The barge BOS 400, owned by Bouygues Offshore S A (Bouygues), was lost in stormy weather while being towed from Pointe Noire, the Congo, to Cape Town, South Africa, by the tug Tigr, owned by Caspian Basin Specialised Emergency Salvage Administration (Caspian), under a charter on Towcon terms between Bouygues as charterer and Ultisol Transport Contractors Ltd (Ultisol) as disponent owner.

Bouygues commenced proceedings in South Africa claiming the value of the BOS 400 and its equipment on board, the estimated costs of removing the wreck, and the costs of attempted salvage (upwards of GBP 50 m in aggregate). Ultisol and Caspian challenged the jurisdiction of the South African courts. Bouygues brought a protective action in England to forestall a time limitation defence should the South African courts decline jurisdiction.

Ultisol and Caspian sought to limit their liability, if any, in England under English law. Bouygues sought to stay the limitation actions until the liability of Ultisol was established or conceded in England, and Caspian's challenge to jurisdiction in South Africa was determined. The difference in Bouygues' approach to the two limitation actions resulted from Bouygues being injuncted from continuing its South African action against Ultisol on the basis of the English law and jurisdiction clause in the charterparty.

Whereas South Africa was a party to the LLMC 1957, the UK was a party to the LLMC 1976, which significantly raised the limit of liability. Bouygues' concern was that a declaration of limitation in England under the LLMC 1976 would prejudice its case that all questions of liability should be dealt with in South Africa under the LLMC 1957. Bouygues was seeking to rely on the more favourable provisions for breaking limitation in the LLMC 1957.

Bouygues' claim was based on, among other things, misrepresentation as to the Tiger's bollard pull and brake horse power. Bouygues argued that its misrepresentation claim did not fall within the LLMC 1957 or the LLMC 1976. Ultisol argued that the claim came within the terms of the LLMC 1976, relying on art 2.1.

Held: Declarations of entitlement to limitation of liability granted.

The UK used to be a party to the LLMC 1957. The condition for the entitlement to limit was the absence of 'actual fault or privity'. Under art 1.6 of the Convention it was left to the lex fori to decide where the burden of proof lay: under the Merchant Shipping Act 1958 (UK) the burden lay on the party claiming limitation to prove the absence of actual fault or privity. Under the LLMC 1976 the test changed. The burden of proof switched so that it is now the claimant who has to break the limit, and it is well recognised that the circumstances under which the limit may be broken have been deliberately rendered extremely difficult to meet. The test is, in the words of art 4 of the LLMC:

A person shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.

The main issue is whether there is an entitlement to limit in response to a claim in misrepresentation. Bouygues submits that the travaux préparatoires of the LLMC 1976 show that there was no intention to depart from the ambit in this respect of the LLMC 1957. The LLMC 1957 provides in art 1 as follows:

1. The owner of a sea-going ship may limit his liability in accordance with Article 3 of this Convention in respect of claims arising from any of the following occurrences unless the occurrence giving rise to the claim resulted from the actual fault or privity of the owner:

(a) loss of life of, or personal injury to, any person being carried in the ship, and loss of, or damage to, any property on board the ship;
(b) loss of life of, or personal injury to, any other person whether on land or on water, loss of or damage to any other property or infringement of any other rights caused by the act, neglect or default of any person on board the ship for whose act, neglect or default the owner is responsible or any person not on board the ship for whose act, neglect or default the owner is responsible: Provided however that in regard to the act, neglect or default of this last class of person, the owner shall only be entitled to limit his liability when the act, neglect or default is one which occurs in the navigation or the management of the ship or in the loading, carriage or discharge of its cargo or in the embarkation, carriage or disembarkation of its passengers ...

The corresponding passage in the LLMC 1976 (art 2.1) is in the following terms:

1. Subject to Articles 3 and 4 the following claims, whatever the basis of liability may be, shall be subject to limitation of liability: (a) claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation) occurring on board or in direct connection with the operation of the ship or with salvage operations, and consequential loss resulting therefrom; ...

2. Claims set out in paragraph 1 shall be subject to limitation of liability even if brought by way of recourse or for indemnity under a contract or otherwise . . .

Rix J held that a limitation action can be commenced and a limitation decree obtained without liability first being established or admitted. Article 1.7 of the LLMC 1976 provides that '[t]he act of invoking limitation shall not constitute an admission of liability' shows that there is nothing wrong with the Court dealing with and thus pronouncing on limitation at a time when liability is still in issue. Although 'invoking' limitation refers to the pleading of limitation or the commencement of a limitation, rather than to the obtaining of limitation relief from the Court, there is no point in being entitled to invoke limitation if one is not entitled to obtain the Court's sanction of limitation without liability first being admitted.

Under the LLMC 1957, the test for breaking limitation had been the actual fault or privity of the party claiming limitation, and art 1.6 of the LLMC 1957 left it to individual States to decide where the burden of proof lay. Under English law the party claiming limitation had the burden of proving the absence of actual fault or privity and thus limitation was easily broken in England under the LLMC 1957. However, the test for breaking limitation is extremely difficult to meet under the LLMC 1976, and the burden lies upon the party who would break the limit, which leaves less room than there might have been for a rule of practice demanding the determination or admission of liability as a prerequisite for limitation relief.

The next issue was whether Bouyges' misrepresentation claim was covered by the reference in art 2.1 of the LLMC 1976 as a claim 'in respect of ... loss of or damage to property'. Rix J held that it was. Without the loss of the barge, there would have been no claim, whatever misrepresentations may have been made in the course of negotiating the charter and whether such misrepresentations would have entitled Bouygues to rescind the charter or to claim economic losses arising from the charter or its rescission otherwise than connected with the loss of the barge. This approach was confirmed by the Convention's wording 'whatever the basis of liability may be'. That language enforces concentration on the nature of the claim for financial relief, and away from the legal basis of that claim. Article 2.2 reinforces the same point by stating in effect that a claim within art 2.1 remains a claim entitled to limitation even if brought in the form of a claim to damages for breach of contract, or a claim to an indemnity.

Such an approach to the categorisation of claims for which limitation is available makes good sense, particularly in an international Convention. Different States will have differing legal principles: it would be undesirable if a claim necessarily pleaded in one way under one domestic legal system should fall within the Convention, when the identical claim necessarily pleaded in some other way under some other domestic legal system might fall outside the Convention. Nor would it make sense if the same loss or damage fell within or outside the Convention depending upon which of several possible causes of action or bases of liability was pleaded.

The next question was whether Bouygues' claim was not only a claim in respect of loss of or damage to property, but also a claim 'occurring ... in direct connection with the operation of the ship'. It could not be said that the claim in misrepresentation does not similarly occur in direct connection with the operation of the tug. If it were otherwise, many contractual claims for breach of warranty within the Convention could be presented as claims for misrepresentation in negotiating a contract outside the Convention. The cause of action in misrepresentation is as much a claim within the LLMC 1976 as any of the other causes of action relied on by Bouygues, and it followed that there was no need to refer to the travaux préparatoires. In any event, the travaux préparatoires did not clearly and indisputably point to a definite legislative intention.

Rix J thus held that all of Bouygues' monetary claims fell within the scope of the LLMC 1976. Finally, Rix J refused to stay proceedings on the basis of forum non conveniens, on the basis that Caspian's limitation action was brought against several potential claimants and there was difficulty in principle in granting a stay based on only one claimant's application. Although England was not the domiciliary forum for Caspian, it was an entirely legitimate and appropriate forum including because Caspian was entitled to take advantage of the limitation fund constituted by Ultisol under art 11.3 of the LLMC 1976.