482 LLOYDS LAW REPORTS
PART 9 Borealis v Geogas Trading
QUEENS BENCH DIVISION
(COMMERCIAL COURT)
19, 2122, 2629 April, 46, 10, 1718 May;
9 November 2010
contract by the defendant and the claimants sub-
BOREALIS AB
v of contract remained an effective cause of the loss,
GEOGAS TRADING SA
[2010] EWHC 2789 (Comm)
Before Lord Justice GROSS
Sale of goods Damages Causation Sale of
butane to be used as feedstock in buyers olefin plant
Butane contaminated with fluorides producing
harmful acids Acids causing physical damage to
buyers plant Seller contending that loss and
damage would have been avoided had buyer
responded appropriately to acid alarm at plant
Whether chain of causation broken Relevant
principles.
By a contract made on 22 August 2003 the defendant
(Geogas) agreed to sell to the claimant (Borealis) 5,200
mt of butane as a feedstock for Borealiss integrated
olefin plant situated at Stenungsund, Sweden.
Borealis alleged that, in breach of contract, Geogas
supplied butane heavily contaminated with fluorides
that cracked under normal processing conditions to
produce hydrofluoric acid which, in turn, caused seri-
ous and extensive physical damage to the plant, with
consequential interruption to Borealiss business. Bore-
alis claimed damages under various different heads,
including loss of profits.
It was common ground that the butane was contami-
nated with fluorides, and Geogas admitted that it was in
breach of an implied term of the contract that the
butane would be of satisfactory quality. However, Geo-
gas denied that it was liable for all the losses claimed
by Borealis, raising arguments on causation, remote-
ness of damage, mitigation and quantum.
As to causation, Geogas contended that Borealis
failed to react appropriately to a pH alarm. Had Bore-
alis reacted appropriately, the physical damage to the
plant would have been reduced by 22/58ths, and the
claimed loss of production would have been avoided.
Accordingly, Geogas should not be liable for more than
22/58ths of the physical damage, and should not be
liable at all for the lost production.
Held by QBD (Comm Ct) (GROSS LJ) that:
(1) The principles applicable to breaking the chain of
causation were as follows (see paras 42 to 47).
(a) Although an evidential burden rested on the
defendant insofar as it contended that there was a
break in the chain of causation, the legal burden of
proof rested throughout on the claimant to prove that
the defendants breach of contract caused its loss.
[2011] Vol 1
[QBD (Comm Ct)
(b) In order to break the chain of causation, the
conduct of the claimant had to constitute an event of
such impact that it obliterated the wrongdoing of
the defendant. The true cause of the loss had to be
the conduct of the claimant rather than the breach of
contract on the part of the defendant. If the breach of
sequent conduct were concurrent causes, it was
unlikely that the chain of causation would be bro-
ken. In circumstances where the defendants breach
at least ordinarily, the chain of causation would not
be broken.
(c) Anything less than unreasonable conduct on
the part of the claimant was unlikely to be capable of
breaking the chain of causation. However, mere
unreasonable conduct on a claimants part would not
necessarily do so, eg where the defendants breach
remained an effective cause of the loss, albeit in
combination with the claimants failure to take rea-
sonable precautions in its own interest. Reckless
conduct by the claimant would ordinarily break the
chain of causation.
(d) The claimants state of knowledge at the time
of and following the defendants breach of contract
was likely to be a factor of very great significance.
For the chain of causation to be broken, the claimant
need not have knowledge of the legal niceties of the
breach of contract; nor would the chain of causation
only be broken if the claimant had actual knowledge
that a breach of contract had occurred otherwise
there would be a premium on ignorance. However,
the more the claimant had actual knowledge of the
breach, of the dangerousness of the situation which
had thus arisen and of the need to take appropriate
remedial measures, the greater the likelihood that
the chain of causation would be broken. Conversely,
the less the claimant knew the more likely it was that
only recklessness would suffice to break the chain of
causation.
(e) Ultimately, the question of whether there had
been a break in the chain of causation was fact
sensitive, involving a practical inquiry into the cir-
cumstances of the defendants breach of contract
and the claimants subsequent conduct. It was
always a question of degree at what point the dam-
age claimed for ceased to flow naturally and directly
from the breach:
County Ltd v Girozentrale Securities
[1996] 3 All ER 834, Compania Naviera Maropan
SA v Bowaters Lloyd Pulp and Paper Mills Ltd (The
Stork) [1955] 1 Lloyds Rep 349; [1955] 2 QB 68,
Kristiandsands Tankrederei AS v Standard Tankers
(Bahamas) Ltd (The Polyglory) [1977] 2 Lloyds
Rep 353, The Spontaneity [1962] 1 Lloyds Rep 460,
Lambert v Lewis [1982] AC 225, Schering Agro-
chemicals Ltd v Resibel NV SA 26 November 1992,
unreported; CA Transcript No 1298 of 1992 and
Barings plc v Coopers & Lybrand [2003] Lloyds
Rep IR 566 considered.
