Trafigura PTE Ltd v TKK Shipping Ltd ("The Thorco Lineage") [2023] EWHC 26 (Comm)
Part of a cargo suffers some minor physical damage. But, an economic loss is suffered in respect of the whole of the cargo – perhaps a diminution in market value due to delay, a liability to pay salvors, or transhipment costs.
In The Limnos [2008] 2 Lloyd's Rep 166, Burton J held that under Article IV(5)(a) of the Hague Visby Rules the economic loss fell to be limited by reference to the weight of the physically damaged cargo, but that if there was no physical damage, the claim would be unlimited. This led to many anomalies, most notably that if there was minor physical damage the entire claim might be limited to a few dollars, but if there was no physical damage at all, the economic loss claim would be unlimited.
In The Thorco Lineage [2023] EWHC 26 (Comm)), Sir Nigel Teare declined to follow The Limnos and rejected the argument that Article IV(5)(a) limits claims for economic loss by reference only to the weight of cargo which suffers physical damage. Rather, he held that the limit is to be calculated by reference to the weight of cargo physically or economically damaged.
Article IV(5)(a) of the Hague-Visby Rules limit's the carrier's liability for "loss or damage to or in connection with the goods" by reference to the higher of two alternative figures: 666.67 SDR per package or unit or 2 SDR per kilogram of gross weight of "the goods lost or damaged".
In The Limnos, Burton J held that the words "the goods lost or damaged" only encompass goods which are physically lost or damaged, so that where an incident causes limited physical damage but substantial consequential economic losses, the carrier can limit its liability by reference to the weight of cargo physically damaged. Further, he held that in the phrase, "loss or damage to or in connection with the goods", "the goods" were only those which were physically lost or damaged.
Sir Nigel, sitting as a Judge of the Commercial Court, declined to follow the analysis of Burton J, preferring the view that goods which suffer a diminution in value are "lost or damaged" for the purpose of the rule. That includes a diminution in market value, a liability to a third party such as salvors, or a requirement to tranship or incur other costs.
The Judge went on to hold that, even if the decision in The Limnos was correct, the entire cargo, in this case, would nevertheless have been considered physically "damaged" because the salvor's maritime lien had the effect of damaging the Claimant's proprietary or possessory title to the cargo, following dicta of Sheen J in The Breydon Merchant [1992] 1 Lloyd's Rep 373 and Derrington J in an Australian case, The Ikan Jahan [2019] 2 Lloyd's Rep 235.
The consequence is that claims for pure economic losses, such as diminution in market value, and quasi-physical losses, such as those arising out of the imposition of a lien for salvage or general average, are limited under Article IV(5)(a), whether or not there is conventional physical damage arising out of the same incident. However, the limit will be calculated by reference to the full weight of the cargo to which the losses relate.
John Russell KC and Benjamin Coffer appeared for the Claimant cargo interests, instructed by Stephenson Harwood. Nevil Phillips and Peter Stevenson appeared for the Defendant carriers, instructed MFB.
Read full article here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
