Henrik Jantzen+ Thomas Åkerstrøm Nielsen, Kromann Reumert, Denmark
In two recent decisions, the Danish Maritime and Commercial High Court had the opportunity to review freight forwarders liability for losses imposed on importers due to the MOL Comfort incident, including whether the constitution of a global limitation fund precludes legal proceedings in Denmark.
In both cases, the freight forwarders were found liable for the losses the importers had suffered due to their loss of shipments when the container vessel “MOL Comfort” wrecked while transiting the Indian Ocean from Singapore to Jeddah in Saudi Arabia. Further, in the latest case, the court found that the constitution of a global limitation fund in Japan did not preclude commencement of legal proceedings in Denmark.
Background
On finishing loading operations, the Japanese container vessel MOL Comfort departed from Singapore to Jeddah on 11 June 2013. On 17 June 2013 sailing across the Arabian Sea, the ship split in two at its cargo hold No. 6. The two parts drifted in the sea before sinking.
Subsequently, the operator Mitsui O.S.K. Lines Ltd and the ship owner Ural Container Carriers S.A instituted a global limitation fund under the 1996 Protocol of the International Convention on Limitation of Liability for Maritime Claims 1976 before the Tokyo District Court in Japan.
Following the incident, Japan’s Committee on Large Container Ship Safety was established to examine the cause of the incident. The committee drew up an interim report in December 2013 and a final report in March 2015. A third report was finalised by the classification society Nippon Kaiji Kyokai in September 2014. None of the reports determined the exact cause of the incident. However, a number of possible causes were pointed at, including: the vertical bending moment of 103 % of the allowable design value and buckling deformations on the bottom shell plates near cargo hold No. 5, which were discovered during safety inspections in January 2010.
The Judgement of the Maritime and Commercial High Court dated 18 January 2016
According to an agreement between a Danish importer (I) and a Danish freight forwarder (T), T undertook to perform the carriage of I’s container shipments from Hong Kong to Denmark. Through several parties, T sub-contracted the carriage to the operator Mitsui O.S.K Lines Ltd, who loaded the containers on board MOL Comfort in Hong Kong.
Pursuant to a letter of subrogation, I’s underwriter (U) commenced legal proceedings against T submitting a claim for damages due to the suffered losses to Danish Maritime and Commercial High Court. In support of the claim, U argued i.a. that (1) MOL Comfort had not been seaworthy at the time of departure from Singapore, (2) the vessel had been overloaded, (3) the stability of the ship was compromised, and finally that (4) T was responsible for the lacking investigation of the buckling deformations discovered in 2010.
T denied liability, alternatively paying a smaller amount than U had claimed due to the fact that I for a part of the claim had commenced limitation proceedings before the court in Hong Kong.
The court stated that the cause of the loss was not established, but that the reports did suggest various circumstances of possible significance, namely: the buckling deformations on the bottom shell plates near cargo hold No. 5 and the vertical bending moment when the voyage from Singapore commenced. The judges followed the explanatory statement of the expert assessors, which concluded that the ship should not have departed from Singapore. Consequently, the court found that T did not satisfy the burden of proof, which according to Sec. 275(1) of the Danish Merchant Shipping Act lied on T. Thus, T was found liable. Furthermore, the court denied to reduce the claimed amount of damages due to the proceedings in Hong Kong as U had paid out the insurance prior to I’s involvement in proceedings before the court in Hong Kong.
Our comments
This judgement is the first of its kind in Denmark regarding carrier’s liability in respect of the Mol Comfort incident. The decision rendered by the Danish Maritime and Commercial High Court imposes on the carrier the burden of proof in accordance with Sec. 275(1) of the Danish Merchant Shipping Act. Consequently, the carrier had to prove that the MOL Comfort incident wasn’t caused wholly or partially by errors or omissions of any party for which the carrier was responsible. According to the Danish Maritime and Commercial High Court, the carrier failed to satisfy the burden of proof.
It is, however, an open question whether this judgement can be executed considering that contractual carriers according to Danish Law most likely are protected by the limitation fund established in Japan. The court did not address this question. However, in the latter case the court initially added that constitution of a global limitation fund in another contracting state does not prevent legal proceedings from being brought in Denmark in pursuance of claims due to the loss neither according to the convention nor according to the Marchant Shipping Act
The Judgement of the Maritime and Commercial High Court dated 3 February 2016
In a similar case five containers belonging to the Danish importer (I2) were loaded on board MOL Comfort. A Danish freight forwarder (T1) was contracted by I2 to perform the carriage of the five containers from Vietnam to Denmark. T1 subcontracted the carriage to a company in Hong Kong (T2) who subsequently through several parties subcontracted the carriage to the shipping company Mitsui O.S.K Lines Ltd. Mitsui O.S.K Lines Ltd loaded the containers on MOL Comfort.
After paying out insurance to I2 the insurance company (F) commenced proceedings in Denmark against T2 and T3 for the damage incurred due to the MOL Comfort incident. F submitted that MOL Comfort due to the buckling deformations and the vertical bending moment had not been seaworthy on commencement of the voyage. T2 and T3 on the other hand rejected the claim as they denied liability under Sec. 275(1) of the Danish Merchant Shipping Act and argued that proceedings could not take place in Denmark given that claims had to be reported to the global limitation fund constituted before the Tokyo District Court.
The court found that T2 and T3 had not satisfied the burden of proof under Sec. 275(1) of the Danish Marchant Shipping Act and ruled in favour of F.
Comments
The main point to take from the Danish Maritime and Commercial High Court’s decision is that the constitution of a global limitation fund in Japan did not preclude commencement of legal proceedings in Denmark regarding whether liability can be imposed on a freight forwarder for the loss that resulted in the constitution of the fund.
It is, however, questionable whether it is possible to enforce the judgement as it may prejudice the freight forwarders right to limit his liability as per Danish law.