Theresa Libra, The Owners of the Ship v Ship MSC Pamela, The Owners of the Ship

An agreement settling collision liability and providing that each party shall pay an agreed proportion of the other’s claim may waive the statutory two-year limitation defence. The agreement must be construed objectively against its contractual terms and statutory background. A party cannot rely on the time bar where that reliance would be inconsistent with the agreed payment obligation and the agreed mechanism for assessing quantum.

Alternatively, time may be extended under section 190(5) of the Merchant Shipping Act 1995 where settlement of liability is followed by reasonable negotiations over quantum and costs. The court applies a two-stage inquiry: good reason, followed by the discretionary justice of extending time.

The owners of Theresa Libra and MSC Pamela settled collision liability in the proportions 25% and 75%, respectively. Their agreement required each party to pay the agreed proportion of the other’s claim and provided for unresolved quantum to be referred to the Admiralty Registrar.

The collision occurred on 6 March 2011. The claim by the owners of Theresa Libra was issued on 8 April 2013, after the two-year limitation period in section 190 of the Merchant Shipping Act 1995 had expired. The issues were whether the settlement agreement excluded reliance on the time bar, whether time should alternatively be extended, and whether the demise charterers of MSC Pamela should be added as defendants.

1. Construction of the settlement agreement. The agreement settled liability, the incidence of costs, and the mechanism for determining quantum. The obligation that each party “shall pay” the agreed percentage of the other’s claim was inconsistent with an option to refuse payment because proceedings had not been commenced within two years of the collision.
2. The agreement was construed objectively against the background of the statutory time bar. The parties had agreed that unresolved claims would be referred to the Admiralty Registrar, which necessarily contemplated proceedings. Each party had therefore waived reliance on section 190 of the Merchant Shipping Act 1995. The subjective understanding of the solicitors was irrelevant: the reasonable meaning of the contract was decisive, as explained in AG of Belize v Belize Telecom [2009] 1 WLR 1988.
3. Alternative extension of time. Following The Al Tabith [1995] 2 Lloyd’s Reports 336, the court applied a two-stage test. The claimant must first establish a good reason for delay and must then satisfy the court that an extension should be granted in its discretion.
4. The solicitor’s mistake alone would not have amounted to a good reason. However, the parties had settled liability before expiry of the limitation period and were engaged in the agreed process of exchanging and considering claims, vouchers and costs. That constituted an additional legally relevant factor and a good reason for extension. The modest delay, absence of prejudice, and prompt application made an extension appropriate. The approach was consistent with The Seaspeed America [1990] 1 Lloyd’s Reports 150.
5. Joinder. Because the demise charterers were parties to the settlement agreement and were likewise precluded from relying on the time bar, the application to add them was governed by CPR 19.2 rather than CPR 19.5. It was fair and just to add them so that all matters in dispute could be resolved. Permission was granted.

First-instance decision in the High Court (Admiralty Division). No prior or subsequent appellate decision is stated in the judgment.