Havard format and Citation
The Task
O voyage-charted their vessel The Costa Lotta to VC, to carry a consignment of crude oil from Piraeus (Greece) to Southampton (the UK). VC own The Jolly Roger. VC are domiciled and have their place of registered business in Piraeus. VC have no agents, nor any business activity in England at all.
During the voyage to carry the oil, The Costa Lotta got into difficulties due to especially bad weather conditions that arose whilst she was in the Mediterranean going towards the Italian coastline. The master of the vessel, Captain Hook, ordered the vessel close into the shoreline and gave a “mayday” call to the Italian Coastguard. A salvage company agreed to Help The Costa Lotta, which was at this initial stage refused refuge at any Italian port. By the time salvage terms were agreed, a considerable amount of the cargo of crude oil had escaped from The Costa Lotta into the surrounding seawater. The salvage company sent their vessel, Thunderbird, to Help The Costa Lotta, and Captain Hook signed a LOF 2000 with the SCOPIC provisions. The salvage operation succeeded in rescuing The Costa Lotta and stopping further oil from escaping. The salvors also provided an effective clean up procedure, which greatly minimised the impact to the environment of the oil that had escaped into the sea. That damage to the environment was minimised was due not only to the specialist skills in oil pollution control of the master of Thunderbird, but also to the considerable efforts made by Captain Hook and his crew.
The Costa Lotta was eventually given refuge by the Italian authorities, and towed into the Ligurian Sea and into the Port of Genoa. Much of her cargo had been lost. Although the clean-up operation appeared to have successfully contained the oil, the neighbouring French authorities were concerned to monitor the arrival of The Costa Lotta into Genoa. When The Costa Lotta arrived within the jurisdiction of the Port, Captain Hook was detained by the Port Authorities to give a detailed report of the incident. The Authorities have now refused to release him and there are suggestions that he might be prosecuted for his part in the occurrence of the incident. The French authorities have also threatened to prosecute the owners of the vessel for the perceived threat of oil damage to the French Rivera coastline (such damage would be most detrimental to the tourist industry there).
The salvors are now pressing O for remuneration for the salvage operation, but O are avoiding them. O have now in fact sold The Costa Lotta to Sergio’s Ltd, a company owned by Bruno, who has been interested in this vessel for some time. Bruno knows nothing about the salvage matter between O and the salvors.
VC have failed to complete payment of agreed freight for the above charter of The Costa Lotta, which was due when the vessel sailed from Piraeus. VC are of the view that the vessel encountered difficulties and lost her cargo because of the master’s incompetence. VC argues that this entitles them to set-off the freight owed against damages that will arise for loss and damage to the cargo.
O have just been informed by their agent that The Jolly Roger is due to berth in Liverpool (UK) within the next few days.
Answer ALL three parts of this question:
The marks for this question will be awarded for overall merit and will not be divided equally between each part.
(a) Will O be successful in a claim against VC for the outstanding freight, and if so, what procedural steps could they take in order to bring the claim?
(b) Critically consider the issues arising in any salvage claim in the above scenario.
(c) Critically evaluate the modern determination to use criminal law in the regulation of ship-source pollution.
PART B (Word limit: 1, 000 words)
Critically evaluate the approach adopted by the English courts in their determination of the “proximate cause” element in a marine insurance claim.
CARRIAGE OF GOODS BY SEA ACT 1 OF 1986
To amend the law with respect to the carriage of goods by sea and to provide for matters connected therewith.
Application of Hague Rules.—(1) Those Rules contained in the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading signed at Brussels on 25 August 1924, as amended by the Protocol signed at Brussels on 23 February 1968, which are set out in the Schedule (hereinafter referred to as the Rules) shall, subject to the provisions of this Act, have the force of law and apply in respect of the Republic in relation to and in connection with:
(a) the carriage of goods by sea in ships where the port of shipment is a port in the Republic, whether or not the carriage is between ports in two different States within the meaning of Article X of the Rules; As in the current case between The Theatre of Wine the claimant and the shipowner Carry Carefully from South Africa to Greenwich London UK.
(b) any bill of lading if the contract contained in or evidenced by it expressly provides that the Rules shall govern the contract; In this case the bill of lading has no detail as to weigh and description of the consignment that were shipped.
