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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Schiffahrtsgesellschaft MS Merkur Sky mbH & Co KG v MS Leerort Nth Schiffahrts GmbH & Co KG [2001] EWCA Civ 1055 (27 June 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/1055.html Cite as: [2001] 2 Lloyd's Rep 291, [2001] 2 LLR 291, [2001] EWCA Civ 1055

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE ADMIRALTY COURT
(MR JUSTICE STEEL)

		Royal Courts of Justice Strand London WC2A 2LL
		27 June 2001

LORD PHILLIPS, MR:

Introduction

1. On 19 September 1998 the "Leerort" was lying peacefully, starboard side to, in a berth at the Jaya Container Terminal in Colombo. She was laden with cargo. Part of that cargo was owned by the appellants. They have been referred to as the "Brookes Cargo Interests", for they are represented by Brookes & Co.
2. At about 18.11 local time, the respondents' vessel, "Zim Piraeus", when in the course of entering harbour, collided with the port side of the "Leerort", breaching No 1 hold. The "Leerort" subsequently flooded and settled on the bottom and the appellants' cargo was lost or damaged, a fate shared by cargo owned by others.
3. On 14 March 2000 Steel J, sitting in the Admiralty Court, made an order in the nature of a decree of limitation under which he held that the respondents were entitled to limit their liability pursuant to the provisions of the Merchant Shipping Act 1995 and gave ancillary directions. This is an appeal against that order with the permission of the trial judge.
4. The appellants challenge the Judge's order on two grounds, one substantial the other procedural. First, they contend that the judge could not properly be satisfied at the time he made the order that the respondents were entitled to limit their liability. It is the appellants' case that they were pursuing a line of inquiry which might enable them to defeat the right to limit, and that the judge erred in prejudging that this endeavour was bound to fail. Secondly, they contend that the judge prematurely made the order in a summary manner at a stage of the procedure when he should simply have conducted a case management conference. With characteristic realism, Mr Nigel Teare QC, for the appellants, accepts that if he fails on the substantive ground, he cannot hope to succeed on his procedural argument alone. Accordingly, I propose to deal first with the substantive ground of appeal before turning to make some comments on procedure.

The facts relating to the collision

5. Almost all contemporary records and reports, both written and automatic, relating to the time of the collision, have now been obtained. They enable a detailed reconstruction to be made of events aboard the "Zim Piraeus" in the minutes leading up to the collision. I shall give times in GMT; local time was GMT plus 6.
6. The vessel cleared the harbour breakwater at about 12.05 GMT. At that time the revolutions per minute ("rpm") of the engine were recorded as 58. This corresponds to a speed of 14 knots in ballast conditions, but the engine had only been running ahead for some four minutes. It is estimated that the vessel would probably have been making good a speed of about 10 knots as she cleared the breakwater. As the vessel came into the harbour she was in an automatic remote control mode on her bridge console. When in that mode the engine responded to the telegraph commands by means of a computer programme. As the vessel came in, at a time recorded on the engine logger print out as 12.07.29, the Master gave a half astern order to take the way off the vessel.
7. The engine stopped, but the automatic control system failed to start it in the astern mode. Two mal-function alarms then sounded in the engine. The Master then ordered "stop" at 12.08.05, engaged emergency manoeuvering mode at 12.08.15 and set minus 36 rpm five seconds later (ie half astern). The engine started working astern at 12.08.31 and revolutions built up steadily, increasing to minus 73 rpm over some three minutes. However, this action failed to take the headway off the ship before the collision.
8. There is an issue as to the implication of these facts to which I shall revert. First, I propose to summarise the law in relation to limitation of liability.

Law of Limitation

9. In setting out the current law I can do no better than adopt some passages of the judgment of Sheen J in The Bowbelle [1990] 1 WLR 1330:

"On 1 December 1986 by virtue of the Merchant Shipping Act 1979 (Commencement No 10) Order 1986, there was a profound change in the law which gives shipowners and others the right to limit their liability in respect of certain claims. On that date there came into force those parts of the Act dealing with limitation of liability. Section 17 of the Merchant Shipping Act 1979 provides:

'(1) The provisions of the Convention on Limitation of Liability for Maritime Claims 1976 as set out in Part 1 of Schedule 4 to this Act (hereafter in this section and in Part II of that Schedule referred to as 'the Convention') shall have the force of law in the United Kingdom. (2) The provisions of Part II of that Schedule shall have the effect subject to the provisions of that Part.'

Part 1 of Schedule 4 to the Act contains the text of the Convention, of which the following parts are relevant:

'Article 1

Persons entitled to limit liability - 1. Shipowners and salvors, as hereinafter defined, may limit their liability in accordance with the rules of this Convention for claims set out in article 2.... 7. The act of invoking limitation of liability shall not constitute an admission of liability.

Article 2

Claims subject to limitation - 1. Subject to articles 3 and 4 the following claims, whatever the basis of liability may be, shall be subject to limitation of liability (a) claims in respect of loss of life or personal injury or loss or damage to property ... occurring on board or in direct connection with the operation of the ship ... and consequential loss resulting therefrom; ...

Article 4

Conduct barring limitation - 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 knowledge that such loss would probably result.

