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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Landcatch Ltd v International Oil Pollution Compensation Fund [1999] ScotCS 116 (19 May 1999)
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Cite as: [1999] ScotCS 116
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SECOND DIVISION, INNER HOUSE, COURT OF SESSION
|
Lord Justice Clerk Lord McCluskey Lord Cowie |
CA155/9/95
OPINION OF THE LORD JUSTICE CLERK
in
RECLAIMING MOTION
in the cause
LANDCATCH LIMITED Pursuer and Reclaimer;
against
THE INTERNATIONAL OIL POLLUTION COMPENSATION FUND Defenders and Respondents:
_______
|
Act: McNeill, Q.C., Weir; Maclay Murray & Spens
Alt: Dean of Faculty, Tyre, Q.C.; Morton Fraser & Milligan, W.S.
19 May 1999
This action arises from the grounding of the MT Braer at Garths Ness, Shetland on 5 January 1993 and the consequent escape or discharge of oil from that vessel. The action was raised against the defenders, to which I will refer as "the Fund", for payment of compensation under section 4 of the Merchant Shipping Act 1974. The pursuer (to which I will refer as "Landcatch") raised a second action against the Braer Corporation, the owners of the vessel, and her insurers. That action claimed compensation under section 1 of the Merchant Shipping (Oil Pollution) Act 1971 and, in regard to the insurers, under Norwegian law. The Fund were sisted as minuters in that action and tabled a full defence. In respect that certain common issues of fact and law arose in both actions the debate on the procedure roll in the second action was appointed to proceed at the same time as the debate in the first action. Following that debate the Lord Ordinary dismissed both actions. Landcatch reclaimed, but has not challenged the decision of the Lord Ordinary in the second action so far as concerned the vessel's insurers. The reclaiming motions were the subject of single discussion before this court.
The main issue with which that discussion was concerned was whether Landcatch had set out a case for compensation against the vessel's owners which was relevant for enquiry. That issue was common to both actions, subject to the fact that Landcatch did not dispute that, even if its averments warranted enquiry, the present action was premature and accordingly would require to be sisted to await the outcome of the action against the vessel owners. The subsidiary issue in the discussion was whether, as the vessel owners and the Fund maintained in their cross-appeal, the Lord Ordinary was in error in taking the view that, if Landcatch had made a relevant case for statutory compensation, the item for "expenses in pursuing claim", should form part of the subject of enquiry.
At this point it is convenient for me to refer to Landcatch's pleadings. Although I will refer, for the most part, to the pleadings in the present action, I will also mention certain passages in Landcatch's pleadings in the second action. The discussion proceeded before this court without any distinction being drawn between the pleadings in the two actions.
Following the grounding of the vessel 84,700 tonnes of crude oil, together with 1,600 tonnes of bulk fuel oil, escaped or were discharged from the grounded vessel. On 8 and 27 January 1993 the Secretary of State for Scotland, in exercise of powers conferred by the Food and Environment Protection Act 1985 issued certain emergency orders for the protection of food, whereby it was provided that within an exclusion zone no person could:
"(a) use any fish taken out of the designated area after the relevant time in the
preparation or processing for supply of food and anything from which food could be derived;
(b) land any fish which were taken from waters in the designated area after
the relevant time;
(c) supply, or have in possession for supply, any fish which were in the
designated area after the relevant time;
(d) supply, or have in possession for supply, any food or anything from
which food could be derived in the preparation or processing of which anything was used in contravention of paragraph (a) of this article".
As a result of the escape or discharge high concentrations of pollutant hydrocarbons were found on certain inshore waters in Shetland within the exclusion zone. Local inshore fisheries and salmon farms were at risk from pollution. In due course the exclusion restrictions were lifted.
According to its averments, Landcatch's business
"includes, inter alia, the rearing of salmon from eggs to smolt, i.e. juvenile salmon of up to two years of age and sufficiently developed to be moved from fresh water to sea water for further on-growing to harvestable fish. This activity is carried on principally at Ormsary, Argyll (about 500 kms from Shetland), but also on the islands of Jura and Islay in Argyll and at Gairloch in Wester Ross. As at about January 1993 the pursuer produced about 2 million smolt annually capable of being reared to harvestable salmon. Of that production not retained by themselves for on-growing or brood stock the pursuer sold about 65% to on-growers in Shetland, about half of which annually was sold to one on-grower. Of the remaining 35% some were sold to third parties elsewhere in Scotland and the balance was reared by on-growers acting on behalf of the pursuer. The pursuer's facilities at Ormsary, Jura, Islay and Gairloch were created and developed from about 1980 principally to service the requirements of independent salmon on-growers including Shetland which accounts for about 50%, or 4 million smolt per annum, of the total free United Kingdom market, that is the market other than smolt produced by operators for their own on-growing facilities. Whilst Shetland enjoys significant sea water resources for on-growing smolt to harvestable salmon, it has highly restricted natural fresh water resources of the type able to provide uninterrupted controllable disease-free water at suitable temperatures in sufficiently large volumes to facilitate major production of smolt. 25%-30% of all salmon reared and harvested in Shetland originate from smolt supplied by Landcatch" (6A-7A).
According to Landcatch's averment in the second action: "The sea-water salmon farming industry of Shetland was and is accordingly dependent on supplies of smolt from producers elsewhere such as Landcatch and was Landcatch's principal market" (11A-B) and "The pursuer's business was at the material time and is still closely integrated in and to the sea-water salmon farming industry in Shetland" (10A-B).
Landcatch goes on in the pleadings in the present action to aver that for these reasons
"the pursuer has always sold significant volumes of smolt to Shetland farmers. Whilst some contracts for sale of smolt are finally agreed only in or about the spring of the year of sale, decisions have to be taken some years in advance in order to have appropriate stock available. Typically, (i) decisions on brood stock levels have to be taken about four years in advance of the year of anticipated smolt sales, (ii) decisions on smolt production levels have to be taken about 18 months in advance of that time, and (iii) some 14 months in advance of that time, smolts are specifically earmarked for sales to Shetland and given husbandry appropriate to their anticipated destination. Such decisions are taken upon the basis of and as a result of frequent discussions between the pursuer and its major customers in Shetland. Prior to 1993 no customer failed to take up the quantity of smolt expected to be taken and the pursuer was never left with significant quantities of smolt in respect of which sales had been anticipated but not concluded. In the foregoing circumstances over half of the business activity of the pursuer was bound with the salmon farming industry in Shetland" (8A-D).
The pursuer later avers with reference to the problems caused by the escape or discharge of oil and the consequent imposition of an Exclusion Zone:
"The foregoing circumstances had a serious effect upon the business of the pursuer. It owned significant stocks of fish being reared in Exclusion Zone waters which had to be culled. Compensation for claims arising therefrom was agreed between the pursuer and the defender. In addition, however, the continuance of Exclusion Zone status and the uncertainties surrounding introduction of new fish into Exclusion Zone waters in 1993 affected the pursuer's trade in smolt which it had reared for transfer to sea water in 1993. In accordance with its ordinary practice the pursuer had been rearing smolt for anticipated delivery to Shetland Isles in or about April or May 1993. The numbers reared had been based upon regular and frequent discussion between the pursuer and Shetland salmon farmers in the expectation that final quantities for each farmer would be agreed by about the end of 1992 and contracts for supply be concluded between February and May 1993. In the first place, as a result of the continued imposition of the Exclusion Zone and uncertainties as to what secondary diseases might emanate from 1992 stocks which growers had been obliged to retain, Shetland salmon farmers operating in the Exclusion Zone and with whom the pursuer had anticipated contracting for supply of 1993 smolt, refused to take delivery of smolt in 1993. In the second place, as smolt are transferred from fresh water to sea water sites by wellboats (such a boat being open to surrounding sea water) it was not possible to deliver smolt to non-Exclusion Zone sites in Shetland if such fish would have to pass through Exclusion Zone waters and thereby become subject to Exclusion Zone restrictions. In the third place, as above condescended upon, given the life cycle of salmon, the fish reared for disposal in 1993 could not be retained in fresh water any longer but, also as condescended upon above, there is a limited free market in the United Kingdom for such disposals. Sale outside the U.K. was prohibited. In these circumstances the pursuer experienced extreme difficulty in disposing of the 1993 smolt stocks" (17A-18B).
Landcatch avers that thereby it has suffered certain losses, namely (1) smolts culled due to lack of sales; (2) reduced selling price of smolts sold in 1993; (3) reduced selling price of smolts in 1994 when prices did not resume normal level; (4) additional rearing costs incurred in making special arrangements for on-growing of 260,000 smolt; and (5) expenses in pursuing claim (24B-D).
