Court of Appeal considers “unusual extension” to duty of care principles

Begum v Maran (UK) Ltd [2021] 3 WLUK 162

The Court of Appeal for England & Wales recently held, unanimously, that a claim brought in relation to events that took place overseas can proceed to a trial of the substantive issues in the English courts against an English shipbroker. One of the key issues pertained to the defendant’s liability for harm caused to the claimant’s deceased husband by the acts of a third party, an issue which the Court noted is at the “forefront of the development of the law of negligence”.

Background

In March 2018, a Bangladeshi shipbreaker (Mr Mohammed Khalil Mollah) fell to his death whilst working to dismantle an oil tanker in the Chittagong shipyards in Bangladesh. Maran (UK) Ltd (Maran), a shipbroker, is an English-domiciled company which acted as agent for the vessel owner, Centaurus Special Maritime Enterprise (CSME), in relation to the sale of a vessel, the “Maran Centaurus”, for the purpose of demolition.

In August 2017, once the Maran Centaurus had reached end-of-life, Maran arranged (on behalf of CSME) for the vessel to be sold to a third party, Hsejar Maritime Inc (Hsejar). Hsejar, a so-called “demolition buyer”, then sold the vessel to the shipyard in Chittagong. CSME entered into a Memorandum of Agreement (MoA) with respect to the sale which provided that Hsejar 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”. Maran was not a party to the MoA, it had no involvement with the vessel after the sale and it did not have any control or interest in the shipyard. However, for the purposes of the Court of Appeal application, it was assumed that Maran knew the vessel would be dismantled in Bangladesh rather than in one of the shipyards in China or Turkey, where health and safety standards are higher.

In April 2019, Mr Mollah’s widow brought proceedings against Maran in the English courts in negligence and unjust enrichment for damages under the Fatal Accidents Act 1976, or, in the alternative, under the relevant provisions of Bangladeshi law. The claimant has not brought proceedings against the owner of the yard or Mr Mollah’s employer, both of which are Bangladeshi entities.

In February 2020, Maran applied for the claim to be struck out and/or for summary judgment to be entered against the claimant on the basis that: (i) nothing it did or failed to do caused the accident; (ii) it had no control over the shipyard or its workers; and (iii) it had not assumed any responsibility for them.

The High Court found that it was arguable on a summary basis that, by selling the vessel to Hsejar, Maran had acted in a way that would expose the shipyard workers to risk of injury and it was therefore arguable that Maran could be liable in negligence for Mr Mollah’s death.¹ Maran appealed to the Court of Appeal.

Court of Appeal decision

Test for summary judgment

Under the English Civil Procedure Rules, the court may only grant summary judgment if the claimant has no real prospect of succeeding in the claim. This means that the court must be able to conclude, without conducting a mini-trial or considering the full scope of evidence that may emerge in the substantive proceedings, that the claim is “bound to fail”.

The Claimant’s case

The Claimant put forward two alternative arguments in respect of Maran’s liability for Mr Mollah’s death:

• Maran is liable in negligence arising from a known danger, per the principles in Donoghue v Stephenson².
• Maran is liable for damage caused by third parties (here, Hsejar and/or the shipyard owner and/or Mr Mollah’s employer) on the grounds that it created the source of the danger.

The claimant argued that Maran was fully aware, by virtue of its position within the international shipping industry, that its acts/omissions would directly expose highly vulnerable third parties to the risk of death and serious injury. She alleged that Maran effectively selected and condoned the dangerous methods used to demolish the vessel as it knew that the vessel was destined for demolition in Bangladesh. The risks of serious and/or fatal injury to workers such as Mr Mollah, tasked with the demolition, were therefore foreseeable to Maran. The claimant also submitted that it is fair, just and reasonable to impose a duty of care in the present circumstances due to various public policy considerations.

As a result of its alleged duty of care, the claimant submitted that Maran was required to take all reasonable steps to ensure that the sale of the vessel for demolition would not endanger human health, damage the environment and/or breach applicable international regulations.

