Splitt Chartering & Ors v SAGA Shipholding & Ors

DMC/SandT/21/01

England

(1) Splitt Chartering APS (2) Stema Shipping A/S (3) Stema Shipping (UK) Limted & Ors v SAGA Shipholding Norway AS and RTE Reseau de Transport d’Electricité SA & Ors: [2020] EWHC 1294 (Admlty) Queen’s Bench Division (Admiralty Court); Teare J; 22 May 2020

John Passmore QC, instructed by Campbell Johnston Clark Ltd, for the Claimants

Chirag Karia QC, instructed by HFW LLP, for RTE Reseau de Transport d’Electricité SA (“RTE”)

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

Summary

This was the trial of an action in which the third Claimant, Stema Shipping (UK) Limited (“Stema UK”), sought to limit its liability under Article 1(2) of the Convention on Limitation of Liability for Maritime Claims 1976 (the “Convention”) as the “operator” of an unmanned barge which, whilst it was at anchor off Dover in November 2016, dragged its anchor in a storm and damaged an undersea electricity cable. At issue was the meaning of “operator of a seagoing ship” under Article 1(2) and whether Stema (UK) fell within that class of persons.

Teare J held that the ordinary meaning of “operator” of a ship extends beyond the manager of the ship and includes an entity which, with the permission of the owner, directs its employees – as in this case - to board an unmanned ship and operate her in the ordinary course of that ship’s business. In the light of the activities performed by Stema (UK), with the permission of the owner, the judge held that it fell within the definition of “operator” and was entitled to limit its liability accordingly.

The Case Note has been contributed by Candice Lau, BBA (Law), LLB (HKU), LLM (Cantab), a barrister at Alan Leong SC’s Chambers, Hong Kong.

Background

Splitt Chartering APS was the registered owner of the dumb barge Stema Barge II (“Barge”). The Barge was chartered by Stema Shipping AS to transport a cargo of rocks which Stema UK had purchased for use in the repair of the railway lines between Dover and Folkesone, that had been damaged in heavy weather. After the Barge had arrived at the coast of Dover, Stema UK sent its employees on board, including a barge master and a crew member. These employees dropped the Barge’s anchor. Whilst the Barge was at anchor, they were responsible for ballasting the Barge, maintaining her generators, and monitoring her position. While riding out a storm at Dover in November 2016, the Barge dragged her anchor, causing damage to an underwater electricity cable owned by RTE.

Under Article 1(1) of the Convention, shipowners and salvors may limit their liability in accordance with Article 2. Article 1(2) defines the term “shipowner” as the “owner, charterer, manager or operator” of a seagoing ship. These persons are entitled to limit their liability under Article 1(1). Relying on Article 1(2) of the Convention, Splitt Chartering APS, Stema Shipping A/S and Stema (UK) brought a claim seeking a declaration that they were entitled to limit their liability to RTE. It was accepted that the first two entities, as the owner and charterer of the Barge respectively, were “shipowners” under Article 1(2). At issue was whether Stema (UK) fell within the meaning of “operator” under Article 1(2).

Judgment

Teare J held that Stema (UK) was entitled to limit its liability under Article 1(2) of the Convention as the “operator” of the Barge.

Given the close connection between “manager” and “operator”, Teare J first considered the definition of “manager” in Article 1 of the Convention. He was of the view that the manager of a vessel is typically a person entrusted by the owner with the duty of devising and maintaining a safe management system to ensure the safe operation of the vessel and the prevention of pollution, crewing the vessel with appropriately qualified and trained personnel, maintaining the vessel, finding employment for her and preparing her for trading Some owners might entrust those tasks to senior personnel, separate companies within a group or third party companies which offer a management service.

Teare J held that the ordinary meaning of “manager” in Article 1(2) the Convention must reflect the above-mentioned role of manager. Therefore, the “manager of the ship” is the person entrusted by the owner with sufficient of the tasks involved in ensuring that a vessel was safely operated, properly manned, properly maintained and profitably employed to justify describing that person as the manager of the ship. If a person is entrusted with just one limited task, it might be inappropriate to describe that person as the manager of the ship; instead, that person would just be assisting in the management of the ship.

Teare J then considered the definition of “operator”. He agreed with a decision by the Federal Court of Australia that a ship is not merely a machine to be worked by a skilled operative, but a working commercial enterprise which, in order to be managed successfully, required the discharge of inter-related operational responsibilities. He found it difficult, he said, to separate management from operation. He considered the ordinary meaning of “operator of a ship” to include not only the “manager of a ship”, but also those who, with the permission of the owner, send their employees with instructions to operate the vessel’s machinery in the ordinary course of the ship’s business. Such an interpretation was, he said, consistent with the object and purpose of the Convention, which is to enable owners, charterers, managers and operators to limit their liability so as to encourage the provision of international trade by way of sea-carriage.

On the facts, after the Barge had arrived at Dover, the employees of Stema (UK) were the only personnel on board; they prepared the Barge for lying safely at anchor and operated the Barge’s machinery to ensure she was safely ballasted. Teare J found that those activities were not part of Stema (UK)’s obligations as purchaser of the rocks but were performed for the benefit of the owner of the Barge. Whilst there was no formal contract to engage Stema (UK) as the operator, it was plain that it acted in the way that it did with the owner’s permission. Employees of Stema (UK) were on board the Barge and operated its machinery for two weeks prior to the accident. The nature of Stema (UK)’s operation of the Barge was such as to make it appropriate to describe it as the operator. Thus, the Judge found that Stema (UK) was entitled to limit its liability under Article 1(2) of the Convention.

Comment

This is the first case where the meaning of “manager” and “operator” in Article 1(2) of the Convention has been considered by the Admiralty Court. By taking into account the purpose of the Convention, the Court has provided useful guidance in determining whether an entity is to be regarded as a “manager or operator” of a ship. The Court, however, was not prepared to draw a definite line between “manager” and “operator”, acknowledging the necessary overlap between the two roles.