River Countess B.v v. MSC Cruise Management (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Andrew Baker |
| Judgment Date | 04 October 2021 |
| Neutral Citation | [2021] EWHC 2652 (Admlty) |
| Court | Queen's Bench Division (Admiralty) |
| Docket Number | Case No: AD-2020-000003 |
[2021] EWHC 2652 (Admlty)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
ADMIRALTY COURT
Royal Courts of Justice
Rolls Building, Fetter Lane, London EC4A 1NL
Mr Justice Andrew Baker
Case No: AD-2020-000003
Simon Rainey QC & Tim Jenns (instructed by Devonshires Solicitors LLP) for the Claimants
Stephen Kenny QC & Paolo Busco (instructed by Mills & Co Solicitors Ltd) for the Defendant
Hearing dates: 20, 21 July 2021
Approved Judgment
This is a reserved judgment to which CPR PD 40E has applied. Copies of this version as handed down may be treated as authentic.
Introduction
On 2 June 2019, the ocean-going cruise liner MSC Opera, operated by the defendant demise charterer, ran into the much smaller inland cruise ship River Countess, which was berthed at the San Basilio Pier in the Giudecca Canal in Venice. The incident attracted global media attention and fuelled an existing controversy over the use of Venetian waters by large cruise ships.
Mercifully, though 28 of the smaller ship's passengers were still on board or in the process of disembarking, River Countess having just completed a six day cruise, there were only a few personal injuries, none serious. River Countess suffered substantial damage. She was removed to Trieste for repairs that it is said took three months and cost over €3 million, returning to service in early September 2019 after a loss of 14 scheduled cruises.
The defendant has accepted 100% responsibility for the collision. By written notice dated 18 March 2020, it accepted liability “ for all loss and damage properly attributable to, and legally recoverable by the Claimants as a result of, the collision”. That admission was recorded by Order of Teare J dated 23 April 2020, reserving costs and directing that “ The issues of (i) whether the Claimants (and each of them) are entitled to sue the Defendant for their alleged losses; and (ii) the quantum of the Defendant's liability to the Claimants (and each of them) shall be referred to the Admiralty Registrar for determination”.
By my Order upon a case management conference held on 9 March 2021, the defendant having shortly before that hearing agreed to concede that Italian law would govern the recoverability of all of the heads of loss asserted, I directed, and gave directions for, a “ preliminary determination of an issue of Italian law: specifically, whether, on the basis of the facts asserted in the Amended Particulars of Claim and Amended Schedule of Loss and in the Claimants' [Further Information], the Claimants' claims for non-physical loss (lost net revenues, lost (net) onboard sales, brand damage and/or injury to goodwill, management time and overheads spent in handling the consequences of the collision) are recoverable under Italian law.”
This is my judgment upon that preliminary issue, as necessarily modified in light of subsequent amendments to the pleading of the losses claimed.
Contentious Losses
The defendant has conceded and paid certain items of loss, for example salvage at €100,000 and a cost of €351,655 incurred to have River Countess removed to Trieste for repair. It has also conceded liability for the reasonable cost of repair, including ancillary costs such as towage and surveyors' and naval architects' fees, with quantum to be assessed if not agreed. In this section of the judgment, I identify the losses that are contentious as to their recoverability in principle applying Italian law so as to be the subject matter of the preliminary issue.
The preliminary issue as formulated in the case management order referred inter alia to management time and overheads, but no claim in respect of such items is now pursued.
Loss of Earnings
The first claimant is a Dutch company and the registered owner of River Countess. The second claimant is a Swiss company and had possession of River Countess at the time of the collision as her demise charterer for the 2019 calendar year, under a charter dated 1 January 2019. The third claimant is a Californian company carrying on business as a holiday tour operator.
