THE RIGHT TO LIMIT LIABILITY IN AN ADMIRALTY ACTION
By Sir Adolphus Nwachukwu
In shipping adventures, calamities such as damage, loss of lives and goods may occur. In such a case, there may be an action against the owner, charterer, manager or the operator of the ship or even the ship involved. If the ship or its owner, charterer, manager or the operator of the ship is allowed to bear the brunt of the damage or loss, it may affect them to the extent that they may be out of business.
It is to this end that the law protects them, not necessarily to support their potential negligence, default or wrongful action or to exonerate their liability but, as a matter of public policy, to keep them in business for the greater good of maritime commerce.
The Admiralty Jurisdiction Act, (‘AJA’) provides for limitation of liability proceedings, where a defendant has been sued for compensation under any admiralty law, including the Merchant Shipping Act, for any calamity on the sea. It gives a defendant, who apprehends that a claim for compensation, may be made against him, the right to apply to the Federal High Court, to determine whether his potential liability may be limited. Upon this application, the Court may determine whether the defendant’s potential liability may be limited and; if so, determine the limit of the defendant’s potential liability, and set up a limitation fund for the benefit of the plaintiff(s).
In addition, the following points should be considered in a claim for limitation of liability:
• An application for limitation of liability action, must be brought by Originating Summons.
• The application shall be commenced by an action in personam in the Originating Summons.
• The commencement of a limitation of liability action does not imply that the defendant is liable in the main suit.
• A limitation of liability action can be initiated at any time during the life of the main suit.
Furthermore, a critical analysis of the AJA and its Rules shows that an action for limitation of liability, is a defence to the main suit that activated the limitation of liability proceedings. As such, bringing such application by originating summons, does not mean that a limitation of liability proceedings is a fresh action.
Notwithstanding the foregoing, by stating that a claim for limitation of liability proceedings should be commenced by an action in personam, it wrongly connotes that it is a cause of action.
This is not correct because an action includes any proceedings commenced in a court established by law, while a cause of action is the fact or combination of facts that led to the dispute and the remedies being claimed by a plaintiff. Thus, since a limitation of liability proceedings is brought by a defendant as a defence to an admiralty suit filed by the plaintiff, it should be perceived as an action simpliciter.
In conclusion, the core of limitation of liability proceedings is to offer the defendant the opportunity to limit his potential liability against the plaintiff(s) in the main suit; and encourage shipowners and other maritime stakeholders to continue to participate in the maritime industry.