HOVERCRAFT (CIVIL LIABILITY)

HC Deb 05 March 1979 vol 963 cc1043-56

10.18 p.m.

The Under-Secretary of State for Trade (Mr. Clinton Davis)

I beg to move, That the draft Hovercraft (Civil Liability) Order 1979, which was laid before this House on 19 February, be approved. Although this order is intended to replace the Hovercraft (Civil Liability) Order 1971, the changes which it makes to the provisions of that earlier order are relatively few and restricted in scope. But, because of the necessarily complex and lengthy nature of the 1971 order and the many detailed amendments which are in consequence required to it, a completely new order has been prepared in the interests of convenience and clarity.

As hon. Members may know, the purpose of the 1971 order, which, like the present order, was made under section 1 of the Hovercraft Act 1968, was to establish the nature and extent of civil liability in respect of the carriage of cargo, passengers and baggage by hovercraft and in respect of third party liability arising in relation to hovercraft.

Thus, the 1968 Act and the 1971 order make provision, first, for a modified version of the Carriage by Air Act 1961 and the Carriage by Air (Supplementary Provisions) Act 1962 to apply to liability in the carriage of passengers and their baggage by hovercraft; secondly, for a modified version of the Carriage of Goods by Sea Act 1924 to apply to liability for cargo carried by hovercraft; and, thirdly, for a modification of part VIII of the Merchant Shipping Act 1894, as amended, to apply to a hovercraft owner's or operator's overall liability for causing personal injury or death or property loss or damage.

In the past eight years there have been two main developments that make amendments to the 1971 order desirable, though without changing the general approach adopted by that instrument. First, inflation and the revised limits of liability that apply under the original maritime or aviation statutes make the various limits of liability established by the 1971 order too low and out of date. Secondly, new legislation that has come into force since 1971 needs to be taken into account.

I shall briefly explain the main changes made by the new order. The 1971 order applied to hovercraft the liability for passenger rules of international carriage by air, but with a standard per capita limit of liability for death or personal injury of £12,000. That was because at the time ship owners were able to exclude contractually all liability towards passengers—a situation which it was not thought should apply in relation to hovercraft.

The £12,000 limit did not, however, derive from the aviation example. It was merely a figure which was considered at the time to be fair to hovercraft operators and passengers alike. The new order simply increases that limit to £30,000 to compensate for inflation since 1971. It is perhaps relevant to note that, as a result of the Unfair Contract Terms Act, ship owners can no longer contract out of all liability to passengers, though they are allowed to limit it to slightly more than £30,000 per capita.

The increase made by the new order will also effectively implement the immediate recommendation on hovercraft limits of liability of the Royal Commission on civil liability and compensation for personal injury—the Pearson Commission. That is the situation on international carriage, but it is different in relation to domestic carriage, for which the order does not introduce the higher limit suggested by the Pearson Commission.

For the longer term, the Commission envisaged the application of the limit in the Warsaw Convention as it will be amended by Montreal Protocol No. 3. The Commission assumed that air law should remain the basis of the carriage of passengers by hovercraft—an assumption which is open to considerable doubt. The legal committee of IMCO may shortly consider a preliminary text of a draft international agreement relating to the carriage of passengers and their baggage by hovercraft which is based on the provisions of a new convention on ship owner's liability for the death of or injury to passengers, namely, the 1974 Athens Convention. It would seem sensible not to prejudice our possible future application of the draft international agreement if, after consideration by the IMCO legal committee, it remains based on maritime law. I hope that the House

will feel that that is an appropriate course.

Two amendments are made to the provisions of the 1971 order in respect of liability for passengers' baggage. The limitations for baggage in the 1971 order were identical to those applying in the United Kingdom to air transport, namely, £138 per passenger for baggage in the passenger's charge and £7 per kilogram for registered baggage. Those limits have since increased by about 50 per cent. while the limits for hovercraft under the 1971 order have remained unchanged. In addition, doubts have been expressed since 1971 about whether the air law distinction between registered baggage and baggage in the charge of a passenger is applicable to hovercraft where items handed over by the passenger on embarkation are not normally weighed.

