On 18 October 2008, the shipper/first defendant's dangerous cargo was being loaded on board the Ing Hua Fu No 9 at Port Klang, Malaysia, when sparks, fire, explosion and sinking occurred in succession. The shipowner/plaintiff was the carrier of the cargo under a bill of lading which evidenced the contract of carriage between the plaintiff and the first defendant.

The International Convention for the Unification of Certain Rules of Law relating to Bills of Lading 1924 (the Hague Rules) is given effect in Malaysia via s 2 of the Carriage of Goods by Sea Act 1950 (the Act) and applied to the bill of lading. The Act was the outcome of an international conference and the Rules have international currency. The enactment was adopted by attaching the international Convention in a Schedule to the Act. It has been stated by Ramly Ali J in Trengganu Forest Products Sdn Bhd v Cosco Container Lines [2007] 5 MLJ 486; [2007] 5 CLJ 720 (CMI464) that the Act gives force to the Hague Rules and provides for its compulsory application to bills of lading and similar documents of title issued in relation to outward bound cargoes. The two material provisions in the present case were arts 4.6 and 4.3, which provide as follows:

Article 4.6: ‘Goods of an inflammable, explosive or dangerous nature to the shipment whereof the carrier, master or agent of the carrier has not consented with knowledge of their nature and character may at any time before discharge be landed at any place or destroyed or rendered innocuous by the carrier without compensation and the shipper of such goods shall be liable for all damages and expenses directly or indirectly arising out of or resulting from such shipment …’

Article 4.3: ‘The shipper shall not be responsible for loss or damage sustained by the carrier or the ship arising or resulting from any cause without the act, fault or neglect of the shipper, his agents or his servants.’

The plaintiff claimed against both defendants jointly and severally for liability for all losses suffered due to explosion and eventual sinking of the Ing Hua Fu No 9 - against the first defendant on the basis of negligence, bailment, or breach of art 4.6 of Hague Rules, in that the first defendant’s cargo packed in pallet no 5 caused the fire; and against the forwarding agent (the second defendant) as agent and the first defendant as principal on breach of warranty. The plaintiff asserted that it did not know the dangerous nature of the first defendant's cargo of agrochemical product (it contained sodium chlorate, a strong oxidising agent which was ignitable by heat and friction and thus incompatible with combustible wood) and hence did not consent to such dangerous goods being carried on board the Ing Hua Fu No 9. The first defendant contended that the cargo was widely known in the shipping industry as a dangerous cargo under the International Maritime Dangerous Goods Code (IMDG Code) that required special packing, handling and stowage.

Both defendants submitted that the fire and explosion could not be attributed to the first defendant's cargo. They argued that the first defendant had complied with the requirements of the IMDG Code to warn or advise the plaintiff of fundamental information relating to the hazards of the cargo, and those of the International Convention for the Safety of Life at Sea 1974 (SOLAS 1974) - since the plaintiff was at all times aware or ought to have been aware of the risks it contracted to undertake, the plaintiff undertook the contractual risk of shipment and thus no indemnity was available to the plaintiff. Moreover, the cause of the accident was unknown.

Held: The plaintiff is entitled to judgment against the first defendant for all losses and damages suffered by it as a consequence of the sinking of the Ing Hua Fu 9.

Liability under article 4.6

The plaintiff had established absolute liability against the first defendant under art 4.6 of the Hague Rules. The first defendant was wholly liable to the plaintiff for all damages suffered.

'Dangerous'

The word 'dangerous' was not to be read eiusdem generis with the words 'inflammable, explosive'. Goods of a 'dangerous' nature referred to goods which had the capacity to cause physical damage in either a direct or an indirect manner and not merely the capacity to cause delay. The duty owed for dangerous goods was that of reasonable care to prevent them from causing injury or damage to persons or property likely to come into contact with them.

Knowledge

The plaintiff was not aware of the nature or characteristics of the goods shipped. It could not be concluded that the master, plaintiff, or plaintiff’s agent ought reasonably to have known of the precise dangers of the agrochemicals by simply sighting their chemical names viz DCN1 and DCN2. They did not have a duty to ask for the material safety data sheet and satisfy themselves as to the precise risks of that group of agrochemicals because it would place far too onerous a duty on the plaintiff and/or the plaintiff's agent. The plaintiff and its master were neither notified of the nature and characteristics of the chemicals, nor informed of the effect of packaging the same together in pallet no 5, nor warned of the necessity of isolating the sodium chlorate. Accordingly, the plaintiff did not consent to carry the cargo, with knowledge of its nature and characteristics, and did not assume the fire and explosion risks.

