When there is a cargo fire and that consequently damages the vessel also, then can the time charterer limit its liability towards the shipowner for a claim of damage to the ship? This is what MSC, as charterer, was attempting in The MSC Flaminia [2022] to fend off owners’ $200m claim.
Many would recall the disaster that struck MSC Flaminia in Jul 2012. There was an explosion in one of the holds leading to a fire and death of three crew members. There was extensive damage to the vessel as well. Shipowner was awarded $200m as recoverable losses from MSC (for repair costs, removal of fire-fighting water etc.), who were trying to limit their liability to around $30m under LLMC 76.
The relevant article (2.1.a) of LLMC reads “claims in respect … loss of or damage to property occurring onboard……and consequential loss resulting therefrom” are subject to limitation. MSC’s argument was that ‘damage to the ship’ in this case could be considered as ‘consequential loss’ resulting from damage to cargo and hence falls within the ambit of Art.2.1.a.
The English High Court noted that as a starting point claims between owners and charterers, i.e. insiders are limitable for property owned by them onboard the vessel, such as charterer’s cargo and consequential loss linked to loss of this property. It includes properties other than the ship itself. The court then said that although the damage to the vessel here was caused by the fire / explosion of the cargo in the containers, but it can’t be characterized as a cargo claim or ‘consequential loss resulting therefrom’. Shipowner could recover the whole of $200m.
Owners involved in large casualties caused by charterers’ cargoes, would certainly welcome this decision.
Link to judgement: https://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/Admlty/2022/2746.html&query=(flaminia)
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