This was an appeal from MSC Mediterranean Shipping Co SA v Stolt Tank Containers BV (Re 'MSC Flaminia' (No 2)) [2023] EWCA Civ 1007 (CMI2276). The appeal concerned the circumstances in which a charterer might limit its liability in respect of claims made by the shipowner. At English law, there is no right for a charterer to limit its liability in respect of claims by a shipowner for loss of or damage to the vessel - see CMA CGM SA v Classica Shipping Co Ltd (The CMA Djakarta) [2004] EWCA Civ 114, [2004] 1 All ER (Comm) 865 (CMI726), approved (obiter) by the Supreme Court in Gard Marine and Energy Ltd v China National Chartering Co Ltd (The Ocean Victory) [2017] UKSC 35, [2017] 1 WLR 1793 (CMI16).

The principal issues on appeal were: 1) whether a charterer can limit its liability for claims by an owner in respect of losses originally suffered by the owner itself; and 2) whether Conti's claims fall within art 2.1 of the LLMC 1996 and, if so, whether the fact that they result from damage to the vessel means that there is no right to limit.

Held: The appeal is allowed on issue 1), and dismissed on issue 2). MSC is entitled to limit under art 2.1.e of the Convention in respect of the claim for the costs of discharging sound and damaged cargo, and of decontaminating the cargo at Wilhelmshaven, but not otherwise.

As to issue 1), the interpretation question is the meaning of the word 'claims' in arts 1.1 and 2.1 of the Convention. Conti's case is that, in their context and in the light of the object and purpose of the Convention, the word 'claims' means, in relation to claims made by an owner against another 'insider', claims other than in respect of losses originally suffered by the owner itself.

Leaving aside context, object and purpose, it is very difficult to see how this can be the meaning of the word 'claims'. 'Claims' is a defined term under the Convention. In art 1.1, the 'claims' for which liability may be limited are those 'set out in Article 2'. Article 2.1 provides that the 'following claims' shall be subject to limitation. Various types of 'claims' are set out. 'Claims' in arts 1.1 and 2.1 therefore means the claims which are specified in art 2 to be subject to limitation. None of those specified claims differentiates between whether the claims are made by owners or other 'insiders', or whether they are made against owners or other 'insiders'. On Conti's case, however, if a claim is made by one 'insider', the owner, against another 'insider', it is subject to the owner’s original loss qualification, but not otherwise. This results in an unstated bar on limitation which only arises where the claim is made by one particular type of 'insider', the owner, and only in respect of a loss of a particular character, namely an original loss.

Conti's case on the meaning of claims therefore involves reading in qualifying words - ie the owner's original loss qualification. That is to give a gloss to the word 'claims'. That is precisely what the Court of Appeal decided in The CMA Djakarta was impermissible. Conti's case also involves the word 'claims' having a different meaning in different contexts - an implausible construction. In relation to claims against owners, whether by 'insiders' or 'outsiders', it means any claim specified in art 2. In relation to claims by owners against other 'insiders', it means any claim specified in art 2 other than claims by an owner in respect of original loss suffered by it. It also involves a striking asymmetry between one type of 'shipowner', ie 'the owner', and all other types of 'shipowner', ie the 'charterer, manager and operator'. Yet, under art 1.2 of the Convention they are all equally defined as being a 'shipowner' without any suggestion of differential treatment.

A charterer being entitled to limit in respect of losses originally suffered by the owner does not lead to absurd or unreasonable consequences, or sufficiently absurd consequences to justify glossing the word 'claims' or reading in qualifications to it. Conversely, there are unreasonable consequences which result if Conti’s case were correct, as illustrated by the asymmetry which results. There are also definitional difficulties. For example, if an owner is to be treated differently from other insiders, it becomes essential to determine what is meant by 'owner'. For all these reasons, a charterer can limit its liability for claims by an owner, including in respect of losses originally suffered by the owner itself.

As to issue 2), ie whether any of Conti's claims fall within art 2.1 of the Convention and, if so, whether the fact that they result from damage to the vessel means that there is no right to limit, there is no reason why the Convention provisions in general or art 2 in particular should be applied either narrowly or widely.

Article 2.1.a: 'Claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation), occurring on board or in direct connexion with the operation of the ship or with salvage operations, and consequential loss resulting therefrom'. MSC seeks to limit its liability in relation to all four claims in issue: 1) payments to national authorities for the purposes of arranging for the vessel to be allowed to be moved to Wilhelmshaven; 2) the costs of discharging sound and damaged cargo, and of decontaminating the cargo, at Wilhelmshaven; 3) the costs of removing firefighting water from the holds; and 4) the costs of removing waste from the vessel. MSC relied on the fact that in the Australian case of Qenos Pty Ltd v Ship 'APL Sydney' [2009] FCA 1090, (2009) 187 FCR 282 (CMI1170) it was held that a claim for pure economic loss falls within art 2.1.a - ie a claim which was not consequential upon property damage. That is not relevant here. This is not a claim for pure economic loss; if it is a claim for consequential loss, it is a claim which is consequential upon property damage, namely the damage to the vessel. MSC's argument is also contrary to the decision in The CMA Djakarta.

