There was a collision between an East German vessel, the Stubbenkammer, and an English tanker, the Zenatia, in the approach to Rotterdam. The Stubbenkamer sank, and the Netherlands Government removed the wreck, as it was an obstruction. The owners of the Stubbenkammer applied to the District Court at Rotterdam to determine the amount to which their liability was limited. The Rotterdam Court fixed the amount at GBP 40,771 13s 6d, and the owners paid that into the Court. Later, the sister ship of the Stubbenkammer, the Putbus, entered the Port of London, and the owners of the Zenatia instituted an admiralty action in rem against the owners of the Putbus for compensation for damages suffered by reason of the collision. The Putbus was then arrested. It was noted that the damage to the Zenatia was not likely to exceed GBP 30,000, and the owners of the Putbus provided security for that amount. Furthermore, the limit of liability under English law was very nearly the same as that under the law in the Netherlands, which was GBP 40,705 18s 4½d. The owners of the Zenatia accepted the security, and the Putbus was released from arrest.

Subsequently, the owners of the Putbus applied for the release of the security provided, arguing that they had already provided a limitation fund in Rotterdam for GBP 40,771 13s 6d, and should not be compelled to give similar security in London. However, Karminski J refused the application to release the security, and the owners appealed.

Held: Appeal allowed.

The application to release the security was made under s 5 of the Merchant Shipping Act (Liabilities of Shipowners and Others) Act 1958 (the 1958 Act), which was enacted in pursuance to the LLMC 1957. The objective of the Convention was to ensure that if a ship is involved in a collision under circumstances that entitle the shipowner to limit liability, the owner should only be compelled to provide a limitation fund once and for all. The shipowner should not have to put up security for those claims in another country if the fund is made available in one country to meet all the limited claims. And where the shipowner is compelled to do so, it should be able to get the additional security released. It was noted that the Convention had special considerations regarding the cost of wreck-raising and wreck removal, to which the United Kingdom made reservations when ratifying the Convention. Therefore, resorting to the Act of Parliament was necessary as the Convention could not provide much guidance.

To obtain the release of the security, the owners of the Putbus had to satisfy two conditions:

1) The GBP 40, 771 13s 6d they provided as equity in Rotterdam had to be equal to or more than the limit under the 1958 Act as required by s 5(2)(b); and
2) Such part of the equity provided in Rotterdam 'as corresponds to the claim' of the English owners will be available to them as required by s 5(2)(a).

Both requirements were held to be fulfilled. Regarding the second requirement, the Court explained that the definition of the words 'as corresponding to the claim' was crucial, and it was found in s 5(4)(c) of the 1958 Act, which provides that where only part of the amount for which a guarantee was given will be available to a claimant, that part shall not be taken to correspond to its claim if any other part may be available to another claimant in respect of a liability to which no limit is set.

Applying the definition to the case, it was concluded that the amount given for guarantee by the owners of the Putbus in Rotterdam was GBP 40, 771 13s 6d. 'Part only of' that amount will be available to the English owners because there is another claimant, the Dutch Government, whose claim may be GBP 100,000 or more. There is, therefore, an 'other part' of the fund that may be available to the Dutch Government. It was then considered whether this 'other part' was available in respect of a liability to which no limit is set by s 503 (as amended) of the Merchant Shipping Act 1894 (the 1894 Act). The Court found that the type of liability which the owners of the Putbus had towards the Dutch Government was the same as under English law, and it was a liability to which a limit was set by s 503 of the 1894 Act, as amended. Having fulfilled both requirements in s 5(2) of the 1958 Act, it was concluded that the Court of Appeal could release the security at its discretion.

The Court of first instance had exercised its discretion by refusing to release the security because the Dutch Court might not treat the matter as res judicata, and the English shipowners might need their English security. The Court of Appeal disagreed. The Court of Appeal held that, save for exceptional cases, discretion should always be exercised by releasing the security. The purpose of the Convention was to enable shipowners to get their ships released by putting up a limitation fund in one country. Once they had done this, they should not be called upon to put it up in another. Releasing the security put up in London achieved this purpose better than retaining it.