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"ATLANTIK CONFIDENCE" - BREAKING THE LIMIT

“ATLANTIK CONFIDENCE” [2016] EWHC 2412 (Admlty) – Breaking the Limit under the Convention on Limitation of Liability for Maritime Claims 1976  

In a recent judgment of Teare J the High Court has held, for the first time, that the limit of liability under the 1976 Convention could be broken under English law. 

Axa were the insurers of the cargo on board the “ATLANTIK CONFIDENCE” when she suffered a fire in the engine room and eventually sank off the coast of Oman in April 2013. They objected to the Owners’ application to the High Court for a declaration that their losses arising out of the sinking were subject to the limits set out in the Convention. Axa referred to Article 4 of the Convention, and argued that the evidence showed that the Vessel had been deliberately scuttled by the crew on the instructions of Owners in order to improve the financial position of Owners and their related companies. 

Article 4 reads as follows: “A person liable shall not be entitled to limit his liability if it is proved that the loss resulted from a personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.”

It was agreed that the Court should approach the case on the same basis as when a hull insurer rejects a claim on the basis that the vessel has been scuttled. That meant that Axa was required to prove its case on the balance of probabilities in order to succeed, but that as their allegation of scuttling was essentially one of fraud, the standard would come close to the criminal standard of proof. In a lengthy Judgment, Teare J reviewed the witness evidence and the extensive expert evidence which was presented to the Court during the six week trial, emphasising at each stage that his task was to consider all the evidence as a whole in order to determine whether the inferences argued for by Axa could safely be drawn. It had not been possible to inspect the Vessel, and so expert evidence in multiple areas was required. In the view of the Court, however, Axa had proved each stage of its scenario of the scuttling on the balance of probabilities, and while although the Court recognised that Owners were not required to provide their own competing explanation of the loss it nevertheless held that their suggested scenario was improbable. Referring to the judgment in the “IKARIAN REEFER” [1995] 1 Lloyds Rep. 455 (“Where the owners’ explanation requires a series of steps to happened in sequence, each of which is improbable or highly improbable, the explanations may become incredible, especially if some or all of the steps have to take place within a tight timescale and involve one or more remarkable coincidences”), the Court held that Axa had proved its case and under Article 4 Owners’ losses were not subject to the limit of the Convention.

 

While this Judgment is an unprecedented instance of the Convention limits being broken, apart from that it is difficult to say that any new ground was really broken by Teare J’s Judgment. Throughout the judge proceeded on the principals laid down in scuttling cases, and approached the facts on that basis. There was no analysis of the Convention itself in the Judgment. Although the expert evidence was complex and not straightforward, there was abundant evidence of underhand and suspicious actions by the Owners and the crew in the way that they reacted to the initial fire. It was also proved that the Owners had lied about their financial position at the time of the casualty and about how the insurance proceeds were applied. In that context the Judgment was not ultimately surprising, but it does at least confirm that the Convention limits are not unbreakable in practice. 

Posted on: Tuesday, November 01, 2016

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