(2) Although Borealiss reaction left considerable
room for improvement, and fell well short of best
practice, it was not unreasonable. There was no break
in the chain of causation. Even if Borealiss reaction
[2011] Vol 1 LLOYDS LAW REPORTS
QBD (Comm Ct)] Borealis v Geogas Trading
was unreasonable, the chain of causation would not
have been broken. There was no suggestion that Bor-
ealiss reaction was reckless, as distinct from unreason-
able. Any failure on the part of Borealis did not
obliterate or destroy the causative potency of the
anterior Geogas breach of contract. Although Borealis
knew or ought to have known of the presence of an acid
in the system, it remained in the grip of an unknown
breach giving rise to an unknown danger. In any event,
the steps proposed by Geogas would not have success-
fully avoided the loss (see paras 93 to 119).
This was the trial of the action brought by the
The following cases were referred to in the
judgment:
4 Eng Ltd v Harper [2008] EWHC 915 (Ch);
[2009] Ch 91;
Aerospace Publishing Ltd v Thames Water Utilities
Ltd (CA) [2007] EWCA Civ 3; [2007] Bus LR
726;
Al Rawas v Pegasus Energy Ltd [2008] EWHC 617
(QB); [2009] 1 All ER 346;
Banco de Portugal v Waterlow & Sons Ltd (HL)
[1932] AC 452;
Barings plc v Coopers & Lybrand [2003] EWHC
1319 (Ch); [2003] Lloyds Rep IR 566;
C Czarnikow Ltd v Koufos (The Heron II) (HL)
[1967] 2 Lloyds Rep 457; [1969] 1 AC 350;
Compania Naviera Maropan SA v Bowaters Lloyd
Pulp and Paper Mills Ltd (The Stork) (CA)
[1955] 1 Lloyds Rep 349; [1955] 2 QB 68;
County Ltd v Girozentrale Securities (CA) [1996] 3
All ER 834;
Elpidoforos Shipping Corporation v Furness Withy
(Australia) Pty Ltd (The Oinoussian Friendship)
[1987] 1 Lloyds Rep 258;
Hadley v Baxendale (1854) 9 Exch 341;
Hart v Lancashire and Yorkshire Railway Co
(1869) 21 LT 261;
Islamic Republic of Iran Shipping Lines v Ierax
Shipping Co of Panama (The Forum Craftsman)
[1991] 1 Lloyds Rep 81;
Kristiandsands Tankrederei AS v Standard Tankers
(Bahamas) Ltd (The Polyglory) [1977] 2 Lloyds
Rep 353;
Lambert v Lewis (HL) [1982] AC 225;
Lodge Holes Colliery Co v Wednesbury Corpora-
tion (HL) [1908] AC 323;
Schering Agrochemicals Ltd v Resibel NV SA (CA)
26 November 1992, unreported; CA Transcript
No 1298 of 1992;
Sotiros Shipping Inc v Sameiet Solholt (The Solholt)
(CA) [1983] 1 Lloyds Rep 605;
Spontaneity, The [1962] 1 Lloyds Rep 460;
483
[GROSS LJ
Sylvia Shipping Co Ltd v Progress Bulk Carriers
Ltd (The Sylvia) [2010] EWHC 542 (Comm);
[2010] 2 Lloyds Rep 81;
Transfield Shipping Inc v Mercator Shipping Inc
(The Achilleas) (HL) [2008] UKHL 48; [2008] 2
Lloyds Rep 275; [2009] 1 AC 61;
West Wales, The (1932) 43 Ll L Rep 504; [1932]
P 165.
claimant buyers, Borealis AB, against the defendant
sellers, Geogas Trading SA, for damages for breach
of contract arising out of the sale of butane for use
in the buyers integrated olefin plant in Sweden.
Veronique Buehrlen QC and Henry King,
instructed by Clyde & Co, for Borealis; Michael
Ashcroft, instructed by Thomas Cooper, for
Geogas.
The further facts are stated in the judgment of
Gross LJ.
Judgment was reserved.