Article 11

Constitution of the fund - 1. Any person alleged to be liable may constitute a fund with the court or other competent authority in any state party in which legal proceedings are instituted in respect of claims subject to limitation. The fund shall be constituted in the sum of such of the amounts set out in articles 6 and 7 as are applicable to claims for which that person may be liable, together with interest thereon from the date of the occurrence giving rise to the liability until the date of the constitution of the fund. Any fund thus constituted shall be available only for the payment of claims in respect of which limitation of liability can be invoked....

Article 13

Bar to other actions - 1. Where a limitation fund has been constituted in accordance with article 11, any person having made a claim against the fund shall be barred from exercising any right in respect of such a claim against any other assets of a person by or on behalf of whom the fund has been constituted. 2. After a limitation fund has been constituted in accordance with article 11, any ship or other property, belonging to a person on behalf of whom the fund has been constituted, which has been arrested or attached within the jurisdiction of a state party for a claim which may be raised against the fund, or any security given, may be released by order of the court or other competent authority of such state. However, such release shall always be ordered if the limitation fund has been constituted:... 3. The rules of paragraphs 1 and 2 shall apply only if the claimant may bring a claim against the limitation fund before the court administering that fund and the fund is actually available and freely transferable in respect of that claim.'

In considering the effect of those provisions upon shipowners and in order to appreciate the dramatic change which has been brought about by the enactment of the Convention on Limitation of Liability for Maritime Claims 1976 it is helpful to have in mind the state of the law immediately preceding the coming into force of that part of the Act.

On 10 October 1957 there was signed at Brussels an International Convention relating to the Limitation of the Liability of Owners of Seagoing ships. The preamble to the Convention of 1957 states that the High Contracting Parties have recognised the desirability of determining by agreement certain uniform rules relating to the limitation of the liability of owners of seagoing ships. In that Convention the British system of limitation of liability was adopted and by article 5 an attempt was made to ensure that when and wherever claims were made against a shipowner, who had the right to limit his liability, that shipowner would be able to give bail or satisfactory security or establish one limitation fund against which all claims arising out of one incident would be brought. The Convention of 1957 started with the statement that the owner of a seagoing ship may limit his liability in accordance with this Convention in respect of claims arising from certain stated occurrences 'unless the occurrence giving rise to the claim resulted from the actual fault or privity of the owner.' Those last few words are the time honoured words which were found in section 503 of the Merchant Shipping Act 1894.

For the purpose of giving effect to article 5 of the Convention of 1957 section 5 of the Merchant Shipping (Liability of Shipowners and Others) Act 1958 was enacted. The opening words of that section are:

'Where a ship or other property is arrested in connection with a claim which appears to the court to be founded on a liability to which a limit is set by section 503 of the Merchant Shipping Act 1894..."'(My emphasis).

In respect of any claim arising before 1 December 1986 a shipowner, who claimed that he was entitled to limit his liability by virtue of section 503 of the Act of 1894, had to discharge the burden of proving that the occurrence giving rise to the claim occurred without his actual fault or privity."

10. At page 1335 the judge commented:

"I turn to consider the Convention of 1976, under which shipowners agreed to a higher limit of liability in exchange for an almost indisputable right to limit their liability. The effect of articles 2 and 4 is that the claims mentioned in article 2 are subject to limitation of liability unless the person making the claim proves (and the burden of proof is now upon him) that the loss resulted from the personal act or omission of the shipowner committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result. This imposes upon the claimant a very heavy burden."

11. It is worth pausing to consider just how heavy that burden is. The language of article 4 of the Convention echoes, though not exactly, that of article 25 of the Warsaw Convention as amended at The Hague 1955, which addresses the right of limitation of liability in relation to carriage by air. Article 25 of that Convention provides:

"The limits of liability specified in article 22 shall not apply if it is proved that the damage resulted from an act or omission of the carrier, his servants or agents, done with intent to cause damage or recklessly and with knowledge that damage would probably result."

12. In Goldman v Thai Airways Ltd [1983] 1 WLR 1186, the issue was whether article 25 prevented the defendant airline from limiting its liability for injuries caused because the pilot disregarded standing orders that seatbelts should be fastened when there was a risk of turbulence. The Court of Appeal held that article 25 did not, on the facts, preclude their right to limit liability. In the leading judgment Eveleigh LJ observed:

"....the doing of the act or omission is not only qualified by the adverb 'recklessly', but also by the adverbial phrase 'with knowledge that damage would probably result'. If the pilot did not know that damage would probably result from his omission, I cannot see that we are entitled to attribute to him knowledge which another pilot might have possessed or which he himself should have possessed."

13. The limitation provisions in relation to merchant shipping provide even greater protection than those in relation to carriage by air. It is only the personal act or omission of a shipowner which defeats the right to limit. A shipowner is defined in article 1 as the owner, charterer, manager or operator of a seagoing ship. Thus, to defeat the right to limit, it is necessary to identify the causative act or omission on the part of such a person that caused the loss. Furthermore, it is only conduct committed with intent to cause such loss, or recklessly with knowledge that such loss would probably result, that defeats the right to limit. It seems to me that this requires foresight of the very loss that actually occurs, not merely of the type of loss that occurs. That certainly appears to have been the conclusion of Steel J in The MSC Rosa M [2000] 2 Lloyd's Rep 399 at 401, where he held:

"The authorities make it plain that, absent as in the present case, any allegation of intent, the person challenging the right to limit must establish both reckless conduct and knowledge that the relevant loss would probably result."

