A collision occurred on 3 February 2007. It was immediately apparent that the claimant had by far the greater claim. The claimant issued its claim form on 30 January 2009. The defendant did not issue a claim form by 3 February 2009, when the two-year limitation period for issuing a claim form expired.

The liability for the collision was apportioned equally between the parties. The parties disagreed on questions of costs. The defendant claimed to have made an offer pursuant to CPR 61 on 5 February 2010 to settle liability for the collision on the basis that each ship was equally to blame. Accordingly, as from 21 days after the date of that offer, the claimant should have paid the defendant's costs and prior to that date, costs should be apportioned in accordance with the collision liability, or alternatively, there should have been no order as to costs. The claimant argued that the defendant should pay the claimant's costs incurred before 26 February 2010 because it obtained judgment on its claim, albeit for 50 per cent of its damages, and the defendant's counterclaim was time-barred. The defendant's offer failed to comply with CPR 61 and so the defendant ought not to be awarded its costs from 26 February 2010.

Held: The defendant is entitled to the costs incurred after 26 February 2010. Regarding the costs incurred before 26 February 2010, each party should pay 50 per cent of the other's costs.

A reasonable solicitor would have understood the defendant’s offer dated 5 February 2010 as complying with CPR Part 61.4(12). In circumstances where the defendant obtained at trial an apportionment equal to its offer, the defendant was entitled to all its costs from 21 days after the offer was made. Accordingly, the defendant was entitled to payment of its costs incurred from 26 February 2010, albeit not on an indemnity basis.

Determining who should pay the costs incurred before 26 February 2010 required the Court to consider whether the defendant had an effective counterclaim. If there was an effective counterclaim, each party should pay 50 per cent of the other’s costs. Teare J found that there was an effective counterclaim due to the following reasons:

(i) It was too late to take the time-bar point;

The defendant argued that once it was clear to the claimant that the defendant was seeking judgment for the damage sustained by the defendant, it was incumbent upon the claimant, if it wished to say that any such claim was time-barred, to say so promptly thereafter. The claimant submitted that the time bar point could be taken at any time before the matter was referred to the Registrar to assess damages. Section 190 of the Merchant Shipping Act 1995 (UK) (the MSA) (based on art 7 of the Collision Convention 1910) barred the remedy of damages, and damages were determined by the Registrar after judgment on liability, so the latest time for taking a time-bar point was before the Court ordered a reference to assess damages.

Section 8 of the Maritime Conventions Act 1911 (UK) (the MCA) provided that 'no action shall be maintainable' unless proceedings were commenced within two years. Section 190 of the MSA, its successor, provides that 'no proceedings … shall be brought' after two years has expired. Thus, what is barred is the proceedings. Whether the time bar is engaged will be apparent when the proceedings are commenced. That is when the claim form is issued or when a defendant to an action for damages caused by a collision counterclaims for judgment in respect of its own damage. The reference, which is the conventional procedure in the Admiralty Court for determining the quantum of damages, is part of the proceedings which are barred. The bar is not restricted to the reference, but extends to the proceedings as a whole.

As a matter of practice, a time-bar point must be pleaded. The modern preferred practice of 'putting your cards on the table' in order to avoid surprise requires that a time-bar point be taken at early stage. In practice time-bar points pursuant to s 190 of the MSA (as with its predecessor, s 8 of the MCA) are taken initially by letter.

Thus, as soon as it is apparent that a shipowner is seeking judgment for the damage sustained in a collision, notwithstanding that it has not brought proceedings within the period of two years from the collision, it is incumbent upon the defendant to that claim to raise the time-bar point if it wishes to rely upon it. That was not done here. It was significant that the claimant was unable to point to any case in which a time-bar point based on s 8 of the MCA or s 190 of the MSA had been taken after the trial on liability.

(ii) The claimant is estopped from doing so;

(iii) The defendant is entitled to an extension of time to bring its counterclaim;

The defendant applied for an extension of time to bring proceedings. Section 190(5) of the MSA gives the Court power to extend the period allowed for bringing proceedings 'to such extent and on such conditions as it thinks fit'. The Court is bound to adopt a two-stage process in dealing with this extension application, stage one being whether there was good reason for an extension and stage two being whether it was fair and just to grant the extension: The Al Tabith and The Alanfushi [1995] 2 Lloyd’s Rep 336 (CMI2489).

What is a good reason for an extension cannot be defined. What must be shown has been described as 'special circumstances which create a real reason why the statutory limitation should not take effect', or 'some good and substantial reason for the exercise of the Court’s discretion in favour of allowing the action to proceed'.

This is a case where an extension of time is sought to bring a relatively small counterclaim which it is sought to set off against the claimant's very much larger claim. That very circumstance is capable of providing good reason for extending time, namely, that in circumstances where the claimant's claim will, in any event, be before the Court, the defendant's counterclaim can be tried on the same evidence and without any increase in expense.

(iv) The defendant is entitled to rely by way of defence on the single liability principle.

A logical consequence of the single liability principle established by The Khedive (1882) 7 App Cas 795, is that where ships A and B collided as a result of the equal fault of each but only A had commenced suit within the two-year limitation period, B was only liable for the amount by which a moiety of A's claim exceeded a moiety of B's claim.

Section 190 of the MSA bars the remedy of bringing proceedings, as did its predecessor, s 8 of the MCA. A shipowner who expects to be the net payee needs to enforce the remedy available to it by bringing proceedings against the other shipowner. If it has failed to comply with s 190 of the MSA, that remedy is barred. However, where it expects to be the net payer, it may not wish to commence proceedings but only, if sued by the other shipowner, to rely upon the principle established by The Khedive to ensure that any judgment obtained against it takes account of the damage suffered by it. In that event it is merely defending itself by relying upon the limitation imposed by the rule in admiralty on the sum in respect of which the defendant is liable to the claimant. It is not bringing proceedings.