Lloyd's Maritime and Commercial Law Quarterly
Navigating between Freedom of Contract and LLMC 1976
Simon Allison*
The Cape Bari
1. Introduction and facts
Can a pilotage indemnity agreement waive a shipowner’s statutory right to limit its liability? If so, how precise must the wording of that indemnity be to achieve this? These questions arise from an unfortunate berthing operation in the Bahamas on 25 May 2012 in The Cape Bari.1 The Cape Bari (owned by the respondents) was berthing at a Freeport terminal facility owned by the appellant, the Bahamas Oil Refining Co International (“BORCO”). The vessel was under compulsory pilotage by an affiliate business of BORCO, the BORCO Towing Co Ltd (“BORTOW”). On behalf of the shipowners, the master signed the “Conditions of Use” as drafted by BORCO.2 Those conditions were subject to the law of the Bahamas. Clause 4 of the Conditions of Use provided:
“If in connection with, or by reason of, the use or intended use by any vessel of the terminal facilities or any part thereof, any damage is caused to the terminal facilities or any part thereof from whatsoever cause such damage may arise, and irrespective of weather [sic] or not such damage has been caused or contributed to by the negligence of BORCO or its servants, and irrespective of whether there has been any neglect or default on the part of the vessel or the Owner, in any such event the vessel and the Owner shall hold BORCO harmless from and indemnified against all and any loss, damages, costs and expenses incurred by BORCO in connection therewith. Further, the vessel and her Owner shall hold BORCO harmless and indemnified against all and any claims, damages, cost and expenses arising out of any loss, damage or delay caused to any third party arising directly or indirectly from the use of the terminal facilities …”
While berthing, the Cape Bari collided with BORCO’s facility, causing substantial damage. BORCO pursued the shipowners for damages exceeding US$20m. The owners responded by establishing a limitation fund of US$16m. The fund was constituted under the Convention on Limitation of Liability for Maritime Claims 1976 (“LLMC 1976”), which was given force of law in the Bahamas by the Merchant Shipping (Maritime Claims Limitation of Liability) Act 1989 (the “1989 Act”).
2. First instance
At first instance, in the Supreme Court of the Bahamas,3 BORCO argued that the owners had waived their right to limit liability by agreeing to Clause 4 of the Conditions of Use. Once the Conditions of Use were signed, it was then a matter of construction whether that right had been expressly or impliedly waived. For the trial judge, Longley J, LLMC 1976
1. Bahamas Oil Refining Co Int Ltd v Owners of the Cape Bari Tankschiffahrts GmbH & Co KG (The Cape Bari) [2016] UKPC 20; [2016] Lloyd’s Rep Plus 69.
2. “Conditions of Use of Jetties, Sea Berth and Inner Harbour Berth at Freeport, Grand Bahama” (“Conditions of Use”).
3. Owners of the Cape Bari Tankschiffahrts GmbH & Co KG v Bahamas Oil Refining Co Int Ltd (9 Aug 2013) Unreported (Bahamas SC). Paras [23–27] and [33–36] of this judgment are set out in the judgment of the Bahamas Court of Appeal [2014] BSCA 96 (infra, fn.8), [7].
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