The 1971 Act introduced a scheme for civil liability for oil pollution by merchant ships, following the participation of the United Kingdom in the International Convention on Civil Liability for Oil Pollution Damage signed in Brussels in 1969. Section 1 provides as follows:
"(1) Where, as a result of any occurrence taking place while a ship is carrying a cargo of persistent oil in bulk, any persistent oil carried by the ship (whether as part of a cargo or otherwise) is discharged or escapes from the ship, the owner of the ship shall be liable, except as otherwise provided by this Act -
(a) for any damage caused in the area of the United Kingdom by
contamination resulting from the discharge or escape; and
(b) for the cost of any measures reasonably taken after the discharge or
escape for the purpose of preventing or reducing any such damage in the area of the United Kingdom; and
(c) for any damage caused in the area of the United Kingdom by any
measures so taken.
(2) Where a person incurs a liability under subsection (1) of this section he shall also be liable for any damage or cost for which he would be liable under that subsection if the references therein to the area of the United Kingdom included the area of any other Convention country.
...".
Section 3 provides, inter alia, that where, as a result of any occurrence taking place while a ship is carrying a cargo of persistent oil in bulk, any persistent oil carried by the ship is discharged or escapes then, whether or not the owner incurs a liability under section 1, he is not to be liable otherwise than under that section for any such damage or cost as is mentioned therein. Under section 4 the owner of a ship who "incurs a liability under section 1 of this Act by reason of a discharge or escape which occurred without his actual fault or privity" may have his liability limited to an amount determined in accordance with that section by reference to the ship's tonnage. Section 5(2) provides that if on such an application for that purpose the court finds that the applicant incurred such a liability and is entitled to limit it, the court, after determining the limit of the liability and directing payment into court of the amount of that limit is to (a) determine the amounts that would, apart from the limit, be due in respect of the liability to the several persons making claims in the proceedings; and (b) direct the distribution of the amount paid into court (or, as the case may be, so much of it as does not exceed the liability) among those persons in proportion to their claims, subject to the following provisions of the section. Section 6 lays down certain restrictions on the enforcement of claims after a limitation fund has been established. Section 9 excludes actions to enforce the claim unless the action is commenced not later than three years after the claim arose or later than six years after the occurrence or first of the occurrences resulting in the discharge or escape by reason of which the liability was incurred. Section 10 provides for compulsory insurance against liability for pollution which satisfies article VII of the Convention. In this connection a certificate is to be issued by the Secretary of State. A direct right of action by third parties against the insurers is conferred by section 12.
The 1974 Act arose out of the United Kingdom's participation in the International Convention on the establishment of an international fund for compensation for oil pollution damage which was opened for signature in Brussels on 18 December 1971 (referred to as the "Fund Convention", in distinction from the earlier Convention, which is referred to as the "Liability Convention"). Section 2 of the Act requires contributions to be paid to the Fund in respect of oil carried by sea to ports or terminal installations in the United Kingdom. Section 4 states:
"(1) The fund shall be liable for pollution damage in the United Kingdom if the person suffering the damage has been unable to obtain full compensation under section 1 of the Act of 1971 (which gives effect to the liability Convention) -
(a) because the discharge of escape causing the damage -
(i) resulted from an exceptional inevitable and irresistible
phenomenon, or
(ii) was due wholly to anything done or left undone by another
person (not being a servant or agent of the owner) with intent to do damage, or
(iii) was due wholly to the negligence or wrongful act of a Government
or other authority in exercising is function of maintaining lights or other navigational aids for the maintenance of which it was responsible,
and because liability is accordingly wholly displaced by section 2 of the Act of 1971, or
(b) because the owner or guarantor liable for the damage cannot meet his
obligations in full, or
(c) because the damage exceeds the liability under section 1 of the Act of
1971 as limited -
(i) by section 4 of the Act of 1971
...".
According to section 1 the expression "pollution damage" means "damage caused outside the ship carrying oil by contamination resulting from the escape or discharge of oil from the ship, wherever the escape or discharge may occur, and includes the cost of preventive measures and further damage caused by preventive measures". Section 7 provides that no action to enforce a claim against the Fund is to be entertained by a court in the United Kingdom unless it is commenced or a third-party notice of an action to enforce a claim against the owner or his guarantor in respect of the same damage is given to the Fund not later than three years after the claim against the Fund arose. Section 23(2) states that references in the Act to the area of any country includes the territorial sea of that country and references to pollution damage in the United Kingdom are to be construed accordingly.
It may be noted that both Acts were repealed and replaced by provisions in chapters III and IV of the Merchant Shipping Act 1995, but this is not relevant or material for present purposes.
It is not in dispute that, as a result of an occurrence taking place while the Braer was carrying a cargo of persistent oil in bulk, such oil was discharged or escaped from the vessel. Further it is not in dispute that as a consequence the owners of the vessel would be liable "for any damage caused in the area of the United Kingdom by contamination resulting from the discharge or escape" in terms of section 1(1) of the 1971 Act. Hence, it is not in dispute that the Fund would also have a contingent liability under section 4 of the 1974 Act if, by reason of the limit under section 4 of the 1971 Act, the person suffering the damage was unable to obtain full compensation. There is no suggestion that there is any difference between "pollution damage" for the purposes of the 1974 Act and the "damage" which qualifies for compensation under the 1971 Act. The question, which is common to both actions, is whether the loss claimed by Landcatch is within the scope of the expression "damage" in section 1(1) of the 1971 Act. Section 20(1) of the 1971 Act states that "damage" includes "loss".
The submission made by counsel for Landcatch was, in brief, as follows. Firstly, on a proper construction, neither section 1 of the 1971 Act nor section 4 of the 1974 Act placed any limit on the liability of the shipowner by reference to the common law of remoteness. The sole qualification for the recoverability of loss was that it was "caused" by contamination resulting from the discharge or escape of oil. The sections imposed a liability irrespective of fault. Accordingly it was enough for Landcatch to establish that, "but for" the contamination, it would not have suffered the loss. While the submission made by junior counsel for Landcatch was to this effect, senior counsel appeared to qualify that approach by submitting that, at least in a case such as the present, in which there was a particularly close connection between the interests of Landcatch in respect of which it had sustained loss and the economic development of the area which had been contaminated, the sections afforded such recovery. Secondly, in any event in determining the ambit of the expression "damage", the court should have regard to the way in which the whole scheme had been operated in practice, and that by reference to the "jurisprudence" of the Fund, and arrive at an interpretation consistent with the criteria adopted by the Fund. Thirdly, assuming that the scope of liability was limited by reference to the common law, Landcatch's averments disclosed a relationship of such intimacy with the Shetland fish farming industry that they could not but be affected by the spill. Thus it could not be said that Landcatch's case was bound to fail.
The response of the Fund and the ship owners was that the loss which was recoverable under the sections was restricted in accordance with the principles of remoteness which were well-recognised in questions relating to the liability of a wrongdoer at common law, and were similar to those applied in connection with claims of compensation for the exercise of statutory powers. On the application of those principles Landcatch's alleged loss was not admissible in respect that it was secondary or relational. The defenders also disputed that it was appropriate for any reliance to be placed on the "jurisprudence" of the Fund.
The submissions made on behalf of the parties were developed at some length. For present purposes I shall endeavour to summarise the substance of the argument on either side. Counsel for the ship owners, supported and to some extent elaborated upon submissions made on behalf of the Fund. For present purposes I do not consider it necessary to distinguish between them.
It is convenient for me to begin by referring to the submissions made on behalf of the Fund. It was submitted that in determining the scope of "damage", inclusive of "loss", for the purposes of section 1(1)(a) of the 1971 Act the court should adopt the "pragmatic rule" applied in an action at common law in respect of a civil wrong. In the words of Lord Oliver of Aylmerton in Murphy v. Brentwood District Council [1991] 1 AC 398 at page 485,:
"It is true that, in an uninterrupted line of cases since 1875, it has consistently been held that a party cannot successfully sue in tort for the interference with his economic expectations or advantage resulting from injury to the person or property of another person with whom he has or is likely to have a contractual relationship: see Cattle v. Stockton Waterworks Co. (1875) LR 10 QB 453; Simpson & Co. v. Thompson (1877) 3 App. Cas. 279; Société Anonyme de Remorquage à Hélice [1911] 1 KB 243. That principle was applied more recently by Widgery J. in Weller & Co. v. Foot & Mouth Disease Research Institute [1966] 1 Q.B. 569 and received its most recent reiteration in the decision of this House in Leigh and Sillavan Ltd. v. Aliakman Shipping Company Limited [1986] AC 785".
