Yara Asia Pte Ltd (Yara) claimed compensation for loss/damage to fertiliser carried on the ship MV Cheshire from Herøya to Thailand in August 2017. The lawsuit was later filed by Yara Insurance DAC and If P&C Insurance Holding Ltd. The defendants are J Lauritzen Singapore Pte Ltd (Lauritzen) and Bibby Transport Ltd (Bibby). Bibby was the shipowner. Lauritzen was a contracting party with Yara, but chartered the ship from Bibby (via the companies Lauritzen Bulkers A/S who had chartered the ship from Pacific Gulf Shipping Co Pte Ltd). The defendants, together with a number of hull sub-insurers and Gard, filed a counterclaim against Yara with a claim for compensation related to loss/damage to the ship.

The damage occurred due to heat generation in the fertiliser, which then underwent a decomposition process. Smoke developed, toxic gases formed, and the ship was evacuated. Both the fertiliser and the ship were significantly damaged.

Yara argued that the defendants were jointly liable for the loss of the fertiliser. Yara argued that Bibby had violated a number of safety standards set out in the International Maritime Solid Bulk Cargoes Code (the IMSBC Code), internal instructions given by Bibby itself, safety rules and information provided by Yara in the charterparty and during review and inspection before loading, by leaving a light on in the hold while on board. There was a visible and foreseeable risk of injury and damage. There was a simple alternative; to disconnect the fuses before loading, or at least not to turn on the lamp, or to turn it off. This was not done.

The damage could have been averted and the extent of the damage could have been limited by simple investigations and actions in the interest of the cargo. The master had a clear reason to act when there were visible signs that something irregular was going on in cargo hold 4. He should have contacted the shipping company and Yara, initiated ventilation, identified the heat source, and insulated the heat source by adding water. This was not done until another four days had passed. All the negligence factors in the direction of the negligence norm in the Maritime Act § 275 (which is loosely based on art 4.2.q of the Hague-Visby Rules, but with a reverse burden of proof) were not complied with.

With regard to the load capacity assessment according to the Maritime Code § 276 (based on art 3.1 of the Hague-Visby Rules), this went to the issue of whether the ship was seaworthy when it left Herøya. The lights in cargo hold 4 were predominantly on during loading and when the ship sailed from Herøya. In any case, the electrical system was not disconnected. This was in violation of the ship's own safety management manual, instructions from Yara, and the IMSBC code. The ship then sailed with an increased risk that something would happen along the way, and this also goes to the issue of whether the ship was seaworthy from the start of the voyage. In the same way, incorrect information was given in the ship's own safety management manual. This gave incorrect instructions not to ventilate the load when developing heat damage. Then the ship sailed with an incorrect instruction on how to handle such an incident. This goes to the seaworthiness of the ship at the beginning of the voyage. Furthermore, the master demonstrated deficient/absent knowledge of the IMSBC code. This also factors into whether the ship was originally seaworthy.

In the alternative, Yara argued that none of the exceptions in the Maritime Act § 276(1) (arts 4.2.a and 4.2.b of the Hague-Visby Rules) were applicable. This was not a fault in the management of the ship, but a fault in the management of the cargo. It was the carriers who had the burden of proof that the error occurred as part of the management of the ship and this was not fulfilled. Decomposition was also not fire, but a chemical process which, unlike fire, was not oxygen driven.

The carriers had also not fulfilled the burden of proof that the damage was partly due to circumstances on Yara's part, cf the Maritime Act § 275(3). Yara had not provided incomplete information about the cargo. The cargo was correctly classified according to the IMSBC rules. Yara had not under-communicated the consequences of the cargo coming into contact with heat sources. Sufficient information on this was provided in the IMSBC Code. In addition, additional information was provided in the charterparty, as well as at the terminal prior to loading. In addition to this, the master received direct information by email from Lauritzen.

Yara further argued in the counterclaim that the cargo was not dangerous according to the Maritime Code § 291 (based on art 4.6 of the Hague-Visby Rules). NPK fertiliser is one of many types of cargo that must be kept away from heat sources in cargo holds, without the cargo type itself being characterised as dangerous. The cargo was correctly classified according to the IMSBC code. Yara provided accurate information about the classification of the cargo. The IMSBC code contained precise and sufficient information on the precautions the carrier should have taken before/during loading.

