On March 10, 2021, the Court of Appeal unanimously upheld Mr Justice Jay’s finding that Maran (UK) Ltd (“the Defendant”) arguably owed Mr Mollah, the deceased husband of Hamida Begum (“the Claimant”) a duty of care1.
The Court of Appeal, ruled that it would be wrong to strike the Claimant’s negligence claim out at this stage as fanciful. The Court of Appeal highlighted that claims based on duty of care in circumstances where damage has been caused by third party acts are at the “forefront of the development of the law of negligence” and the alleged duty in this case could certainly be regarded as on the edge of that development. The judgment leaves open the door for a negligence claim on the substantive issues against the Defendant.
Factual background
Mr Mollah had fallen to his death while working on the demolition of the vessel, the EKTA (formerly the Maran Centaurus), at the Zuma Enterprise Shipyard (Zuma) in in Chattogram (formerly known as Chittagong), Bangladesh. The Defendant, an English company, acting as an agent for the vessel’s registered owner arranged for the vessel to be sold to a demolition cash buyer named Hsejar Maritime Inc (Hsejar). Hsejar, subsequently sold the vessel for demolition to Zuma. The Claimant brought a claim against the Defendant for damages in tort.
The Defendant made an application seeking an order to strike out the claim and, alternatively, a claim for summary judgment on the basis that the Claimant’s claim had no real prospects of success.
The High Court refused the Defendant’s application and held that the Claimant satisfied the summary judgment test i.e. the Claimant had a “real prospect of success”. The Defendant appealed to the Court of Appeal.
Duty of care
Under English law, a defendant will not be liable in tort for any harm caused by the intervention of third parties. The Defendant sought to apply that principle by arguing that:
1. It was not the shipowner who sent the vessel to Bangladesh or who controlled the vessel’s ultimate destination. The shipowner merely sold the vessel to an intermediate buyer, which was then free to decide where the vessel would be broken up, on terms that required demolition and recycling of the vessel in an “environmentally sound manner and in accordance with good health and safety work ing practices” (clause 22 of the Memorandum of Agreement (MoA));
2. Lack of proximity relationship between the shipowner and Mr Mollah would result in not fulfilling a necessary requirement to establish a duty of care was owed; and
3. Mr Mollah was already at risk throughout his working life and if he had not been killed while working on the Defendant’s ship, he might just as easily have been killed or injured when working on another ship.
The Court disagreed with and addressed the Defendant’s submissions as follows:
1. The sale price and the quantity of fuel oil left in the tanks were consistent with sale to an ultimate buyer in Bangladesh. In those circumstances there is at least an arguable case that the shipowner had knowledge of and intended that the vessel would go to Bangladesh to be demolished, and that it exercised the same control over the ship’s destination as if it had been sold directly to the shipbreaker in Bangladesh.
2. Although the Defendant did not exercise control over the working conditions in the yard in Bangladesh, it did have control over whether Mr Mollah would be exposed to the risk of death or serious injury from working on its ship. Lord Justice Males found this to be a foreseeable risk which the Defendant created by sending the vessel to be recycled in Bangladesh and is arguably sufficient to create the required relationship of proximity.
3. The Court was not attracted and left unimpressed by the Defendant’s argument that Mr Mollah could just as easily have been killed working on another ship.
Two Routes to a duty of care
The Claimant put forward two “routes” to the Court in arguing the existence of a duty of care.
Route 1: Known source of danger – Donoghue v Stevenson
The Claimant sought to establish a duty of care by relying on the Donoghue and Stevenson2 principles. The Claimant argued that the vessel was a “dangerous product” which it was foreseeable would be broken up in Bangladesh in an unsafe manner that could cause harm, adding that there was no break in the chain of causation as the third parties involved acted in a way that was/could be anticipated.
The Court found that the case “does not fit comfortably” with the principles in Donoghue v Stevenson as inter alia: (i) foreseeability is not sufficient to establish a duty of care; and (ii) proximity was not adequately established between the Defendant and the deceased as the Defendant lacked the significant element of supervision of and control over the third parties.
In particular, the Court found an inherent difficulty in the assumption that the vessel was a “dangerous product”. It appeared to the Court that the danger arose from the way in which the demolition was undertaken i.e. demolition being “an inherently dangerous activity”, rather than the vessel itself. In this case, the demolition was not arranged, supervised or undertaken by the Defendant.
