Following a collision on the River Thames in the UK in 1989, the owners of the Bowbelle, while not admitting liability for the resulting passenger deaths and injuries, established a limitation fund that was paid into Court. The Admiralty Registrar refused to allow the owners to file a praecipe in the Court registry requesting that a caveat be entered in the caveat book against the issue of a warrant of arrest of any of their named ships. The owners appealed.

The praecipe requested a caveat against arrest because of the fund. The owners undertook to acknowledge service of writs in any action arising out of the collision against any of the named ships. The Rules of the Supreme Court (RSC), O 75 r 6, was the only rule which enabled a shipowner to give a warning that one of its ships ought not to be arrested. However, that Rule did not account for the limitation fund and required an undertaking for bail to be given.

The owners argued that under the Merchant Shipping Act 1979 (UK), they could not be compelled to give bail, or any other security, beyond that provided by the limitation fund. They contended that if any ship owned by them were to be arrested in respect of a claim arising out of the collision, the Court would be bound to order its release without further security being provided. Thus, they were entitled to give warning that any arrest would be pointless and wrongful: RSC O 75 r 7. They contended that the appropriate way of giving such a warning was to enter a caveat in the caveat book.

Held: Appeal allowed.

In 1986, by virtue of the Merchant Shipping Act 1979 (Commencement No 10) Order 1986 (SI 1986 No 1052 (c 28)), shipowners and others could limit their liability for certain claims under the Convention on Limitation of Liability for Maritime Claims 1976 (the LLMC 1976). Section 17 of the Merchant Shipping Act 1979 (the Act) provided that the LLMC 1976, as set out in Pt I of Sch 4 of the Act, shall have the force of law in the UK, subject to Pt II of that Schedule. The following articles of the LLMC 1976 are relevant: arts 1.1, 1.7, 2.1, 4, 11.1, 13.1, 13.2, and 13.3.

Understanding the prior law helps one to appreciate the significance of the LLMC 1976. In 1957, the International Convention relating to the Limitation of the Liability of Owners of Seagoing Ships (the LLMC 1957) was signed. Its Preamble stated that parties have recognised the desirability of determining by agreement certain uniform rules relating to the limitation of the liability of owners of seagoing ships. In the LLMC 1957 the British system of limitation of liability was adopted, and by art 5 an attempt was made to ensure that when claims were made against a shipowner who had the right to limit its liability, that shipowner would be able to give bail or satisfactory security or establish one limitation fund against which all claims arising out of one incident would be brought. The LLMC 1957 started with the statement that the owner of a seagoing ship may limit its liability in accordance with the LLMC 1957 in respect of claims arising from certain stated occurrences 'unless the occurrence giving rise to the claim resulted from the actual fault or privity of the owner'. Those last words are the time-honoured words which were found in s 503 of the Merchant Shipping Act 1894 (the 1894 Act). To give effect to the LLMC 1957 art 5, s 5 of the Merchant Shipping (Liability of Shipowners and Others) Act 1958 was enacted. The opening words of that section are:

Where a ship or other property is arrested in connection with a claim which appears to the court to be founded on a liability to which a limit is set by section 503 of the Merchant Shipping Act 1894 … [emphasis added]

In respect of any claim arising before December 1986, a shipowner who claimed that it was entitled to limit its liability by virtue of s 503 of the 1894 Act had to discharge the burden of proving that the occurrence giving rise to the claim occurred without its actual fault or privity. The Wladyslaw Lokietek [1978] 2 Lloyd's Rep 520 set a relatively high standard of proof for the shipowner to meet. Article 13 of the LLMC 1976 was drafted with the intention of overcoming the effect of The Wladyslaw Lokietek and of ensuring that shipowners would only be compelled to provide one limitation fund in respect of any one incident giving rise to claims.

Under the LLMC 1976, shipowners had a higher limit of liability in exchange for an almost indisputable right to limit their liability. The effect of arts 2 and 4 of the LLMC 1976 is that the claims mentioned in art 2 are subject to limitation of liability unless the person making the claim proves (the burden of proof being now upon that claimant) 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 knowledge that such loss would probably result. This imposes upon the claimant a very heavy burden.

But regardless of whether a claimant contends that it can prove that the shipowner was guilty of conduct barring limitation, the combined effect of arts 2 and 13 is that a shipowner can only be compelled to constitute one fund in accordance with art 11. Article 2 sets out the categories of claims which are subject to limitation of liability. The claims against the owners come within art 2.1.a. Article 13 shows that any claimant may bring a claim against the limitation fund in court. Therefore by virtue of art 13.3 the rules set out in arts 13.1 and 13.2 apply. Article 13.1 shows that any person who has made a claim against the fund in court is not entitled to arrest any ship in the same ownership as the Bowbelle.

Any person who has a claim against the owners (but has not yet made a claim against the fund) has 'a claim which may be raised against the fund': art 13.2. The fund has been constituted in London which is 'the port where the occurrence took place': art 13.2.a. Accordingly, if one of the ships named in the praecipe were to be arrested, the Court would be bound to order its release. The fund has been constituted by the owners in accordance with art 11 in 'respect of claims subject to limitation': art 11.1. Those words clearly refer to the categories set out in art 2. The drafter has omitted the words 'which appears to the court to be founded on a liability to which a limit is set' which led to the decision in The Wladyslaw Lokietek. The Court is not required to investigate the question whether the shipowner has been guilty of conduct barring limitation. In these circumstances, there should be some way to give warning to would-be arresting parties that they should not arrest any of the ships belonging to the owners. The current RSC have not made provision for this situation. Until such provision is made, shipowners could file in the Court registry a praecipe which must be signed by their solicitors who must undertake to acknowledge service of writs in any action which may be begun against the owners of the ship in question, and state that a limitation fund in respect of damage arising from the relevant incident has been constituted by payment into Court of the appropriate amount.

Any person who has a claim arising out of the same incident and who wishes to contend that the conduct of the shipowner bars its right to limitation may pursue that allegation without the security provided by the arrest of a ship.