ICL Shipping Ltd (the plaintiff) was the owner of the ICL Vikraman. Chin Tai (the defendant) was a Taiwan corporation and the holder of a bill of lading issued by the plaintiff. The plaintiff acknowledged receipt for shipment of 10,078 mt of casting billets for carriage on the ICL Vikraman from Poland to Taiwan. On 26 September 1997 the vessel collided with the Mount 1 in the Malacca Strait and sank with the loss of the cargo. The defendant arrested the ICL Raja Mahendra, a sister ship of the plaintiff, in a proceeding commenced in Singapore in April 1998. The vessel was released against a letter of undertaking (LOU) that did not refer to limitation of liability.

The claim by the defendant for loss of cargo was referred to arbitration in London. On 9 April 2003 the arbitration award concluded that the defendant's claim succeeded on the basis that the plaintiff had failed to exercise due diligence to make the vessel seaworthy at or before the commencement of the voyage, which was a breach of the Hague Rules. On 18 March 2003 the plaintiff issued a limitation claim form and established a limitation fund in England under Civil Procedure Rules (UK) (CPR) r 61.11(18) and art 11 of the Convention on Limitation of Liability for Maritime Claims 1976 (the LLMC 1976) by making a payment into the Admiralty Court. On the following day the plaintiff applied to the Admiralty Court for an order pursuant to art 13.2 of the LLMC 1976 for the release of the LOU issued in Singapore or, in the alternative, an injunction restraining the defendant from presenting the LOU to the P&I club.

On 21 March 2003, the Admiralty Court made an order for an injunction against the defendant and for permission to serve the limitation claim form on the defendant in Taiwan.

The defendant applied to set aside service upon it of the limitation claim form and/or the injunction. In substance, the defendant contended that, having arrested the sister ship in Singapore and security having been provided there for its release, it was not subject to or bound by the establishment of the limitation fund in London or the limitation proceedings commenced in London and that accordingly English courts had no jurisdiction over it in relation to limitation under the LLMC 1976. In addition, the LLMC 1976 contained no provision as to the jurisdiction of the courts of the State where the fund had been constituted. Article 11 of the LLMC 1976 should not have that effect. Even if art 11 of the LLMC 1976 did confer jurisdiction and the LLMC 1976 was an 'applicable Convention' within the meaning of CPR r 61.11(5)(c), art 11 could not be applied to the present case because no 'legal proceedings' had ever been instituted in English courts in respect of claims subject to limitation. It was further argued on behalf of the defendant that, even if art 11 of the LLMC 1976 did cover arbitration proceedings, art 13 did not confer on English courts jurisdiction to order the release of the LOU in Singapore. That was because the arrest of the sister ship took place and the security was given in Singapore which was not a State Party to the LLMC 1976. For these reasons, English courts had no jurisdiction to order an injunction interfering with the enforcement of the LOU. Finally, it was submitted on behalf of the defendant that even if art 13.2 of the LLMC 1976 might apply to the LOU on the basis that it was given in England, its application was excluded by art 13.3 of the LLMC 1976, because the fund set up in English courts was not 'actually available' at the relevant time. The plaintiff had not obtained a limitation decree at the time when the injunction was granted. Therefore, no injunction should have been ordered.

The plaintiff applied for release and return of the LOU under art 13.2 of the LLMC 1976. Jurisdiction was established under CPR r 61.11(5)(c). That rule was to be construed by reference to art 11.1 of the LLMC 1976. If the plaintiff was entitled to set up a limitation fund in England under this article, it must follow that English courts had jurisdiction in respect of claims on that fund because under CPR r 61.11(5)(c) the LLMC 1976 was an 'applicable Convention' and it was jurisdiction over 'the claim' to limit liability, as distinct from the underlying claim, that was relevant. Article 11.1 of the LLMC 1976 should be construed as covering proceedings by way of arbitration, as well as proceedings in courts. As to art 13.2 of the LLMC 1976, its purpose was to facilitate the release of all security once a limitation fund had been constituted. In art 13.2 of the LLMC 1976, the words 'any security given' were not geographically restricted by reference to the arrest or attachment of a ship or other property. The plaintiff submitted that under art 13.2 the Court entitled to release the arrest, attachment or security is the Court which is administering the limitation fund. The reference back to art 11 of the LLMC 1976 indicates that 'the court ... of such State' must refer to the same Court and State Party as that in which the fund had been constituted. Given that construction, art 13.2 would reflect the basic purpose of the LLMC 1976, which was to ensure that shipowners were able to confine their exposure to one limitation fund and that the Court administering that fund would have control over all other attempts by those with relevant underlying claims to provide themselves with security outside the fund.

