The Thorco Lineage: Limitation Under The Hague-Visby Rules Where There Is Physical Damage And Economic Loss (Video)

• Published date: 19 January 2023
• Subject Matter: Transport, Marine/ Shipping
• Law Firm: Quadrant Chambers
• Author: John Russell and Benjamin Coffer

OVERVIEW

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Part of a cargo suffers some minor physical damage. But, an economic loss is suffered in respect of the whole of the cargo - perhaps a diminution in market value due to delay, a liability to pay salvors, or transhipment costs.

Under the Hague Visby Rules ("the HVR") is the economic loss limited by reference to the weight of the whole cargo, just the physically damaged cargo, or is it unlimited?

In the controversial decision, The Limnos [2008] 2 Lloyd's Rep 166, Burton J held that the economic loss fell to be limited by reference to the weight of the physically damaged cargo (at least where the economic loss is consequent on the physical damage), and that if there was no physical damage, the claim would be unlimited. This led to many anomalies, most notably that if there was very minor physical damage the entire claim might be limited to a few dollars, but if there was no physical damage at all, the economic loss claim would be unlimited.

In an important judgment handed down on Friday 13th January 2023 (Trafigura PTE Ltd v TKK Shipping Ltd ("The Thorco Lineage") [2023] EWHC 26 (Comm)), Sir Nigel Teare declined to follow The Limnos and rejected the argument that Article IV(5)(a) of the HVR limits claims for economic loss by reference only to the weight of cargo which suffers physical damage.

Rather, he held that the limit is to be calculated by reference to the weight of cargo physically or economically damaged.

John Russell KC and Benjamin Coffer appeared for the Claimant cargo interests, instructed by Joe O'Keeffe, Richard Hugg, Richard Murray and David Wilson of Stephenson Harwood. Nevil Phillips and Peter Stevenson appeared for the Defendant carriers, instructed by Mark Seward and Ben Middleton at MFB.

Article IV(5)(a) of the Hague-Visby Rules limit's the carrier's liability for "loss or damage to or in connection with the goods" by reference to the higher of two alternative figures: 666.67 SDR per package or unit or 2 SDR per kilogram of gross weight of "the goods lost or damaged".

In The Limnos, Burton J held that the words "the goods lost or damaged" only encompass goods which are physically lost or damaged, so that where an incident causes limited physical damage but substantial consequential economic losses, the carrier can limit its liability by reference to the weight of cargo physically damaged. Further, he held that in the phrase, "loss or damage to or in connection with the goods", "the goods" were only those which were...