England and Wales Court of Appeal (Civil Division) Decisions

IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HONOURABLE MR JUSTICE CHRISTOPHER CLARKE

		Royal Courts of Justice Strand, London, WC2A 2LL
		09/12/2010

Lord Justice Longmore:

Introduction

1. At about 0230 local time on 30^th December 1998 an explosion took place in the No 3 hold of the m.v. "Aconcagua" when she was on passage off the coast of Ecuador. The fire which resulted was so great that the crew had to abandon ship. Widespread damage was caused to the vessel and her cargo.
2. The cause of the explosion was the self ignition of 334 kegs of calcium hypochlorite stowed in quadritainers which were themselves loaded in a container ("the container"). The container had been loaded at Busan, South Korea and was due to be discharged at San Antonio in Chile. The vessel was on time charter to Compania Sud Americana de Vapores S.A. ("CSAV"), a Chilean company, the claimant. The owners of the vessel – MS ER Hamburg Schiffahrtsgellschaft Mbh & Co ("the Owners") – commenced an arbitration under the charterparty against CSAV. The arbitrators issued an interim award as a result of which CSAV reached a settlement with the Owners and paid them US$ 27,750,000.
3. CSAV claimed damages against Sinochem Tianjin Import and Export Corp ("Sinochem"), who shipped the container of cargo, declared as calcium hypochlorite ("CH"), with an IMDG dangerous goods classification of UN 1748 (being a particular form of CH known as anhydrous or dry CH), between 26^th-28^th November 1998. CSAV was the carrier under a bill of lading, which was subject to the Hague Rules. Under the IMDG Code, UN 1748 CH is to be stowed away from sources of heat. It was in fact stowed in a position (stowage position 15-09-06) which was surrounded on three sides by a bunker tank No. 3, Forward Fuel Oil Tank Starboard ("3FFOTS") which was not a source of heat at the time of shipment. When the contents of the container exploded during the carriage on 30^th December 1998, the vessel had entered and was proceeding in tropical waters and was, as a result, subject to elevated ambient temperatures. Before the explosion, on a date found by the judge to be 22^nd December, the bunkers in No. 3FFOTS began to be heated in order to be transferred to other tanks, such transfer causing the level of heated oil in the tank adjacent to the container to fall as and when the transfer occurred.
4. The parties' cases rested upon diametrically opposed factual contentions.

i) CSAV's case was that the cargo had, unknown to CSAV, an abnormally high thermal instability, being prone to self-heat at ordinary carriage temperatures. As a result the cargo, in its container, exploded on board the vessel at temperatures which were ordinarily to be expected onboard the vessel during the voyage.

ii) Sinochem's case was that the heating of the bunker tank on the voyage was either the (or a) cause of the explosion.

iii) CSAV contended in response that the stowage of the cargo next to a bunker tank which was heated on the voyage was of no causative significance. The contribution made by the heating of the bunkers to the warming of the container and its contents was wholly insufficient to have had any significant effect on, and made no difference to, the outcome.

