The Henderson Axe Falls on Limitation
A Warning from the Admiralty Court

In Admiralty law, the right to limit liability is a freestanding cause of action, distinct from the underlying liability itself. This distinction grants shipowners the powerful strategic advantage of seizing the initiative—choosing when and where to commence their limitation action and to constitute a fund, often long before liability is established. However, this independence is a double-edged sword. Because limitation is a cause of action, it is subject to the strict finality of res judicata. If a claimant seeks a decree but holds back an alternative “limb” of argument for a later date, they may find themselves permanently debarred from raising it. This peril was starkly illustrated in RTE v Costain & Ors [2025] EWHC 73 (Admlty), where the Court struck out a limitation defence under Article 1(4) as an abuse of process, ruling that the argument “could and should” have been deployed in the earlier limitation trial.

Concept of Limitation

When a maritime incident happens, such as a collision, the various persons potentially liable for the incident may be entitled to limit the quantum of their liability.

The categories of persons entitled to limit are named in Art 1 of the Convention on Limitation of Liability for Maritime Claims 1976, as amended by the 1996 protocol and the limits increased by the 2012 Resolution (“LLMC”), namely:

·       The “shipowner” group: The owner, charterer, manager, or operator of a seagoing ship (Arts 1(1) and 1(2));

·       Salvors: Persons rendering services in direct connection with salvage operations (Arts 1(1) and (3)); and

·       Others: Any person for whose act, neglect, or default the shipowner group or salvor is responsible (Art 1(4)) – for example, a master.

The incidents in respect of which those named in Art 1 have a right to limit their liability are listed in Art 2, subject to exclusions stated in Arts 3 and 4.

In the UK, the LLMC is given the force of law in the UK by s 185 and Schedule 7 of the Merchant Shipping Act 1995 (“MSA 1995”).

It is a settled law that the right to limit is a cause of action rather than merely a defence to a substantive liability claim. The “cause” of the limitation action is the maritime incident itself, distinct from the substantive liability claim which an injured party may bring. Importantly, invoking the right to limit does not constitute an admission of liability (Art 1(7)).

Consequently, a limitation claimant need not wait for liability to be established – or even for a substantive liability claim to be brought – before applying to the court for a limitation decree (The Western Regent; Seismic Shipping Inc and another v Total E & P UK plc [2005] EWCA Civ 985). It is common practice for limitation actions to be commenced, and even determined, in advance of substantive liability claims.

The distinction implies that the limitation action need not be brought in the same jurisdiction as the substantive liability claim or the anticipated substantive liability claim. Questions of forum non conveniens regarding the limitation action are decided by reference to the limitation cause itself, not the substantive cause (Zurich Insurance Company Limited & 2 others v Halcyon Yacht Charter LLP & another [2024] EWHC 937 (Admlty)). Generally, this confers upon the limitation claimant the privilege of choosing the forum for their limitation action.

The Procedure

Procedurally, under CPR Part 61 and CPR PD 61, a limitation action may be brought by way of a limitation claim (CPR Part 61.11), a counterclaim (CPR Part 61.11(22)), or even as a defence (PD 61 para 10.18). However, the procedural allowance to plead limitation as a “defence” does not derogate from the principle that the right to limit remains a cause of action.

The Danger

The privilege of treating the right to limit as an independent cause of action carries a significant risk: if a limitation claimant applies for a decree and fails, that cause of action may be extinguished. The claimant may be barred by res judicata from re-litigating limitation on new grounds if those grounds could and should have been raised in the initial action.

Specifically, a claimant may be unable to argue new grounds for limitation based on the specific facts of a substantive claim that surfaces later.

Case Study: RTE v Stema [2025] WEHC 73 (Almlty)

This danger was starkly illustrated in the recent judgment of Mrs Justice Cockerill in RTE v Costain Limited and another v Stema Shipping (UK) Limited and others [2025] EWHC 73 (Admlty).

The Incident: Undersea high-voltage electricity cables in the English Channel were damaged, allegedly by Stema Barge II (a dumb barge) and Saga Sky (a cargo vessel). The barge was owned by Splitt Chartering APS (“Splitt”) and chartered to Stema A/S, both companies within the same corporate group. Stema Shipping (UK) Limited (“Stema UK”) provided assistance to Stema A/S in the operation of the barge. The cables were allegedly owned by RTE.

The Limitation Action: Splitt, Stema A/S and Stema UK applied to the English court for a general limitation decree s 185 of the MSA 1995, relying on Arts 1(1) and (2) – the shipowner group. It was not disputed that Splitt (as owner) and Stema A/S (as charterer) were entitled to limit their liability.

The dispute centred on Stema UK. They argued they were entitled to limit liability under the “operator” category defined in Art 1(2). At first instance, Teare J granted the decree. However, the Court of Appeal reversed the decision, holding that “operator” entails more than mere operation and must relate to the operation at a higher level of abstraction involving management and control, which Stema UK lacked. Stema UK was, therefore, refused a limitation decree under s 185.

The Second Attempt to Limit: Separately, RTE sued Splitt and Stema A/S in Denmark. Under Danish law, the concept of vicarious liability is wider than in England, rendering a shipowner liable not only for the fault or negligence of the master and crew but also for pilots and “others who carry out work in the service of the ship”.

RTE argued that Splitt was liable for errors committed by Stema UK “in the service of the barge” under the extended concept of vicarious liability in the Danish law.

Simultaneously, RTE advanced a claim against Stema UK in England, alleging negligence in the services and advice provided regarding the barge’s operation. In its defence, Stema UK attempted to raise a new limitation defence under Art 1(4). Their argument was that if shipowner group (Splitt and Stema A/S) was liable for Stema UK’s actions (as per RTE’s Danish case), then Stema UK qualified as a “person for whose act, neglect or default the shipowner is responsible” under Art 1(4).

Stike Out of the Limitation Defence

RTE applied to strike out this defence, arguing Stema UK was debarred from raising the limitation point either by res judicata (specifically, cause of action estoppel) or by the principles of abuse of process set out in Henderson v Hendeson. Stema UK countered that the Court of Appeal had only decided the limitation question of limitation based on Arts 1(1) and (2) only, and not Art 1(4).

The judge held that Stema UK was debarred by cause of action estoppel. She reasoned that the “cause” of the right to limit in both the previous limitation action and the current defence arose from the same incident, and the relevant parties were the same. Stema UK had previously sought a declaration under s.185 of the MSA 1995 – the exact same statutory basis they were attempting to use in their current defence.

Furthermore, the Judge held that Stema UK was also debarred under the principle of Henderson abuse. The principle prevents a party from raising matters in subsequent proceedings which “could and should” have been raised in earlier ones. It aims to prevent abuse of process by raising issues belatedly that could have been addressed earlier. The judge found that the Art 1(4) argument could and should have been advanced in the original limitation claim, regardless of whether Stema UK anticipated that a specific liability subject to Art 1(4) would arise.

Takeaway from RTE v Stema

The judgment in RTE v Costain serves as a critical warning for practitioners:

1.          Plead Widely: In a limitation action, a claimant must plead all possible grounds of limitation, even if it some grounds appear less relevant at the time.

2.          No Second Chance: If a limitation claimant omits a ground they believe is irrelevant, they may be surprised if that limb becomes relevant in a subsequent liability claim. By then, it will likely be too late; the claimant will be debarred by res judicata and principle of Henderson abuse from raising it.