‘Big Kahuna’ - the proper forum for a limitation claim does not default to the jurisdiction of the tort

Posted: 25/04/2024

In Zurich Insurance Company Limited & Ors and Halcyon Yacht Charter LLP & Ors [2024] EWHC 937 (Admlty) (BIG KAHUNA), the English Admiralty Court confirmed the well-established principle that a shipowner is afforded the right to limit their liability in a separate jurisdiction to where an underlying substantive claim is tried (or arbitrated). 

The sea is inherently perilous and commercial maritime adventure is to be encouraged. With this in mind, a shipowner is entitled under a spread of international conventions to limit their overall liability arising from a maritime incident to a fixed global sum, the amount of which varies by jurisdiction according to which limitation convention, if any, is in force.

Following the catastrophic Baltimore bridge collapse on 26 March 2024, there has been widespread controversy over whether global limitation, a privilege exclusively afforded to shipowners, ought still to apply in a modern world. The owners of the MV Dali are seeking under US law to limit their liability of up to US$3 billion to a mere US$44 million by bringing their limitation claim in the US, where the tort was committed.

Contrastingly, in this recent Admiralty Court decision, Penningtons Manches Cooper partner Sarah Allan acted for the successful vessel owner and insurer in resisting the defendant’s forum non-conveniens application and thereby securing English jurisdiction for the owner’s limitation claim, even though the alleged tort was committed in Greece. 

Background

On 7 September 2022, a fire broke out aboard the 65 ft motor yacht Big Kahuna in a Corfu marina. The fire spread to other vessels, three of which sank, including Halcyon, a 95 foot classic wooden ketch. Then, on 15 November 2022, the Big Kahuna owners and insurers commenced a limitation claim in the Admiralty Court pursuant to the 1976 Convention on Limitation of Liability for Maritime Claims. The only named defendant was the owner of Halcyon, being a yacht flagged in the UK. The claim was also expressed to be against ‘all other persons claiming to have suffered loss and damage by reason of the fire on board the vessel Big Kahuna’.

On 15 December 2022, the Halcyon owners applied for an order staying the proceedings on the basis of forum non conveniens because ‘the courts of Greece are clearly and distinctly more appropriate as the forum for resolution of both limitation and the underlying substantive claims’.

Pursuant to Article 15(2) of the Convention, the limitation regime in England and Wales incorporates a small craft limit for vessels of less than 300 tons, resulting in a limitation fund of 500,000 SDR being about £530,000 for Big Kahuna. As Greece only incorporated the same limit effective from 1 May 2023, the relevant Greek limit for this incident would be calculated in accordance with Article 6, resulting in a fund of about £1.6 million.

Submissions

An English court has power to stay proceedings on the basis that England is an inappropriate forum if the defendant shows there to be another court with jurisdiction which is clearly or distinctly more appropriate for the trial, unless the claimant can show that it is unjust for it to be deprived of the right to trial in England.

The Halcyon owners contended that Greece was the jurisdiction in which the tort was committed, whose law would be the governing law, and which was the natural forum for determining disputes arising out of the incident. Witnesses, such as marina staff, emergency and wreck removal personnel, the Halcyon’s skipper, and a local diver, were based in Greece. Documentary evidence was likely to be in the Greek language. If expert evidence was required, it would be more efficient for such experts to be based in Greece.

If there was an Article 4 defence to the limitation claim, namely that ‘the loss resulted from [the Big Kahuna owner’s] personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result’ then the natural and appropriate forum for that issue was Greece, being the place of domicile of that owner. 

The claimants’ approach in securing limitation in England was accordingly described as ‘opportunistic, tactical forum-shopping’ that was unfair to the other vessel owners.

Decision

Confirming the arguments presented by the Big Kahuna owners, Admiralty Registrar Davison observed that, while it is true that the natural forum for the underlying claims is Greece, the limitation claim is a separate and distinct claim. Ordinarily, the only issues figuring in a limitation claim are the arithmetic calculation of the amount of the fund and whether there is an Article 4 defence. As the cause of the fire is unknown and further evidence has not emerged in the course of eighteen months, an Article 4 defence was ‘speculative and improbable’.

The judge furthermore observed that it is commonplace for the limitation claim and the underlying claims to be tried independently in separate jurisdictions. If the proper limitation forum were to default to the jurisdiction of the tort, a defendant could always trump the claimant’s choice of forum. But it was settled international practice for a shipowner to be free to secure the jurisdiction in which to set up his limitation fund and establish his right to limit, and English courts should be ‘exceedingly slow’ to interfere with such settled practice. 

On an objective level, there was also no unfairness. While the English limitation regime was advantageous to the Big Kahuna owners, the loss of that right to limit would be a corresponding disadvantage. An advantage lost by one party was equally an advantage gained by the other. 

Comment

This decision provides an insight into the English court’s analysis of limitation claims, notably that, notwithstanding inventive arguments seeking to restrict the shipowners’ right to limit, the court will be reluctant to depart from well-established principles.   

Substantial global maritime catastrophes are rare but, in the absence of limitation, have the potential to wipe out a shipowning company. It is easy to criticise limitation as a means of enabling the shipowner to escape liability at a minimum of exposure. However, the reality is that limitation renders shipping insurable, and therefore financially viable, which is absolutely necessary for the world economy.

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