14. Mr Teare submitted that the words "such loss" meant loss of the type suffered and that, to identify the type of loss, it was necessary to refer back to article 2, which sets out the various types of loss in respect of which a right to limit arises. Thus, in the instant case, the claims advanced are in respect of "loss of or damage to property", so that the only foresight required to defeat the right to limit was of the likelihood of loss of or damage to property.
15. This submission runs counter to the clear meaning of the wording of article 4. The words "such loss" in that article clearly refer back to the loss that has actually resulted and which is the subject matter of the claim in which the right to limit is asserted.
16. It seems to me that where the loss in respect of which a claim is made resulted from a collision between ship A and ship B, the owners of ship A, or cargo in ship A, will only defeat the right to limit liability on the owner of ship B if they can prove that the owner of ship B intended that it should collide with ship A, or acted recklessly with the knowledge that it was likely to do so.
17. The alternative, which is perhaps arguable, is that the claimant merely has to prove that the owner of ship B intended that his ship should collide with another ship, or acted recklessly with the knowledge that it was likely to do so.
18. On the facts of this case it is not necessary to decide which alternative is correct. In either event the reality is that when damage results from a collision the shipowner will only lose his right to limit if it can be proved that he deliberately or recklessly acted in a way which he knew was likely to result in the loss of or damage to the property of another in circumstances where, inevitably, the same consequences would be likely to flow to his own vessel. Maritime history has many instances of scuttling, but I am not aware of one involving deliberate collision with another vessel. More pertinently, Mr Teare has been unable to point to any collision case in any jurisdiction where the right to limit under the 1976 Convention has been successfully challenged.
19. These considerations demonstrate that when a claim is made for damage resulting from a collision, it is virtually axiomatic that the defendant shipowner will be entitled to limit his liability with those observations, I revert to the facts of the present case.

Why did the engine not work astern?

20. The facts that I have summarised earlier demonstrate that, when initially the engine controls were put to the astern mode, the engine stopped working ahead, but failed to restart so as to work astern. A total of a little less than one minute was lost before the Master managed to get the engine working astern by engaging the emergency manoeuvering mode. It is the appellants' case that the initial failure of the engine to work astern may have been attributable to a defect, or defects, which rendered the vessel unseaworthy.
21. This case is based upon a report dated 8 March 2000 of Mr George Lugg, a consultant marine engineer, of Casebourne, Leach & Co. This report was itself based on a scrutiny of records relating to the operation of the main engine of the "Zim Piraeus".
22. As to the main engine, the report comments as follows:

"It is clear that there were problems with both the main engine and the surveillance system on this vessel. The vessel had problems with several main engine bearings, starting in February 1998 when some bearing metal was found under No 8 main bearing. Detachment of bearing metal is a serious matter, particularly in a new ship. No 8 main bearing was renewed in March 1998 at Singapore and again about a month later at Haifa. At that time No 8 bearing was modified, No 4 bearing was also renewed and an adjustment was made to 'intermediate sheets' which I assume to mean that the bearing segments of the intermediate bearing, which is external to the engine. It is recorded that the lower bearing shell of this bearing was 'pressed out' which I assume to mean that it had been extruded.

Further checks of main engine bearings were carried out in May at Pusan when the alignment of the shaft was checked. Bearing loads were also checked by jacking up the shaft. Further loose bearing metal was found under No 7 main bearing and a piece of metal was found to be missing from the lower bearing shell at the after edge. No repairs are reported at this time.

In July further problems were found, pieces were found to have broken off both Nos 7 and 8 bearings. In August further damage was found, Nos 8 and 9 main bearings were renewed by service engineers from the engine designers. A further inspection in October revealed that loose metal had again been found in No 8 main bearing so the problem was still persisting. Eventually in November 1998 the propeller shaft was realigned with the engine by repositioning the intermediate shaft, fitting a special ring in the seal and fitting a specially machined thinner bearing shell in No 9 main bearing. It is not known whether these repairs were successful.

Damage to main bearings is a serious matter. Main bearings support the crankshaft of the engine and if any of them are defective there is a danger of serious damage to the engine and immobilisation of the ship. Germanischer Lloyd were sufficiently concerned by the damage to insist that, after the repairs were carried out in November 1998, sea trials and a further inspection should be carried out before the vessel left the European continent."

23. In giving his conclusions, Mr Lugg said:

"The documents which I have seen contain evidence that the main engine sustained repeated bearing damages on a number of occasions during the months preceding the collision. The Owners clearly knew of the problems because they had obtained the assistance of MAN-B & W under the guarantee clause of the shipbuilding contract. Such main bearing damages could have initiated an alarm in the surveillance system which might have caused the main engine to be stopped automatically.

In my opinion, based on the evidence I have seen to date, I do not believe that the vessel was seaworthy at the commencement of her voyage to Colombo. I believe that she should have been taken out of service for realignment of the shafting system as soon as it was established that a serious problem existed, say by March or at latest April 1998."

