ICL Shipping Ltd v Chin Tai Steel Enterprise Company Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Colman |
| Judgment Date | 10 October 2003 |
| Neutral Citation | [2003] EWHC 2320 (Comm) |
| Docket Number | Case No: 2003 Folio 268 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 10 October 2003 |
[2003] EWHC 2320 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Colman
Case No: 2003 Folio 268
Mr Nigel Teare QC and Mr Nigel Jacobs (instructed by Ince & Co) for the Claimants
Mr Lionel Persey QC and Mr Michael Davey (instructed by Howard Kennedy) for the Defendants
Hearing dates : 15 and 21 July 2003
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.
Colman J.
Introduction
The applications now before the court raise points of wide-ranging importance as to the effect of the Convention on Limitation of Liability for Maritime Claims 1976. The provisions of that Convention are incorporated in substance into English law by the Merchant Shipping Act 1995.
The underlying facts are as follows.
The United Kingdom is a party to the 1976 Convention. Singapore is not. It is instead a party to the predecessor to that Convention, namely the 1957 Convention. There are numerous differences between the two conventions but the most important substantive difference is that, whereas under the 1957 Convention (Article 1.1) a shipowner is entitled to limit his liability for specified areas of liability, including cargo damage unless the occurrence giving rise to the claim resulted from the actual fault or privity of the owner, under the 1976 Convention entitlement to limit liability is barred (under Article 4) if it is proved that the loss resulted from the owner's "personal act or omission, committed with the intent to cause such loss, recklessly and with knowledge that such loss would probably result".
The First Claimants ("ICL") were the owners of the ICL VIKRAMAN. The First Defendants ("Chin Tai"), a Taiwan corporation, were holders of a bill of lading dated Hamburg 10 August 1997 issued by ICL under which ICL acknowledged receipt for shipment of 10,078 mt of casting billets for carriage on ICL VIKRAMAN from Poland to Taiwan. Tragically, on 26 September 1997 the vessel collided with the MOUNT 1 in the Malacca Strait and sank with the loss of 26 lives and all the cargo.
Chin Tai arrested a sister ship – the ICL RAJA MAHENDRA – under proceedings commenced in Singapore in April 1998: Admiralty in Rem No. 236 of 1998. The parties were not able to agree as to the terms of security for the release of that vessel. Negotiations took place between Ince & Co, in London, acting for the Second Claimants, ICL's P & I Club, and Daire O'Keefe & Co in Newry, Northern Ireland, acting for cargo interests. Singapore law firms Khattar Wong (for the Club) and Joseph Tan Jude Benny & Scott (for cargo) were also involved. The Club's letter of undertaking was accepted by Cargo under protest and the sister ship released. The point of disagreement related to the identification of the amount covered by the letter – "any sum found to be due to you for damages, interest and costs in a court or tribunal of competent jurisdiction". The ship interests wanted the letter to make express reference to such amount as should be found due in the Singapore proceedings or in London arbitration. The reason for the insistence on wording to cover London arbitration was that the bills of lading expressly incorporated a London arbitration clause to be found in the underlying charterparty. In the event the issue as to the wording was referred to the Singapore Court where it was decided and confirmed on appeal that the letters of undertaking ("LOU") should as far as material be in the following form:
"we hereby undertake to pay you on demand any sum found to be due to you for damages, interest and costs in Admiralty In Rem No. 236 of 1998 in the High Court of The Republic of Singapore or on appeal thereon or by arbitration in London in accordance with the Arbitration Clause incorporated in the bill of lading, or as may be agreed in writing between the parties hereto to be recoverable from the owners of the 'ICL VIKRAMAN' in respect of your claims provided that our total liability hereunder shall not exceed the sum of US$4,500,000.00. (United States dollars four million five hundred thousand) inclusive of interest and costs.
We hereby confirm that we are informed by the said shipowners that the said vessel was not on demise charter at the material time.
This undertaking is to be governed by and construed in accordance with English law and we further agree to submit to the jurisdiction of the English High Court of Justice for the purpose of any process for the enforcement hereof and confirm that our registered office is situated at Clarendon House, Church Street West, Hamilton, Bermuda.
