Claims against time charterers for damage to ship, caused by damage to cargo, not subject to limitation under 1976 LLMC.

In  July 2012 while under charter to MSC from the owner Conti, the MSC Flaminia suffered an explosion which killed five of her crew, and one crew member was never found.  Hundreds of containers were destroyed and extensive damage was caused to the ship. The explosion was caused by auto-polymerisation of the contents of one or more of three tank containers laden with 80% divinylbenzene (‘DVB’) which  had been shipped at New Orleans on 1 July 2012. In a series of arbitration awards MSC was held liable to Conti in respect of the casualty, and Conti was awarded damages of c.US$200 million on a quantification by the arbitrators of its recoverable losses.

In June 2020 MSC commenced an Admiralty limitation claim under the 1976 LLMC as amended by the 1996 Protocol which came before Andrew Baker J who gave judgment at the start of this month, MSC Mediterranean Shipping Company SA v Stolt Tank Containers BV & Ors [2022] EWHC 2746 (Admlty) (02 November 2022)

There were three defendants two Stolt companies (the first and second defendants, ‘Stolt’), Stolt having been the road carrier of the DVB tank containers to New Orleans, and vis-à-vis MSC the shippers of those containers onto MSC Flaminia, claimants other than Stolt in a claim brought by cargo claimants whose bill of lading claims against MSC were subject to English law and jurisdiction, and Conti, the shipowner.

Conti’s claims included ship repair costs, payments to public authorities in Belgium, France, the UK and Germany following the casualty and also the costs of and associated with removing the waste from the ship. Could MSC limit in respect of these claims? This involved a question of whether the effect of the phrase ‘consequential loss’ in Article 2(1)(a). Where losses caused by damage to the cargo were losses which Conti was required to incur in order to repair the ship, could Conti’s claims in respect of those losses be characterised as claims in respect of damage to the ship or consequential losses resulting from such damage and if so, did it follow that those claims could not be limited under Article 2(1)(a)?

Claims for consequential loss had been found to be limitable in The Aegean Sea  and The APK Sydney. Andrew Baker J, considered that the lost profits claims in The Aegean Sea, were claims for consequential loss resulting from the environmental damage, and the lost profits claims in The APL Sydney, had been claims for consequential loss resulting from the pipeline damage, where the relevant property damage occurred in direct connection with the operation of the ship in question, and was not damage to the ship herself. Those claims as made against the owner were limitable, and similarly the claim by the owner to pass those claims on to the charterer.

However that was not the case in the instant case, which involved claims in respect of damage to the ship which were not limitable, as held by the Court of Appeal in The CMA Djakarta , approved obiter by the Supreme Court in The Ocean Victory. The fact that it could be said, in point of fact, that all the damage to the ship can be traced back, by a chain of causation, to loss of or damage to the DVB that exploded, did not mean that a claim by Conti for compensation for damage to the ship was a claim in respect of loss of or damage to the DVB (or consequential loss resulting therefrom). The causal connection on the facts did not turn a claim for damaging the ship into a cargo claim. Conti’s claim against MSC, established in the arbitration, did not seek to enforce a right of redress in respect of loss of or damage to cargo, but rather a right of redress in respect of the risk of harm to the ship that had been posed by the cargo, and the damage the ship suffered when that risk eventuated

MSC also claimed that costs incurred by Conti related to the removal or destruction of cargo waste, burned or unburned were limitable under Article 2(1)(e), as claims “in respect of the removal, destruction or the rendering harmless of the cargo of the ship”. This claim was also found not to be limitable. The ordinary meaning of Article 2.1(d)/(e), is that tonnage limitation is to apply in respect of liabilities such as might be incurred by an owner for casualty intervention or aftermath liabilities of the kinds indicated, i.e. wreck removal (etc.) (Article 2.1(d)) and cargo removal, destruction or neutralisation (Article 2.1(e)). Conti’s claim for reimbursement of or damages in respect of the cost of cargo handling due to MSC’s breach in loading dangerous cargo was not a claim in respect of the removal, destruction or rendering harmless of cargo within Article 2.1(e). Nor could the claims be limitable to the extent that the relevant costs related to the removal or destruction of cargo waste, burned or unburned as they were to be characterised as claims in respect of damage to the ship or for consequential losses resulting from such damage.

As regards Conti’s costs cost incurred in disposing of the firefighting water these were not limitable under Article 2.1(f) as the claim was not distinct from the non-limitable category of claims in respect of the loss of or damage to the ship.

Effectively, all Conti’s claims related to damage to the ship and the fact that had occurred due to the damage to the cargo in the explosion did not mean that the claim was one relating to damage to cargo. All the claims were claims for damage to the ship and were not subject to limitation.

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Professor Simon Baughen

Professor Simon Baughen was appointed as Professor of Shipping Law in September 2013 (previously Reader at the University of Bristol Law School). Simon Baughen studied law at Oxford and practised in maritime law for several years before joining academia. His research interests lie mainly in the field of shipping law, but also include the law of trusts and the environmental law implications of the activities of multinational corporations in the developing world. Simon's book on Shipping Law, has run to seven editions (soon to be eight) and is already well-known to academics and students alike as by far the most learned and approachable work on the subject. Furthermore, he is now the author of the very well-established practitioner's work Summerskill on Laytime. He has an extensive list of publications to his name, including International Trade and the Protection of the Environment, and Human Rights and Corporate Wrongs - Closing the Governance Gap. He has also written and taught extensively on commercial law, trusts and environmental law. Simon is a member of the Institute of International Shipping and Trade Law, a University Research Centre within the School of Law, and he currently teaches at Swansea on the LLM in:Carriage of Goods by Sea, Land and Air; Charterparties Law and Practice; International Corporate Governance.

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