The "Sunrise Crane"

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DMC/SandT/04/60
The "SUNRISE CRANE"
Singapore Court of Appeal: Chao Hick Tin JA, Judith Prakash J, Yong Pung How CJ: 13 September 2004
Rajah & Tann for the "Sunrise Crane"
Haridass Ho & Partners for the "Pristine"
VESSEL SUNK FROM DAMAGE BY CONTAMINATED NITRIC ACID TRANSFERRED FROM ANOTHER VESSEL: DUTY OF CARE OWED BY OWNERS OF TRANSFEROR VESSEL TO INFORM OWNERS OF RECIPIENT VESSEL OF CHARACTERISTICS OF DANGEROUS cargo: WHETHER OWNERS OF TRANSFEROR VESSEL negligent: whether can limit liability: whether "actual fault or privity"
Summary
The "Sunrise Crane" discovered that part of its cargo of nitric acid was contaminated. Contractors were appointed to remove the contaminated cargo. The "Pristine" was engaged by sub-contractors to remove the contaminated cargo. There was no direct contract between the owners of the Sunrise Crane and the owners of the Pristine. The owners of the Pristine were not informed that the cargo was contaminated nitric acid and the Pristine did not have steel tanks necessary to receive such cargo. During the transfer, the contaminated acid bored holes into the hull of the Pristine and she sank. The owners of the Pristine sued the owners of the Sunrise Crane, alleging the latter’s failure of duty to inform the Pristine of the nature of the cargo. The Court held, by a majority, that the owners of the "Sunrise Crane" were in breach of a duty of care owed by them to the owners of the "Pristine". The court also held, unanimously, that the owners of the "Sunrise Crane" could not limit their liability in this respect under the Singapore Merchant Shipping Act of 1996.

Facts
The "Sunrise Crane", a chemical carrier, arrived in Singapore carrying a cargo of nitric acid and discovered part of the cargo to be contaminated. Her owners knew of the highly dangerous nature of the cargo and that only stainless steel tanks could receive it. Her P&I Club appointed a surveyor to find a contractor to remove the contaminated cargo. The surveyor contracted Pink Energy and informed Pink Energy that the cargo to be disposed was contaminated nitric acid. Pink Energy sub-contracted the job to the time charterers of the "Pristine", but did not inform her time-charterers or her owners that the cargo was contaminated nitric acid. Instead, they were told that it was "Annex I slops", i.e. petroleum slops. The "Pristine" was capable of carrying MARPOL Annex I slops but not nitric acid, which is MARPOL Annex II slops.

The "Pristine" sank during the transfer because the cargo corroded her hull. The owners of the "Pristine" sued the owners of the "Sunrise Crane" for negligence, in not informing them of the nature of the cargo.

The essential question was whether, given the very dangerous nature of the cargo, the "Sunrise Crane" still owed a separate duty to advise the "Pristine" of the nature of the cargo even though the "Sunrise Crane" had informed the contractor, Pink Energy, of the nature of the cargo and it was through the default of the contractor that the information was not passed down to the time-charterers and the owners of the "Pristine".

The other issue was whether "Sunrise Crane" could limit its liability under section 136 of the Merchant Shipping Act* if it was liable.

By a majority of two to one (Prakash J dissenting), the Court of Appeal held that the owners of the "Sunrise Crane" were in breach of a duty of care owed to the owners of the "Pristine". Held, by the majority:

1. The ultimate question is what is the degree or scope of care which a person in the shoes of the owners of the "Sunrise Crane" should exercise. What is adequate for one set of circumstances may not be so in relation to a different set of circumstances. More care must be exercised where a highly dangerous substance is involved.

2. The following features of the case were critical. First, the cargo to be transferred was highly dangerous and toxic. Second, the "Sunrise Crane" knew that Pink Energy would not be the party removing the cargo. Third, there was no written communication between the "Sunrise Crane" and Pink Energy as to the nature of the cargo and the request of Pink Energy for one was not acceded to. Fourth, both vessels were in close proximity to each other when the transfer was carried out. Fifth, the "Sunrise Crane", being in the business of transporting dangerous chemicals, would have appreciated the dire consequences if nitric acid were to be transferred to a vessel not built for receiving such a substance. Sixth, the practice of the "Sunrise Crane" in asking for a MSDS (Material Safety Data Sheet containing information on characteristics and handling of dangerous cargo) in relation to the first time shipment of a dangerous chemical, illustrated the need for special care in regard to the shipment of chemicals, particularly chemicals of the nature of nitric acid. Seventh, the crew of the "Pristine" asked for a sample of the cargo but this request was turned down. Eighth, during the transfer of the contaminated cargo, the crew of the "Sunrise Crane" were without protective gear.

3. In relation to ordinary or less dangerous chemicals, an advice to the main contractor could perhaps suffice. But having regard to the circumstances and the very dangerous substance involved, more care should have been exercised by the "Sunrise Crane".

