Admiralty Law Part 11

Pursuant to the earlier topic of Introduction to Maritime Law in Malaysia, published on 22 February 2021, in the coming series the basis and elements of Admiralty Law will be explored.

Civil Liability For Collision Damage

1. Who May Be Liable? Standard Of Care And Burden Of Proof

   When ships collide, they are normally under the command of the master of the ship. The master is responsible for taking all precautions in order to avoid a collision. The negligent act which causes the collision may be that of the master or one committed by an officer or a seafarer. In such a case the actual wrongdoer would be liable in negligence. However, a mariner, even a master mariner, would not normally be financially able to satisfy claims for collision damage.

   Vicarious liability makes the employer of the master and the crew, whether the shipowner or demise charterer, liable for the negligence of their employees. This way access to the person who has the benefit of using the ship and the financial ability to compensate claimants is established.

   However, claims arising from collisions between ships or a ship and another object can have various legal bases. Each legal basis has its own threshold that has to be satisfied so that the claimant can recover damages, differing time bars, exceptions, jurisdictional requirements and extent and type of damages covered.

   Passengers, cargo owners and seafarers claiming against the carrying ship will have claims based in contract and, in many countries, will also enjoy statutory protection imposing minimum liability on the carrier and employer respectively. Claims by the same claimants against the non-carrying ship will be based in tort, normally the tort of negligence.

   Third party claims, for example, claims for pollution damage, wreck removal and damage to docks, could be under strict liability regimes enabling claimants to be compensated quickly.

   In all cases, even where the liability is strict, indemnity claims could then be brought against the wrongdoer in negligence, contract or other legal basis, thus permitting partial or full recovery for the party strictly or otherwise liable.

   Following a collision, salvage and towage assistance may also be needed and then the incurred expenditure may also be recoverable against the party that caused the collision damage.

   Collisions affect a large number of entities. Typically, shipowners and demise charterers, as well as various time and voyage charterers, all lose the use of the ship. Their entitlements and obligations as between them would then be determined on the basis of their contractual arrangements (i.e. the charterparties).

   Not all of them, however, would have a right of recovery of the losses against the other ship involved in the collision. They all certainly lose the use of the ship temporarily or, in some cases, permanently. However, their claim against the other ship is in negligence, but pure economic loss is not normally recoverable under English law in collision cases.

   For a claimant to establish civil liability in negligence it must prove the facts of culpable fault giving rise to liability. A breach of the COLREGS will also be a piece of evidence, although mere breach of the COLREGS will not be a presumption of fault. The claimant needs to show that a duty was owed to the claimant by the defendant and that there was a breach of such duty which caused the damage claimed. It has long been established that the common law duty of care is owed to other ships at sea (The Dundee [1823] 1 Hagg Ad 109) and most claims for collision damage are based on breaches of this duty.

   There is a three-stage test (Caparo Industries v Dickman) that needs to be satisfied. In straightforward cases of direct physical damage to property, death or personal injury by the act of the defendant, the three-stage test can easily be satisfied. Such cases include physical damage caused by a collision between two or more ships (The Hua Lien).

   On the contrary, in cases where no physical damage, death or personal injury has resulted from the breach of the duty of care but only economic loss has been suffered, the three-stage test is more difficult to be satisfied. The difficulty of recovery in such cases has led to the general rule that pure economic losses are not recoverable under English law. The few exceptions available are not relevant to collisions.

   The burden of proof of negligence at common law and, therefore, in collision cases, is on the claimant (Heranger v Diamond). The claimant must prove:

   1. breach of duty of care
   2. that the breach caused the collision and the damages claimed
   3. that the damages are not too remote.

   The law accepts that in some cases the facts ‘speak for themselves’; in other words the facts are enough to discharge this burden of proof (e.g. in clear daylight a ship collides with another ship which is anchored at port). This is known as res ipsa loquitor. In such cases the burden of proof shifts to the defendant to explain how the incident happened (The Merchant Prince and The Kite).