Tuesday, 9 November 2010
JUDGMENT
Lord Justice GROSS:
Introduction
1. The claimant (Borealis) claims damages
from the defendant (Geogas), arising out of the
supply by Geogas to Borealis of some 5,200 mt of
butane as feedstock for Borealiss integrated olefin
plant situated at Stenungsund, Sweden, in Septem-
ber 2003 (the plant). It is Borealiss case that, in
breach of contract, Geogas supplied butane (the
goods) heavily contaminated with fluorides that
cracked under normal processing conditions to pro-
duce, amongst other substances, hydrofluoric acid
(HF) which, in turn, caused serious and extensive
physical damage to the plant and equipment,
together with consequential interruption to Bor-
ealiss business.
2. It is common ground that the goods were
contaminated with fluorides. It is further admitted
by Geogas that it was in breach of contract in
that the contamination of the goods (by 2 methyl 2
fluoropropane, 2M2F) placed Geogas in breach
of an implied term of the contract to the effect that
the goods must be of satisfactory quality. Geogas
does not, however, concede that it was in breach of
contract in other respects alleged by Borealis.
3. Against this background, the trial was essen-
tially about causation, remoteness, mitigation and
quantum.
484 LLOYDS LAW REPORTS
GROSS LJ] Borealis v Geogas Trading
4. Much of the factual history is common ground
and can largely be taken from the relevant section
of the most helpful list of issues, prepared by
counsel.
Parties
5. Borealis is a well-known producer of polyeth-
ylene and polypropylene (plastics) for use in vari-
ous applications with production sites all over the
world. The plant includes an ethylene cracker com-
plex that processes hydrocarbon feedstocks (such as
butane and propane) to produce ethylene and
propylene.
6. Geogas is a well-known trader in, inter alia,
liquefied petroleum gas (LPG), including
butane.
The contract
7. By an oral agreement, evidenced in and/or
subsequently reduced into writing, entered into
between Borealis and Geogas on 22 August 2003,
Geogas agreed to sell and Borealis agreed to buy
5,200 mt (5 per cent more or less at Geogass
option) of butane (ie, the goods), at a price of
US$259.50 pmt (the contract).
8. A firm called Norenergy Oilbrokers AS (Nor-
energy) acted as the parties broker. The docu-
ments evidencing the contract include Norenergys
email sent to the parties at 18.11 on 22 August 2003
confirming the transaction (the 22 August email)
and a further email sent to the parties at 11.53 on 25
August 2003 (the 25 August email), setting out
the detailed terms.
9. The 22 August email stated: quality: field
grade as per specs in separate email.
10. The 25 August email confirmed the sale of
5,200 mt of commercial butane to be delivered
colder than zero deg c on, inter alia, the following
express terms:
field grade with specs as fol-
Quality:
lows:
c3 and lighter less than 1pct
nc4 80pct
ic4 14pct
butenes 3pct
c5 plus less than 2pct
sulphur less than 50ppm
oxygenates nil
water nil
[2011] Vol 1
[QBD (Comm Ct)
copper corr 1 max
origin: us east coast
quantity: 5,200 mt 5 pct molso
cif one safe port/berth
delivery: stenungsund during period
712th september 2003
price: usd 259.50 mt
vessel: gt henning maersk . . .
at loadport to be inspected by
independent inspector to be
appointed and paid for by sell-
inspection: er. At discharge port cargo to
be inspected by independent
inspector to be appointed and
paid for by buyer.
11. As is common ground, there were implied
terms of the contract:
(i) that the goods would correspond with their
contractual description;
(ii) that the goods would be of satisfactory
quality.
Delivery
12. The goods (in the event, 5,455.662 mt of
butane) were sourced by Geogas from petrochem-
ical facilities owned by Sunoco Inc (Sunoco),
situated at Marcus Hook, Pennsylvania. The goods
were loaded onto the carrying vessel, Henning
Maersk (the vessel), on 27 and 28 August 2003
and the vessel arrived at Stenungsund on 12
September 2003.
13. Discharge from the vessel into one of the
plants underground caverns, number UC-731 (the
cavern), commenced at about 13.20 the same day
and was completed at about 00.58 on 13 September.
At the time of discharge, the cavern already con-
tained some 25,276 mt of butane/propane feedstock
mixture. As discharge took place, so fluids from the
cavern were simultaneously fed to the plant (to
the cracking furnaces) as is usual.
The contamination
14. As already noted, the goods were contami-
nated with a compound subsequently identified
as 2M2F.
The incident
15. At about 20.00 on 13 September 2003, a gas
alarm in the disengaging basin (indicating contami-
nated seawater cooling medium returning to the
sea) signalled the presence of hydrocarbon gas
[2011] Vol 1 LLOYDS LAW REPORTS
QBD (Comm Ct)] Borealis v Geogas Trading
indicative of leaks in the cracker plants overhead
heat exchangers. Subsequent investigations
revealed that numerous tubes in the crackers pri-
mary and secondary heat exchangers sustained an
extensive and severe corrosion attack in the hours
leading up to the triggering of the gas alarm on 13
September so much so that several of the tubes
became perforated allowing (inter alia) ethylene to
escape into the atmosphere.
