Compania Sud Americana de Vapores S.A. v. Sinochem Tianjin Import & Export Corp. (The Aconcagua)  EWHC 1880
The Aconcagua is the first dangerous goods case to deal directly with a carriers' right to recover an indemnity under Art IV rule 6 of the Hague Rules where loss arises from a combination of the shipment of dangerous cargo and a breach of the carriers' obligation to properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods under Article III rule, 2.
On 30 December 2008, an explosion took place in the no 3 hold of the m.v. Aconcagua off Ecuador causing widespread damage to the vessel and her cargo. The cause of the explosion was self ignition of a container of calcium hypochlorite, which is a dangerous cargo and had been declared as such. The IMDG Code required the cargo to be stowed "away from" sources of heat. Despite this, the cargo was stowed in a position where it was surrounded on 3 sides by a bunker tank, which was heated during the voyage.
The vessel was on time charter to CSAV, who paid US$27,750,000 in settlement of the shipowners' claim. CSAV then pursued a claim against Sinochem, the shippers of the container, for breach of the terms of the bill of lading. The bill of lading was subject to the Hague Rules, under Art IV, rule 6 of which the shipper is liable for all damages and expenses directly or indirectly arising out of or resulting from the shipment of dangerous cargo to which the carrier has not consented, with knowledge of the nature of the goods.
CSAV admitted that the storage of the container next to the bunker tank was negligent. However, they contended that:
- The stowage of the cargo was not the cause of the explosion as it was a rogue batch of calcium hypochlorite with an abnormally high thermal instability, that exploded at temperatures ordinarily to be expected on board the vessel during the voyage.
- If the cargo had not been abnormal, it would not have exploded and any self heating would have been negligible.
- When the cargo was loaded at Busan in Korea, bound for San Antonio, the vessel was not unseaworthy because the bunker tank in question was not needed for the voyage. The tank was heated because of a decision of the Chief Officer to use it as opposed to others available. His negligent decision did not mean that the vessel was unseaworthy at the commencement of the voyage. Additionally, his decision was "an act, neglect or default in the management of the vessel", in respect of which the carrier was exempt from liability under Article IV, Rule 2(a).
Sinochem contended that:
- The cargo was not abnormal or, at the least, had not been shown to be so.
- The heating of the bunker tank on the voyage was either the or a cause of the explosion;
- The bad stowage of the container and its contents amounted to unseaworthiness and that, even if the cargo was a rogue cargo, CSAV was not entitled to relief under Article IV, rule 6, because it had failed to take due care to make the vessel seaworthy.
Having considered very extensive factual and expert evidence the judge concluded the material shipped was likely to have been a rogue batch of calcium hypochlorite with the capacity to explode at an abnormally low temperature, far lower than that which a prudent carrier would expect from the description of the material. CSAV did not know, nor should it have known, that the cargo could explode at temperatures of 40°C or below. Therefore, it was a cargo of a dangerous nature of which CSAV neither had nor ought to have had knowledge and CSAV had not knowingly consented to the shipment of a cargo of this nature.
The judge then went on to deal with the following questions:
Who bore the burden of proof as to the causative effect (or the lack of it) of the negligent stowage?
If the goods had had only the characteristics which a prudent carrier should have been aware of, the explosion would not have occurred. Therefore, Sinochem were seeking to avoid a liability to which it would be subject unless bad stowage was a cause. It was, therefore, for Sinochem to establish that the bad stowage was causative. It followed that once CSAV had established that the casualty resulted from the shipment of goods, the true danger of which it was unaware, the burden was on Sinochem to establish that the negligent stowage of the container had a causative effect.
Was the stowage of the calcium hypochlorite next to the bunker tank a breach of the carriers' seaworthiness obligations under Article 3, rule 1(a)?
Although Sinochem were not able to show that the negligent stowage had a causative effect, the judge went on to consider what the position would be if the negligent stowage had been causative.
In this case the vessel was only in danger if the fuel tank was heated on the voyage to San Antonio. If no heating had taken place the container would be entirely safe. In these circumstances the vessel would not be unseaworthy at the commencement of the voyage unless the heating was bound to occur because the fuel tank had to be used on the voyage; or if heating was pre-programmed to occur, or the crew was incompetent because they were so ill trained they did not know they had to protect heat sensitive cargo. That was not alleged.
Whether or not the fuel tank was used depended on an operational decision made during the voyage. The fault lay not in the stowage but the decision to use and heat the tanks and the failure of the crew to appreciate that a cargo described as one to be stowed away from sources of heat, ought not to be heated by the bunker tank around it, and that bunkers from other tanks should be used. The Chief Officer had the information that the cargo was UN1748 and therefore should be stored away from heat. There was a system for addressing the question as to which tanks should be bunkered at different stages of the voyage. The Chief Officer could and should have assessed the acceptability of heating the tank next to the container and objected to the heating of the tanks. He did not do so nor did the Master or the Chief Engineer, but it was not suggested that they were incompetent and the obligation to take care to make the vessel seaworthy did not mean the ship must be immune from the negligence of her crew.
If not a breach of the seaworthiness obligation, did CSAV's fault amount to an "act, neglect or default in the management of the vessel" within Article IV, rule 2 (a)? If so, is CSAV still liable under Article IV, Rule 6?
Subject to the provisions of Article IV, CSAV was bound under Article III, rule 2 "properly and carefully to keep, care for and carry" the cargo. Heating the fuel tanks when a container of calcium hypochlorite was stowed on top of it was a failure properly to care for and carry that cargo. However, the heating of that cargo was an act, neglect, or default in the management of the ship. The risk of loss arising therefrom was, therefore, an excepted peril and CSAV was under no liability in respect of it.
If CSAV's fault did not fall within Article IV, rule 2 (a), was CSAV precluded from claiming under Article IV, rule 6, because the indemnity under that Article is to be construed so as not to apply in the case of causative negligence?
If the Article IV, rule 2 (a) exception was not applicable, and the casualty was caused by a combination of (a) the shipment of dangerous goods and (b) the heating of the bunker tanks, then, CSAV would not be able to recover an indemnity. On those facts the casualty would in part be caused by the operation of a non-excepted peril for which CSAV was responsible. The exclusions and indemnities in Article IV are predicated on the carrier showing that the loss for which he is said to be liable, or in respect of which he claims an indemnity, was alone caused by a peril falling within Article IV (e.g. an act in the management of the vessel or the shipment of dangerous cargo). They are not to be construed as applying to loss caused in part by the negligence of the party which seeks to invoke the Article.
The outcome in The Aconcagua is illustrative of the significant protection conferred on carriers by the exemption from liability in respect of damage caused by an "act, neglect or default in the management of vessel" under Article IV rule 2(a) of the Hague and Hague Visby Rules.
Notably, if the Rotterdam Rules, signed by 17 states on 23 September 2009, were to apply to the facts of this case, the outcome would have been very different. Under the Rotterdam Rules the carrier is obliged to exercise due diligence "at the beginning of, and during the voyage .... to make and keep the ship seaworthy". The carrier cannot therefore avoid liability simply because the event resulting in the loss or damage to cargo has occurred during the voyage. Nor, as a result of the omission from the Rotterdam Rules of the nautical fault defence would the carrier be able to avoid liability because the loss has been caused by the negligence of the master or crew.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.