Judgment

Known source of danger (route 1)

In terms of the claimant’s first route to establishing a duty of care, the Court of Appeal agreed with Mr Justice Jay in the High Court that the case does not fit comfortably with the principles in Donoghue v Stevenson. In particular, the Court found an inherent difficulty in the assumption that the vessel was a “dangerous product”. Whereas in Donoghue, there was also a chain of contractual relationships, there was no intervening action by any third party. This was because the “danger” in that case, a snail concealed in an opaque bottle of ginger beer, was inherent to the product from the point of manufacture.

In this case, there were interventions by the yard owner and/or Mr Mollah’s employer which brought about Mr Mollah’s work on the vessel and the failure to implement safe working practices.3 In other words, it appeared to the Court that the danger arose from the way in which the demolition was carried out, rather than the vessel itself. Notwithstanding these reservations, the Court concluded the arguments raised by the claimant on this point were not “so fanciful” that they should be struck out.

The defendant created the source of the danger (route 2)

The Court then considered the claimant’s secondary argument: that Maran is liable for the actions of third parties (i.e. the shipyard owner and/or Mr Mollah’s employer) on the basis that it created the source of the danger. This is an exception to the general rule that the law does not impose liability on a person for the interventions of a third party which cause harm to another.⁴

The Court was similarly satisfied that this claim was arguable. It did, however, note the claim reflected “an unusual extension” to existing jurisprudence, and could be regarded as being at the “edge” of the developing case law regarding when a defendant can be found to owe a duty of care in respect of harm caused by a third party (which is currently at the “forefront of the development of the law of negligence”).

The Memorandum of Agreement

In his leading judgment, Lord Justice Coulson took the opportunity to address an argument raised by the defendant regarding what else it might have done, or should have done, to avoid the risks. Referencing expert evidence which indicated that there were a number of ship yards where the vessel could have been demolished, Coulson LJ suggested that, when negotiating the MoA, Maran could have sought to link the inter-party payments to the delivery of the vessel to an approved (safer) ship yard.

He considered that: “Such an arrangement appears not only feasible, it also finds a clear echo in the MoA itself”. He further noted that “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 working practices’”. Requiring safe demolition was therefore within the reasonable control of the defendant (even though it was not a party to the MoA itself). The evidence suggested that the seller (CSME), the buyer (Hsejar) and the agent (Maran) knew that provisions “like clause 22 would be entirely ignored”, reflecting 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”.

Limitation

The Court of Appeal also heard arguments on whether a one-year limitation period under Bangladeshi law applied, meaning the claim would be time-barred. The Court rejected the claimant’s argument that the claim was one of environmental damage, which would have allowed for a three-year limitation period under English law (applying Article 7 of the EU “Rome II” Regulation⁵). The Court did, however, hold that it was at least arguable the one-year limitation period under Bangladeshi law caused “undue hardship”, making it incompatible with public policy (Article 26 of Rome II). This issue will be addressed by way of a preliminary issue at trial.

Implications

Begum joins a number of recent English Court of Appeal and UK Supreme Court judgments exploring the parameters of when a company may owe a duty of care for third party acts, including the ‘parent company liability’ cases of Lungowe v Vedanta and Okpabi v Shell.

In this case, the Court noted that defendants are rarely found liable based on the “creation of danger” exception, and remarked on the “hurdles” the claimant would face in establishing that the defendant knowingly exposed the shipyard workers to significant dangers. Nonetheless, the Court’s refusal to strike out the claim is significant as jurisprudence in this area continues to evolve.

Though obiter dicta, the Court’s commentary on the clause in the MoA requiring the safe demolition of the ship is worthy of note. Companies are increasingly relying upon human rights (and broader ESG) focussed contractual obligations in their agreements with business partners as part of their response to legislation including the UK Modern Slavery Act 2015, as well as international frameworks including the UN Guiding Principles on Business and Human Rights. Coulson LJ’s assessment of the clause suggests the Courts will be unwilling to allow a defendant to rely on a contractual clause to discharge its liability where evidence suggests that the parties knew that it would not, or could not, be followed or enforced.