Further matters not in dispute
16. A number of further matters were not in
dispute:
(i) HF can be extremely destructive.
(ii) Cargo containing 2M2F would not be fit
for use in the plant.
(iii) Borealis did not specifically warn Geogas
about the danger of a fluoride compound being
present in the goods.
(iv) Borealis did not test the goods for fluoride
compounds prior to discharge. For that matter,
nor did Geogass inspector when inspecting the
goods at the loadport.
(v) Representatives of Borealis noted that the
smell and appearance of the first set of samples
taken from the vessel on 12 September 2003
(prior to discharge) were unusual.
(vi) A pH meter (at the plant) indicated that pH
in the discharge from the distillate drum
(D-1681) dropped from its target level of
between pH 5 to 7, to a range of about pH 3.5 to
3.7, shortly after discharge of the goods into the
cavern had commenced.
(vii) After the gas alarm went off at 20.00 on
13 September (as described above), Borealis
(inter alia) brought heat exchangers E and G on
line to continue production while it shut down
heat exchangers B, D, F and H in order to inves-
tigate the problem.
(viii) All production of ethylene using feed-
stock from the cavern was halted by Borealis at
about 21.40 on 16 September 2003.
The workings of the plant
General
17. I must next and in very simple terms, based
on the excellent agreed note prepared by counsel,
describe the working of the plant.
18. The Stenungsund site comprises a cracker
complex, three polyethylene plants and an innova-
tion centre. The plant uses naphtha, ethane, propane
and butane as feedstock to produce ethylene and
propylene which are in turn used to produce high-
density polyethylene, low-density polyethylene and
485
[GROSS LJ
patented polyethylene products, primarily for pipe,
wire and cable applications.
19. The raw materials are delivered by ship
directly to Borealiss harbour in Stenungsund and
are stored in four underground caverns and one
overground ethylene tank.
20. Butane is stored in cavern UC-731 (ie, the
cavern), along with a proportion of propane (75:25
butane/propane) to create an LPG feed.
21. The cracker alone is a large plant consisting
of approximately 950 km of pipes, 20 distillation
towers, reactors, some 400 pumps and 20,000
valves.
22. A process flow diagram of the relevant part
of the plant for present purposes is attached here-
with as Annexe I. [Editors note: diagram omitted
from this Report.]
23. In essence, naphtha, ethane, propane and
butane/propane (the LPG mix) in various quantities
are fed from the caverns (and the overground eth-
ane tank) to nine cracking furnaces (F-1601 A-G, V
and X), where the feeds are mixed with steam, in a
ratio of 70:30 hydrocarbonteam, and heated to 850
to 870C. (It may be noted though it does not
effect this description that on the date of the
incident, seven or eight furnaces were operating.)
The effect is to break up long chains of hydro-
carbon molecules into shorter ones. The individual
product streams from the furnaces are then cooled
(quenched) individually, by heat exchangers (not
the subject of these proceedings), before being
mixed into a single product stream. That product
stream is then transported through an overhead
transfer line to the T-1651 primary fractionator
tower. This is the plants first stage distillation
tower where heavier components in the product
stream are separated out from the lighter ones. The
lighter components, consisting primarily of ethyl-
ene and steam, are taken from the top of T-1651
through overhead pipelines (the T-1651 overhead
line) to a set of primary and secondary heat
exchangers: E-1651 and E-1656.
The E-1651 and E-1656 heat exchangers
24. E-1651 and E-1656 are made up of 16 heat
exchangers E-1651 A to H and E-1656 A to H.
They operate in pairs, each consisting of a primary
exchanger sitting above a secondary exchanger: so,
eg, E-1651 A and E-1656 A. Further, they are
divided into a north bank and a south bank, each
bank consisting of four exchanger pairs. The south
bank is made up of units A, C, E and G. The north
bank is made up of units B, D, F and H.
25. The heat exchanger shells are made of carbon
steel. The shells house heat exchanger tube bundles,
consisting (in the case of the primary exchangers)
486 LLOYDS LAW REPORTS
GROSS LJ] Borealis v Geogas Trading
of some 1,445 titanium tubes (ie, ~ 8.8 km of
tubes). Cooling seawater flows through the titanium
tubes whilst the product stream flows around the
outside (ie, the shell) of the tubes. Cooling water
used in the plant as a whole is returned to the sea
through two effluent pipes, known as the northern
header and the southern header, which then merge
before entering the disengaging basin (D-1101).
