Genoa Court of Appeal confirms decision on limitation of carrier's liability under Hague-Visby Rules

20 February 2019 

First-instance decision

Five yachts were loaded on board the M/V S Partner in the port of Baltimore to be carried to Genoa. The carrier issued bills of lading and the carriage was subject to the Brussels Convention 1924, as amended by the 1968 and 1979 protocols (ie, the so-called Hague-Visby Rules). During the sea passage, the ship encountered adverse weather conditions, which caused the five yachts to shift inside the hold and suffer serious damage. Upon the ship's arrival at the port of destination, the yachts were declared a total loss due to the extent of the damage suffered.

Subsequently, receivers commenced legal proceedings before the Tribunal of Genoa, claiming the full value of the yachts. The carrier pleaded that the sea and weather conditions that the ship had encountered during the voyage had been so severe as to amount to a peril of the sea and, alternatively, it was entitled to limit its liability under Article 4.5(a) of the Hague-Visby Rules.

The receivers counterargued that the carrier was not entitled to rely on the limitation of liability as the yachts had not been lashed or, in any event, their stowage and lashing inside the hold had been insufficient as to amount to a 'gross fault'.  The Tribunal of Genoa granted the receivers' claim on the issue of liability, but held that the owner was entitled to limit its liability.

On the limitation issue, the tribunal held that:

·         the carrier was entitled to rely on the benefit of limitation under Article 4.5(a) of the Hague-Visby Rules; and

·         to establish the loss of the carrier's limitation of its liability, the claimants had to provide evidence that the damage had resulted from an act or omission of the carrier done with the intent to cause damage or "recklessly and with knowledge that damage would probably result" and not simply due to gross fault.

Evidence collected at first instance was held to be insufficient to break the carrier's limitation of liability.

Appeal

The receivers appealed the first-instance decision on the limitation issue. They did not oppose the tribunal's view that the words "recklessly and with knowledge that damage would probably result", as set out in Article 4.5(e) of the Hague-Visby Rules, do not frame the concept of gross fault. Instead, the receivers pleaded that, in order to discharge their burden of proof and successfully break the carriers' limitation of liability, the carrier's actual knowledge of the likelihood of damage could be proven by simple presumptions, otherwise it would have been an impossible task to discharge such a heavy burden of proof against the carrier. In particular, the receivers argued, among other things, that the carrier's professional qualification should be regarded as proof of its awareness of the likelihood of a harmful event in case of its reckless conduct.

The carrier counter-appealed the first-instance decision claiming that no liability could be established against it, by seeking to bring itself within the exception of the peril of the sea. Further, the carrier insisted that the first-instance decision should be upheld in respect of the limitation issue and that it was entitled to limit its liability (if any).

After confirming the first-instance decision regarding the carrier's liability, thereby upholding the tribunal's view that the sea and weather conditions encountered during the voyage were not so severe as to amount to an excepted peril for an ocean sea passage, the Genoa Court of Appeal centred on the limitation issue.

The court referred to Italian Supreme Court Decision 8328 of 19 June 2001 issued in respect of a carriage by air under the Warsaw Convention 1929, which held that the concept of "recklessness and knowledge that damage would probably result" forged by international uniform law consists of two layers:

• the recklessness of the carriers' conduct; and
• the carriers' awareness that a harmful event would probably occur as a result of its reckless conduct.

The Supreme Court's decision concluded that a carrier's awareness must be actual. Receivers must therefore prove the carrier's actual knowledge of the likelihood that a harmful event will occur as a result of its reckless conduct in order to exclude the carrier's limitation of liability.

Having accepted the reasoning of the Supreme Court's decision, the Genoa Court of Appeal concluded that the receivers could not rely on simple presumptions in order to discharge their burden of proof and instead had to provide actual evidence. Further, and alternatively, the court stated that the carrier's professional quality (as an important liner) could not assist the receivers in discharging their burden of proof, as the carriage of goods by sea is always carried out by professionals.

Comment

The Genoa Court of Appeal's decision is welcome, as it interprets the principle of the loss of a carrier's limitation of liability as set out by the Hague-Visby Rules with the aim of safeguarding the uniform application of said convention. Indeed, it affirms that receivers must give actual (and in concreto) evidence of a carrier's knowledge that damage would probably have resulted as a consequence of its reckless conduct in order to claim the exclusion of the carrier's limitation of liability, with no recourse to factual presumptions.

The judgment will be welcomed by carriers and protection and indemnity clubs, as it will be difficult for claimants to discharge such a high standard of evidence in order to successfully plead the loss of a carrier's limitation of liability.