Mediterranean Freight Services Ltd v BP Oil International Ltd (The Fiona)

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeNourse,Hirst,Hoffmann L JJ
Judgment Date07 July 1994
Date07 July 1994

Court of Appeal.

Nourse, Hirst and Hoffmann L JJ.

Mediterranean Freight Services Ltd
and
BP Oil International Ltd (“The Fiona”)

Stephen Boyd QC and Nicholas Hamblin (instructed by Dorman & Co) for Mediterranean Freight Services.

Michael Harvey QC and Simon Crookenden (instructed by Jarvis & Bannister) for BP.

The following cases were referred to in the judgments:

A/S Rendal v Arcos Ltd (1937) 58 LI L Rep 287.

Actis Co Ltd v Sanko Steamship Co Ltd (“The Aquacharm”) [1982] 1 LI Rep 7.

AMF International Ltd v Magnet Bowling Ltd & AnorWLR [1968] 1 WLR 1028.

Aries Tanker Corp v Total Transport LtdWLR [1977] 1 WLR 185.

Canada Steamship Lines Ltd v RELR [1952] AC 192.

Hadley v BaxendaleENR (1854) 9 Exch 341; 156 ER 145.

Karlshamns Oljefabriker (AIB) v Monarch Steamship Co LtdELR [1949] AC 196.

McGhee v National Coal BoardWLR [1973] 1 WLR 1.

Paterson Steamships Ltd v Canadian Co-operative Wheat Producers LtdELR [1934] AC 538.

Philco Radio & Television Corp of GB Ltd v J Spurling Ltd & OrsUNK [1949] 2 All ER 882.

Photo Production Ltd v Securicor Transport LtdELR [1980] AC 827.

Smith & Anor v South Wales Switchgear Co LtdWLR [1978] 1 WLR 165.

Smith, Hogg & Co Ltd v Black Sea and Baltic General Insurance Co LtdELR [1940] AC 997.

Walters v Whessoe Ltd & AnorUNK (1960) 6 BLR 23.

Wilsher v Essex Area Health AuthorityELR [1988] AC 1074.

Shipping — Bill of lading — Seaworthiness — Dangerous cargo — Carriage of cargo of fuel oil — Explosion occurred while vessel preparing to discharge — Explosion caused by spark igniting explosive gases in tank — Explosive gases derived from previous cargo of condensate and methane trapped in fuel oil — Failure to wash out condensate in breach of owner's obligation to make vessel seaworthy — Failure by cargo owners to warn shipowners of dangerous nature of cargo — Damage and expense caused by breaches by both parties — Whether shipowners entitled to indemnity from cargo owners — Hague-Visby Rules, art. III, r. 1, art. IV, r. 6.

This was an appeal by the plaintiff shipowners against a decision of the Commercial Court that the shipowners were not entitled to be indemnified by the cargo owners under a bill of lading incorporating the Hague-Visby Rules for loss and damage caused by an explosion on board the shipowners' tanker. The issue was whether the shipowners' obligation of seaworthiness under art. III, r. 1 overrode any claim against the cargo owners under art. IV, r. 6 in respect of dangerous cargo.

The tanker “Fiona” was moored in Long Island Sound preparing to discharge a cargo of fuel oil when an explosion occurred in her No. 1 cargo tank. One man was killed and the vessel badly damaged. The shipowners brought an action against the cargo owners claiming under the bill of lading which incorporated the Hague-Visby Rules an indemnity against loss and damage caused by the explosion. The trial judge found that a spark had ignited a mixture of explosive gases in the tank when a surveyor inserted an unearthed metal temperature probe into the tank. The explosive gases were caused by the remains of a previous cargo of natural gas condensate which the shipowners had failed to wash out of the ship's ducts and lines before loading the fuel oil. The fuel oil itself also produced explosive gas because of a change in refinery methods of which the cargo owners were aware, but they had not informed the shipowners of that danger. Previously fuel oil had been a safe cargo. The trial judge found that both the condensate and the fuel oil were contributory causes of the explosion. If the fuel oil gas had been the sole cause of the explosion the judge found that the cargo owners would have been liable under art. IV, r. 6 of the Hague-Visby Rules to indemnify the shipowners since the shipowners had not consented to carry goods of a dangerous nature. Since, however, the damage and loss had been partly caused by the shipowners' breach of art. III, r. 1, which required them to make the vessel seaworthy, the claim to an indemnity failed. The shipowners appealed.

Held, dismissing the shipowners' appeal:

1. Article IV, r. 6 of the Hague-Visby Rules which concerned the shipping of dangerous cargo without the shipowners' consent, was an indemnity clause. It was accordingly subject to the well-established rule that, in the absence of a contrary intent, exemption and indemnity clauses were not construed as applying to loss caused by the negligence of the party who invoked them.

