Alegrete Shipping Company Inc. v International Oil Pollution Compensation Fund (The Sea Empress)
| Jurisdiction | England & Wales |
| Judge | Mr Justice David Steel |
| Judgment Date | 07 February 2003 |
| Neutral Citation | [2002] EWHC 1095 (Admlty) |
| Docket Number | Case No: 1998/1868 |
| Court | Queen's Bench Division (Admiralty) |
| Date | 07 February 2003 |
[2002] EWHC 1095 (Admlty)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
ADMIRALTY COURT
The Honourable Mr Justice David Steel
Case No: 1998/1868
David Westcott and David E Grant (instructed by Clarke, Wilmott and Clarke) for the Claimants
Julian Flaux QC and David Goldstone (instructed by Clifford Chance) for the Defendants
Hearing date: 16th April 2002
APPROVED JUDGMENT
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The Court is concerned with a preliminary issue in the claim arising out of the grounding of the Sea Empress off Milford Haven in February 1996. The claim is brought by RJ Tilbury & Sons (Devon) Ltd ("Tilbury") against the owners of the Sea Empress ("the owners") pursuant to section 153 of Schedule 4 to the Merchant Shipping Act 1995. The claim is brought in the limitation proceedings that were commenced by the owners on the 29th April 1999. This preliminary issue proceeds on the basis that the claimants' pleaded case is presumed to be correct.
The totality of the claims arising out of the incident is substantially in excess of the owners limitation figure calculated pursuant to section 157 of the Act. In short, the total sum already paid out to the claimant is in the order of £34 million where the limitation figure is only about £7.4 million. Thus the owners have no further financial interest in the outcome.
By virtue of its obligation under the "top up" provision in section 175 of the Act, the International Oil Pollution Compensation Fund 1971 ("the Fund") is responsible for all claims above the owners limit subject to the Fund's own limit (which has not and will not arise). The Fund has accordingly intervened in the limitation action.
Tilbury is a company engaged in the business of fish processing. It is based in Exmouth in Devon. Something in the region of half of Tilbury's sales were accounted for in processed whelks. Most of these whelks were Welsh, in respect of which there was a lucrative Korean market (the alternative of Grimsby whelks being far less prized). To this end, Tilbury had a long-term sales contract with Yosung Mulsan Company Limited.
Tilbury had supply contracts with fishermen who fished the whelk ground between Tenby and Saundersfoot landing their catch in the Milford Haven area. Following the grounding, some 72,000 tonnes of crude oil spilled into the sea. The spillage lead to the imposition of a fishing ban pursuant to Part 1 of the Food and Environment Pollution Act 1985. That ban was in force from the 28th February to the 12th September 1996.
The relevant regulation provided as follows:—
"Rule 2
In the opinion of the Secretary of State, any edible plants, edible seaweed and fish in the area designated in Article 3 below may be affected by oil or other chemical substances which are likely to create a hazard to human health if they are consumed.
Rule 4
No person shall fish for or take fish in the designated area.
Rule 5
No person shall gather or pick edible plants or edible seaweed in the designated area.
Rule 6
No person shall remove any edible plants, edible seaweed or fish out of the designated area.
Rule 7
No person shall in the United Kingdom or in United Kingdom waters –
(a) use any edible plants, edible seaweed or fish taken out of the designated area after the relevant time, preparation or processing for supply of food or anything from which food could be derived …'
As a result of these restrictions, Tilbury claim to have lost the profit that it would otherwise have made from processing whelks supplied by the fishermen to the tune of £643,557.00. Tilbury contends that this sum is recoverable without proof of default by virtue of section 153(1) (a) of schedule 4 to the Merchant Shipping Act 1995 which provides:
"Where, as a result of any occurrence … any persistent oil… is discharged or escapes from a ship, to which this section applies, then the owner of the ship shall be liable –
(a) for any damage caused in the territory of the United Kingdom by contamination resulting from the discharge or escape …
The claimant's argument can be summarised briefly:
a) By virtue of Section 170 (I) of the Act, "damage" includes "loss";
b) Accordingly economic loss caused by contamination resulting from the escape of oil is recoverable in principle;
c) The claimant's economic loss was caused by contamination in that but for escape of oil no fishing ban would have been imposed;
d) The escape of oil was the effective cause of the loss of profit;
e) The loss was not too remote since it was foreseeable.