5. There were therefore only two possible causes of the explosion canvassed at the trial; either the cargo blew up without any external trigger other than ordinary ambient temperature conditions during the carriage, or it blew up because the heating to which the cargo was subjected by reason of its stowage position and the heating of the bunker tanks was the (or a contributory) trigger. No other possibilities were in play and none were suggested by Sinochem at trial.
6. CSAV adduced expert evidence on the basis of which it contended that the effect of bunker tank heating was such as to make no difference to the temperature which the container (and, importantly, its contents) would have experienced (a) without heating, i.e. if No 3FFOTS had not been heated at all and (b) if stowed away from the bunker tank elsewhere in the hold in a stowage position which was in accordance with the IMDG Code requirements for UN 1748. In other words, CSAV's expert evidence was to the effect that with or without heating, the cargo would have experienced effectively the same temperature. CSAV also adduced expert evidence to identify what characteristics the cargo must have had to have exploded, even if Sinochem was correct.
7. The judge, in a comprehensive judgment now reported at [2010] 1 Lloyd's Rep 1, accepted CSAV's case and rejected Sinochem's case following an analysis of (a) the factual evidence as to what bunker heating was done by the vessel's crew and when it was carried out; (b) the expert evidence as to the (non-) effect of the heating of No. 3FFOTS upon the high ambient temperatures in the hold which would have pertained during the vessel's transit through tropical waters in any event; (c) the expert evidence as to the absence of any effect of heating upon the cargo given the short and transient duration of that heating; (d) the expert evidence as to the characteristics which the cargo would have had to have had in order to be caused to explode by extreme bunker heating as postulated by Sinochem. He accepted expert evidence that what is called the Critical Ambient Temperature ("CAT") of the cargo actually shipped was between 25° and 27° Celsius.
8. Sinochem now accepts that ambient carriage temperatures of the mid to high 20s or even low 30s would have been "ordinary" and that material with a CAT as low as that found by the judge would have to be considered as "rogue material". The judge found that the contents of the container experienced only ordinary ambient temperatures with no influence of bunker heating due to the container's stowage position adjacent to No. 3FFOTS but that the cargo nevertheless exploded in those ordinary carriage conditions. It follows, and is now accepted by Sinochem, that bunker heating cannot have played any causative role since with or without heating (or stowed elsewhere in hold No 3), the contents of the container would have experienced the same (or effectively the same) temperature in any event.
9. Originally, Sinochem sought to launch a wholesale attack on the judge's findings but that application for permission was refused by Sir Richard Buxton on the papers. On the renewed oral application, Aikens LJ granted a very limited permission to appeal pursuant to which Sinochem now submit:-

i) that the judge held Sinochem liable to CSAV merely because he rejected Sinochem's primary case that the explosion was caused by exposure to excessive heating and that he was wrong to so hold because the explosion could have been caused by some other (unknown) factor;

ii) that, to the extent that the judge relied on factors other than his rejection of Sinochem's primary case, his reliance on such factors was misplaced;

iii) that, accordingly, CSAV had failed to prove their case that, in breach of contract, Sinochem had shipped a dangerous cargo.

10. The first ground of appeal raises a question as to the true construction of the judgment; the second ground is essentially an appeal on a question of fact; the third ground is a question of law but can only be arguable if the first and second grounds are correct.

Construing the Judgment

11. Mr Robert Bright QC for Sinochem relied on the judge's statement that it was necessary to determine the characteristics of the cargo by "reference to what occurred on the voyage" and that, if normal (UN 1748) cargo would have withstood the temperature regime in No 3 Hold of the vessel, "the fact of the explosion would itself indicate that the cargo had abnormal characteristics" (paras 232 and 233).
12. These statements were, however, only stepping-stones to the judge's ultimate conclusion at para 326 that the evidence taken as a whole established that the cargo was a cargo of a dangerous nature. That conclusion was preceded by findings summarised in paras 322, 324 and 325 respectively:-

i) that CSAV did not know nor should it have known that UN 1748 could explode if the Critical Ambient Temperature ("CAT") was 40° Celsius or less;

ii) that Professor Gray's testing of samples from the Jingang factory (but not of the cargo actually shipped) suggested that CH from Jingang would, on occasion be rogue material. Moreover, the calculations made by Professor Gray for the purposes of the trial and based on a hotter heating regime than that prevailing on the "Aconcagua" ("the back calculations") established that the material actually shipped was likely to have had an abnormally low CAT – somewhere between mid 20s – low 30s Celsius.

iii) that the Jingang factory had poor manufacturing standards and inadequate quality control.

13. This combination of findings shows that the judge did not jump straight from the conclusion that the cause suggested by Sinochem (namely overheating of 3FFOTS during the transfer of bunkers) did not cause the explosion to the conclusion that the explosion must have been caused by the rogue nature of the cargo. The judge used other evidence to come to that conclusion. It is, therefore, only if findings (2) and (3) above can be successfully attacked that the judgment can be undermined. This is what Mr Bright proceeded to attempt to do.

