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Gard News 196, November 2009/January 2010


By Rory Butler and Julian Clark,
Holman, Fenwick & Willan, London.

 

English High Court considers shipper's liability for dangerous goods in a case involving carriage of calcium hypochlorite in its dry form.

 

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The ACONCAGUA: the entirety of the cargo was destroyed by the initial fire and explosion.

The High Court has recently issued a potentially far-reaching judgment in the first substantive English decision concerning the dry form of calcium hypochlorite (classified as UN1748).1   Calcium hypochlorite is a cargo which has been linked to a number of serious casualties that occurred in the late 1990s, including the CMA DJAKARTA, DG HARMONY and CONTSHIP FRANCE, although these cases all involved calcium hypochlorite in its hydrated form (UN2880).2

The case concerned a major fire and explosion on board the container ship ACONCAGUA (entered with Gard on behalf of the charterer/carrier) on 30th December 1998, resulting in extensive damage to vessel and cargo on board. The source of the explosion was immediately identified to be a container loaded with 334 kegs (plastic drums, known as quadritainers) of calcium hypochlorite (declared to be UN1748), shipped by a major Far Eastern shipper.  Mr Justice Clarke found the shipper liable to the carrier under the bill of lading contract for shipping dangerous goods in breach of Article IV(6) of the Hague Rules, with an initial judgment amount in the sum of USD 27.75 million, and further extensive quantum issues still to be dealt with.
 
The issues
The judgment, which runs to over 100 pages and is highly technical from an expert evidence viewpoint, contains useful guidance on the interpretation of the IMDG Code, on the legal test to be applied in dangerous goods cases, the burden of proof, unseaworthiness, the carrier's defences and guidance on expert evidence in complex cases. In summary, the case dealt with the following four issues:

(a) What characteristics should a prudent carrier have expected of goods declared as UN1748 in 1998?
(b) Did the calcium hypochlorite actually shipped have such characteristics, or did it have abnormal characteristics which rendered it more dangerous than was to be anticipated?
(c) Was the explosion and resultant damage the result of such abnormal characteristics or of the stowage of the container on top of a bunker tank that was heated, or both? (the container was placed on top of and next to a heated bunker tank. The carrier admitted that the stowage of the cargo was in breach of the IMDG Code requirement that calcium hypochlorite be stowed "away from" sources of heat.); and
(d) what is the legal consequence where bunker heating is found to be either the or a cause of the incident?

The answers developed by the court will have application in other dangerous goods cases.

Issue (a) - Critical Ambient Temperature (CAT) and UN1748
In considering causation, it was first necessary to investigate the self-heating properties of calcium hypochlorite and its Critical Ambient Temperature, or CAT. The judgment notes that a CAT of a product is the ambient temperature at or above which thermal runaway or ignition will occur and below which only sub-critical heating will occur (with the key to the time to ignition being how far above the CAT the ambient temperature is and for how long).
 
The court considered the history of UN1748, including the previous incidents, and detailed academic papers. The submission that a prudent carrier would, in 1998, have known a CAT as low as 40º C could be expected if calcium hypochlorite was containerised (larger bodies of material including a container of kegs have a lower CAT than a single keg) was rejected, as was a suggestion that a carrier could be expected to be aware of the details of and information contained within a body of complex academic literature.
 
It was held that while the permitted moisture content of UN1748 was up to 5.5 per cent, and not 1 per cent as previously suggested, (the IMDG Code is arguably not clear in this regard and the judgment contains useful guidelines for future disputes), the lowest CAT a prudent carrier would have in mind would be 60º C, which was the warning given in the then edition of the IMDG Code and that a carrier should assume that it was safe to carry the product in containers on or under deck (where it should be stowed away from sources of heat), as such temperatures would not normally be exceeded on container ships.

Issue (b) - The actual characteristics of the product
One of the difficulties of the case was that the entirety of the subject cargo was destroyed by the initial fire and explosion and it proved very difficult for all parties involved to access other material from the same source following the casualty. During the trial the shipper adduced little evidence as to the characteristics of the product shipped but did confirm the identity of the factory that had originally manufactured the product. Fortunately for the carrier their main expert  had managed to obtain and test samples of the product from that same factory after the incident. These tests revealed that the product had an unusually low CAT and behaved in an inconsistent manner when heated. Mr Justice Clarke found that this suggested poor quality control, but said that since there was no direct information as to what was actually shipped it was necessary to look at what occurred on the voyage to determine the characteristics of what had actually been carried. He accepted the approach suggested by the carrier, namely to see if normal UN1748 would have withstood the temperature regime in the hold of the ACONCAGUA. If the answer to that question was "yes", then the fact of the explosion would itself indicate that the material shipped had abnormal characteristics.