(c)any receipt which is a non-negotiable document marked as such if the contract contained in it or evidenced by it or pursuant to which it is issued is a contract for the carriage of goods by sea which expressly provides that the Rules are to govern the contract as if the receipt were a bill of lading, but subject to any necessary modifications and in particular with the omission in Article III of the Rules of the second sentence of paragraph 4 and paragraph 7;
Seaworthiness not to be implied. There shall not be implied in any contract for the carriage of goods by sea to which the Rules apply by virtue of this Act, any absolute undertaking by the carrier of the goods to provide a seaworthy ship.
Maritime law is a distinct body of law that governs maritime questions and offenses. It is a body of both domestic law governing maritime activities, and private international law governing the relationships between private entities that operate vessels on the oceans. It deals with matters including marine commerce, marine navigation, marine salvaging, shipping, sailors, and the transportation of passengers and goods by sea.
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MARITIME LAW
Date
Q2. “A person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with the knowledge that such loss would probably result.” (1976 Limitation Convention Article 4). Discuss the implications of the above provision with reference to the relevant case laws.
Article 4 of the 1976 Convention is a supplement connected with the most revolutionary modification within the viewpoint implicit in the principle associated with a shipowner’s right to restrict the degree of their legal responsibility for their actions along with those of their crew members (Watson 2009, 249). Among the controverting contentions according to legislation and policy concerns, had been that the new Assessment that changed that which was initially a privilege into a right and created it essentially infrangible; significantly towards the fulfillment regarding the insurance of marines that inevitably should recompense the damages in several instances (Hudson 2006).
Hill (2013), pointed out that in an ironic manner, article 4, although merely below 4 lines long probably creates the biggest amendment from its equivalent Article within the 1957 Convention (Hill 2013, 394). The limitation of conduct barring can be described as counter-balance towards the idea of legal responsibility restriction. It is regarded as a counter-balance, given that it is the consequence of the bargain minted amongst the parties, specifically whenever shipowners had been geared up for larger reimbursement and sequentially article 4 has been designed so that it is more difficult to be proved by the claimants. The insurance sector’s reasoning was that assurance of the legal responsibility of insurance was essential for the shipping sector hence, quid pro quo pertaining to increased restrictions was a leak-proof preparation creating the limits essentially infrangible (Hill 2013, 394).
Conversely, the passing away from the 1957 conference most likely had been that the precise problem as well as privity ended up being a matter of substantial lawsuit particularly within the United Kingdom judicatures, given that in line with the 1957 conference “limitation had been obtainable according to the stipulated conditions of the convention apart from where the incident resulting to the assertion originated through the specific problem or the owner’s privity.” From 1854-1986 shipowners weren’t accountable to cover losses past the limit of liability in case particular incidences occurred devoid of their “privity or precise fault.” (Hay & Walker 2005,421). In the 1976 convention regarding limitation of liability, it was determined that the phrases “privity as well as actual fault” did not provide adequate safeguards to ship owners anymore. The shipowners were willing to concur with the greater limitation of liability in turn for assurance of the right to restrict their legal responsibility (Volk & Cobbs 2006, 953; Allen 2000, 263).
Conduct barring limitation was brought in towards maritime legislation through different conventions as well as from programs in different disciplines, infamously within the aviation sector (Cheka 2011, 487). The primary maritime tool to integrate the revolutionary Assessment was 1968 The Hague-Visby Guidelines, that represent the existing routine. In spite of the explanation for bargain stated previously, the 1976 Conference was an attempt to harmonize the ship owners’ concerns along with the insurance sector; nonetheless, it is apparent that through the texts from the article 4 in accordance with which the impediment of evidence changed to the claimants that endured injuries or losses, the existing structure is unjust to the sufferer (Billah 2007).
Through a distinct clarification, the new Assessment enforced towards the claimant a “double-barreled impediment of substantiation”, first within the normal lawsuit course, the claimant equally like the plaintiff was required to bear the responsibility of proof regarding the worthiness of his/her assertion”, secondly, the claimant, would additionally have to provide evidence that the shipowner had not been eligible for limitation of his legal responsibility. Based on the previous Assessment, the onus of evidence landed on the owner to demonstrate that he/she was eligible for the limitation of his/her legal responsibility. The transposition regarding onus mirrored the concept that the limitation was not a right but a privilege (Meeson & Kimbell 2013).