Article 2.1.f: 'Claims of a person other than the person liable in respect of measures taken in order to avert or minimize loss for which the person liable may limit his liability in accordance with this Convention, and further loss caused by such measures.' MSC relies on this art in relation to two of its claims: 1) the payments to national authorities for the purposes of arranging for the vessel to be allowed to be moved to Wilhelmshaven; and 2) the costs of removing firefighting water. MSC's argument addresses the wrong question and does not properly focus on the claim being made. This is not a claim for salvage expenses; it is a claim for the removal of firefighting water from the vessel after the salvage operation had been completed. That is not a mitigation cost under art 2.1.f; it is a repair cost.

The Court of Appeal held that the claim for the costs of discharging sound and damaged cargo, and of decontaminating the cargo at Wilhelmshaven fell within art 2.1.e and so was limitable. The key issue is what is the position if the costs are incurred in order to repair the vessel and, as in this case, are part of the costs of the repair of the vessel.

First, the language of art 2.1.e, like many of the categories of claim which are limitable, focuses on the nature of the claim being made. It does not depend on what caused the claim to arise or the purpose of incurring the claimed cost or expense. If the claim is for the 'removal, destruction or the rendering harmless of the cargo', it falls within the terms of the art. Secondly, art 2.1 does not preclude the dual characterisation of claims. It will frequently be the case that a claim falls within more than one subpara - for example, cargo removal costs under art 2.1.e which are also mitigation costs under art 2.1.f. The fact that a claim may be the consequence of damage to the ship should not therefore preclude its characterisation as a claim falling within a subpara other than art 2.1.a. Thirdly, considering the issue more broadly, if a claim which is consequential on damage to the ship is never limitable, that would exclude many claims which would otherwise fall within the terms of art 2.1. Limitation generally arises after a marine casualty and there will be very many costs and expenses which as a matter of causation result from damage to the ship. So, eg, delay will frequently occur in consequence of a casualty and claims in respect of delay in the carriage of cargo are limitable under art 2.1.b. If, however, that art cannot be relied upon where the delay and resulting loss is a consequence of damage to the ship, that will significantly limit its application as well as making necessary a potentially complex and disputatious causal inquiry. Fourthly, art 2.1 specifically contemplates there being limitable claims which result from damage to the ship. This is made clear by art 2.1.d, which makes wreck removal claims subject to limitation. If the wreck is the limiting ship then that claim will be a direct consequence of the damage to the ship. The fact that art 2.1.d does not have the force of law in this jurisdiction does not detract from the significance of this to the drafting of art 2.1 as a whole. Fifthly, to conclude otherwise would effectively elevate the fact that loss or damage to the ship is not within art 2.1.a into a general but unstated exception to the whole of art 2.1. But it is not even an exception in the context of art 2.1.a. It is simply a type of claim which does not fall within the terms of art 2.1.a. Sixthly, the Convention expressly addresses what claims are to be excepted from limitation in art 3 which sets out five categories of excepted claims. If a further general exception had been intended, it would be expected to be specified in this article. Conti's case involves the creation of a sixth, unstated category of excepted claims. Seventhly, an important purpose of the Convention was to provide a limit of liability which was effectively unbreakable. For there to be exceptions to the right to limit not set out in the Convention itself undermines that purpose. Eighthly, it leads to what MSC described as a 'twilight zone'. If the right to limit depends on whether the ship is in fact repaired, it is unclear what happens in the in-between period when nobody knows whether the ship will be repaired but an otherwise limitable expense has been incurred. So, for example, in this case the payments for national authorities were made within weeks of the casualty but the repairs were not completed until nearly two years later.

The Court of Appeal was thus correct to conclude that the claim for the costs of discharging sound and damaged cargo, and of decontaminating the cargo, was limitable under art 2.1.e. The fact that the claim may be consequential upon damage to the vessel does not preclude reliance on the right to limit in respect of claims which fall within the terms of any of the subparas of art 2 other than article 2.1.a. This conclusion also means that the fact that the claim can be characterised as a single claim for damage to the vessel does not preclude parts of that claim being subject to limitation because they fall within one or more of the art 2 paras other than art 2.1.a. Conti's single claim case is therefore rejected.