Bahamas Oil Refining Company International Ltd v Owners of the Cape Bari Tankschiffahrts GmbH & Company KG (Cape Bari)
| Jurisdiction | UK Non-devolved |
| Judge | Lord Clarke |
| Judgment Date | 19 July 2016 |
| Neutral Citation | [2016] UKPC 20 |
| Date | 19 July 2016 |
| Docket Number | Appeal No 0114 of 2014 |
| Court | Privy Council |
[2016] UKPC 20
Lord Neuberger
Lord Mance
Lord Clarke
Lord Sumption
Lord Toulson
Appeal No 0114 of 2014
Privy Council
From the Court of Appeal of the Commonwealth of the Bahamas
Appellant
Peter MacDonald Eggers QC Oscar Johnson Tara A Archer
(Instructed by Clyde & Co LLP)
Respondents
Luke Parsons QC Paul Henton Kenra Parris-Whittaker
(Instructed by Reed Smith LLP)
Heard on 23 February 2016
On 25 May 2012, during a berthing operation, the respondents' vessel Cape Bari ("the vessel") collided with Sea Berth no 10 at Freeport in Grand Bahama. Sea Berth no 10 was the property of the appellant ("BORCO") and was part of its storage facility. As a result of the damage caused by the collision, BORCO initially claimed damages in the amount of about US$26.8m, plus interest, against the respondents ("the owners"). It later reduced its claim to some US$22m. The owners say that they are entitled to limit their liability (if any) to 11,012,433 Special Drawing Rights (calculated by reference to the vessel's gross tonnage), being approximately US$16.9m plus interest, under the Merchant Shipping (Maritime Claims Limitation of Liability) Act 1989 of the Bahamas ("the 1989 Act"), which incorporated into Bahamian Law the Convention on Limitation of Liability for Maritime Claims 1976 ("the 1976 Convention"). BORCO denies that the owners are entitled to limit their liability, on the ground that they had waived their right to do so under a contract which it was agreed that the parties had made immediately before the berthing operation. The contract is contained in or evidenced by a document referred to hereafter as "Conditions of Use" which was signed by the master.
On 20 September 2012, upon the owners' ex parte application, the court made an order for the constitution of a limitation fund in the amount of US$16,995,487.84. By a summons dated 16 October 2012, BORCO applied to the court for an order setting aside that order. At first instance, in a judgment dated 9 August 2013, Senior Justice Hartman Longley ("the judge") held that the owners were not entitled to limit their liability because, on the true construction of the contract, they had contracted out of their right to limit. It was common ground before the judge that, under both the 1989 Act and the 1976 Convention, it was permissible for the owners to contract out of their right to limit.
On 22 May 2014 the Court of Appeal (Allen P and Blackman and Adderley JJA) reversed the decision of the judge, not on the ground that he erred in his construction of the Conditions of Use, but on the different ground that, under articles 2.1 and/or 2.2 of the 1976 Convention it was not permissible to contract out of the right to limit, even by entering into a contract of indemnity. However it is not in dispute that this issue was not argued before the Court of Appeal because it then remained common ground that it was permissible for parties to contract out of the 1989 Act and the 1976 Convention.
It is submitted on behalf of BORCO that the Court of Appeal was wrong to reverse the decision of the judge because (1) on the true interpretation of the 1989 Act and the 1976 Convention it was permissible for the owners to contract out of the right to limit (as both parties had acknowledged) and (2) on the true construction of the Conditions of Use, the owners had done so. BORCO also complains that the Court of Appeal acted unfairly in disposing of the appeal on a ground which had not been argued by either party and which the court gave neither party an opportunity to address in argument.
So far as relevant to this appeal, the facts are not in dispute. The vessel arrived at Freeport at about 1318 hours on 25 May 2012 with a view to berthing in order to load a cargo of crude oil at BORCO's terminal. At or soon after 1330 hours, two pilots boarded the vessel. It was a requirement at the terminal that the vessel would berth using tugs and a pilot provided by BORCO, although they were in fact supplied through BORCO's affiliate company, BORCO Towing Company Ltd ("BORTOW"). At about 1336 hours, the master and the pilots exchanged information and the master, as agent for the owners, signed two agreements as presented to him. The first was a Pilotage/Towage Agreement relating to the provision of pilotage and tug services. The second was an agreement headed "Conditions of Use of Jetties, Sea Berth and Inner Harbour Berth at Freeport, Grand Bahama" relating to the owners' use of BORCO's facilities, which the Board will call the "Conditions of Use". Shortly after the agreements were signed, at about 1348 hours on the same day, 25 May 2012, two tugs arrived and towing lines were secured to the vessel and at or soon after 1350 hours, the vessel proceeded towards Sea Berth no 10. Very shortly thereafter, at about 1401 hours, the vessel collided with Sea Berth no 10, causing substantial damage.