Any demands or notices or requests under this letter of undertaking and any originating process or other legal documents in connection with it may be served by letter or fax at our address stated above, or at such other business address in London as we may advise to you in writing from time to time."
The function of that court in determining the wording was as a matter of procedure a necessary part of its approval of the release from arrest of the sister ship.
On 16 December 1998 the Club's London office sent to Dolphin Maritime Services Ltd, the agents for the cargo interests, a signed top copy of the LOU. The agents' address was in Stanmore, Middlesex.
It is be observed that the LOU contained no restriction by reference to tonnage limitation. The club also provided to other cargo interests another LOU in respect of eight other bills of lading. However, there had been no further arrest of any sister ship.
The claim by Chin Tai for loss of the cargo was referred to arbitration in London together with claims under eight other bills of lading. On 9 April 2003 an Interim Final Award was published which concluded that Chin Tai's claim succeeded on the basis that the shipowners, in breach of their duty under the Hague Rules, had failed to exercise due diligence to make the vessel seaworthy at or before the commencement of the voyage. Chin Tai were awarded US $ 2,696,127.15 plus interest.
Meanwhile, between the end of the hearing of the arbitration and the publication of the award, the Club and ICL came to appreciate that, if an award were made in favour of cargo, Chin Tai would be able to draw down on the LOU without regard to the application of the Limitation Convention. There were several other cargo claimants in addition to Chin Tai.
Accordingly, on 18 March 2003 ICL issued a limitation claim form and established a limitation fund in England under CPR 61.11(18) and Article 11 of the 1976 Convention by making a payment into court of £6,265,288.77. It is said by the claimant's solicitor that Chin Tai's share of that fund amounts to about £1,068,097 (equivalent to US$1,687,593) which is substantially less than the amount of the arbitration award.
On the following day ICL applied to the Admiralty Court in London for:
(i) an order pursuant to Article 13(2) of the 1976 Convention for the release of the LOU, or alternatively
(ii) an injunction restraining the plaintiffs in the Singapore action in rem and in particular Chin Tai from presenting the LOU to the Club.
On 21 March 2003 Moore-Bick J., after a hearing ex parte on notice, made an order for an injunction against Chin Tai and for permission to serve the Limitation Claim Form on Chin Tai in Taiwan.
Chin Tai now applies to set aside service upon it of the Limitation Claim Form and/or the injunction. In substance, it is contended that Chin Tai, having arrested the sister ship in Singapore and security having been provided there for its release, unlimited by reference to limitation under the 1976 or any other Convention, is not subject to or bound by the establishment of the limitation fund in London or the limitation proceedings commenced here and that accordingly the English courts have no jurisdiction over it in relation to limitation under the 1976 Convention.
ICL's application is for release and return of the LOU under Article 13.2 of the 1976 Convention.
The 1976 Convention
In the context of these applications the key provisions of the 1976 Convention are as follows:
Article 11
"Constitution of the Fund
Any person alleged to be liable may constitue a fund with the Court or other competent authority in any State Party in which legal proceedings are instituted in respect of claims subject to limitation. The fund shall be constituted in the sum of such of the amounts set out in Articles 6 and 7 as are applicable to claims for which that person may be liable, together with interest thereon from the date of the occurrence giving rise to the liability until the date of the constitution of the fund. Any fund thus constituted shall be available only for the payment of claims in respect of which limitation of liability can be invoked.
A fund may be constituted, either by depositing the sum, or by producing a guarantee acceptable under the legislation of the State Party where the fund is constituted and considered to be adequate by the Court or other competent authority.
A fund constituted by one of the persons mentioned in paragraph 1(a), (b) or (c) or paragraph 2 of Article 9 or his insurer shall be deemed constituted by all persons mentioned in paragraph 1(a), (b) or (c) or paragraph 2, respectively."
Article 13
"Bar to other actions
Where a limitation fund has been constituted in accordance with Article 11, any person having made a claim against the fund shall be barred from exercising any right in respect of such a claim against any other...
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