   The standard of care is that expected of a reasonable and careful person being in the same position. For collisions caused by navigational errors good seamanship provides the standard. The test is objective. However, all servants of the shipowner and the ship’s manager have a duty to other ships navigating the same seas, and ought to foresee that carelessness on their part would be likely to cause harm to others. This means that where the collision is caused by an act of negligence in the maintenance, surveying or equipping of the ship, or manning and supplying, liability in negligence can be attached to the shipowner or the ship’s manager even if there is no culpable fault in the navigation of the ship.

   In collision cases a ship can be at fault even without physical contact with another ship, for example, where the manoeuvre of a ship forces another ship to run aground in order to avoid a collision or where the other ship is pushed on the dock because of the waves created by another ship which is navigated at an unsafe speed. In such cases liability in negligence may attach (The Ore Chief; The Miraflores v The Abadesa).

2. Causation

   Negligence on the part of a defendant must have caused the collision and the damage claimed to be actionable.

   The claimant must prove:
   1. breach of duty
   2. the breach caused the collision
   3. the breach caused the damage claimed.

   A breach of the COLREGS which has not been causative of the collision – or even if it has been causative of the collision, it has not caused the damage – will not create liability for damages for the wrongdoer.

   A simple example of a non-causative fault would be this: a vessel failed to sound a fog signal to indicate its presence to the other ship; a collision occurred; but if it is proved that its presence was known to the other ship through the radar observation, the failure to sound the fog signal would not be causative of the collision.

   The claimant must discharge that there was culpable fault by the defendant and that the breach caused the collision. In other words, that the collision would not have happened but for the breach of duty.

   This ‘but for’ test is useful in order to eliminate irrelevant factual causes. (The Humbergate). In collision cases in which facts become complicated by multiple successive faults and contributing causes of the ships involved, the ‘but for’ test will not suffice. Therefore, in these cases the test is whether or not one or more cause(s) was the most probable cause(s).

   Once this stage of factual causation is proved (known as causation in fact), the court has to ascertain which of the relevant causes is to be regarded in law as the cause from which the damage arose; this is the third tier of the claimant’s burden of proof. In other words, the claimant has to prove the cause which gave rise to the liability of the defendant (known as causation in law). For example, a fault may have contributed to the collision but it may not have contributed to the damage claimed.

   Where there are multiple breaches of the duty of care the court will look not only at the extent to which these contributed to the collision but also to how much each contributed to the damage, the causative potency of the culpable fault. (The Statute of Liberty and The Devotion II; Nautical Challenge Ltd v Evergreen Marine (UK) Ltd)

   Therefore, the courts look at:

   1. what faults were committed by the relevant ships
   2. which of those faults contributed to the loss or damage claimed (liability).

   Throughout the process of determining causation (in fact and in law), the defendant will raise their probable defences. The main defences rely on shifting the causation of the damage away from the defendant’s acts.

   1. For the defence of inevitable accident read The Marpesa; The Merchant Prince; and The Frosta.
   2. For the defence of novus actus interveniens The City of Lincoln is to be contrast with The Fritz Thyssen.
   3. For the defence of the ‘agony of the moment’ see, for example, The Bywell Castle and Tian E Zuo [2018] SGHC 93, 297 a multiple ship collision at Singapore for a discussion of this defence.

   The aforementioned defences were developed before apportionment of liability was adopted in collision cases or in the general English law of negligence.

   The contributory negligence defence, if successful, will result in apportionment of loss between the guilty ships.

   Apportionment between ships is founded in statute under s.187 of the MSA 1995. Contributory negligence is to be decided on a broad common sense approach: The Anneliese; The Miraflores v The Abadessa.