Assessment and testing of Jingang samples

14. Mr Bright pointed out that both the moisture content and CAT of these samples were within the acceptable limits of UN 1748 and submitted that, on balance, the evidence of the samples was therefore to the effect that the nature of the cargo shipped was not such as to have caused the explosion.
15. As against this, Professor Gray's analysis (accepted by the judge) showed that the Jingang material had

i) widely variable results in respect of moisture, chlorine content and time taken before the samples would ignite (para 180-182);

ii) particulate contamination with a rust like appearance (para 180);

iii) activation energies and thermo-kinetic characteristics different from those of other normal material (para 214).

These factors suggested both that the Jingang factory might produce rogue material (para 224) and that there was poor quality control at the factory (para 230) which meant that calcium hypochlorite from Jingang "was liable to" include from time to time a rogue batch of unusually low thermal stability.

16. These considerations did not stand alone because, as indicated, Professor Gray had carried out what he called "back calculations" in order to discover what the relevant CAT would have to be if an explosion were to occur in the course of a voyage in which the cargo was subjected to the heating that occurred on the actual voyage. If Professor Gray's assumptions (on which his calculations were based) were well-founded and if his method of calculation was correct, the result would be that the material actually shipped must have had a very low CAT – "somewhere in the 25°-27° Celsius range or lower" (para 285). There was a great battle between the experts as to the correctness of Professor Gray's assumptions and his method of calculation but the judge preferred Professor Gray's evidence (for CSAV) to that of Mr Phillips (for Sinochem), calling Mr Phillips' approach illogical. This, the judge was entitled to do and, in any event, permission has not been granted to challenge this aspect of the judge's decision.
17. It follows that Mr Bright cannot challenge factors (2) and (3) in paragraph 12 and that there was ample evidence which enabled the judge to conclude at para 324:-

"The results obtained from Professor Gray's testing of the Jingang samples suggest that CH from that source would, on occasion, be rogue. The calculations carried out by Professor Gray, on the assumption of a bunker heating regime which was hotter than that which prevailed on the "Aconcagua" established to my satisfaction that the material shipped is likely to have fallen within the category and to have had an abnormally low CAT – somewhere in or around the mid to high 20s, or early 30s, far less than that which a prudent carrier would expect from UN 1748 and worse than the rogue UN 2880 investigated by Professor Gray. The nature of the evidence makes it impossible to be more definite. Even if the figure were out by a sizable fraction the CAT would still have been abnormally low."

And further at para 326

"In short, the evidence, taken as a whole, establishes that the CH shipped on the "Aconcagua" was a cargo of a dangerous nature of which CSAV neither had, nor ought to have had knowledge and that CSAV had not knowingly consented to the shipment of CH of such a nature."

18. That therefore is, in my view, the end of this appeal. As Sir Richard Buxton put it:-

"…[the judge] did not conclude that he must accept the defective cargo thesis willy nilly and even though evidence supporting it was defective or absent."

Although Mr Bright had other complaints to the effect that the judge should have addressed the question whether it was likely that every quadritainer of CH in the container had a CAT in the range of low 20s to high 30s degrees Celsius and that the judge had on occasion appeared to ignore the burden of proof, there was nothing in either of these grounds which are, in any event, peripheral to the main grounds of appeal. No expert suggested that it was necessary for every quadritainer to have an abnormally low CAT before an explosion could occur. I am, moreover, satisfied that the judge could not possibly have lost sight of the elementary principle that it was for the claimants to prove their case.

The Authorities

19. It is, finally, necessary to say a little about the authorities of which Mr Bright reminded us. He relied on Rhesa Shipping S.A. v Edmunds (The Popi M) [1985] 1 WLR 948 which is authority for the proposition that if two possible causes of loss are put forward, the rejection of one cause does not necessarily lead to the conclusion that the loss must have been occasioned by the alternative cause.
20. Not only did the judge not fall into this error as I have already explained. He was acutely alive to it and even referred to the Popi M in para 340 of his judgment saying:-

"I do not, however, accept that the evidence is in so unsatisfactory a state that the only just course is to leave the outcome of the case to the incidence of the burden of proof. Sinochem cannot say what exactly was shipped. It is, therefore, necessary to decide what inferences can be drawn from a consideration of the characteristics of other normal cargo and other Jingang material, the history of UN 1748 and UN 2880, and the temperature prevailing on the voyage, amongst other things,"

those other things being (as he had earlier explained) the poor quality control likely to have been exercised within the Jingang factory and Professor Gray's back calculations. In my judgment, therefore, the Popi M can have no effect on this appeal.

