In August 2011, the F/V Teraka No 168 ran aground on the Eauripik atoll. The People of Eauripik (Eauripik) brought a class action against the vessel, Yuh Yow Fishery Co Ltd (Yuh Yow), the shipowners, Marin Marawa Ltd (Marin), and Captain Masanaga Shimazu (collectively defendants) for damage to the reef. Eauripik subsequently added the F/V Yuh Yow 606, the F/V Fu Kuan 606, the M/Tug Trabajador-I, Malayan Towage & Salvage Corp, and Hsin Horng Fishery Co Ltd (collectively the assisting defendants) for damage caused by the aforesaid vessels’ unsuccessful attempts to get the F/V Teraka No 168 off the reef. The Federated States of Micronesia (FSM) intervened as a plaintiff.

Marin filed for limitation of liability for USD 575,000. In March 2012, the court approved the limitation for liability application. 

Eauripik applied for partial summary judgment, arguing that the vessel’s maps and charts were inadequate, resulting in the grounding. Eauripik contended that Marin was not entitled to limit liability as the statute was unconstitutional and was overridden by Eauripik custom and tradition, and Marin had waived, or was estopped from asserting, limitation of liability due to its criminal conduct. Eauripik also argued that the limitation of liability defence could not be pleaded because no limitation fund was constituted with the court.

Marin contended that, since the FSM now claims ownership as receiver of the wreck, Marin no longer has an ownership interest. The fund should start at zero so that its previous proffer of USD 1,000 would be adequate pursuant to Supplemental Admiralty and Maritime Rule F(1), which provides that the Fund should be calculated in accordance ‘with value of the owner's interest in the vessel'.

The plaintiffs contend that, in addition, limitation cannot be asserted by the assisting defendants because their claims relate to the creation of a wreck and rendering it harmless.

Held:

Summary judgment denied. Plaintiffs entitled to challenge the fund amount. Marin to constitute the limitation fund by March 2013, failing which, the limitation defence will waived and stricken.

Limitation Statute's Constitutionality

Eauripik had not shown that the Eauripik custom of gariya divests Congress of its power to regulate shipping and commerce, or renders the statute unconstitutional. The FSM Constitution expressly grants Congress exclusive powers ‘to regulate navigation and shipping', and to regulate foreign and interstate commerce. The limitation defence was enacted under Congress's powers to regulate shipping and navigation and foreign and interstate commerce. Statutes are presumed to be constitutional. Furthermore, the international nature of admiralty and maritime law would necessitate that FSM statutory maritime law be applied uniformly throughout the FSM and not vary from island to island.

Calculation of Fund

The relevant FSM statute provides for the Fund amount to be calculated in accordance with the LLMC 1976 and Tonnage Convention 1969. Those Conventions calculate the limitation amount in accordance with the vessel's tonnage and not the value of the owner’s interest. Even in the absence of regulations, Congress's intent in providing for a limitation of liability defence is clear - the limitation of liability fund is to be calculated in accordance with the LLMC 1976. If there is any conflict between Rule F(1) and the limitation statute, then the statute must prevail since the Constitution permits the Chief Justice to promulgate procedural rules which Congress may amend by statute.

A fund must be constituted before the limitation defence can be effective. The court thus ordered Marin to constitute the fund by March 2013.

Burden of Proof

It is not apparent that the limitation of liability defence cannot be asserted. In limitation proceedings, the plaintiffs must prove that the damage was caused by negligence or unseaworthiness. The burden then shifts to the defendant shipowner to demonstrate that he comes within the statutory limitations - there was no design, neglect, privity or knowledge on his part. Eauripik asserts that it has proven negligence - the vessel did not have a navigational chart and thus the master plotted a course running directly over the Eauripik atoll. Eauripik contends that this negligence or unseaworthiness was within the shipowner’s privity and knowledge. Assuming absence of relevant navigational charts proves negligence or unseaworthiness, Marin’s burden is then to prove that it did not have actual knowledge of the lack of charts and could not have known by reasonable inquiry or inspection. Accordingly, summary judgment is inappropriate. Eauripik had yet to overcome Marin's affirmative defence of limitation of liability.