Articles

Law of Marine Pilotage Limitation of Liability

BASIC PRINCIPLES

Before we discuss limitation of liability in the context of pilotage, it is worth putting the concept of limitation of liability in context. It fits in towards the end of the framework on civil liability.

There are really three questions that have to be asked in any situation. First, is there a potential liability? Second, is that liability excluded? Third, is that liability limited?

We will look at the first two questions briefly before going on to consider limitation in more detail.


LIABILITY – GENERAL

We should really try to establish what liability it is we are talking about before we go on to consider how we can limit that liability, if we ever have to. We are, of course, here talking about civil liability. Civil liability can arise in a number of ways. The three most common types of civil liability are liability in contract, liability in negligence and liability for breach of statutory duty. If a civil liability arises, it is not uncommon for it to arise for two of these situations e.g. liability for breach of contract and for negligence, or liability for negligence and breach of statutory duty. It is less likely for liability to arise under all three of these types of situations.

The consequences of a finding of liability are usually that the body or person found to be liable will end up having to pay damages or compensation to the body or person to whom they are liable.

That’s the legal analysis of the different types of situation in which civil liability can arise.


PRACTICAL SCENARIOS – THINGS GO WRONG

It is stating the obvious to say that there is a potential for liability when things go wrong. Things go wrong probably every day and most people get away with it without any potential for a civil liability arising. On occasions, however, when things go wrong, it is not perhaps only one thing that goes wrong, but a number of things go wrong. They go wrong either at the same time or they are very closely linked in time. Or one thing going wrong sets off a chain of other things going wrong. All these things conspire together to make one event, which could perhaps have been corrected, spiral out of control into an unpredictable chain of reactions. This can sometimes end up with catastrophic results which will make worldwide news items.

There are a number of recent examples of casualties in UK waters which have attracted very considerable publicity, public inquiries, legal proceedings, papers and discussions in the aftermath. One example, however, which caught my attention some five and a half years ago, further away from these shores is that of Captain Ted Davisson, a Louisana pilot on board the Liberian registered bulker “BRIGHT FIELD” who found himself caught up in a situation where a number of things conspired to go wrong to fairly catastrophic effect. “BRIGHT FIELD” carrying 56,000 tons of corn was in the course of proceeding downstream on the Mississippi. After clearing the Crescent City connection bridge, a clogged oil filter and low oil pressure caused the engine to shut down and meant that Captain Davisson was unable to obtain any response from the helm.

The associated press report described the consequences of this as:
“sending the ship barrelling out of control into the crowded Riverwalk mall at New Orleans.” The “BRIGHT FIELD” sliced into the mall, the Hilton Hotel and a parking garage lot along the Mississippi River, narrowly missing the Hilton Flamingo Casino, a riverboat casino with 800 people on board, only due to the prompt reaction of Captain Davisson in dropping the vessel’s anchor which brought the “BRIGHT FIELD” up just short of the riverboat casino.”

Following the shutdown of power, a series of mishaps had occurred, mostly in the engine room, which led to the casualty. This illustrates the type of unpredictable chain of events that can lead to this sort of situation. Damage to property was apparently in the order of US$17 million (relatively cheap these days) and 100 or so persons reported as injured - none fatally. There was no question of Captain Davisson being held liable for this incident, or therefore the need for consideration of entitlement to limit his liability under USA Pilotage Law.


LIMITATION, NOT EXCLUSION OF LIABILITY

We are dealing here with limitation of liability, not exclusion of liability. Although the two may sound similar, there is a substantial difference. Exclusion of liability occurs when a situation arises which could render a person liable to another for the consequences of that situation, but for other circumstances or factors which prevent or exclude that person being liable.

There are many examples of situations where potential liability may be excluded, both in matters concerning public and private law. A fairly obvious example of an exclusion of liability in public law is the fact that the Crown or the Government is not liable for injury or death to a member of the Armed Forces, when the person is on duty. Other examples are found in statutory regulations which create a liability for an incident which occurs ashore, but where that incident occurs at sea, the liability of a ship owner is excluded because a particular statute or regulation does not apply to seagoing ships. That is not, of course, to say that there may not be another regulation which does apply to seagoing ships, which could impose a liability in similar circumstances.

