John Habergham, Myton Law, Hull U.K.
This case will probably (for which see the final paragraph below) lead to a sea change in English law with regard to limitation under the Hague-Visby Rules where there may be some minor physical damage to cargo, but there is a far greater economic loss – for eg possibly delay causing a drop in the value of the goods and so on.
Previously, the position by reference to a case called The Limnos is that in the absence of any physical damage, economic losses were unlimited under the HVR. This was always considered a controversial decision and the court in The Thorco Lineage declined to follow it.
Rather, the key to this court’s decision was that all losses must be limited by reference to the weight of the goods in connection with which the loss has suffered – physical and economic.
The court decided that goods which suffer a reduction in value are “lost or damaged” for the purpose of the Rule. Whilst the goods may not be worthless, they are “worth less”.
The court came to its decision after analysis of the travaux prépartoires of the convention which led to the Rules.
The reason why this issue was critical in this case was that the vessel suffered a loss of main engine power and was salved. Salvage remuneration was at in excess of US $7m but only a small proportion of the cargo was physically damaged – about US $300,000.
Hence the carrier argued that its liability for all losses was limited by reference to the weight of the small quantity of cargo which had actually suffered some physical damage.
But, as outlined above, the court took the view that whatever the nature of the heads of claim – physical damage or economic, they are limited by reference to the weight of the goods in connection with which the loss has been suffered and, as this was a salvage claim, the whole cargo was damaged. They were reduced in value as a consequence. So, limitation should be by reference to the weight of the full cargo, not the small percentage damaged.
By a quirk of procedural law (the Arbitration Act), as the judge refused the carrier’s application for leave to appeal to the Court of Appeal, there can be no direct application for leave to the Court of Appeal itself. Matters are left, therefore, with two contradictory first instance decisions but it is felt that, moving forward, The Thorco Lineage is going to be preferred to The Limnos.