To this may be added the well-known passage in the opinion of Lord Kinloch in Allan v. Barclay (1864) 2 M. 873 at page 874:
"The grand rule on the subject of damages is, none can be claimed except as naturally and directly arise out of the wrong done; and such, therefore, as may reasonably be supposed to have been in the view of the wrongdoer. Tried by this test, the present claim appears to fail. The personal injuries of the individual himself will be properly held to have been in the contemplation of the wrongdoer but he cannot be held bound to have surmised the secondary injuries done to all holding relations with the individual, whether that of a master, or any other".
cf. Reavis v. The Clan Line Steamers Limited 1925 SC 725.
In Candlewood Navigation Corporation Limited v. Mitsui Limited [1986] 1 A.C. 1, Lord Fraser of Tullybelton at page 17 pointed out, in delivering the judgment of the Judicial Committee of the Privy Council, that the line of authorities showed
"that the justification for denying a right of action to a person who has suffered economic damage through injury to the property of another is that for reasons of practical policy it is considered to be inexpedient to admit his claim".
At page 25 he observed that the need for such a limit had been repeatedly asserted and that their Lordships were not aware that a view to the contrary had ever been judicially expressed. He added:
"The policy of imposing such a limit is consistent with the policy of limiting the liability of ships and aircraft in maritime and aviation law by statute and by international agreement".
He went on to observe that it should enable legal practitioners to advise their clients as to their rights with reasonable certainty. In Leigh and Sillavan v. Aliakman Shipping Company Limited Lord Brandon of Oakbrook at page 816 observed that the policy reason for the rule was to avoid opening the floodgates so as to expose a person guilty of want of care to unlimited liability to an indefinite number of other persons whose contractual rights had been adversely affected by such want of care.
It was submitted on behalf of the Fund that essentially the same considerations applied in the case of damage, including loss, in terms of section 1 of the 1971 Act, and hence section 4 of the 1974 Act. Jurisdiction had been conferred on the courts of the United Kingdom to deal with the statutory claims. There was no reason why the language should not be construed according to concepts which were recognised in the existing legal system of this country. The 1971 Act itself demonstrated its connection with that system, for example in the application of the law relating to contributory negligence (section 1(5)). There was no reason for disregarding the floodgates objection in this context. Although it was open to the shipowner to limit his liability in accordance with the provisions of the 1971 Act, his exposure to indeterminate liability would greatly reduce the amount of compensation available to claimants. Express language would be required in order to bring about liability on a "but for" basis. On the contrary there was nothing to exclude the application of the usual restriction which excluded secondary or relational loss. It was pointed out that section 13(2) of the 1971 Act provided that where no damage caused by contamination resulted in the area of the United Kingdom and no measures were reasonably taken to prevent or reduce such damage in that area, no court in the United Kingdom should entertain an action to enforce a claim arising from any damage caused in the area of another Convention country by contamination resulting from the discharge or escape or any cost involved in taking measures to prevent or reduce such damage in the area of another Convention country or any damage caused by any measures so taken. There would, it was submitted, be little point in that provision if the statute intended the recovery of loss of whatever degree, since there would be no end to the ramifications of indirect claims which could come from any part of the world.
The Fund also sought to derive some assistance from decisions relating to liability in compensation of the exercise of compulsory powers. It was pointed out that these decisions related to statutory provisions which were expressed in wide terms. No question of a duty of care arose. The court was referred in particular to the speeches of Lord Chelmsford L.C. and Lord Cranworth in Ricket v. Metropolitan Railway Company (1867) L.R. 2 H.L. 175 which was concerned with a claim in respect of temporary loss of trade due to the construction of a railway. At page 198, in holding that the loss was not compensatable as the injurious affection of land, Lord Cranworth said:
"Any other construction of the clause would open the door to claims of so wide and indefinite a character as could not have been in the contemplation of the Legislature".
In Aikman v. Caledonian Railway Company (1877) 4 R. 1020, where a person from whom land had been taken for a railway had made a claim in respect of the loss of money paid for a wayleave, it was held that this was not to be taken into account in fixing the amount of his compensation. At page 1027 the Lord Justice Clerk (Moncrieff) said:
"What the pursuer really complains of is that the defenders, by affording increased facilities for traffic, have furnished a motive to the lessees to break their lease and make the new connecting line. But that is what all railway facilities have done, and are intended to do. To affect property injuriously is one thing; to divert traffic from one district and take it to another is quite a different thing. The gain of the many is everyday the indirect cause of the loss of one or several. But this is the true end for which these increased powers are given, and it is in vain to attempt to place on the shoulders of those who afford these facilities the remote effects of the alterations in life which they produce".
Counsel submitted that the damage, including loss, within section 1 of the 1971 Act must be seen to have been caused through the instrumentality of the contamination. It was not enough that the contamination had provided a person with a motive to act differently, to the disadvantage of the claimant. Reference was made, by way of comparison, to cases concerning claims for "damage done by a ship" within the terms of section 1(1) of the Administration of Justice Act 1956 and the statutory predecessors of that enactment. In this connection it was well-established that the ship required to be the actual instrument of the damage (see, for example, The Eschersheim [1976] 1 W.L.R. 430).
In presenting their submissions the Fund did not dispute that "loss" for the purpose of section 1 was apt to include pure economic loss, but this was so long as it could be seen to be a direct result of contamination as opposed to the merely secondary or relational. "Damage" and "loss" could not be used interchangeably in practice. Economic loss was more likely to be relational in nature. It was accepted on behalf of the Fund that Shetland fishermen who were prevented from fishing in the sea within the exclusion zone would have suffered an economic loss which was admissible. They would not have suffered the loss of anything owned by them, since they owned neither the sea nor the fish in it. Their economic loss would have been a direct result of the contamination, without any party or relationship interposed. The same would not have applied, or at least would not necessarily have applied, in the case of a fisherman whose home port was further afield. This was because statute indicated that it was imposing liability for damage, including loss, which was localised. The central idea was physical contamination. This pointed to a place or thing which was contaminated, and hence to a geographical location. The terms in which sections 1 and 13 were expressed envisaged that the contamination and the damage or loss would be in the same area. While every claim of economic loss would require to be considered on its own merits, the further away that a claimant's economic activities were from the scene of the contamination the more difficult it was to fit his claim within the scope of the Act. Thus it was submitted on behalf of the fund that a fisherman operating from a port in Spain would experience that difficulty and the Dean of Faculty, on behalf of the Fund, was not prepared to concede that the same difficulty might also apply to a fisherman operating out of Thurso.
Against the background of these submissions as to the law to be applied, the Dean of Faculty submitted that there could be no real dispute as to the nature of the loss which Landcatch was claiming. Whatever gloss was put on it, it consisted essentially of the loss of potential supply contracts into which Landcatch had expected to enter. Landcatch had not even been in the position of a person who had an existing contract, the fulfilment of which was disrupted by the contamination. It was at one remove from the Shetland fish farmers. Landcatch's business was not bound with the Shetland fish farming industry. Landcatch chose to operate in such a way that each party to the supply of smolt was free to go elsewhere. It was pointed out that the decision of the fish farmers had not taken place until several months after the contamination occurred. The Lord Ordinary had correctly described Landcatch's averments that its business was bound with the Shetland fish farming industry and was "closely integrated" with it as empty phrases. The importance of the Shetland market to Landcatch did not make Landcatch an integral part of it. Landcatch's business activities were, moreover, nowhere near the contamination. They did not carry on business in Shetland. If Landcatch's claim was to be included, there would be no sensible limit. It would mean that any supplier or contractor would have a valid claim. The Act could be construed as wide enough to cover local business activities which were affected even though there was no damage to property.
Counsel for Landcatch submitted that the court should proceed on what was said to be the "ordinary and natural meaning" of the language of section 1 of the 1971 Act. Far from making a simple extension to the Merchant Shipping Acts it was plainly intended to lay down entirely new law, imposing liability for contamination irrespective of fault. Reference was made, by way of comparison, to the introduction of the code relating to negotiable instruments by the Bills of Exchange Act 1882. In Bank of England v. Vagliano Brothers [1891] AC 107 Lord Hershell at pages 144-145 said:
"I think the proper course is in the first instance to examine the language of the statute and to ask what is its natural meaning, uninfluenced by any considerations derived from the previous state of the law, and not to start by enquiring how the law previously stood, and then, assuming that it was probably intended to leave it unaltered, to see if the words of the enactment will bear an interpretation in conformity with this view".
Section 1 contained no qualification of the damage or loss, such that it should be "direct". Provision to that effect could readily have been made (cf. Elliott Steam Tug Company Limited v. Shipping Controller [1922] 1 Q.B. 127). It was to be noted that in other respects the Act was explicit when it laid down exceptions, restrictions and limitations in respect of the liability which was imposed by section 1. There were particular reasons for bringing into the statute selected parts of the existing law, such as that relating to contributory negligence. It did not follow that the whole of the common law was brought in train. In these circumstances the plain intention was to oust the common law rule against the admission of secondary or relational claims.