To deal with those two matters, the new order increases the hovercraft limit of liability for baggage in the charge of a passenger to £216, so that it again accords with that applicable in carriage by air and establishes a separate and additional limit of £216 for other baggage, replacing that which now applies to registered baggage.

I turn now to cargo liability. The rules in the 1971 order for goods on board a hovercraft were based on the Carriage of Goods by Sea Act 1924. That Act implemented in the United Kingdom an international maritime agreement on the subject known as the 1924 Hague Rules. However, in June 1977 the 1924 Act was superseded by the bringing into force of the Carriage of Goods by Sea Act 1971, which gives effect to a protocol to the 1924 Hague Rules. It is therefore only sensible that the 1971 order should now be amended to reflect the changes that have resulted from the Carriage of Goods by Sea Act 1971 entering into force.

Finally, there is global limitation, the overall ceiling on liability in respect of all claims which may arise from an incident, although under both the 1971 order and this new order that overall liability limit does not include claims in respect of death or injury to passengers on board the hovercraft itself, or for loss of or damage to their baggage. But the global limitation figures which apply to ship owners, and upon which the corresponding 1971 hovercraft limits were based, have increased by over 50 per cent. since 1971. This order simply increases the hovercraft limits in the same proportion.

I hope that the House will approve the order, which does not depart from the principles established in the 1971 order but merely brings that order up to date in certain limited respects. In so doing, I particularly emphasise and commend to the House the substantially increased protection that the new order will accord to hovercraft passengers.

10.26 p.m.

Mr. David Hunt (Wirral)

Although the order is a technical provision, it is very important. It gives the House an opportunity to look at hovercraft travel over the period since the previous order was made. Looking back over the past 10 years, one sees that the number of passengers and the number of cars carried by hovercraft have greatly increased. Whereas 10 years ago Hoverlloyd carried 36,000 cars annually, it now carries a quarter of a million. Compared with the 300,000 passengers it carried 10 years ago, it now carries 1¼ million every year. Sea-speed carries about three-quarters of those numbers of cars and passengers.

I believe that what has happened over those years has justified the original decision to treat the hovercraft as a vehicle sui generis and to apply each rule, order and provision relating to ships, aircraft or motor vehicles only if it is applicable.

However, other countries have not been so far-sighted. France, for example, has sought to treat the hovercraft as a ship, and in doing so has encountered a great deal of difficulty. Although we are not dealing with that subject tonight, one example of the problems lies with the French treatment of port and harbour dues according to tonnage, which is causing our operators some problems.

The order is a very important measure, dealing as it does with civil liability. I take issue with the Minister over the amount of consultation that has taken place. I understand that the main operators have been consulted, but they have expressed some concern to me—I cite Hoverlloyd in particular—about the lack of any response to the consultation. Hoverlloyd has shown me a letter that it wrote to the Department of Trade on 12 May 1978 making a number of very important points about the draft, not one of which appears to have changed the draft. It received no communication in reply. It would be helpful if the Minister could indicate that the points raised by Hoverlloyd and Seaspeed will be dealt with in correspondence.

Having made the right decision, so that since 12 July 1972 a hovercraft has not been treated as a ship, motor vehicle or aircraft, but as an air-cushion vehicle, we must get the balance right. As the Minister has explained, the order is based on the practice of using the Carriage by Air Acts for liability for carriage of passengers and baggage and the Carriage of Goods by Sea Act for liability for carriage of cargo.

Under the order, there are to be substantial increases in liability for hovercraft operators. This is perhaps an appropriate moment to point out something that the Minister did not mention, namely, that as well as applying the different principles of liability in the amounts involved, doing it in this way introduces differing principles of liability.

