MSC Mediterranean Shipping Company S.A. -v- Stolt Tank Containers B.V. and others 'The MSC Flaminia  EWHC 2746 (Admlty)
The MSC Flaminia and much of its cargo was badly damaged by a container explosion and subsequent fire-fighting efforts. Its owner's claim against the time charterer (MSC) for breach of the obligation not to ship dangerous cargo was upheld in arbitration.
MSC sought to limit its liability under the Amended 1976 Limitation Convention. It is of course well established that a charterer cannot limit its liability for damage to the ship (The CMA Djakarta and The Ocean Victory). Undeterred, MSC claimed that it could nonetheless limit its liability in relation to several heads of loss associated with that damage, including salvage charges, ship repair costs and the costs of removing cargo, damaged cargo, waste and firefighting water from the vessel.
Its principal argument, in essence, was that that damage was consequential on damage to cargo and thus within Article 2(1)(a) of the Convention. Its alternative argument was that several heads of claim were within Article 2(1)(e) ("Claims in respect of the removal, destruction or the tendering harmless of the cargo of the ship") or (f) ("Claims of a person other than the person liable in respect of measures taken in order to avert or minimize loss for which the person liable may limit his liability in accordance with the Convention, and further loss caused by such measures").
For its part, the owner sought to argue that claims between "insiders" (i.e., members of the class of those permitted in principle to limit their liability under the Convention) could never fall within Article 2(1)(a).
The judge rejected all these arguments. Claims between "insiders" – most obviously in relation to cargo claims – could certainly fall within Article 2(1)(a), and the owner's broad submission was therefore rejected. MSC's submissions likewise failed, in essence because they sought to mischaracterise the owner's claims by reference to causation. The proper approach, according to the judge, was to characterise them by reference to their nature. A claim for damage to a ship caused by damage to cargo was still a claim for damage to the ship, not a claim consequential upon damage to cargo. Similarly, the costs of removing cargo waste and firefighting water were incurred to prepare the ship for repair and so were also claims for damage to the ship.
The judge also rejected an argument (founded on a contention in Derrington & Turner on Admiralty Matters) that "consequential loss" in Article 2(1)(a) referred only to losses suffered by the owner or person entitled to possession of physically damaged or lost property. The judge preferred the conclusion of Finkelstein J in the Australian case of The APL Sydney, upholding the right to limit against a claim for pure economic loss resulting from damage to a pipeline in which the claimant had no proprietorial interest, but on which its business depended.
This lengthy and careful judgment would repay careful reading. However, it is not the last words on these questions. The Court of Appeal heard the appeal in July and its judgment is expected in October.
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