There are many more examples of liability being excluded in private law. Many agreements will exclude the liability of one party to another where things go wrong. Exclusion of liability here are called Exclusion Clauses. One of the most common type of exclusion clause is where one party excludes liability to another for not being able to perform his side of the agreement, due to an act of God. Act of God has been defined in law to encompass a wide variety of events or causes. These types of exclusion clause are commonly seen in shipbuilding contracts and contracts for the carriage of cargo and passengers by sea.

Another common example is the owner of premises, who will display a notice excluding liability to trespassers or for damage to vehicles left on their premises with or without the permission of the owner. The former attempt to exclude liability for personal injury this way may not work but excluding liability for damage to property this way may be effective.

It is true to say that not all exclusion clauses work. As always, each case will depend on the individual circumstances involved.


LIMITATION OF LIABILITY IN GENERAL

We have now gone some way down the process of analysing a situation to establish where there is a potential liability. Having established that there is a potential liability, we’ve looked to see whether that liability is or can be excluded. Having concluded that liability is not excluded, we have now reached the position of considering whether that liability can be limited.

Limitation of liability is simply a means by which liability to pay someone money by way of compensation for damage to property, injury or death can be reduced from the amount that would otherwise be payable. You could look at it as the final hurdle that a person who is seeking compensation, who is called a Claimant, has to jump before payment can be demanded from the person in the wrong.

As in the case of exclusion of liability, there are many examples of limitation of liability in public and private law, in both the non-marine and the marine context.

I think that when lawyers first study marine law, limitation of liability is often thought to be somewhat of a novel concept, exclusive to marine law. I think it is also true to say that most mariners and those involved in the shipping or marine industries are aware of the concept of limitation of liability, compared to the vast majority of those who are not involved in the marine industry, to whom the concept is relatively unknown.

There are, however, many examples of limitation of liability outside the marine world.

Many non-marine statutes and regulations effectively limit the amount of compensation that a wrong-doer has to pay to a Claimant. In claims where there has been a fatal accident, the amount that a close relative of the deceased can recover simply for the fact that that person is no longer with them and the stress of going through a bereavement, is strictly limited. You may be surprised to learn that that item of loss is valued at no more than £7,500.

Again, there are many varied examples of limitation of liability in private law.

In building contracts, where the builder is late in completing a commercial property, such as a hotel, or a shopping mall, the owner of the property or the banks may face very large potential loss of business caused by the fact that the hotel or shopping mall was not open on time. However, often the building contract will limit the amount of compensation that is payable in these circumstances to an agreed amount for each day by which completion of the building is late.

Some professions will attempt to limit by agreement with the client the maximum amount of their liability for negligent advice.

There are many, many more examples of the concept of limitation of liability in the non-marine environment.

Having said that, it never ceases to amaze me when we deal with Claimant’s solicitors who, admittedly, may not deal with marine work and raise the issue of limitation of liability, that there is often a stunned silence on the other end of the telephone when this is mentioned. This is usually followed by expressions of utter incredulity and disbelief, bordering on the suggestion that we have taken leave of our senses to suggest that the amount of their client’s claim might be subject to a maximum limit.


LIMITATION OF LIABILITY IN MARINE CLAIMS

The concept of limitation of liability in marine claims has been around for a very long time. When I first studied marine law, we had to trawl through numerous different pieces of legislation to find all the provisions relevant to limitation of liability in all circumstances. It was a fairly daunting task, as Merchant Shipping legislation was fairly frequently revised, but relevant pieces of legislation were often left unamended in earlier statutes. It could be quite time consuming ensuring that you were referring to the current provisions when dealing with a case concerning limitation of liability.

There was also a different test (not applicable to a Pilot’s entitlement to limit liability) applied under the old legislation as to whether a person would qualify to be entitled to limit liability. Essentially, the proviso was that a person would not be entitled to limit their liability if the damage or injury had been caused with their actual fault or privity (knowledge). This principle gave rise to numerous cases defining what was meant by fault or privity on behalf of a ship owner. This got even more interesting when the ship owner happened to be a small company owning, say, one ship and the Managing Director of the company was also the Master of the company’s ship.

