This case concerned whether Tryg Forsikring A/S (Tryg), as a cargo insurer, was bound by the distribution of a limitation fund which was set up in Liberia in connection with the capsizing of the M/V Torm Alexandra in the port of Monrovia, Liberia. Hansen & Lange I Malta Ltd (Hansen), the shipowner, and Torm Lines A/S Dampskibsselskabet Torm (Torm), the time charterer of the M/V Torm Alexandra, did not dispute that a skewed distribution has taken place to the detriment of Tryg. Tryg filed a claim that Torm and Hansen be ordered to pay DKK 248,769.88.

Torm and Hansen claimed that the case was previously dismissed by the Maritime and Commercial High Court on the grounds that the case was to be brought in London: see cl 2 of the bill of lading. By the judgment of the Maritime and Commercial High Court of 31 October 2005, the case was dismissed (see CMI1563). This judgment was appealed to the Supreme Court on 14 November 2005 (HR 467/05), and by the Supreme Court's ruling of 12 April 2007, the case was remanded back to the Maritime and Commercial High Court.

The Danish Red Cross bought a batch of carpets on C&F terms from a carpet factory in Italy for use in an emergency aid program in Liberia. The rugs had a value of USD 30,225, corresponding to DKK 248,769.88. They were stored in a container and shipped by the seller on the M/S Mirella under a bill of lading issued by MSC Mediterranean Shipping Co SA (MSC) for delivery to the International Red Cross in Monrovia. The bill of lading contained the following venue and choice of law clause as well as liability clause (Himalalya clause):

2. LAW AND JURISDICTION. Claims and disputes arising under or in connection with this Bill of Lading shall be referred to the High Court of Justice in London or such other place as the Carrier in his sole discretion shall designate. English law shall be applied, unless some other law is compulsory applicable. ...

18. LIABILITY OF SERVANTS AND SUB-CONTRACTORS. It is hereby expressly agreed that no servant or agent of the carrier, including any independent sub-contractor employed by the Carrier in any circumstance whatsoever be under any liability whatsoever to the Merchant for any loss or damage or delay of whatsoever kind arising or resulting directly or indirectly from any act, neglect or default on his part while acting in the course of, or in connection with his employment and without prejudice to the generality of the foregoing provisions in this clause, every exception, limitation, condition and liberty herein contained and every right, exception from liability, defense and immunity of whatever nature applicable to the Carrier or to which the Carrier is entitled hereunder shall also be available and shall extend to protect every such servant or agent of the Carrier (including any stevedore, terminal operator or any other independent contractor) acting as the aforesaid and for the purpose of the foregoing provisions of this clause the Carrier is or shall be deemed to be acting as agent or trustee on behalf of and for the benefit of all persons who are or might be his servant or agent (including all independent contractors as aforesaid) and all such persons shall to this extent be or be deemed to be party to this Bill of Lading.

During the voyage, the container was transhipped to the M/V Torm Alexandra. Hansen had entered into an agreement with MSC regarding over 30 container slots available on the ship, according to a slot agreement with Torm. No bill of lading issued by Torm was submitted, but it was stated that a service bill of lading was issued by Torm to MSC.

The ship capsized on 25 July 2001 in the port of Monrovia. The container was opened by unknown persons and the blankets disappeared. On 3 January 2002, Tryg paid compensation to the Danish Red Cross. On 2 April 2002, Tryg filed a claim for damages against Hansen, and on 6 May 2002 against MSC. On 12 June 2002, the Insurance Association Skuld (Skuld) informed Tryg's lawyer that the claim had been forwarded to France P&I (France), which had been appointed by Torm as claims handler. A copy of this letter was sent to Torm.

In a letter dated 13 June 2002 to Tryg's lawyer, France informed that it did not accept Torm as directly responsible; that a settlement was sought against payment of 50% of the amount; and that a limitation fund was being set up in Liberia. On 13 June 2002, Tryg's lawyer replied that Tryg was not necessarily obliged to participate in the fund, and asked why the fund would be established in Liberia, as no legal action had been taken.

