By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Oil Refining Company (BORCO) yesterday lost its battle to gain $22 million in damages from the owners of an oil tanker that caused “substantial damage” by crashing into one of its jetties.

The Privy Council instead ruled in favour of the Cape Bari’s owners, finding that they had not waived their rights to “limit liability” for any accidents through an agreement signed with BORCO immediately before the ill-fated berthing attempt.

The London-based court, the highest in the Bahamian judicial system, found it was “inconceivable” that the tanker’s owners would agree to remove such protection, while there was nothing in the agreement suggesting they had done so.

However, the Privy Council declined to rule on whether a September 20, 2012, Supreme Court Order, to create a $16.995 million ‘limitation fund’ should stand, instead implying that the two sides now needed to settle all issues arising from its judgment themselves.

The ‘limitation fund’ sum is what the Cape Bari’s owners claim their liability for the jetty damage is capped at. They alleged they were entitled to do this by the Merchant Shipping (Maritime Claims Limitation of Liability) Act 1989, which incorporated into Bahamian law an international convention that limits liability for maritime claims/damages.

BORCO, though, having reduced its original damages claim from $26.8 million to $22 million, denied that the Cape Bari’s owners could limit their liability as a result of the contract signed by the vessel’s master just before berthing.

“BORCO denies that the owners are entitled to limit their liability, on the ground that they had waived their right to do so under a contract which it was agreed that the parties had made immediately before the berthing operation,” the Privy Council recorded.

Its judgment recalled how the Cape Bari had arrived off Freeport in the early afternoon on May 25, 2012, to load a cargo of crude oil from BORCO’s Grand Bahama-based oil storage and blending terminal.

BORCO’s affiliate, BORCO Towing Company, provided the tugs and pilot for the berthing operation after the Cape Bari’s master signed two agreements presented to him.

These dealt with the provision of pilotage and tug services, and the usage by vessels of BORCO’s facilities.

“Shortly after the agreements were signed, two tugs arrived and towing lines were secured to the vessel,” the Privy Council judgment said.

“Soon after 1350 hours, the vessel proceeded towards Sea Berth no 10. Very shortly thereafter, at about 1401 hours, the vessel collided with Sea Berth no 10, causing substantial damage.”

Then-senior justice Hartman Longley ruled in BORCO’s favour on August 9, 2013, finding that the Cape Bari’s owners could not limit their liability because they had “contracted out” of this via the two sides’ pre-berthing agreement.

The Court of Appeal, though, overturned that decision some nine months later, finding the convention on limited liability, which was ratified by the 1989 Bahamian Act, did not allow parties “to contract out of the right to limit”.

However, this issue was not argued before the Court of Appeal. As a result, BORCO appealed to the Privy Council on two grounds - that it was possible to waive the ‘limited liability’ stipulation, and that the Cape Bari’s owners had done just that.

“BORCO also complains that the Court of Appeal acted unfairly in disposing of the appeal on a ground which had not been argued by either party, and which the court gave neither party an opportunity to address in argument,” the Privy Council added.

Addressing that point, the Privy Council criticised the Court of Appeal, especially given that attorneys for both BORCO and the Cape Bari’s owners had agreed it was possible to contractually waive ‘limited liability’ rights.

“The Court of Appeal answered the question ‘no’ and, moreover, did so without the point being taken and without giving the parties the opportunity to make submissions on it,” the Privy Council said.

“The Board wishes to make it clear at the outset that the Court of Appeal ought not to have decided the point without giving the parties such an opportunity. In very many cases, such an approach will lead to an appeal against the decision being allowed.”

With both parties able to argue the case before it, the Privy Council found there was nothing in the international convention, or Bahamian law, “to prohibit” shipowners from agreeing to waive their rights to limited liability.

As to whether the Cape Bari’s owners had actually done this, the Privy Council found there was nothing in the ‘facilities usage’ agreement that “contains even a hint” they were agreeing to waive limited liability rights.

That agreement, its judgment said, provided BORCO with numerous liability exclusions and protections.

“As the owners observe, it is this liability to hold harmless and indemnify BORCO which triggers the owners’ need to limit their liability,” the Privy Council said of the Cape Bari’s owners.

“In short, there is nothing in the language of the agreement which suggests that the owners were agreeing to waive their right to limit. Indeed, viewed objectively, it seems to the Board to be inconceivable that the owners intended to waive their right to limit.

“Moreover, if BORCO had intended that they should do so, it could reasonably have been expected for BORCO to include such a clause in the ‘Conditions of Use’.”

However, the Privy Council subsequently declined to give a declaration that the Cape Bari owners’ liability “shall be no more than $16.995 million” plus interest of $342,696.

Several Bahamian attorneys were involved in the case. Kenra Parris-Whittaker, of Parris Whittaker, represented the Cape Bari’s owners, while Oscar Johnson and Tara Archer from Higgs & Johnson acted for BORCO.