Stema Shipping (UK) v RTE - The Stema Barge II
Stema Shipping (UK) Limited & Others v RTE, Réseau de Transport d’Electricité SA & Others (The “Stema Barge II”)
Court of Appeal: Phillips LJ, Sir David Richards and Sir Launcelot Henderson:  EWCA Civ 1880: 15 December 2021
Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWCA/Civ/2021/1880.html
Chirag Karia QC (instructed by HFW LLP) for RTE (subsea electricity cable owner)
John Passmore QC (instructed by Campbell Johnson Clark Limited) for Stema UK (receiver of cargo on unmanned barge)
LIMITATION OF LIABILITY: CONVENTION ON LIMITATION OF LIABILITY FOR MARITIME CLAIMS 1976: INTERPRETATION OF ARTICLE 1(2): MEANING OF “MANAGER OR OPERATOR OF A SEAGOING SHIP”: ANCHOR OF UNMANNED BARGE CAUSING DAMAGE TO ELECTRICITY CABLE
The Court of Appeal, in allowing the appeal of RTE from the judgment of the High Court, held that Stema UK was not entitled to limit its liability to RTE for damage to its underwater cable, because to qualify as “the operator”, who would be entitled to limit liability, there had to be an element of management or control in the vessel and the provision of personnel to operate the machinery of the vessel alone did not qualify for that purpose.
Case note contributed by Jim Leighton, LLM (Maritime Law), LLB (Hons), BSc (Hons), Solicitor Advocate of England & Wales, Mediator, LMAA Supporting Member and International Contributor to DMC’s Case Notes
The fuller facts and background to the case can be found in the background section of the High Court case note, which can be found here [].
In summary, the issue on this appeal was whether, on 20 November 2016, Stema UK was "the manager or operator" of “STEMA BARGE II” ("the barge") within the meaning of article 1(2) of the Convention for the Limitation of Maritime Claims 1976 (the “Limitation Convention” – fn.1). Early that morning, whilst off Dover, the barge's anchor dragged during a storm and damaged an underwater cable owned by the RTE. The issue arose because Stema UK was the receiver of the cargo on the unmanned barge and did not have any formal role in respect of the barge's management or operation, but its personnel did operate the machinery of the barge whilst off Dover and were involved in monitoring the weather and in the decision to leave the barge at anchor during the storm.
It was agreed between the parties that if Stema UK was the manager or operator of the barge (and therefore fell within the definition of the term "shipowner" in article 1(2) of the Limitation Convention) then RTE's claim for the damage to the cable was subject to limitation under article 2 of the Limitation Convention, being "in respect of ... damage to property … occurring … in direct connection with the operation of the ship …".
The judgment of the Court of Appeal was given by Phillips LJ, who allowed the appeal for the following reasons.
Having introduced the background to the appeal, the judge identified that RTE had two principal grounds of appeal, in that the High Court judge was wrong:
(1) in construing “the operator” of a ship in the Limitation Convention as including “any entity which, with the permission of the owner, directs its employees to board the ship and operate her in the ordinary course of the ship’s business” - whether or not that ruling was limited to unmanned ships; and
(2) in his application of the law to the facts of the case, in ruling that, despite its functionally and temporally limited activities on the barge, Stema UK was its operator.
Ground 1: the meaning of "the operator" in article 1(2)
The judge noted that the finding of the High Court, that the ordinary meaning of “the operator of a ship” included an entity that, with the permission of the owner, directed its employees to board the ship and operate her in the ordinary course of business, appeared circular, begging the question of what it meant to operate a ship.
That conclusion, if applicable to all vessels, appeared to bestow the benefit of limitation on those who provided crew to operate the machinery of those vessels, even if they had no other role in the broader operation of the vessel. That would be contrary to the view of the Australian Federal Court in ASP v AAT (fn.2) and could not easily be reconciled with the High Court's own conclusion, early in its judgment, that article 1 of the Limitation Convention as a whole suggests that "operator" is used at a higher level of abstraction, one which has a notion of management and control over the operation of the ship. It was, the judge said, difficult to see that a person who does no more than provide crew to operate the machinery of a vessel is any more "the operator" than the crew that person provides.
If that were to be the case, it would also potentially expand the protection to large classes of analogous service providers, notwithstanding that they were intended to be excluded from the protection of the Limitation Convention, as revealed in the travaux préparatoires (the official record of the negotiations of the Limitation Convention).
Once it was accepted (as the High Court had) that “operator” must be considered at a higher level of abstraction than mere physical operation, involving an element of management or control, it was not clear why the full-time presence or otherwise of Master and crew on the vessel was crucial. Management and control would almost certainly be found in those who directed the on-board personnel (not in the Master and crew, as the High Court held), being legal persons who were highly unlikely to be on board the vessel.
Accordingly, in the judge’s opinion, the term “operator” must entail more than the mere operation of the machinery of the vessel (or providing personnel to operate that machinery). The term must relate to “operation” at a higher level of abstraction, involving management or control of the vessel or else article 1(4) of the Limitation Convention (fn.3) would be rendered otiose by encompassing categories of service providers who would be included notwithstanding their express exclusion by the contracting parties as revealed in the travaux préparatoires.
Whilst the decision in ASP v AAT addressed the term “operated by” in a different statute employing different language, the judge considered that the approach of the Federal Court (which had in mind the wording of the Limitation Convention) was instructive and accorded with his reading of article 1(2). In particular, the judge would adopt, in the present context, the Federal Court’s view that the mere provision of the crew for a vessel does not mean the vessel is operated by the provider.