   In Nordlake v Seaeagle [2015] EWHC 3605 (Admlty) the Nordlake collided with the Indian warship Vindhyagiri following actions to avoid a collision with the container vessel Seaeagle. The Indian state sued the owners of the Nordlake in the Indian courts. The owners of the Nordlake brought a claim against the owners of the Seaeagle in the Admiralty Court in England asking for apportionment of liability, taking into account that in addition to these three ships there were other naval ships which were allegedly being navigated negligently and contributed to the collision. The owner of the warships (i.e. the Indian state), was not a party to the proceedings and any decision would not be binding on it. The court held that s.187 requires the apportionment of liability to take into account not only the causative fault of the ships which were party to the action, but also any other ship, despite the fact that those vessels were not party to the action before the court.

   The apportionment of liability can be very complex. The court will look at the nature and quality of faults rather than the number of faults on each side; also at types of faults in terms of seriousness and the extent to which such faults contributed to the collision or to the damage.

   In other words, the court will look at blameworthiness and causative potency of the various negligent acts in order to apportion liability between tortfeasors. An innocent ship which has suffered damage due to the faults of the other ships is not covered by the wording of s.187 of the MSA 1995. Its position is that it can claim against any of the wrongdoers, who are liable jointly and severally, for the whole damage to the innocent ship. The paying wrongdoer can claim contribution against the other for the proportion of the other’s fault to the damage caused to the innocent party, either at the time of apportionment of liability under s.187 of the MSA 1995 or by bringing separate proceedings later under the Civil Liability (Contribution) Act 1978.

   Contributory negligence in cases of collision between a ship and a on-ship is dealt with by a different statute, namely the Law Reform (Contributory Negligence) Act 1945. Prior to that year, and unlike the Admiralty law rule, there was no recovery at common law by a claimant who was also at fault.

3. Claims For Personal Injury Or Loss Of Life And Claims For Damage To Or Loss Of Property

   The Merchant Shipping Act 1995 is the basis for claims for damage to property and for loss of life and personal injury. Claimants for loss of life and personal injury arising from a collision are treated differently from property damage claimants. The major difference is that the whole claim for loss of life and personal injury can be brought against any of the negligent ships (joint and several liability), while a claim for property damage can only be brought against a contributing ship and only to the extent of the apportioned negligence.

   Thus, in a collision where three ships have contributed by, let’s say:

   • A: 40 per cent
   • B: 35 per cent
   • C: 25 per cent,

   a claim for loss of life and personal injury can be brought against any of A, B or C for the full amount. This facilitates the recovery for such a claimant. Of course only one recovery of damages is possible and there are indemnity claims between A, B and C on the basis of s.189 MSA 1995 to ensure that the end distribution of liability is that agreed or prescribed by the court. Contribution is also available under the Civil Liability (Contribution) Act 1978 which permits such contribution at common law.

   By contrast, a claimant for property damage will have to sue all three shipowners in order to recover its damage as it can only recover proportionally from each of them. The proportionate fault rule of admiralty law applies to all property claims, including cargo claims for damage to or loss of the cargo carried on board either ship. So, under English law, a cargo owner cannot claim 100 per cent of its claim from one tortfeasor. It has been argued that since the cargo owner is innocent (i.e. is not involved in any fault which contributed to the collision), they should be able to recover from either tortfeasor 100 per cent in the same way as any other innocent third party. For an analysis of the issues involved in this respect and the reason why the cargo owner is treated differently from personal injury claimants read extracts from The Drumlanrig [1911] AC 16 HL.

   The same rule is followed by other maritime nations which have ratified the Brussels Collision Convention 1910, with the exception of the USA. In the US a cargo claimant can recover 100 per cent of its damage from any of the contributing ships. This does encourage cargo owners to claim against the non-carrying ship as the claim against the carrying ship may be excluded through the operation of exceptions of liability or reduced by contractual liability. In such a case the cargo claimant avoids the contract of carriage. The ‘Both to blame collision’ clause is inserted in charterparties and insurance contracts to adjust the liability between the parties involved.

4. Collision With An Innocent Third Ship Or With A Non-Ship

   When an innocent ship suffers damage due to a collision between two or more ships the liability of the several tortfeasors will be joint and several. Either of them can be sued for the total damage to the innocent third party. Contribution between the joint tortfeasors will come into play either during the trial for the apportionment of their respective liabilities, or separately under the Civil Liability (Contribution) Act 1978, once there is payment by the one tortfeasor to the innocent third party claimant (The Devonshire; The Cairnbahn).

