CSAV v Sinochem the Aconcagua
Note: the judgment in this case has been affirmed by the Court of Appeal in its decision reported at  EWCA Civ 1403
Compania Sud Americana de Vapores SA v Sinochem Tianjin Import & Export Corp - the « Aconcagua»
English High Court: Christopher Clarke J.:  EWHC 1880 (Comm); 24 July 2009
Simon Rainey QC and Ruth Hosking, instructed by Holman Fenwick Willan, for CSAV
Robert Bright QC and Anna Gotts, instructed by Reed Smith LLP, for Sinochem
BILLS OF LADING : SHIPMENT OF CALCIUM HYPOCHLORITE IN CONTAINER: EXPLOSION AND FIRE: DANGEROUS GOODS: WHETHER CARRIER ENTITLED TO INDEMNITY UNDER ART.IV RULE 6 OF HAGUE RULES: STOWAGE OF CONTAINER IN PROXIMITY TO HEATED BUNKER TANK: WHETHER THIS CAUSED THE EXPLOSION: WHETHER THIS RENDERED VESSEL UNSEAWORTHY AT THE COMMENCEMENT OF THE VOYAGE: WHETHER CARRIER COULD RELY ON DEFENCE OF ERROR IN MANAGEMENT OF THE SHIP
Whilst CSAV, as time-charterers of the container ship “Aconcagua” and carriers under the bill of lading, had admittedly been negligent in stowing a container of calcium hypochlorite next to a fuel tank that was heated during the course of the voyage, the sole cause of an explosion that occurred when the chemical self-ignited had been its abnormal characteristics. These caused it to ignite at a much lower temperature than could have been expected by the carrier. Had that not been the case, the judge held that stowing the container next to the fuel tank did not make the ship unseaworthy at the commencement of the voyage, as there was no necessity to draw fuel from that tank during the contemplated voyage. In those circumstances, the decision to heat the fuel was to be categorized as an ‘error in the management’ of the vessel, for which the carrier was exempted under Article IV Rule 2 (a) of the Hague Rules. In consequence, CSAV was entitled to an indemnity from the shipper in respect of payments it had made to the owners of the vessel in settlement of a claim for damage to the ship arising from the explosion
At about 0230 local time on 30th December 1998 an explosion took place in the No 3 hold of the m.v. “ Aconcagua” when she was on passage off the coast of Ecuador. The fire which resulted was so great that the crew had to abandon ship. Widespread damage was caused to the vessel and her cargo. The cause of the explosion was the self ignition of 334 kegs of calcium hypochlorite (‘CH’) stowed in a container. The container had been loaded at Busan, South Korea and was due to be discharged at San Antonio in Chile. The vessel was on time charter to Compania Sud Americana de Vapores S.A (‘CSAV’), a Chilean company. The owners of the vessel - MS ER Hamburg Schiffahrtsgesellschaft Mbh & Co - commenced an arbitration under the charterparty against CSAV. They held it responsible for the explosion and their consequent loss, claiming damages or an indemnity. The arbitration proceeded to an interim award in which the arbitrators decided certain issues, after which CSAV reached a settlement with the owners pursuant to which they paid them US$27,750,000.
The parties' contentions
In this case, CSAV sought to recover from the shippers of the calcium hypochlorite, Sinochem Tianjin Import and Export Corp (‘Sinochem’) the amount which it had paid the owners in settlement – and certain other items – as damages for breach of the bill of lading contract, which was subject to the Hague Rules. Sinochem is a Chinese State-owned trading house, which supplies many different chemicals and Sinochem Tianjin is the Tianjin based company in a large group of other Sinochem companies. Calcium hypochlorite is a dangerous cargo. CSAV claimed that this particular consignment had, unknown to it, an abnormally high thermal instability, being prone to self-heat at ordinary carriage temperatures. As a result it exploded on board the “Aconcagua” at temperatures which were ordinarily to be expected onboard that vessel during this voyage. If it had not been abnormal (or “ rogue” ) it would not have done so and any self heating would have been negligible. CSAV claimed compensation for its losses under Article IV Rule 6 of the Hague Rules. Sinochem contended that the cargo shipped was not abnormal or, at the lowest, had not been shown to be so.
The cargo was stowed in a position where it was surrounded on three sides (forward, base and outboard side) by a bunker tank. That tank was heated during the voyage in order to allow the transfer of bunkers to one of two settling tanks for fuel oil in the engine room. The stowage of the container in that position was admitted by CSAV to have been negligent. The relevant International Maritime Dangerous Goods (‘IMDG’ ) Code requires the cargo to be stowed “away from” sources of heat. When heated, the bunker tanks were sources of heat. The bunker tank in question was first heated on 22 December 1998, some eight days before the casualty occurred. There was evidence that, at least on one occasion, the tank was heated to a temperature in excess of 60 degrees Celsius.
Sinochem contended that the heating of the bunker tank on the voyage was either the or a cause of the explosion; that 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 any relief under Article IV Rule 6 because it had failed to take due care to make the vessel seaworthy.
CSAV contended that the stowage of the cargo next to a bunker tank which was heated on the voyage was of no causative significance. The contribution made by the heating of the bunker tank to the warming of the container and its contents was wholly insufficient to have had any significant effect on, and made no difference to, the outcome. The explosion occurred when the vessel was, and had been for some 6-7 days, in tropical waters. As a result the temperatures which the calcium hypochlorite would have experienced without heating were sufficient to cause an explosion in this material, but not in normal material.