Counsel for Landcatch went on to submit that the decisions which were relied on by the Fund in support of that rule were distinguishable. The concern in regard to the recognition of indeterminate liability was overcome in the case of the 1971 Act by the fact that the statute enabled the shipowner to limit his liability and determined what was to be done with the limited funds. Moreover the 1971 Act was not concerned with the question of whether there had been a breach of duty. Accordingly it was not concerned with questions of foreseeability. As far as concerned decisions relating to compensation for the use of compulsory powers, these raised policy considerations which were different from any in the present type of case. It was understandable that compensation in such cases was restricted to what would have been actionable in the absence of such powers. Not only was there concern as to the burden placed upon the railway company as a private party, there was also a trade-off between the restriction of claims and the benefit of the railway to the public. The Fund could be said to be different from a private party, although the same could not be said of the shipowners. As regards the use of decisions relating to the expression "damage caused by the ship", it was important to remember that this expression had become a term of art.
It was also submitted that the Fund's concession that pure economic loss was not excluded by section 1(1) of the 1971 Act led to their conceding that at least in certain respects some form of secondary or relational loss was covered. It was pointed out that in the course of his submissions junior counsel for the Fund had given as an example of a claimant with an admissible claim for economic loss the owner of a hotel at a beach who suffered loss of tourist trade as the result of the contamination. As soon as some form of economic loss was admitted, one was "worlds away" from the common law. A Shetland fisherman would suffer economic loss if he was unable to take fish out of the sea in the Exclusion Zone. He would also suffer a loss of market if the place in which he sold his fish was rendered inoperative. The same reasoning could be applied to Landcatch who, by reason of the contamination, lost the market into which it would have taken smolt for on-growing in Shetland. There was no ground for drawing a line at a particular location in the case of economic loss. Section 1 did not say anything about the damage or loss requiring to be in the vicinity of the contamination. It would be strange if a large producer of smolt whose business activities assisted the local economy in Shetland was excluded.
Counsel for Landcatch drew attention to the fact that in Murphy Lord Oliver of Aylmerton at page 487 pointed out that foreseeability was not in itself enough to make admissible a common law claim in respect of economic loss. There required to be sufficient "proximity" between the plaintiff and the defendant to impose a duty on the latter to take care to avoid or prevent the loss which was sustained. This was difficult to apply in the case of strict liability. There was no logical reason to restrict the scope of claims. The present type of case differed from one which was concerned with a single event. In the present type of case there was on any view the possibility of a wide number of claimants. Therefore concepts of proximity should not be introduced from the common law. If, however, it was necessary on policy grounds to show that in the present case there was something more than that Landcatch's loss was factually caused by the contamination, it lay in the considerations that (i) the liability imposed under section 1 was strict; and (ii) the evident purpose of the statute being to protect communities, persons such as Landcatch were so closely connected with the type of damage which was caused that they should not be regarded as mere suppliers. Thus, if it was necessary to draw the line somewhere, in applying liability on a "but for" basis, it should be drawn so as to include Landcatch which had such a particularly close association with the economic development of the area that it formed part of its working environment. Even if the scope of liability under section 1 fell to be determined by applying the common law rule, Landcatch satisfied its requirement. If there was a major oil spill, it could not but be the case that its operations would be affected. Unlike the persons in Aikman who elected to cease paying for a wayleave, the Shetland fish farmers had no choice. Landcatch could not readily go elsewhere if the Shetland market collapsed. Counsel described Landcatch and the Shetland fish farmers as resembling two halves of a whole. There was a "constructive joint venture" between them.
In addition to their submissions in regard to the terms of the legislation, each of the parties for their own purposes sought to derive assistance from other sources.
Firstly, the terms of the Conventions. They were not incorporated into the Acts, and accordingly there is no question of searching for the international significance of certain terms. In Stag Line Limited v. Foscolo, Mango and Co. [1932] A.C. 328, which was concerned with the statute in which an international Convention had been incorporated, Lord McMillan at page 350 observed that it was important to remember that the rules of the Convention had an international currency, adding:
"As these rules must come under the consideration of foreign courts it is desirable in the interests of uniformity that their interpretation should not be rigidly controlled by domestic precedence of antecedent date, but rather that the language of the rules should be construed on broad principles of general acceptation".
On the other hand when legislation has been formulated in order to give effect to international agreement, there is a presumption that it has not been enacted in breach of that agreement. In The Eschersheim Lord Diplock at page 436 stated:
"If there be any difference between the language of the statutory provision and that of the corresponding provision of the Convention, the statutory language should be construed in the same sense as that of the Convention if the words of the statute are reasonably capable of bearing that meaning".
In passing I note that counsel for the shipowners maintained that the scope for the court's use of a Convention was limited to situations in which there was an ambiguity. However, if the court is endeavouring to give effect to the Convention where the language of the statute reasonably bears that meaning, this involves too narrow an approach.
In the present case none of the parties suggested that there was any conflict between the terms of either Convention and those of the statute to which it related. Furthermore there was no suggestion that any of the terms of the statute were ambiguous. However, each of the parties sought to derive a measure of support for their interpretation of the statute without requiring to depend on the Convention for this purpose. For Landcatch it was maintained that its submission as to the width of the scope for claims under the Act was supported by the equally broad terms in which each of the Conventions was expressed. For the defenders it was submitted that the Conventions supported the view that they were directed to securing that claimants received adequate or full compensation. For this purpose they referred to the preamble of the Liability Convention and certain articles (in English and in French) of the Fund Convention.
Secondly, the use of travaux preparatoires. In Gatoil v. Arkwright - Boston Insurance 1985 SC (HL) 1 Lord Wilberforce at pages 10-11 recalled that in Fothergill v. Monarch Airlines Limited [1981] AC 251 he had suggested that two conditions must be fulfilled before they could be used by a court: first, that the material is publicly accessible; and secondly that it clearly and indisputably pointed to a definite legislative intention. In the present case the fund referred to the records of the International Legal Conference on Marine Pollution Damage in 1969 in regard to the introduction of reference to "contamination" by way of an amendment to the text of the Convention. The record note states:
"This amendment is designed to ensure that damage covered by the Convention is confined to damage by contamination whether to persons or property and does not extend to damage consequential on an escape of oil such as fire or explosion".
The minute of the meeting at which that amendment was adopted states the submission of the representative of the United Kingdom to the same general effect.
Thirdly, as I have already noted, Landcatch sought to rely on the "jurisprudence" of the Fund, consisting of criteria adopted and decisions taken on behalf of the Fund in dealing with claims made against the Fund under the Fund Convention. The proceedings of the Seventh Inter-Sessional Working Group of the Fund in 1994 were referred to. In these proceedings it was decided that claims for consequential loss and for economic loss were not ruled out in principle. It was stated that "in order to qualify for compensation the basic criterion should be that there was a reasonable degree of proximity between the contamination and the loss or damage sustained by the claimant" (para. 7.2.29). The report of the Working Group states that when considering whether the criterion of reasonable proximity was fulfilled, the following elements should be taken into account, namely (1) the geographic proximity between the claimant's activity and the contamination; (2) the degree to which a claimant was economically dependent on an affected resource; (3) the extent to which the claimant had alternative sources of supply, and (4) the extent to which a claimant's business formed an integral part of the economic activity within the area affected by the spill (para. 7.2.30). Landcatch in these circumstances relied, as it had before the Lord Ordinary, on six points in its pleadings, namely (1) that Landcatch serviced the smolt requirements of the Shetland growers, had done so since 1980 and had organised the husbandry of their smolt production to suit the needs of the Shetland industry, for example by planning the production several years ahead; (2) that 65% of Landcatch's smolt were sold to Shetland, representing 25%-30% of all salmon reared there; (3) that Shetland's capacity to rear smolt was limited by the lack of fresh water resources; (4) that before the Braer incident, no customer had failed to take up the quantities of smolt that he had been expected to take up; (5) that over half of Landcatch's business activity was therefore bound up with the salmon industry in Shetland, and (6) that Landcatch's operations were integrated with the Shetland salmon farming economy. Counsel also referred to specific decisions of the fund in order to gain support for the proposition that this case satisfied the criteria. Counsel accepted that the Fund had not applied a "but for" approach. It was emphasised that there was no question of Landcatch founding on these matters, as this would be improper. However, the unique position of the Fund as a supranational body was emphasised. Uniformity of approach was desirable. If there was any ambiguity as to who could claim in respect of economic loss, it would be useful to have regard to what the Fund had done, especially in the absence of any previous legal decisions. It could be expected that the Fund had brought some objectivity to bear on the subject. For the Fund it was submitted that the criteria were of no relevance. They merely gave an indication of developing attitudes to claims in the light of experience. It was for the Fund to have regard to the decision of courts rather than the other way round. It was pointed out that many more countries were parties to the Liability Convention than were parties to the Fund Convention. The criteria which had been developed post-dated the incident with which the present case was concerned. In any event Landcatch's claim failed to meet the Fund's criteria and had in fact been rejected. The criteria were not covered by the Vienna Convention on the Interpretation of Treaties. The same applied even more clearly to the decisions of the Fund.