Held: The plaintiff is entitled to constitute a limitation fund in England. The security located in Singapore does not fall within art 13 of the LLMC 1976 and is not required by the Convention to be released.

The overriding purpose of the LLMC 1976 is to provide for the quantification of a shipowner's maximum liability in respect of a particular occurrence and for the enforcement of that liability against a single source of security. Its geographical scope is confined to State Parties both in relation to the constitution of the limitation fund and in relation to the release of additional security (in the form of a ship or other property arrested or attached or any security given) which is 'within the jurisdiction of a State Party'. The United Kingdom is a party to the LLMC 1976. Singapore is not. It is a party to the LLMC 1957. There are numerous differences between the two Conventions but the most important substantive difference is that, whereas under art 1.1 of the LLMC 1957 a shipowner is entitled to limit its liability for specific areas of liability, including cargo damage unless the occurrence giving rise to the claim resulted from the actual fault or privity of the owner, under the LLMC 1976 entitlement to limit liability is barred under art 4 if it is proved that the loss resulted from the owner's 'personal act or omission, committed with the intent to cause such loss, recklessly and with knowledge that such loss would probably result'. Under art 11 of the LLMC 1976, the entitlement of a shipowner to constitute a limitation fund is conditional upon 'legal proceedings' having already been instituted against that person in the State party in which it is to constitute the fund. The institution of 'legal proceedings' under art 11 of the LLMC 1976 includes the commencement of arbitration. It follows that the plaintiff is entitled to constitute a limitation fund in respect of the defendant's cargo claim in this case. The question is whether the Admiralty Court has jurisdiction to give permission for service out of the jurisdiction of the limitation claim form. That depends on the scope of CPR r 61.11(5). In this section, 'claim' should be construed as meaning 'claim to limit' and 'any applicable Convention' should be construed as covering the LLMC 1976. It follows that in the present case, once the plaintiff has established the limitation fund, there is jurisdiction to give permission to serve the limitation claim out of the jurisdiction on the defendant. The defendant has therefore effectively been made a party to the limitation claim.

It is unreasonable to accept the plaintiff's submission that 'such State' at the end of the first sentence of art 13.2 of the LLMC 1976 can refer to the State where the limitation fund has been constituted regardless of the jurisdiction in which the vessel has been arrested or within which security has been put up. Such construction is inconsistent with the words used, for such State must refer back to the State Party in whose jurisdiction the attempt has been made to create additional security. Further, the LLMC 1976 cannot be construed so as to create a power in the courts of one State Party to interfere by order with the disposition of property or other security within the jurisdiction of a State that is not a party. The security regime provided by the LLMC 1976 is clearly confined to State Parties.

The next question is therefore in which jurisdiction the security given by the P&I club and represented by the LOU is located. If one compares the provisions in relation to arrest of a ship or attachment of other property, it is obvious from the wording that the release, whether mandatory or non-mandatory, under art 13.2 of the LLMC 1976 can only be effected by that State Party which is seized of the arrest or attachment. In the present case, the first provisional LOU is provided by the P&I club in order to procure the release from the arrest of the ICL Raja Mahendra in Singapore and the substitute LOU is provided in a form prescribed by the Singapore High Court as a sequel to the release proceedings. That LOU continues to stand as the only security in the pending action in rem in Singapore. The LOU therefore currently stands in the place of the released vessel as security in those proceedings in rem. Although there has been an arbitration award in London, the proceedings in rem in Singapore remain alive and have not been discontinued. Thus, although the LOU is expressed to be to pay on demand any sum found due in those proceedings or in the arbitration or by agreement, since the Singapore High Court is still seized of the proceedings, it is that Court in that jurisdiction which has immediate control over the security. Unless the parties agree that the security should cease to secure the claim in the Singapore action and consent to the release of the LOU as such security, it can be released only by an order of the Singapore High Court. It is accordingly in that jurisdiction where the security represented by the LOU can be released.

In case this conclusion is wrong, it is necessary to consider art 13.3 of the LLMC 1976. The issue is whether a limitation fund which has already been constituted is 'actually available' before a limitation decree has been made and liability has been admitted or determined. These words are also to be found in a similar context in art 2.4 of the LLMC 1957. The correct construction of art 13.3 is that a limitation fund established in this country is available to a given claimant notwithstanding there being no limitation decree at the material time. That availability continues unless and until a claimant discharges the burden of proving that the shipowner is not entitled to the decree. Accordingly, even if it is wrong to conclude that there is no bar in respect of the LOU under art 13 of the LLMC 1976, the absence of a limitation decree at this stage would not be a ground for refusing the release of that security.