   Another complication arises when a ship collides with an object which is not by definition a ship. If that other object is not negligent the position is similar to that of an innocent ship. However, where there has been contributory negligence on the part of the non-ship the relevant sections of the MSA 1995 which apportion liability (ss.187–190) do not apply (The Ellen M; The Mearsk Colombo; The Belle Usk).

   In such cases the relevant statute applicable to the defence of contributory negligence is the Law Reform (Contributory Negligence) Act 1945. This Act does not require an individual assessment of the faults of each party as is the case under s.187 of the MSA 1995 relating to collisions between two or more ships at fault. The claimant’s conduct, if they have contributed to the collision, is contrasted with the defendant’s conduct in the liability action; for the apportionment of liability, contributory negligence is taken into account.

   Moreover, if in this situation there is an issue of liability caused to an innocent third party, for which both tortfeasors (i.e. the ship and the non-ship) would be jointly and severally liable, contribution to liability paid by the one tortfeasor to the innocent third party will be determined in the action for contribution under the Civil Liability (Contribution) Act 1978, which may be joined with the main liability action. Contribution criteria under the 1978 Act are based on what is just and equitable, not on individual culpability.

5. Remoteness Of Damages And Mitigation Of Loss

   Once causation is established, the last element of the claimant’s burden of proof is to show that the damage claimed was reasonably foreseeable and thus it was not too remote.

   Once this last part of the claimant’s burden of proof is discharged by proving that the damages claimed were reasonably foreseeable by the defendant, the next question will be whether or not the claimant mitigated their loss.

   The remoteness rule has been evolving over time. The leading decision for the law before 1960 was Re Polemis, which involved damage caused to the ship by the negligence of the stevedores who had been appointed by the charterers. The test established by this decision in determining the issue of what damages are recoverable was that the defendant was liable for all direct and natural consequences of their negligence even if such damages could not reasonably have been foreseen.

   In 1960, however, this issue was re-examined in The Wagon Mound (No.1) and the Privy Council disapproved of the decision in Re Polemis. But because the function of the Privy Council is advisory, it could not expressly overrule the decision – only the House of Lords can overrule decisions of the lower courts. However, the principle set by the Privy Council on the test of what damages are recoverable has been the acceptable law ever since.

   The Wagon Mound (No.1) and The Wagon Mound, which are to be read together, which followed, involving different parties but the same facts which arose out of the same incident at a ship repair wharf in Sydney Harbour. The Wagon Mound (No.2) clarified further the issue of the remoteness of damages. Briefly, the facts were these: while the Wagon Mound was bunkering there was an oil spill due to the negligence of the ship’s crew. The oil spill spread to a repair wharf where welding repairs on another ship had been taking place. Molten metal from the welding fell and set fire to floating cotton waste, which in turn ignited the oil that had been spilled on the water and drifted quite a distance to the wharf. The fire then spread to the wharf and surrounding area. The wharf owners sued the demise charterers of the Wagon Mound claiming damages caused to the wharf.

   The central issue in The Wagon Mound (No.1) was whether or not the extensive damage suffered by the wharf due to the spread of the fire in the surrounding area was too remote and therefore not recoverable. So it had to be decided whether or not the test to be applied should be that in Re Polemis, or whether a new test should be pronounced. If the test in Re Polemis were to be acceptable, then all the damage caused to the wharf would be a direct consequence of the negligence of the defendant to allow the spread of oil which caught fire on the water. If the test was based on what was reasonably foreseeable, the defendant would not be liable for all the damage caused to the wharf by the fire, other than the fouling of the wharf by oil.