The answer to the main issue under discussion depends on the interpretation of section 1 of the 1971 Act. I do not consider that it is proper or appropriate to treat the criteria and decisions of the Fund as an aid to the construction of the legislation. It is conceded that they have no binding effect on the Fund and that they are not to be treated as authorities so far as this court is concerned. They do not have the status of an international agreement for the interpretation of a Convention. They are no more than indications of the Fund's response to certain types of claims. Whether or not the criteria or decisions were well-founded on an interpretation of the Convention is a matter that is neither here nor there so far as the present case is concerned. The Fund rejected the claim by Landcatch with which the present actions are concerned. It appears to me to be entirely improper exercise to divert the court from seeking a proper statutory interpretation by submitting that assistance can be gained by considering whether rejection of Landcatch's claim was inconsistent with the criteria adopted by a party.
Turning to the terms of the 1971 Act I note the following:
(1) Section 1 shows that the liability which it imposes follows upon a series of physical events - the occurrence, the discharge or escape of persistent oil from the ship, and contamination.
(2) Liability under section 1(1)(a) is for "any damage caused in the area of the United Kingdom by contamination...". The matter of location is plainly of significance for the purpose of giving jurisdiction to the courts which exercise admiralty jurisdiction in the United Kingdom. The expression which I have quoted, which is substantially repeated in paras. (b) and (c), implies that damage has an identifiable location and has to occur in the United Kingdom. In that respect there is a geographical limitation. Section 13(2), on the other hand, refers to "any damage caused by contamination in the area of the United Kingdom", but it does not seem to me that this should be understood as intending that the contamination requires to be solely in the United Kingdom.
(3) The liability imposed by section 1(1)(a) is in compensation, as distinct from liability in damages at common law, and, as Landcatch has emphasised, it does not depend on proof of fault. At the same time it is not without its effect on the common law since section 3 entails that the only way in which a shipowner can be made liable is under section 1. Further, questions of fault are not entirely excluded from the statute since in terms of section 4(1) the ability of the ship owner to limit his liability depends on whether the discharge or escape occurred without his fault or privity.
(4) While section 1 states that the ship owner is to be liable for "damage" it does not state to whom he is to be liable nor for what damage or loss.
(5) The fact that specific provision is made for compensation covering the cost of measures and any damage caused by such measures, in terms of paras. (b) and (c) of section 1(1), implies that without such express provision these matters would not, or at least might not, have been covered. In particular the fact that specific provision was required in regard to measures taken for the purpose of reducing damage caused by contamination suggests that such expenditure would not otherwise have been covered by para.(a).
(6) The 1971 Act specifically provides that certain statutory rules are to apply in connection with claims made under it. I have already referred to the terms of section 13(1). The Act is to be cited together, and construed as one, with the Merchant Shipping Acts 1894 to 1970 (section 21(1) and (2)). Section 1(5) provides that the statutory rules in regard to contributory negligence are to apply in relation to any damage or cost for which a person is liable under this section, but which is not due to his fault, as if it were due to his fault.
Against this background what is in issue is the scope of the expression "damage", including "loss", in section 1(1). It is not in dispute that the ship owners and the Fund were liable to compensate Landcatch in respect of its fish within the exclusion zone. The question is whether they are also liable to compensate them for the loss which is the subject of the present action.
I am in no doubt that if Landcatch had been able to sue, and had sued, the ship owners for damages at common law in regard to those losses, its claim would have failed, on the application on the well-recognised "pragmatic rule" against secondary or relational claims. Landcatch's case in such an action could not be more than that owing to market conditions it did not obtain the return on their investment in smolts which it had expected, and it incurred certain additional expenditure. Its business did not form part of the business of Shetland fish farmers, and the smolts were not even the subject of an existing contract at the time.
What then is the correct approach to the 1971 Act which provides for strict liability in compensation, supplanting the right to damages and superseding the need to prove fault? There is some attraction in the point made by Landcatch that claims of compensation in respect of economic "loss" under section 1 of the 1971 Act are distinguishable from claims of damages for economic loss at common law, in respect that the Act enables the ship owner to limit his liability. However, I do not find this argument convincing. Firstly, if Landcatch's "but for" construction of causation is correct it opens up a limitless chain of claims as the implications of ever more remote effects are worked out, wherever, whenever and in whatever circumstances, they come to pass. I find this hard to accept when where the section merely imposes liability for the adverse effects of the physical event of contamination. The fact that the section is silent on this point does not seem to me to support Landcatch's position, but rather indicates that the normal rule against secondary or relational claims would apply. Even if Landcatch's argument is modified to the extent of limiting the scope of claims to those who have some form of connection with the economic activity of the place where the contamination occurred, I do not find this provides a satisfactory solution to the difficulty. As framed, and as applied to Landcatch, it is an extremely vague qualification and appears to lack any foundation in principle. Secondly, while it is true that the ship owner can limit the amount for which he is liable, the impact of secondary or relational claims cannot simply be ignored. As the Fund submitted, the effect of introducing them could well be to attenuate the amounts received by those who were directly affected by the contamination. This plainly runs counter to the underlying intention of both Acts, consistent with the terms of the Conventions. The fact that contamination may on any view lead to multiple claims does not assist Landcatch's argument but tends, in my view, to undermine it. In any event the ship owner cannot rely on being able to limit his liability in all circumstances but only where the discharge or escape occurred "without his actual fault or privity". Thirdly, I consider that the fact that the Act refers to damage and loss in conjunction with causation without any further explanation points to an intention that these terms should be understood as coming fully armed, as it were, with concepts with which lawyers in this country are well familiar. Fourthly, I have no difficulty in accepting that the mere fact that the expression "loss" is apt to include claims of pure economic loss in the context of this legislation does not entail that every claim for pure economic loss is admissible. That is clearly so where, as in this case, the claim is of a secondary or relational type. I have more difficulty in applying the other restriction which was maintained by the Fund, namely by reference to the location of the person suffering the loss. It is difficult, in my view, to justify a distinction between claims made by sea fishermen according to the geographical location of their home ports. It may be said that in each case the economic loss occurred where, but for the effect of the contamination, the fisherman would have obtained a benefit. However, that point is not material for present purposes. Likewise, I have some difficulty with the principle which counsel for the Fund was applying in conceding that certain claims by persons carrying on business in Shetland adjacent to the Exclusion Zone would be admissible. However, this does not affect the principal submissions which were made on behalf of the Fund and which I regard as determinative of Landcatch's reclaiming motion.
In these circumstances I consider that "loss", as included in "damage" for the purposes of section 1(1) of the 1971 Act, does not cover secondary or relational or secondary claims. I have arrived at that conclusion by applying considerations similar, though not identical, to those which have led to the development of a rule against such claims in actions at common law. I have derived less assistance from the decisions relating to compensation for the use of compulsory powers, since these seem to be influenced by the terms of the compensation statute and by considerations of public benefit which do not have true counterparts in the present case.
I should add that I have not found that reference to the travaux preparatoires to be of much assistance, since the passages to which reference was made appear to be concerned with distinguishing between different sets of initial events rather than displaying an intention to exclude consequential claims of a particular type.
In the light of the foregoing it is clear that no useful purpose would be served in admitting Landcatch's claim to probation, since it would be bound to fail.
It remains for me to deal with the cross-appeal. Counsel for the ship owners attacked Landcatch's attempt to recover "expenses in pursuing claim" for which compensation in the sum of £206,000 is sought. It was submitted that this aspect of Landcatch's claim was entirely lacking in specification. Furthermore it was irrelevant in respect that such a matter should be dealt with, if at all, as a matter of expenses rather than compensation. In accordance with normal practice this should not form part of the claim itself. The Lord Ordinary indicated that if this had been the only question he would have allowed proof before answer. He stated in his opinion that since Landcatch averred that its present claims were invited and considered by the fund, there could be outlays which were reasonably and necessarily incurred in the pursuit of those claims, for example in assembling and vouching the details of the claims and in having them valued, which could be recoverable as costs relevant to the statutory claims but which might not be recoverable as judicial expenses. He considered that this possibility would have been sufficient to require proof before answer on that head of claim. He observed that this would be in line with the approach of the court in The Nukila [1996] 1 Lloyds. L.R. 85, where the recoverability of certain costs was decided on after the court had considered the facts. Counsel submitted that there was no satisfactory basis for relating this claim to the dealings between Landcatch and the Fund.