Bibby and Lauritzen denied that they were liable under the Maritime Code § 275. In the alternative, they argued that the special grounds for exemption from liability in the Maritime Act § 276 regarding fault in the management of the ship or fire applied. The ship was seaworthy at the beginning of the voyage. The lamp in cargo hold 4 was most likely lit after the ship left Herøya. The error in turning on the lamp was an error in the management of the ship. The threshold for seaworthiness pursuant to the Maritime Act § 276(2) was high and the shipping company was not to blame for the fact that no action was taken to ensure that the light could not be turned on by accident. The incident was a fire according to the Maritime Code § 276. The term 'fire' included not only open flame but also similar events, including embers. Decomposition has many similarities with fire.

Held: Judgment for the plaintiff in both the main claim and counterclaim.

Overall, the Court finds that the master's handling of the situation was negligent. It follows from the MV Cheshire's own safety manual that the master, before loading, is obliged to have as much information about the cargo as possible and that all available sources must be used. He must also familiarise himself with and assess all risks, precautions and special aspects of the cargo, and monitor temperature, gas and oxygen levels. It also states that the master, if he is unsure, must contact the relevant 'management office' for advice. It seems clear that the master neither complied with the repeated requirement to avoid heat sources, nor assessed the risk of the cargo well enough. He also did not respond to many signs of an ongoing development in the cargo on 7 or 8 August and contact the relevant office on land.

The master and Bibby as a whole received sufficient information about the properties and the potential for damage to the fertiliser to understand the importance of taking care of relevant safety measures. This also means that the information about the fertiliser was sufficient to understand that the decomposition could spread if it was not stopped. With regard to information on safety measures, it is clear that the IMSBC code and the information provided by Yara also contained plenty of information that the cargo should not be exposed to heat sources. This is the most important safety information related to the fertiliser.

It is most likely that the triggering cause and the cause of the extent of the damage were the circumstances for which the carrier is responsible and Bibby and Lauritzen are thereby in principle responsible for Yara's loss. The Court also considers that the characteristics of the cargo were in accordance with the information Bibby and Lauritzen received about the cargo. Yara did not provide sufficient information on safety measures, but the Court has concluded that there is no causal link between the defective points and the extent of the damage.

It is thus not necessary to assess whether Bibby would have accepted the cargo and entered into the transport agreement if it had been given the correct information. There is also no basis for division of responsibilities according to the Maritime Code § 275(3).

As to seaworthiness, according to the Maritime Code § 276(2), the carrier must prove that it has exercised 'due diligence' in making the ship seaworthy if there is unseaworthiness at the beginning of the voyage. The Court does not find this probable. No evidence has been presented in the form of routines etc or other measures that support this. As a consequence, the exceptions in the Maritime Code § 276(1) do not apply and the Court therefore does not go further into when the lamps were turned on. It is also not necessary to assess whether the damage is due to fire. As a consequence, Bibby and Lauritzen are jointly and severally liable for Yara's losses.

Bibby and Lauritzen have stated that Yara is objectively liable for damage and loss that Bibby and Lauritzen have suffered as a result of the transport of dangerous goods. It has emerged from the evidence that the classification of group C fertilisers has been discussed in the IMO for several years. In 2016, on the basis of a decomposition accident in another ship, Germany proposed changing the classification because the trough test was not suitable to give a correct picture of the danger of the fertiliser when it was in bulk, and that it was misleading to call it non-hazardous. It is documented that the IMO, which decides how different types of cargo are to be classified, is in the process of changing the classification of NPK fertilisers. Depending on the composition of ammonium nitrate and chlorine content, certain types of NPK fertilisers that are currently in group C will in future be classified as group B. It is stated that the fertiliser in this case will be classified in group B.

The Court has nevertheless concluded that Lauritzen and Bibby as a whole received sufficient information about the cargo's properties, including its 'dangerous nature'. Nor can the Court see that Yara acted negligently by giving incorrect, incomplete and misleading information to Lauritzen or Bibby. This therefore does not constitute a basis for Yara's liability.

[For the unsuccessful appeal to the Borgarting Court of Appeal, see J Lauritzen Singapore Pte Ltd v Yara Asia Pte Ltd 20-062574ASD-BORG / 03 (CMI1624).]