Based on the United Kingdom Commercial Code, whenever maritime cases are presented against a shipowner, the owner has the ability to limit his legal responsibility to some degree (Hill 2013, 394). As the shipping and delivery sector encourages global trade between countries and adds up to their financial systems, it is within the people’s welfare to ascertain institutional ways of dealing with challenges within the marine sector. The conduct barring limitation below the Code is recognized as an “international restriction” which is governed by a “contract” legal responsibility as well as “tort” legal responsibility rather than a “bundle limitation” which is merely governed by “contract” liability below service provider or storage facility contracts. Article 769 regarding the Code verifies the shipowner’s right to the limitation of his/her liability. Nonetheless, the application assortment with regard to this article ought to be reviewed in addition to the 2nd sentence, that establishes execution that is going to standard this kind of limitation below certain conditions. Therefore, in spite of an efficient assertion below the limitation application, when unlawful actions resulting in the liability are as a result of the shipowner, the justification to any limitation can be rejected (Watson 2009, 249).
In situations where the limitation right is rejected, in case the determination standard is unknown, the right of a claimant or the shipowner to a just outcome could be jeopardized, which is in opposition to the legal intent behind the stipulated condition. Therefore, as a result of the dynamics of maritime situations where international legitimate associations are often involved, it is essential to set up a homogeneous specification with regards to conduct which bears the shipowner’s limits of liability (Hodges 2010). Because a number of shipowners leading shipping firms nowadays set up some sort of organization, it appears to be suitable to utilize the “alter-ego” concept to identify the extent of the phrase “shipowner,” to make sure they tend not to unfairly take advantage of the liability limitation.
The phrase “if the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with the knowledge that such loss would likely result”, this implies recognition of the likelihood that this kind of destruction is going to “genuinely” happen. This could be construed as willful wrong doings indicating a willingness to bring about such destruction. In case the careless act or omission had been committed with no willingness to bring about the damage, but with the understanding of the probability that this kind of destruction could take place, it can be construed as “willful misconduct.” Despite the fact that the onus of evidence is situated with the claimant, considering that the Code adheres to the 1976 Convention, the owner ought to present prima-facie proof of information associated with the event for the account of legitimate steadiness. The 1976 Limitation Convention guarantees (i) an increased limitation of liability, (ii) that the responsibility of proof is placed on the party trying to “conquer” the limitation; and (iii) that impediment is (deliberately) an extremely weighty load (Allen 2000, 263; Smit 2009, 443).
Nowadays, there is a factor that is challenging to acknowledge from an interpersonal perspective, specifically it is unjust to recognize this regime regardless of routing technology advancement as well as sophisticated communication technological innovations of the day. Nevertheless, as the maritime sector grows, more maritime specialists along with associated staff members are expected to make sure that relevant sectors, such as the marine insurance sector, grow and expand collectively and therefore, the effectiveness of the conduct barring limitation continues to be legitimate (Birnie 2014, 485).
Taking into consideration the distinctiveness of maritime organizational administrations, it is difficult to eliminate or largely control the range of the limitation (Mandaraka 2014). Consequently, clear, comprehensible, and sensible interpretation criteria with regards to behavior that could bar constraints on shipowner legal responsibility along with the extent of the word “shipowner” need to be enacted. The governing administration ought to recommend sensible, clear, as well as unified specifications after having a thorough Assessment of each nation’s situation and interpretation requirements with regard to such conduct so as to avoid destruction caused by an erroneous legislation or judicature. In case the degree, as well as understanding of conduct barring limitation, are adaptable, the claimant is going to have an unjust advantage, thereby neglecting the legal purpose. As a result, lawful scholars have to set up sensible and rational conditions through striking an equilibrium between the parties.
To sustain a well-balanced maritime sector, the interpretation standard with regard to the conduct barring the shipowner’s limits of legal responsibility ought to be made more stringent, and the requirements of the maritime sector as well as the marine insurance sector should be modified equally to draw in investments, despite the fact that such investments involve risks as marketplace circumstances could change tremendously (Hudson 2006).
Q3. “The three-fourths collision liability clause in a typical hull and machinery policy is drafted in vague terms and the users need to refer to case-law for their interpretation of the main provisions.” Critically asses the validity of the above statement taking into account the typical content of such a clause in a hull and machinery policy governed by the English Law.
The intent behind the Three-Fourths Collision Liability Clause, most commonly known as the “Running Down Clause,” is to offer a shipowner a number of protection plans for 3rd party liability in case of a collision. It is vital, to be aware that 2 different forms of loss could occur due to a collision (Brown 2004).
First, it is to be remembered that the loss endured by the covered ship is redeemable as a damage by ‘hazard associated with the oceans’, as outlined in Rule R-7 of the Regulations with regard to Construction examine with the famous case of Owners of Cargo per ‘Xantho’ Vs. Wilson, Sons, and Co [1887] 12 App Cas 503. This kind of damage, in case developing because of the ‘carelessness of the authorities or navigation captains, is likewise redeemable below Clause 6.2.2 of the ITCH(95) (1/11/95. INSTITUTE TIME CLAUSES – HULLS), an insurance policy which is governed by the English legislation as well as practices (Brown 2004).
