This appeal arose from an accident in 2017 when a helicopter ditched into the sea while trying to land on the aft leisure deck/helipad of the superyacht Bacarella in Bergen, Norway. The accident occurred because the cover of a temporary fuel tank was blown off by the down blast of the helicopter and became entangled in its rotors. The first respondent was the owner of the helicopter, and the second respondent was its insurer. The appellant was the owner of the yacht. The appellant conceded that it was negligent in leaving the cover inadequately secured, and thus was liable for the accident. That left two issues for determination at trial. The first was contributory negligence, the second was limitation under the LLMC 1976/1996.

The Judge dismissed the defence of contributory negligence, and held that the appellant was entitled to limit its liability under s 391 of the British Virgin Islands (BVI) Merchant Shipping Act 2001 (the Act). This limited damages to 1.51 million SDRs, which converted to USD 2,168,340.79: see CMI1411. There was no appeal against that judgment. The Judge also decided that where no limitation fund had been established, the rate established for pre-judgment interest under s 404 of the Act did not apply. The Judge also permitted the respondents to recover costs in respect of legal fees paid to Dr Trevor Fox, an English solicitor and specialist in aviation litigation, who at the time was neither qualified nor admitted to pactise as a solicitor or barrister in the BVI: see CMI2046.

The appellant appealed the latter findings to the Court of Appeal.

Held: The appeal is allowed in part.

Under the LLMC, a shipowner may limit its liability for claims made against the vessel by constituting a limitation fund in accordance with art 11. The Act reproduces the text of the 1976 Convention as amended by the 1996 Protocol. Section 404 of the Act states:

(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 ...

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

The respondents accepted that the appellant was entitled to limit its liability even though no limitation fund was constituted. In the BVI, the decision whether to constitute a fund is a choice of the shipowner, and is advantageous to it.

The appellant argues that the Judge erred in awarding pre-judgment interest at the rate of 5%. He should have held that he was obliged to award interest at the rate of 1% over Bank of England Base Rate (which was 0.1% at the material time) as set out in the UK Merchant Shipping (Liability of Ship Owners and Others) (New Rate of Interest) Order 2004 (the 2004 Order). The 2004 Order has effect in the BVI pursuant to the Merchant Shipping (Adoption of United Kingdom Enactments) Order 2005 (the 2005 Order), and the Validation (Merchant Shipping (Adoption of United Kingdom Enactments) Order 2005) Act 2017. Alternatively, the Judge erred in the exercise of his discretion in relation to interest.

The appellant argues that as a matter of English law, the Merchant Shipping Act 1995 (UK) (the 1995 Act) provides that the Secretary of State may by order prescribe the rate of interest to be applied for the purposes of art 11. This has been done in the 2004 Order. Neither the 1995 Act nor the 2004 Order expressly refers to the calculation on interest where, instead of a fund being constituted under art 11, limitation is invoked as a defence pursuant to art 10. However, the correct analysis must be that the prescribed rate applies from the date of the occurrence to either the date of payment or judgment, which is treated as if it were the date of the constitution of the fund.

In support of this submission, the appellant relies on Griggs, Williams, and Farr, Limitation of Liability for Maritime Claims, in their commentary on art 11.1:

Where there is only one claimant, the defendant may decide to rely upon Article 10(1) and invoke limitation without constituting the fund. In these circumstances the question arises whether, when payment to the claimant eventually takes place, this should include interest on the funds 'from the date of the occurrence' as specified in Article 11(1).

The answer is to be found in Article 10(2) which provides that if limitation of liability is to be invoked without the constitution of the limitation fund 'the provisions of Article 12 shall apply correspondingly.' Article 12, Distribution of the fund, directs that 'the fund shall be distributed among the claimants in proportion to their established claims against the fund'. In this context 'a fund' must mean the fund as defined in Article 11 itself, namely 'the amounts set out in Articles 6 and 7... together with interest.

The appellant seeks to interpret that passage as suggesting that interest should be calculated at the same rate whether a person relies on art 10 (pleads a limitation defence where no fund is constituted) or art 11 (constitutes a fund).

The respondents submit that this passage addresses the question (in a case where no fund is constituted) of whether, when payment to the claimant eventually takes place, this should include interest on the fund from the date of the occurrence, and not whether the rate of interest is prescribed. Article 10.2 applies the provisions of art 12 where limits are invoked without constituting a fund. However, art 12 regulates the final distribution of the fund, not its constitution nor the calculation of interest to be added to it on constitution. The Convention provision regulating interest is art 11 (not art 12) which is not referred to at all in art 10.2. Article 10.2 is irrelevant. And finally, art 10.2 was not replicated at all in Ch II of the Act - unlike in the United Kingdom. The appellant’s argument based on art 10.2 was snuffed out by the BVI legislature by its exclusion of art 10.2 from the Act.

The respondents are correct. The appellant is seeking to rely on the passage from Griggs to support its argument about calculation of interest in the case where no fund is constituted. But the passage has nothing to do with calculation or any applicable rate of interest. The passage is therefore no authority for the appellant’s conclusion. The respondents are also correct that, in any event, art 10 is not included in the Act.

The appellant sought to rely on the Singaporean case of AS Fortuna Opco BV v Sea Consortium Pte Ltd (CMI748). In that case the plaintiffs sought to limit their liability and constitute a limitation fund in respect of claims arising from the running aground of the vessel AS Fortuna. The plaintiffs applied to have the limitation fund constituted by way of a letter of undertaking (LOU) from a P&I Club, rather than by payment into Court. One of the issues before the Court was the applicable rate of interest to be provided for in the LOU in respect of the period after the constitution of the limitation fund. Fortuna dealt with a limitation fund constituted by an LOU. The very different case of an invocation of limitation (under art 10) by the shipowner without putting up a limitation fund was not considered at all.

In addition, and quite important to this issue of interest, there is the fundamental difference that a shipowner who does not establish a fund retains the ability to invest monies in the meantime in a manner that may prove advantageous from a commercial perspective, as explained in Fortuna. It would seem rather odd that a shipowner, who has not provided the actual security of a fund and who retains the right to deal with its monies as it pleases, should automatically be entitled to the same interest rate, simply on the basis of entitlement to plead limitation. Consequently, the appellant’s appeal on the interest point fails.

On the second ground of appeal, the Court agrees with the appellant that the Judge erred in permitting the respondents to recover costs in respect of legal fees paid to Dr Fox on the ground that he was, as a legal practitioner, providing assistance with the BVI litigation while his name was not on the roll, and this ground of appeal succeeds.