Marc Rich & Co AG v Bishop Rock Marine Co Ltd (The Nicholas H)

The mere foreseeability of physical damage does not dispense with the need to consider proximity and whether it is fair, just and reasonable to impose a duty of care. Rather, those three inquiries remain relevant in physical damage cases. A classification society is not immune as of right. But imposing a duty on a society may be unjust where it would subvert the international contractual allocation of risks, undermine the society's public role, or produce intolerable policy and insurance consequences. Absent direct dealings or identifiable reliance, no assumption of responsibility arises.

The ship Nicholas H sustained hull damage while laden. A classification society surveyor initially recommended permanent repairs. Owners had temporary repairs made and the surveyor later permitted the vessel to sail. The ship sank and cargo was lost. Cargo owners sued the classification society in tort for negligent surveying. The Commercial Court held a duty of care existed. The Court of Appeal reversed, finding it was not fair, just and reasonable to impose such a duty, with reliance on the contractual regime for carriage and policy considerations. The House of Lords considered whether, on the assumed facts, a classification society owed cargo owners a tortious duty and whether an assumption of responsibility could be inferred.

1. Overall disposition: The appeals are dismissed and the Court of Appeal's decision is affirmed. The House declines to impose a tortious duty of care on the classification society in the present facts.
2. General principle: Even where physical damage is foreseeable, the analysis of duty requires consideration of proximity and whether it is fair, just and reasonable to impose a duty; the three inquiries are facets of a single pragmatic assessment (see [1995] UKHL 4 paras [20]-[22]).
3. Application to classification societies: Classification societies have public, collective welfare functions and exercise de facto control over classification and thereby influence whether a vessel may sail. They are not immune in principle. But imposing an open-ended tortious duty on a society would risk undermining the international contractual allocation of risks between shipowners and cargo interests and would produce adverse policy, insurance and practical consequences. On balance those considerations outweigh the factors favouring a duty in this case (see paras [23]-[29]).
4. Contractual matrix and international regime: The existence of bills of lading incorporating international rules and the system of tonnage limitation and overlapping insurance are material. Recognition of a tortious duty here would, in practice, permit cargo insurers to outflank the international bargain and would complicate settlement and insurance structures (see paras [24]-[26]).
5. Assumption of responsibility: An assumption of responsibility is not to be inferred where there is no direct dealing or known reliance by cargo owners upon the society's survey. Here cargo owners were unaware of the survey and relied on shipowners; therefore no voluntary assumption of responsibility arose (see paras [30]-[31]).
6. Remedy and scope: The decision is confined to the assumed facts. The House acknowledged that on different facts a duty might arise; the ruling does not create a blanket immunity for classification societies (see paras [3], [28]).

• House of Lords: Appeal dismissed; order of the Court of Appeal affirmed. [1995] UKHL 4
• Court of Appeal: Reversed Commercial Court and held no duty of care on the facts. [1994] 1 W.L.R. 1071
• Commercial Court (Queen's Bench Division): Held, on a preliminary issue, that a duty of care existed on the assumed facts. [1992] 2 Lloyd's Rep. 481