A collision occurred in Falmouth Harbour between the Annie Hay, owned by the plaintiff, who was acting as its master and navigator at the time, and the Rosewarne. The plaintiff began an action to limit his liability for damage to property caused by the collision under the s 503 of the Merchant Shipping Act 1894 (the 1894 Act), read with s 3 of the Merchant Shipping (Liability of Shipowners and Others) Act 1958 (the 1958 Act). Section 503 of the 1894 Act provides:

(1) The owners of a ship, British or foreign, shall not, where all or any of the following occurrences take place without their actual fault or privity; (that is to say) …

(b) Where any damage or loss is caused to any goods, merchandise, or other things whatsoever on board the ship …

be liable to damages beyond the following amounts…’

Section 3 of the 1958 Act provides:

(1) The persons whose liability in connection with a ship is excluded or limited by Part VIII of the Merchant Shipping Act, 1894, shall include any charterer and any person interested in or in possession of the ship, and, in particular, any manager or operator of the ship.

(2) In relation to a claim arising from the act or omission of any person in his capacity as master or member of the crew or (otherwise than in that capacity) in the course of his employment as a servant of the owners or of any such person as is mentioned in subsection (1) of this section, -

(a) the persons whose liability is excluded or limited as aforesaid shall also include the master, member of the crew or servant, and, in a case where the master or member of the crew is the servant of a person whose liability would not be excluded or limited apart from this paragraph, the person whose servant he is; and

(b) the liability of the master, member of the crew or servant himself shall be excluded or limited as aforesaid notwithstanding his actual fault or privity in that capacity, except in the cases mentioned in paragraph (ii) of section five hundred and two of the said Act of 1894.

The defendant disputed that the plaintiff has a right to limit his liability. The Court had to then consider whether, on the true interpretation of the sections, the plaintiff was entitled to limit his liability when he was both the master and the owner of the vessel.

The plaintiffs made two contentions:

1) The claims made against the plaintiff fall under s 3(2)(a) of the 1958 Act as the plaintiff was acting in his capacity as master of the Annie Hay at the time of the collision, and
2) By virtue of s 3(2)(b), the plaintiff is entitled to limit his liability regardless of his actual fault or privity.

In support of these contentions, the plaintiff argued first that the words 'any person in his capacity as master' in s 3(2), in their ordinary and natural interpretation, could include a person who was also an owner or quasi-owner. If this interpretation was possible, then this should be the meaning attributed to it. Second, s 508 of the 1894 Act, which had prevented a master who was also an owner from limiting his liability if he had been negligent as a master, had been repealed by the 1958 Act. Therefore, the plaintiff argued that Parliament would not have repealed this provision if it did not intend to allow a master who was also the owner to limit his liability. Third, the plaintiff argued that the Act was enacted to apply domestically the LLMC 1957, and the Convention itself made it clear that it intended to entitle a person in the position of the plaintiff the right to limit his liability. Therefore, the Act should be interpreted in the same light as the Convention.

The defendant countered by arguing first that the term 'master' in s 3(2) should be interpreted to mean a master who is a servant of the owner or quasi-owner. Second, the defendant argued that the words relied on by the plaintiff must be given a narrower meaning in their context, notwithstanding their capability to be interpreted widely. In the immediate context the defendant argued that in s 3(2), three persons are mentioned: a master, a member of the crew, and a person employed by an owner or quasi-owner. Since the third person is a servant, the first two should also be interpreted as servants. In their larger context, the defendant argued that the Act provided two categories of persons who could limit their liability: employers who would limit in respect of vicarious liability under the old Acts and as extended by s 3(1) of the 1958 Act, and employees who could limit their liability notwithstanding personal fault under s 3(2). Consequently, the defendant argued that it would not be appropriate to create or recognise a hybrid character which was a cross between both categories. Third, it was argued that both Acts effectively reduced the common law rights of prospective claimants who would otherwise be entitled to recover damages on the basis of restitution in integrum. Therefore, a narrower interpretation of the Act should be preferred over a wider one.

Held: The plaintiff is entitled to limit his liability.

The Court agreed with the plaintiff for three reasons. First, it held that the interpretation proposed by the plaintiff was in accordance with the ordinary and natural meaning of the words in s 3(2) of the 1958 Act. The words 'any person in his capacity as master' were wide enough to include the plaintiff, and to adopt the construction proposed by the defendant would be to cut down the ordinary and natural meaning of the words. Second, the Court held that Parliament would not have repealed s 508 of the 1894 Act, which would have had the effect of prohibiting a person in the position of the plaintiff from limiting liability, if it did not intend to enact something inconsistent with it. Third, the Court acknowledged that the bulk of the 1958 Act intended to enact domestically the Convention. The Court noted specifically arts 6.2, 6.3, and 7, which set out the persons to whom the Convention may apply and the circumstances under which they could limit their liability. The Court held that arts 6.2 and 6.3 clearly indicated that a person in the position of the plaintiff should be entitled to limit his liability, and if Parliament was successful in giving effect to the Convention, the same result should follow from the 1958 Act. Moreover, the cases of Salomon v Commissioners of Customs and Excise [1967] 2 QB 116 and Post Office v Estuary Radio Ltd [1967] 1 WLR 1396 show that where domestic legislation is enacted to give effect to an international Convention, it is to be presumed that Parliament intended to fulfil its international obligations. If the domestic legislation clearly did not intend to give effect to the international Convention, then the presumption would not override the plain language of the statute. These cases further show that the Court is entitled to look to the international Convention to construe any doubtful provisions in the Act and to apply that presumption when appropriate. The Court also agreed with the defendant that if Parliament had chosen to enact the provisions, particularly art 6, in words more similar to the Convention, the Court's work would have been easier. However, s 3(2) should be given the same interpretation as the Convention.