Notwithstanding the above, the Court noted it was not hearing a trial but rather an interim application for summary judgement and concluded the arguments raised by the Claimant in relation to this Route 1 were not “so fanciful that it should be struck out”.
Route 2: The Defendant created the source of the danger
A recognised exception to the legal principle that no tortious liability arises if harm is caused by the intervention of third parties is when the defendant is responsible for creating the danger which results in the third party causing injury to the claimant (the “creation of danger” exception). The Claimant sought to apply the “creation of danger” exception under this route.
The Claimant argued that the Defendant did not fail to make things better; here it actually made things worse by creating a danger when being aware of the unsafe working practices in Bangladesh, and deciding to proceed with having the vessel broken up there. Under the circumstances, Mr Mollah’s death was not a mere possibility but a probability.
The Court found that the Defendant “arguably played an active role by sending the vessel to Bangladesh, knowingly exposing workers (such as [Mr Mollah]) to the significant dangers which working on this large vessel in Chattogram entailed…. The yard’s failure to provide any safety harnesses or any other proper equipment, and the tragic consequences of their not doing so, were entirely predictable.”
The Court concluded that this claim was arguable noting however it reflected “an unusual extension of an existing category of cases where a duty has been found, but it would not be an entirely new basis of tortious liability”. The Court added that the alleged duty of care being at the “edge” of the developing case law, it would be inappropriate to strike out the claim based on assumptions in the absence of finding facts. 3
What could/should the Defendant have done?
To the Defendant’s rhetorical questions of what else could/should the Defendant have done differently to avoid the risks to Mr Mollah, Lord Justice Coulson, by referencing to the Claimant’s expert evidence indicated a number of “green” shipyards with proper working practices in place where the vessel could have been broken up, pointed out that this could have been achieved when negotiating the MoA, by the Defendant linking the inter-party payments to the delivery of the vessel to an approved “green” shipyard.
He considered that: “Such an arrangement appears not only feasible, it also finds a clear echo in the MoA itself. Clause 22 imposed an obligation on the buyer [Hsejar]… to confirm that they would only sell to a yard that would perform the demolition ‘in accordance with good health and safety work ing practices’”. Requiring safe demolition was therefore well within the reasonable control of the Defendant.
Based on the evidence, the Court suggested that all parties involved (the seller, the buyer and the agent) knew that provisions “like clause 22 would be entirely ignored” as “a seller in the position of the Appellant would have no interest in ensuring the performance of clause 22 as it stands, and a buyer in the position of Hsejar could therefore be in breach of that provision without any sanction”. It was noted that this forms part of an “unhappy reality of the shipbreaking business”. In Coulson LJ’s view, had the payment arrangements been different, clause 22 may have been “more than words on a piece of paper”.
As the Court concluded, “it is at least arguable that [the Defendant] could have acted differently and that, if they had done, it might have made a real difference to the outcome”.
Takeaways
Until recently, English courts had a strict approach in upholding corporate separation and, therefore, were reluctant in piercing the corporate veil. However, Begum is added to the new English case law whereby the English Court of Appeal and the UK Supreme Court set new boundaries and precedents on the corporate accountability for third party acts and omissions, such as the parent company liability cases of Lungowe v Vedanta4 and Okpabi v Shell5. Although the Court did acknowledge the “formidable hurdles” that the Claimant will now face in establishing a duty of care, it refused to strike out the claim due to its significance in an evolving jurisprudence area. The Court’s ruling echoes intensified global awareness requiring a shift towards green, sustainable, healthy and safe practices upholding human rights across the ship demolition sector.
In the ever-evolving corporate liability landscape, these recent cases highlight the continuous challenges corporations face in trying to establish reliable due diligence procedures on human rights, environmental and good governance throughout their value chain (including their subsidiaries). Corporations should note the Court’s unwillingness to allow defendants to rely on human rights, environmental and corporate governance clauses and then seek “to wash their hands of responsibility for anything, however foreseeable” when the evidence itself suggests the parties knew that such contractual clauses are of limited value as they would not be followed or enforced.
Haynes and Boone LLP
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