Zurich Insurance Company Limited (trading as Navigators and General) & Ors v Halcyon Yacht Charter LLP & Ors

On 7 September 2022, at Gouvia Marina in Corfu, a fire broke out aboard the vessel “BIG KAHUNA”, a Princess V65 motor cruiser. The fire spread to other vessels in the Marina, three of which unfortunately sank. One such was “HALCYON”, a 95 foot classic wooden ketch built in 1929 by John Thornycroft of Southampton. On 15 November 2022, the owners and English insurers of BIG KAHUNA commenced a limitation claim in the Admiralty Court of England & Wales pursuant to the provisions of the 1976 Convention (incorporated into English law by section 185 and Schedule 7 of the Merchant Shipping Act 1995). The only named defendant was Halcyon Yacht Charter LLP, the owner of HALCYON. But (as is conventional) the claim was also expressed to be against “all other persons claiming to have suffered loss and damage by reason of the fire on board the yacht BIG KAHUNA”.

On 14 December 2023, the owners of HALCYON issued proceedings against the owners of BIG KAHUNA in the Court of First Instance of Piraeus, Greece seeking compensation for the loss and damage caused by the fire. Limitation may or may not be raised as a defence to the claim in Greece; (see further below). However this may be, there is a significant difference between the limitation regimes in the two countries. Pursuant to Article 15(2) of the Convention, the regime governing limitation claims in England & Wales incorporates a small craft limit for vessels of less than 300 tons. This limit is 500,000 SDR (about £530,000) and would apply to BIG KAHUNA. Greece incorporated the same limit from 1 May 2023. But the new Greek limit is not retrospective. Thus, the relevant Greek limit for BIG KAHUNA in respect of this incident would be calculated in accordance with Article 6 and would be 1,510,000 SDR (about £1.6m).

In England & Wales, limitation can be raised in two ways: either by the obtaining of a limitation decree, or by way of a defence. However, as explained in Admiralty Jurisdiction and Practice 5^th Ed at 8.104 - 8.105:

The claimants in this limitation claim anticipate that there will be more than one claim against the fund. Therefore, it was correct and in accordance with the practice set out in the passages from Admiralty Jurisdiction & Practice quoted above to commence a claim for a limitation decree. (The evidence and submissions are unclear as to whether this procedure has a direct equivalent in Greece or whether limitation can only be raised responsively to individual claims.)

By Application Notice dated 15 December 2022, Halcyon Yacht Charter LLP have applied for an order staying the English proceedings on the basis of forum non conveniens because “the courts of Greece are clearly and distinctly more appropriate as the forum for resolution of both limitation and the underlying substantive claims”. For the purposes of the application, the parties exchanged witness evidence, which included or referred to expert evidence as to Greek law. There were disputes about how to deal with this evidence. The disputes were resolved by a Consent Order dated 13 February 2024 which set out in a Schedule ten propositions which were either fully agreed or agreed to be “properly arguable either way”.

The legal principles were not in dispute and I therefore simply recite the relevant passages from Dicey & Morris, The Conflict of Laws, 16^th Ed.

Dicey Rule 41 is in these terms:

The leading case is The Spiliada [1987] AC 460, the principles of which are helpfully reduced to seven propositions in Dicey at 12-029:

Mr Watthey’s submissions for the first defendant can be summarised as follows:

Powerful and attractively phrased as they were, there are short, decisive answers to Mr Watthey’s submissions. (Mr Steward’s submissions for the claimants, which I have substantially accepted, appear sufficiently from what follows.)

It is true that the natural forum for the underlying claims is Greece. But the limitation claim is a separate and distinct claim. In this, or any, limitation claim there are usually just two issues: (1) the amount of the limitation fund and (2) an Article 4 defence, if raised. The first of these is an arithmetical calculation, which rarely gives rise to a dispute (and does not here). The second is a defence which, since the introduction of the more tightly-drawn wording of Article 4 of the 1976 Convention, is notoriously difficult to make out, is therefore seldom raised and for which there is, in this case, to date, no support. The cause of the fire is simply unknown. Eighteen months have elapsed and no evidence has emerged to suggest that it was started deliberately or recklessly. In answer to a question from me, Mr Watthey was also unable to point to potentially fruitful lines of enquiry that were being pursued. An Article 4 defence is therefore speculative and, on present material, improbable. A speculative and improbable Article 4 defence is no basis upon which to find England an inappropriate forum. I do not, in these circumstances, need to decide whether England or Greece would be the natural and appropriate forum for an Article 4 defence, if one were raised. All I will say is that the witnesses and evidence to which Mr Watthey referred were primarily concerned with dealing with the fire, once underway, and its aftermath. If an Article 4 defence were raised, the evidence would be directed towards how the fire was started and the state of mind of the vessel’s owners or those acting for them. Evidence directed to these issues would not necessarily come from the factual witnesses to whom Mr Watthey referred – and certainly not exclusively from those witnesses.

