This case is about liquid oxygen which leaked from a cryogenic tank container while on board the MV Cabot. As a result, part of the Cabot’s deck and shell plating became extremely brittle and fractured. The owners of the vessel, Oceanex, sued Praxair, the bailee in possession of the tank, for the cost of repairs and for the lost revenue during the corresponding downtime.

As to the facts, Oceanex submitted that a valve or valves behind the cabinet doors on one side of the container were not sufficiently tight to withstand the normal rigours of transit by water. Oceanex also relied on the fact that it came to light during the proceedings that two of the valves had leaked two months prior to the present incident, but only one was tightened. For its part, Praxair alleged that the container was either dropped or set down heavily while in the custody of Oceanex or its subcontractors, and this led to a misalignment of the piping, and put undue pressure on various valves, thus leading to the leak.

The contract between the parties was found in the rate quotation which incorporated the Oceanex tariff, and a non-negotiable receipt. The rate quotation specifically provided that the shipment was not subject to the Hague-Visby Rules or the Hamburg Rules. No bill of lading was issued. The non-negotiable receipt stipulated that the contract was governed by Canadian maritime law.

Notwithstanding the contractual ouster of the Hague-Visby Rules, Oceanex submitted that as a matter of public policy they should still apply.

Held: Per Harrington J, as a matter of fact, the fire-block valves V1 and V2 of the container leaked whilst on board the Cabot because they were not sufficiently tight.

As to the Hague-Visby Rules, the court held that s 43(2) of the Canadian Marine Liability Act makes perfectly clear that although the Hague-Visby Rules apply to cabotage, they do not do so if, as in this case, if no bill of lading was issued, and the contact stipulates that the Hague-Visby Rules do not apply.

Harrington J discussed The Giannis NK (Effort Shipping Co Ltd v Linden Management SA)  [1998] 1 Lloyd’s Rep 337 where the English House of Lords had held that dangerous goods within the meaning of the Hague Rules were not confined to goods of inflammable or explosive nature. In the absence of the carrier’s informed consent, the shippers were prima facie liable for all damages and expenses directly or indirectly arising out of the shipment. The House of Lords also added (obiter) that the liability of a shipper did not depend on his knowledge or means of knowledge, and liability would be the same whether it arose by virtue of an implied term at common law, or by art 4.6 of the Hague Rules. Harrington J emphasized that liability is strict.

Harrington J then discussed the Canadian case Industries Perlite Inc v Marina Di Alimuri [1996] 2 FC 426, emphasizing that whatever warranty exists (absolute or qualified) on the part of the shipper as to the suitability of goods for carriage, the liability for damage arising out of ‘dangerous cargo’ is judged on a sliding scale wholly dependent on the knowledge, or deemed knowledge of the carrier.

Returning to the facts of this case, the court confirmed that liquid oxygen and liquid nitrogen are covered by the Canadian Transportation of Dangerous Goods Act 1992 and Regulations thereunder. Refrigerated gases fall within Class 2 of the Act. Under s 5.4 of the Consolidated Transportation of Dangerous Goods Regulations, the shipper must ‘load and secure dangerous goods in a means of containment … in such a way as to prevent, under normal conditions of transport, damage to the means of containment or the means of transport …’.

In addition, be it under common law or the non-negotiable receipt, the carrier is not responsible for damage caused by insufficiency of packing. No person is entitled to claim compensation from others for damage occasioned by his neglect to do something which it was his duty to do. Furthermore, the insufficiency of packing, ie the insufficiently tightened packing nuts, could not be detected by Oceanex. The fire block valves were behind sealed cabinet doors. It was never expected that Oceanex would do anything with the container other than carry it. Oceanex did not accept the risk that Praxair would not do the right thing by it.

In consequence, the court held that Praxair was liable.

Harrington J also expressed his view (obiter) that the earlier leaks of the container should have put Paxair on inquiry. It should have been at pains to see what could be done to counter the problem which had thus been revealed.