In reply counsel for Landcatch submitted that there might not be a true difference of principle between the parties in regard to this claim. In regard to the question of specification it was a matter of degree.
I am not persuaded that Landcatch has provided any satisfactory basis for making such a head of claim. It may be noted that it is common to both actions. In so far as any expenses were incurred as a consequence of the need to prepare a claim for submission to the Fund, this can be of no concern to the ship owners. Since the involvement of the Fund in the present type of case arises merely from the need to ensure that Landcatch receives the full amount of its claim against the ship owners, I fail to see how the expenses incurred in preparing a claim for the Fund come within consideration. In these circumstances I differ from the view expressed by the Lord Ordinary. Accordingly, even if Landcatch's action in each case had been sufficiently relevant to warrant enquiry, I would have been in favour of excluding this claim.
In these circumstances I consider that Landcatch's reclaiming motion should be refused and that the Lord Ordinary's interlocutor should be affirmed.
SECOND DIVISION, INNER HOUSE, COURT OF SESSION
|
Lord Justice Clerk Lord McCluskey Lord Cowie |
CA155/9/95
OPINION OF LORD McCLUSKEY
in
RECLAIMING MOTION
in the cause
LANDCATCH LIMITED Pursuers and Reclaimers;
against
THE INTERNATIONAL OIL POLLUTION COMPENSATION FUND Defenders and Respondents:
_______
|
Act: McNeill, Q.C., Weir; Maclay Murray & Spens
Alt: Dean of Faculty, Tyre, Q.C.; Morton Fraser & Milligan, W.S.
19 May 1999
On 5 January 1993 the MT Braer, carrying a cargo of oil, was grounded at Garths Ness near Sumburgh head, Shetland Isles. In consequence, over 80,000 tons of persistent oil escaped from the ship and widespread contamination resulted. On 8 January, the Secretary of State for Scotland, in the exercise of his statutory powers, designated an Exclusion Zone, which was later extended and, much later, relaxed. Within the Exclusion Zone, extending at one time to some 400 square miles, prohibitions were imposed upon various activities, including taking fish for food, landing fish or supplying fish from the designated area. High concentrations of pollutant hydrocarbons reached inshore waters off the Shetland Isles. The contamination and the prohibitions caused significant problems for many, including those involved with the salmon fishing industry in Shetland. The pursuers and reclaimers (referred to as Landcatch) claim that their business suffered as a result. This reclaiming motion relates to two actions in which Landcatch claim the right to recover compensation in respect of specified heads of loss. It is unnecessary for me to repeat the full details of the circumstances said to give rise to this claim, as both the Lord Ordinary and your Lordship in the chair have dealt with them fully, and I can confine myself to summarising the bare essentials.
We are to take the averments for Landcatch pro veritate; but there is little significant disagreement between the parties on the facts underlying Landcatch's claim. What Landcatch claim is that their business, which involved growing and trading in smolt was adversely affected by the consequences of the oil spillage. At the material time they were in the business of rearing salmon from eggs to smolt. They carried on this business at various places in the West of Scotland where supplies of fresh water, an essential resource for the purpose, were available. No sufficient supplies of fresh water were available in Shetland. The rearing process necessarily took some two years to complete; and there had to be planning for an even longer period in order to have a product - smolt - to sell when the salmon growers were ready to buy with a view to growing the smolt into adult salmon in sea fish farms, for sale as food. A substantial part of Landcatch's trade was traditionally with Shetland salmon farmers. In the years preceding the Braer oil disaster they looked forward to selling smolt in future years. They anticipated the demand by preparing for and starting up the rearing process several years in advance of the dates when they expected to conclude the contracts of sale which would result in the delivery to the purchasing salmon farmers of the smolt, ready for on-growing in fish farms in Shetland waters. The disaster and the consequent imposition of the Exclusion Zone restrictions had the result that the expected demand for smolt for Shetland did not materialise in the early months of 1993. The Shetland salmon farmers could not grow salmon in sea fish farms; so they did not need, and did not want to buy, smolt. In short, the oil spillage caused the bottom to fall out of the Shetland market for smolt. Landcatch could not wind back the clock and undo what they had done. Having thus failed to find in 1993 the Shetland customers that they were expecting, on the basis of past experience, to find they suffered economic loss, the details of which they set forth in the pleadings.
It appears to me that this brief narrative is sufficient for the purpose of identifying the legal character of the claim by Landcatch. It is not a claim for loss or damage caused directly and immediately by the contamination which resulted from the escape of oil. It is, in essence, a claim for loss of the profits which Landcatch expected to make - and were fully entitled to expect to make - but did not make from selling smolt to Shetland fish farmers in and after 1993. The principal claim is directed against the owners of the Braer. The other parties who are in the process, the Fund and the insurers, are there for reasons which your Lordship in the chair has set out in his Opinion. The principal claim is directed against the owners of the ship because section 1(1) of the Merchant Shipping (Oil Pollution) Act 1971 makes the owner of the ship liable when persistent oil carried by his ship escapes, causing contamination and damage. As the escape, the contamination, and the affected business of the pursuers and reclaimers were all located in the area of the United Kingdom, the claim is properly pursued in this forum. In terms of section 20(1) of the 1971 Act, "'damage' includes loss". In the related action, against the Fund, it is certain provisions of the Merchant Shipping Act 1974 which are said to give Landcatch a right to maintain a claim against the Fund; but there is no material difference that I can detect between the wording of the 1971 and 1974 Acts that has any bearing on the issues raised in this reclaiming motion. The parties did not submit otherwise.
The principal issue is a narrow one. The liability in respect of which Landcatch claim derives from section 1(1)(a) of the 1971 Act. In terms thereof the owner of the ship "...shall be liable, except as otherwise provided by this Act, - (a) for any damage caused in the area of the United Kingdom by contamination resulting from the discharge or escape..." [of persistent oil]. It is not suggested that any other provision of the Act affords the owners any exception from the strict liability created by section 1(1). It is clear that this statutory liability was created to replace any liability that, before the Act came into force, might have been constituted against the owner of a oil-pollution-causing ship under the common law of quasi-delict, nuisance or otherwise: cf. Section 3 of the 1971 Act. Landcatch submit that on a proper construction of section 1(1)(a) the Lord Ordinary should have held that this language "placed no limit by which liability for pure economic loss could be circumscribed by ordinary common law principles of remoteness, and that accordingly the test for recovery of compensation was causation alone." - these being words taken from Ground of Appeal (i) in the action against the Braer Corporation. What was meant by "causation alone" was that the Court had to apply a "but for" test, that is to say that the owner must be held liable for all loss which any claimant could show he had sustained in consequence of the contamination, being loss which he would not have sustained but for the contamination. The owners and the Fund maintain that, under the Acts, liability is not unlimited in extent, that it does not extend to economic loss of which it is said only that it would not have occurred but for the escape of oil, and that, on the contrary, the scope of liability is restricted by familiar principles of proximity and remoteness of universal application.
There are issues which are subsidiary to the main point concerning the proper construction of the words contained in the two Acts. Thus there are questions as to the need and desirability of taking account, as aids to the construction of the statutory provisions, of the two Conventions from which the 1971 and 1974 Acts derive; and, in the same context, of the appropriateness of examining and giving any importance to the travaux preparatoires leading to the adopting of those Conventions. It is also submitted that the Lord Ordinary erred by failing to uphold the submission of Landcatch "that the principles adopted by the Fund's Seventh Intersessional Working Group, and arrived at as a result of the Fund's experience in dealing with claims for compensation since the Fund's inception, represented a proper and reliable guide to the intended ambit of recovery under the 1971 Act and Civil Liability Convention"; cf. Ground of Appeal (iii) in the action against the Braer Corporation; and that he should have had regard to the approach of the Fund in deciding cases arising out of other oil pollution incidents: these cases were referred to, somewhat imaginatively, as the "jurisprudence" of the Fund. For my part, I am entirely content with the way in which the Lord Ordinary and your Lordship in the chair have dealt with these matters. I would wish to add only this. It was not in dispute that the modern approach to statutory construction, where the provisions being scrutinised derive from Treaty obligations undertaken by Her Majesty's Government, is to presume that Parliament did not intend to legislate in breach of such Treaty obligations; and accordingly, if possible, the United Kingdom statute should be construed in a manner that is consistent with the Treaty. So it is not inappropriate to look at the terms of any relevant Treaty or Convention, and indeed it may be necessary, to check that its terms do not point to any problem that is not immediately patent in the wording of the United Kingdom statute.