The judge also saw no reason why the position should be different in relation to an unmanned vessel, nor why the physical operation of such a vessel necessarily involved an element of management and control so as to make the provider of the crew the operator of the vessel, regardless of whether they were supervised by an operator and manager from afar.
On that basis the judge considered that ground 1 of the appeal succeeded. However, there remained the question of whether the High Court was right to find that Stema UK was the operator of the vessel, applying what the judge considered to be the correct test.
Ground 2: application to the facts of this case
The judge noted that the High Court appeared to have had regard to two particular matters in finding that Stema UK was the operator of the barge off Dover, as opposed to merely assisting Stema A/S (the undoubted operator throughout) in its operation.
First, Stema UK provided the personnel to operate the barge when there was no-one present from Stema A/S. Second, Stema UK’s role in determining what action to take when storm force winds were forecast, from which the High Court inferred that Mr Johansen and Mr Upcraft of Stema (UK) were part of the steering committee to which responsibility for such actions was assigned in the Barge Operator Manual.
The judge found difficulty in accepting that either aspect supported a finding that Stema UK had management or control of the vessel in any sense. As to the operation of the machinery of the vessel by crew supplied by Stema UK:
(i) It was clear that the crew were following Check Lists prepared and supplied by Stema A/S.
(ii) It was also clear that Stema A/S were exercising an ongoing and direct supervisory role throughout the time the vessel was at Dover. Mr Grunfeld of Stema A/S (the “operator” with responsibility for the barge) expressly stated that “We would discuss operational matters with the local personnel by telephone”.
(iii) Although the superintendent, Mr Upcraft, was engaged by Stema UK, it was clear that he was acting under instructions from Stema A/S, Mr Johansen (the Managing Director of Stema UK) stating that “under instructions given by Stig Olsen (of Stema A/S) the superintendent put in place a roster for the Barge Masters and crewmembers”.
(iv) All of Stema UK’s witnesses stated that the superintendent, Barge Masters and crewmembers were physically operating the barge on behalf of Splitt as owner.
(v) Mr Boisen of Stema A/S confirmed that Splitt remained responsible for the barge. Mr Johansen made it even clearer, stating that a distinction was made between the vessels involved in terms of responsibility, Stema UK being responsible for “CHARLIE ROCK” and “AFON GOCH”, whereas Splitt was responsible for the barge.
Accordingly, in the judge’s view, it was clear from the above that Stema UK’s actions were for, on behalf of, and supervised by, Splitt (as owner) and Stema A/S (as operator). To the extent that any of them amounted to operating the barge, the judge considered that those actions were plainly by way of assistance to Stema A/S in its role as operator, not by way of becoming a second or alternative operator or manager.
As regards the decision to leave the barge at anchor during the storm, it was the case that each of the witnesses gave evidence as to the extensive involvement of Mr Upcraft and Mr Johansen of Stema (UK) in monitoring the weather forecasts and discussing the options for safeguarding the barge, a role which might be expected as they were the persons at the relevant location. However, Mr Boisen and Mr Johansen emphasised that the decision as to what to do with the barge remained with the owner, Mr Boisen clarifying that the decision would be taken by employees of Stema A/S on behalf of Splitt.
Neither witness gave any support to the view that Mr Johansen (or Mr Upcraft) was party to the actual decision. Given the clarity of that evidence from Stema UK's own witnesses, the judge did not consider that the reference to the role of the steering committee in “discussing and agreeing” actions in the Barge Operator Manual was of any significance.
As a result, the judge held that Stema UK was, at most, assisting Stema A/S in the operation of the barge, as a result of which the Court of Appeal allowed RTE’s appeal.
This judgment has sought to give effect to the underlying intention of the Limitation Convention by requiring more than the provision of personnel to operate the machinery of a vessel to qualify as “the operator”.
The Court of Appeal recognised, as did the High Court, that it may be unfortunate if the limitation afforded to a group of companies which comprised the owner, charterer and operator of a vessel was effectively lost because an associated company provided crew for certain mechanical operations of the vessel, as had happened in this case.
However, the Court of Appeal pointed out that such a group can take steps to bring all its associates within the umbrella of the protection by ensuring that crew are seconded to the owner or operator and/or by ensuring that the owner or operator is responsible for the actions of the associate.
The approach of the High Court would have effectively extended the protection given under article 1(4) to “associated companies” providing services to the vessel, even if the owner is not responsible for their actions.
Whilst that might be seen to be a fair or reasonable result, the Court of Appeal pointed out that it is not what the Limitation Convention currently provides and a revision to so provide is a matter for the contracting parties, not the courts.
Accordingly, given the importance of limitation of liability to the viability of the overall enterprise, ensuring such protection would seem to be an important business consideration for those engaged in international trade by sea and one which they would be well advised to arrange with care to benefit from the right to limit.
Footnote 1: The Limitation Convention is given the force of law in the United Kingdom by section 185 of the Merchant Shipping Act 1995
Footnote 2: ASP Ship Management Pty Limited v Administrative Appeals Tribunal  FCAFC 23
Footnote 3: Article 1(4) of the Limitation Convention reads:
If any claims set out in Article 2 are made against any person for whose act, neglect or default the shipowner or salvor is responsible, such person shall be entitled to avail himself of the limitation of liability provided for in this Convention.