$780,000 claim nearly sunk

Posted: 30th September 2013

Ship owners came within a whisker of losing their right to pursue a $780,000 compensation claim following a maritime collision in the South China Sea.

shipsBoth vessels (ship A and ship B) were seriously damaged in the impact and their owners subsequently agreed to submit their respective compensation claims to the jurisdiction of the English courts. Liability issues were settled prior to the institution of proceedings, with the owners of ship A accepting 25% responsibility for the accident and the owners of ship B 75%.

Negotiations for the settlement of quantum issues continued, with the owners of ship A claiming approximately $780,000 and the owners of ship B putting their losses at about $1.3 million. A final deal had yet to be struck by the second anniversary of the collision, on which date the limitation period for launching a damages action expired.

The owners of ship B, who had anticipated being the net paying party given the agreed liability split, put forward a limitation defence on the basis that the owners of ship A had not launched proceedings until about a month after the expiry of the two-year time limit.

The High Court decided that, on a true interpretation of the liability settlement – by which each party had made a commitment to pay the other’s claim in line with the agreed percentages – the owners of both vessels had waived any entitlement to rely on a limitation defence.

Ruling that it would be ‘unjust and unfair’ for the owners of ship A to have their claim barred due to the inadvertent late filing of proceedings, the Court noted that the liability settlement had been agreed well within the limitation period and that they had thereafter made prompt attempts to agree quantum.