Kovats, who has written what is described as the bible on the law of hovercraft, points out the difficulties of doing it in this way. I wonder whether the Minister is wedded totally to the principle, or whether he is still considering it. Kovats says: By introducing the concept of wilful misconduct (which is based on intentional wrongdoing) from air law, while leaving unaffected the rules relating to negligence (which are based on reasonableness) and limitation of liability (which are based on fault and privity) applied in maritime cases, the legal analysis of a single act or omission on the part of one and the same person "— albeit in respect of differing liabilities— will pose innumerable difficulties to all whose task will be to fix the incident of liability where it should lay. That is very important, of course.

Returning to the amounts involved, I wish to put three matters to the Minister. First, while I recognise that in 1971 the limit of liability for injury to or death of passengers was fixed at £12,000 and therefore, of course, there must be a review, in my view the increase to £30,000 is very substantial. Despite the Government's mismanagement of the economy. that is not related wholly to inflation. It represents a positive increase. Operators believe that it will place them at a competitive disadvantage with ship owners.

Under SI No 1468 of 1978 ship owners may limit liability to £30,390.8, but they have the benefit of an overall limitation of liability. I refer to representations which have been made by the British Hovercraft Corporation Ltd.—and I had the opportunity of speaking today to Mr. Stanton-Jones, the managing director. It believes that the lack of an equivalent overall limitation of liability places the hovercraft operator at a considerable disadvantage. In putting his case, Mr. Stanton-Jones included the existing limit, which is £130 per gross ton of the ship involved. He gave an example of an N4 mark 2 hovercraft with 280 passengers and 30 cars, where the limit of liability under this order and its new provisions will be £8. 5 million, whereas a typical cross8. Channel ferry with a gross weight of 2,400 tons carrying 1,200 passengers and 155 cars will have a maximum liability of £310,000. At first sight, unless the Minister can explain why he wants this order to come into force on 1 April, that would seem to be a very serious disadvantage.

Even if the London Convention 1976 is ratified in relation to ships, a ship owner will still have an overall limit of approximately £17 million. As the Minister knows, we have been discussing the London Convention in our debates in Committee on the Merchant Shipping Bill. But even though it reaches that limit, there are still competitive disadvantages.

It was as long ago as 28 November 1977 that Hoverlloyd put a case to the Department, and it has not had a response to its case as yet. It cited as an example the motor vessel "Earl Siward", which is in regular service on the short sea route, with a gross tonnage of 3,602 and a net registered tonnage of 1,217. The approximate global limitation for total liability for that vessel would be £230,000, whereas even on the present liability figure of £12,000 for hovercraft passengers, where there is no overall liability limitation, a hovercraft has to carry only 20 people before its total liability is greater than that of a ship the size of the "Earl Siward". I should be grateful if the Minister would respond to the very serious contentions put forward by Hoverlloyd and the industry. Assuming a cross8. Channel ship to have a capacity of 1,000 passengers, even under the London Convention 1976 the per capita limit will be £17,000, whereas he is proposing a figure of £30,000 for hovercraft operators.

The Minister mentioned the Pearson Commission report. That Commission suggested that there should be a two8. tier system of liability, with a separate limit of £37,700 for journeys within the United Kingdom. That met with hostility from the industry, and it will be helpful if the Minister will confirm that he has rejected that approach, that so far as he is concerned he will stay with the £30,000 limit for all journeys and that no reconsideration in the light of Pearson is continuing at the present time.

The third point relates to baggage. Again, this will place the hovercraft operator at a disadvantage compared with airlines because it assumes that, with a limit of £216 per item of registered luggage, each item weighs 20 kilograms. But that is totally inaccurate, as Hoverlloyd's research shows that the average weight per item is 10 kilograms. Why is there difficulty in determining the difference between hand baggage and registered baggage? This is a point that concerns the industry. Can the Minister explain why he cannot simply define registered baggage as that which has been handed into the care of the operator? I know that there is no checking8. in, as there is with an airline, but baggage is handed into the custody of the operator. Surely that gives a reason why a particular definition can be taken in that context.

