Reseau De Transport D’Electricite & Others v Stema Shipping (UK ) Limited & Ors (decided on 20.1.2025)
Article 1(4) Limitation Liability
Res Judicata
Mrs Justice Cockerill DBE held : –
– An order cannot be challenged when it is unambiguous.
– Cause of action estoppel operates when there is a lack of cause of action under Section 185 of the Merchant shipping Act 1995.
– The issue estoppel only arises when the cause of action estoppel arguments were unsuccessful.
– Parties are not allowed to advance an alternative limitation under Article 1(4) after failing to establish or advance the same at an earlier proceedings initiated by the same party.
Factual Background
On 20.11.2016 in the English Channel two pairs of high voltage electricity cables, which connect England and France, were damaged. They are alleged to belong to the Claimant, Reseau De Transport D’ Electricite (RTE). In these proceedings, it was alleged that this was caused by having an anchor dragged over them. The two vessels in the area at the time were the Stema Barge II, a dumb barge, and the SAGA SKY, a general cargo vessel. These two vessels also collided with each other.
The Barge was carrying rock under a sale contract between the third party (Stema UK) and the Defendants, Network Rail and Constain (NRC). The rock was needed by NRC to repair part of the railway line between Dover and Folkestone.
The barge was chartered to the Fourth party, Stema A/S. The fifth party (Splitt) is the owner of the barge. Splitt, Stema A/S and Stema UK are all part of the same group of companies (also known as the Stema Interests). The owner of the SAGA SKY is a Norwegian Company (Saga).
This incident has give rise to a multiplicity of legal proceedings in Denmark, France and England. Thet fact gives rise to this application, because Stema UK seeks to argue that it is entitled to limit its liability under Article 1(4) of the Convention of Limitation of Liability for Maritime Claims 1976 (The Limitation Convention).
To this the applicants respond that it is an abuse of process for Stema UK to seek to argue this Article 1(4) claim in these proceedings – because it could ad should have been argued at the trial of the earlier limitation proceedings commenced by the Stema Interests which was heard by Mr. Justice Teare in May 2020 (the limitation proceedings). It is said that the purpose of those proceedings was for Stema UK to secure a general limitation decree in respect of any maritime claims arising out of the incident and to avail itself of the benefit of the limitation fund established as part of those proceedings. The applicants say that not only did Stema UK fail to plead or argue Article 1(4) point at the limitation trial, but then Stema UK at least attempted to argue it and then actually explicitly withdrew that argument in the Court of Appeal (again seeking to revive it in the Supreme Court).
The applicant say that the matter is res judicata in that :-
a) The order made by eth Court of Appeal in the limitation proceedings declared (without qualification) that Stema UK was not permitted to limit its liability under Article 1 of the Limitation Convention;
b) The cause of action, alternatively the issue, which Stema UK seeks to invoke was determined against it;
c) Even if there is no res judicata this is Henderson v Henderson abuse.
The Stema Interest say that there is no room for the operation of the doctrines of cause of action estoppel or issue estoppel in the circumstances where Article 1(4) (and issues essential to it) were not previously decided and that there is similarly no abuse of process, primarily because at the time of the limitation claim, claims were not sufficiently formulated against Stema UK for a meaningful decision to be made on the substance of Article 1(4). A defence based on Article 1(4) is most appropriately considered in these proceedings and does not constitute harassment of the Applicants.
Stema Interests made an application at the beginning of the hearing for permission to rely on an expert report of Danish law. The applicants submitted that the content of the report was not necessary for or relevant to their applications so permission ought not be granted. In the event I did not rule on admissibility before the hearing commenced, and some features of the report were to some extent referred to de bene esse. Ultimately the court concluded that the substance of Danish law is not relevant for present purposes and the features of Danish law to which reference had to be
Issues
RTE submits that the Court should strike out and / or give RTE summary judgment on the Article 1(4) plea because Stema UK is debarred from raising it for a variety of broadly res judicata reasons : –
a) Because the Court of Appeal’s final declaration in its Order is final;
b) By the doctrine of cause of action estoppel;
c) By the doctrine of issue estoppel; and / or
d) By the rule in Henderson v Henderson.
That application is supported, predominantly on Henderson grounds by NRC.
