This case concerned the limitation of liability by shipowners against cargo owners' damage claims under the Convention on Limitation of Liability for Maritime Claims 1976 (the LLMC 1976), which is incorporated into UK law by the Merchant Shipping Act 1979 (UK) (the Act). The Breydon Merchant encountered a serious fire while transporting a cargo of commercial explosives and detonators from Great Oakley to Drogheda. This cargo was partly owned by the defendants, Irish Industrial Explosives Ltd, referred to as the cargo owners, and partly by the Minister for Defence of Ireland. Following the incident, salvage operations were successfully executed, and the plaintiffs, the vessel's owners, sought to limit their liability in respect of the loss or damage resulting from the fire under the LLMC 1976.

In addition to their liability to pay salvage, the cargo owners faced additional costs due to the salvage, including those related to stevedoring, transhipment, and additional freight, and claimed damages against the vessel's owners. They argued that the vessel was not seaworthy at the voyage's outset: thereby, the shipowners were not protected by the contract of carriage and, thus, not entitled to limit their liability. Counsel for the cargo owners further contended that their claim was not subject to limitation based on art 3 of the LLMC 1976, where it is provided that 'the rules of this Convention shall not apply for salvage'. In contrast, the shipowners contended that the cargo owners’ claims were subject to limitation as per art 2 of the LLMC 1976.

Eventually, the core legal issue before the Court was whether the cargo owners' claims should be directed against the limitation fund established by the shipowner or if the shipowners were, in fact, ineligible to limit their liability for this incident.

Held: Judgment for the shipowners.

The cargo owners' claim for damages was indeed a claim for damages for breach of contract by the shipowners, not a salvage claim. The cargo owners' argument, citing art 3 of the LLMC 1976, was irrelevant to the matter before the Court, since this provision solely relates to a claim made by a salvor against the owner of the property that was salvaged. There are, indeed, two primary reasons why the LLMC 1976's limitation provisions do not extend to salvage claims: first, limiting liability could potentially discourage salvors by reducing the rewards they could expect for their services - contrary to public policy, which aims to encourage mariners to assist persons and property in distress at sea. Secondly, allowing shipowners to limit their liability for salvage costs, while not extending the same privilege to cargo owners, would create an incongruous situation.

Another issue was whether the claim for damages brought by the cargo owners was one of the claims subject to limitation under art 2 of the LLMC 1976. The LLMC 1976 permits shipowners to limit their liability for a broad range of claims listed in art 2, irrespective of the basis of liability, including contract, tort, or statute. This encompasses the cargo owners' damage claims stemming from a breach of the contract of carriage. Damage to the cargo, whether due to physical harm, actionable delay, or a lien for salvage, invariably leads to a decrease in its value. Such a decrease is considered within the scope of claims that can be limited in accordance with art 2.1.a of the LLMC 1976. Moreover, actions taken to prevent or reduce further loss or damage to the cargo fall under the purview of art 2.1.f of the LLMC 1976, thereby rendering the cargo owners' claims eligible for limitation. Indeed, the historical context and legislative intent behind the LLMC 1976, as applied through the Act, underscored that the right of shipowners to limit their liability was not to be diminished by the LLMC 1976's adoption. Instead, the LLMC sought to expand the scope of claims subject to limitation while affirming the shipowners’ right to limit liability, in exchange for agreeing to a higher limit of liability.