I should like to raise a further point in relation to cars. Under article 5 (b) a vehicle and its contents shall not be treated as baggage ". I know that Seaspeed—British Rail Hovercraft Ltd.—has put forward a contention to the Minister that it believes his Department has missed an opportunity to rectify an anomaly over liability for motor cars. Ship ferries are governed by the Athens Convention, which lays down a limit of liability for cars of £2,170. This order clearly states that cars are not baggage, but it does nothing to lay down a limit for operator's liability. Perhaps the Minister will confirm that as a vehicle and its contents will not be treated as baggage they immediately fall into the cargo definition.

If that is the case, one then looks at the Carriage of Goods by Sea Act and sees that it operates by reference to a bill of lading. A bill of lading in relation to hovercraft operation does not have any relevance. A passenger does not negotiate a bill of lading with the hovercraft operator, yet if the operator wishes to incorporate the provisions of the Carriage of Goods by Sea Act he has to have a bill of lading or something equivalent. Perhaps the Minister will explain whether he is reconsidering the application of the Carriage of Goods by Sea Act in that context, because on the one hand he is making a substantial addition to the definition of cargo by treating all vehicles and their contents as cargo. But he is not, on the other hand, making the task any easier for the hovercraft operator by simplifying the definition and, indeed, the relevance of the Carriage of Goods by Sea Act.

The Minister referred to the IMCO Convention. As I understand the position, hovercraft were excluded from the Athens Convention in 1974 by a United Kingdom initiative, because the International Institute for the Unification of Private Law was studying a separate convention. I presume that this must be the draft convention to which the Minister referred, which is shortly to be discussed through IMCO.

As I understand it, that convention brings in a new definition, namely, "luggage", which would obviously require some reconsideration of the provisions of this order. I wonder whether the Minister could explain how he intends to consult the industry over this IMCO convention. Will he do it just through the hovercraft committee of the Air Regulation Board or does he propose to initiate a series of discussions with the operators and other interested bodies? The interested bodies, for instance the United Kingdom Hovercraft Society, would probably have some valuable contributions to make to the IMCO deliberations.

Seaspeed makes the point, which I understand it made to the Department, that we have a new Merchant Shipping Bill and that there is a new carriage by air and road Bill on the stocks. There are obviously things in both those Bills which will affect hovercraft liability, and therefore this order will surely have to be amended before it has been in existence for long. Seaspeed has felt strongly that it would have been better to have those two Bills out of the way before making the order effective. As it is eight years since the previous order was made it would not, in its opinion, have been wrong to have waited a bit longer.

The United Kingdom Hovercraft Society has also posed the question, which rather summarises my remarks: what are the different limits of liability for hovercraft, aircraft, ships and hydrofoils? We seem to be setting up a regime where there are different limits of liability for each of these vessels and craft, which adds to the complexity of existing law, particularly for passengers. What consideration is being given to reaching a unified approach on these issues? It would be helpful if the Minister could—if not now, in a letter, so that I can pass it to the various bodies which have been in touch with me—give an analysis of the differing limits of liability so that representations can be made on them.

Many of my points tonight have referred to the urgency to get the balance right when trying to incorporate these different regimes. We are talking more about the level of insurance premiums than anything else, because we must be aware of the industry's safety record. But insurance premiums contribute substantially to the competitive structure within which hovercraft operate. We have every right to be proud of the achievements of the United Kingdom in the manufacture and operation of hovercraft. We must ensure that we do not impose an unfair burden on this important sector.

10.43 p.m.

Mr. Stephen Ross (Isle of Wight)

I begin my speech where the hon. Member for Wirral (Mr. Hunt) ended. I congratulate the hon. Member on his research. He has become knowledgeable in an area in which I did not know he was expert. I at once confess that I know very little about the subject. I am concerned because the British Hovercraft Corporation Ltd. employs 2,200 of my constituents and is, therefore, the largest employer of labour on the Isle of Wight, with the exception, I am afraid, of the Isle of Wight county council, which I suppose we have to expect.