By order of 4 July 2002, at the request of Torm and Hansen, a limitation fund was established in Monrovia in accordance with the LLMC 1976, which both Liberia and Denmark have ratified. Under the LLMC 1976, Torm and Hansen were able to limit their liability to SDR 749,496, equivalent to USD 967,000, but the Court in Monrovia increased the limitation amount to USD 1,500,000, of which USD 690,000 was allocated for the removal of the wreck, while the rest was to be distributed pro rata between the notified claims.

In July 2002, France notified Tryg of the establishment of the fund and the notification of the claim.

On 14 August 2002, the Liberian Court made a preliminary ruling on the distribution of the fund's resources. The ruling stated, among other things:

As to the claims of insurers, such as SKULD and France P&I club, and the claims by persons who provided services in respect of the sunk vessel, this Court observes that said claims are so disproportionate to the value of the Balance of the Augmented Limitation Fund that it is laughable. Were the Court to address any of these claims in the manner suggested by the claimants, that is, that the Balance of the Augmented Limitation Fund should be divided on a pro rata basis according to the claims, the party to be most affected, even though it is the party that is the most aggrieved, would be the National Port Authority.

This Court cannot ignore the fact that the owner and charter brought their vessel to Liberia and sank at the Free Port of Monrovia. The National Port Authority has not only lost revenue because its berth could not be used but its facilities were also damaged. Unlike the cargo owners, these losses incurred by the national Port Authority are not losses that are foreseeable in the normal course of business and for which insurance can be obtained. Also as between the insurers and other claimants who are in the business of providing indemnities for such accidents and the results thereof, the National Port Authority is not in the business of repairing damaged facilities of ports and securing ports against loss of revenue as a consequence of the sinking of a vessel. So as between the National Port Authority and these insurers and other claimants, the latter are in a better position to sustain the losses.

Another item of consideration is the public interest. The Liberian public has an interest in the only commercial port of Liberia being restored and used, and given the very small amount of US$ 810,000,00 left to settle all obligations, it is the National Port Authority, based on public interest, which must be satisfied if there is to be any equity in the distribution of the Balance of the Augmented Limitation Fund.

It is based on the foregoing consideration, that this Court has already ordered the amount of US$ 799,500,00 from the Balance Augmented Limitation Fund to cover all the liabilities to the National Port Authority, legal fees and expenses, court fees, and bank charges. Because US$ 100,000,00 of the amount ordered disbursed was reimbursable to the fund, and same has been reimbursed, the balance of the Augmented Limitation Fund now available for distribution is US$ 110,500,00. …

As the removal of the vessel and the pollutants is primary, any and all matters relating thereto should be first completed before any claimant besides the National Port Authority, can get compensated. So notwithstanding the distribution as aforesaid ordered, no actual distribution shall be made until after the final certification that the wreck of the vessel has been removed and that there is no need for arbitration to determine whether there has been performance of the works to remove said wreck and pollutants.

Of the limitation amount, USD 110,500 was distributed, with USD 68,100 allocated to costs associated with fund management, and the remaining USD 42,400 distributed among shipowners, time charterers, insurance companies, and cargo owners. Tryg's claim did not appear in the ruling, but was contained in a claim of USD 1,490,713, which was stated next to Hansen, for which USD 24,000 in dividends was set aside. Based on the ruling, Tryg would receive USD 1,818.16 in dividend of the notified claim. The payment of the amount awaits the removal of the wreck.

By letter dated 5 May 2003 from France, Tryg's lawyer received a copy of the ruling and notification of the size of the dividend. In a letter dated 7 May 2003 to Skuld, Tryg's lawyer criticised the constitution of the limitation fund and maintained that Tryg's claims should be paid in full. Furthermore, Tryg's lawyer argued that its claim was not covered by the limitation fund, as the damage had not occurred in the capsizing of the ship, but only in the subsequent theft. This argument was later dropped. In August 2004, Tryg's lawyer asked France to have the dividend amount paid as an on-account amount and asked if an objection had been raised against the ruling of 14 August 2002. On the same day, Tryg's lawyer asked Skuld to document what claims were listed next to Hansen and Torm.