24. Mr Lugg believes that the one minute during which the engines were stopped may have been critical in bringing about the collision. Thus he postulates that the collision may have been attributable to unseaworthiness to which the owners were privy. Mr Lugg had an alternative theory that the momentary engine failure was caused by faulty working of the automatic engine surveillance system. This is no longer pursued.
25. In order to pursue Mr Lugg's speculative theory further, it is the appellants' case that they ought to have been granted discovery of a wide range of further documents and that, until these had been analysed, the judge was in no position to make a decree of limitation. These documents include

1. Newbuild contract between the Claimant and the Shipyard (including technical specifications, drawings, plans and instructions in relation to the engine).

2. Technician Attendance Notes for any repairs to the engine governor or the associated control circuitry.

3. Superintendent's detailed reports relating to repairs to the engine or the control system.

4. Telegraph movement/manoeuvering recorder printouts.

5. Rough engine logbooks or rough notes relating to engine or control system performance or repairs.

6. Correspondence between the Owner or managers or Owner's Superintendent and MAN B&W and the Shipyard relating to the engine or the engine control system.

7. Correspondence between the Owner and the Charterer relating to the engine performance and repairs.

8. Correspondence between the vessel and the owners and managers relating to the engine and the engine control system.

26. All these relating to the period between delivery of the newbuild vessel in 1997 and December 1998.
27. As to the case that the collision may have been attributable to defects in the main engine, Steel J commented in his judgment:

"Any suggestion that the sequence of problems with the bearings of the crankshaft should have led to the withdrawal of the vessel from service is doomed to failure given the attendance of class at the repairs."

28. It may be that this comment was based on a misunderstanding of the evidence. The only repairs where Germanischer Lloyd, the vessel's classification society, are recorded to have been present took place after rather than before the collision, although it is quite likely that they were involved on earlier occasions when repairs were carried out to the main bearings.
29. More fundamentally, however, the judge considered that the exercise on which the appellants had embarked was, in effect, an expensive expedition up a blind alley as it was inconceivable that it would lead to identification of the type of personal fault on the part of the owners that would preclude the right to limit liability. Thus, he remarked at page 6 of the transcript of his judgment:

"It was submitted to me on behalf of the Brookes Cargo defendants that it was appropriate and proportional to seek some degree of discovery from the claimants for material that would allow the defendants to decide whether it was appropriate to challenge the right to limit. But perhaps it should be noted that the nature of the discovery exercise (and indeed this is confirmed by the way in which matters thereafter proceeded) and the scope of the submissions that have been put before me today) reveals that the approach of the defendants has been to treat the issue of limitation incrementally: that is to say not to focus upon the stringent terms of Article 4 but to start by embarking upon an investigation into the cause of the casualty and then move on to questions of seaworthiness. Now they say they want to go on to the next stages (as they call them) so as to investigate whether any defect in the vessel existed at the beginning of the voyage, then investigate whether there was some fault in that respect, then investigate how high up the hierarchy of the company that fault extended, then investigate thereafter the quality (as it might be called) of the fault, and only finally embark on an analysis as to whether the nature of the conduct which has been unearthed is something which justifies a challenge to the right to limit, the burden of which will be upon them.

It seems to me therefore that one of the difficulties in this case is that the defendant Cargo interests have had their eyes off the ball and that the process which they have embarked upon, even if it had resulted in the unearthing of more material than it has, is not really focusing on the proper issue in the case."

30. At page 11 of his judgment he commented:

"There is at present in my judgment absolutely no material whatsoever which could give rise to even the suspicion that this collision was brought about by way of a personal act or omission on the part of the alter ego of the owning company committed with intent to cause the collision or recklessly and knowing that the collision or loss would probably result. One of the reasons, perhaps, why the material is not there is from the very nature of this incident. It involves the running down of one vessel by another occasioned (let me assume in favour of the Cargo defendants) by some problem with her main engine or her controls system. The scope of discovery which now is sought in order to justify postponing a decree of limitation which would otherwise be obtained by the claimant owners seems to me to involve the proposition that wherever there is a pleadable case of unseaworthiness (which there is not here) that alone justifies the Cargo owners embarking upon applications for full discovery of all relevant material relating to a possibility that the owners are in breach of Article 4. That, in my judgment, is completely contrary to both common sense and indeed for that matter the underlying policy of the 1976 Convention as adopted by this country. It is to embark upon a process of wholly disproportional expense in order to explore not merely 'in the dark' but to seek to challenge what is to all intents and purposes a right to limitation which could only be disputable in very unusual and extreme cases involving the sort of conduct which is elaborated on in the well known case of Goldman v Thai Airways."

31. Mr Teare argued that the judge's approach was wrong in principle and that the appellants were entitled to pursue a sequential chain of inquiry, which started logically with the cause of the collision, in order to decide whether or not to concede the right to limit. He referred us to a passage in the judgment of Saville LJ in The "Happy Fellow" [1998] 1 Lloyd's Rep 13 at page 16. The issue in that case was whether an English limitation action should be stayed pursuant to article 21 of the Brussels Convention 1998 in the light of the fact that a collision action had already been commenced in France. In that context, Saville LJ remarked:

"As to the English limitation action, it seems to me that although any challenge to the right to limit has indeed to be based on art 4 of the Convention, the question whether the owners were personally at fault cannot be examined in a vacuum, divorced from the circumstances of the collision itself. As Mr Gross, QC put it on behalf of the respondents, a limitation action begins and ends with what sequence of circumstances brought about the collision, for until this is ascertained it is simply impossible to embark on inquiring whether the owners were personally to blame for the loss in question, let alone whether they had the necessary intent or knowledge with regard to that loss."