By a cruise charter agreement dated 1 May 2019, the second claimant promised the third claimant exclusive use of River Countess and eleven other cruise ships during 2019 for a cruise programme to be set out as an appendix to the charter. The cruise charter price for River Countess was set as a daily hire rate, payable per cruise 30 days prior to departure. It is common ground that the cruise charter agreement was akin to a time charter, in that it was not by demise but was a contract for the provision by the second claimant to the third claimant for reward of the services of River Countess and her crew (employed by the second claimant), the reward being the stated daily hire rate.
The cruise charter agreement was expressly governed by Swiss law, with an exclusive jurisdiction clause in case of dispute in favour of the courts of the Rheinfelden Municipality.
Clause 12 of the cruise charter agreement provided for charter cancellation charges on an escalating scale depending on the length of notice given, but also contained provisions catering inter alia for impossibility of performance. They included provisions for charter price refunds to the third claimant in certain circumstances. At an earlier stage the second claimant asserted a loss of earnings, but now the claimants' claim is that the third claimant was liable to the second claimant for the agreed charter price for the cruises that were cancelled due to the collision.
That change of case came on 30 April 2021, when in Further Information in respect of the second claimant's then claim for loss of hire, the claimants pleaded that the third claimant had not paid cruise charter hire in an amount exceeding €2 million, but that “ the Claimants now understand, having taken Swiss legal advice …, that under the [cruise charter agreement] the Third Claimant is in fact liable to the Second Claimant for that hire. Accordingly, the Second Claimant has not lost hire as a result of the collision and this claim is no longer pursued.” It is evident from the claimants' loss schedules that in the third claimant's loss of revenue claim, credit has not been given for any saving in cruise charter hire resulting from the collision.
The defendant has pleaded in general terms that if otherwise liable (which it denies) for the third claimant's loss of earnings due to the collision, it “ can … only have liability for sums calculated by reference to net income lost to C3” (original emphasis). That is not an adequate plea to the effect that the charter price for the charters that were cancelled because River Countess was out of service has been saved and should be deducted in any damages calculation. Mr Kenny QC was candid that the defendant had not yet committed to a position on that point.
That is not good enough. The defendant is as able as are the claimants to assess whether on the proper construction of the cruise charter agreement, applying Swiss law, the second claimant was liable to pay the charter price for charters that were cancelled because River Countess was out of service. Any consequent case, which would be that the third claimant's loss (if otherwise recoverable) is overstated by €2 million or so because of a failure to give credit for cruise charter hire saved, ought to be pleaded. That would be so even if the second claimant were not party to the proceedings or had never made a loss of hire claim; it is all the more so where the second claimant made such a claim but withdrew it on the asserted basis, in effect, that its co-claimant's loss is not overstated in that way.
That said, nonetheless the defendant has not admitted the claimants' plea that the charter price for the cancelled cruises was and is still payable by the third claimant. Absent such an admission, it will be the claimants' burden to establish that proposition as an element of the claim for lost earnings advanced by the third claimant. The question at this stage, and it is the principal question governed by Italian law now arising, is whether a loss of earnings suffered by the third claimant by reason of the temporary unfitness of River Countess for service due to the collision may be claimed by the third claimant from the defendant upon the basis of the defendant's fault (in the form of negligence) in causing the collision.
If the first claimant had been running the scheduled River Countess cruise programme as owner-operator, so as to earn for itself the revenue available to her on the inland cruise holiday market, it would be entitled under Italian law to damages for the loss of that revenue caused by the collision. In such a claim, credit would have to be given for operational costs saved, of course, but that would be just an aspect of quantifying the damage caused by the loss of revenue, it would not affect the nature of the loss suffered or its recoverability in principle. If a suitable alternative could reasonably have been chartered in to cover the period when River Countess was out of action, damages might be limited to the cost of doing so. Again, that would not affect the nature or recoverability in principle of the primary loss of earnings claimed, it would go to whether the collision was truly the cause of (the full extent of) that loss when considering Articles 1223 and 1227 of the Italian Civil Code, which are set out below.
The loss suffered by the third claimant is by nature the same loss, relocated into the hands of the third claimant by virtue of the two charters. The third claimant would not have title to sue the...
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