The cooling water from the E-1651 and E-1656
heat exchangers passes through the northern header.
Alarms exist to detect the presence of hydrocarbons
in the cooling water returning to the sea in both
headers and in the disengaging basin.
26. The product stream from the T-1651 over-
head line passes first into the primary E-1651 heat
exchangers where it is cooled from about 110C to
58C and then on into the secondary E-1656 heat
exchangers (sitting, as already described, below the
primary exchangers). In the secondary heat
exchangers, the product stream is further cooled to
approximately 35C. The cooled product stream
then flows downstream into a distillate drum
(D-1681), where the hydrocarbon gas, hydrocarbon
liquid and water are further separated from each
other.
27. The pH of the water stream leaving D-1681
(sour water) is measured by an online meter (the pH
meter) and also, three times a week, by the cracker
laboratory. The measurements are recorded and, if
the online pH meter readings drop below 5 (or
increase above 7), a visible and audible alarm dis-
play in the cracker control room activates by means
of a flashing white button which the operator
acknowledges by pressing the button.
28. The feedstocks can contain compounds such
as oxygenates that once cracked and dissolved in
water create weak acids, eg, carbonic acid. Over
time, these acids can corrode carbon steel.
29. The plant is fitted with a system that provides
for the manual injection of a neutralising agent,
here ammonia, into the T-1651 overhead line. The
original design purpose of the ammonia injection
system was disputed between the parties; Geogass
case was that it was intended to neutralise any
acids, without discrimination, that might be present
in the system; Borealiss case was that it was to
neutralise weak acids that form naturally in the
system from the feedstocks used, including car-
bonic acid resulting from the presence of oxygen-
ates in the feedstocks.
Chronology
30. The unfolding of the incident can be seen
having regard to a number of significant times
which it is now convenient to bring together here
(albeit that some have already been referred to):
[2011] Vol 1
[QBD (Comm Ct)
12 September 2003
u 04.00 to 08.45: taking of samples from the
vessel and complaint as to cargo quality.
u 13.20: commencement of discharge.
u 15.20: pH falls below 5, triggering pH
alarm.
13 September 2003
u 00.58: completion of discharge.
u 20.00 and 20.30: gas alarms go off in the
disengaging basin. Laboratory tests confirm
hydrocarbon leak into seawater.
14 September 2003
u 01.30: gas alarm goes off in northern
header, indicating that leak is coming from
E-1651 and E-1656 heat exchangers. By 06.00
this is traced to the D unit. Decision taken by
Borealis to maintain production by bringing
(south) heat exchangers E-1651 and E-1656 E
and G into service, before isolating the north
bank heat exchangers.
u 12.30: furnace C (cracking naphtha) taken
offline.
u 23.45: furnace F (one of two furnaces
cracking LPG from the cavern at the time of
the incident) taken offline; time now elapsed,
from the triggering of the pH alarm on 12
September, approximately 56 hours.
15 September 2003
u 03.00: south bank heat exchangers
(including units E and G) brought online.
u 10.00: lab tests show pH reading of 6.
u 20.45: north bank heat exchangers
isolated.
16 September 2003
u 21.40: furnace B (the other furnace crack-
ing LPG from the cavern at the time of the
incident) taken offline; all production of ethyl-
ene using feedstock from the cavern now
halted.
Principal issues
31. To begin with, a word needs to be said as to
the significant narrowing of the issues in the course
of the trial.
32. I have already indicated the broad outline of
the Borealis case; namely, that, in breach of the
contract, Geogas supplied heavily contaminated
goods which caused serious and extensive physical
damage to the plant and equipment, together with a
variety of consequential losses.
33. Initially, amongst these consequential losses,
the Borealis claim included the amount of
4,838,238 (some 38 per cent of the total claim), in
respect of alleged loss of profits in November 2003,
said to have resulted from the damage to the heat
[2011] Vol 1 LLOYDS LAW REPORTS
QBD (Comm Ct)] Borealis v Geogas Trading
exchangers in September 2003. Realistically, if I
may say so, Ms Buehrlen QC, for Borealis, did not
ultimately pursue this head of claim, recognising
the difficulties in establishing the requisite causa-
tive link.
34. At the start of the trial, Geogas relied on an
extensive assortment of defences, including the
following.
(i) The Geogas primary case alleged failure
or unreasonable failure on the part of Borealis to
test for fluorides in the goods.
(ii) The Geogas tertiary case alleged a fail-
ure to react appropriately to the gas alarms
(which, as will be recollected, sounded from
20.00 on 13 September).
