This was an appeal from the decision in Dominator Ltd v Gilberson (CMI515) to interpret O 6 R 1(h) of the Rules of the High Court of Justice of the Isle of Man in such a way as to enable the High Court, as the forum of a shipowner's domicile, to determine limitation proceedings brought by the shipowner under art 10 of the Convention on Limitation of Liability for Maritime Claims 1976 (LLMC 1976) against persons domiciled in jurisdictions other than the Isle of Man.

Held: Appeal dismissed.

Article 10 of the LLMC 1976 contains no express indication as to the forum in which a shipowner may commence a limitation action. In England historically a shipowner was entitled to bring a limitation action in the forum of his domicile, or in the case of a company, the forum of incorporation. The same position existed in the Isle of Man. Article 10.3 of the LLMC 1976 expressly provides that questions of procedure shall be decided in accordance with the national law of the State Party in which a limitation action is brought. On the facts of this case Rule 1(h) is capable of permitting the service out of the jurisdiction of a limitation action commenced by a shipowner which is incorporated, and thus has its domicile, in this jurisdiction.

Counsel for the appellants argued that since the phrase 'action is brought' appears in both art 10.3 and the second sentence of art 10.1 (which neither England nor the Isle of Man has chosen to incorporate) the words 'action is brought' in art 10.3 must be expanded to include the full meaning attached to such words in the second sentence of art 10.1, namely 'action is brought to enforce a claim subject to limitation' [emphasis added]. Were the position otherwise the meaning of art 10.3 would differ as to whether a State Party had elected to incorporate the second sentence of art 10.1 which ought not to be the construction applied to an international Convention. Accordingly he asked the Court to conclude that the respondent was not entitled to issue pre-emptive and free-standing limitation proceedings in the absence of a substantive claim made against the appellants in this jurisdiction. We reject this submission. Article 10.1 of the original LLMC 1976, the second part of which was not incorporated into either United Kingdom or Manx law, read thus: 'Limitation of liability may be invoked notwithstanding that a limitation fund as mentioned in Article 11 has not been constituted. However, a State Party may provide in its national law that, where an action is brought in its Courts to enforce a claim subject to limitation, a person liable may only invoke the right to limit liability if a limitation fund has been constituted in accordance with the provisions of this Convention or is constituted when the right to limit liability is invoked.'

If a State Party were to so provide, it is thus clear that any right to limit liability can only be invoked if a limitation fund has been constituted or is constituted when such right is invoked. Since art 11 expressly provides that 'any person alleged to be liable' may constitute such a limitation fund, it is equally clear that the invocation of any limitation of liability is dependent of an allegation of liability being made. On such an analysis the invocation of a limitation of liability under art 11 is reactive to the making of an allegation of liability.

By contrast, if a State Party were not to so provide, as is the case in this jurisdiction, a different construction has to be placed on art 10.1. Free from any restriction on the invocation of the right to limit liability, art 10.1 must mean what it says, namely that there may be limitation of liability notwithstanding that no limitation fund has been constituted in accordance with art 11. In such circumstances the right to limit liability is capable of being exercised proactively.