Limitation in respect of Wreck Removal Costs

The Convention on Limitation of Liability for Maritime Claims (the “LLMC”) is intended as a uniform set of rules to provide predictable liability limits in respect of maritime claims.  This international treaty gives shipowners, salvors and other parties the right to limit liability for the overall claims against a vessel arising out of a single incident. The calculation of that limit depends on which version of the LLMC applies (which in turn depends on the jurisdiction in which the limitation action is brought), and is calculated by reference to the ship’s tonnage.

However, the question as to whether the costs of wreck removal are captured by the LLMC as a matter of English law is not settled.

This article considers the current judicial approaches to this issue in certain common law jurisdictions.

LLMC

The original wording of Article 2(1)(d) of the LLMC is such that liability for wreck removal costs are subject to limitation, as below:

“Subject to Articles 3 and 4 the following claims, whatever the basis of liability may be, shall be subject to limitation of liability:

…

(d) Claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship”

However, many States (including the UK, Hong Kong and Australia) have derogated from this provision (by virtue of the Article 18 reservation) to ensure the State itself is not left facing a liability they cannot recover against shipowner or their insurer.

One unresolved issue that has arisen in recent years is in the case of a collision, where the ‘live’ ship, being at least partly responsible for the collision, is seeking to limit liability in respect of the “dead” ship’s wreck removal costs.

Debate on the limitation of wreck removal costs arises by virtue of the fact that these costs can be characterised in different ways.  For example, these costs could arguably fall under Article 2(1)(a) as “salvage operations, and consequential loss resulting therefrom”, or Article 2(1)(c) as “other loss resulting from infringement of rights other than contractual rights”. 

The question which remains to be resolved is, irrespective of any LLMC Article 18 derogation, can a ’live’ ship limit liability for the costs of the wreck removal of the ’dead’ ship? 

English Law Position

There is no direct English authority on this issue.  The MSC FLAMINIA (UKSC/2023/0131) deals with the construction of Article 2(1) of the LLMC, albeit wreck removal costs were not directly considered in that case.

Moreover, the latest edition of the leading English textbook on limitation (Limitation of Liability for Maritime Claims, Griggs et al, 4th Ed.) only provides limited speculation on how the English Courts may approach this point and presents reasoning supporting either approach.  Griggs concludes:

“The position remains unclear, with meritorious arguments both in favour and against limitation in respect of recourse claims for wreck removal expenses.”

In short, there is no determinative answer on how wreck removal costs will be treated by the English Courts, and it remains to be seen when this issue will be put before the Courts. 

This leads us to consider the approaches adopted in other common law jurisdictions, such as Hong Kong and Australia.  English Court judgments have made clear that common law judgments can be considered persuasive, see Starbucks (HK) Ltd v British Sky Broadcasting Group plc [2015] UKSC 31 where Lord Neuberger said:

“In addition to domestic cases, it is both important and helpful to consider how the law has developed in other common law jurisdictions – important because it is desirable that the common law jurisdictions have a consistent approach, and helpful because every national common law judiciary can benefit from the experiences and thoughts of other common law judges.”

Hong Kong Approach

The question of whether a ’live’ ship can limit liability for the costs of the wreck removal of the ’dead’ ship was considered by the Hong Kong SAR Court of Final Appeal (“Hong Kong CFA”) in the Perusahaan Perseroan (Persero) Pt Pertamina -v- Trevaskis Ltd and Others [2023] HKCFA 20 (STAR CENTURION c/w ANTEA 13 January 2019) (the “STAR CENTURION”).

The answer of the Hong Kong CFA was “No”.  Therefore, as a matter of Hong Kong law the owners of the ‘live’ ship cannot limit liability in respect of the ‘dead’ ship’s wreck removal costs. This means that the owners of the ‘dead’ ship could recover wreck removal costs.

In reaching this conclusion, the Hong Kong CFA decided that there was no distinction between statutory, common law, private, or consequential wreck removal costs. It also considered it relevant that LLMC Article 2(1)(d) concerns only wreck removal expenses, and Article 2(1)(a) makes no mention of wreck removal at all.

Australian Approach

The question has also been considered by the Australian Federal Court in the CSL Australia Pty Ltd -v- Tasmanian Ports Corporation Pty Ltd (The Goliath) [2024] FCA 824 (the “GOLIATH”).  

The answer of the first instance Australian Federal Court was “Yes”.  As a result, the vessel GOLIATH was able to limit liability in respect of the wreck removal costs arising out of an incident concerning an allision with a wharf and collisions with the tugs York Cove and Campbell Cove.  In reaching this decision, which contradicted the Hong Kong CFA, the Australian Court found that the claims for the costs and expenses of removing the ‘dead’ ship fell within LLMC 1976 Article 2(1)(a).

The Federal Court categorised the costs of the ‘dead’ ship’s wreck removal as a claim for “consequential loss” resulting from the loss of or damage to property.  In doing so, it stated that adopting the Hong Kong CFA’s judgment which removed all claims relating to wreck removal from limitation would “drive a horse and coaches through the international limitation regime”.

The Court also stated:

“For those reasons, and with both respect and some diffidence, I consider that The Star Centurion is incorrectly decided and should not be followed. As mentioned, I am alive to the importance of developing a uniform international jurisprudence on the Convention, but I am also alive to the importance of giving effect to its principal purpose, namely to expand upon and to protect the rights of limitation. In those circumstances I feel compelled to adopt the construction that sits best with the text as supported by the preparatory works and circumstances of conclusion rather than to follow the decision of another national court, albeit one of such influence and standing.”

Appeal

This decision was subsequently successfully appealed before the Australian Full Federal Court.

The Full Federal Court placed a great deal of importance on comity and emphasised the need for consistency of construction in respect of international conventions with numerous references to the judgment of the Hong Kong CFA in the STAR CENTURION.  The following extract from paragraph 115 underpins the approach adopted:

“Where there is jurisprudence of other superior courts, which have considered the very same issue, particularly a superior court of a congruent jurisdiction, and where the reasoning of those courts is compelling, it would be contrary to the principles of comity to adopt an alternative construction unless convinced that those decisions were plainly wrong“

 This decision is currently under appeal in the High Court of Australia (the highest Court in the Australian judicial system).

Summary

As matters stand, a consistent position on this issue has been adopted by the Hong Kong and Australian Courts.  It remains to be seen whether the High Court of Australia will upset this position.

Whilst any determination by the highest court of Australia will not be binding in England, bearing in mind that this decision will be made with the benefit of a detailed consideration of the Hong Kong position, this judgment will inevitably carry significant weight as and when this issue has to be considered by an English Court or Tribunal.

This article was written by Sam Kelly

A copy of the Australian Full Federal Court’s judgment can be found here: Tasmanian Ports Corporation Pty Ltd v CSL Australia Pty Ltd (The Goliath) [2025] FCAFC 53