An unusual, and often misunderstood, feature of maritime
law - arising under international convention and adopted into
Australian law - is the ability of shipowning and operating
interests to limit their liability in certain
The underlying policy is said to be to protect shipowners from
the sometimes disproportionate liability risks they face, and also
to provide a distinct limit that makes potentially spectacular
The size of the limitation fund is calculated by reference to
the tonnage of the ship involved or, in relation to passenger
claims, to the number of passengers the ship is licensed to carry.
If claims made exceed the limitation fund, they are paid on a
proportionate basis. Most claims for injury and loss of life,
infringements of rights and damage to property are limitable.
Common claims that are not limitable include those for salvage, and
Limitation does not occur frequently as only the most serious
incidents produce losses higher than the applicable limits. However
in matters involving major casualties, the limitation fund and
therefore the owner's maximum legal liability can be
significantly less than the full amount of potential claims against
the owner or operator. Limitation has been invoked in Australia in
two recent cases, each highlighting a different issue.
Following the "Pacific Adventurer" oil spill in 2009
the vessel's well known owners could invoke limitation but
came under tremendous political and popular pressure not to do so.
The situation resolved but not before the owners indicated that
they would both set up a limitation fund and make an extremely
substantial donation to a government controlled environmental
trust. In future, will "brand name" shipowners involved
in high profile incidents in Australia find it practical to limit
In late 2008 the "APL Sydney" dragged its anchor
across a submarine gas pipeline in Port Phillip Bay, allegedly
causing extremely large losses. The owners moved to limit. A
limitation fund covers all claims arising "on any distinct
occasion". Although there was what could be seen as one
overarching (but drawn out) casualty, claimants argued that the
course of the ship's entanglement with and extrication from
the pipeline - first damaging, and then rupturing it - constituted
more than one "distinct occasion". The Federal Court
agreed and concluded there were two distinct occasions (or
incidents), such that the shipowner effectively had to establish
two limitation funds, each for the full limitation amount.
Marine casualties resulting in claims for limitation will now
more than ever be closely scrutinised by claimants seeking to
classify the casualty as not a single occurrence but rather as a
series of incidents.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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