Back on Course - Excluding the Right to Limit Liability Under the 1976 Convention: Bahamas Oil Refining Company International Ltd v The Owners of the Cape Bari Tankschiffahrts GMBH & Co KG ('The Cape Bari') [2016] UKPC 20

• Author: Samuel Walpole - Leo Rees-Murphy
• Position: Associate, Supreme Court of Queensland - TC Beirne School of Law
• Pages: 13-20

(2016) 30 ANZ Mar LJ

13

BACK ON COURSE – EXCLUDING THE RIGHT TO LIMIT LIABILITY UNDER THE 1976

CONVENTION: Bahamas Oil Refining Company International Ltd v The Owners of the

Cape Bari Tankschiffahrts GMBH & Co KG (‘The Cape Bari’) [2016] UKPC 20^

Samuel Walpole* and Leo Rees-Murphy**

!

Introduction

The decision of the Privy Council earlier this year in Bahamas Oil Refining Company International Ltd v The

Owners of the Cape Bari Tankschiffahrts GMBH & Co KG (“The Cape Bari”),1 allowing an appeal from the

Court of Appeal of the Commonwealth of the Bahamas, provides clarification on whether a shipowner can waive

its right to limit liability under the Convention on Limitation of Liability for Maritime Claims 1976 2

(“Convention”) and on ho w a contract purporting to exclude the right to limit should be construed. The case

represents the first consideration of this question under the Convention and since the 19th century by a final

appellate court.3 Ultimately, the Privy Council confirmed that the Convention can be contracted out of, and that

whether a contract excludes the Convention is to be determined through construction of the relevant contract.!

!

For centuries, a distinguishing feature of maritime law has been the capacity for shipowners to limit the quantum

of liability for maritime claims against them.4 Such regimes are justified on public policy grounds,5 including the

need to ensure the availability of affordable marine insurance.6 Attempts to harmonise the law of m aritime

limitation culminated in the Convention, which has b een incorporated into the domestic law of many nations.!

!

The scheme of the Convention represented a “profound change” in the law of maritime limitation.7 It set the limit

on the quantum of maritime claims at a much higher level but “[i]n exchange for the much higher limitation fund

claimants [had] to accept the extremely limited opportunities to break the right to limit”.8 As Griggs, Williams

and Farr note, it was intended to implement “a virtually unbreakable righto limit liability”.9!

!

This compromise was recognised by the Privy Council in The Cape Bari, which noted that under the Convention:10!

!

“...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...that the loss resulted from the personal act or omission of the shipowner committed w ith 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.”!

!

It w as a m isunderstanding of the broader application of this high threshold for establishing “conduct barring

limitation” under Article 4 of the Convention that led the Court of Appeal into error. Prior to the Court of Appeal’s

decision, both case law11 and leading texts12 indicated that it was p ossible to exclude limitation of liability by

contract.!

!

^ The views expressed in this article reflect the personal views of the authors. We thank Jaamae Hafeez-Baig, Tristan Pagliano, and Georgia

Williams for their helpful comments on an earlier draft.

* Associate, Supreme Court of Queensland.

** TC Beirne School of Law.

1 [2016] UKPC 20 (19 July 2016) (Lords Neuberger, Mance, Clarke, Sumption and Toulson).

2 1946 UNTS 221.

3 See The Satanita [1897] AC 59.

4 For a summary of the historical developments, see Nigel Meeson and John R Kimbell, Admiralty Jurisdiction and Practice (Informa, 4th

ed, 2011) 283-287; see also Patrick Griggs, Richard Williams and Jeremy Farr, Limitation of Liability for Maritime Claims (Informa, 4th ed,

2004) Ch 2.

5 The Bramley Moore [1963] 2 Lloyd’s Rep 429, 429 (Lord Denning MR).

6 For a contemporary justification, see The European Enterprise [1989] 2 Lloyd’s Rep 185, 191 (Steyn J).

7 The Cape Bari [2016] UKPC 20 (19 July 2016) [14], citing The Leerort [2001] 2 Lloyd’s Rep 291, 293-294 [9] (Lord Phillips MR).

8 Griggs, Williams and Farr, above n 4, Ch 1.

9 Ibid Ch 1.

10 The Cape Bari [2016] UKPC 20 (19 July 2016), citing The Leerort [2001] 2 Lloyd’s Rep 291, 293-294 [9] (Lord Phillips MR).

11 The Satanita [1897] AC 59; Virginia Carolina Chemical Co v Norfolk and North American Steam Shipping Co [1912] 1 KB 229

(‘Virginia’).

12 Meeson, above n 4, 292.