As the hon. Member for Wirral has rightly pointed out, the hovercraft has a marvellous safety record. I can think of only one fatal accident, which occurred off Ryde in rough weather. That accident was a tragedy which never should have happened. There may well have been another occurrence, but I cannot think of it.

I feel that this British technical invention has not had enough support from the Government. The hovercraft in which I travel across the Solent—and I know of only those two routes, plus the cross-Channel routes, which are operated regularly in this country—were built 10 or more years ago. Even the SRN 4, the Earl Mountbatten of Burma class, which operates from the constituency of the hon. and learned Member for Dover and Deal (Mr. Rees), is a stretched craft. It was originally built in the late 1960s and has had the middle chopped out and an extra bit put in. It is a great success and we in the Isle of Wight are thrilled with it. We are doing the second one for Seaspeed. But the fact is that we ought to have developed much further. We should be in the next stage of these craft, where they would be competitive with merchant shipping. We demonstrated that in the House some two or three years ago.

New opportunities are opening up in Alaska and China. My constituents and the managing director of the British Hovercraft Corporation Ltd. are somewhat incensed that when the Chinese are over here they seem to be directed to subsidiaries of British Shipbuilders—nationalised companies—and Vosper Thorneycroft in particular, which is a real tiddler in the production of hovercraft—while BHC is generally left out of the picture, although now I gather that it is back in it. But as it is the manufacturer of virtually every craft, except for the French craft which are operating across the Channel, it is nonsensical not to give it every opportunity to get in on the area of operation now opening up in China. I have a feeling that hovercraft will be of use to China, and I am pleased also that in Alaska the Jones Act, which had the effect of stopping operations in Alaska, has been conceded for five years. That allows British operators to get into the Alaskan market, too.

I am concerned that this order will put hovercraft at a grave disadvantage in comparison with ships. At a time when they are struggling to continue to keep ahead, this additional blow may persuade some of the operators—there are only three that I know of in this country, Hoverlloyd, Seaspeed and Hover Travel, which is based in my constituency—that it is no longer a viable possibility to continue to operate.

I have confirmation of some of the figures quoted by the hon. Member for Wirral. Under the Merchant Shipping Bill, some of the liability for cover for merchant ships is being substantially increased. If the figures given to us by the managing director of British Hovercraft are correct, it seems to me that the company is being put at a considerable disadvantage. Is this necessary in view of the very limited operations of these craft? Their operations have not expanded at anything like the rate which we would have expected. They have not had anything like the encouragement that they should have had. We are passing a very lengthy document here for a very small number of hovercraft operating in this country. Is it really necessary to land them with such heavy overheads?

10.48 p.m.

Mr. Clinton Davis

The hon. Member for Wirral (Mr. Hunt) asked me about consultations. My understanding of the situation was that all the points that had been raised by the hovercraft operators were fully considered. Indeed, a copy of the draft order was submitted to them last week, and my understanding was that the points they had raised were substantialy covered in this order as we are now considering it. If they wish to raise any specific matters, of course I shall deal with them by way of correspondence, but, to the best of my recollection, they have not written to me about the situation. I shall certainly consider what the hon. Gentleman has said, and perhaps the hovercraft operators will do likewise if they wish to raise any particular matters beyond those which have been canvassed in the House.

The hon. Member for Wirral asked whether we would be considering longer- range changes in the concept of liability. I indicated in opening the debate that the order did not dramatically affect the situation. It is merely a reflection of developments since the 1971 order and is, therefore, limited. Longer-term thinking should be undertaken in the light of the changing international scene, not least the current deliberations in the IMCO legal committee—to which I referred earlier. It would be premature to embark on a substantial change prior to the conclusion of those deliberations, and it is unlikely that IMCO will come forward with a convention for some years. It is impossible to predict how long that will take.