32. In The "Happy Fellow" the issue being canvassed in the limitation proceedings was whether owners were privy to a steering gear failure which brought about the collision. Without knowing much more about that case, it is impossible to comment on whether, and if so how, it was envisaged that such privity would defeat the right to limit liability. I do not see that the case affords any assistance in deciding whether there is any possibility of the Brookes Cargo Interests breaking the respondents' limit of liability in the present case.
33. The owners of the "Zim Piraeus" have admitted liability for the collision. This is on the basis that:

(i) the vessel entered the harbour at excessive speed;

(ii) the Master failed to engage manual control before going astern when he ought to have known that the vessel's forward speed would jeopardise an astern start-up in automatic mode;

(iii) having engaged manual control, the Master failed to put the engine immediately full astern.

34. The aspect of this explanation which the appellants challenge relates to the second stage. It is the respondents' case that it was a normal feature of the engine control system that, when in ordinary automatic remote control mode, an astern direction would not be executed while the vessel had significant headway. Only by engaging the emergency manoeuvering mode was it possible to procure that the engine would start working astern. Mr Lugg has not commented on this proposition, but Mr Teare made it plain that it was not accepted. He drew attention to a recently obtained report of an inquiry into the collision by the Colombo port authority which discloses that when, in a sea trial after the collision, the engine movements leading up to the collision were replicated, the engine started working astern immediately. Mr Teare submitted that further discovery and consideration of the implications of the documents disclosed was necessary before the cause of the failure of the engine immediately to work astern could be determined with certainty.
35. We asked Mr Teare to describe the best case that the appellants might find themselves able to advance in the light of the discovery sought. He replied that the evidence might confirm Mr Lugg's speculative theory that the initial failure of the engine to operate astern had been caused as a result of an automatic alarm triggered by a mal-operation of the engine as a result of the misalignment of the crankshaft.
36. We asked Mr Teare how, if this were established, it might involve the type of privity on the part of the owners to the subsequent collision that would have to be proved in order to defeat their right to limit. His answer was that this would depend upon what was disclosed on further discovery.
37. The appellants have thus far expended over £70,000 on their discovery exercise. I suggested that, if taken to its logical conclusion, it would culminate in an application for ship's papers. Mr Teare did not dissent. The appellants have been expending this money in pursuit of a chimera. I agree with the conclusion of Steel J that they have lost sight of reality. While the documents that they have obtained do not answer all questions about the minutes before the collision, they render Mr Lugg's theory that the main bearing problems experienced by the vessel may have led to an engine shutdown at the critical moment, a coincidence that is almost incredible. What is totally absurd is the suggestion that the 50 second interruption in the operation of the engine might be attributable to an act or omission of the owners done with the intention of bringing their new-building into a collision, or performed recklessly with the knowledge that it was likely to produce this result.
38. If the appellants had appreciated the full impact of the limitation regime under the 1976 Convention, I do not see how they could have contemplated that there was any realistic prospect of defeating the right of the owners of the "Zim Piraeus" to limit their liability once they learned of the collision. I suspect that the steps that they have taken in this case reflect an attitude that is still influenced by the previous regime under the 1957 Brussels Convention. If so, the appellants may not be alone in their failure to come to grips with the current law of limitation. The facts of The "Capitan San Luis" [1994] QB 465; The "Happy Fellow" and The "MSC Rosa M" suggest that there may be a reaction on the part of many claimants suffering losses which fall within article 2 of the 1976 Convention, to pursue investigations of the facts of the casualties in the hope of defeating the right to limit, when the odds against success are very long indeed.
39. It will by now be apparent that I am in no doubt that Steel J was right to conclude that the respondents were entitled to limit their liability and that the decree to this effect should not be delayed in order to permit the appellants to pursue further discovery. This conclusion renders the appellants' attack on the procedure adopted in this case of limited significance. This appeal has, however, disclosed considerable confusion about this. Accordingly, it may be of some assistance to attempt to clarify the position.

Limitation Procedure

40. These proceedings were commenced on 17 November 1998 before the new Civil Procedure Rules had come into force. Limitation procedure under the old Rules of the Supreme Court had not changed significantly since the days of the limitation regime prevailing under the 1957 Convention, where the burden of proof of the right to limit liability fell upon the shipowner seeking to establish that right. Under that procedure, the shipowner commenced a limitation action claiming a right to limit his liability which, provided that he succeeded in proving that right, led to a decree to that effect binding (at least as far as the Admiralty Court was concerned) upon all the world. The Rules providing for that procedure included the following:

"Limitation action: parties (O 75 r 37):

37(1) In a limitation action the person seeking relief shall be the plaintiff and shall be named in the writ by his name and not described merely as the owner of, or as bearing some other relation to, a particular ship or other property.

(2) The plaintiff must make one of the persons with claims against him in respect of the casualty to which the action relates defendant to the action and may make any or all of the others defendants also.

(3) At least one of the defendants to the action must be named in the writ by his name but the other defendants may be described generally and not named by their names.

