Law of Tug and Tow and Offshore Contracts
Page 541
CHAPTER 12
Towage and limitation of liability
Part A. Limiting Liability: General Principles
Historical background
A question of policy
12.1 The right in English law of a shipowner to limit his liability to a fixed sum calculated by reference to the tonnage of his vessel in the event of loss or damage caused to others by his vessel or his crew, rather than by his personal fault or omission, is of considerable antiquity (the first statute of limitation of liability was in 1734, 7 Geo. 2, c. 15). The right is a creature of statute and, although it may appear to work injustice in certain cases, it is well-settled as a matter of public policy and is (arguably) defensible upon these grounds As Lord Denning MR summarised the position in The Bramley Moore [1964] P 200 at p. 220: “but limitation of liability is not a matter of justice. It is a rule of public policy which has its origin in history and its justification in convenience.” 12.2 A detailed consideration of the law relating to limitation of liability is outside the scope of this book. For a still valuable detailed account, including the historical background and comparative analysis with other jurisdictions, see Professor N. Gaskell (ed.), Limitation of Shipowners’ Liability: The New Law (1986); for a compendious modern overview, see Griggs, Williams and Farr, Limitation of Liability (4th edn, 2004). 12.3 However, a consideration of the historical development of the statutory limitation of a shipowner’s liability is necessary in order to put into context the decisions of the English courts on certain important limitation questions touching upon tug and tow.The English approach
12.4 The English statutory approach to limitation of liability became gradually defined during the eighteenth and nineteenth centuries (see eg the Responsibility of Shipowners Act 1813 and the Merchant Shipping Act 1854). Certain features of that approach set it apart from corresponding developments in the law of the United States and of other ship-owning nations, such as the Scandinavian states. The features of the English approach were five-fold:- i The shipowner was entitled to limit his liability to a sum of money calculated by reference to a fixed sum multiplied by the tonnage of the offending vessel rather than upon the value of the ship after the casualty.
- ii The claims in respect of which the shipowner could invoke limitation were confined, at first, to claims in respect of damage to property with, thereafter, a special limitation category for claims for death and personal injury.
- iii The “fund” produced by the tonnage calculation was to be distributed between the claimants pro rata in proportion to the size of their claims one to another (cf. the approach in other jurisdictions which adopted a gradation of claimants on principles akin to those regulating priorities in rem).
- iv The English approach restricted the application of limitation of liability to claims arising on any one distinct occasion rather than permitting its application to a simple aggregation of all claims which had accrued at the date of the casualty.
- v
The right to limit liability was lost in the event that the loss and damage or casualty resulted from personal fault on the part of the shipowner himself rather than from the negligence or default of his crew.Page 542
Section 503 of the Merchant Shipping Act 1894
12.5 These principles were reflected in the first of the modern statutes dealing with limitation of liability, the Merchant Shipping Act 1894 in its section 503. As originally enacted, section 503 provided for a system of limitation based on a fixed sum per ton of the vessel’s tonnage, calculated in accordance with the Act. The right to limit granted to shipowners was lost in the event that the relevant “occurrence” took place “with their actual fault or privity. 12.6 The English law of limitation of liability remained that enacted in the 1894 Act. In 1924, the Comité Maritime International was prominent in the adoption and promotion of an International Convention on Limitation which allowed the shipowner the right to choose between limiting on the basis of a sum per ton (corresponding closely to the English system) and the value of the vessel and its freight. The United Kingdom did not accede to the Convention which remained, consequently, of limited effect, although it was adopted by several important ship-owning nations. 12.7 Following World War II, further progress was made at the international and conventional level. The 1957 Convention Relating to the Limitation of Liability of Owners of Sea-going Ships was the result. This Convention marked the international recognition and adoption of the English statutory approach set out in the 1894 Act, coupled with a much wider application of the right of limit to cover, in practice, all liabilities in respect of loss and damage occasioned by the shipowner’s operation of a vessel. The close correspondence between the 1957 Convention and the English statutory system led to the amendment of the 1894 Act by the Merchant Shipping (Liability of Shipowners and Others) Act 1958 to implement the 1957 Convention. 12.8 The Merchant Shipping Acts 1979, 1981 and 1984 made further changes to the 1894 Act, principally to change the limitation figures to Special Drawing Right figures and to increase the limitation fund.The Merchant Shipping Act 1979 (replaced by the Merchant Shipping Act 1995): the new regime
12.9 The limitation figures adopted by the Convention were little higher than those used in the nineteenth century UK statutes. The inadequacy and insufficiency of these rapidly became apparent in the 1960s. The growing awareness of oil pollution risks and the consequent adoption in 1969 of the Convention on Civil Liability for Oil Pollution Damage with a greatly increased limitation figure for oil pollution damage led the CMI to start work on the revision of the 1957 Convention. 12.10 The 1976 Convention which resulted made a radical change to the approach of the 1957 Convention. While liability was still to be limited by reference to a limitation figure or “fund” calculated on the basis of the defendant vessel’s tonnage, that limit was greatly increased. (Although the increase did little more than to reflect what was, in 1976, the level of limit used in the 1924 Convention, scaled up for the change in money values.) In return for the increase in the level of the limitation fund, the Convention abandoned the test of “actual fault or privity” on the part of the owner seeking to limit liability as the test for conduct which removed the right to limit and replaced it with a much more exacting test from the point of view of the claimant seeking to break the limit. In the words of Article 4:A person shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss or recklessly and with knowledge that such loss would probably result.