Supreme Court Decision 99Da9646, 9653, 9660, 9677 delivered on August 22, 2000 [Objection to Assessment Order]

【Main Issues】

[1] The meaning of Article 748(4) of the Commercial Act

[2] Where the owner of the collided vessel who has the statutory obligation of removal, etc. pays the cost of wreck removal incurred from the collision of vessels and subsequently claims reimbursement of such costs from the owner of the colliding vessel, whether such claim is an unlimited liability claim set forth in Article 748(4) of the Commercial Act (negative) or a limited liability claim under Articles 746(1), (3) or (4) of the Commercial Act (affirmative)

[3] Whether fuel oil leakage from a collided general cargo ship constitutes one of the "other things that is, or used to be, on board" under Article 748(4) of the Commercial Act (affirmative)

【Summary of Decision】

[1] Under Article 748(4) of the Commercial Act, with respect to a "claim regarding the lift, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, its cargoes, and any other thing that is or was on board on such ship (the 'wreck removal claim')," the owner of such ship may not limit his liabilities thereunder. In light of the language, legislative intent, and historical context of such provision, the appropriate interpretation of this provision would be that said provision does not allow the ship owner to limit his liabilities as to the wreck removal claims if he is statutorily liable for removal, etc. for reasons of promoting the public interests of maritime safety, sanitation, and environmental protection.

[2] The claim in which the ship owner with a statutory obligation of removal, etc. seeks indemnity for damages incurred in the course of said ship owner's performance of his obligations and responsibilities from the owner of the colliding ship whose collision caused the damages incurred by the first ship owner may not be viewed as a "claim arising in connection with the lift, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned its cargoes, and any other thing that is or was on board such vessel (the "wreck removal claim")" under Article 748(4) of the Commercial Act. To the contrary, such claim for compensation falls under a claim specified under Articles 746(1), (3) or (4) of the Commercial Act that limits the liabilities of a ship owner depending on specific circumstances.

[3] Oil leakage from the wreckage, etc. of a ship, other than a ship that transports oil not subject to paragraph 3 of Article 748 of the Commercial Act, is one of "other things that is, or was, on board" under paragraph 4 Article 748 of the Commercial Act. Such interpretation is clear not only from the literal reading of the provision, but also from the fact that under paragraph 4 Article 748 of the Commercial Act, for the purpose of achieving public interests, the ship owner may not limit his liabilities for removal, etc. of said things.

【Reference Provisions】 [1] Article 746 and Article 748(4) of the Commercial Act, Articles 2-1(d) and (e) of the Convention on Limitation of Liability for the Maritime Claims of 1976 and Article 1-1(c) of the International Convention Relating to the Limitation of the Liability of Owners of Seagoing Ships of 1957 / [2] Articles 746(1), 746(3), 746(4) and 748(4) of the Commercial Act, Article 2-1(d) and (e) of the Convention on Limitation of Liability for the Maritime Claims of 1976 and Article 1-1(c) of the International Convention Relating to the Limitation of the Liability of Owners of Seagoing Ships of 1957 / [3] Article 748(4) of the Commercial Act, Article 2 of the Oil Pollution Damage Indemnity Guarantee Act and Article 1 of the International Convention on Civil Liability for Oil Pollution Damage of 1969.

Article 2 of the Convention on Limitation of Liability for the Maritime Claims of 1976 (limited liability claims)

1. Subject to Articles 3 and 4, the following claims, whatever the basis of liability, shall be subject to limitation of liability:

(a)~(c) <omitted>

(d) claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, and any other thing that is or has been on board on such ship

(e) claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship

(f) <omitted>

2. <omitted>

Article 1 the International Convention Relating to the Limitation of the Liability of Owners of Seagoing Ships of 1957

Under Article 3 of this Convention, the owner of a sea-going ship may limit his liability for claims arising from any of the following accidents, provided that the accident giving rise to such claim was not caused by the intentional act or negligence of such owner.

(a) and (b) <omitted>

(c) any obligation or liability imposed by laws relating to the removal of wreck and arising from the lift, removal or destruction of any ship which is sunk, stranded or abandoned (including things aboard such ship) or arising from any damage suffered by harbor buildings, mooring facilities or navigable waterways.

Article 2 of the Oil Pollution Compensation Damage Guarantee Act (Definitions) For the purpose of this Act the definitions of the terms used in this Act shall be as follows:

1. The term "ship" means any sea-going vessel (including a lighter) of any type whatsoever constructed or adapted for the carriage of oil in bulk as cargo. Provided, that a ship capable of carrying oil or other cargoes shall be regarded as a ship only when it is actually carrying oil in bulk as cargo, and unless it is proved that it has no residues of such carriage of oil in bulk aboard

2. The term "owner" means the person or persons registered as the owner of a ship under the provisions of Article 8.1 of the Ship Act or foreign acts and subordinate statutes or in the absence of registration, the person or persons owning the ship. Provided, that in case of a ship owned by a foreign country, any corporation or association in that country registered as the ship's operator, shall be deemed as the owner of a ship under this Act, and in case of a ship of foreign registry chartered by a national of the Republic of Korea, any person or persons registered as the owner of a ship and the charterer shall be deemed as the owner of a ship under this Act

