Rich (Marc) & Co. AG et al. v. Bishop Rock Marine Co. et al., (1995) 185 N.R. 265 (HL)

• Case Date: Thursday July 06, 1995
• Jurisdiction: Canada (Federal)
• Citations: (1995), 185 N.R. 265 (HL)

Rich & Co. v. Bishop Rock Marine Co. (1995), 185 N.R. 265 (HL)

MLB headnote and full text

Marc Rich & Co. A.G. (Body Corporate) and others (appellants) v. Bishop Rock Marine Co. Ltd. (Body Corporate) and others (respondents)

Indexed As: Rich (Marc) & Co. AG et al. v. Bishop Rock Marine Co. et al.

House of Lords

London, England

Lord Keith of Kinkel,

Lord Jauncey of Tullichettle,

Lord Browne-Wilkinson,

Lord Lloyd of Berwick and

Lord Steyn

July 6, 1995.

Summary:

A crack appeared in a ship's hull during the course of a voyage. The ship anchored off a harbour. Further cracks developed. The ship's owners requested a damage survey from their classification society. The classi­fication society's sur­veyor recommended that the ship go into drydock and undergo per­manent repairs. Instead, the owners opted for tem­porary repairs. Subsequently, the sur­veyor reversed his original recommendation subject to the temporary repairs being exam­ined after the voyage was completed and the cargo dis­charged. The surveyor recom­mended that the ship be retained in class for her original voyage. The ship could sail. A few days later, the welding of the temporary repairs cracked. The ship and cargo were lost. The value of the cargo was in excess of U.S. $6 million. The cargo owners sued the ship­owners, the head charterers and the classifi­cation society. The cargo owners settled the claim against the ship­owners for U.S. $500,000. The claim against the char­terers was aban­doned. The question of whether the classifi­cation society owed a duty of care to the cargo owners came before the court as a preliminary issue.

The Commercial Court, in a decision reported [1992] 2 Lloyd's Reports 481, held that on the assumed facts, the classification society owed a duty of care to the cargo owners which was capable of giving rise to a liability in damages. The classification society appealed.

The Court of Appeal of England, in a decision reported [1994] 1 W.L.R. 1071, allowed the appeal. The cargo owners appealed.

The House of Lords, Lord Lloyd of Berwick, dissenting, dismissed the appeal.

Damages - Topic 528

Limits of compensatory damages - Re­moteness - Torts - Foreseeability - [See Torts - Topic 1 ].

Damages - Topic 530

Limits of compensatory damages - Re­moteness - Torts - Recoverable damages - Direct consequences of fault - Directly inflicted physical loss v. indirectly inflicted physical loss - Ship classification societies are nonprofit organizations which inspect ships - A ship's hull developed a crack - A surveyor from the ship's classification society recommended permanent repairs - The owners opted for temporary repairs - The surveyor reversed his original recom­mendation on the condition the ship un­dergo a further survey at the end of the voyage - The ship sank - The cargo was lost - The cargo owners sued the classifi­cation society on the ground that the sur­veyor's negligence caused them direct physical loss - The House of Lords held that the carelessness of the surveyor did not involve the direct infliction of physical damage in the relevant sense - See para­graph 61.

Damages - Topic 531

Limits of compensatory damages - Re­moteness - Torts - Recoverable damages - Purely economic loss - [See Torts - Topic 1 ].

Damages - Topic 532

Limits of compensatory damages - Re­moteness - Torts - Recoverable damages - Consequential economic loss - [See Torts - Topic 36.1 ].

Torts - Topic 1

Negligence - General principles - A plaintiff, citing the observations of Lord Oliver of Aylmerton in Caparo Industries Plc. v. Dickman et al., [1990] 2 A.C. 605; 108 N.R. 81, submitted that in negligence cases deal­ing with direct physical damage to prop­erty, as opposed to indirect eco­nomic loss, the only requirement is proof of reasonable foreseeability - The House of Lords rejected that submission - Speaking for the majority, Lord Steyn stated that "since the decision in Dorset Yacht Co. Ltd. v. Home Office, [1970] A.C. 1004, it has been settled law that the elements of foreseeability and proximity as well as considerations of fairness, justice and reasonableness are relevant to all cases whatever the nature of the harm sustained by the plaintiff" - See paragraph 56.

