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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Macieo Shipping Ltd v Clipper Shipping Lines Ltd [2001] EWHC 545 (Comm) (12 April 2000) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2001/545.html Cite as: [2001] EWHC 545 (Comm)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		12 April 2000

The Hon. Mr. Justice David Steel:

Introduction

1. This dispute arises under an amended NYPE charterparty dated the 20th July, 1992 between the Claimants as Owners and the Defendants as Charterers. The focus of the dispute is a fire that started in Hold No. 5 of the Claimants' vessel CLIPPER SAO LUIS when lying alongside at Rio de Janeiro on the 19th February, 1997.

The common ground

2. CLIPPER SAO LUIS is a 1975 build, 5 hold 'tween decker, of 10,367 GRT and 6,304 NRT. She is fitted for carriage of containers and has 7 x 15 MT SWL Hagglund cranes. The vessel is registered at Valletta. The managers were Primera Maritime of Athens. The Defendants were employing the vessel in their liner service for general and container cargoes between West Africa and South America. The vessel had called at Contonou in early February where she had loaded a part cargo of baled cotton into Hold No. 5. Having proceeded via Abidjan, the vessel had arrived in Rio on the 14th February. When the fire broke out on the 19th February, cargo operations had been completed. Her next port of call was to be Itajai.
3. Most of the cotton loaded at Cotonou had been stuffed in containers but there were some 536 loose bales. The majority (495) were stowed in the after half of the lower hold of Hold No. 5 and the remainder in the aft wings of the lower 'tween deck. The forward part of the hold, from the tank tops to the underside of the hatches was used to stow some of the containers, 5 high and 3 abeam.
4. Leaving aside discharge and loading of deck containers, the first movement of cargo in Hold No. 5 after arrival at Rio was on the 17th February when 40 "big bags" of Ferro Silicon (42.12 te) and 14 "big bags" of Ferro Manganese (21 te) were loaded by stevedores across the forward bulkhead of the upper `tween deck. The following day the stevedores commenced loading 121 pallets (137 te) of fire bricks across the forward bulkhead of the lower 'tween deck. This was completed early on the 19th February. Three containers of cotton bales were then shifted from deck and re-positioned on the after lower 'tween deck cover, above the loose bales.
5. The hatch covers were closed and sealed at 0922 hours. Two containers were then lashed onto the hatch covers. All other cargo operations were complete at 0958 hours and, thereafter, the vessel, being ready to sail to Itajai, was simply awaiting the arrival of the pilot. However, at 1040 hours, the ship's electrician detected fire in No. 5 Hold.
6. The master and the bosun carried out a quick inspection and discovered smoke coming from underneath the aft lower 'tween deck. The hold's ventilation was thereupon closed and all openings sealed. Once this was achieved, 46 cylinders of CO2 were discharged into the hold. Thereafter, having been informed of the emergency, the fire brigade, a representative of the port authority, a P&I surveyor and the charterers' supercargo, Captain Galiatsatos, attended on the vessel. A further 54 cylinders of CO2 were discharged at 1310 upon the discovery that the forward bulkhead of the engine-room was hot to the touch.
7. On the morning of the 20th February, with further smoke emerging from Hold No. 5, additional CO2 was discharged. An inspection by three firemen and the bosun then ensued. Visibility was heavily obscured by smoke but it was clear that access to the fire was blocked by the containers on the after part of the lower 'tween deck cover. These three containers were accordingly discharged and at 1311 the lower aft 'tween deck cover was opened. This revealed that the upper layer of the cotton bales were light brown in colour, with a few blackened.