   It was found on the evidence that the defendant could not reasonably be expected to have known that the furnace oil was capable of being set afire when spread on water. However, the judge in The Wagon Mound (No.1) and the Supreme Court of New South Wales in Australia were bound by Re Polemis, and held the defendants liable for all the damage which was the direct consequence of their negligence, although neither court approved the test of Re Polemis. Therefore, the case was taken to the Privy Council. (Note that the Privy Council is the highest court for cases which have been decided by courts of the Commonwealth. Australia was one of the Commonwealth countries.)

   It was decided that the test of reasonable foreseeability which applies to determining culpability should also apply to determining compensation.

   In The Wagon Mound (No.2) the claimant was the owner of the two ships which were undergoing repairs at the wharf and were seriously damaged due to the fire. The defendant was the demise charterer of the Wagon Mound, who was found in this case liable by the Privy Council for the damage caused to the ships under repair.

   More recently, a very important change in the law has been brought in by the House of Lords in relation to the issue of whether the impecuniosity of the claimant is a factor too remote to be taken into account. In the old House of Lords decision, The Liesbosch, the cost of hiring a dredger in place of the lost dredger (which was lost due to the defendant’s fault) was categorised as a separate head of damage to the cost of buying a new dredger (which the claimant could not afford) in order to continue the contract of dredging and prevent penalties under that contract. The cost of hiring was considered to have been caused by a separate cause which, in this case, was said to have been the impecuniosity of the claimant.

   The Court of Appeal in The Sivand, on similar facts, reluctantly distinguished The Liesbosch as it could not overrule it. This decision has now been overruled by the House of Lords in Lagden v O’Connor (a non-shipping case). The principle established by this decision is that a wrongdoer has to take their victim as they find them and bear the consequences, if it is reasonably foreseeable that the injured party will have to borrow money or incur some other type of expenditure to mitigate their loss. (Another case critical of the older law is the Privy Council decision in Alcoa Minerals of Jamaica v Broderick).

   To conclude on the issue of remoteness of damages, the claimant must show that the kind of damage suffered was reasonably foreseeable, and they do not have to show that the defendant should also have foreseen the exact way in which the damage was sustained. The rule of foreseeability runs all the way through the process of deciding culpability, which caused the collision and the damages, as well as in determining remoteness of damages.
   With regard to the issue of mitigation of loss by the claimant, the sole relevant criterion is the reasonableness of the steps which the claimant took in mitigation. Provided they took reasonable steps they would be entitled to recover their loss and the costs incurred in mitigation of loss; questions of foreseeability are not relevant here (Hobhouse LJ in The Sivand).

6. Assessment Of The Quantum Of Damages

   The general principle in theory is restitutio in integrum, which is the right of the claimant to be put in the same position as if the loss or injury had not been suffered (The Clarence (1850)). In reality, however, there can be no exact way of assessing the quantum of damages. Values are not always precisely assessed. Profit lost must be within anticipated margins of foreseeable loss. Moreover, recovery can be reduced by statutory rights available to the owners of the guilty ships who are normally entitled to limit their liability, as you will see in the next chapter. Broadly, the claimant can recover for physical and consequential financial loss but not for pure economic loss.

   Pure economic loss is loss not flowing from loss of proprietary rights damaged in the collision, but, for example, loss based on contractual rights (The Mineral Transporter). After the liability issues are determined by the court, the Registrar determines the quantum of damages, and there are various rules about this established by the authorities. The Lagden case was raised as the basis for claiming extended losses arising from the delays in the ship repair after a collision following a refusal by the insurers to pay. However, the claim for extended damages failed in this case on causation grounds (Nautical Challenge Ltd v Evergreen Marine (UK) Ltd (No 2)).

   The assessment of the loss is estimated on the basis of the time of the loss (The Baltic Surveyor and Timbuktu). The damages recoverable in collision cases are damages in negligence. There are statutory regimes especially for pollution damage which may affect the type of damage that can be recovered, the rules about consequential damages and the applicable limits of liability.

If you have any questions or require any additional information, please contact our lawyer that you usually deal with.

This article is written by our Principal Associate, Chakaravarthi