Tilbury v. IOPCF CofA

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RJ Tilbury and Sons (Devon) Ltd, v. The International Oil Pollution Fund 1971 (the"Sea Empress")
Court of Appeal: Kennedy, Chadwick and Mance LJJ, 7th February 2003
David Westcott & David E. Grant (Clarke, Willmott & Clarke) for Tilbury
Julian Flaux QC & David Goldstone (Clifford Chance) for the Fund

The Court of Appeal upheld the decision at first instance that a fish processor was not entitled under Schedule 4 Section 153(1) of the Merchant Shipping Act 1995 to recover economic loss that he had sustained when his supplies of fish were interrupted by reason of a fishing ban imposed following the oil pollution caused when the ‘Sea Empress’ grounded off Milford Haven in January 1996. Such a loss was secondary, relational or indirect and was therefore irrecoverable at common law and also under the statute.

DMC Category Rating: Confirmed

This was an appeal against a decision of Steel J of May 2002 on a preliminary issue as to whether Tilbury’s loss of profits constituted "damage [defined to include "loss"] caused by contamination resulting from the discharge or escape" of oil from the "SEA EMPRESS" within s.153 of Schedule 4 to the Merchant Shipping act 1995.

The "SEA EMPRESS" grounded off Milford Haven in February 1996 and there was an escape of crude oil into the sea. The Government imposed a fishing ban off the Welsh coast including an area where whelks were caught which were supplied to Tilbury in Devon who in turn processed the whelks for Korean buyers. The ban brought an immediate end to the catching of whelks and thus destroyed Tilbury’s business with its Korean buyers.

Section 153 of the MSA 1995 sets out the extent of the liability of the shipowner, s.157 limits it (in the absence of actual fault and privity) and s.175 makes the Fund liable to compensate where the damage exceeds the shipowner’s liability under s.153 as limited by s. 157. These proceedings were brought against the Fund.

The leading judgment was given by Mance LJ. In it, he placed considerable reliance upon the Scottish case of Landcatch Ltd v International Oil Pollution Compensation Fund [1999] 2 LLR 316, in which not dissimilar claims had been advanced against the Fund arising out of the grounding of the "Braer" off the Shetland Isles in January 1993. In that case, the Inner House of the Court of Session had denied recovery from the Fund for economic loss suffered by certain salmon farmers in Argyll who raised smolt (young salmon) each year to on-sell them to fish farmers in the Shetlands for on-growing in salt waters to maturity. The fishing ban imposed by the authorities after the Braer accident brought this business to a halt for both 1993 and 1994. Whilst the Court of Session accepted that the statute imposed liability for pure economic loss, that did not cover secondary or relational claims such as those of the Argyll smolt farmers. In reaching its conclusion, the court applied considerations similar but not identical to those which had led to the development of a rule against such claims at common law.

In the Tilbury case, the Court of Appeal held that Tilbury’s loss was a form of secondary economic loss which fell outside the intended scope of the statute which was closely focussed on physical contamination and its consequences. Tilbury was not engaged in any local activity in the physical area of the contamination. Its interest was in landed whelks, not in the whelks in their natural habitat. The contamination prevented local fishermen, whose physical activities were closely affected by the contamination of the waters and of whelks, from supplying Tilbury with the landed whelks for which it had contracted. Tilbury’s resulting loss arose from its inability to carry out processing the whelks at points far away from the contaminated areas.

In reaching its conclusion, the Court accepted that it was legitimate to bear in mind the general policy of the common law to limit the recoverability of claims for pure economic loss, but the common law rules could not be absolutely decisive. Thus, although it was not necessary to decide it, Mance LJ was prepared to assume that there could be claims under the statute for loss suffered by the fishermen, which would not be recoverable at common law, even assuming negligence. In making that assumption, he emphasized the very close relationship between the contaminated waters and the fishermen’s activities and loss.

In a concurring judgment, Chadwick LJ placed importance upon the fact that the liability of the Fund was subject to financial limits in accordance with the Fund Convention of 1971. This led him to believe that the test of causation to be applied was restrictive, in the sense that it should operate so as to enable those whose loss was more proximate to recover in full by excluding from participation in the common fund those whose loss was less proximate.

The appeal was accordingly dismissed.


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