R J Tilbury & Sons (Devon) Ltd. (t/a East Devon Shellfish) v Alegrete Shipping Co Inc & Ors

Liability under the oil-pollution compensation scheme is not a general but-for guarantee for every economic consequence of contamination. The statutory causal link is a legal and contextual requirement. It must draw a pragmatic boundary between losses sufficiently proximate to contaminated waters and secondary or relational losses. Common-law principles concerning economic loss are relevant, but the whole law of negligence is not automatically imported. A business outside the contaminated area, with no proprietary or possessory interest in affected property, cannot recover lost processing profits merely because a fishing ban prevents suppliers performing contracts. A close physical relationship with contaminated waters may support recovery for pure economic loss, although that issue was assumed rather than decided.

The appellant operated a whelk-processing business in Devon. Following the grounding of the Sea Empress and the escape of crude oil, a fishing ban prevented Welsh fishermen from supplying whelks under existing contracts. The appellant claimed lost profits on processing and exporting the whelks.

David Steel J decided on a preliminary issue that the claim was not damage caused by contamination under section 153 of the Merchant Shipping Act 1995: [2002] EWHC 1095 (ADMLTY). The appeal concerned whether the loss was within the statutory concept of pollution damage and whether the Scottish decision in Landcatch could be distinguished.

The appeal was unanimously dismissed. Lord Justice Mance gave the leading judgment, with which Lord Justice Chadwick agreed; Lord Justice Kennedy agreed with both judgments.

1. Sections 153 and 175 of Schedule 4 to the Merchant Shipping Act 1995 implement international conventions. They should therefore receive a liberal and broad construction which conforms to the convention language where reasonably possible. Causation is not an autonomous but-for inquiry. The scope of liability, including the required causal link, is a matter of statutory construction informed by legal policy, fairness and the statutory purpose.
2. The common law’s restrictions on relational economic loss are relevant background, but the entire body of negligence law must not be imported automatically into the strict-liability scheme. The Fund’s finite resources also require a restrictive causal boundary so that losses more proximate to the contamination are distinguished from remote losses.
3. The reasoning in Landcatch Ltd v International Oil Pollution Compensation Fund [1999] 2 Ll.R. 316, together with the Outer House judgment reported at [1998] 2 Ll.R. 552, was applied. Loss caused through a statutory fishing ban, its effect on third parties’ operations, and those parties’ inability to perform trading contracts was too remote. Existing contracts with fishermen did not alter that conclusion.
4. The appellant had no proprietary or possessory interest in contaminated whelks and carried on no activity in or closely associated with the contaminated waters. Its lost processing, packing and export profits were secondary economic loss outside the statutory scope. The factual differences from Landcatch were insufficient.
5. It was assumed, without deciding the point, that fishermen with a close physical relationship to contaminated waters might recover pure economic loss under the statute. Previous Fund payments could not construe the statutory language, and the precise scope of the Fund’s obligations was best determined case by case.

1. Court of Appeal (Civil Division): dismissed the appeal against the preliminary-issue decision; [2003] EWCA Civ 65 .
2. Queen’s Bench Division, Admiralty Court: David Steel J decided that the claimed loss of profits was not damage caused by contamination under section 153 of the Merchant Shipping Act 1995; [2002] EWHC 1095 (ADMLTY).