3. The term "oil" means any persistent hydrocarbon mineral oil such as crude oil, fuel oil, and lubricating oil, whether carried on board a ship as cargo or in the bunkers of such a ship, which is determined by the Presidential Decree

4. The term "pollution damage" means the following damages or costs:

(a) Loss or damage caused outside the ship by contamination resulting from the escape or discharge of oil from the ship, wherever such escape or discharge may occur. Provided, that compensation for impairment of the environment other than loss of profit from such impairment shall be limited to costs of reasonable measures of reinstatement actually undertaken or to be undertaken

(b) The costs of preventive measures and loss or damage caused by preventive measures

5. The term "incident" means any occurrence or a series of occurrences having the same origin, which causes pollution damage or creates a grave and imminent threat of causing such damage

6. The term "preventive measures" means any reasonable measures taken by any party or a third party after an incident has occurred to prevent or minimize pollution damage

7. The term "insurer, etc." means any person who compensates the damage of the owner of a ship or guarantees the performance of compensatory obligation under the compensation for oil pollution damage guarantee contract as provided for in this Act

8. The term "limited claim" means any claim against the owner of a ship or the insurer, etc. which such owner or insurer may limit his liability under this Act

9. The term "beneficiary obligor" means any person who is an obligor to the limited claim in the liability limitation procedures, other than the person who makes a request for the initiation of the liability limitation procedures

10. The term "Liability Convention" means the International Convention on Civil Liability for Oil Pollution Damage, 1992

11. The term "International Fund Convention" means the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage of 1992

12. the term "International Fund" means the International Fund for Compensation for oil pollution damage under Article 2.1 of the International Fund Convention.

Article 1 of the The International Convention on Civil Liability for Oil Pollution Damage of 1969

For the purposes of this Convention:

1. "Ship" means any sea-going vessel and any sea born craft of any type whatsoever, actually carrying oil in bulk as cargo.

2. "Person" means any individual or partnership or any public or private body, whether corporate or not, including a State or any of its constituent subdivisions.

3. "Owner" means the person or persons registered as the owner of the ship or, in the absence of registration, the person or persons owning the ship. However in the case of a ship owned by a State and operated by a company which in that State is registered as the ship's operator, "owner" shall mean such company.

4. "State of the ship's registry" means in relation to registered ships the State of registration of the ship, and in relation to unregistered ships the State whose flag the ship is flying.

5. "Oil" means any persistent oil such as crude oil, fuel oil, heavy diesel oil, lubricating oil and whale oil, whether carried on board a ship as cargo or in the bunkers of such a ship.

6. "Pollution damage" means loss or damage caused outside the ship carrying oil by contamination resulting from the escape or discharge of oil from the ship, wherever such escape or discharge may occur, and includes the costs of preventive measures and further loss or damage caused by preventive measures.

7. "Preventive measures" means any reasonable measures taken by any person after an incident has occurred to prevent or minimize pollution damage.

8. "Incident" means any occurrence, or series of occurrences having the same origin, which causes pollution damage.

9. "Organization" means the Inter-Governmental Maritime Consultative Organization.

【Reference Cases】 [1] [2] Supreme Court Decision 98Da62626 delivered on August 22, 2000

【Plaintiff (Counter-Defendant), Appellant】 Partenreederei M.S. Alexandria

【Successor Intervenor】 Allianz Versicherungs-Aktiengesellschaft, Zweigniederlassung fuer Norddeutschland (Attorneys Lee Jae-hoo and 5 others, Counsel for successor intervenor)

【Defendant (Counter-Plaintiff), Appellee】 China Shipping Development Co., Ltd. (formerly known as Shanghai Haishing Shipping Co., Ltd.) (Attorneys Lee Chang-joon and 1 other, Counsel for defendant, counter-plaintiff and appellee)

【Court of First Instance】 Busan District Court Judgment 96Gahap14046, 13968, 14053, 14015 delivered on June 24, 1998

【Court of Second Instance】 Busan High Court Judgment 98Na8066, 8073, 8080, 8097 delivered on January 8, 1999

【Disposition】 The appeal shall be dismissed. All costs of appeal shall be assessed against Plaintiff (Counter-Defendant).

【Reasoning】 The grounds for appeal are examined as follows.

