No chinks in the chain of causation: liability for continuing loss and third party acts
28 November 2017
Questions of causation are tricky for lawyers and highly fact dependent. This case is an example of how it can be difficult to change a tribunal’s finding on causation: St Shipping v Space Shipping.
A charterer hired a vessel and sub-hired it on to a third party that intended, unlawfully, to export crude oil from Venezuela. The charterer, unaware of the third party’s intentions, ordered the vessel to proceed to port to load the third party’s cargo. An authorisation required for loading the cargo was forged and, as a result, the vessel was detained pending a criminal investigation. The Venezuelan authorities made no allegations against the charterer, the owner of the vessel or any individuals connected with the vessel, but the Venezuelan courts refused to lift the ban on the vessel leaving port.
A dispute arose between the owner and the charterer as to the financial consequences of the detention. The arbitrator made a number of interim awards on issues connected with detention of the vessel, pending a final assessment of the associated trading losses. In his first award (upheld by the English court) the arbitrator found that the charterer was liable for the owner’s losses as a result of the detention up to July 2015. The charterer’s order was an effective cause of the vessel’s detention because the investigation and detention were triggered by the forged authorisation that had been obtained as a result of the charterer’s order.
By 2017 the vessel was still stuck in port. In a further award, the arbitrator found that two years’ on the order was still an effective cause of the owner’s losses. Circumstances had not changed since the first award and the Venezuelan court’s “extra unusual behaviour” in refusing to release the vessel was “not sufficient to obliterate the original cause of the detention.” The charterer was therefore still liable for the owner’s losses.
The charterer appealed to the English court arguing that the arbitrator failed to ask the correct question of law when determining causation of the continued detention of the vessel. The court found that the arbitrator had not misunderstood or misapplied the legal test for causation. The arbitrator had expressly adopted the correct test in his first award. Following the Supreme Court’s decision in The Kos the arbitrator had asked whether the order was an effective cause of the detention up to July 2015. There was nothing in the language of the further award to suggest that he had forgotten or chosen to apply a different test in this award. The arbitrator’s consideration of whether circumstances had changed was a legitimate reference to considerations of central, if not determinative, evidential relevance to the question. The order had already been found to have been causative up to July 2015. The focus was on whether what had happened since then was sufficient to break the chain of causation. The fact that the approach and attitude of the Venezuelan courts had not subsequently changed could legitimately be taken as powerful evidence that the order remained causative and that the chain of causation had not been broken (Borealis v Geogas applied). That was the factual conclusion reached by the arbitrator. The charterer was trying to “dress up” an appeal against findings of fact as one turning on a question of law. There was no right of appeal on a finding of fact and permission to do so was refused.