8. The upper hatch covers were closed for a while and then reopened at 1515 to allow the fire brigade to spray foam on the bales but after a few minutes flames were seen to be emerging and the hatches were closed again. In any event, the master was concerned about the use of foam. He envisaged that the heat might create steam that in turn might condense and then run down onto the ferro-silicone. The master was aware that the properties of ferro-silicone were such that, when wet, it produced phosphine, arsine and hydrogen.
9. The hatches were closed again at 1553 and a further 47 bottles of CO2 were discharged into the hold. The fire brigade obtained further supplies of foam and at 1825 persuaded the master to allow them to introduce it once again. Despite this, flames broke out again. Following closure of the hatches at 1910 and the introduction of further CO2, it was necessary for some 60 bottles to be sent ashore for recharging. They were received back at 1640 on the 21st February. In the meantime, on the advice of the vessel's managers, a programme of the introduction of one cylinder of CO2 every 4 hours was introduced pending the arrival of expert assistance.
10. The managers had been in touch with the Piraeus fire brigade and with a fire consultant in England. On the 21st February, they instructed Mr. Richard Sutcliffe of Messrs. Burgoyne & Partners to attend on the casualty and both he and Mr. Vitzileos, Primera's Technical Manager left for Rio. The master in the meantime had been placed under considerable pressure by the local authorities to vacate the berth and go to an anchorage. Very sensibly the master stood firm on the basis that fighting the fire and discharge of cargo was only practicable alongside and in due course the authorities relented.
11. Mr. Sutcliffe boarded the vessel on the 25th February. Wearing breathing apparatus, he carried out an inspection of Hold No. 5 together with the bosun and the technical manager. The chief officer was on standby on the deck wearing just a gas mask and was overcome by fumes as he waited for the inspection party to complete their survey. Fearing that he had succumbed to toxic gases from the ferro-silicon, he was hospitalised but returned to work within a day or so.
12. Following the inspection, flooding of Hold 5 was considered but rejected for a number of reasons. A plan was formulated to contain the fire, discharge the burning bales, break them up on the quayside, extinguish them with water and finally dump them. This plan was put into action on the 26th February with crew using breathing apparatus. First damp tarpaulins were placed over the bales to keep out oxygen and plastic sheeting over the ferro-silicon to protect against water.
13. More CO2 was introduced overnight and on the morning of the 27th discharge began with the containers so as to avoid them becoming involved in the fire. It was not until the 3rd March that the necessary permissions had been obtained and the appropriate equipment had been assembled so as to commence discharge of the bales. This process continued intermittently until completed on the 10th March and, on the following day, there was an inspection by a class surveyor. His report contained no conditions but a port state control inspection led to a recommendation that part of the fire line system be repaired. On the 12th March the undamaged cotton bales were reloaded at 0505.
14. The vessel was at this stage ready to resume her voyage but, in addition to the outstanding requirement with regard to the fire line, two further impediments to her departure had arisen. The harbour master was requiring both the presentation of some outstanding dangerous cargo documentation and the completion of an inquiry into an incident (unconnected with the fire), in which the 2nd Engineer had been seriously injured, before permitting the vessel to sail. All these matters were not completed until 1930 on the 14th March. The vessel sailed at 2030.

