On 10 May 2017, a helicopter was landing on the aft leisure deck of a superyacht, the Bacarella, in Bergen Harbour in Norway. The cover of a fuel tank on the deck of the vessel was blown off by the down blast of the helicopter. The cover was pulled into the rotating blades of the helicopter. Control of the helicopter was lost, but due to the exceptionally fast reaction of the pilot in command, the helicopter was able to be ditched in the sea instead of crashing onto the yacht.

The helicopter was a constructive total loss. Its value was agreed at GBP 2,092,369. The first claimant was the owner of the helicopter; the second claimant was its insurer. The defendant was the British Virgin Island (BVI) company that owned the Bacarella.

In previous proceedings, the Judge held that the defendant was entitled to limit its liability under s 391 of the BVI Merchant Shipping Act 2001 (the Act), which gives domestic effect to the LLMC 1976 (see HQ Aviation Ltd v Sun Vessel Global Ltd (The M/Y Bacarella) (CMI1411), and that the defendant was wholly liable for the incident which resulted in the constructive total loss of the helicopter.

Under the LLMC 1976, the limitation sum payable was 1.51 million SDRs, which translated to USD 2,168,340.79. One of the issues was what rate of interest was payable on the principal limitation sum.

Held: Five per cent per annum is an appropriate rate of interest.

It is common ground that interest was payable from 10 May 2017, the date of the incident, to 29 April 2021, when the substantive judgment was delivered. The claimants also claim pre-judgment interest up to 12 May 2021, when the order giving effect to the 29 April judgment was made. The parties dispute the basis on which interest can be awarded.

The defendant's position is that interest is payable under art 11.1 of the LLMC 1976. From this it follows, according to the defendant, that the Merchant Shipping (Adoption of United Kingdom Enactments) Order 2005 (the BVI Order) gives effect in the BVI to the United Kingdom Merchant Shipping (Liability of Ship Owners and Others) (New Rate of Interest) Order 2004 (the UK Order).

However, there are some indications that the adoption of the UK Order was an error on the part of the drafters. First, the UK Order provides that the rate of interest should be one per cent over the Bank of England base rate. Fixing a rate of interest based on sterling is not obviously appropriate in a dollarised economy such as that of the BVI. Secondly, the UK Order appears in Pt 4 of the Schedule to the BVI Order, which is entitled 'Dangerous Goods'. In the alternative, the defendant submits that the rate fixed by the US Federal Reserve Bank, which was 0.07 per cent per annum, should be substituted. There are no principles of statutory construction which would permit the Court to disregard the rate fixed by the UK Order. The Bank of England base rate has for the entire period under review been 0.1 per cent per annum. The rate payable under the BVI legislation would therefore be 1.1 per cent per annum.

The claimant submits that the whole of the interest argument based on art 11.1 of the LLMC 1976 is misconceived. Article 11.1 provides:

Any person alleged to be liable may constitute a fund with the Court or other competent authority in any State Party in which legal proceedings are instituted in respect of claims subject to limitation. The fund shall be constituted in the sum of such of the amounts set out in Articles 6 and 7 as are applicable to claims for which that person may be liable, together with interest thereon from the date of the occurrence giving rise to the liability until the date of the constitution of the fund. Any fund thus constituted shall be available only for the payment of claims in respect of which limitation of liability can be invoked.

Effect is given to art 11 by s 404 of the Act, which provides:

(1) Any person alleged to be liable and seeking to limit his liability under this Part may constitute a fund by depositing with the Court an amount at least equivalent to the limit provided for in section 396 or section 401 as appropriate, or by producing a guarantee acceptable by the Court, together with interest thereon from the date of the occurrence giving rise to the liability until the date of the constitution of the fund, and the fund so constituted shall be available only for the payment of claims in respect of which limitation of liability can be invoked. …

The Minister may determine the rate of interest to be applied for the purposes of subsection (1).

The claimant makes a preliminary point that the BVI Order was made by the Governor rather than a minister. Any issues as to the validity of the BVI Order are, however, resolved by the Validation (Merchant Shipping (Adoption of United Kingdom Enactments) Order 2005) Act 2017, which rendered the BVI Order legally valid.

The claimant's main argument, however, is that s 404 of the Act only applies where the defendant sets up a limitation fund. In this case, that did not happen. Instead, the claim (on which the claimant succeeded) was a claim for damages, albeit capped at the limitation sum of 1.51 million SDRs. Where a limitation fund is created, the parties need to know what interest rate is applicable, so that the right amount can be paid into the fund. There is no scope in this scenario for the rate of interest to be determined by a Court, because the fund will usually be set up before any litigation has eventuated; hence the need for a statutory rate of interest. By contrast, where a damages claim is made, pre-judgment interest can be assessed by the Court on the usual principles.

A damages claim raises different issues to the creation of a limitation fund. Section 404 does not expressly apply to a damages claim and there is no need to imply such an extension to the statutory interest provisions. Looking at the appropriate rate of interest, 5 per cent per annum is appropriate for a US dollar-based liability owed to a small or medium-sized enterprise like the claimant.

[For the partially successful appeal to the BVI Court of Appeal, see Sun Vessel Global Ltd v HQ Aviation Ltd (CMI2090).]