Sun Vessel Global Limited (Appellant) v (1) HQ Aviation Limited, (2) Great Lakes Insurance (UK) SE (Respondents) Judgment given on 9 January 2023
Section 404 of the BVI Merchant Shipping Act, 2001- Pre-Judgment Interest- Limitation Fund- Section 18 (3) of Legal Profession Act, 2015- Costs
This case raised two substantive issues before the Court of Appeal, the first being a novel point in this jurisdiction concerning the applicability of the rate of interest prescribed by section 404 of the BVI Merchant Shipping Act, 2001 ( the “MSA”). The second issue concerned the recoverability of pre-action costs incurred by a foreign lawyer not enrolled as a legal practitioner in the Territory of the Virgin Islands (“BVI”).
The dispute arose following an accident on 10 May 2017, where a helicopter owned by the First Respondent ditched into sea while trying to land on the aft leisure deck of a superyacht owned by the Appellant in Bergen, Norway. Shortly before trial, the Appellant conceded liability in negligence for the accident, which left two issues for determination by the trial judge, namely: i) whether the First Respondent was contributorily negligent; and ii) whether the Appellant was entitled to limit its liability under the Convention on Limitation of Liability for Maritime Claims 1976 (as amended by a 1996 Protocol) (the “Convention”) as enacted under the MSA.
First Instance Decision
The trial judge dismissed the defence of contributory negligence and held that the Appellant (as Defendant at first instance) was entitled to limit its liability under section 391 of the MSA which gave domestic effect to the Convention and effectively limited damages to 1.51 million Special Drawing Rights or US$2,168,340.79.
On 13 October 2021, at a consequential hearing following the substantive judgment, the trial judge determined that (1) where no limitation fund had been established, the rate prescribed for pre-judgment interest under section 404 of the MSA was not applicable and (2) the Respondents (as Claimants at first instance) were permitted to recover the pre-action costs in the form of legal fees incurred by their English solicitor, an aviation specialist who was not admitted to practice as a solicitor or barrister in the BVI. The trial judge reasoned that Part 64.3 of the Eastern Caribbean Supreme Court Civil Procedure Rules, 2000 was essentially ‘backward-looking’ and therefore covered the English solicitor’s pre-action costs since they were related to the proceedings.
The Court of Appeal Judgment
Section 404 of the MSA – the Limitation Fund
The Court of Appeal held that, as a matter of statutory construction, the Appellants could not rely on section 404 of the MSA, which provides for the constitution of a limitation fund and applies a rate of interest as determined by the Minister. Section 404 of the MSA incorporates the text of Article 11 of the Convention into national law. However, the Appellant elected to plead limitation under the Convention as a defence, rather than constitute a limitation fund. In the circumstances, the Court of Appeal opined that the Appellant failed to satisfy the court that on ‘a question of construction or interpretation’ there was a legal basis for application of the prescribed rate where no fund was constituted.
The Court of Appeal considered that there were important practical and legal differences between constituting a fund and pleading limitation as a defence without a fund being constituted. In the former, the ship-owner is confident that he can secure the interest rate prescribed by national law, such that there is no scope for such determination by the court. By contrast, in the latter, the applicable rate can only be assessed in the normal way at the Judge’s discretion by taking into account all relevant factors.
In summary, a ship-owner does not automatically derive the benefit of the limitation interest rate by electing to plead limitation as a defence without constituting a fund. The trial judge’s finding awarding the Respondents pre-judgment interest at the rate of 5% was therefore upheld.
Section 18 (3) of the Legal Profession Act, 2015
With regard to recoverability of pre-action costs, the Court of Appeal re-affirmed its interpretation of section 18 (3) of the LPA, which prohibits the recoverability of fees claimed for legally qualified persons who are not admitted to practice law in the BVI. The effect of section 18(3) is that such fees are not recoverable at common law as disbursements, save in relation to expert evidence of foreign law which is not applicable in the present case.
The Court of Appeal affirmed its previous decisions applying the functionality test in assessing whether such costs are recoverable. Under this approach, the function performed by the foreign non-admitted lawyer is what matters, rather than the capacity in which the foreign lawyer acted. Broadly speaking, the test is whether the foreign lawyer acted in a way that was broadly deemed to be assisting with the conduct of a BVI matter. On the facts, the Court of Appeal held that where the trial judge made a finding that the foreign lawyer was acting as a ‘legal practitioner’ there was no need to dissect the work performed, since any administrative task would be incidental to anything done in assisting with the conduct of the litigation. The Court of Appeal further held that it was irrelevant that at the time the work was done by the foreign lawyer, it was not contemplated to be used in the BVI proceedings. As a result, the cost order of the trial judge was set aside and the pre-action costs were disallowed.
This clarification by the Court of Appeal is consistent with previous decisions and is welcome in avoiding hindsight interpretation of Part 64.3 following enactment of the LPA.
A link to the full judgment is here.