The cause of the fire

15. In response to a Notice to Admit Facts served by the Claimants, the Defendants accepted by letter dated the 3rd February, 1999, that "the fire in hold 5 was caused by stevedores dropping lit cigarettes and/or matches." This reflected the unchallenged evidence contained in the report of Mr. Sutcliffe which excluded all possible causes other than the careless discard of smoking materials by the stevedores in Rio. Against this background there arose the perhaps rather surprising contention on the part of both parties that, by virtue of the express terms of the charterparty, the other was liable for loss and damage thus caused.

Liability for stowage

16. The relevant terms of the charterparty were as follows:-

8. ...The Captain (although appointed by the Owners) shall be under the orders and directions of the Charterers as regards the vessel's employment and agency; and the Charterers are to load, stow and trim and discharge the cargo at their expense under the supervision and responsibility of the Captain, however this responsibility not to have any effect on the stevedore damage clause...

35. Charterers are responsible for damages to the hull, machinery, equipment caused by stevedores in loading and discharging vessel, only when such damage is duly substantiated by the Master's prompt notice of claim served in writing upon the party responsible and to the Charterers or their agents. For stevedore damage not visible, Charterers are not to be responsible unless notified by Master as soon as possible but not later than on completion of discharge of the cargo in question...

17. It is well established that, in the absence of causative intervention by the charterers, the words "and responsibility" in clause 8 transfer liability for careless or bad stowage on to the owners: The Shinjitsu Maru No.5 [1985] 1 Lloyd's Rep. 568, The Argonaut [1985] 2 Lloyd's Rep. 216 and The Alexandros P [1986] 1 Lloyd's Rep. 421. It was the Claimants' case that the effect of clause 35 was to limit the transfer of responsibility. The argument was presented in various ways but can be summarised in the proposition that the dividing line between clauses 8 and 35 turns on whether the conduct of the stevedores performing the stowage was such as to endanger the cargo or the ship. If the latter, so the argument ran, the charterers are liable not only in respect of the cost of any repairs to the vessel but also for the costs of, and the delays involved in, dealing with peril whether or not the vessel actually sustained damage.
18. I am quite unable to accept the owners' submission. Clause 35 is manifestly only concerned with physical damage to the ship. Although the word "damages" is used in the first line, it is clear that notice is required in respect of "such damage" at different stages depending upon whether the "damage" is immediately visible or not. The charterers become responsible for such damage if it occurs and is duly reported. Otherwise all loss and damage is to be borne by the owners (including any unreported damage to the vessel). In the present case there was no material damage to the ship, no claim is made in respect of such damage nor (if the point had been a live one) was any appropriate notice given.
19. I reject the submission that this construction gives rise to curious, let alone capricious, consequences. An owner who did nothing to prevent the spread of fire so as to allow damage to be sustained by his vessel would not be "better off" than the diligent owner. He may be able to recover the costs of repair thus precipitated but would expose himself to greatly enhanced liability in respect of the other consequences of the spread of fire. By the same token I am unable to follow the proposition that responsibility for a fire would somehow "hover" dependent upon the ultimate gravity of the consequences. This is a bootstrap argument since it is in turn dependent on the enlarged meaning of the word "damages" contended for by the Claimants.
20. The conclusion thus reached is also sufficient to deal with the Claimants' case that their claim is recoverable as a loss sustained in an attempt to mitigate their loss. The charterers were not in breach of clause 35. The expenses were incurred in an attempt to reduce any loss of hire and to limit any exposure on the owners' part to charterers and to cargo-owners. By the same token, I am unable to accept the somewhat tentative suggestion made on behalf of the owners that there was an implied agreement on the part of the charterers to pay for the services provided or arranged by the owners that were of benefit to the charterers. Accepting that it was common ground that the vessel should stay alongside at the berth and fight the fire, there is no material to be derived from the documents or the oral evidence in support of an implied agreement in direct contradiction to the express terms of the charterparty.

Implied terms

21. The owners contended in the alternative for an implied term in respect of which the charterers were in breach. Their extreme case was that it was appropriate to imply a term to the effect the stevedores appointed by the charterers would take reasonable care not to endanger the ship or cargo. The short answer to this point, in my judgment, is that such an implied term would be wholly inconsistent with the express term imposing liability on the owners for bad stowage. Neither necessity nor business efficacy justify imposing a concurrent warranty on the part of the charterers that the stevedores will not be careless.
22. The more conservative submission by the owners was that it was appropriate to imply a term to the effect that the charterers would appoint reasonably competent stevedores. The primary response to this on the part of the charterers was that the scope of any implied term should be restricted to an obligation on their part to exercise reasonable care to appoint competent stevedores. In support of this approach, the charterers rely upon the line of authorities which underline that the duty imposed on those undertaking the task of loading, stowing and trimming a cargo is that of reasonable care: see e.g. Canadian Transport & Co v. Court Line Ltd. [1940] A.C. 934 at 951. This was inconsistent, it was contended, with a warranty of competence.
23. On this issue, I consider that both authority and business efficacy support the owners' analysis. As regards authority, the starting point is The Sinoe [1971] 1 Lloyd's Rep. 514 where one of the issues was whether the owners' claim for demurrage failed because the terms of the charterparty rendered the dilatory stevedores their servants. Donaldson J. felt unable to decide the point directly but felt that it was unnecessary to do so because the charterers were in breach of clause 23, which imposed the obligation on the charterers to employ the stevedores, by appointing incompetent stevedores:

Mr. Rokison for the charterers says that clause 23 says nothing about competent stevedores and submits that this qualification should not be implied. Lord Esher M.R. in Harris v. Best, Ryley & Co (1893) 68 L.T. 76...discussing the various ways in which stevedores may be employed under the terms of the charterparties gave one example:

...the charterer makes a contract with the shipowner or captain that the shipowner or captain shall employ a stevedore, to be appointed or nominated by the charterer. In such a case the shipper nominates a good stevedore, and then leaves him to be the servant of the shipowner, just as if he had been nominated by the shipowner...

