The Owners of the Café Bari Tankschiffahrts GMBH & Company KG (Disponent Owners) v Bahamas Oil Refining Company International Ltd et Al

• Jurisdiction: Bahamas
• Judge: Allen, P.
• Judgment Date: 22 May 2014
• Neutral Citation: BS 2014 CA 88
• Date: 22 May 2014
• Court: Court of Appeal (Bahamas)
• Docket Number: SCCivApp No. 220 of 2013

Court of Appeal

Allen, P.; Blackman, J.A.; Adderley, J.A.

SCCivApp No. 220 of 2013

The Owners of the Café Bari Tankschiffahrts GMBH & Co. KG (Disponent Owners)

and

Bahamas Oil Refining Company International Limited et al

Appearances:

Mr. Luke Parsons Q.C. with Mrs. Parris Whitaker, counsel for the appellants.

Mr. Peter McDonald-Eggers Q.C with Mr. Oscar Johnson, and Mrs. Tara Archer, counsel for the first respondent.

Mr. Sean Moree, counsel for the second and third respondents.

Mr. Dywan Rodgers, counsel for the Interveners.

Maritime Law - Collision between vessel and terminal facility — Damages — Indemnity — Limitation of Damages — Whether it is possible to contract out of the Maritime Shipping Act— Whether contract afforded the appellant full indemnity.

Allen, P.

1 This case arises from a collision between the vessel MT Cape Bari and the first respondent's terminal facility at Grand Bahama, on 25th May, 2012.

2 At the relevant time, the vessel was under compulsory pilotage by a pilot provided by the first respondent.

3 The first respondent claimed, in proceedings commenced in the Supreme Court on 29th May, 2012, a full indemnity from the appellants in the sum of US $26.8 million for the damage suffered by the terminal as a result of the collision.

4 That claim was predicated on the terms of a contract made between the master of the vessel, as agent of the appellants, and the first respondent prior to the first respondent's pilot taking over command of the ship for docking at the facility.

5 The appellants did not deny liability, but claimed in proceedings they commenced in the Supreme Court on 25th June, 2012, that by virtue of the limitation provisions in the 1976 Convention on Limitation of Liability for Maritime Claims(“the Convention”) as embodied in the Merchant Shipping (Maritime Claims Limitation of Liability) Act 1989 construed as one with the Merchant Shipping Act Chapter 268 of the Statute Laws of The Bahamas, (the Act) they were not liable to damages beyond the aggregate amount of a sum equal to US $16,687,630.30 ($B16,613,900.00) together with interest thereon at the rate of 6% per annum as prescribed by the Merchant Shipping (Liability of Shipowners and Salvors) (Rate of Interest) Order.

6 These competing claims were heard by Senior Justice Longley, who dismissed the action of the appellants on 9th August, 2013, holding that the appellants were not entitled to limit their liability as claimed.

7 The ratio decidendi of the case is set out in paragraphs 23 to 43 of the judgment, however, its essence is captured in paragraphs 23 to 27, and 33–36, which are set out below:

• “23, I start with the basic, perhaps elementary proposition that freedom of contract exists. What that means is that parties enter into bargains voluntarily and use the terms they wish to govern their relationship. No term can be imposed unless it is imposed by law. In this case there is no suggestion that any term could have been imposed by law, That being so the agreement struck and in the language in which it was struck represents fairly and accurately the agreement by which the parties wished to be bound. No one has the authority to unilaterally alter the terms or to write into it terms not agreed not even the Courts unless it be so unreasonable or absurd a bargain that the Courts ought to interfere.

• 24. As a matter of construction when effect is given to the language used by these parties only one true construction is possible. The parties agreed that the First defendant would have a full indemnity and the plaintiff would pay all and any damages and expenses suffered by BORCO for the event which has happened. No provision is made for a limitation. Liability is unlimited.

• 25. To read it in otherwise would be to import language into the contract that the parties themselves did not intend. The intention of the parties is always to be gathered from the language they used and the surrounding circumstances and effect given to it unless by operation of law the Courts are bound to ascribe to the parties a different intention and rewrite the agreement.