As no party sought to argue that there was a conflict between the terms of the relevant Articles in the respective Conventions and the statutory provisions deriving from them (and I agree that there is none), and as all parties argued that there was no real need to go beyond the wording of the statutes because the statutes were clear in their terms, I am unable to derive any material assistance from examining the Conventions themselves. As Counsel for Landcatch put it, neither the Conventions nor the Statutes expressly draw any clear line between admissible and non-admissible claims. We were, however, referred to the Official Records, in English and in French, of the International Legal Conference on Marine Pollution Damage, 1969, which may shed some light upon the reason why the definition of "Pollution damage" was altered so as to include a reference to contamination. The related note says, "This amendment is designed to ensure that damage covered by the convention is confined to damage by contamination whether to persons or property and does not extend to damage consequential on an escape of oil such as fire or explosion." The Minute of the 15th meeting at which this amendment was adopted narrates the submission of the United Kingdom representative to the effect that, "...the IMCO text of pollution damage could be argued to cover consequential damage such as fire and explosion. The draft Convention was about pollution damage and the United Kingdom amendment limited damage to damage by contamination". I agree with the Lord Ordinary that this, if it were appropriate to look at it, would point to the importance of the directness of the link between the cause, contamination, and the damage. The intention there evidenced to exclude consequential damage does not sit very well with an overall intention to apply the "but for" test for determining the types of claim that may be brought. As for the appropriateness of taking account of the reported determinations by the fund in respect of claims made by other claimants in respect of alleged loss or damage suffered in consequence of oil pollution from a ship, I do not see how such decisions can assist this court to construe a United Kingdom statute. We do not know exactly how any particular decision was arrived at and the decisions can hardly be said to have established a corpus of law, still less to have established an interpretation of the relevant law to the effect that the "'but for" principle is to be applied.
The argument for Landcatch rests entirely upon the words of the relevant sections. It is, however, sought to be buttressed by reference to the "concession" intimated to the Lord Ordinary and noted by him in these terms, "Counsel for the owners, the insurers and the Fund conceded that under both the 1971 and 1974 Acts a claim lies in respect of pure economic loss; but they argued that the admission of such a claim does not mean that all claims for pure economic loss are relevant. On the contrary, they argued that this legislation is governed by the well established principle of the common law by which a pragmatic limit is placed upon the ambit of liability and that on any view these claims lie outwith that limit." I do not understand this to signify that the respondents have conceded anything more than that if pure economic loss can be shown to have been caused directly by contamination then it may be recoverable under the legislation. At first sight, this acknowledgement might be thought to be inconsistent with their submission that contamination has to be given its ordinary dictionary meaning; and that therefore the Acts are principally envisaging damage caused directly by contact between oil and the thing damaged. But the respondents do not insist that damage is restricted to harm resulting from direct contact, from physical contact with oil. They accept, and I do not see how it could be argued otherwise, that, as damage includes "loss", a victim of the contamination may suffer pure economic loss, which by its very nature is intangible. The most obvious case is the fisherman whose livelihood is earned fishing in particular waters, in respect of which he may indeed have a licence to fish or some form of permission or quota allowance; he then loses that livelihood because those waters are polluted by oil escaping from a ship and he can no longer take fish there. He does not own the waters; he does not own the fish in the sea; his vessel may be based and berthed far distant from the scene of the oil spill, and his business may be registered elsewhere (although as your Lordship in the chair has noted, counsel for the Fund made no concession in relation to fishermen who were not locally based; but this point is not material here). For the fisherman I am considering, the pollution of the waters in which he regularly fishes does no physical harm to his person or his property; the oil does not touch him or anything belonging to him; there is no contamination of him or of his vessel or equipment. Nevertheless, it appears to me that the loss of his livelihood is properly described as damage that is caused directly and immediately by contamination resulting from the discharge or escape of oil from the ship. The contamination does not set in train a chain of events that eventually results in his suffering loss or damage. On the contrary, the contamination is both the immediate, direct and, in such a case, the only cause of his loss. The contamination occurs at the very point at which he carries on his economic activity, fishing. But, because he does not own the waters in which he fishes or the fish which swim there, that loss is properly described as pure economic loss; because what he loses is not the fish or the waters but the intangible prospect of making a net profit by selling any fish that he might otherwise have caught in the waters had they not been contaminated. That loss of prospective profit is pure economic loss. In a figurative sense what he has in the waters is a direct economic interest. That interest is directly affected by the contamination. By contrast, the trader who regularly supplies him with the diesel and the nets without which he cannot catch any fish has himself no direct interest in the waters in which the fisherman fishes. That trader's economic interest - in making a profit out of the sale of diesel and nets - has its location, at least figuratively speaking
Mr. McNeill, for Landcatch, submitted that, as soon as it was conceded - as it was, and had to be, here - that pure economic loss was recoverable under the Acts, we were worlds away from common law rules about remoteness; and there was no reason whatsoever to introduce the notion that a line fell to be drawn on the basis of geography or location or indirectness. There was no warrant in the legislation for drawing any such line; there was no logic or rationality in drawing a line based on such considerations. The law should be based upon rational considerations, not least because the drawing of a definite and readily ascertainable line would help legal practitioners to advise their clients as to their rights with reasonable certainty: cf Lord Fraser of Tullybelton in Candlewood Corporation v Mitsui Ltd [1986] AC 1, at p. 25. Locality had no significance in the statutory scheme except that the locality of the occurrence of the loss determined which of the Convention countries had jurisdiction and which had no jurisdiction in respect of any particular pollution incident. The words "outside the ship" placed no restriction on the possible claims. There was no warrant for inserting "directly" in section 1(1)(a) to qualify "caused". In its absence, there was no reason not to give "caused" its ordinary meaning. The fact that economic loss was recoverable as "damage" under the statute meant that "damage" was not confined to the physical effects of the oil pollution; and in the absence of the word "directly" it was enough that the loss was a consequence of the contamination, as a loss that would not have occurred if there had been no contamination. Mr. McNeill took no issue with the submission for the respondents that a statute implementing a treaty obligation fell to be construed against the background of the existing municipal law. However, the statute under consideration swept aside the pre-existing law of negligence and nuisance and removed such routes to a remedy, replacing them with strict liability. Thus a person who could show that his loss was caused in the United Kingdom by contamination resulting from an escape from a ship did not have to do more to show that he had a title to sue: but his loss, if resulting from the contamination, even indirectly, was his title. Equally, he did not have to show that the shipowner owed him any duty; familiar common law concepts bearing upon the vexed issue of whether or not the alleged wrongdoer owed any duty towards the person claiming to have suffered damage in consequence of the alleged wrongdoer's act or omission had no part to play in the situation envisaged by the statute. In particular, the concepts of "reliance", "assumption of responsibility" and even "reasonable foreseeability" had no obvious place in consideration of the narrow point raised by the wording of the statute applicable here. Similarly, although the 1971 and 1974 Acts had to be read along with other statutes referred to therein, including the Law Reform (Contributory Negligence) Act 1945, there was no need to suppose that the legislature had intended that all the law which formed the background to such legislation was to be brought into the 1971 and 1974 Acts. The statutes referred to had limited purposes and did not affect the meaning of "caused" in these Acts. For example, the 1945 Act was concerned with apportionment of damages, not with their ascertainment or quantification. In the present statutes we were not dealing with expressions and concepts which had become terms of art of the kind under consideration by Lord Diplock in The Eschersheim 1 W.L.R. 430 at p. 438. It could not be disputed that there was a considerable tract of authority against recognising indeterminate liability both in negligence cases and in other types of situation. But,
