Oil pollution - Landcatch Limited v The Braer Corporation and others (11 November 1997) Court of Session

This was a case arising out of the stranding of the Braer off Zetland on 5 January 1993. Landcatch Limited reared smolt (young salmon) for the salmon farming industry at farms in Argyllshire and Wester Ross. Landcatch Limited claimed that in 1993 it was to sell about 65% of its smolts to purchasers on Zetland. The contracts were normally agreed in February, however, the Braer ran aground in January spilling oils into the waters off Zetland. Following the spill the UK Government introduced restrictions on the landing, use and supply of fish from those waters. As a result, the Zetland salmon farmers to whom Landcatch Limited would normally expect to sell its smolt did not enter into contracts to purchase smolts. Landcatch Limited claimed to have sustained losses as a result. Landcatch Limited sought to recover these losses from the shipowner under the Merchant Shipping (Oil Pollution) Act 1971 and from the P&I Club under a liability which the purchaser claimed was imposed on that P&I Club by a Norwegian Insurance Act of 1989. The main issue in the case was whether Landcatch Limited's losses were "damage caused ... by contamination resulting from the discharge or escape" of oil under Section 1(1) of the Merchant Shipping (Oil Pollution) Act 1971. Landcatch Limited argued that the Merchant Shipping (Oil Pollution) Act 1971 imposed strict liability on the shipowner and P&I Club for all damage or loss which would not have occurred but for the discharge or escape of oil and that this liability was not limited by any concept of remoteness or such like. The Court disagreed and held that Parliament had intended the normal limitations on recoverability of economic loss to apply. Any contrary intention would have been provided for expressly. The Court also held that the provisions of the Merchant Shipping (Oil Pollution) Act 1971 indicated that liability under the Act should be limited to the area of contamination. Therefore, liability for pure economic loss under the Merchant Shipping (Oil Pollution) Act 1971 should be taken to mean liability for pure economic loss where it was directly caused by the contamination in accordance with established principles of law. The Court accordingly held that Landcatch Limited had suffered merely relational economic loss which was therefore not recoverable. (Times Law Reports, 6 March 1998)