(4) The writ must be served on one or more of the defendants who are named by their names therein and need not be served on any other defendant.

....

Limitation action: payment into court (O 75 r 37A):

(1) The plaintiff may constitute a limitation fund by paying into court the sterling equivalent of the number of special drawing rights to which he claims to be entitled to limit his liability under the Merchant Shipping Act 1979 together with interest thereon from the date of the occurrence giving rise to his liability to the date of payment into court.

....

(4) On making any payment into court under this rule, the plaintiff shall give notice thereof in writing to every defendant, specifying the date of payment in, the amount paid in, the amount of interest included therein, the rate of such interest and the period to which it relates.

The plaintiff shall also give notice in writing to every defendant of any excess amount (and any interest thereon) paid out to him under paragraph (2)(b).

....

Summons for decree or directions in limitation action (O 75 r 38):

(1) The plaintiff must-

(a) within 7 days after the acknowledgement of issue or service of the writ by one of the defendants identified by his name or,

(b) if none of the defendants acknowledges issue or service, within 7 days after the time limited for acknowledging service,

and without serving a statement of claim, take out a summons returnable in chambers before the Admiralty registrar or district judge, as the case may be, asking for a decree limiting his liability or, in default of such a decree, for directions as to the future proceedings in the action.

(2) The summons must be supported by affidavit verifying -

(a) the plaintiff's case in the action and

(b) if no defendant identified in the writ by his name has acknowledged service, service of the writ on at least one of the defendants so identified.

(3) The affidavit referred to the paragraph (2) above shall state-

(a) the names of all the persons who, to the knowledge of the plaintiff, have claims against him in respect of the casualty to which the action relates, not being defendants to the action who are identified in the writ by their names, and

(b) the address of each of those persons if known to the plaintiff.

(4) The summons and every affidavit in support thereof must be served on every defendant who has acknowledged issue or service of the writ at least 28 clear days before the hearing of the summons.

(5) Any defendant who disputes the plaintiff's claim to limit his liability or alleges that he is unable to decide whether to dispute that claim shall, within 14 days of the service upon him of the summons and any affidavit in support, serve upon the plaintiff an affidavit stating the grounds upon which he relies to dispute the plaintiff's claim to limit his liability or such facts and matters as could justify the Court in giving a direction under paragraph (8) of this rule.

(6) The plaintiff may, within 7 days of service upon him of any affidavit under paragraph (5), serve such further affidavit evidence as he may wish upon any defendant who has served an affidavit under paragraph (5) of this rule.

(7) If on the hearing of the summons it appears to the Admiralty registrar or district judge that the plaintiff's claim to limit his liability is not disputed, he shall make a decree limiting the plaintiff's liability and declaring the amount thereof.

(8) If on the hearing of the summons it appears to the Admiralty registrar or district judge that any defendant has not sufficient information to enable him to decide whether to dispute the plaintiff's claim to limit his liability, he may, on such terms as seem just, give such directions as appear to him appropriate to enable the defendant to obtain such information and shall adjourn the hearing.

(9) Any defendant who thereafter disputes the plaintiff's claim to limit his liability shall state on affidavit the grounds upon which he relies and such affidavit must be served on the plaintiff at least 10 clear days before the resumed hearing of the summons.

(10) If on the hearing or the resumed hearing of the summons, the Admiralty registrar or district judge does not make a decree limiting the plaintiff's liability, he shall give such directions as to the further proceedings in the action as appear to him to be appropriate including, in particular, a direction requiring the taking out of a summons for directions under Order 25, and, if he gives no such direction, a direction fixing the period within which any notice under Order 38, rule 21, must be served.

(11) Any defendant who, after the Admiralty registrar or district judge has given directions under paragraph (8) or (10), ceases to dispute the plaintiff's right to limit his liability must forthwith file a notice to that effect in the Registry or district registry and serve a copy on the plaintiff and on any other defendant who has acknowledged issue or service of the writ.

(12) If every defendant who disputes the plaintiff's right to limit his liability serves a notice on the plaintiff under paragraph (11), the plaintiff may take out a summons returnable in chambers before the Admiralty registrar or district judge asking for a decree limiting his liability; and paragraphs (4) and (7) shall apply to a summons under this paragraph as they apply to a summons under paragraph (1).

Limitation action: proceedings to set aside decree (O 75 r 40):

(1) Where a decree limiting the plaintiff's liability (whether made by a registrar or on the trial of the action) fixes a time in accordance with rule 39(2) any person with a claim against the plaintiff in respect of the casualty to which the action relates, who-

(a) was not named by his name in the writ as a defendant to the action, or

(b) if so named, neither was served with the writ nor has acknowledged the issue thereof

may, within that time, after acknowledging issue of the writ, take out a summons returnable in chambers before the registrar or district registrar, as the case may be, asking that the decree be set aside.

(2) The summons must be supported by an affidavit or affidavits showing that the defendant in question has a bona fide claim against the plaintiff in respect of the casualty in question and that he has sufficient prima facie grounds for the contention that the plaintiff is not entitled to the relief given him by the decree.

(3) The summons and every affidavit in support thereof must, at least 7 clear days before the hearing of the summons, be served on the plaintiff and any defendant who has acknowledged issue or service of the writ.