The Stema Interests resists this. While engaging in each individual point, the thrust of their submission is that this is an unattractive attempt to avoid a contest on the merits. As to the substance of the arguments, Stema UK contends the combination or the lack of requirement to raise limitation at any given point, plus requirement for establishing a causative act, neglect or default plus the particular requirements of that in this case means that the right time to raise this argument in this case is now, abd there is no bar to that being done.
Discussion and Analysis
A. The Limitation Convention
Section 185 of the Merchant Shipping Act 1995 gives force of law to the Limitation Convention in the UK.
A reflection of the historical development of limitation of liability is outlined un the decision of the then Admiralty Judge David Steel in CMA CGM SA v Classica Shipping Co Ltd (2003) EWHC 641 (Comm); (2003) 2 All ER (Comm) 21 [2004] EWCA Civ 114 (2404) 1 CLC 468 at first instance : [14] – [27], subject to the reservation at [9] of the Court of Appeal’s judgment.
A limitation claim is an Admiralty claim and the procedures to be followed are found within CPR 61 and PD 61. It is common ground that there is no prescribed time for asserting a limitation claim as anyone who wishes to invoke the right to limit liability can either wait for liability claim (usually a claim for damages) to be formally commenced against them and then plead the right to limit as a defence to that claim or they can take steps to initiate limitation proceedings by issuing a limitation claim form seeking a declaration of the right to limit against named claimants or unnamed claimants.
Usually a limitation claimant initiates the proceedings in the immediate aftermath of a maritime incident and often concluded before any liability proceedings begin. It is in the interest of all potential claimants to know how much money there is in the fund and who may claim the procedural protection afforded by the fund.
Under English law, limitation claims are regarded as free-standing independent proceedings. Limitation proceedings are usually accompanied by the constitution of a limitation fund under Article 10 of the Limitation Convention. This is done by paying into Court the sterling equivalent of the relevant number of SDR prescribed by the convention, plus interest. The constitution of a fund gives protection to the assets of the parties constituting the fund. It precludes any person having a claim against the fund from exercising any rights against any other assets of the parties constituting the fund.
B. The Court of Appeal Order
The applicants relied on a number of authorities in establishing the first point of their contention i.e res judicata
They begin with the case of International General Electric Company of New York Ltd v Commissioners of Customs and Excise (1962) Ch 784 at 789-790 referring to the decision of Upjohn LJ which states that “ an order declaring the rights of the parties must in its nature be a final order after a hearing when the court is in a position to declare what the rights of the parties are, and such order must necessarily then be res judicata and bind the parties forever, subject only, of course, to a right of appeal… [a final declaration] finally determines and declares the rights of the parties: it is not open to further review except on appeal.”
Diplock LJ agreed with this and was later approved by him in Inland Revenue Commissioners v Rossminster Ltd (1980) AC 952 at 1014F-G (HL).
The applicants also relied on the Court of Appeal decision in Gordon v Gonda (1955) 1 WLR 885 and Privy Council decision in Winston Gibson v Public Service Commission (2011) UKPC 24 where the net effect of the decisions were to hold up the decisions of the Court and the Privy Council respectively.
These arguments were resisted by Stema UK by relying on the case of Sans Souci Ltd v VRL Services Lt (2012) UKPC 6. Here they submitted that the judgment indicated that the matter had to be one of construction against the broader background and that the Court of Appeal held that the Article 1(4) argument “was withdrawn (for purposes of these proceedings) during oral argument” and that this does not cover a situation which requires the identification of the decided cause of action and issues as a matter of substance rather than as a matter of form.
C. Cause of Action Estoppel
Stema UK relying on Spencer Bower at para 7.03-7.04; Caltex Singapore Pte and Others v B.P. Shipping Ltd (1996) 1 Lloyd’s Report 286 at 293-294; Test Claimants in the FII Group Litigation v Revenue and Customs Commissioners (2022) AC 1, submitted that a limitation decree is a declaration as to the availability of a procedural defence to a liability claim, and a procedural defence to a liability claim is not in itself a cause of action for the purpose of cause of action estoppel.
A limitation claim is not simply a procedural device. It is true that in Caltex Singapore and in the Happy Fellow it was characterised as a procedural device. Elsewhere it is treated as a substantive claim. So it is established that it is different both to the cause of action giving rise to that party’s underlying liability to third parties such as cargo interests and to defences.