The 2nd form of damage, referred to as 3rd party liability, incurred by the insured by means of losses collectible to the proprietor of the other ship, is additionally redeemable below this Clause. This kind of resultant damage wasn’t, nonetheless, before the judgment of De Vaux against Salvador [1836] 4 Ad&E 420, through an explanation of its isolation, regarded as a damage by an ocean peril. The Three-Fourths Collision Liability Clause was therefore created to offer a vessel owner with insurance for this kind of financial damage caused by a collision of his/her ship with another ship (Franck 2006, 260).
Through Clause 8 regarding the ITCH(95), insurance agents consent to indemnify the insured party to the level of Three-Fourths associated with the losses caused by the other ship in case of a collision; and the assured paying off the remaining 1/4th. However, in practice, the shipowner is commonly an associate of a Protection and Indemnity Club, that is going to satisfy the deficiency within the 3rd party insurance. It is important to be aware that under no conditions will the insurance agents’ legal responsibility for losses add up to greater than Three-Fourths of the covered worth of the ship insured. Nonetheless, they have additionally consented to pay Three-Fourths of the legitimate expenses of the assured whenever contesting legal responsibility or taking cases to the limitations of their liability. This responsibility by the insurance agents is structured on their preceding composed authorization and is simply meant to take care of the expenses of the assured whenever defending an assertion, and not in the event the assured seeks for an assertion versus a 3rd party. In addition, in contrast to an assertion for losses, there exists, in this head of the claim, no limitation to the insurance agent’s liability with regards to the covered worth of the ship.
Clause 8.4 of the ITCH(95) outlines the exceptions to the Three-Fourths Collision Liability Clause. A new exemption can be obtained from Clause 8.4.5, that has been integrated to correspond to Clause 7, the Pollution Hazard Clause. While the Pollution Hazard Clause makes it possible for recuperation for damage or loss endured by the assured’s ship a result of the governmental authority’s measures taken so as to protect against or reduce losses to the environment, the objective of Clause 8.4 is to leave out the insurance provider from the legal responsibility for specific forms of damages, the most significant that is incorporated into Clause 8.4.5, that pertains to any amount that the Assured might have suffered based on contamination, pollution or destruction to the surroundings, or risk thereof (Ozcayir 2007).
Additionally, it is to be taken into consideration that the Three-Fourths Collision Liability Clause subsidiary to the stipulated conditions enclosed within the Paramount Clause, i.e. Clauses 24-27 of the ITCH(95) as well as Clauses 21-24 of the IVCH(95) (INSTITUTE VOYAGE CLAUSES – HULLS) (Brown 2004).
The Sister Ship Clause, i.e. Clause 9 belonging to the ITCH(95) as well as Clause 6 belonging to the IVCH(95), is incorporated to make sure that, whenever a collision takes place involving two vessels that belong to the same proprietor, the connection between the 2 parties, despite the fact that basically one and the same, might be regarded as being no different from the ones involving different people. Without this stipulated condition, any assertion created by one ship against another is going to be impossible, simply because, below typical legislation, it is impossible for an individual to take legal action against him or herself. Additionally, the Clause makes sure that any kind of cases created against sister’s vessels is forwarded to a single arbiter.
It is important to remember that the Three-Fourths Collision Liability Clause is dependent on negotiation by cross-liabilities, rather than a single liability. Beneath the idea of cross-liability, whenever 2 vessels collide, a degree of fault is doled out between the 2 vessels, that in that case ascertains how much each vessel is going to pay as a percentage of the entire loss endured by the two ships.
In actual fact, whenever a collision takes place, the assured’s insurance agent is accountable for the entire amount of the damage endured by the assured’s ship additionally, below the Three-Fourths Collision Liability Clause, Three-Fourths of a balanced quantity of the losses endured by the other ship, that sum being based on the level of fault linked to the assured’s ship. In case, for instance, the assured is fully at fault, then the insurance agent’s legal responsibility is Three-Fourths of the entire loss endured by the other ship. In case the assured is fifty percent accountable, then the insurance agent’s liability gets to be Three-Fourths of the half of the entire loss suffered by the other ship. The assured’s insurance provider may then, through subrogation, recuperate from the proprietor (or his insurance agent) of the other ship a percentage (based on the level of fault doled out) of the losses suffered by the assured’s ship. In case the assured is totally at fault, the amount redeemable is 0%; in the event the assured is fifty percent accountable, the total amount redeemable by the assured’s insurance provider is half of the entire loss suffered by the assured’s ship; in the event the assured is not at blame, then the sum redeemable is a hundred percent of the entire loss suffered by the assured’s ship.
