellant had 18 days of fishing left of the 23 days to which she was entitled in that fishing year.

The appellant claimed ISK 7,640,161.25 in damages from the respondent, based on the latter's employees' gross negligence. They did not let the appellant's boat sit on its keel on the platform, but instead let the main weight of the boat rest on wooden planks that had been placed under the sides of the boat. The respondent was liable under art 68.1 of the Shipping Act/Siglingalög No 34/1985 (the Act) [cp arts 3.2 and 4.2.q of the Hague-Visby Rules]. The respondent could not claim limitation of liability pursuant to art 70.2 of the Act [cp art 4.5.a of the Hague-Visby Rules], since the respondent's employees caused the appellant damage intentionally or with gross negligence and they should have known that loss would probably result: art 70.6 of the Act [cp art 4.5.e of the Hague-Visby Rules].

The respondent argued that the conditions of art 68.1 of the Act were not met. The respondent's port workers prepared the boat for sea on the container platform in a normal and careful manner. In doing so, the defendant ensured with normal vigilance that the ship was suitable for receiving, transporting, and storing the cargo [cp arts 3.1 and 4.1 of the Hague-Visby Rules]. It was customary to transport such a wooden boat on a container platform and secure it to the platform with lashing straps. The lashing straps were placed in the middle of the boat as well as at its ends if possible, to prevent it from moving on the platform during the voyage. The boat was also restrained with wooden boards or planks with attached tyres that were placed against the sides of the boat. With this equipment, an attempt was made to restrain the boat so that it moved as little as possible during the voyage. This lashing was based on the boat being in good condition. This arrangement was functional and normal and should have been sufficient for the sailing route from Reykjavík to Ísafjörður in mid-June in good weather.

The appellant's boat was in very poor condition and was not at all capable of withstanding sea transport by container ship. The boat was over 21 years old, and did not appear to have been renovated. The damage was therefore primarily caused by the boat's own defects: according to art 68.2.m of the Act, the respondent was not liable for damage resulting from the goods' own defects [cp art 4.2.m of the Hague-Visby Rules].

In addition, the respondent argued for a dismissal of this case on the basis of arts 68.2.i and o of the Act [cp arts 4.2.i and o of the Hague-Visby Rules], since it was clear that the damage was caused by the appellant's inaction and/or inadequate or inaccurate marking.;

The respondent further argued that it could not under any circumstances be required to pay an amount higher than the legally prescribed limit amount according to art 70.2 of the Act, ie ISK 600,480.

The respondent pointed out that the barring of the right to limitation of liability under art 70.6 of the Act applied only to the actions of the carrier itself, ie the senior management, board of directors, and CEO, and not to the actions of its employees. This was an exceptional rule that should be interpreted narrowly and strictly. A special rule applied to the carrier's employees in art 72.3 of the Act in this regard [cp art 4.bis.4 of the Hague-Visby Rules].

The Reykjavík District Court held that the respondent was liable for the appellant's damage, but was entitled to limitation of liability.

The appellant and respondent appealed and cross-appealed to the Supreme Court.

Held: Appeals dismissed. District Court judgment confirmed.

The District Court, which was composed of two expert Judges, found that the carriage of the appellant's boat on the deck of the Bakkafoss was neither satisfactory nor efficient, as it was sitting on a deck with its keel in the air. The respondent was held liable for the appellant's damage on the basis of art 68.1 of the Act. Article 70.2 prescribes a limitation of the amount of compensation in a specific manner, but the carrier cannot rely on this limitation if it is proven that it caused the loss or damage intentionally or with gross negligence and it must have known that loss would probably result. The District Court concluded that the loss could not be attributed to intent or gross negligence of this kind and that the respondent had therefore not forfeited its right to limit its liability under art 70 of the Act.

No evidence has been submitted by the appellant that overturns the aforementioned opinion of the District Court. This Court accordingly confirm the District Court's conclusion on the amount of compensation.