(4) On the hearing of the summons the registrar, if he is satisfied that the defendant in question has a bona fide claim against the plaintiff and sufficient prima facie grounds for the contention that the plaintiff is not entitled to the relief given him by the decree, shall set the decree aside and give such directions as to the further proceedings in the action as appear to him to be appropriate including, in particular, a direction requiring the taking out of a summons for directions under Order 25."

41. The effect of these rules can be summarised as follows:

(i) Only one claimant on the limitation fund needed to be named as a defendant in the writ. The others could be described generically.

(ii) Only one named defendant needed to be served with the writ.

(iii) All known claimants on the fund, ie named defendants and those described generically, had to be given notice of the payment into court of the limitation fund.

(iv) Only a defendant who had acknowledged service of the writ had to be served with a summons for a limitation decree.

(v) Unless such defendant disputed the right to limit, or sought additional information, a decree of limitation would be made on the basis of an affidavit sworn on behalf of the claimant in support of the claim.

(vi) The decree had to be advertised. At that stage any claimant on the fund could apply to have the decree set aside.

(vii) Such application could lead to the setting aside of the decree and a full blown contested limitation action.

42. I have omitted from this description rules providing for what is known as a restricted limitation decree, which only purports to be binding on named defendants rather than all the world.
43. The new Civil Procedure Rules came into force on 26 April 1999. Despite this, the existing limitation procedure has been preserved almost entirely as before. This has been achieved by making The Civil Procedure Rules subject to the provisions of a special Admiralty Practice Direction (see CPR 49). The Practice Direction includes the limitation procedure, suitably adapted, in PD9. One significant change is, however, that the limitation claim form replacing the old writ has to be served on all named defendants.
44. The provisions of the old Order 38 rules 7, 8, 9 and 10 are replaced by PD9.2(4) as follows:

"Where the right to limit is not admitted or the Claimant seeks a general limitation decree in Admiralty Form No ADM19 he must within 7 days of the date of filing of the defence of the named defendant last served, or the expiry of the time for doing so, apply for an appointment before the Admiralty Registrar for a case management conference at which directions will be given for the further conduct of the proceedings."

Procedure in the present case

45. The writ issued on the 17 November 1998 described the plaintiffs as "SCHIFFAHRTSGESELLSCHAFT MS 'MERKUR SKY' mbH & Co KG" and the defendants as "MS LEERORT NTH SCHIFFAHRTS GmbH & Co KG - The Owners of the Ship 'LEERORT' and all other persons claiming or being entitled to claim damages by reason of or arising out of the collision between the ship 'ZIM PIRAEUS' and the ship 'LEERORT' which occurred in the port of Colombo on or about the 19th September 1998". The owners of the "Zim Piraeus" then agreed to pay to the owners of the "Leerort" and others $12 million under a side agreement. This entitled the owners of the "Zim Piraeus" to step into the owners of the shoes of "Leerort" and to make a subrogated claim on their own fund. That fund stands at the equivalent of a little under £4.5 million.
46. On 3 November 1999 the respondents served an application notice in form N244. This sought a decree of limitation and consequential directions. I understand it was served on the named defendants, "The owners of the 'Leerort'". The application was supported by an affidavit sworn by Mr Gregson of the respondents' solicitors, seeking to make out the entitlement to the decree of limitation. The affidavit gave a brief account of the collision and then set out the details of the claims against the "Zim Piraeus" as follows:

"Parties with relevant claims against the 'ZIM PIRAEUS' comprise the following distinct groups:

(1) The owners of the 'LEERORT';

(2) The owners of the cargo loaded on board the 'LEERORT' and lost or damaged by reason of the events described above; and

(3) The owners of containers loaded on board the 'LEERORT' and lost or damaged by reason of the events described above.

(4)Charterers of the 'LEERORT' and the charterers of container slots on board her.

Proceedings have been commenced within the jurisdiction (in an action 1998 Folio No 1506) by the First Defendant (as the Owners and/or Bareboat Charterers of the 'LEERORT').

9. The potential claimants against the Plaintiff may themselves further be subdivided into:

(1) Those who have already agreed to English jurisdiction for the determination of their claims and have accepted security for their claims;

(2) Those who have notified the Plaintiff of claims but who have not agreed to jurisdiction nor accepted security;

(3) Those who have notified the Plaintiff of claims but who have commenced proceedings in other jurisdictions; and

(4) Those who have not notified the plaintiff of any claim, but who may do so in the future.

10. I have prepared lists showing, where it has so far been possible to ascertain them, the names and addresses of all potential claimants falling into the above categories, as well as (where applicable) the bill of lading numbers and claim amounts. The lists [are exhibited]. In the case of parties who have commenced proceedings elsewhere, the relevant jurisdictions are also noted on the relevant list. My firm is in the course of writing to all the parties identified in the lists, notifying them that a limitation fund has been established. A copy of the pro-forma letter which we are employing for that purpose is at page 10."

47. That proforma letter read as follows:

"This is to advise you that the Owners of the vessel ZIM PIRAEUS have now constituted a Limitation Fund in accordance with the terms of the Merchant Shipping Act 1995 (which incorporates into English law the 1976 Convention on Limitation of Liability for Marine Claims). On 17th September 1999 the Owners of the ZIM PIRAEUS constituted the Limitation Fund by way of Payment into Court. The amount of the Fund, in accordance with the above Act is £4,473,168.30, which includes interest from 19.9.98 to 17.9.99.