(iii) Geogas further raised an erosion-corro-
sion defence, asserting that the flow rate of the
product through the exchangers was excessive
and unreasonable.
(iv) A point was taken on the currency of loss
and exchange rates.
(v) It was alleged that in selling the LPG mix
from the cavern to Statoil, as it did, Borealis had
failed to mitigate its loss; other avenues and
prospective purchasers could and should have
been explored.
(vi) A host of detailed points as to quantum
were raised.
35. Realistically, with respect, Mr Ashcroft, for
Geogas, jettisoned these defences over the course
of the trial, recognising the legal and factual diffi-
culties they variously faced and, in at least one
instance (the currency point) taking a simple prag-
matic view.
36. As already recorded, Geogas conceded
before the trial that it was in breach of an implied
term of the contract that the goods must be of
satisfactory quality. By the conclusion of the trial,
both counsel were sensibly agreed that the question
of whether there were further breaches of contract
on the part of Geogas was academic.
37. In the event, by the time of closing submis-
sions, Geogass case was, in a nutshell, as follows.
First and foremost, Geogas relied on its secondary
case (as it was known by way of shorthand
throughout the trial); namely, the allegation that
Borealis had failed to react appropriately, or at all,
to the pH alarm (which sounded at 15.20 on 12
September). Conceptually, this case was advanced
both in terms of causation and mitigation. Bor-
ealiss acts or omissions following the sounding of
the pH alarm had broken the chain of causation and
Geogas denied liability for the resulting inflated
losses, especially in respect of consequential loss;
alternatively Geogas was not liable for avoidable
losses flowing from a failure to mitigate. Secondly,
Geogas raised two discrete arguments involving
remoteness of damage. The first related to Bor-
487
[GROSS LJ
ealiss claim for loss of profits in September 2004
and the second to the unavailability of the cavern.
Thirdly and (effectively or largely) in the alter-
native to the second of its remoteness arguments,
Geogas submitted that the cavern was unavailable
for too long; in that regard, Borealis had failed to
mitigate its loss and, to the extent that it had so
failed, Geogas denied liability. Fourthly, Geogas
continued to maintain a miscellany of arguments as
to the quantum of damage.
38. It follows that the principal issues which
remained at the end of the trial and with which I
must deal, concerned causation, remoteness, mit-
igation and quantum. These may be summarised as
follows:
(i) Issue (I): the Geogas secondary case.
(ii) Issue (II): remoteness of damage.
(iii) Issue (III): mitigation.
(iv) Issue (IV): quantum.
I shall deal with these issues in turn but, before
doing so, I must complete my survey of what may
be termed preliminaries and should say something
as to the legal framework concerning issues (I)
to (III).
39. This narrowing of the issues had certain con-
sequences. First, on any view, Borealis was entitled
to a substantial sum by way of damages. In the
circumstances, the Borealis application at the con-
clusion of closing submissions for an interim pay-
ment was irresistible in principle: in the exercise of
my discretion, I duly made an order for such a
payment in the amount of 2.75 million. This judg-
ment therefore deals with the balance of the sums
in dispute.
40. Secondly, Borealis called a large number of
factual witnesses and Geogas two such witnesses.
Both parties called or relied upon a number of
expert witnesses. It is unnecessary to list these
witnesses here. Suffice to say that in the light of the
narrowing of the issues, a not insignificant part of
the evidence had ceased to be of practical relevance
by the end of the trial. Such comments as I have on
particular witnesses are best deferred until later and
in the context of the issues which remain.
41. It is convenient at this stage, to express my
thanks to both Ms Buehrlen and Mr Ashcroft, not
only for their realism in narrowing the issues in
dispute but also for the quality of their written and
oral submissions those thanks extending to the
assistance given by Mr King, Ms Buehrlens junior,
in the area of quantum.
The legal framework
Causation
42. I start with causation, extensively debated by
counsel when addressing the Geogas secondary
case (issue (I)). The specific focus was the test for
488 LLOYDS LAW REPORTS
GROSS LJ] Borealis v Geogas Trading
breaking the chain of causation. My approach, dis-
tilled from the submissions of counsel and the
authorities cited, is summarised in the paragraphs
which follow.
43. First, although an evidential burden rests on
the defendant insofar as it contends that there was a
break in the chain of causation, the legal burden of
proof rests throughout on the claimant to prove that
the defendants breach of contract caused its loss.