Under Article 748(4) of the Commercial Act, with respect to a "claim regarding the lift, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, its cargoes, and any other thing that is or was on board on such ship (the "wreck removal claim"), the owner of such ship may not limit his liabilities thereunder." First of all, the language of the foregoing provision suggests that it is logical to limit a ship owner, who may not limit his liabilities under said provision, to the owner of a wrecked ship due to sinking, etc. Furthermore, the provision refers to a "claim regarding ……" rather than, as in each clause of Article 746 of the Commercial Act, "a claim caused by ……" In addition, the main reason why Korean Assembly, while amending this clause, namely Article 748(4) of the Commercial Act, pursuant to Law No. 4770 issued on December 31, 1991, withheld application of Article 2(1)(d) and (e) of the Convention on Limitation of Liability for Maritime Claims of 1976 (hereinafter the "1976 Convention") to the effect that limitation of liability was not allowed for the wreck removal claims was out of concern that if such claims become limited liability claims, the costs of performing the wreck removal may also become a limited liability claim, which would mean that the ship owner would have an incentive for not engaging in removal voluntarily and hence would be less willing to perform his obligations and responsibilities. Lastly, Article 2(1)(d) and (e) of the 1976 Convention is based on Article 1(1)(c) of the International Convention Relating to the Limitation of the Liability of Owners of Seagoing Ships that defines the statutory obligations or responsibilities with respect to wreck removal. Thus, in light of the language, legislative intent, and historical context of such provision, the appropriate interpretation of the meaning of this provision would be that said provision does not allow the ship owner to limit his liabilities as to the wreck removal claims if he is statutorily liable for removal, etc. for reasons of promoting the public interests of maritime safety, sanitation, and environmental protection. In addition, the claim in which the ship owner with a statutory obligation of removal, etc. seeks indemnity for the damages incurred in the course of said ship owner's performance of his obligations and responsibilities from the owner of the colliding ship whose collision caused the damages incurred by the first ship owner may not be viewed as a "claim arising in connection with the lift, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, its cargoes, and any other thing that is or was on board on such vessel (the "wreck removal claim")" under Article 748(4) of the Commercial Act. To the contrary, it is appropriate to view such claim for compensation as falling under a claim specified under Articles 746(1), (3) or (4) of the Commercial Act that limits the liabilities of the shipowner depending on specific circumstances. Furthermore, oil leakage from the wreckage, etc. of a ship other than a ship that transports oil not subject to paragraph 3 of Article 748 of the Commercial Act, is one of "other things that is, or was, on board" under paragraph 4 Article 748 of the Commercial Act. Such interpretation is clear not only from the literal reading of the provision, but also from the fact that under paragraph 4 Article 748 of the Commercial Act, for the purpose of achieving public interests, the ship owner may not limit his liabilities for removal, etc. of said things.

According to the rationale for the decision of the court below decision, the court below found the following facts based on admitted evidence: Alexandria, a container carrier owned by the plaintiff (also the counter-defendant and hereinafter the "plaintiff") collided into Xin hua 7, a cargo carrier owned by the defendant (also the counter-plaintiff and hereinafter the "defendant") due to the joint negligence of the crews of both parties (the negligence ratio between the plaintiff and the defendant was 3:7); such collision led Alexandria to sink; oil in that ship leaked and contaminated the sea in front of Taejongdae, Busan, and the cargo carried by said ship floated into the water to the impediment of other ships' navigation; the plaintiff was ordered by the Busan Marine Police Commissioner to remove the oil and collect the cargo; and Steamship Mutual Underwriting Association Ltd., the mutual insurance company at which the plaintiff was a policyholder, paid on behalf of the plaintiff the cost of oil pollution control in the amount of US$ 879,338.96 to the Korean Marine Industries and others and the cost of towing the containers in the amount of US$ 572,446.75 to the Hyopsung Inspection Cor. and others. Based on such findings of fact, the court below decided that the cost of towing the containers incurred as a result of the collision at issue was not an unlimited liability claim governed by Article 784(4) of the Commercial Act, but a limited liability claim governed by Articles 746(1), (3) and (4). Furthermore, the court below decided that the indemnification claim in respect to oil pollution control did not apply to Alexandria since it was not oil carrier governed by Article 748(3) of the Commercial Act. As for the oil pollution control, the court below decided that it was a limited liability claim governed by Article 746(3) or (4) of the Commercial Act since it is unlikely to qualify as a "claim in respect of removing other things" as set forth in Article 748(4) of the Commercial Act since it is subject to an order regulated by the Prevention of Marine Pollution Act governing the prevention and removal of oil, etc., not by the Open Ports Order Act.

In light of the records and principles of law, we hold that the court below was in error in deciding that the cost of oil pollution control was unlikely to qualify as a "claim in respect of removing other things" as set forth in Article 748(4) of the Commercial Act. However, a claim in which the plaintiff, who is the shipowner with the statutory obligation to prevent oil pollution, seeks indemnification for losses arising from the removal of oil, etc. in the course of performing his obligations and responsibilities from the defendant, who contributed to the occurrence of such losses, does not qualify as an unlimited liability claim governed by Article 748(4) of the Commercial Act, but a limited liability claim governed by Article 746(1), (3) or (4) of the Commercial Act. Therefore, the court below correctly decided that the indemnification claims in respect to the costs of towing the containers at issue or in respect to the cost of oil pollution control are limited liability claims governed by Article 746 of the Commercial Act. In the court below's decision, there was no reversible errors from a misinterpretation of the law as alleged in the appeal. The appeal with respect to the foregoing is groundless.

Accordingly, this appeal shall be dismissed. This decision is delivered with the assent of all Justices who reviewed the appeal. All costs of appeal shall be assessed against the plaintiff.

It is so ordered per Disposition.

Justices Lee Kyu-hong (Presiding Justice)

Song Jin-hun (Justice in charge)

Yoon Jae-sik

Son Ji-yol