On 19 September 1998, the Leerort collided with the Zim Piraeus, which was owned by MS Leerort Nth Schiffahrts GmbH (the respondent). The Leerort subsequently flooded and settled on the bottom of the sea. The Leerort was laden with cargo, part of which was owned by Schiffahrtsgesellschaft MS Merkur Sky mbH (the appellant).

On 14 March 2000 Steel J, sitting in the Admiralty Court, held that the respondent was entitled to limit its liability according to the provisions of the Merchant Shipping Act 1995 (UK) (the 1995 Act) and gave ancillary directions.

The appellant appealed and challenged the Judge's order on two grounds. First, the appellant contended that the Judge could not properly be satisfied at the time he made the order that the respondent was entitled to limit its liability. The appellant was pursuing a line of inquiry which might enable it to defeat the right to limit and the Judge erred in prejudging that this endeavour was bound to fail. Second, the appellant contended that the Judge prematurely made the order in a summary manner at a stage of the procedure when he should simply have conducted a case management conference. The appellant submitted that the words 'such loss' meant the loss of the type suffered and that, to identify the type of loss, it was necessary to refer to art 2 of the Convention on Limitation of Liability for Maritime Claims 1976 (LLMC 1976), which set out the various types of loss in respect of which a right to limit arose. Thus, in the instant case, the claims advanced were in respect of 'loss of or damage to property', so that the only foresight required to defeat the right to limit was the likelihood of loss of or damage to property.

Held: Appeal dismissed.

LLMC 1976 has the force of law pursuant to the 1995 Act.

According to arts 2 and 4 of the LLMC 1976, the claims mentioned in art 2 are subject to limitation of liability unless the person making the claim proves that the loss resulted from the personal act or omission of the shipowner committed with the intent to cause such loss, or recklessly and with the knowledge that such loss would probably result. This imposes upon the claimant a very heavy burden. It is only the personal act or omission of a shipowner which defeats the right to limit. A shipowner is defined in art 1 of the LLMC 1976 as the owner, charterer, manager or operator of a seagoing ship. Thus, to defeat the right to limit, it is necessary to identify the causative act or omission on the part of such a person that causes the loss. Furthermore, it is only conduct committed with intent to cause such loss, or recklessly with the knowledge that such loss would probably result, that defeats the right to limit. This requires foresight of the very loss that actually occurs, not merely of the type of loss that occurs. The appellant's submission runs counter to the clear meaning of the wording of art 4 of the LLMC 1976. The words 'such loss' in art 4 refer back to the loss that has actually resulted and which is the subject matter of the claim in respect of which the right to limit is asserted.

Where the loss in respect of which a claim is made results from a collision between ship A and ship B, the owners of ship A, or cargo in ship A, will only defeat the right to limit liability of the owner of ship B if they can prove that the owner of ship B intended that it should collide with ship A, or acted recklessly with the knowledge that it was likely to do so. The alternative, which is perhaps arguable, is that the claimant merely has to prove that the owner of ship B intended that its ship should collide with another ship, or acted recklessly with the knowledge that it was likely to do so. In either event, the reality is that when damage results from a collision, the shipowner will only lose its right to limit if it can be proved that it deliberately or recklessly acts in a way which it knows is likely to result in the loss of or damage to the property of another in circumstances where, inevitably, the same consequences will be likely to flow to its own vessel. More pertinently, the appellant has been unable to point to any collision case in any jurisdiction where the right to limit under the LLMC 1976 has been successfully challenged.

According to the investigation of the facts of the casualty, the Admiralty Court was right to hold that the respondent was entitled to limit its liability and the decree to this effect should not be delayed in order to permit the appellant to pursue further discovery.