The Sunrise Crane was a chemical tanker owned by the appellant. On 4 March 2001, the vessel arrived in Singapore to discharge a cargo of nitric acid. It was found that 34 mt of the nitric acid in one of her tanks had been contaminated by hydraulic oil. The contaminated cargo had to be disposed of by safe means. The appellant requested the vessel’s P&I club to assist. The club appointed a surveyor (Capt Gill) to find a suitable licensed contractor to remove the contaminated cargo. The surveyor got in touch with two possible contractors, one of which was Pink Energy Enterprises (Pink Energy). Pink Energy in turn engaged Pristine Maritime Ltd (Pristine Maritime). Pristine Maritime had the vessel Pristine on time charter from the respondent, who owned the vessel.

The trial judge accepted that Pink Energy had been told the cargo was contaminated nitric acid. However, Mr Windsor of Pink Energy failed to advise Pristine Maritime, or the owners of the Pristine, that the cargo was contaminated nitric acid. Instead he said it was ‘contaminated lubes’. The works order issued by Pink Energy to the Pristine referred to the contaminated cargo as ‘Annex I slops’ ie petroleum slops. The Pristine was a slop carrier, constituted of mild steel. She was only capable of carrying MARPOL Annex I slops. She was incapable of carrying nitric acid (a MARPOL Annex II slop). Around 1 am on 8 March 2001, the Sunrise Crane moored alongside the Pristine and transferred the contaminated nitric acid into the Pristine. A short while later, smoke was seen coming out of the Pristine which also listed a little to port. The crew from the Pristine evacuated to the Sunrise Crane and some of the crew of the Sunrise Crane had to put on protective equipment and breathing apparatus before boarding the Pristine to close its valves and openings. Eventually, the Pristine capsized. It was subsequently established that the cargo of contaminated nitric acid had bored holes into the hull of the Pristine, causing leaks. It was common ground that prior to the transfer, no one on board the Sunrise Crane informed the crew of the Pristine that the substance to be transferred was contaminated nitric acid.

The respondent owners of Pristine brought an action in tort against the appellant for failing to inform the Pristine of the nature of the cargo immediately prior to the transfer. The appellant’s response was that it had engaged an independent contractor (ie Pink Energy) to dispose of the cargo and that Pink Energy had been fully informed. Thus, the appellant did not owe a duty of care to the respondent. Alternatively, the appellant submitted it was entitled to limit its liability under the Merchant Shipping Act (Cap 179, 1996 rev ed), which incorporated the provisions of the LLMC 1957. The trial judge found in favour of the respondent. She held that the appellant owed a duty of care to the respondent, and the appellant was not entitled to limit its liability. The appellant appealed against the entire decision.

Held: The appeal would be dismissed, both on liability and on quantum. As to liability, the Court held, by a majority (Judith Prakash J dissenting), that the appellant owners of Sunrise Crane owed a duty of care to the respondent owners of the Pristine. As this duty had been breached, the appellant was liable to the respondent in tort. As to quantum, the Court unanimously held that the appellant was not entitled to limit its liability.

Section 136 of the Merchant Shipping Act provides, inter alia, 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 the ship as long as such loss or damage was sustained ‘without his actual fault or privity’. This section is the Singapore law enactment of the provisions of the International Convention Relating to the Limitation of Liability of Owners of Seagoing Ships 1957 (the LLMC 1957).

The court began by considering the justification for rules relating to limitation of liability by shipowners, and concluded that convenience, and in particular the ability to obtain adequate insurance cover for third party liabilities, drove the rules. With them, insurers could calculate their maximum exposure with certainty. Victims could benefit if limits were set high enough and they could ensure the insurer would pay their claims.

The Court went on to discuss the concept of ‘without his actual fault or privity’. As the cases developed over the years, the threshold to cross before a defendant could avail itself of limitation became very high.

The Court considered the three English cases cited:

1. The Norman [1960] 1 Lloyd’s Rep 1, where the shipowners failed to pass on to the master information in circulars about navigation hazards in an area in which the Norman was likely to be navigated. The vessel struck an uncharted rock in fog at night and sank. The defence of limitation was denied. Lord Radcliffe, in coming to the conclusion that the owners had a duty to communicate the latest information that would assist navigation, found two questions to be pertinent: namely (a) what action should have been taken by a prudent and conscientious owner in the circumstances, and (b) if action should have been taken, had the owners established with sufficient probability that even though it was not, the omission had no bearing upon the casualty that occurred, so that it was not contributed to by their fault?

2. In The England [1973] 1 Lloyd’s Rep 373, the owners failed to ensure that copies of the Port of London River By-laws were placed on the ship. The defendants asserted that they were entitled to limit liability on the basis that they had engaged a master who had sufficient knowledge to navigate the River Thames. The defence was rejected.   

3. In Grand Champion Tankers Ltd v Norpipe A/S (The Marion) [1984] 1 AC 563, the ship managers had left the updating of the charts entirely to the master. There was no system in place for the owners to supervise and ensure the master updated the charts. The House of Lords agreed with the Court of Appeal who found that the managers had failed to operate a proper system of keeping the charts up-to-date, and the owners therefore could not prove that the loss was without their actual fault.

Returning to the present case, the court held that, in order for the appellant to establish that its own fault did not contribute to the loss, the appellant had to 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. The court found that the appellant had not provided any evidence as to the management system which it had adopted so as to ensure that the vessel implemented and followed industry standards. It relied on the fact that it had appointed a competent master and officers to serve on the Sunrise Crane.

That the officers were qualified to handle dangerous cargo like nitric acid, did not absolve the appellant 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 such a system. Thus, the court found that (given the duty to warn existed) the appellant 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. As such, no entitlement to limit liability was proved.

In a concluding remark, the Court commented that there was hardly a reported case after the Norman where an owner had managed to show that his systems of management of the vessel were such that they in no way contributed to any negligence on the part of the crew of the vessel. Thus, the purpose of s 136 of the Merchant Shipping Act (and therefore the LLMC 1957) had to a great extent been negatived, and the protection it offered to shipowners had become largely illusory. This development was a major reason why many countries, including the United Kingdom, had moved away from the LLMC 1957 and adopted the LLMC 1976. Under the 1957 Convention, the monetary limits were higher but the right to limit was only lost if it was proved that the loss ‘resulted from [the owner’s] personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.’ This phraseology made it difficult for a claimant to break limitation. Given the original object of limitation, the Court was of the view that the existing state of the law of limitation in Singapore was not achieving its objective and it was time for Singapore to consider ratifying the LLMC 1976 and amending s 136 of the Merchant Shipping Act accordingly.