44. Secondly, in order to comprise a novus actus
interveniens, so breaking the chain of causation, the
conduct of the claimant must constitute an event of
such impact that it obliterates the wrongdoing . . .
of the defendant: Clerk and Lindsell on Torts,
19th Edition, at para 2-78. The same test applies in
contract. For there to be a break in the chain of
causation, the true cause of the loss must be the
conduct of the claimant rather than the breach of
contract on the part of the defendant; if the breach
of contract by the defendant and the claimants
subsequent conduct are concurrent causes, it must
be unlikely that the chain of causation will be
broken. In circumstances where the defendants
breach of contract remains an effective cause of the
loss, at least ordinarily, the chain of causation will
not be broken: County Ltd v Girozentrale Securities
[1996] 3 All ER 834, at page 849b to c, per Beldam
LJ and at pages 857f to g and 858b to c, per
Hobhouse LJ (as he then was). Other examples can
be found in the area of shipping law. Where, in
breach of charterparty, charterers order a vessel to
proceed to an unsafe port, the conduct of the ves-
sels master in obeying the order (placed as he well
may be, on the horns of a dilemma) will be judged
sympathetically, in context and will not lightly be
treated as unreasonable: Compania Naviera Mar-
opan SA v Bowaters Lloyd Pulp and Paper Mills
Ltd (The Stork) [1955] 2 QB 68. But even negligent
navigation following the charterers order to pro-
ceed to an unsafe port will not necessarily break the
chain of causation: see, for example, Kristiand-
sands Tankrederei AS v Standard Tankers (Baha-
mas) Ltd (The Polyglory) [1977] 2 Lloyds Rep
353, at page 366. Conversely, where the negligence
of vessel X caused vessel Y to run aground, vessel
X was not liable for such damages as were attribut-
able to the subsequent, clearly separate and negli-
gent re-floating of vessel Y: The Spontaneity [1962]
1 Lloyds Rep 460; the negligence of vessel X had
ceased to be operative.
45. Thirdly, it is difficult to conceive that any-
thing less than unreasonable conduct on the part of
the claimant would be capable of breaking the chain
of causation. It is, however, also plain that mere
unreasonable conduct on a claimants part will not
necessarily do so for example where the defen-
dants breach remains an effective cause of the loss,
albeit in combination with the claimants failure to
[2011] Vol 1
[QBD (Comm Ct)
take reasonable precautions in its own interest: see,
for example, County Ltd v Girozentrale Securities,
per Beldam LJ (loc cit). By its nature, reckless
conduct by the claimant would or would ordinarily
break the chain of causation, though there is no rule
of law that only recklessness on the part of the
claimant will do so: Lambert v Lewis [1982] AC
225, per Roskill LJ (as he then was) in the Court of
Appeal, at page 252; County Ltd v Girozentrale
(supra), per Hobhouse LJ at page 857, more con-
veniently discussed below, when dealing with the
claimants knowledge or lack of it.
46. Fourthly, the claimants state of knowledge at
the time of and following the defendants breach of
contract is likely to be a factor of very great sig-
nificance. For the chain of causation to be broken,
the claimant need not have knowledge of the legal
niceties of the breach of contract; nor, as it seems to
me, will the chain of causation only be broken if the
claimant has actual knowledge that a breach of
contract has occurred otherwise there would be
a premium on ignorance. However, the more the
claimant has actual knowledge of the breach, of the
dangerousness of the situation which has thus
arisen and of the need to take appropriate remedial
measures, the greater the likelihood that the chain
of causation will be broken. Conversely, the less the
claimant knows the more likely it is that only reck-
lessness will suffice to break the chain of causation.
Ready illustrations are furnished by the
authorities:
(i) In the sad case of Lambert v Lewis (supra),
the farmer could no longer rely on the dealers
warranty in the factual circumstances graphically
outlined by Lord Diplock (at pages 276 and
277):
. . . I would accept that in the case of the
coupling the warranty was still continuing up
to the date, some three to six months before
the accident, when it first became known to the
farmer that the handle of the locking mecha-
nism was missing. Up to that time the farmer
would have had a right to rely upon the dealers
warranty as excusing him from making his
own examination of the coupling to see if it
were safe . . . After it had become apparent to
the farmer that the locking mechanism of the
coupling was broken, and consequently that it
was no longer in the same state as when it was
delivered, the only implied warranty which
could justify his failure to take the precaution
either to get it mended or at least to find out
whether it was safe to continue to use it in that
condition, would be a warranty that the cou-
pling could continue to be safely used to tow a
trailer on a public highway notwithstanding
that it was in an obviously damaged state. My
Lords, any implication of a warranty in these
[2011] Vol 1 LLOYDS LAW REPORTS
QBD (Comm Ct)] Borealis v Geogas Trading
terms needs only to be stated, to be rejected
. . . In the state in which the farmer knew the
coupling to be at the time of the accident, there
was no longer any warranty by the dealers of
its continued safety in use on which the farmer
was entitled to rely.
