The English High Court has just decided in The Thorco Lineage not to follow its 14-year-old decision in The Limnos on carriers limiting their liability for bill of lading cargo claims.
In The Limnos (2008), 0.6% of the cargo had been damaged during its shipment by the vessel. But the whole cargo was treated in the market as a distressed cargo, so its receiver claimed its US$1.5 million total loss from the owner/carrier under the bill of lading.
The bill of lading incorporated the Hague-Visby Rules (HVR). The owner sought to limit its liability based on the 0.6% physically damaged quantity under Article IV.5(a)’s words emphasised in bold by us: “Unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading, neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the goods in an amount exceeding 666.77 [Special Drawing Rights/SDRs] per package or unit or 2 [SDRs] per kilogram of gross weight of the goods lost or damaged, whichever is the higher.”. The cargo receiver said the limit should be a much higher figure, calculated on the whole cargo quantity – not just the physically lost/damaged part.
The High Court judge (Burton J) agreed with the owner:
In The Thorco Lineage, the same question arose. Cargo was shipped from the USA to Australia. The vessel suffered engine failure and grounded. Salvors were contracted. Some cargo was discharged in South Korea and some was transhipped by another vessel to Australia. The cargo receiver claimed US$8.4 million of which 3% of the claim was for the 7%-physically lost/damaged cargo and the balance (the vast majority of the claim) was for its paid salvage and on-shipment costs.
But the High Court judge (Sir Nigel Teare) disagreed with the decision in The Limnos (a High Court judge is not bound by the decision of another one), holding that:
The judge also expressed his (obiter dictum/non-binding) view that even if he had followed The Limnos, there was physical damage by reason of the maritime lien the salvor had had over the cargo (damaging the cargo owner’s title to the cargo) until it was given security for its salvage remuneration.
The decision in The Thorco Lineage will come as a pleasant surprise to cargo owners advancing claims for lost profit/expense arising out of loss/damage to cargo. Though it will also benefit shipowners in rarer cases where they will be assisted by limitation of liability and where they do so despite there being no cargo loss or damage at all (such as a claim for the cargo’s loss in value due to delay).
The decision is not being appealed to the Court of Appeal, so it is the final word on this – for now.