Remoteness of damage : New Case

Date 8 April 2008
Judgment Humber Oil Terminal Trustees Ltd -v- Owners of the Ship "Sivand", Court of Appeal 29 January 1998
The Issue ICE clause 12 ground condition claims and remoteness of damage.
Implication Where a third party is liable for the costs of repair to a property, the appropriate measure of damages may be the sum which properly becomes due under the repair contract, including where appropriate sums payable as a consequence of unforeseeable physical conditions.

Six and a half years ago Humber Oil Terminal Trustees Ltd were brought to the Court of Appeal to consider the question of the remoteness or foreseeability of damages. A quirk of the law has brought them back to the same court to consider a closely related matter arising out of the same circumstances.

In June 1991 the Court of Appeal decided the case of Humber Oil Terminal Trustees Ltd -v- Harbour and General Works (Stevin) Ltd concerning unforeseeable ground conditions and the application of clause 12 of the ICE conditions of contract.

A ship named "Sivand" had damaged the harbour installations owned by Humber as a result of negligent handling. Humber had engaged Harbour and General as contractors to carry out repairs under the ICE conditions of contract. The contractors used a jack-up barge, equipped with a 300 tonne fixed crane. Whilst it was lifting a large concrete soffit the barge listed, became unstable and collapsed. It was a total loss. Extensive damage was caused to plant and equipment and much delay and other expense ensued.

The contractors claimed under clause 12 of the ICE conditions that the collapse of the barge with its consequences was due to physical conditions which could not reasonably have been foreseen by an experienced contractor. Humber argued against this, saying that the collapse was a consequence of the contractor's temporary works, and by reason of 8(2) of the ICE conditions was the responsibility of the contractor.

An arbitrator had found that although the soil conditions at the base of the leg of the barge were foreseeable, there must have been a very unusual combination of soil strength and applied stresses just before the failure occurred.

This constituted a physical condition for the purposes of clause 12, which could not have been foreseen by an experienced contractor.

This was upheld on appeal to an Official Referee. Still Humber were unsatisfied and they appealed to the Court of Appeal on the basis that: (1) an applied stress could not be part of a physical condition as it was transient and could not be "encountered", and (2) in circumstances such as this, clause 12 must be overriden by clause 8(2) which placed on the contractors an unqualified responsibility for the adequacy, stability and safety of all site operations and methods of construction.

Once again the Court of Appeal rejected the appeal. It held that applied stress, namely the loading of the barge, may be a part of a physical condition within the meaning of clause 12, since the nature of the ground cannot be discovered without an actual or notional application of some degree of stress on it. They also held that clause 8(2) concerning itself with contractor's temporary works, did not limit or restrict the ambit of clause 12.

Consequently the contractor was entitled to be paid for all the costs and consequences of the collapse.

Now all of these works it will be recalled were being carried out as a consequence of damage to the harbour caused by the negligent handling of the "Sivand". Naturally it was Humber's intention to pass all these costs and losses on to the owners of the ship.

The owners in turn argued correctly that they should only be liable for those costs which could be said to be foreseeable as a consequence of their negligent act. Their position was therefore quite clear. Since all the costs associated with the collapse of the barge had already been adjudged by the Court of Appeal to have arisen as a consequence of unforeseeable events, then such costs should not be passed on to them on the basis that they are too remote in law.

Lord Justice Evans considered the matters on a step by step basis. Firstly, he considered the appellants, as owners of the negligent vessel, must be liable for the cost of repairing the respondent's damaged property. Secondly, the respondents could not be said to have acted otherwise than in the ordinary course of things, or to have failed in their duty to mitigate their loss. They employed reputable and competent contractors to carry out the repairs upon the terms of a well known standard and appropriate form of contract. Thirdly, the additional disputed cost became due to the contractors in circumstances which were within clause 12. This had been confirmed by the Court of Appeal and there was no suggestion that the additional costs were unreasonable in amount.

Considering these factors, he concluded that the ship owners were liable for the additional costs on the simple basis that Humber were entitled to recover the reasonable cost of repairs as the appropriate measure of damages, and the sum which became due under the repair contract established that amount.

As to whether there was some intervening independent event which broke the chain of causation, Lord Justice Evans considered that this was not the case. An example would be where the contractors had become bankrupt and others had had to be employed to complete the works. Nothing of that sort had happened here. The occurrence of the clause 12 event was within the ordinary scope of such a contract, and since the ship owners had accepted that it was reasonable for Humber to contract on ICE terms, that was in effect the end of the matter.

- Geoff Brewer
B.C. Chaubey

Post a Comment