Ian Teare Matthew Dow June 24 2020 Limitation of liability – determining the meaning of 'operator' and 'manager' Wikborg Rein | Shipping & Transport - United Kingdom Ian Teare, Matthew Dow Shipping & Transport IntroductionRoles of Stema A/S and Stema UKInterpreting Article 1(2) – meaning of 'operator' and 'manager'Applying judge's principles to factsCommentIntroductionOn 22 May 2020 the Admiralty Court handed down a judgment in The Stema Barge II ( EWHC 1294), which looked in detail at the scope and meaning of the Convention on Limitation of Liability for Maritime Claims 1976 (Limitation Convention) – in particular, the meaning of the phrase "the operator of the ship" in Article 1(2). In determining the meaning of 'operator', it was also necessary for the court to examine the meaning of 'manager'. This is the first time that the English courts have been called on to consider this issue.In December 2015 severe weather caused damage to the railway line which runs along the English coast between Dover and Folkestone. Subsequently, the appointed repairers contracted with Stema Shipping (UK) Limited (Stema UK) for the provision of rock to be used in the repairs. Stema UK purchased the rock from its associated company, Stema A/S. The rock was shipped from Norway in the barge Stema Barge II, which was anchored in an agreed location before it dragged anchor in gale force winds in November 2016, allegedly damaging a subsea electricity cable owned by Reseau de Transport D'Electricite (RTE).A limitation action arose from the above events. RTE accepted that the registered owner of the barge, Splitt Chartering APS, and the charterer, Stema A/S, were entitled to limit their liability but denied that the third defendant company, Stema UK, was similarly entitled.Roles of Stema A/S and Stema UKThere was a written agreement between Splitt and Stema A/S for the carriage of the rock on Stema Barge II from Norway to the United Kingdom for this project. Although the contract was not in the form of what might be regarded as a conventional charterparty, it was unchallenged that Stema A/S was the charterer. However, an employee of Stema A/S provided evidence that he had been an operator with "daily responsibility for the operation of barges owned by Splitt". This individual had also followed procedures in a barge operator manual which included the fixing of tugs, insurance, surveys at the load and discharge ports and weather routing.Although Stema UK was the party that contracted with the main railway repairer ashore for the provision of the rock, it also had some involvement with the barge. Stema UK provided a method statement to the rail repairer, which included matters such as the anchorage and trans-shipment location. It also provided a safety statement and other documents, including a man overboard procedure.When the barge arrived off the English coast in November 2016, Stema UK placed a barge master and a crew member on board, who were operating under a shore-based superintendent who was also an employee of Stema UK. Between them, these personnel were responsible for dropping the barge's anchor and following a checklist, which included checking:the illumination of navigation lights;the preparedness of the emergency towing wire;ballasting arrangements;the operation of the generators; andthe barge's position.On the night of the incident, although the decision to leave the barge at anchor to ride out the storm was ultimately made by the owners (Splitt), it was based on the conclusion of an on-site meeting, which included representatives from both Stema A/S and Stema UK.On the facts, therefore, it can readily be seen that both Stema A/S and Stema UK had some role in the physical activities on and in relation to the barge. Stema UK argued that the number of activities for which it was responsible was sufficient to amount to management and control and thus it could properly be described as the operator. By contrast, RTE argued that:Stema A/S was both the charterer and the operator; andStema UK was, in reality, simply the purchaser of the rocks and that its onboard activities were insufficient to make it the operator.Interpreting Article 1(2) – meaning of 'operator' and 'manager'The parties directed the court to a wide range of sources from which it was said that guidance could be taken in undertaking this exercise in interpretation. These sources included:the travaux preparatoire of the Limitation Convention;the Australian Federal Court decision in ASP Ship Management Pty Ltd v The Administrative Appeals Tribunal;the wordings of Baltic and International Maritime Council's Shipman contract;various practitioners' text books; andindustry dictionaries.Both sides in the case accepted that there might be some overlap between the meanings of operator and manager.The judge concluded that the ordinary meaning of 'manager' in the Limitation Convention is:the person entrusted by the Owner with sufficient of the tasks involved in ensuring that a vessel is safely operated, properly manned, properly maintained and profitably employed to justify describing that person as the manager of the ship. I put it that way because if a person is entrusted with just one limited task it may be inappropriate to describe that person as the manager of the ship. A person who is entrusted with just one limited task of management may be described as assisting in the management of the ship rather than being the manager of the ship.In relation to the meaning of 'operator' in the Limitation Convention, the judge first noted that the meaning of operator would include the manager and, in many cases involving conventional merchant vessels, there may be little scope for the definition to go further than that. However, this case did not involve conventional tonnage, but a dumb barge and so the judge went further. The judge concluded that:those who cause an unmanned ship to be physically operated have some management and control of the ship. If, with the permission of the Owner, they send their employees on board the ship with instructions to operate the ship's machinery in the ordinary course of the ship's business, they can, I think, be said to be the operator within the ordinary meaning of that phrase, though they may not be the manager of it.The judge also made the perhaps obvious observation that the fact that Article 1(2) expressly includes both the words operator and manager suggests the possibility that there might be parties who would qualify as an operator but not as a manager.In arriving at the above-quoted definition, the judge also noted that the ordinary meaning of the word 'operator' should be understood in the light of the object and purpose of the Limitation Convention. In this respect, the judge noted that if a dumb barge is used in an operation such as this, it would have to be anchored on arrival and, ordinarily, the owner would be responsible for making that happen. The judge further noted that it would not encourage international trade by sea if an owner could limit its liability for losses which arose through the negligent performance of that task but a third party engaged for the same tasks could not.Applying judge's principles to factsIt was clear that Stema UK could not be considered to have been the operator at any stage prior to the barge's arrival off the English coast. Further, it was clear that Stema A/S retained some operational role after the barge was anchored. However, the judge recorded that once the barge arrived on site, Stema UK had had "a real involvement" with the barge, including anchoring and ballasting. The only personnel who went on board while the vessel was anchored were Stema UK employees. Of equal, perhaps even greater, significance was that, while the owner (Splitt) made the ultimate decision to leave the barge anchored on the night of the casualty, the decision was made based on advice from Stema UK personnel on site.Taking all of the evidence as a whole and in the round, the judge found that the nature of Stema UK's operation of the barge during the relevant period was such as to make it appropriate to describe them as the operator and thus entitled to limit their liability.In reaching the above conclusion, the judge rejected RTE's argument that the use of the word 'the' ahead of 'operator' in the Limitation Convention suggested that there could be only one operator. However, the judge also noted that the facts would have to demonstrate that, as in this case, the division of operational tasks was sufficient to make it appropriate to describe both parties as operators.CommentWhile the judgment provides a comprehensive and, arguably, common sense analysis of the Limitation Convention, it raises the obvious question of how many tasks (and perhaps of what nature) it takes to be considered an operator. In this case, that appears to have been a relatively easy decision but it could be more challenging in cases with different fact patterns.In the context of the fact pattern in this case, it is worth noting the extent to which the contemporaneous documents and witness statements were scrutinised by the judge in arriving at his conclusion. There was no single piece of evidence which alone pointed definitively towards the conclusion, which is why the judge was at pains to say that he was "taking all of the evidence as a whole and in the round". This approach is worth keeping in mind at the evidence-gathering stage of any future casualty that has the potential to follow a similar path as this case.For further information on this topic please contact Ian Teare or Matthew Dow at Wikborg Rein's Singapore office by telephone (+65 6438 4498) or email ([email protected] or [email protected]). The Wikborg Rein website can be accessed at www.wr.no.