The shipowner loses the right to limited liability if the damages are caused by “his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result”. This test requires
(a) personal act or omission of the shipowner, and
(b) culpability which is intentional or almost as bad as intentional.
The personal acts of the shipowner when the shipowner is a company are not always easy to identify and a case-by-case approach is adopted by the courts. The answer depends on the structure of each company and the way responsibilities are allocated within each company.
More recent case law recognises that certain actions by the company may be delegated to lower ranking officers who do not in general have decision- making authority in respect of the running of the company. This avoids the difficulty that arises if solely the hierarchical approach is used, namely that the delegation of duties to lower ranking officers would exclude the possibility of attributing the faults of these officers to the company itself and consequently ensure an unbreakable right to limit liability.
Acts of a member of the board of directors would normally implicate the acts of the company. There could however be circumstances under which such a person may not be representing the company. In the same line, even where there is one person who has the ultimate control of a company, this does not necessarily mean that only this person’s acts would count as acts of the company.
Fault may also be found in the way the constitution of the company attributes duties. However, such fault would arguably be relevant only where the company directors are in fact aware of the fault and they do not perform the necessary duties.
From a practical point of view, the above would mean that, provided that appropriate procedures are established by the company’s constitution, faults by officers operating or supervising the operation of the vessel would not normally be considered as faults of the company.
The entrusting of the running of the vessel by the registered owner to a management company does not exclude the possibility that there is fault or privity by the registered owners.
Where the time or voyage or slot charterer or the salvor tries to limit under a regime that gives them such right the same rules as in respect of the registered owner will also apply.
Prove of Conduct
Having discussed the conditions under which the personal act or omission of the shipowner is established we now need to discuss the type of conduct that needs to be proved in order to deprive the shipowner of its right to limit liability.
If intention can be shown, for example where the vessel is scuttled, the test will be satisfied. However, difficulties arise in the interpretation of the term “recklessly and with knowledge that such damage would probably result”.
The Court of Appeal in Goldman v Thai Airways International Ltd held that the phrase “recklessly and with knowledge that such damage would probably result” means a person’s act which indicates a decision to run the risk or a mental attitude of indifference to the risk’s existence. This creates the need to understand the risk involved in order to decide whether a particular act or omission is indeed reckless.
Moreover, it is also necessary to show that the wrongdoer had knowledge that damage would probably result. The term “with knowledge” was held to refer to the actual knowledge held by the wrongdoer in respect of the damage that would probably result and not to knowledge that the wrongdoer ought to have had. The word “probably” has been distinguished from the word “possibly” and was taken to mean “something likely to happen”.
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