Tryg argued that Hansen and Torm were jointly and severally liable for the damage as performing and intermediate contracting carriers respectively. It must be the carriers, and not Tryg, who bore the risk that the limitation fund was not distributed correctly. Torm and Hansen could have asked Tryg to bring an action in Denmark so that the limitation fund could have been established in Denmark. In this case, the Court must decide whether Torm and Hansen were protected by the constitution of the limitation fund. The fund was set up in violation of the LLMC 1976, as no legal action had been taken in Liberia. Torm accepted an increase in the fund amount, although there was no authority for this. Next, there was a skewed distribution of the fund amount in favour of the Liberian creditors, which was not in accordance with Liberian law. Furthermore, the fund amount had never been paid out. Security must therefore be provided as if the fund had never been constituted. The Court must therefore disregard the constitution of the fund in Liberia, as the fund was not actually made available: see s 178(1) v of the Maritime Act, which corresponds to art 13.3 of the LLMC 1976: 'The regulations of subsections 1-4 shall apply only if the claimant may bring a claim against the fund before the court administering that fund and the fund is actually available and freely transferable in respect of that claim.' Liberia was not a State governed by the rule of law, as the Liberian Court did not apply the rules of the Convention. Finally, Tryg was only notified of the distribution order almost one year after it had been handed down.

Torm contended that, as an intermediary carrier, it was not liable. Tryg initially raised the claim against Hansen. France was an independent contractor that was used to report claims in the fund. Tryg had also only sent its claim to France and not to Hansen and Torm. The review from France was a service. Tryg could have contacted local legal advisers in Liberia. Torm was justified to set up a limitation fund in Liberia, as claims had been made in Liberia against the ship and its interests. Tryg could have appealed both the decision to constitute the fund and the decision to distribute the fund amount to a higher court. The distribution order did not give the impression that Liberia was a State with an uncivilised legal system. The ruling contained a number of considerations as well as justification for the result. The decision was made by a very respectable Judge and the judicial system was not under the influence of the government. Tryg had been able to report claims in the fund, which was actually available and could be freely transferred to cover the claim: see s 178(1)(v) of the Maritime Act. There was therefore no basis for disregarding the constitution of the fund. If the Liberian ruling were to be set aside as a matter of public policy, Tryg must prove that it is contrary to basic Danish legal principles.

Hansen agreed with the views expressed by Torm. Tryg was bound by the limitation fund's distribution, as the claim had been notified to the fund without making any reservations, and Tryg requested payment from the fund. A limitation fund was typically set up where the accident occurred, which in this case was Liberia. The alternative for Hansen would be to set up a limitation fund in Malta, where the company was based. Denmark had acceded to the LLMC 1976 and was therefore bound in relation to Liberia to accept the establishment and distribution of funds. The fact that the fund amount had almost doubled neutralises the skew to a certain extent. It was also not unknown in maritime law that certain claims take precedence over others.

Held: Judgment for Torm and Hansen.

Both Denmark and Liberia have acceded to the LLMC 1976, which is why Denmark must in principle recognise a limitation fund set up in Liberia. According to art 14 of the LLMC 1976, the rules of the country in which the fund is to be set up determine the establishment and distribution of the fund and the rules of procedure relating thereto.

It is common ground that the claim which Tryg made in this case arose from the capsizing of the M/V Torm Alexandra in the port of Monrovia. The claim has been notified and recognised in the fund, and a dividend of the amount has been set aside by the distribution order of 14 August 2002. According to art 13.1 of the Convention, a creditor who notifies claims in a limitation fund is barred from raising independent claims against those responsible outside the fund. This provision does not apply if the fund is not available and the fund amount cannot be freely transferred to cover the claim. The distribution order shows that the claim has been notified and the dividend amount can be paid. The provisions in arts 13.1 and 13.2 of the Convention can therefore not be overridden pursuant to art 13.3, which corresponds to the Maritime Act s 178(1)(v).

Tryg has stated a number of reasons why the Court should be able to override the provision in art 13 that creditors may not raise claims when a limitation fund has been set up, namely that the condition for setting up a fund did not exist in the absence of legal action in Liberia: see art 11.1; that the fund amount was too high: see art 6; and that the fund amount was not distributed pro rata: see art 12. There is no evidence that legal action was taken in Liberia, and it is common ground that the amount of the fund exceeded the limitation amount, and that there was some distortion. These facts could have been asserted in an appeal on the Liberian rulings. The Court does not find that these circumstances are of such a nature that a recognition of the Liberian rulings will be manifestly incompatible with the legal order in Denmark, which is why Torm and Hansen are not liable.