The emphasis on the word "good" is mine. Lord Esher M.R.. makes the implication and I have no doubt that I should do likewise. A reasonable shipowner may well be prepared to accept the chance that competent stevedores nominated by the charterer will delay the sailing of his ship by some act of foolishness, but surely none would be prepared to accept the risk attendant upon having thrust upon him the services of incompetent stevedores.

24. In the Court of Appeal ([1972] 1 Lloyd's Rep. 201), Lord Denning expressed a similar view, although the other two members of the court left open the question whether in selecting incompetent stevedores the charterers were in breach of contract. If the point be still open, I unhesitatingly opt for the view that there is a warranty of competence:-

a. Whilst it is true that the duty to load and stow involves a contractual duty of care, it is broken if due care is not in fact exercised whether by the contracting party, his servants or his sub-contractors: see The Apostolis [1999] 2 Lloyd's Rep. 292.

b. Furthermore, I accept the limitation on the master's (and thus the owners') responsibility for damage outlined by Leggatt J. in The Argonaut [1985] 2 Lloyd's Rep. 216 at p.224 to the effect that "a master cannot be said to be responsible for damage which he cannot avoid by the reasonable exercise of his powers of supervision and control."

c. Accordingly, it seems to me to be necessary that the master should be entitled to proceed on the basis that the stevedores furnished by the charterers are competent. It is one thing to supervise, quite another to train.

Competence

25. As regards the competence of the stevedores, it was the owners' case that the fact that the fire was occasioned by a stevedore dropping a lighted cigarette or match onto a cargo of baled cotton establishes that the person concerned had no basic understanding of safety matters and was thus, by definition, incompetent. Before discussing this submission, it is desirable to set out some of features of stevedoring services in Rio.
26. The system for obtaining stevedoring services in Brazilian ports since the implementation of the Port Modernisation Law in 1993 is as follows. Requests for labour have to be made through a Port Operator. These requests are channelled to the relevant monopolistic port labour contractor, which for Rio was Orgao Gestor de Mao de Obra ("OGMO"). OGMO maintains a register of stevedores who have been trained on the job. However, the reality is that the composition of the actual gangs is dictated by the unions and, indeed, the gangs may include unregistered workers.
27. Be that as it may, in my judgment, the Claimants have fallen a long way short of establishing that the fire was caused by the appointment of incompetent stevedores:-

a. It is not suggested that the general standards of stevedoring in Rio were such as to preclude the legitimacy of an order to proceed here for cargo operations.

b. There is no direct evidence that the fire was attributable to the actions of an unregistered or inexperienced stevedore or that he was an habitual smoker in the presence of inflammable cargoes.

c. There is no evidence that supervision of the stevedores by the loading officers of the vessel presented any difficulty. The only uncontainerised cotton was stowed in Hold No. 5. The Chief Officer gave a direct order to stevedores to cease smoking on one occasion which instruction was obeyed. He did not report the incident.