Whenever cargo insured below the ICC (A) is destroyed on account of a collision, the damage is redeemable due to the insurance policy being for all hazards. Damage of, or loss suffered by, shipment insured below the ICC (B) as well as ICC (C) are, nonetheless, redeemable under Clause 1.1.4 that suggests: “This protection plan insure damage of or loss to the party covered fairly due to collision or getting in contact with another ship, craft, or conveyance with any kind of outside object besides water.” The interpretation of the word ‘contact’ has been lately regarded, although temporarily, and within a distinct context, associated with an express assurance, in Costain-Blankevoort (UK) Dredging Co Ltd Vs. Davenport, ‘Nassau Bay’ [1979] 1 Lloyd’s Rep 395. In addition, if the ship or craft, that the cargoes are transported, ‘strand, ground, sink, or tip over’ due to a collision, Clause 1.1.2 of the ITCH (95) as well as IVCH(95) could additionally be raised.
Clause 8 of the ITCH (95) along with Clause 6 of the IVCH(95) state: “The insurance providers consent to indemnifying the Assured for 3/4ths of any amount or amounts compensated by the Assured to another individual or individuals through the rationale of the Assured getting to be legitimately accountable through losses for…where these kinds of settlement by the Assured is as a result of the Ship hereby covered getting in collision with another ship.” Specific interest is attracted to the words ‘collision’, ‘as a result of, ‘ship,’ ‘through losses’, ‘compensated by’, and ‘settlement by’. The Judicature has considered to some extent on their appropriate application as well as understanding.
Collision liability signifies the liability of the covered to 3rd parties that endure losses, injury or destruction due to the collision of the insured ship with a different ship. These kinds of 3rd parties could possibly be the proprietor of the other ship involved in the impact, proprietors of shipment aboard the other ship, individuals aboard the other ship that could possibly sustain injuries, or other persons afflicted with the results of the collision, such as, through the escape of bunker oil from the other ship. Every standard hull terms insure the liability of collision, but English stipulations protect just three-fourths. Therefore, below the English stipulations, it is imagined that the assured is going to place insurance coverage for the remaining 1/4ths legal responsibility somewhere else – usually included in the protection and indemnity insurance policy (Leader 2005, 75). These kinds of inclusions need to be specific within the protection and indemnity conditions of admittance (Tilley 2006, 261).
Emmett (2010), pointed out that a constraint that pertains to every standard hull, as well as machinery conditions, is that the proprietor is covered for the liability of collision to the covered worth of the ship, but no more. In a few conditions, the collision liability could surpass that covered cost, whereby the Protection and Indemnity insurance is going to act in response (Emmett 2010, 75). This is the supposed “additional collision liability insurance”. A few ship owners have put complete (four-fourths) collision legal responsibility underneath their Protection and Indemnity insurance. This collision liability insurance is often the most detailed liability protection plan, due to the fact that all 3rd party liability developing from the collision might, in theory, be protected without limitations or economic restrictions (Leader 2005, 75). Nonetheless, the shipowner could nevertheless require his hull as well as machinery insurance to manage the loss of or destruction to his own ship. Standard hull, as well as machinery stipulations, in addition, provide protection plan based on the liability developing from the striking by the covered vessel of 3rd party asset besides a vessel (Emmett 2010, 75).
Additionally, there are modifications within the standard hull and machinery policy stipulations throughout market segments regarding the range of insurance for liabilities not brought on by collision or striking as outlined above. Cases applicable to this include damage of property the result of the utilization of the vessel’s machines during operations, for example, the pulling of a sub-sea fiber cord by the vessel’s anchor or the destruction of port items by the vessel’s crane. Once more, the Protection and Indemnity insurance is going to act in response to liabilities which fall beyond the conditions of the hull policy (Wright 2008, 576).
References
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Wright, S.R., 2008. Liabilities (1) Arising Out of Collision with Another Vessel and Not Covered by the Hull Policy, (2) for Damage to Another Vessel or Her Cargo, Not Caused by Collision with the Insured Vessel,(3) For Damage to Any Object or Property Except Another Vessel or Her Cargo. Tul. L. Rev., 43, p.576.
