Compania Sud Americana De Vapores SA v Sinochem Tianjin Import and Export Corp

Under Article IV, Rule 6 of the Hague Rules, a shipper is liable for loss resulting from the shipment of dangerous goods whose true dangerous character was unknown to the carrier. The carrier need not prove that the dangerous shipment was the sole or dominant cause. Liability may nevertheless fail where the carrier’s own causative breach of the seaworthiness obligation contributed to the loss. A carrier’s negligent choice to heat a bunker tank beside dangerous cargo was an act in the management of the vessel and therefore an excepted peril. Bad stowage did not itself make the vessel unseaworthy where the danger depended on a later operational decision. The cargo was abnormal and materially more dangerous than the characteristics which a prudent carrier should have attributed to the declared goods.

An explosion occurred aboard the Aconcagua after a container of calcium hypochlorite shipped by Sinochem was stowed beside a bunker tank which was later heated. Compania Sud Americana de Vapores SA (“CSAV”), the charterer, had paid a substantial settlement to the vessel owners following arbitration proceedings concerning the casualty.

CSAV claimed that amount and related losses from Sinochem under Article IV, Rule 6 of the Hague Rules. The issues included whether the cargo had abnormal characteristics, whether bunker heating or the stowage position caused the explosion, whether CSAV’s conduct made the vessel unseaworthy, and whether the settlement was recoverable.

1. Dangerous cargo. The calcium hypochlorite shipped was of a dangerous nature whose abnormal characteristics were unknown, and could not reasonably have been known, to CSAV. Normal UN 1748 cargo was capable of decomposition at temperatures as low as 60°C but was regarded as safe for container carriage on or under deck in ordinary containership conditions. The cargo shipped had an exceptionally low critical ambient temperature and was materially different from normal UN 1748.
2. Article IV, Rule 6. Applying The Fiona [1993] 1 Lloyd’s Rep 257, the carrier had to establish shipment of dangerous goods, absence of informed consent, and loss directly or indirectly arising from the shipment. The indemnity was not confined to cases where the shipment was the proximate, dominant or sole cause. The explosion resulted from the shipment of the abnormal cargo.
3. Causation and stowage. Sinochem failed to prove that heating No 3 FFOTS caused the explosion. The surrounding hold temperatures, even without that heating, were likely sufficient to trigger the cargo. The container would probably have exploded in another suitable position in the hold.
4. Seaworthiness. Negligent stowage beside a bunker tank did not make the vessel unseaworthy at the commencement of the voyage. The relevant danger depended on a later operational decision to use and heat that tank. The vessel had systems and information by which the crew could have avoided the danger.
5. Management exception. Heating bunker oil for transfer to the engine room was part of the running and management of the vessel. It therefore fell within Article IV, Rule 2(a), even though it also involved a failure properly to care for the cargo. In any event, if the heating had been causative and outside the exception, CSAV could not have recovered because its own causative negligence would have contributed to the loss.
6. Settlement. The settlement paid by CSAV was reasonable in amount and reasonably made. Judgment was therefore entered for CSAV on the recoverability of the settlement sum, with the remaining quantum issues left for later determination.

The judgment itself records that the arbitrators issued an interim award and that CSAV’s appeal under section 69 of the Arbitration Act 1996 was dismissed by the High Court: [2006] 2 Lloyd’s Rep 66. The present claim was brought by CSAV against Sinochem following settlement of the owners’ arbitration claim.