Dissenting judgment of Prakash J:

1. The three elements for duty of care, as formulated by the English House of Lords in Caparo Industries v Dickman [1990] 2 AC 605, are foreseeability of damage, a relationship of "proximity" and that the situation was one in which it was fair, just and reasonable to impose such a duty.

2. The "Sunrise Crane" could not have foreseen that the tanker sent to collect the cargo would not have been told its nature. While theoretically it was foreseeable that nitric acid could corrode the hull of the vessel it was discharged into, it was not foreseeable that it would corrode the hull of the "Pristine".

3. There was proximity in the sense used in Caparo, as there was physical proximity between the two vessels and the "Pristine" was sent by the contractor of the "Sunrise Crane" to fulfil its contract with the "Sunrise Crane". But given that there was no reasonable foreseeability of damage, it would not be just, fair and reasonable in all the circumstances to impose on the "Sunrise Crane" a duty to warn the "Pristine" of the nature of the cargo. It would be unduly onerous to require party A to be present to warn party B’s employees or sub-contractors of the dangers involved in carrying out the work.

4. Even if the two-stage test of duty was used, i.e. proximity and whether there was any material factor or policy to prevent a duty arising, there would be no duty because the element of foreseeability formed part of the concept of "proximity" in the two-stage test and this element was absent. There were also policy reasons why a duty of care should not be imposed in the circumstances of this case, for the reasons stated above.

5. The "Sunrise Crane" had a duty to inform the party it employed to dispose the cargo of the true nature of the cargo. It did not have a duty to give such information to the employee, sub-contractor or other person sent by Pink Energy to carry out the contract as it could not foresee that the latter would suffer injury by its omission to impart the information.

Limitation of Liability
By unanimous decision (Prakash J writing the judgment with which the other two judges concurred):

1. In order for a shipowner to rely on the limitation of liability provided by s.136 of the Singapore Merchant Shipping Act 1996, he has the onus of proving that the loss or damage caused by the negligent navigation or management of his ship took place without his "actual fault or privity".

2. In order to establish that its own fault did not contribute to the loss here, the "Sunrise Crane" owner must show that it had an efficient system of management of the vessel that ensured that, at the least, the standard industry practices for dealing with the dangerous chemical cargoes that the vessel carried were implemented and followed by the officers and crew of the ship. Such practices would have included the safety and other procedures to be followed when loading and discharging such cargo, whether from or to a shore terminal or from or to another vessel.

3. The "Sunrise Crane" did not give any evidence as to the management system which it had adopted so as to ensure that the vessel implemented and followed the industry standards of practice in relation to the handling of chemical cargo. The fact that its officers were qualified to handle dangerous cargo did not absolve the "Sunrise Crane" from its own duty to ensure that there was a proper system on board the vessel for dealing with such cargo, in particular in relation to the transfer of the cargo between vessels or between the vessel and a shore installation. No evidence was given of the existence of this system. In the circumstances, if a duty of care existed, the "Sunrise Crane" had not discharged the burden upon it to show that the crew’s failure to comply with that duty arose without its actual fault or privity.

Comments
*S.136 of the Singapore Merchant Shipping Act 1996 is based on the International Convention Relating to the Limitation of the Liability of Owners of Seagoing Ships, 1957 ("the 1957 Convention") and provides that, where a ship has, in the discharge of its cargo, caused damage to any property, the owner of the ship is entitled to limit his liability for such damage to an amount based on the tonnage of his ship as long as such loss or damage was sustained "without his actual fault or privity".

In finding that there was no duty of care, the dissenting judge, Prakash J, referred to Man B&W Diesel v PT Bumi [2004] 2 SLR 300 in which the Court of Appeal cautioned against extending the duty of care to new situations, particularly to a scenario which is essentially contractual. Ironically, in that case, Prakash J at first instance had found that there was a duty of care but the Court of Appeal reversed her decision. The majority in The Sunrise Crane explained away the PT Bumi decision by saying that it was on pure economic loss, on which the law was more restrictive. The majority gave emphasis to the fact that the cargo being transferred here was highly dangerous, and acknowledged that the decision might have been different if the cargo was of a less dangerous nature.

On limitation of liability, Prakash J observed that over the years, the court had whittled down the protection available to the shipowner from the 1957 Convention and that the protection offered by section 136 Merchant Shipping Act was largely illusory. She noted that, as regards the 1976 Convention (Convention on Limitation of Liability for Maritime Claims, 1976), monetary limits are much higher but the benefit to the shipowner is that the right to limit is only lost if it is proved that the loss sued for "resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result. She recommended that Singapore ratifies the 1976 Convention. The Court of Appeal was unanimous in this part of the judgment on limitation, and a proposed amendment of the Merchant Shipping Act 1996 to give effect to the 1976 Convention has already been tabled before the Singapore Parliament. One can expect the 1976 Convention to be in effect in Singapore by early next year.

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