Instead, the first defendant clearly breached or failed to comply with the segregation table of the IMDG code in packing the sodium chlorate, which was packed together with incompatible chemicals. The first defendant was aware or ought to have been fully aware of the potential dangers of sodium chlorate and its corresponding manner of packing and it was thus incumbent on the first defendant to notify and procure the plaintiff's consent to the potential fire and explosion hazard posed by the pallets. Even if the first defendant had no knowledge of this danger, it ought to have alerted the plaintiff of the danger, for precautionary measures to be taken (if possible) or to give the plaintiff the option to refuse to carry the cargo altogether, but it failed to do so. Accordingly, the plaintiff could not be said to have received enough warning, nor could be reasonably expected to know the particular characteristics of the dangerous cargo.

'Shall be liable'

The cause of the incident, being attributable to the first defendant, was not necessarily of relevance to establish liability; the shipper's liability was not dependent on any negligence or deliberate act by it, other than the act of shipment (The Giannis NK [1996] 1 Lloyd’s Rep 577 (CMI571)). The Giannis NK considered whether art 4.6 created an absolute liability for the shipper, or whether the effect of art 4.6 was somewhat diluted to comprise a qualified warranty by reason of art 4.3. The Judge adopted the reasoning of the Court in The Giannis NK that the clear words of art 4.6 were not capable of the qualified construction and the choice of wording was quite categorical.

'Directly or indirectly'

Article 4.6 does not require the plaintiff to prove any deliberate act of negligence or fault on the part of the first defendant in order to claim an indemnity under this article - 'directly or indirectly' means that recovery is not dependent on establishing that the dangerous nature of the cargo was the proximate or dominant cause of the loss, although it was so in this case.

Liability under common law

The first defendant's liability was also absolute under the common law regarding the dangerous goods and liability extended to a situation where the plaintiff was arguably not aware of the dangerous nature of the goods. The first defendant owed a duty of care to the plaintiff to specifically point out the potential dangers posed by the cargo - the proximity of the relationship between the two parties required it to inform the plaintiff of the dangerous nature of the goods it was expected to carry and especially so because of the privity of contract between them.

Negligence

The first defendant’s liability arose when it failed or breached the duty of care and the cause of action was in negligence. The first defendant could not fulfil its duty of care owed to the plaintiff by simply designating the goods as 'dangerous goods', complying with the statutory requirements of the port authorities by filling in DCN1 and DCN2 and describing the goods, without more, as 'agrochemicals'.

Liability of the forwarding agent if principal found to be liable

Since this was a matter wholly within the knowledge of the first defendant, knowledge was only attributable to the first defendant. The first defendant as principal was wholly liable for the consequences of the dangerous cargo that was shipped on board the vessel. The plaintiff was also fully aware at all material times that it was contracting with the first defendant and not the second defendant. Both the first defendant and the second defendant were parties to this action (it might have been different if the first defendant was not a party to the action) but the second defendant genuinely had no comprehension of the precise potential dangers afforded by the cargo. The second defendant had relied entirely on the first defendant and made no independent assessment of the risk. Liability accrued to the principal, rather than the agent, and thus the second defendant was exempt from liability as an agent. The second defendant relied entirely on the first defendant, made no independent assessment of the risk and did not apparently comprehend that in view of the position in law and the certification provided to the authorities, it provided an independent warranty to the plaintiff that the goods were safe for shipment. Accordingly, the second defendant clearly indicated that it had no knowledge of the nature and characteristics of these chemicals in relation to potential fire or explosion hazards.

Liability of the forwarding agent in breach of warranty

It was clear that the second defendant breached both its express and implied warranty. A declaration was not sufficient to exempt the second defendant from liability. It was incumbent on the second defendant to warn or caution the plaintiff of the danger. Neither the first defendant nor the second defendant made the danger of packing incompatible chemicals or specific dangers of sodium chlorate as being potentially explosive and fire-prone foreseeable or known to the plaintiff. The alleged placement of stickers on the pallets was wholly insufficient to meet the second defendant's duty owed to the plaintiff in respect of the carriage of dangerous goods. The contention that the second defendant could not possibly forewarn the plaintiff in absence of specific knowledge appeared to be neither a defence nor a bar to its liability.

[For the successful appeal to the Court of Appeal, see Vitachem (M) Sdn Bhd v Ing Hua Fu Marine Line Sdn Bhd [2014] 6 MLJ 566 (CMI138).]