That situation largely changed with the coming into force of the Merchant Shipping Act 1995. MSA 95 was a consolidating statute, the aim of which was to bring up to date and put in one place a very large chunk of marine legislation that had been in force prior to that in numerous Acts going back more than 100 years, such as the Merchant Shipping Act 1894.

Having said that, the limitation provisions in the MSA 95 are still fairly complex, to the extent that books specifically dealing with the subject written by our learned legal brethren are still very much relied on by the rest of the marine legal profession.

The test or proviso to the entitlement to limit liability has changed.

We do not need to concern ourselves greatly here with general aspects of limitation of liability in marine claims, as we are concerned solely with limitation in the context of claims arising in connection with pilotage services.


SOME EXAMPLES

However, as you may be aware, the limitation of liability may arise in cases where one ship owner claims against another for damage caused to his vessel as a result of a collision; or where claims are made against a ship owner for damage to other fixed or floating property; personal injuries, including claims for loss of life; claims for loss of or damage to the luggage of passengers on board vessels; pollution.

Definitions in Marine Pilotage
I think it makes sense to start this section by defining the principle terms:
‘Master’ is defined in section 313 MSA 95 as including every person (except a Pilot) having command or charge of a ship.
‘Pilot’ is defined in section 31(1) of the Pilotage Act 1987 as any person not belonging to a ship who has the conduct thereof.
‘Authorised Pilot’ is defined in section 31(1) of the Pilotage Act 1987 as in relation to any area means a person authorised under the Act for that area and in relation to any ship, a person so authorised in respect of ships of that description.
Finally, ‘Competent Harbour Authority’ is defined in section 1 of the Pilotage Act 1987 as meaning any harbour authority:

(a) which has statutory powers in relation to the regulation of shipping movements and the safety of navigation within its harbour; and
(b) whose harbour falls wholly or partly within an active former pilotage district and references to a harbour authority’s harbour are to the area or area inside the limits of which its statutory powers and duties as a harbour authority are exercisable but, where there are two or more separate such areas, include only those areas which fall wholly or partly within an active former pilotage district.


Liability in Marine Pilotage : Master & Pilot
When a vessel is navigating with a pilot on board who has the conduct of the ship, the classical textbook legal definition of that scenario is one of divided authority. The Pilot has conduct of the ship but the Master still has command of it. As you would expect, this concept has been considered by the courts in the past. Although each pronouncement was no doubt intended to clarify the situation, I think it is questionable the extent to which this has been achieved. It is often the case that a series of judgments on a topic can create further uncertainties and I think you might well find that, having studied the authorities, the situation is as clear as mud.

I think I would prefer to refer you to the highly acclaimed text book Marsden on Collisions, which seems to me to provide a much more useful summary of the position as follows:
“The Master of a vessel is not liable in negligence for wrongful acts of the crew. The reason is simple. An employer is liable for the acts of his employees, but a senior fellow employee never is. The rule equally applies where the ship is under the control of a Pilot, whose negligence causes a collision, whether the Pilot is taken on voluntarily, or under compulsion of law. The Master is not, in the absence of fault on his part, liable. Of course, if he were personally at fault (e.g. by allowing a Pilot who is obviously drunk to take charge of the vessel) then he would be liable in the normal way.

It is true that by section 16 of the Pilotage Act 1987, the liability of the owner or Master is unaffected by the fact that pilotage is compulsory. The Master, however, unlike the owner, is not liable for the default of the Pilot where pilotage is voluntary, from which it follows that he must equally escape liability where it is compulsory.”

N.B. The reason why the ship owner is liable for the default of the Pilot is that the Pilot is deemed to be the servant of the ship owner when he has conduct of the ship, whether or not he is employed by a Pilotage authority [The “CAVENDISH” 1993 2LR292]. Who is at fault is usually a question of mixed fact and law. If we go back to the earlier example of the “BRIGHT FIELD”, in that case the incident was clearly not caused by the negligence of the Pilot and therefore he was not liable for the resultant damage and injury caused.

The point of all this, therefore, is that there are circumstances in which the Master may be liable for damages or injury caused by his ship. There may also be occasions on which the Pilot is liable. It is that potential liability which we are concerned with.