28. The foundation of the Claimants' case is, and has to be, in these circumstances that the negligent discard of smoking materials in the vicinity of combustible cargo by itself establishes incompetence. In this connection it has to be borne in mind that cotton is inflammable but does not give off explosive gases. Indeed, although a number of cigarette stubs were found in the 'tween deck, the fire actually started in the lower hold by reason of discarded cigarette or match falling between the two halves of the lower 'tween deck cover. But lack of certification or training does not of itself establish incompetence: see The Empire Jamaica [1957] A.C. 386. Nor is a person incompetent merely because he makes one or more mistakes: see The Star Sea [1997] 1 Lloyd's Rep. 360. It may well be that it is possible in certain circumstances to draw the inference from one incident alone that someone is incompetent. But, whilst it may well be that there was general lack of discipline amongst stevedores in Rio, on the present facts I am quite unable to conclude that the stevedore concerned had a "disabling lack of knowledge."
29. This conclusion also disposes of the owners' argument that they are entitled to recover by virtue of an implied indemnity arising from obedience to the charterers' orders. There remains the contention that the fire was caused by the intervention of the charterers in the form of control of the cargo operations by their supercargo. By referring to the fact that Captain Galiatsatos provided a stowage plan for the master's approval and, from time to time, furnished translation services, this point boils down to the proposition that thereby the supercargo controlled the operation and thus the failure to prevent smoking constituted intervention. The point is, in short, inventive but hopeless.

Off-hire

30. It was the charterers' case that the vessel was off-hire throughout the period from the 19th February to the 14th March. (Pending the outcome of this action, the charterers agreed to pay 50% of the hire and this forms the bulk of their counter-claim.) The off-hire clause was in conventional form and read as follows:-

15. That in the event of the loss of time from deficiency of men and/or default of crew or deficiency of stores, fire, breakdown or damages to hull machinery or equipment, grounding, detention by average accidents to ship or cargo...or by any other cause preventing the full working of the vessel, the payment of hire shall cease for the time thereby lost...

31. The proper construction of this clause was not in issue. It is sufficient to cite part of the judgment of Kerr J. in The Mareva A.S. [1977] 1 Lloyd's Rep. 368 at p. 382:-

The owners provide the ship and the crew to work her. So long as these are fully efficient and able to render to the charterers the service then required, hire is payable continuously. But if the ship is for any reason not in full working order to render the service then required from her, and the charterers suffer loss of time in consequence, then hire is not payable for the time so lost. The word "other" in the phrase "or by any other cause preventing the full working of the vessel" in my view shows that the various events referred to in the foregoing provisions were also only intended to take effect if the full working of the vessel in the sense just described was thereby prevented and time was lost in consequence. But if, for instance, the cargo is damaged as a result of an accident, but the vessel's ability to work full is not thereby prevented or impaired, because the vessel in herself remains fully efficient in all respects, the I do not that the charterers bring themselves within the clause.

32. The owners denied that the full working of the vessel was prevented at any time. The argument appeared to be that, since it was the consensus amongst all concerned that the vessel should remain alongside the berth in order to fight the fire, it was thus capable of performing the service then required of her. This proposition is wholly unreal. The vessel had a substantial fire in one of her holds. This had to be extinguished. She could not safely sail. The crew had to act as stevedores, wearing breathing apparatus. Outside assistance was required from the fire brigade, the P&I Club surveyor and a fire expert. The vessel had to remain alongside. She was thus unable to perform the service then required of her, which was to sail for Itajai.
33. I reject the submission that, during the currency of the fire, the loss of time was nonetheless attributable to a failure by the charterers to obtain a dangerous cargo certificate. There was no evidence in support of the point. As regards the period from the 12th to the 14th March, there were three contenders as the cause of the delay; the absence of a certificate, the defects in the fire line and the inquiry into the accident to the engineer. The accident to the engineer occurred on the 4th March. The class and port state control inspections took place on the 11th March, accompanied by a request from the agents for permission to sail being granted on their undertaking to provide a dangerous cargo certificate within 10 days. Although a pilot was ordered for 0600 on the 12th March, the harbour master gave orders that the vessel could not depart until both the master and the chief engineer had given evidence to the official inquiry into the accident.
34. I suspect that there was some confusion as to the documentation required by the terms of SOLAS. Be that as it may, I find that the harbour master accepted the agents undertaking at 1400 the following day. Absent the continuing impact of other factors, I do not consider that this requirement would have occasioned any material delay. I also accept the evidence of Mr. Josivan Santos that the leakages in the fire lines (which was in any event also an off-hire event) had been repaired by 1600 on the 13th March but, because the inquiry had then been postponed by the harbour-master to the 14th, so also was the confirmatory survey. The inquiry was finished at 1930 on the 14th whereupon the vessel received immediate clearance. In these circumstances, I find that the sole effective cause of the delay until the 14th was the need for two witnesses to stay for the inquiry and thus I also find that the vessel was also off-hire during those two days.
35. This finding with regard to off-hire is also sufficient to deal with an alternative case made by the owners with regard to recovery of part of their claim to the effect that they were entitled to pray in aid Clause 2. The Clause is expressly only applicable "whilst on hire".

