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ATLANTIK CONFIDENCE - cargo insurers "break limits" in unprecedented judgment

In a groundbreaking judgment handed down today (11 October 2016), HFW has successfully acted for cargo insurers in a case where it is believed that, for the first time anywhere in the UK, limits under the Convention on Limitation of Liability for Maritime Claims 1976 (as amended) have been broken.

Background

Following the fire and sinking of the bulk carrier ATLANTIK CONFIDENCE off the coast of Oman in April 2013, the Owners of the vessel sought to constitute a Limitation Fund in the Admiralty Court and obtain a declaration that they were entitled to limit their liability in accordance with the Convention due to the size of potential claims advanced against the Owners.

The Cargo Insurers sought to "break limits" by defending the application on the basis that the loss of the vessel along with her cargo was caused by the "personal act or omission" of the Owners. Therefore the exception in Article 4 of the Convention applied. The Cargo Insurers argued that the only credible explanation for the sinking of the Vessel which was consistent with all of the evidence was that she was deliberately sunk by her crew on the direction of her Owners. They argued that the "innocent" explanation for the vessel sinking put forward by the Owners required a series of improbable fortuities which when viewed in the context of the other evidence such as the change of routing of the vessel into deeper water, the Master and Chief Engineer's behaviour and response to the fire and the difficult financial circumstances of the Owners' principal meant that the only credible conclusion could be that the loss was caused by a deliberate act.

Decision

In a very detailed and considered judgment which followed extensive factual and expert evidence and argument on both sides during a six week hearing, Mr Justice Teare concluded that the sinking was a deliberate scuttling. He said:

"Having considered the totality of the evidence in this case and the opposing arguments I have concluded that the chief engineer, with the knowledge and agreement of the master, deliberately set a fire in the store room and deliberately caused ATLANTIK CONFIDENCE to sink.  They denied that they did so but I cannot accept their evidence. When their evidence is placed in the context of the case as a whole it cannot be true"

And

"The vessel was deliberately sunk by the master and chief engineer at the request of Mr. Agaoglu, the alter ego of the Owners. In those circumstances the loss of the cargo resulted from his personal act committed with the intent to cause such loss. The loss of the cargo was the natural consequence of his act as he must have appreciated. There can be no doubt that he intended the cargo to be lost just as much as he intended the vessel to be lost. It follows that the Owners’ claim for a limitation decree must be dismissed."

Judgment was handed down today. It is not yet know whether the Owners will seek permission to appeal.

HFW comment on the decision is as follows:

This was an exceptionally technical and detailed dispute with many strands of expert and factual evidence for the Judge to consider. As far as we are aware, this is the only time in the UK limits have successfully been broken under the Convention in 40 years. In our view this is a decision which turns on its own unique facts. Therefore we do not see that this decision changes the interpretation or application of Article 4 or in any way lowers the threshold for breaking limits. It should not open the floodgates to parties seeking to break limits as the facts of this case as found by the Court are thankfully, highly unusual. We suggest that all this case demonstrates is that in the correct factual scenario the Admiralty Court will be willing to take a decision to "break limits".  

The HFW team was led by partner James Gosling (recently retired and now a consultant with the firm) and included senior associates Alex Kemp and Jenny Salmon and latterly Rory Butler (partner).

Counsel were Nigel Jacobs QC and Ruth Hosking both of Quadrant Chambers.

Notes to editors

The neutral citation for the judgment is [2016] EWHC 2412 (Admlty).

For further information please contact: Alex Kemp, Senior Associate on +44 (0)20 7264 8432 or email alex.kemp@hfw.com, or Jenny Salmon, Senior Associate, on +44 (0)20 7264 8401 or email jenny.salmon@hfw.com, or Samantha Maher, Marketing Communications Manager, on +44 (0)20 7264 8148 or email samantha.maher@hfw.com