Introduction

Lawyers tend to believe that:

  1. US courts willingly award punitive damages;
  2. the emphatic notion of impecuniosity offers tantalising recoverability issues that seem to elude determination; and
  3. high claim value explains why so many leading decisions, especially on damages, are shipping cases;

Between them, two recent rulings, one each side of the Atlantic, show that (1) is wrong, (2) is often right and (3) is a reliable reminder of the importance of maritime matters in the development of the general law.

We here discuss the 24 June US Supreme Court judgment in Dutra Group v Batterton, No. 18-266 and the 29 January UK decision in the collision case of Nautical Challenge v Evergreen Marine [2019] EWHC 163 (Admlty).

Punitive damages

Facts and issues

Mr. Batterton was a deckhand who was injured when a hatch cover blew. In a claim under the US general maritime law for failure to provide a seaworthy vessel, the issue was whether he could recover punitive damages.

Nature

Variously also known in the UK as exemplary, retributory or even vindictive damages, these do not compensate. Rather, they punish for oppressive or calculated conduct. So they are generally confined there to active torts like deceit and defamation, as opposed to negligence, and are not available for breach of contract.

In the US, under similar rationale, they “have long been an available remedy at common law for wanton, willful, or outrageous conduct,” and some may say, in widespread legal folklore they are awarded as routinely as they are claimed.

Decision

The Supreme Court ruled 6-3 that “a [personal injury] plaintiff may not recover punitive damages on a claim of unseaworthiness” and that the “lack of punitive damages in traditional maritime law cases [was] practically dispositive.”

The majority therefore declined to extend their ambit – from, for example, applicability in actions based on maintenance and cure. Amid the various legal bases for refusal to “sanction a novel remedy”, they observed that such would be a significant competitive disadvantage for US operators and would discourage overseas owners from engaging US crew.

Discussion

The issue of availability of punitive damages in US general maritime law, here in form of an unseaworthiness claim, has been multifaceted. The impact of statutory regimes, mainly the Merchant Marine “Jones” Act of 1920, has been significant in curtailing availability of punitive damages in some but not all areas of the US general maritime law. The unavailability of punitive damages under the Jones Act is generally seen as the legislature opposing availability, at least for like actions.

Although the Court in Batterton resolved a split between US circuit courts in favour of excluding punitive damages, in part because both unseaworthiness and Jones Act negligence claims share similarities, they remain available in claims for maintenance and cure. In maintenance and cure actions, where the behaviour of the ship owner is by nature more egregious, imposing punitive damages, i.e., a remedy for “wanton, willful, or outrageous conduct,” is vindicated.

Impecuniosity

Development

Sometimes a claimant seeks additional damages incurred because he was impecunious – he lacked money so his losses were greater.

In the UK, in terms of physical damage claims, the defendant is generally said to take the claimant as he finds him – the so-called “egg-shell skull” rule.

However, in the maritime case of Liesbosch Dredger v SS Edison (the “LIESBOSCH”) [1933] AC 449 the [UK Supreme Court] said that losses due to impecuniosity were irrecoverable.

This rule was much criticised and distinguished almost out of existence, and 70 years later, in the motor insurance wrangle of Lagden v O’Connor [2003] UKHL 64, the highest court abolished whatever remained. A defendant must pay the cost if it was reasonably foreseeable that the claimant would have to borrow or incur other expenditure to mitigate loss.

Maritime context

Where a ship is damaged, arrested or otherwise detained, and perhaps also where goods are held on some basis, it is easy to see such a claim arising. The vessel or cargo interest may lack sufficient funds to effect repair, release or other remedy, and there may be difficulty under the insurance policy. He may have to obtain finance or meet some other interim cost, and/or may claim that, due to financial constraint, the relevant period was longer and the losses commensurately greater.

Nautical Challenge v Evergreen Marine

The containership “EVER SMART” collided with the tanker “ALEXANDRA 1”. Liability was apportioned 80/20. That will now go to the UK Supreme Court, but in the above first instance ruling on damages recoverability of extended losses was a key issue.

The claimants sought to recover further, very substantial damages due to an extended lay-up allegedly caused by lack of funds. However, finding that they could and should have avoided that by swiftly obtaining bridging finance, the judge dismissed this on the basis of causation.

So he just considered, but did not decide, the following:

  1. impecuniosity must be (reasonably) foreseeable, but there is no need to enquire why;
  2. he was prepared to assume that such a vessel owner must show that it was reasonably foreseeable that he could not fund repairs without prompt payment or acknowledgment by H & M underwriters; and
  3. he provisionally found that the claimant would have succeeded on that.

Discussion

It is submitted, first, that within the complex matrix of the maritime market, finance, insurance and the many operational factors, foreseeability of lack of funds will often be closely connected with the reason for it.

Also, while a claimant may be vindicated in juggling scarce resources, leaving none for the matter in issue, a defendant might be justified in pointing to overall profligacy.

Further, while the action of underwriters (of whatever kind) may prove crucial for a claimant, whether or not they were justified in declining under the policy will only be relevant if that, too, informs reasonable foreseeability.

Lastly, in an appropriate case, a claimant insured might have to show adequate chasing, perhaps (in English law) under threat of an Insurance Act 2015 section 13A action for culpable delay.

Conclusion

In both the US and the UK, on recoverability under the general law, maritime matters again make their indelible mark, and will continue as ever to trace, or bar, new paths across old ground.

 

If you would like to discuss anything arising from this article please contact Jonas Patzwall at jonas.patzwall@floydzad.com, Ed Floyd at ed.floyd@floydzad.com and +1 (917) 999 6914 or Luke Zadkovich at luke.zadkovich@floydzad.com and +1 (917) 868 1245 / +44 (20) 8068 6844.

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