Marc Rich & Co AG v Bishop Rock Marine Co Ltd

The House considered whether a classification society (Nippon Kaiji Kyokai) owed a duty in tort to cargo owners for physical damage to cargo occasioned by a surveyor's negligent recommendation that the vessel could sail after only temporary repairs. The court applied ordinary negligence principles: foreseeability of physical damage, proximity between parties, and whether it is fair, just and reasonable to impose a duty. The House emphasised the distinction between physical damage and pure economic loss but held that policy factors — chiefly the international contractual regime for carriage of goods by sea, the role of classification societies in the public interest, the likely impact on insurance and commercial allocation of risk, and the absence of direct contact or reliance by cargo owners — weighed against imposing a general duty in the circumstances of this case. The appeal was dismissed, affirming the Court of Appeal's conclusion that, in these facts, no such duty should be recognised.

This is an appeal by cargo owners against a decision of the Court of Appeal. The cargo owners sued the shipowners and the vessel's classification society (N.K.K.) after the bulk carrier Nicholas H developed hull cracks, was surveyed by an N.K.K. surveyor (Mr Ducat), was permitted to sail after temporary repairs and subsequently sank with loss of the cargo.

Procedural posture: Hirst J in the Commercial Court held (on a preliminary issue, on agreed assumptions) that N.K.K. owed a duty of care to cargo owners ([1992] 2 Lloyd's Rep. 481). The Court of Appeal reversed ([1994] 1 W.L.R. 1071). The House of Lords (Appellate Committee) heard the appeal and dismissed it.

Nature of the claim / relief sought: The cargo owners sought damages in tort for physical loss of goods against N.K.K. for the negligent conduct of its surveyor; they pursued this after a limited recovery from shipowners due to tonnage limitation.

Issues framed:

• Whether, on the assumed facts (foreseeable physical damage caused by the surveyor's negligence), there was sufficient proximity to found a duty of care;
• Whether it would be fair, just and reasonable to impose such a duty on a classification society in the context of the international contractual and insurance framework for carriage of goods by sea (including the Hague Rules and statutory limitation regimes);
• Whether an assumption of responsibility or reliance by cargo owners on the classification society could be inferred.

Court’s reasoning: The House confirmed that foreseeability, proximity and considerations of whether it is fair, just and reasonable are relevant even in physical damage cases. The majority concluded that, while foreseeability and proximity might be arguable on the facts, broader policy considerations were decisive: recognising the claimed duty would risk undermining the internationally agreed allocation of rights and liabilities between carriers and cargo (the Hague/Hague-Visby regime and tonnage limitation), would interfere with the public-interest role of classification societies and would introduce disruptive additional layers of insurance and litigation. The House therefore dismissed the appeal. The judgment notes Hirst J.'s contrasting view at first instance, but affirms the Court of Appeal on policy grounds.

Appeal dismissed. The House held that, notwithstanding assumed foreseeability of physical damage and close factual proximity in this particular incident, it would not be fair, just and reasonable to impose on the classification society a duty of care to cargo owners in the circumstances because doing so would upset internationally settled allocation of risk for carriage of goods by sea, interfere with the public-interest role of classification societies, and create adverse commercial and insurance consequences.

First instance: Commercial Court (Hirst J) held N.K.K. owed a duty of care [1992] 2 Lloyd's Rep. 481. Court of Appeal reversed: Marc Rich & Co. A.G. v. Bishop Rock Marine Co. Ltd. [1994] 1 W.L.R. 1071 (order of the Court of Appeal of 3 February 1994). Appeal to House of Lords: dismissed [1995] UKHL 4; [1996] 1 AC 211.