Dangerous cargo

36. The off-hire issue elides with the question whether the vessel was delayed by the loading of dangerous cargo in the form of ferro-silicon. A considerable part of the evidence and the submissions placed before the Court by both parties was directed to the issue whether the charterers were in breach in loading this parcel. In due course, the Defendants conceded both that ferro-silicon was an expressly excluded cargo under Clause 47 and that it had been loaded without the informed consent of the master. The outstanding issue was whether the presence of the cargo had any delaying impact on the fire-fighting operations.
37. The owners' case was that, but for the presence of the ferro-silicon, a containment strategy with the use of CO2 pending the arrival of Mr. Sutcliffe would not have been adopted and that, even after the arrival of the fire expert, the work was slower that it would otherwise have been because of the need to wear breathing apparatus by reason of the presence of the ferro-silicon. In my judgment both these points fail on the facts. On this topic, I had the benefit of oral evidence from Mr. Vitzileos, the Technical Manager, who attended on the vessel at Rio and Mr. Dimakis, the Operations Manager, who co-ordinated matters in Greece, as well as the Master and Mr. Sutcliffe. Whilst there were undoubtedly contemporary concerns as to the risk of wetting the ferro-silicon directly or indirectly, it was also clear that the appropriate way to deal with the cotton fire was to avoid water and use CO2. As regards the use of breathing apparatus, this was necessitated in the earlier stages of discharge by the presence of both CO2 and smoke. The only precaution taken with regard to the ferro-silicon was its covering with plastic sheeting. I am unable to identify any material period by which the fire-fighting exercise was extended by the presence of the ferro-silicon.

The Inter-Club Agreement

38. The relevant part of the Inter-Club Agreement reads as follows:

(8) Cargo Claims shall be apportioned as follows:

...

(b) Claims in fact arising out of the loading, stowage, lashing, discharge, storage or other handling of cargo: 100% Charterers unless the words "and responsibility" are added in clause 8 or there is a similar amendment making the Master responsible for cargo handling in which case: 50% Charterers 50% Owners

(c) ...

(d) All other cargo claims whatsoever (including claims for delay to cargo): 50% Charterers 50% Owners unless there is clear and irrefutable evidence that the claim arose out of the act or neglect of the one or other (including their servants or sub-contractors) in which case that party shall then bear 100% of the claim.

39. The charterers contended that the cargo claims in the present case fell within the second part of sub-paragraph (b) whilst the owners submitted that they fell within the second part of sub-paragraph (d). On this topic I say no more than the charterers are unquestionably correct.

General Average Recoveries.

40. On my findings, the owners' claim must fail. This makes it unnecessary to consider a submission made by the charterers that owners were obliged to give credit against their claim for any monies recovered under the general average adjustment. Suffice it to say that I would not have acceded to this submission. The owners are not confined to recovery of their net loss: see The Greystoke Castle [1947] A.C. 265 atp.279. In any event, the short answer on the facts is that the adjustment is only provisional: it is, as is conventional, expressly subject to any further recoveries from non-contributors. I agree with counsel for the owners that any recovery that might have been made, which matched a recovery already allowed in the adjustment, would be held on trust for redistribution pursuant to the York-Antwerp Rules 1924 as amended.

Counterclaim

41. There remains the charterers' counterclaim. The claim in respect of 50% of the hire must be allowed in the light of my findings. There is also a claim for $7,850.70 in respect of surveyor's fees and other expenses incurred as a result of the fire. This is agreed as a figure but liability is challenged on the basis of the fire exception in the Hague Rules (which I find to be applicable, if it be in issue, by virtue of Clause 28). The charterers suggest that the fire exception is overridden by clause 8. Such a construction is not, in my judgment, made good and this element of the counterclaim fails.