Sabah Shell Petroleum Co Ltd (the plaintiff) engaged in offshore oil and gas exploration and production activities. The plaintiff operated offshore platform structures which included an underwater pipeline. The plaintiff contracted with the owners of the vessel Borcos Takdir to delivery food, equipment, tools and machinery to the plaintiff’s offshore platform structures. On 28 July 2004, the vessel damaged the pipeline by dropping anchor over the pipeline thereby snagging and rupturing it.

The defendant pleaded the defence of limitation of liability under s 360 of the Merchant Shipping Ordinance 1952 (which is similar to art 1.1 of the International Convention Relating to the Limitation of the Liability of Owners of Seagoing Ships 1957 (LLMC 1957)).

Held: The defendant’s application to limit liability under the LLMC 1957 is rejected.

In order for a party to be entitled to limit liability under the LLMC 1957, the shipowner has to establish whether the incident occurred without its actual fault or privity. It is trite law that under the wording of the LLMC 1957, the burden lies on the defendant to establish that the incident occurred without its actual fault or privity.

Actual fault and privity refers to some fault or blameworthy conduct which was personal to the owners of the ship or to which they consented or of which they had knowledge.

Neither the employment of a competent master nor a manager would divest a shipowner of its responsibility.

In reviewing the evidence presented, the court found the following infractions against the defendant:

1. There was no comprehensive guide on the procedure to be adopted in dropping anchor in the defendant’s safety management system prior to the incident.
2. There was no emphasis on the importance of plotting positions prior to the incident to inculcate safe anchoring procedures.
3. There was no supervision of navigational skills or practices of the master of the vessel to ensure that he was complying with or practising safe anchoring procedures.
4. There were no briefings or audit checks on the operational issues relating to the dropping of the anchor.
5. There were no audits or supervision of the navigational procedures such as parallel indexing for the purposes of ascertaining the anchor drop.
6. There was insufficient specification of a stop work policy on incidents where a vessel came across an obstruction within the vicinity of the pipeline.
7. There was insufficient briefing on the dangers of forcing or applying forward thrust when a pipeline in the vicinity of an oil field was snagged.

In light of the above infractions, it was clear that the defendant simply shut its eyes to the obvious risk of a casualty arising from a defective anchor operation in the vicinity of an oil pipeline. This showed that the incident happened with the actual fault and privity of the defendant. The defendant was therefore not entitled to limit its liability.