MIOM 1 Ltd & Anor v Sea Echo ENE (No 2)

In an Admiralty collision action, a Part 61 settlement offer is construed objectively in its commercial and procedural context. Earlier correspondence may supply omitted terms, so an offer can comply with CPR Part 61.4(12) despite not repeating every requirement.

A limitation point under Merchant Shipping Act 1995, section 190, must be raised promptly once the counterclaim is apparent. Delay until after trial may make the point too late and may amount to estoppel.

The court may extend time for a counterclaim where there is good reason and it is fair and just. The single-liability principle in The Khedive remains available as a defensive set-off notwithstanding the limitation provision.

The judgment concerned costs following an earlier collision trial in which liability had been apportioned equally. The Defendant had made a written offer to settle liability on a 50/50 basis. The issues were whether the offer complied with CPR Part 61, whether indemnity costs were available, and how costs incurred before the offer should be allocated.

The latter issue depended on whether the Defendant had an effective counterclaim despite not issuing proceedings within the two-year period under section 190 of the Merchant Shipping Act 1995. The Claimants raised the time-bar point only after the liability trial. The court also considered estoppel, an extension of time, and the Admiralty single-liability principle.

1. The Defendant’s 5 February 2010 offer complied with CPR Part 61.4(12). A reasonable solicitor would read it in context, including the earlier offers and correspondence, as incorporating the required terms concerning costs and the consequences after 21 days. Since the Defendant obtained the offered 50/50 apportionment, it was entitled to its costs from 26 February 2010 under CPR Part 61.4(10)–(11).

2. Indemnity costs were refused. CPR Part 61 contains no provision equivalent to CPR Part 36.14 for indemnity costs following a successful offer. That difference indicated that indemnity costs should not be awarded merely because a Part 61 offer succeeded.

3. The Claimants raised the section 190 time-bar point too late. The limitation bar applies when proceedings are commenced, including when a defendant counterclaims for judgment. It is not confined to the later reference for assessment of damages. The point should have been raised promptly after the Defendant’s Statement of Case disclosed the counterclaim, consistently with CPR Part 16 Practice Direction 13.1 and the practice of putting one’s case on the table.

4. The delay was contrary to principle and good practice. Exceptional circumstances might permit a limitation point to be taken after judgment, but none existed. The Defendant therefore had an effective counterclaim. The Claimants were also estopped from relying on the point: their failure to raise it by the case-management stage constituted a clear and unequivocal representation that it would not be relied upon.

5. Applying The Al Tabith, an extension under section 190(5) involves two stages: whether there is good reason, and whether an extension is fair and just. The small size of the counterclaim, its intended use by way of set-off, and the fact that it could be tried on the same evidence without increasing expense provided good reason. The interests of justice favoured an extension, which would have been granted to validate the counterclaim.

6. The principle in The Khedive establishes a single Admiralty liability for the balance between the parties’ respective moieties, rather than two independent cross-liabilities. Section 190 bars the bringing of proceedings; it does not prevent a shipowner defending a claim by relying on that principle to ensure that any judgment takes account of the other vessel’s damage. The Defendant could therefore rely on the principle defensively.

7. The costs incurred before 26 February 2010 were to be apportioned according to the equal liability finding: each party was to pay 50 per cent of the other’s costs. The Defendant was entitled to its costs incurred after that date.

First-instance costs judgment following the earlier liability judgment, [2010] EWHC 3180 (Admlty).