It is commonplace for the limitation claim and the underlying claims to be tried (or arbitrated) separately and in separate jurisdictions. Examples include Bouygues Offshore S.A. v Caspian Shipping [1998] 2 Lloyd’s Rep 461; The Volvox Hollandia [1988] 2 Lloyd’s Rep 361 (especially at 370) and The Falstria (ibid). If the proper forum for a limitation claim were to default to the jurisdiction of the tort (which is what, despite elegant denials, Mr Watthey’s submission came to), a defendant could always trump the claimant’s choice of forum. But it has been emphasised that “a shipowner is at liberty to choose his domiciliary court as the forum in which to set up his limitation fund and establish his right to limit his liability; see The Volvox Hollandia (ibid) at 379. English courts “should be exceedingly slow to interfere with such a settled practice which has international ramifications”. The first claimant is the English insurer and the second claimant is the English beneficial owner of the vessel in respect of which a decree is sought. I see nothing sinister or untoward in them (together with the registered owner) bringing this claim against a Welsh company, of whom at least one of the beneficial owners is Welsh, in this jurisdiction. Although the insurer of HALCYON is not a defendant, that insurer is also an English company. Of other potential claimants against the fund, with the exception of the Marina itself, not one is Greek. On the contrary, they represent a variety of different nationalities and flags, including Germany, Malaysia, Italy and the Cayman Islands. In these circumstances, there seems little reason to disturb the “settled practice” referred to in The Volvox Hollandia – something an English court should be “exceedingly slow” to do.

Further, it seems to me that the disorderly scenes evoked by Mr Watthey are unlikely to arise. For there to be a limitation claim in England whilst substantive claims are made in Greece (if that happens – at the present time there is only the claim by the owners of HALCYON) would, I repeat, be commonplace. There would be nothing “disorderly”. Indeed, the reverse is the case. The availability in England of a single, unitary limitation claim (as opposed to the need to raise limitation as a defence to each substantive claim) allows the orderly management and ranking of a full cohort of claims against the fund. As to disorder provoked by a clash of limitation decrees, it is relevant to observe that the claimants (defendants to the Greek proceedings) have been careful not to say that a limitation defence will necessarily be raised in Greece, let alone adjudicated upon; see paragraphs 3 and 8 of the Schedule to the 13 February 2024 Order. The claimant may see little utility in seeking judicial recognition of an English limitation decree in circumstances where there are no assets in Greece and no prospect of enforcement of a Greek judgment in England save to the limit of a limitation fund constituted here, (which would not, strictly speaking, be “enforcement” at all). The clash of limitation decrees is unlikely to arise. But even if limitation is raised in Greece, an English court cannot be deterred from proceeding with a limitation claim here by the prospect that a court in another jurisdiction may not recognise its limitation decree. Self-evidently, that would be no basis to conclude that that other court was the more appropriate forum.

Finally, it does not seem to me that the claimants can fairly be accused of “forum-shopping”. Given the primacy afforded to the shipowner as to choice of jurisdiction (see above), it is hard to see how that can have frustrated the expectations of other potential claimants. There was nothing untoward in bringing the claim here against an English defendant with an English insurer and there was at least one other English defendant which could also have been sued here as of right. The defendant’s real complaint is that a limitation fund established here will be one third the size of a limitation fund established in Greece. But if England is a forum where the limitation claim may be tried “suitably for the interests of all the parties and the ends of justice” (a phrase originating from the judgment of Lord Kinnear in Sim v Robinow (1892) 19 R. 665) a juridical advantage such as this is not relevant. In a well-known passage from The Spiliada, Lord Goff said this:

Lord Goff went on to say that a court should not, in a proper case, be deterred from granting a stay of proceedings simply because the claimant will be deprived of such an advantage. By the same token, a court should not, in a proper case, be deterred from refusing a stay simply because the claimant will thereby retain such an advantage. In The Herceg Novi [1998] 2 Lloyd’s Rep 454 the application of these principles led the Court of Appeal to stay an English action in favour of Singapore, even though the English claimants were thereby deprived of the higher limits of the 1976 Convention (in force in England & Wales) in favour of the lower limits of the 1957 Convention (then in force in Singapore). The Court of Appeal held that “in terms of abstract justice” neither Convention was “objectively more just than the other”. Therefore the only question was whether substantial justice would be done in Singapore, which the judge below (Clarke J) had already found to be clearly or distinctly the more appropriate forum. The Court of Appeal held that substantial justice would indeed be done in Singapore and therefore granted a stay of the English proceedings.

The facts of The Herceg Novi have resonance in this case. Greece has not been shown to be clearly or distinctly the more appropriate forum for the limitation claim. It is true that there is a large difference in the limitation regimes for small vessels which prevailed in England & Wales and in Greece for this casualty. But the regime prevailing in Greece cannot be said to be objectively more just than that prevailing here, (the more so, perhaps, given that the two regimes have now equalised). It cannot be said that substantial justice is not available in England. The higher Greek limit, which I apprehend to be the main driver for the defendant’s application, is therefore no basis upon which to grant the relief sought.

For these reasons, I refuse the application for a stay of the English proceedings.

Because I have concluded that the application for a stay fails on its merits, it has not been necessary to address what might otherwise have been called a threshold point, advanced by the claimants. In The Falstria (ibid), Sheen J held that it was not open to the court to stay a claim for a limitation decree on the basis of an application by only one of a number of anticipated claimants against the fund, (who, in the slightly confusing terminology of limitation claims would, in fact, be defendants to the claim). “On that short ground” Sheen J described the application as “misconceived”. But, in case he was wrong, he went on to deal with the substance of the application, which he refused. The judgment is, on this threshold point, brief and unreasoned. I agree with Mr Watthey that, on the face of it, there is at least tension with Rule 41 of Dicey and the principles enunciated in The Spiliada. But this is an argument for another day.