Derby Resources AG v Blue Corinth Marine Company Ltd [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Colman J. |
| Judgment Date | 06 May 1998 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 06 May 1998 |
Queen's Bench Division (Commercial Court).
Colman J.
George Leggatt QC (instructed by Clyde & Co) for the plaintiff.
Timothy Saloman QC (instructed by Elborne Mitchell) for the defendant.
The following cases were referred to in the judgment:
Charlotte, TheELR [1908] P 206.
Columbus, TheENR (1849) 3 W Rob (Adm) 158; 166 ER 922.
Good Friend, TheUNK [1984] 2 Ll Rep 586.
Livingstone v Rawyards Coal CoELR (1880) 5 App Cas 25.
Paul (R & W) Ltd v National Steamship Co LtdUNK (1937) 59 Ll L Rep 28.
Rodocanachi Sons & Co v Milburn BrosELR (1886) 18 QBD 67.
Sanix Ace, TheUNK [1987] 1 Ll Rep 465.
Texaco Melbourne, TheUNK [1994] 1 Ll Rep 473.
Williams Brothers v Ed T Agius LtdELR [1914] AC 510.
Shipping — Tort — Negligence — Damages — Whether cargo contamination caused by defendant shipowner's breach of duty — Whether cargo owner had suffered recoverable loss — Materiality of available market for cargo, sound and damaged.
This was a claim for damage to a cargo of jet kerosene.
The plaintiffs were buyers of a cargo of kerosene shipped on board the defendant's vessel at Banias in Syria for carriage to Iran. The cargo was contaminated and was off specification in terms of colour. The vessel's master told the shipper's surveyors (“CB”) that the vessel had carried two cargoes of gas oil since the last cargo of fuel oil and that the vessel's tanks had been washed consistently with good practice. That was untrue. After the vessel's tanks had been loaded to a depth of one foot samples were taken by CB for quality analysis, including colour, in accordance with an agreement between the first plaintiff (“Derby”) and the third plaintiff (“NIOC”). CB asked the master and refinery to stop loading while the samples were analysed but loading continued. Approximately 40 per cent of the cargo had been loaded by the time that analysis of the first foot samples was completed. The samples were off colour and CB (in accordance with the agreement between Derby and NIOC) then tested a further composite sample made up of part of the first foot sample and the balance from the shoretank sample. That sample was within the contract specification. However the entire cargo was below the contract specification. That resulted in Derby reducing the price payable by NIOC down to that of gas oil together with a handling fee of US $5 per metric ton. NIOC sought to recover against the defendant shipowner in tort.
The defendant argued that the conduct of CB and of the shippers in continuing to load the cargo was the cause of the damage and not the negligence of the shipowners. The defendant argued that NIOC had suffered no loss because there was no market either for kerosene or off specification kerosene in Iran at the relevant time because of the local command economy during the Iran-Iraq war. Accordingly there was no evidence of any reduction in value. On arrival in Iran the cargo was blended with gas oil and NIOC thus used it as a blending agent in just the same way as it would have used sound kerosene.
Held, giving judgment for NIOC:
1. The contamination of the kerosene was caused exclusively by the defendant's breach of its duty of care in relation to the cargo. The master deceived CB about the previous cargoes (since the last but one was fuel oil) and the washing of the tanks. Further the continuation of loading after the taking of the first foot samples was caused by decisions of the master and the refinery and not by CB. The fact that loading was not stopped while the first foot samples were analysed was not causative because the composite sample was within specification. There was an unbroken chain of causation from the defendant's breach to the entire damage to the cargo. The contamination was not caused wholly or partly by CB's conduct and CB's conduct could not be relied on to found an allegation that NIOC had failed to mitigate its loss. CB was the agent of the second plaintiff not of NIOC.
2. NIOC was entitled to be given the financial means of providing itself with goods in as sound condition as the goods carried should have had if the defendant had exercised reasonable care. NIOC's particular circumstances and hence the utility of the goods to NIOC were irrelevant to an objective assessment of any reduction in value. The relevance of an available market was simply to provide evidence of the monetary value of the goods, sound and damaged. If there was no available market, because there was a command economy, the value of the goods still had to be ascertained on the available evidence. The price at which the damaged goods were sold was evidence of their value in damaged condition. But where the receiver used the damaged goods for a particular purpose that would generally be incapable of providing evidence of the damaged value.