Torts - Topic 36.1

Negligence - Standard of care - Ship surveyors - Ship classification societies are nonprofit organizations which inspect ships for safety purposes - The insurance premium for an unclassed ship would not be commercially feasible - A ship's hull developed a crack - A surveyor from the ship's classification society recommended permanent repairs - The owners opted for temporary repairs - The surveyor reversed his original recommendation on the condi­tion the ship undergo a further survey at the end of the voyage - The ship remained in its class and could sail - The ship sank - The cargo was lost - The cargo owners sued the classification society on the ground of the surveyor's negligence - The House of Lords held that it would not be fair, just and reasonable to impose a duty of care on the classification society.

Torts - Topic 81

Negligence - Duty of care - Requirement that duty be owed to plaintiff - Ship surveyors - [See Torts - Topic 36.1 ].

Cases Noticed:

Rondel v. Worsley, [1969] 1 A.C. 191 (H.L.), refd to. [para. 5].

Hill Estate v. Chief Constable of West Yorkshire, [1989] A.C. 53; 102 N.R. 241 (H.L.), refd to. [para. 5].

Riverstone Meat Co. Pty. Ltd. v. Lanca­shire Shipping Co., [1961] A.C. 807 (H.L.), refd to. [para. 6].

Grant v. Australian Knitting Mills Ltd., [1936] A.C. 85 (P.C.), refd to. [para. 8].

Mobil Oil Hong Kong Ltd. and Dow Chemical (Hong Kong) Ltd. v. Hong Kong United Dockyards Ltd., [1991] 1 Lloyd's Rep. 309; 122 N.R. 65 (P.C.), refd to. [para. 8].

Caparo Industries v. Dickman et al., [1990] 2 A.C. 605; 108 N.R. 81 (H.L.), consd. [para. 8].

Murphy v. Brentwood District Council, [1991] 1 A.C. 398; 113 N.R. 81 (H.L.), refd to. [para. 8].

Clay v. Crump (A.J.) & Sons Ltd., [1964] 1 Q.B. 533 (C.A.), dist. [para. 19].

Donoghue v. Stevenson, [1932] A.C. 562; [1932] All E.R. Rep. 1 (H.L.), refd to. [para. 23].

McAlister (Donoghue) v. Stevenson - see Donoghue v. Stevenson.

Arbuthnott et al. v. Fagan and Feltrim Underwriting Agencies Ltd. et al., [1994] 3 W.L.R. 761; 173 N.R. 173 (H.L.), dist. [para. 23].

Henderson et al. v. Merrett Syndicates Ltd. et al. - see Arbuthnott et al. v. Fagan and Fel­trim Underwriting Agencies Ltd. et al.

Adler v. Dickson, [1955] 1 Q.B. 158 (C.A.), consd. [para. 24].

Wilson v. Darling Island Stevedoring and Lighterage Co., [1956] 1 Lloyd's Rep. 346 (Aust. H.C.), refd to. [para. 25].

Midland Silicones Ltd. v. Scruttons Ltd., [1962] A.C. 446 (H.L.), refd to. [para. 26].

White et al. v. Jones et al., [1993] 3 W.L.R. 730 (C.A.), refd to. [para. 28].

Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465 (H.L.), consd. [para. 31].

Morrison Steamship Co. v. Greystoke Castle (Cargo Owners), [1947] A.C. 265 (H.L.), consd. [para. 32].

Ship Tojo Maru, Re; Owners of the Motor Vessel Tojo Maru (Her Cargo and Freight) v. N.V. Bureau Wijs­muller, [1972] A.C. 242 (H.L.), consd. [para. 36].