The Fund's case can be summarised equally briefly:
a) The claimant's propositions (a) to (d) inclusive are correct;
b) Whilst it is accepted that the loss was foreseeable, such is not sufficient to render economic loss recoverable.
c) The claimant's loss flowed from interruption of a business relationship with the primary victims of the contamination, namely the fishermen.
d) As a matter of law, such a "secondary" or "relational" claim is not recoverable: see Landcatch Ltd v. The International Oil Pollution Compensation Fund [1999] 2 Lloyd's Rep 316.
CAUSATION/REMOTENESS
The argument focussed on the separate issues of causation and remoteness and it is convenient to adopt the same categorisation. I recognise that there is, however, an element of artificiality about such an approach. As Lord Hoffmann observed in Kuwait Airways Corporation v. Iraq Airways Company [2002] UKHL 19 at para. 128:—
"One cannot separate questions of liability from questions of causation. They are inextricably connected. One is never simply liable; one is always liable for something and the rules which determine what one is liable for are as much part of the substantive law as the rules which determine which acts give rise to liability."
As indicated, there was no apparent dispute on the issue of causation to the extent that it was distinct from the issue of remoteness. This is not surprising. The causative link between the escape of oil and the loss of profitable sales of processed Welsh whelks was unconnected with, let alone interrupted by, any fresh or intervening cause.
Of course, the loss would not have been sustained but for a range of other factors: the contracts with the fishermen, the absence of an alternative source of whelks; the distinctive nature of the Korean palate and so on. But these pre-existing factors were simply the circumstances in which the escape could occasion the loss. In short the escape was the only legally effective cause of the loss.
FORESEEABILITY
It was, as I have recorded, common ground that the loss sustained by the claimant was oreseeable. Indeed, I apprehend that it was not in issue that losses all the way down the supply chain were reasonably foreseeable:
a) Loss of profit by the fishermen
b) Loss of profit by the processors
c) Loss of profit by the importers into Korea
d) Loss of profit by the Korean restaurants
Foreseeablity is a prerequisite to recovery in tort: The Wagon Mound (No. 1) [1961] AC. 388 (negligence), The Wagon Mound (No. 2) [1967] 1 AC 617 (public nuisance), Cambridge Water Co. v. Eastern Counties Water Co. [1994] 2 AC 264(Rylands v Fletcher and private nuisance), Kuwait Airways v. Iraq Airways [2001] I Lloyd's Rep 161 (causation). Again, it was common ground that foreseeablity was equally a pre-requisite to a claim for the recovery of damage under the Act.
ECONOMIC LOSS
It was Tilbury's case that, as a matter of law, foreseeability of damage was sufficient to allow recovery of economic loss. The Fund insisted that, as a matter of law, even if an economic loss was foreseeable, it remained irrecoverable where it was "secondary", "relational" or "indirect".
In this context, the Fund relied upon the Landcatch decision (supra). This was the culmination of a number of actions arising out of the grounding of the Braer off the Shetlands in January 1993. The claimants reared salmon smolts in Argyll. Their primary market was fish farms in Scotland. The effect of a similar ban to that imposed in the present case was to shut off that market. The Inner House affirmed a judgment by the Lord Ordinary dismissing the claim.
I propose to cite only a few short passages from the detailed judgments. Lord Cullen, the Lord Justice Clerk, stated as follows:
"I am in no doubt that if Landcatch had been able to sue, and had sued, the shipowners for damages at common law in regard to those losses, its claim would have failed, on the application the well recognised "pragmatic rule" against secondary or relational claims …
What then is the correct approach to the 1971 Act, which provides for strict liability in compensation, supplanting the right to damages and superseding the need to prove fault? …
… I consider that the fact that the Act refers to damage and loss in conjunction with causation without any further explanation points to an intention that these terms should be understood as coming fully armed, as it were, with concepts with which lawyers in this country are well familiar. Fourthly, I have no difficulty in accepting that the mere fact that the expression "loss" is apt to include claims of pure economic loss in the context of this legislation does not entail that every claim for pure economic loss is admissible. That is clearly so where, as in this case, the claim is of a...
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