Shipping agent potentially responsible for alleged negligent disposal of ship in Bangladesh

The recent case of Hamid Begum v Maran (UK) Ltd [2020] EWHC 1846 (QB) builds on recent trends which have seen Courts extending traditional boundaries of tortious liability. One area of significant recent Court activity is with regard to potential liability for companies in respect of environmental, social or human rights breaches occurring elsewhere within the corporate group or supply chain.

In this case, the defendant, Maran (UK) Ltd (Maran), acted as agent for the owner of a ship (within the same corporate group) in relation to the sale of a ship for the purpose of demolition. In this case, it was considered arguable that Maran could be responsible for loss and damage caused by negligent demolition of the vessel. This is notwithstanding an express contractual term that the demolition broker would only sell the vessel to a “ship breaker’s yard that is competent and will perform the demolition and recycling of the vessel in an environmentally sound manner and in accordance with good health and safety working practices”.

Businesses engaged in upstream supply chains where there is the potential for environmental and human rights issues to arise will be watching this case with interest.

Background

Proceedings were brought against English-domiciled Maran. Maran was alleged to be responsible for the death of Mr Mohammed Khalil Mollah (Mr Mollah), who died whilst working on the demolition of the Maran Centaurus, later renamed EKTA (the vessel).

The deceased's widow issued proceedings claiming damages for negligence under the Law Reform (Miscellaneous Provisions) Act 1934 and the Fatal Accidents Act 1976; alternatively, under Bangladeshi law. The scope of the proceedings was subsequently broadened to include a cause of action in unjust enrichment. Proceedings were not brought against the Bangladeshi owner of the yard and/or the deceased’s employer.

Maran applied to strike out the claim and/or for summary judgment. Judgement on this application was handed down on 13 July 2020.

Responsibility for the vessel

Maran is part of the Angelicoussis Shipping Group (ASG) and was just one of the entities involved in the ownership and management of the vessel. The vessel was registered to Centaurus Special Maritime Enterprise (CSME), incorporated in Liberia. CSME is owned by Maran Tankers Shipholdings Ltd (MTS), incorporated in the Cayman Islands. Maran Tankers Management (MTM), which is incorporated in Liberia but with a place of business in Greece, agreed to operate and manage the vessel as independent contractor for CSME.

Pursuant to an agency agreement, Maran agreed to provide agency and shipbroking services to MTM in respect of 29 vessels. These services included, among other things, “to act as chartering broker”, “to collect … all proceeds realised from the employment of the Ships” and “to attend and deal with the insurance of the Ships”. The court accepted that the agency agreement covered the sale of vessels for the purposes of demolition and found that it was clear that Maran acted under the direction and instructions of MTM.

Sale of the vessel

In 2017, Maran made enquiries, obtained quotations for the vessel’s sale, and conducted the negotiations for the sale through an intermediary. It is standard practice that shipowners, acting through managers and/or agents, contract with demolition cash buyers who assume the credit risk.

The highest bidder was Hsejar Maritime Inc (Hsejar), a company incorporated in Nevis. The sale was to be “as is” in Singapore. On 24 August 2017, CSME agreed to sell the vessel to Hsejar pursuant to a Memorandum of Agreement (MoA). The purchase price was over USD16 million with Hsejar’s obligations under the MoA being guaranteed by Wirana Shipping Corp Pte Ltd (Wirana), a company incorporated in Singapore and which the claimant contended was the real buyer. Maran was not a party to this agreement.

In the MoA, Hsejar agreed that the sale was to be for demolition purposes only and that it would only sell the vessel to a “ship breaker’s yard that is competent and will perform the demolition and recycling of the vessel in an environmentally sound manner and in accordance with good health and safety working practices”.

Title was transferred to Hsejar and sums were paid by Wirana. On 5 September 2017, Hsejar took delivery of the vessel, which was reflagged from Greece to Palau, and its name was changed to EKTA. From that moment, no entity within Maran’s corporate group had any direct involvement with it. The vessel left Singapore on 22 September 2017 and was beached at Chattogram on 30 September, when it then must have come under the ownership of the yard.

Facts surrounding the accident

The deceased had been working in shipbreaking continuously since 2009. He worked for at least 70 hours a week for low pay in highly dangerous conditions. His fatal accident happened when he fell from a height and sustained multiple injuries.

