Due to the joint negligence of the crews of both ships, the plaintiff’s container ship the Alexandria collided with the defendant’s cargo carrier the Xin Hua 7. The collision resulted in the following consequences: the Alexandria sank and the oil on that ship leaked; the sea off Taejongdae, Busan was contaminated; and the defendant’s cargo carried on the Alexandria floated into the water and became an impediment of other ships' navigation.

The plaintiff’s P&I Club paid for the cost of oil pollution control (USD 879,338.96) and the cost of towing the containers (USD 572,466.75). The court at first instance came to the conclusion that both the cost of towing the containers and the cost of oil pollution control were limited liability claims according to arts 746(1), (3) and (4) of the Commercial Act. The plaintiff appealed.

The main issue for the Supreme Court to consider was that whether the reimbursement of a wreck removal costs claim which was brought by the owner of the collided vessel who has a statutory obligation of wreck removal and has paid the cost of wreck removal incurred from the collision of vessels against the owner of the colliding vessel is an unlimited liability claim under art 748(4) of the Commercial Act or a limited liability claim under arts 746(1), (3) or (4) of the Commercial Act?

Held: This claim is a limited liability claim according to arts 746(1), (3) or (4) of the Commercial Act. The plaintiff’s appeal is dismissed.

The relevant provision reads as follows:

Article 748 (Claims Excepted from Limitation)

The shipowner shall not limit his liability for the following claims:

(4) claims arising in connection with the lifting, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned its cargoes, and any other thing that is or was on board such vessel

In light of the language, legislative intent, and historical context of this provision, the Supreme Court held that the appropriate interpretation of this provision is that it does not allow the shipowner to limit its liability as to wreck removal claims if it is statutorily liable for wreck removal.

This clause as cited by the Supreme Court excludes the application of arts 2.1.d and 2.1.e of the Convention on Limitation of Liability for Maritime Claims of 1976 (LLMC Convention 1976) which is based on art 1.1.c of the International Convention Relating to the Limitation of the Liability of Owners of Seagoing Ships (LLMC Convention 1957).

However, a claim in which the shipowner with a statutory obligation of wreck removal seeks an indemnity for the damages incurred in the course of its performance of its obligations and responsibilities against the owner of the colliding ship whose collision caused the damages incurred by the first shipowner may not be viewed as a claim under art 748(4) of the Commercial Act. To the contrary, such claim should be seen as a limited liability claim governed by arts 746(1), (3) or (4) of the Commercial Act.

Therefore, the court below was right to decide that the indemnification claims in respect to the costs of towing the container ship or in respect to the cost of oil pollution control are limited liability claims governed by art 746 of the Commercial Act, but was wrong in deciding that the cost of oil pollution control was unlikely to qualify as a 'claim in respect of removing other things' as set forth in art 748(4) of the Commercial Act.