Both of the agreements were expressed to be governed by the law of the Bahamas. Clause 2 of the Pilotage/Towage Agreement provided:
"2. Whilst towing and/or piloting the vessel, the Pilot and the Master and the crew of the tug shall be deemed the servants of the Owner of the vessel (the 'Owner') and/or servants or agents and shall be under the control of and identified with the Owner and/or his servants or agents, and anyone on board the vessel who may be employed and/or paid by BORTOW shall be considered the servant of the Owner."
Clauses 1, 4 and 6 of the Conditions of Use provided, so far as material
1. … In all circumstances the Master of any vessel shall remain solely responsible on behalf of his owners for the safety and proper navigation of his vessel …
4. If in connection with, or by reason of, the use or intended use by any vessel of the terminal facilities or any part thereof, any damage is caused to the terminal facilities or any part thereof from whatsoever cause such damage may arise, and irrespective of weather [sic] or not such damage has been caused or contributed to by the negligence of BORCO or its servants, and irrespective of whether there has been any neglect or default on the part of the vessel or the Owner, in any such event the vessel and the Owner shall hold BORCO harmless from and indemnified against all and any loss, damages, costs and expenses incurred by BORCO in connection therewith. Further, the vessel and her Owner shall hold BORCO harmless and indemnified against all and any claims, damages, cost and expenses arising out of any loss, damage or delay caused to any third party arising directly or indirectly from the use of the terminal facilities or of any part thereof by the vessel …
6. These Conditions of Use are the [sic] be interpreted and construed in accordance with the Laws of the Bahamas.
In the agreed statement of facts and issues the parties agreed that the principal issues which arise in this appeal are these. (1) Is it permissible for the owners of a vessel to contract out of or waive their statutory right of limitation under the 1989 Act and the 1976 Convention? (2) On the true construction of the agreement contained in or evidenced by the Conditions of Use, did the owners and BORCO agree to exclude the owners' right to limit their liability under the 1989 Act and the 1976 Convention? (3) Accordingly, are the owners entitled to a declaration that their liability in respect of damages caused as a result of the Collision shall be no more than $16,995,487.84 plus interest thereon in the amount of $342,695.90? In addition the Board is asked to consider whether the Court of Appeal acted unfairly in holding that it was not permissible for the owners of a vessel to contract out of or waive its statutory right of limitation under the 1989 Act and the 1976 Convention because the Court of Appeal (a) determined the appeal from the decision of the judge on a basis not put forward by either party and not raised by the Court of Appeal during the hearing and (b) failed to give BORCO a reasonable opportunity to argue before the Court of Appeal that any such conclusion was wrong as a matter of law.
The agreed statement of facts and issues also contains a further question which seems to the Board to be encompassed in the issues set out above. It also says that there are in addition consequential issues relating to procedural matters, including BORCO's application for an order setting aside the order dated 20 September 2012 relating to the constitution of a limitation fund. The Board will return to this, so far as necessary, below. It is convenient first to discuss the first two questions set out in para 7 above in the order set out in the statement of facts and issues. However, before doing so, it is appropriate to refer briefly to the statutory limitation regime set in its international and historical context.
The 1976 Convention superseded the International Convention Relating to the Limitation of the Liability of Owners of Sea-Going Ships of 1957 ("the 1957 Convention"), to which the Bahamas was a party by accession. The earlier UK legislation of particular relevance, prior to international harmonisation, was section 503 of the Merchant Shipping Act 1894, and prior to that section 54 of the Merchant Shipping Act Amendment Act 1862, which was the statutory regime in operation when Clarke v Earl of Dunraven and Mount-Earl (The Satanita) [1897] AC 59 was decided. In order to limit its liability at that time it was necessary for the owner to show that the damage had been caused without its actual fault or privity.
The 1976 Convention radically altered the position. It introduced a harmonised and uniform set of rules in relation...
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