Counsel for the Respondents were agreed in submitting that the issue was the construction of the statutory provisions applicable. But it was important to note that the nature of the disputed claim by Landcatch was perfectly clear. The loss that they were claiming to have suffered was the loss of an anticipated market. They carried on no economic activity in the seas affected by the oil spill. That loss did not stem from the loss of contracts which the pollution rendered impossible of fulfilment but from the loss of the future prospect of entering into contracts at a time which had not arrived when the Braer disaster happened. They were not, except in a potentially misleading metaphorical sense, bound up or integrated with the economic activity carried on in the Shetland areas contaminated. At the material time, Landcatch's potential customers in Shetland remained free to buy elsewhere; and they remained free to sell elsewhere. They fell to be treated as persons who at best could claim to have suffered in their economic prospects as a remote and indirect consequence of an event which affected others. If such a claim were to be allowed there could be no end to the claims that might be advanced, to the detriment of the limited compensation funds available for the purpose of compensating those who suffered directly and immediately from the contamination. Given the weight of authority against opening the floodgates by allowing unlimited and indeterminate claims, the burden was on Landcatch to show what it was in the two Acts that opened up the way to maintaining this type of claim. The proposition advanced by Landcatch would lead to such an unusual result that one would expect that the statute would express that result in absolutely clear terms. No such terms were used. Instead the legislature had chosen to use familiar words and expressions and to fit the new provisions into the existing municipal law, most strikingly by requiring them to work alongside the Law Reform (Contributory Negligence ) Act of 1945 and the Merchant Shipping Acts. Such indications as there were in the language and form of the legislation pointed against the indeterminate liability for which Landcatch had to contend. The use of the word "contamination" pointed to a localisation of the "damage": the dictionary definitions of contamination supported that reading of the section. The claims were also localised, as damage had to be suffered in the United Kingdom for the courts here to have jurisdiction. Nothing could properly be made of the so-called concession; it was merely a part of the respondents' submission; and the court itself had to decide upon the relationship between damage in the section and pure economic loss; the critical question was not the nature of the damage in itself, whether physical or pecuniary, but whether the law excluded the recovery of loss at all; this was clear from the speech of Lord Oliver of Aylmerton in Murphy v Brentwood D.C. [1991] AC 398 at 485. This claim was secondary, derivative and relational; much economic loss might possess the same character but not all would. The fallacy of Landcatch was to treat pure economic loss as a definite category, which, for this purpose anyway, it was not. Even economic loss could be "localised"; as in the case of a fisherman from the locality who had a licence to fish in Shetland waters but whose port and landing site were not within the area suffering contamination; his loss would be pure economic loss but might be said to be localised by the whole circumstances. Relational economic loss is excluded in this type of case for reasons stated by Lord Penzance in Simpson & Co v Thomson & Co 1877, 5 R (HL) 40 at 46. It is universally rejected on grounds of policy. The "grand rule" stated by Lord Kinloch in Allan v Barclay 1864, 2 M 873 was qualified by the words "B
The submissions of the parties were much fuller than I have indicated in the summary that I have attempted. The Lord Ordinary and your Lordship in the chair have dealt with them in a way that I need not attempt to emulate. I have come to the view that the key issue is a simple one. Leaving aside peripheral matters such as the relationship between the Conventions and the legislation, and the decisions of the Fund in respect of the applications to which our attention was drawn, the issue is whether or not the words used in the sections governing damage are apt to extend the liability of the responsible shipowner much wider, so as to make him potentially liable to compensate an indeterminate number of claimants who would not, under the common law, have had a claim, because their claims would have been regarded as too remote. I cannot see that the legislature would have left such a result to inference. To have created a liability towards the world on a 'but for' basis would have been to effect a dramatic change in the existing law throughout the United Kingdom - as it would in many other countries which signed the Conventions and agreed to be bound by the new regime and to introduce the necessary provisions into their municipal law. I should have expected the legislature to use language that would make it abundantly clear that the old and widely accepted principles governing and limiting the liability of wrongdoers for damages in reparation for delict, quasi-delict, nuisance or breach of statutory duty were to be departed from in this special case of contamination by oil spilled from a vessel at sea. I cannot accept that it could have been intended by the legislature to require the legal advisers of those concerned with the consequences of an oil pollution incident to search the new provisions and the words of the new sections for clues as to what the owner might be liable for and to whom: a distinct change in the law would have been made unambiguous and explicit.
The words in a statute are not freshly minted in a new currency whose value is unknown. Over time words may come encrusted with forensic history so that their full meaning when they are used in a statute is to be found only in the decided cases in which they have previously acquired their essence and their patina. They may have been used so often with different meanings that they have ended up with no fixed meaning and require re-definition every time parliament has to use them: the word "child" is such a word - cf, for example, section 307(1) of the Criminal Procedure (Scotland) Act 1995, "'child', except in section 46(3) of and Schedule 1 to this Act, has the meaning assigned to that expression for the purposes of Chapters 2 and 3 of Part II of the Children (Scotland) Act 1995". So, as has been well said before, a word does not come like a crystal, clear, transparent and unchanging. But some words, including "damage", "caused by", "liable" and "fault" which appear in these Acts, have been used so often both in statute and in common law litigation that they carry with them an aura, a lawyers' baggage: all reparation lawyers are on familiar terms with them; they recognise them when they see them; they need no introduction. If the legislature decides to rob them of their familiar meaning and to give them new, changed significance, it is entitled to do so; because parliament is in that respect sovereign. But it would not and could not do so by stealth. It would hardly do so by deliberately creating a semantic mystery, with clues buried in various parts of the statute so that those who required to understand the legislation would have to search the texts as etymologists to uncover the new significance of the old familiar words and concepts.
If we have to search for clues, then, to my mind, one of the most significant provisions bearing upon this matter is that contained in section 1(5) of the 1971 Act: "The Law Reform (Contributory Negligence) Act 1945...shall apply in relation to any damage or cost for which a person is liable under this section, but which is not due to his fault, as if it were due to his fault". This is a striking use of the word "damage" in a very familiar, everyday setting. Applying the provisions of the 1945 Act, the "damage" suffered by the person claiming and "the damages recoverable" would normally be identified and measured by ordinary common law rules including principles of remoteness. If section 1 of the 1971 Act had been intended to give a wholly different significance to the words "damage caused" then I should have expected that to be reflected here. It is not.
The whole corpus of cases cited to us from different fields in which the common law or the legislature have conferred rights to compensation, reparation or damages for loss demonstrates, in my view, that the test of remoteness is too well established to be excluded except by express and unambiguous enactment. That test would exclude a claim such as is now advanced by Landcatch on the ground that it was indirect, relational pure economic loss which is too remote from the causal factor which makes the causer liable. I do not consider that Landcatch have succeeded in showing that the words used in the statutes creating liability for this particular compensation have displaced these familiar principles.
It would not be difficult to employ words to make it clear that under section 1 the damage giving rise to a statutory claim would be any loss or damage resulting directly or indirectly from the contamination, notwithstanding any rule of law restricting claims on the ground of remoteness. No such provision appears. I can find nothing in the words used to signify any intention on the part of the legislature to sweep aside the widely applicable principles applicable to the ascertainment of the types of loss and damage in respect of which the courts will recognise claims. That is, in my opinion, fatal to Landcatch's principal contention.
I now turn to consider the final ground of appeal, to the effect that, even if Landcatch fail on the principal argument, their averments support a sufficiently close relationship between Landcatch and the Shetland fish farming industry to entitle them to a Proof before Answer to establish the proximity necessary to Landcatch to show that their loss as condescended upon is recoverable.
In relation to that submission, I agree with the submission for the respondents, that Landcatch have averred the primary facts of their true position with such clarity, and indeed frankness, that their claim for pure economic loss is seen to be unquestionably relational, indirect and remote. None of the many authorities referred to supported the conclusion that mere closeness of the kind averred could give Landcatch a right to recover their relational loss. It may be somewhat harsh to characterise the averments founded upon for this purpose as "empty phrases"; but they are essentially metaphorical: Landcatch were not literally "bound up" or "integrated with" the Shetland fish farming industry. Literally, they were at the material time just persons who were hoping and expecting to enter in the future into profitable commercial relations with some Shetland fish farmers.
In relation to the cross-appeal, I also agree with your Lordship in the chair.
SECOND DIVISION, INNER HOUSE, COURT OF SESSION
|
Lord Justice Clerk Lord McCluskey Lord Cowie |
CA155/9/95
OPINION OF LORD COWIE
in
RECLAIMING MOTION
in the cause
LANDCATCH LIMITED Pursuer and Reclaimer;
against
THE INTERNATIONAL OIL POLLUTION COMPENSATION FUND Defenders and Respondents:
_______
|
Act: McNeill, Q.C., Weir; Maclay Murray & Spens
Alt: Dean of Faculty, Tyre, Q.C.; Morton Fraser & Milligan, W.S.
19 May 1999
I have had the advantage of reading the Opinion of your Lordship in the chair in relation to this reclaiming motion and I wholly concur in the manner in which your Lordship proposes to dispose of it and the cross appeal; I also concur in the reasons for doing so.
At the risk of over-simplifying this complex action I would only say that, in my opinion, the averments of the pursuers and reclaimers amount to no more than a claim for relational economic loss. Such a claim has for many years and in several branches of the law been rejected by the courts.
Accordingly, it seems to me that the real issue in the present case is whether, notwithstanding the reluctance of the courts to entertain such a claim, the provisions of the Merchant Shipping (Oil Pollution) Act 1971 and the Merchant Shipping Act 1974 are wide enough to permit it.
For the reasons which have been stated by your Lordship in the chair, and, in particular, in the absence of clear indications to the contrary, I am satisfied that the Acts do not have that effect.
Accordingly, I would affirm the interlocutor of the Lord Ordinary and dismiss this reclaiming motion. In these circumstances, the cross appeal does not arise, but if it had, I would have allowed it.