The Court also looked at the cases of The Volvox Hollandia (1988) 2 Lloyd’s Rep 361 at 363, The Falastria (1988) 1 Lloyd’s Rep 495 at 498, James Patrick & Co Ltd v Union Steamship Co of New Zealand Limited (1938) 60 CLR 650. These authorities suggests that there is no bar to regarding a limitation claim as a substantive claim.
The case of FII Group deals with time bar limitation. That is a form of bar to remedy, and is purely a defence. Tonnage limitation is a very different purpose and capable of giving rise to an independent action.
Stema UK then contended that if cause of action estoppel were available in this context, it was not applicable in this case because on the authorities the required task is to identify the points, “which had to be ad were decided in order to establish the existence or non-existence of a cause of action”. This contention was side stepped as it looks beyond the cause of action to the elements of the arguments.
In this case Stema UK claimed to have a cause of action entitling it to limit its liability against the world for the damage to the cables pursuant to Section 185 of the Merchant Shipping Act 1995. The Court of Appeal held that Stema UK has no such cause of action and instead declared that Stema UK is not entitled to limit its liability in respect of the damage to the cables pursuant to Section 185 Merchant Shipping Act 1995 ot the Convention on Limitation of Liability for Maritime Claims 1976.
As such Stema UK is now debarred by cause of action estoppel from trying again.
D. Issue Estoppel
This issue was not available as cause of action estoppel was established
E. Henderson v Henderson (1843) 3 Hare 100, 115
This principle of law in Henderson v Henderson was established to prevent repetitive and vexatious litigation.
This principle was recently discussed in cases such as Barrow v Bankside Agency Ltd (1996) 1 WLR 257, 260; Johnson v Gore Wood (2002) 2 AC 1, 31; Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd (2013) UKSC 46 [2014] AC 160 [24]; and Test Claimants in FII Group Litigation v Revenue and Customs Commissioners (formerly Inland Revenue Commissioners) [2021] UKSC 31 at [77].
Additionally NRC referred to the cases of Aldi Stores Ltd v WSP Group Plc (2008) 1 WLR 748 where it relied upon the Aldi requirements as to whether potential points for a particular piece of litigation need to be flagged to the court and the consequences if they do not.
This was referred to in the case of Gladman Commercial Properties v Fisher Hargreaves Proctor [2013] EWCA Civ 1466. Here the Court of Appeal through Briggs LJ held that the general principle is that the parties should not hold potential claims back and that a failure to follow the Aldi guidelines was a relevant matter pointing to a conclusion that a later claim constituted an abuse of process of civil litigation.
This was also referred to in the case of Stuart v Goldberg Linde (a firm) & Others (2008) EWCA Civ 2; [2008] 1 WLR 823. Here Clarke MR stated that the approach of the CPR was to require cards to be put on the table in cases of this kind and, if that did not happen a claimant is at high risk of the second claim being struck out as an abuse.
The parties agreed that the case of Outotec (USA) Inc v MW High Tech Projects UK Ltd [2024] EWCA 844. It follows that the Aldi case does not impose a requirement but rather provides guidelines. As to the submission that those guidelines apply only in limited circumstances, that is not how the authorities have developed. Outotec suggests that no such limitations, but does however warn against a rigid application different from the broad merits based evaluation of whether conduct is abuse.
Overall the factors which the court considered indicate that : –
a) The approach taken contravenes the public interest in finality and prevention of parties being vexed twice
b) Both parts of the could and should tests are satisfied
c) There has been or will be a waste of time and resources, both on the part of the parties and that of the court
d) There has been misuse of the court’s process in the failure to follow the Aldi guidelines
e) There were other reasons why earlier engagement with this issue would have been beneficial. One is that the declaration sought is binding on any potential claimant on the fund. Another is that these are not simple or cheap proceedings, so the course taken involves considerable increase of cost and delay – the limitation proceedings were completed in 2022 and the coss of thos proceedings exceeded £1 million.
Although this is not a classic oppression case, it would be an abuse for Stema UK to seek to advance an alternative limitation case based in Article 1(4) at this point.
Decision
For the reasons given, Stema UK should therefore not be permitted to advance its Article 1(4) case in these proceedings. The relevant paragraphs of the pleadings should be struck out.
This case summary was prepared by Chakaravarthi Thillainathan, Principal Associate at Low & Partners, Malaysia. We thank Dr. Arun Kasi, Barrister at 4-5 Gray’s Inn Square, London, for his insightful input on the case.