CSAV further contended that, when the vessel was loaded at Busan in Korea, bound for South America, she was not unseaworthy. If heat from the bunker tank was of any causative significance, that only arose when the heating took place as a result of a decision of the ship’s officers to use and heat that tank as opposed to others available. Their negligent decision to heat a bunker tank adjacent to a cargo of calcium hypochlorite did not mean that the vessel was unseaworthy at the commencement of the relevant voyage. In addition that decision was “an act, neglect or default in the management of the vessel” for which CSAV was not responsible by virtue of Article IV Rule 2 (a) of the Hague Rules.
The issues were:
(i) what were the characteristics of the chemical that a prudent carrier should have expected;
(ii) whether the chemical actually shipped had those characteristics or it had abnormal characteristics which rendered it more dangerous than was to be anticipated;
(iii) whether the explosion and resultant damage was as a result of those abnormal characteristics, or of the stowage of the container next to a heated fuel tank, or both
(iv) what were the legal consequences if the heating of the fuel tank was either the only or one of the causes of the chemical igniting.
After an exhaustive evaluation of the expert evidence, the Court held that the understanding that a prudent carrier would have had in 1998 of UN 1748 – the particular type of CH here concerned - from its hazard history (the history of previous casualties involving consignments of CH) was that the material was safe for carriage on or under deck in temperatures normally experienced on container ships. It would not have known of expert opinions that the critical ambient temperature before ignition (‘CAT’) of this type of CH could be as low as 40 degrees centigrade if it were carried in large numbers of packages in containers – as here, where 334 kegs of CH were stowed in the one container. Indeed, the effect of close packing of a large number of drums was something about which in 1998 little was known
Further, the description of UN 1748 recorded that its “critical ambient temperature of decomposition may be as low as 60°C”. A prudent carrier, the judge held, would reasonably take that as signifying that the CAT could go down as low as 60°C but not further. Such information would tally with the hazard history –- of which it would be aware.
As regards the effect of heating the bunker tank, the evidence indicated that the oil temperature was kept at around 55°C, save for a temperature spike of 63.3°C reached between the morning and afternoon on 29th December. In those circumstances, the corresponding highest temperature of the CH container would have been in the high thirties °C, save for a short period. The spike would, however, have had no perceptible effect on the container, particularly having regard to the fact that by then the level of the oil was well below all relevant tank wall faces facing the container. The oil had dropped below the level of the tank top on 25th December.
Accordingly, there would have been little or no appreciable difference between the temperature that the container would be likely to have experienced in consequence of the heating of the bunker tank compared with the position without such heating and any such difference would have been barely perceptible to the container. Further, there would have been little difference between the temperature to which the container would have been exposed due to heating of the tank and the temperature which it would have experienced if stowed somewhere else in the hold “away from” heat in accordance with the IMDG Code
The category of calcium hypochlorite stated on the bill of lading – UN 1748 -would not normally have ignited at those temperatures. That itself indicated that the chemical in the container had been abnormal. Evidence of tests carried out on samples indicated that the manufacturers of the chemical in issue could on occasions produce calcium hypochlorite with an abnormally low CAT. The evidence as a whole established that the calcium hypochlorite shipped by Sinochem was a dangerous cargo the nature of which CSAV neither had, nor ought to have had, knowledge, and that CSAV had not knowingly consented to the shipment of calcium hypochlorite of such a nature.
From his analysis of the evidence, the judge concluded that the CAT of the cargo shipped on the “Aconcagua” was probably below 35°C and had it not had an abnormally low CAT, the explosion would not have occurred.
However, CSAV would not be entitled to an indemnity under Art.IV Rule 6 if the loss had also resulted in part from breach of its overriding obligation of seaworthiness. The burden was on Sinochem to establish that the negligent stowage was a breach of CSAV's obligation of seaworthiness and that it had some causative effect. The likelihood was that the heating of the tank was not a cause of the explosion.
But even if that were wrong, there had been no breach of the obligation of seaworthiness. That obligation required the vessel to be seaworthy at the start of the voyage. The “Aconcagua” was only potentially in danger if that particular bunker tank were heated on the voyage to San Antonio. If no such heating had taken place the container would, so far as anything concerning the vessel was concerned, be entirely safe. In those circumstances the vessel could not be treated as unseaworthy at the commencement of the voyage unless such heating was bound to occur because fuel from that tank had to be used on the voyage to San Antonio.
In the present case the vessel did not have to use the fuel from the tank in question on the voyage from Busan to San Antonio. Whether or not those tanks were used would depend on an operational decision made during the voyage. The operative fault lay not in the stowage of the container adjacent to the fuel tank but in the decision to use and heat fuel from that tank and the failure of the Chief Officer and the Chief Engineer, in deciding which bunkers to use, 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.
To heat the fuel in this tank was negligence but not unseaworthiness. The obligation to take care to make the vessel seaworthy does not mean that the ship must be immune from the negligence of her crew. Heating the fuel tank when a container of calcium hypochlorite was stowed next to it was a failure properly to care for the cargo but it was an act, neglect or default in the management of the vessel which was an excepted peril under Art.IV. Accordingly, even if the heating had been causative, CSAV would still have been entitled to an indemnity under Art.IV Rule 6.
In paragraph 375 of his judgment, the judge summarized his conclusions as follows:
“(a) The CH shipped on board the “Aconcagua” was of a dangerous nature of which CSAV did not, nor ought it to have had, knowledge;
(b) Sinochem, on whom lay the burden of proof, had not established that the heating of [the fuel tank in question] was a cause of the explosion. The likelihood was that it was not;
(c) The heating of [the fuel tank in question] did not constitute or result from unseaworthiness;
(d) The heating constituted an act, neglect or default in the management of the vessel, which was an excepted peril;
(e) Accordingly, even if the heating had been causative, CSAV would have been entitled to an indemnity under Article IV Rule 6 .
In short, CSAV’s claim succeeded.