The hon. Member for Wirral thought, as did the hon. Member for Isle of Wight (Mr. Ross), that hovercraft operators would be prejudiced by the changes in relation to operators of ships and, to some extent, aircraft. But perhaps we should consider the comparison with ships rather than aircraft. The British Insurance Association has examined this from an insurance point of view. Its advice is that, even with the increase from £12,000 to £30,000 per passenger, the resultant increased insurance premiums will probably only have a slight effect on fares. The grave disadvantages which the hon. Member for Isle of Wight mentioned are confuted by that assertion.

The hon. Member for Wirral asked about the non-application of the global limitation to hovercraft passenger claims. A difference will exist under the new order, but that is so under the 1971 order and is nothing new. That order was made at a time when ship owners were able contractually to exclude all liability towards passengers. Exclusion of passenger claims from a hovercraft operator's global liability, however, continues to be desirable to ensure that compensation available to passengers is not significantly reduced by other claims. The present position of ship owners being able to include passenger claims within their ordinary global limitation amounts will end once the 1976 London Convention comes into force.

The hon. Member for Wirral went on to question the basis of the rules whereby a comparison is made with ships. The measurement rules by which a ship's tonnage is assessed cannot easily be applied to hovercraft. The global limitation calculation for hovercraft is derived from a comparison of the values of ships and hovercraft. That was the subject of detailed study before the making of the 1971 order. The new order does not change that.

I thought that I had made the position on the Pearson Commission quite clear. The Government are not taking up the matter of the rules relating to liability in the domestic regime.

The question of cars has been raised. The new order does not change the treatment of vehicles at all. It specifies that vehicles and their contents are not to be treated as passengers' baggage. On the other hand, if a vehicle were carried under a bill of lading or some similar document the cargo liability provisions of the order would apply. Otherwise, any contract for the carriage of a vehicle by hovercraft would be subject to the general rules of law, and loss or damage to the overall limitation provisions of the order. Any alteration in this can properly await the more fundamental review of the whole of the hovercraft civil liability provisions, and it would be premature to embark upon that now.

Mr. Peter Rees (Dover and Deal)

This is obviously a matter of concern for those operating from my constituency. Is the Minister indicating that a major review will be undertaken by his Department? If so, when, and when is it likely to report? Also, what will be the terms of reference?

Mr. Davis

The major review is in the hands of IMCO initially. I was asked earlier about the nature of the consultations that will flow from that. It is far too early to judge how we would want to go about consulting. This is a matter that will probably take place in 1981 or thereabouts. It would be wrong for me to enter into any commitments now. Although some criticism has been made of the adequacy of consultation in this case—and I shall investigate that because that was not my understanding—it is the Department's general policy to consult widely. Should there be occasions when deficiencies have occurred in this respect, I shall do my best to ensure that they are put right. I am sure that my officials will have noted very carefully what has been said in the House tonight.

On the question of differing limits of liability, it would be useful to have these set out in writing because there is a measure of confusion. This matter will be put right only when the fundamental review has been carried out. I shall certainly write to the hon. Member for Wirral. I cannot give him a time scale for this because the matter may need a certain amount of research, but I shall try to do it as soon as possible. I agree that this is a little bewildering on occasions.

I share the views expressed by the hon. Member for Isle of Wight about the very remarkable record, not simply in terms of safety but in terms of initiative and enterprise, that has resulted from the development of the hovercraft in this country. It is a superlative example of ingenuity. Whether we have made the best use of it is a matter that goes far wider than the terms of tonight's debate.

All I can say about the Chinese interest is that I am not a Trade Minister as such, but I shall draw this matter to the attention of my ministerial colleagues in my Department and the Department of Industry. I should be very surprised if every attempt had not been made to interest people overseas in this product. I gather that if there has been any sort of oversight here, it has all been put right and that the Chinese may be as interested in this as they are in certain other matters.

Question put and agreed to.

Resolved,

That the draft Hovercraft (Civil Liability) Order 1979, which was laid before this House on 19 February, be approved.