Caparo Industries v. Dickman et al., [1989] Q.B. 653 (C.A.), consd. [para. 39].

Anns v. Merton London Borough Council, [1978] A.C. 728; [1977] 2 W.L.R. 1024; [1977] 2 All E.R. 492 (H.L.), refd to. [para. 40].

Nocton v. Ashburton (Lord), [1914] A.C. 932 (H.L.), refd to. [para. 41].

Haseldine v. Daw (C.A.) & Son Ltd., [1941] 2 K.B. 343 (C.A.), refd to. [para. 41].

Voli v. Inglewood Shire Council and Lockwood (1963), 110 C.L.R. 74, refd to. [para. 41].

Muirhead v. Industrial Tank Specialities Ltd., [1986] Q.B. 507 (C.A.), refd to. [para. 41].

Sundance Cruises Corp. v. American Bureau of Shipping, [1994] 1 Lloyd's Rep. 183; 7 F.3d 1077 (2nd Cir.), refd to. [para. 44].

International Ore & Fertilizer Corp. v. SGS Control Services Inc. (1994), 38 F.3d 1279 (2nd Cir.), refd to. [para. 44].

Dorset Yacht Co. v. Home Office, [1970] A.C. 1004 (H.L.), folld. [para. 56].

White et al. v. Jones et al., [1995] 2 W.L.R. 187; 179 N.R. 197 (H.L.), refd to. [para. 57].

Pacific Associates Inc. v. Baxter, [1990] 1 Q.B. 993 (C.A.), dist. [para. 70].

Elguzouli-Daf v. Commissioner of Police of the Metropolis, [1995] 2 W.L.R. 173, refd to. [para. 71].

Angliss (W.) & Co. (Australia) Pty. Ltd. v. Peninsular & Oriental Steam Naviga­tion Co., [1927] 2 K.B. 456, refd to. [para. 72].

Statutes Noticed:

Hague Rules, art. III, art. IV [para. 17].

N.K.K. Rules - see Nippon Kaiji Ky­okai Rules.

Nippon Kaiji Kyokai (N.K.K.) Rules, Regulations for the Classification and Registry of Ships, reg. 3.1 [para. 50].

Nippon Kaiji Kyokai (N.K.K.) Rules, Rules for the Survey and Construction of Steel Ships, rule 1.1.3, rule 1.1.10 [para. 50].

Authors and Works Noticed:

Cane, P.F., The Liability of Class­ification Societies, [1994] L.M.C.L.Q. 363, pp. 373 [para. 65]; 375 [para. 67].

Clarke, Malcolm, Misdelivery and Time Bars, [1990] L.M.C.L.Q. 314, generally [para. 66].

Lux, Classification Societies (1993), pp. 53 [para. 38]; viii [para. 39].

Markesinis and Deakin, Tort Law (3rd Ed.), p. 114 [para. 39].

Singh and Colinvaux, Shipowners (British Shipping Laws) (1967), vol. 13, pp. 167 to 169, paras. 391 to 394 [para. 72].

Counsel:

Peter Gross, Q.C. and A. Baker, for the appellants;

R. Aikens, Q.C., and J. Harvey, Q.C., for the respondents.

Agents:

Lovell White Durrant, for the appellants;

Narbarro Nathanson, for the respondents.

This appeal was heard on April 25 to 27 and May 1 and 2, 1995, at London, England, before Lord Keith of Kinkel, Lord Jauncey of Tullichettle, Lord Browne-Wilkinson, Lord Lloyd of Berwick and Lord Steyn of the House of Lords.

The decision of the House of Lords was delivered on July 6, 1995, and the following speeches were given:

Lord Keith of Kinkel - see paragraph 1;

Lord Jauncey of Tullichettle - see para­graph 2;

Lord Browne-Wilkinson - see paragraph 3;

Lord Lloyd of Berwick, dissenting - see paragraphs 4 to 41;

Lord Steyn - see paragraphs 42 to 77.