• 26. Counsel for the plaintiffs advanced the proposition that I should read the conditions of use as though the Convention for the limitation provisions of the Convention were attached or somehow appended to it. I do not accept that as permissible. If that was what the parties intended they should have and could have, with immeasurable ease, made that clear. Courts do not unnecessarily usurp the will of the parties and read into contracts things that are not put there unless compelled to do so. Nothing compels that conclusion.

• 27. Freedom of contract encompasses the notion that parties are free to choose the terms they wish. Clause 6 of the contract specifically provides that it shall be governed by the laws of The Bahamas. The Convention is part of the law of The Bahamas. The Convention is part of the law of The Bahamas as much as the rules of construction and principles of construction are a part of it. If the parties wanted to place emphasis on a particular law of The Bahamas they would have indicated. They simply executed a contract in The Bahamas and provided it was to be construed and interpreted in accordance with and governed by its laws.

• 33. However it seems to me that the other side of that coin is that when the parties entered into that indemnity agreement both BORCO and the plaintiff knew or with the least bit of effort could have ascertained what the limits of liability were for the event which has happened. And BORCO, well aware that the potential damages could or might exceed the limits, provided for that eventuality by entering into the indemnity agreement, a course of conduct which seem to have been previously followed without incident.

• 34. The furthest I would be prepared to go is to say that prior to the parties entering into the indemnity agreement they must be taken to have done so knowing that the ship owner had a right to avail himself of the limitation provision of the Convention. Having entered into the indemnity agreement, it then became a matter of construction as to whether he retained that right or not or had by his contract of indemnity impliedly waived it or contracted out of it. There is no presumption either way. The contract falls to be considered as it lay.

• 35. To come to any other conclusion would in my judgment mean that the statutory right conferred by the Convention has appended to it some special presumptive status not written into the law, and which it never had

• 36. All the Convention appears to do is to grant a bare right of limitation. And in so far as it may be waived, all the Court is required to do when faced with a limitation application in these circumstances (unlike the straightforward collision cases on tortuous liability where the application of the limitation provisions of the Convention was regarded by Lord Phillips as axiomatic in ‘ the Leerot’ [2001] 2 Lloyds Law Report 291) is to see whether the right still exists or has been waived, either expressly or impliedly. To contract out does not require an express reference to the statute. Words which make it clear that the agreement forbids access to limitation or are inconsistent with it will suffice in my judgment.”

8 As noted, the learned judge relied on the case of The Satanita [1897] A.C. 59 as authority for his finding that parties can, by their language, contract out of the right to limit their liability given by the Convention.

9 The appellants seek through this appeal to have that decision set aside, and the grant to them of a declaration that they are entitled to limit their liability pursuant to articles 1 and 2 of the Convention in respect of damages caused by the collision.

10 The above relief is sought on some fourteen grounds which I have distilled to the following:

• “1. The learned judge wrongly construed clause 4 of the contract;

• 2. The learned judge erred in failing to give sufficient weight to the status of the Convention as part of the law of The Bahamas, and in finding that any exclusion of the provisions of the Convention must be expressed in clear and unambiguous language;

• 3. The learned judge erred in concluding that if the parties wanted the Convention to apply, it was for them to take positive steps to demonstrate this;

• 4. The learned judge failed to give any consideration or weight to the particular principles of construction applicable to the waiver or renunciation of a statutory right;

• 5. The learned judge erred in failing to give sufficient weight to Article 2(2) of the Convention, which provides that claims are subject to limitation even where brought by way of recourse or by way of indemnity under a contract;

• 6. The learned judge erred in giving undue weight to the decision of the House of Lords in The Satanita (above);

• 7. The learned judge erred in his application of the relevant principles of construction to the Convention;

• 8. The learned judge erred in having insufficient regard to the reasoning and analysis of Reyes, J. in the Hong Kong case of Sun Wai Wah Transportation Ltd. v. Cheung Kee Marine Services Co. Ltd. [2010] 1H.K.L.R.D. 833 as to the proper construction of an indemnity clause similar to that of clause 4 of the...