It was therefore necessary to determine what effect heating of the bunker tank had on the container in question.

Issue (c) - Bunker heating
The evidence of the crew as to the duration and temperature of the bunker heating, together with expert evidence as to the effect this actually had on the container was considered closely by the court. The finding was that even an unheated hold could have reached temperatures in the mid 30º Cs and above, and that there was little or no appreciable difference between the temperature the container experienced due to heating of the bunker tank below/next to it and in the same position without such heating (with other bunker tanks in the hold being heated to the same extent).

The carrier's main expert produced models to show the probable back calculated CAT of the material shipped based on the probable temperature regime on board the vessel. This showed that to explode in the time that it did (a known parameter) the material must have had an unusually low CAT, somewhere in the region mid to high 20º Cs or low 30º Cs.

Accordingly, the court held that normal UN1748 should not have exploded if subjected to such temperatures and that this itself implied that the material actually shipped was rogue material. The CAT was also abnormally low and as such the cargo was of a dangerous nature of which the carrier neither had, nor ought to have had knowledge. The carrier had not knowingly consented to the shipment of such cargo. The explosion was not therefore the result of bunker heating but of the characteristics of the cargo itself.

Issue (d) - What if heating was "a" cause?
Having found that the cargo shipped was dangerous, the court then had to consider if the admitted negligent stowage had a causative effect and the effect of possible competing causes (for example if the cargo had been stowed "away from" heat would it still have exploded?).  The court was faced with three further issues as follows;
(i) the burden of proof in this regard;
(ii) the seaworthiness obligation under Article III(1)(a) of the Hague Rules; and finally,
(iii) the Article IV(2)(a) defence of an "Act, neglect or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship".

Significantly, the case decides that it is for a shipper to establish that a particular stowage arrangement has some causative effect once the carrier has established that the goods are dangerous. On the facts of this case the shipper had failed to meet this burden. Also of significance is the finding that in any event a carrier in such circumstances as those in this case will not be in breach of its seaworthiness obligation. Referencing Steel v The State Line Steamship Company,3 Mr Justice Clarke held that a vessel is not unseaworthy merely because at the commencement of the voyage there is something which may need a correction, so long as such a correction can readily be made and the need for the same has not been hidden. In the current case he held the ACONCAGUA was only in danger if the bunker tank had been heated. On the facts of the case the crew had not needed to use the bunker tank next to the container and could have used alternative tanks. To heat the tank was negligence on the part of the crew but did not amount to unseaworthiness. Given that the vessel was seaworthy, the carrier was able to rely on the Article IV(2)(a) defence to defeat any breach of Article III(2) ("properly and carefully to keep, care for and carry"). Bunker heating was clearly an act in the management of the ship. Therefore, even if the heating had been causative, the carrier would still be entitled to an indemnity under Article IV(6).

Expert evidence
The decision sets out some useful guidance on the correct approach to expert evidence at Appendix 3 of the judgment. The court criticised the volume of expert evidence submitted and suggested that this may have been a case whereby some form of preliminary "tutorial" would have been of assistance, as contemplated by the Long Trials Working Party Report.

Summary
The case is interesting in that it illustrates the dangers of UN1748 which if not subject to rigorous quality control in terms of raw materials and manufacture may have a very low CAT of well below normal carriage temperatures.
 
The case also demonstrates the considerable exposure that a shipper of goods may have (in this case the shippers did not manufacture the goods themselves). The burden of proof will be on the shipper once the carrier establishes dangerous goods were shipped. Further, it demonstrates that potential unseaworthiness, for example bunker heating where a heat-sensitive cargo is involved, may not amount to unseaworthiness where the crew could remedy the problem after the commencement of the voyage and that, in any event, the carrier may rely on the Article IV(2)(a) defence providing the vessel is seaworthy to defeat any breach of Article III(2).

The decision is one which shippers of dangerous goods (and their insurers), shipowners and charterers carrying UN1748 or other similar heat sensitive, self-heating dangerous goods should read carefully.

At the time of going to press an application by shippers for leave to appeal to the Court of Appeal was pending. Readers will be kept informed in case leave is granted and an appeal filed.

Footnotes
1 CSAV v. Sinochem Tianjin Limited [2009] EWHC 1880 (Comm).
2 See articles "The CMA DJAKARTA case settles" in Gard News issue No. 183, and "US law - Carriage of calcium hypochlorite - The DG HARMONY on appeal" in Gard News issue No. 191.
3 [1877] 3 A.C. 72.

Gard News 196, November 2009/January 2010

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