21. It must also be remembered that the Popi M was a marine insurance case in which the insured (whose vessel had been totally lost) had the burden of showing a loss by perils of the seas. Bingham J had concluded that ordinary wear and tear was an impossible cause and that the only other possible cause was the (highly improbable) cause of collision with an unidentified under water submarine. It cannot be plausibly said in the average dangerous cargo case (if there is such a thing) that the inherent quality of the cargo is a highly improbable cause in the same sense that collision with an unidentified submarine is highly improbable. In the usual case it must be either the quality of the cargo or mismanagement (in its broadest sense) by the ship that is the cause of the relevant incident. Otherwise the incident would not have occurred.
22. This consideration was, with respect, aptly and concisely summarised by Mustill J in 1979 in The Athanasia Cominos [1990] 1 Lloyd's Rep 277 in words which have never been improved upon:-

"There still remains the problem of identifying the boundary between those risks which the shipowner contracts to bear and those which he does not. One possibility is to draw the line by reference to the proper method of carriage. According to this view, a shipowner who consents to carry goods of a particular description contracts to perform the carriage in a manner appropriate to goods of that description, and thereby assumes all risks of accidents attributable to a failure to carry in that manner.

This is an attractive proposition, for it neatly solves the question of degree to which I have referred, and enables attention to be concentrated on the means adopted to carry the goods. If the carrier proves that he has used the appropriate means, the claim succeeds, without his having to engage in the often difficult tasks of establishing the precise character of the goods, and the precise respects and degree in which they deviated from the norm. Conversely, if his performance has fallen short of what is appropriate, in a manner which is causative of the loss, his claim must fail. This approach also has the theoretical merit of keeping attention focused on the carriage of the goods, which is the subject-matter of the contract from which the liability of both parties mainly, if not exclusively, arises.

This approach will be sufficient to deal with most problems relating to dangerous cargoes, for in respect of the great majority of goods, the normal precautions will suffice to eliminate the risk of carrying normal goods of the description stated in the contract. Leaving outside casualties from wholly extraneous causes, one can say that proper carriage and dangerous nature are opposite sides of the same coin.

There are, however, cases to which this simple analysis cannot be applied: i.e. those where the nature of the goods is such that even a strict compliance with the accepted methods of carriage will not suffice to eliminate the possibility of an accident. Whether consciously or not, seafarers and those who advise them have chosen to adopt methods of carriage which involve an element of risk. No doubt the risk could be eliminated, if those concerned were to provide complex equipment, and enforce rigorous standards of performance. But for practical reasons, they do not. The existence of this gap between acceptable carriage and safe carriage means that there may be cases where an accident is due, neither to the unusual cargo, nor to any short-comings in the carrier, but to simple bad luck.

Who is to bear the risk of accidents falling into this category? In my judgment, the risk must fall on the carrier. By contracting to carry goods of a specified description, he assents to the presence on his ship of goods possessing the attributes of the goods so described; and in the case under discussion, those attributes include the capacity to create dangers which the accepted methods are not always sufficient to overcome."

23. Calcium hypochlorite is not a cargo whose nature is "such that even a strict compliance with the accepted methods of carriage will not suffice to eliminate the possibility of an accident". It has been carried safely for decades and if the carriage by the shipowner (or, as in this case, the time charterer) cannot be faulted the likelihood must be, both in common sense and in law, that the claim by the owner/charterer for breach of contract in shipping dangerous cargo is likely to succeed.

Conclusion

24. I would dismiss this appeal.

Lord Justice Stanley Burnton:

25. I agree.

Lord Justice Maurice Kay:

26. I also agree.