BMT Marine and Offshore Survey Ltd v Lloyd Werft Bremerhaven GmbH

Under German law, contractual construction proceeds in two stages. The court first determines whether the parties had a common subjective intention. If none is established, it construes the contract objectively by considering its language, purpose, negotiations and the parties’ commercial interests. Liability exemption clauses are construed narrowly.

Where co-insurance is agreed, the contractual effect depends on the proper construction of the contract. A co-insurance arrangement may exclude the contractor’s liability for negligence, subject to an express exception where insurance cover is withdrawn through management fault.

A contribution claim under the Civil Liability (Contribution) Act 1978 requires two persons to be liable in respect of the same damage. A contingent or extinguished liability does not satisfy that requirement.

The Part 20 claimant sought a contribution or indemnity from the Part 20 defendant after a fire damaged a vessel undergoing conversion at the defendant’s shipyard. The claimant faced the owners’ insurers’ substantive claim alleging negligent surveying.

The conversion contract was governed by German law and required insurance naming the owners and shipyard as co-assured. The issues concerned whether the contract excluded the shipyard’s liability for negligence, whether the owners retained a claim against it, whether contribution was available under the Civil Liability (Contribution) Act 1978, and the applicable German contractual and statutory duties of care.

1. Contractual construction. The court accepted the German-law two-stage approach. It first considered the evidence of common intention. The negotiating lawyers’ evidence established that the parties intended the shipyard to have no liability for negligence, except where Builders’ Risk insurance was withdrawn because of fault by the shipyard’s management. The word “remains” in the exception did not create a general residual liability.
2. The objective construction confirmed that conclusion. The wording, negotiation history and commercial context supported an exclusion of liability. It would produce an unlikely commercial result to impose negligence liability without the liability insurance which the shipyard had previously required and for which the owners would have paid through an increased contract price. The relevant German decisions on co-insurance did not assist because they concerned different contractual settings and the effect of insurance arrangements rather than construction of this ship-conversion contract.
3. Contribution. Issues (a) and (b) were answered yes and no respectively: the owners had contractually waived or surrendered claims against the shipyard, and the shipyard had no liability to the owners in respect of the fire. It followed that no contribution claim arose under the Civil Liability (Contribution) Act 1978.
4. On the alternative hypothesis that the claimant was correct on liability, sections 1(1) and 6(1) required both parties to be liable in respect of the same damage. The authorities established that the relevant question was whether the owners were entitled to recover compensation from the shipyard when contribution was claimed. Section 1(3) did not preserve a claim based only on liability which had existed when the damage occurred but had ceased before contribution was sought. Issue (c) was therefore answered no.
5. In the absence of express contractual provision, German law imposed a statutory and contractual duty to exercise the skill and care expected of an ordinary German or West European shipyard. The shipyard also had to comply with applicable technical fire-prevention standards and was responsible for employees’ and subcontractors’ acts or omissions in performing the contract.

First-instance decision on preliminary issues in Part 20 proceedings. No appellate history is stated in the judgment.