2. There was nothing in the language of art. IV, r. 6 which expressly or impliedly negatived a construction that it did not apply to damage caused or contributed to by the negligence of the shipowners. It followed that the shipowners' rights under art. IV, r. 6 were subject to their overriding obligation under art. III, r. 1 to make the vessel seaworthy.

3. Since the shipowners' negligence in failing to wash out the condensate from the previous cargo materially contributed to the accident, they were in breach of their duty under art. III, r. 1 to make the ship seaworthy. Article IV, r. 6 was therefore inapplicable. The shipowners were accordingly unable to rely on the indemnity in art. IV, r. 6 against the cargo owners in respect of loss and damage caused by the explosion.

4. The limitation period of one year in art. III, r. 6, which extinguished any claim against the shipowner or ship unless suit was brought within a year of the date on which the goods should have been delivered, was irrelevant to the issue of whether the shipowners' negligence was a defence to a claim under art. IV, r. 6. It followed that the time-bar in art. III, r. 6 was no obstacle to the defence raised by the cargo owners under art. III, r. 1.

JUDGMENT

Hirst LJ: Introduction

On 31 August 1988 the appellant plaintiffs' tanker “Fiona”, which was on charter to the respondent defendants, was preparing to discharge her cargo of fuel oil at an offshore platform near Long Island Lighting Co's power plant at Northport New York when an explosion occurred in No. 1 tank.

Immediately prior to the explosion SGS and Saybolt surveyors had approached the tank, which was slack and only loaded to about 3.6 per cent of its capacity, in order to take ullage soundings and temperature readings. The SGS surveyor inserted an unearthed electronic temperature probe, whereupon the tank exploded, tragically causing the death of the Saybolt surveyor, and also inflicting severe damage to the vessel.

By reason of the Carriage of Goods by Sea Act 1971 and the terms of the bill of lading the contract was subject to the Hague-Visby Rules (“the rules”).

On 25 October 1989 the plaintiffs issued proceedings in the Commercial Court, claiming both damages and indemnities against any cargo claim or personal injury claim against themselves on the ground that the cargo of fuel oil shipped by the defendants was of a dangerous character, as a result of which the plaintiffs were entitled to the relief provided by art. IV, r. 6 of the rules.

The defendants by their defence denied liability, and contested the claim inter alia on the grounds that the plaintiffs were in breach of art. III, r. 1 of the rules, by reason of their failure to discharge from the vessel part of its previous cargo of volatile petroleum condensate, which mixed with the fuel cargo and rendered the vessel unseaworthy.

The action was tried over a period of several weeks by His Honour Judge Diamond QC, who held on 12 November 1992 in a judgment ([1993] 1 LI Rep 257):

  1. (1) That the defendants had shipped a dangerous fuel oil cargo by reason of the tendency of this particular blend to give off light hydrocarbon gases in tank head spaces which sometimes approach and occasionally exceed the lower explosive limit (LEL) irrespective of flashpoint temperature; that this was one of the causes of the explosion; and that since the plaintiffs had never consented to the shipment of this dangerous cargo, the plaintiffs were in principle entitled to rely on art. IV, r. 6 of the rules.

  2. (2) That the oil in tank No. 1 was contaminated by the highly volatile condensate left on board from the previous voyage, which was a concurrent, and indeed the dominant and most efficient cause of the explosion, with the result that the plaintiffs had failed to exercise due diligence to render the vessel seaworthy; and that in consequence the plaintiffs were in breach of art. III, r. 1.

  3. (3) That a shipowners' rights under art. IV, r. 6 were subject to the performance by him of his overriding obligation under art. III, r. 1 to exercise due diligence to make the vessel seaworthy, so that the plaintiffs' breach of that overriding obligation furnished a defence to their claim under art. IV, r. 6, which therefore failed.

The plaintiffs now appeal against the dismissal of their claim, and the central issue in the appeal is whether the judge was correct in his conclusion that the carriers' obligation under art. III, r. 1 overrides any claim the shipper might otherwise have under art. IV, r.6.

Article III, r. 1 provides as follows:

“1. The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to —

  1. (a) Make the ship seaworthy.

  2. (b) Properly man, equip and supply the ship.

  3. (c) Make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation.”

In contrast to art. III, r. 2, art. III, r. 1 contains no stipulation that it is subject to the provisions of art. IV.

Article IV, r. 6 provides as follows:

“Goods of an inflammable, explosive or dangerous nature to the shipment whereof the carrier, master or agent of the carrier, has not consented, with knowledge of their nature and character, may at any time before discharge be landed at any place or destroyed or rendered innocuous by the carrier without compensation, and the shipper of such goods shall be liable for all damages and expenses directly or...

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