3. The court accepted NIOC's evidence valuing sound kerosene at Hormuz at US$184.50 per metric ton based on market rates sufficiently closely related to the time and place of delivery. Although the damaged cargo might in theory have been used to thin gas oil if refinery space was available, in practice that was very difficult if not impossible. Although the damaged kerosene had some uses it could not be used in jet engines. The reason it was mixed with gas oil was to get rid of it. There was no evidence that a sound cargo would have been used for blending. The fact that the damaged kerosene could have been used by NIOC in various ways was not evidence of its damaged value in monetary terms. The agreement with Derby that NIOC would pay the gas oil price less a handling charge was evidence that the value of the damaged cargo was equivalent to gas oil. In theory the cargo could have been reinstated by refining but that was unrealistic in practice. As a matter of mitigation it was reasonable for the cargo to be sold by NIOC at or near the price of gas oil. The price of gas oil calculated by the same method as the price of sound kerosene at Hormuz was US$158 per metric ton. Thus the reduction in value of the cargo was US$26.5 per metric ton and NIOC was entitled to damages calculated on that basis.
Colman J:
This is a claim for damage to a cargo of jet kerosene which was shipped on board the defendants' vessel, Athenian Harmony, at Banias in Syria on 6 and 7 September 1987 for carriage to Iran. It raises a point of some importance on the method of calculating loss attributable to negligent damage to goods by a carrier.
The nature of the damage was contamination by fuel oil, specifically by a substance known as asphaltene. One of the consequences of this contamination was that the colour rating of the cargo on the Saybolt colour scale was reduced to well below that specified in the receivers' purchase contract and well below that to be expected of jet kerosene.
It is common ground that the contamination took place after the cargo was shipped on board and after title to the cargo had passed to the National Iranian Oil Co (“NIOC”), the third plaintiff under the terms of its purchase contract. The defendant shipowners concede that NIOC alone of the plaintiffs has title to sue and that its sole cause of action is in tort. The defendants further concede that they were in breach of their duty of care in failing to provide a ship whose lines and tanks were fit to receive the cargo. However, they contend that NIOC have failed to prove that they have suffered loss caused by that breach of duty. In summary, it is submitted that the cargo was largely damaged due to the negligence of Caleb Brett, the surveyors appointed by the shippers at Banias in as much as they permitted the continued loading of cargo before the results of analysis of the first foot samples were to hand and when subsequently it was found from the results that the cargo had been contaminated. On this basis it is said that the conduct of Caleb Brett and of the shippers in continuing to load the cargo was the cause of the damage and not the negligence of the shipowners. Alternatively, it is said that NIOC failed to mitigate its loss because the shippers and Caleb Brett should reasonably have suspended loading pending sample analysis results becoming available. The defendants further argue that if, contrary to their primary submission, the damage to the cargo was caused by their breach of duty as distinct from the conduct of Caleb Brett and the shippers, the plaintiffs have failed to prove that they suffered loss in consequence of that damage. They submit that in September 1987 there was no available market for jet kerosene in Iran due to the command economy in operation in that country and that NIOC used the cargo for one of the uses to which jet kerosene which complied with the contractual specifications could normally be put, namely, as a blending agent to improve the properties of gas oil with which it was blended after discharge. It could also have been used as burning kerosene except in certain wick-fed appliances.
In the course of the plaintiffs' final submissions, Mr Saloman QC, on behalf of the defendants, applied to re-amend the points of defence to plead contributory negligence based on the conduct of Caleb Brett in permitting the continuance of loading at Banias. This application was refused because it was made far too late. The points of defence had originally been served over eight years before the trial and had then been amended only the week before the trial to introduce a new positive case to the effect that NIOC had suffered no loss. The plaintiffs' expert evidence adduced at the trial was not designed to meet any allegation that the cargo surveyors were professionally negligent in their conduct at Banias. That issue was not explored with Mr Minton, the Plaintiffs' expert, either in his evidence in chief or in cross-examination and the plaintiffs had the opportunity of calling no other expert evidence on the practice of cargo surveyors in...
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