The dispute relates to MV «Cheshire» incident in 2017, where a cargo of 42,000 metric tons of fertiliser was subject to a major decomposition incident off Gran Canaria, during a voyage from Norway to Thailand. The fertiliser was completely damaged and the vessel was declared a total loss. The cargo owners held the ship owners jointly liable for the cargo damage. Bibby Transport Ltd and a number of H&M insurers held the fertiliser producer liable for the damaged vessel.
In all material aspects, the Court of Appeal upheld the decision from Oslo District Court and awarded the fertiliser manufacturer full legal costs.
The Court of Appeal concluded that the cargo was correctly classified in accordance with the IMSBC code and that the fertiliser manufacturer had provided correct and sufficient information about the properties of the fertiliser and relevant safety measures for the transport.
The cause of the decomposition incident was held to be solely due to the negligent actions and omissions of the crew. Contrary to the clear provisions in the IMSBC Code and in the information material provided by the fertiliser manufacturer, the hold light system was never properly disconnected prior to loading. This created a significant risk of hold lights being left on during the voyage. This risk materialised and the cause of the incident was held to be heat transfer into the fertiliser from a lamp that was located in an enclosed ladder in one of the cargo holds.
The heat transfer into the cargo from the light probably occurred prior to the vessel leaving Norway on 6th August 2017. According to the Court of Appeal, the crew ought to have been aware that a chemical reaction was going on inside the cargo hold already on 7th August – but at least on 8th August when the crew observed gases coming out of the cargo hold. However, no attempts were made to arrest the decomposition before 4-5 days later, when some unsuccessful attempts were made to stop the decomposition.
The Court of Appeal makes very interesting remarks about the importance of the information and instructions provided in the IMSBC Code and the importance of crew awareness and immediate action when signs of decomposition occurs.
The total amount awarded to the fertiliser manufacturer, including compensation for the loss of cargo and associated costs, legal costs and interest amount to approximately USD 30 000 000. At the same time, the fertiliser producer was released from liability from the ship owners’ and insurers’ counter claims for loss of the vessel.
The Court of Appeal’s judgement will become legally binding 16 December 2021. The ship owners and their insurers will have to apply for leave to appeal to the Supreme Court if they wish to challenge the decision.
The Judgment from the Norwegian Appeal Court (Borgarting)