Limitation of Liability in Marine Pilotage
Thankfully, the regime of limitation of liability in marine pilotage is much more straightforward than the other regimes mentioned earlier in which limitation of liability may apply. The situation is summarised fairly neatly in the Pilotage Act 1987:

Pilot – S.22(1) & (2) PA87
The liability of an authorised pilot for any loss or damage caused by any act or omission of his (i.e. negligence) whilst acting as such a Pilot shall not exceed £1,000 and the amount of the pilotage charges in respect of the voyage during which the liability arose.

Pilot Outside District – S.22(4) PA87
What happens if the incident for which the Pilot is liable occurs outside the pilotage district? The Act deals with this in section 22, subsection 2, where it provides that for the purpose of limiting the liability of the Pilot, a person shall be deemed to be an Authorised Pilot notwithstanding that he is acting as a pilot of a ship navigating outside the area in relation to which he is authorised if:

(a) he is piloting the ship to that area from a place where pilots authorised for that harbour regularly board ships navigating to it; or
(b) he is piloting the ship from that harbour to a place where such pilots regularly leave ships navigating from it; and
(c) in either case, the ship is one in respect of which he is authorised.

So that takes care of any worries in case you find yourselves in a situation where you board or are landed outside the defined pilotage area, provided that you are authorised to pilot the ship concerned.


Pilotage Agent - S.22(4) PA87
What if you are one of a number of fellow pilots who formed an organisation to provide pilotage services to a Competent Harbour Authority on a sub-contracted basis as allowed in section 11 of the 87 Act and either you or one of your colleagues is found liable for damage to the ship or other property whilst conducting the navigation of a ship as its Authorised Pilot. This situation is also taken care of by section 22, sub-section 4 of the 87 Act, which provides that the liability of your organisation or association shall not exceed the amount of £1,000 multiplied by the number of Authorised Pilots providing pilotage services for the Competent Harbour Authority concerned at the date when the damage or injury occurs, where the damage occurs without any personal act or omission of the agency.

CHA – S.22(3)

What then is the position of the Competent Harbour Authority who employs the Authorised Pilot found liable for damage or injury caused whilst having the conduct of a ship as its Authorised Pilot? The position is exactly the same as that of the Pilotage Agency – with the same proviso.

“Personal act or omission” – Article 4, part 1, schedule 7 of the Merchant Shipping Act 1995.

Article 4 as above defines the conduct barring the entitlement of a person to limit their liability as follows.

A person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.

The two important alternative phrases here are:

“With the intent to cause such loss”
“Recklessly and with knowledge that such loss would probably result”

It is generally acknowledged that it is more difficult for a Claimant to show that the liability of an Authorised Pilot resulted from actions or omissions of the Pilotage Agency or the CHA in the circumstances defined in Article 4 of Schedule 7 than was the case where, under the old limitation of liability regime, the right to limit could be lost unless the person seeking to limit could show that the liability was incurred without his or her fault or knowledge.

What are the losses for which liability can be limited?

Section 22, subsection 5 of the Pilotage Act 1987 provides that the right to limit liability shall apply to the whole of any losses and damage which may arise upon any one distinct occasion, although such losses and damages may be sustained by more than one person.

N.B. The Pilots limit may extend to claims for personal or fatal injury but the CHA’s Agency limits probably do not.

Do the rights to limit liability under the Pilotage Act 1987 restrict rights to seek to limit liability under any other enactments?

The answer to this is contained in section 22, subsection 7 of the Pilotage Act 1987, to which the answer is no and this applies to any rights of a person to exclude liability if available.

Finally, section 22, subsection 8 of the Pilotage Act provides that a Competent Harbour Authority shall not be liable for any loss or damage caused by any act or omission of a Pilot authorised by virtue only of that authorisation. In other words, if the Pilot is not employed by the Competent Harbour Authority, a Claimant cannot make a claim against the Competent Harbour Authority for any liability of a Pilot, simply on the basis that the Harbour Authority issued a licence or authorised that Pilot in respect of the ship for which the Pilot was engaged in an act of pilotage at the time the liability arose.

Talk given by Nash & Co Marine Department at the South West Pilots Seminar on 31 May 2002 on limitation of liability in marine pilotage.