For the purposes of this application only, Maran accepted that the “beaching” method of demolition carried out in India, Pakistan and Bangladesh is characterised by inherently dangerous working practices. Expert evidence was produced to show that it has been the subject of international concern for many years and that yards in Bangladesh are known to show scant regard for health and safety, citing reports from the International Labour Organisation.

The judge accepted (for the purpose of deciding the application before him only and in the absence of any evidence to the contrary) that the Defendant knew that the vessel would be broken up in Bangladesh rather than anywhere else. This inference was drawn on the basis of the price paid by Hsejar in August 2017 (a lower price would have signified onward sale to a more reputable yard) and the quantity of fuel oil left on the vessel when it was delivered.

The claimant’s case in negligence and the judge’s findings

The court concluded that it was arguable in this case that Maran was responsible for a state of danger which may be exploited by a third party, in circumstances where (a) it is not a pure omissions case; and (b) the intervening causal contribution of the yard/employer was not deliberate.

The judge concluded that it would be overly restrictive to say that the danger which caused injury to the deceased was created solely by the acts and omissions of the ship yard/ employer in Bangladesh, particularly when there is no evidence that these third parties were acting deliberately to injure the deceased. The judge observed that “it was a danger which inhered in this end-of-life vessel once it was broken up, unless appropriate safety measures were taken”. He therefore considered it inappropriate to strike out the claim.

Unjust enrichment

The claimant also brought an alternative case in unjust enrichment. However, the judge concluded that “it is not remotely arguable that the defendant has been enriched at the deceased’s expense, and this issue is fit to be dealt with summarily”.

The finding in relation to the claim for unjust enrichment follows patterns in other jurisdictions where unjust enrichment has been unsuccessfully pleaded against companies domiciled in the jurisdiction for environmental and social harm occurring in another country. For example, cases in North America and Canada, where unjust enrichment has been pleaded against confectionary companies in relation to child labour in cocoa supply chains. In this case, the judge emphasised that the enrichment was received by the ship yard/ deceased’s employer rather than the Defendant.

Analysis

This case marks a further development in the claims being brought against English-domiciled companies for liability arising from environmental and/or social harm to third parties in another country, without any direct contractual nexus.

At the summary judgment/ strike out stage, where the role of the court is to look at the claims as pleaded, and discern whether they are arguable, such that they should proceed to a full trial, the court was persuaded to look behind the fact that the disposal was made in contravention of an express contractual duty, and the fact that Maran was agent, rather than owner of the vessel.

The claimant’s expert evidence stated that Maran must have received an instruction from the owner to sell the vessel and that Maran “had a high degree of autonomy in those negotiations. It certainly appears that they made a decisive choice, or a series of choices, which led to the ship being sold for guaranteed demolition to Wirana at a price which meant that Chittagong was the only possible destination for the Vessel”. This was further developed in the claimant’s written submissions, where it was argued that “'Control' in this context can take a number of legally relevant forms, each of which may be sufficient to establish a duty of care, all of which are dependent on what the facts reveal” and went on to describe examples from its highest point being literal control over the negotiations and sale, “setting the price, effectively selecting Chittagong, determining the terms of the agreement, giving approval, etc…” to, at the other end, being an instrumental role in advising on the negotiation.

Counsel for Maran took a pragmatic approach for the purpose of this application and accepted that it was at least arguable that the commercial realities went further than the four corners of the relevant operating agreement and agency agreement, with the judge finding that “there is a real prospect that an examination of the complete evidential picture at any trial would support the high watermark of the claimant’s case on control”. The judge also accepted that factual evidence would be necessary to determine whether or not the express contractual proviso as to the method by which demolition should be carried out was a true representation of the parties’ intention.

Conclusion

This case is part of a trend towards accountability being pursued against English-domiciled companies with no direct link to the injuries or environmental harms alleged and where advocacy groups are seeking to extend the boundaries of tort law to account for borderless economic activities.

English-domiciled companies, as well as those domiciled in jurisdictions that follow English law, will follow this case with interest , in particular because of the suggestion that a duty of care extends to checking whether contractual duties have been followed, and ensuring that they are enforced.

This decision also underlines the reluctance of first instance judges when dealing with these types of claims to determine them on a summary basis following the decision in Vedanta Resources PLC and another v Lungowe and others [2019] UKSC 20.