The Owners of the ZIM PIRAEUS have now made an application to the Admiralty Court in London for a Limitation Decree and a copy of the application and supporting evidence is enclosed for your information."

48. Brookes & Co received a copy of this letter dated 9 November 1999. On 22 November 1999 they wrote to the respondents' solicitors:

"We have today lodged acknowledgement of service forms in respect of your Limitation Proceedings. You will be served by the Court but in any event we attach copies by way of service. Kindly acknowledge receipt.

We have also been instructed to represent the cargo interests so far represented by W E Cox & Co Ltd."

49. In correspondence with the respondents' solicitors, the appellants' solicitors made it plain that they would attend the application in order to resist it and seek further documents.
50. At the hearing of the application before Steel J on 14 March 2000, Mr Macdonald QC introduced the parties follows:

"My Lord, I appear for the claimants in this matter. My learned friend Mr Crookenden appears for the generic defendant Brookes Cargo interests. Mr Alistair Johnson of Holmans is in court for the owners of the LEERORT and certain others, I think probably primarily as an observer. There is Mr Olubi here for one of the Cargo interests and there are others whose names and functions are not known to me but who presumably are representatives of claimants against the fund.

If your Lordship wishes to establish their identity, I will pause.

MR JUSTICE DAVID STEEL: They are welcome to make themselves known to me but at the moment let us assume that they come to watch rather than to participate."

51. There was then, understandably, some discussion between counsel and the judge as to the precise nature of the proceedings. This included the following passage:

"MR JUSTICE DAVID STEEL: So this is a CMC?

MR MACDONALD: So this is in effect a CMC, but we are asking you to exercise a power to grant a decree.

MR JUSTICE DAVID STEEL: You are asking for a limitation decree on the basis that there is no defence?

MR MACDONALD: On the basis that there is no defence.

MR JUSTICE DAVID STEEL: So it is a default application.

MR MACDONALD: It is in substance therefore and analytically it is a default application. No statement of defence has been served by anyone and our submission to your Lordship today is that there is no sustainable ground of defence which is reasonably arguable. That is where the issue is joined because the Brookes Cargo interests step in."

52. There was then discussion as to whether the judge had jurisdiction to grant a limitation decree at that hearing. The basis upon which the application proceeded is apparent from the following further passages of the transcript. At page 12 Mr Crookenden said:

"My Lord, just on the procedural situation, as I understand it technically the old rules still apply to this action because the writ was issued in November '98 and the matter has not been before a judge before now and it is up to your Lordship to determine to what extent the new rules apply.

MR JUSTICE DAVID STEEL: Under the transitional provisions, as you say, it is for me to decide and in my judgment it is appropriate that the CPR applies unless there is in a sense some compelling reason why not.

MR CROOKENDEN: My Lord, we assumed that would be the case and we certainly are proceeding as though the CPR does apply. But just to clarify what the position is, your Lordship may recall that under the old rules O 75 r 38(8) did expressly provide that the court could give directions if a defendant to a limitation action needed further information to decide whether to dispute limitation.

MR JUSTICE DAVID STEEL: I have no doubt we have the powers to do that now."

53. At page 14 Mr Crookenden continued:

"Going then to the application that is made, my friend asks for a limitation decree now. We say it is inappropriate to pursue the application for a decree at this stage since those instructing me to do not admit the right to limit. The claimants seek to determine this issue of entitlement to limit summarily and shut out my clients from disputing limitation. It appears that this would be under the summary judgment part of the CPR which has been indicated. Neither the old rule nor the Admiralty Practice Direction provide for summary grant of limitation decree, though I entirely accept that your Lordship has the power under Part 24 in an appropriate case. But it can only be in the clearest and most obvious cases that it would be appropriate to grant summary relief in relation to a limitation action and the claimants' right to limit is certainly not either plain or clear."

54. Thus, in the present case, instead of applying to the Admiralty Registrar for a case management conference, the respondents applied to Admiralty judge for a limitation decree. Brookes Cargo Interests were notified of the application and filed an acknowledgement of service though they had not been served with the originating process (the writ). They made their own application that a decree should not be given and that they should be granted further discovery. This was a deviation from the procedure under both the old rules of Supreme Court and the new practice direction. That procedure envisages that the time at which an unnamed defendant can challenge the right to limit is after the initial decree is made. For all that, in the circumstances that occurred, I do not see how any challenge could be made of the judge's right (i) to grant a decree of limitation, or (ii) to decline to do so and to order the respondents to provide further discovery if he thought fit.
55. The fact that the procedure adopted in this case deviated from the rules, suggests that the latter may not accord with the practical needs of current limitation procedure. Indeed, it is for consideration whether the alteration of the limitation regime that occurred when the 1976 Convention came into force, did not call for a new look at limitation procedure. The Rules Committee is in the process of drafting rules to replace the Admiralty practice direction and the experience in the present case may afford some assistance in that exercise.
56. For the reasons I have given, I would dismiss this appeal.
57. LORD JUSTICE HENRY: I agree.
58. LORD JUSTICE BROOKE: I agree.

Order: Appeal dismissed with costs assessed in the sum of £26,000 to by paid by the appellants within 14 days.