On 28 December 1992 there was a fire in holds 4 and 5 of the Apostolis. As a result of the fire, the cargo of cotton (owned by the plaintiff charterers) being loaded into those holds was seriously damaged, the ship was seriously damaged and the ship was delayed before it could reload and set sail on 4 March 1993. The contract of carriage was subject to the Hague-Visby Rules. The plaintiff said that the fire was caused by welding carried out on deck which put the owner (the defendant) in breach of the Hague-Visby Rules and therefore liable for its loss. The defendant said the most probable cause of the fire was a discarded cigarette for which the plaintiff was liable and counterclaimed for its loss.

At first instance, the trial Judge, Tuckey J, concluded that the fire was caused by welding being carried out to a cylindrical pulley underneath the winch platform on the masthouse between holds 4 and 5. Tuckey J held that in relation to art 3.1 of the Hague-Visby Rules, the vessel was unseaworthy, concluding that the carrier would not be making the hold of its ship fit and safe for the preservation of an inflammable cargo 'when he was carrying out welding work above the hold which resulted in sparks raining into it'. That conclusion rendered it unnecessary to consider art 3.2 and art 4.2, but in case he was wrong, Tuckey J considered the effect of those articles and concluded that the plaintiff had established that the fire was caused with the actual fault or privity of the defendant which made it impossible for it to rely on the art 4.2 fire exemption. Tuckey J assessed damages at USD 2,359,761.43 plus interest of USD 351,594.04 and gave judgment for the plaintiff.

The matter then went to the Court of Appeal which found that even if welding was the cause of the fire, there was no breach of art 3.1 of the Hague-Visby Rules and the defendant was not liable on that ground. Even if welding had caused the fire, there was no reliable evidence of welding having taken place before 28 December 1992 and it followed that the allegation of privity against the owners must fail. Even if there was welding being done to the pulley, Tuckey J was not justified in finding that welding was the cause of the fire. The Court of Appeal did not make any clear finding as to what the cause was, and remitted the counterclaim to the Commercial Court for further hearing.

In the Commercial Court, Longmore J held that the Court of Appeal decision read that the hatch covers were dropped and locked and that although they did not need to say so, a possible cause of the fire (ie welding) had been eliminated. The evidence was that the most common cause of fires was the discarding of a cigarette and since that was the only alternative to welding, fire by a discarded cigarette was the cause. It was more likely than not that the cigarette end was probably carelessly discarded by a stevedore. By cll 3 and 20 of the booking note, the plaintiff was under a duty to load with proper care. Clause 20 did not affect that obligation and thus the defendant’s claim for damages in relation to damage to the ship succeeded. However, as the fire was beyond the control of the plaintiff it was not liable for demurrage claimed as a result of the outbreak of the fire. Longmore J gave both sides leave to appeal.

Held: Appeal allowed. Cross-appeal allowed.

When the matter was remitted to the Commercial Court, all that Court was required to do was work out the consequences of the positive findings of the Court of Appeal. On those findings, welding had not been established, nor had a stevedore’s cigarette. That meant that the defendant’s counterclaim for damage would fail. The reason for remission was narrow. The Commercial Court (and this Court) should not be reviewing findings of fact or expressions of opinion of the Court of Appeal’s first judgment. Therefore, the only live issue is demurrage. However, there needs to be a conclusion on the liability of the stevedores and the proper construction of the booking note.

Clause 3 of the booking note provided that '[o]n receipt of the Master's notice that the vessel is in every respect ready to receive and load the Merchant's goods ... the Merchant shall tender and load the goods at the average rate of not less that 400 metric tons per weather working day ... The cost of loading, stowing and discharging the goods shall be borne by the Merchant.'

Clause 20 stated that '[s]tevedore damage, if any, is to be settled directly between the Carrier and the Stevedore, but in case of a dispute/difficulties and/or non-co-operation of the stevedore, the Merchant to give all possible assistance in order for the case to be concluded.'

Clause 20 is clearly saying that the merchant is not to be liable for stevedore damage. The provision requiring the merchant to give assistance for the case to be concluded would be unnecessary if the owners retained a right to recover for stevedore damage from the plaintiff. If it had been established that a stevedore’s cigarette had been the cause of the fire, cl 20 would have provided the answer to the defendant’s counterclaim for damage to the ship.

The Court is unable to reach a conclusion as to what was the cause of the fire. It may have been welding. It may have been a stevedore's cigarette. In the former case it would have been beyond the control of the plaintiff, but what if it was the stevedore? In the Court’s view, the clause refers to causes which, by the contract, are under the control of the plaintiff; the effect of cl 3 is that, as between the defendant and the plaintiff, the stevedores are under the control of the plaintiff. The situation then is that the cause of delay may or may not have been caused by something which was not under the control of the plaintiff. The defence is therefore not made out and the claim for demurrage succeeds.