Background
The vessel “THORCO LINEAGE” carrying zinc calcine ran aground in French Polynesia due to engine failure while en route from the USA to Australia in June 2018. Salvors were hired to re-float the ship and tow it to South Korea for repairs. The salvors had a maritime lien on the salvaged property, and the cargo owners provided security of $8 million. Only a small portion of the cargo suffered physical damage or loss. The cargo owners (Claimant) claimed nearly $8.5 million from the shipowner (Defendant) for various reasons, including the liability to salvors, physical damage to the cargo, on-shipment costs, and cargo disposal costs. The Defendant argued that their liability should be limited to the physically damaged cargo, as per Article IV rule 5(a) of the Hague-Visby Rules. The parties agreed to refer the question of whether Defendant could limit their liability and the amount of such limitation to the Commercial Court for resolution.
The decision of the Commercial Court (Sir Nigel Teare)
The dispute in the case centred around the interpretation of the phrase “goods lost or damaged” in Article IV Rule 5(a) of the Hague-Visby Rules. The Claimant argued that the phrase should include both physical and economic losses, while the Defendant objected, citing a previous case (The Limnos) where it was concluded that “damaged” referred only to physical damage. However, the Commercial Court rejected the interpretation of The Limnos and held that the phrase should encompass both physical and economic damage. The Court believed that this interpretation aligns with the intention of the Rules to limit a carrier’s liability for “loss or damage or in connection with” the goods. Additionally, although not directly addressed in the case, the Court viewed the entire cargo as “damaged” due to the loss of proprietary and possessory interests caused by the maritime lien of the salvors. Therefore, Defendant’s liability for various claims, including the liability to salvors and on-shipment costs, was limited based on the weight of the entire cargo rather than just the physically damaged portion.
Comments
The case of The Thorco Lineage has established that carriers can now benefit from the limitation in Article IV Rule 5(a) of the Hague-Visby Rules for both physical and economic losses claims. Previously, carriers could only invoke limitations for physical damage claims. This decision is seen as a victory for the cargo claimant in this particular case, as the weight of the cargo exceeded the limitation figure. However, it is also welcomed by carriers in general, as it allows them to limit liability for various economic losses, such as market value diminution, salvor liability, and additional costs. The Judge’s detailed analysis of legal sources and persuasive reasoning in The Thorco Lineage may make it a preferred precedent for future cases, despite the existence of inconsistent judgments. The Defendant did not receive permission to appeal, leaving two conflicting first-instance rulings.
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Source: UK Pandi