. . . The farmers liability arose, not from the
defective design of the coupling but from his
own negligence in failing, when he knew that
the coupling was damaged, to have it repaired
or to ascertain if it was still safe to use. The
issue of causation, therefore, on which the
farmers claim against the dealers depended,
was whether his negligence resulted directly
and naturally, in the ordinary course of events,
from the dealers breach of warranty. Mani-
festly it did not.
(ii) In the unreported case of Schering Agro-
chemicals Ltd v Resibel NV SA (CA) 26 Novem-
ber 1992, unreported; CA Transcript No 1298 of
1992, the defendants were employed by the
plaintiffs to provide safety devices to guard
against the known risk of fire. The safety devices
were defectively designed and did not provide
that protection. The result, on 30 September
1987, was a serious fire. However, on 8 Sep-
tember, so some three weeks earlier, there had
been very small fire, which disclosed to the
plaintiffs that the safety device did not work.
Both the eminent judge at first instance (Hob-
house J, as he then was) and the Court of Appeal
(Purchas LJ and Nolan and Scott LJJ, as they
then were) held that the defendants were not
liable in respect of the loss occasioned by the 30
September fire. Their reasons for doing so dif-
fered, spanning a break in the chain of causation,
a failure to mitigate and remoteness of damage. It
is unnecessary to explore those differences of
reasoning here. The striking feature of Schering
was that the 8 September incident was sufficient
to disclose to the plaintiffs that a breach of con-
tract had occurred and made it reasonable to
expect the plaintiffs to take appropriate steps to
minimise the consequences. A highly dangerous
situation had been revealed; the production line
ought to have been stopped so that a proper
investigation could take place. It may further be
noted that, as in Lambert v Lewis (supra), the
plaintiffs knowledge of the breach and the need
to address it took place some period of time
before the later incident in respect of which the
(bulk of) the damages were claimed. On the facts
of the case, viewed as a matter of causation, the
plaintiffs failure to do what was reasonable . . .
destroyed the further causative potency of the
pre-existing breach of contract . . . : Hobhouse
LJ, explaining Schering, in County Ltd v Gir-
ozentrale Securities (supra), at page 858. Even
489
[GROSS LJ
though the warning on 8 September had been
purely fortuitous (Nolan LJ, at page 16 of the
Schering transcript), the defendants were entitled
to pray it in aid.
(iii) By contrast with Lambert v Lewis and
Schering, the plaintiff in County Ltd v Girozen-
trale Securities (supra) did not know of the
defendants breach of contract. This case con-
cerned a share issue. The plaintiff bank agreed to
underwrite a placement of the shares; the defen-
dant brokers made representations to potential
investors outside and in breach of the terms of
the engagement letter; for its part, the bank failed
to check on the status of indicative commitments
obtained by the chairman of the company. In the
event, a significant number of shares were not
taken up, leaving the bank with a loss. The Court
of Appeal held that the bank was entitled to
recover its loss from the brokers. In so doing, the
Court of Appeal reversed the decision of the trial
judge who had held, inter alia, that the brokers
representations were not of equal efficacy with
the banks decision to accept the quality of the
indicative commitments . . . without making
proper inquiries (see, the headnote, at page
834). Against this background, Hobhouse LJ said
this (at page 857b to d):
Where a plaintiff does not know of a
defendants breach of contract and where he is
entitled to rely upon the defendant having per-
formed his contract, it will only be in the most
exceptional circumstances that conduct of the
plaintiff suffices to break the causal relation-
ship between the defendants breach and the
plaintiffs loss.
The plaintiffs conduct was not voluntary in
the sense of being undertaken with a knowl-
edge of its significance. Conduct which is
undertaken without an appreciation of the
existence of the earlier causal factor will nor-
mally only suffice to break the causal relation-
ship if the conduct was reckless. It is the
character of reckless conduct that it makes the
actual state of knowledge of that party imma-
terial . . .
For completeness, I do not, with respect, read
these observations of Hobhouse LJ as furnishing
support for any rule of law that only reckless con-
duct will serve to break the chain of causation.
Instead, these observations are authority for a more
limited proposition: namely, that in circumstances
where the claimant is unaware of the defendants
breach of contract normally (ie, not invariably)
only recklessness will suffice. As such the good
sense of the rule is difficult to gainsay and its
compatibility with rules governing mitigation of
damage is apparent.
490 LLOYDS LAW REPORTS
GROSS LJ] Borealis v Geogas Trading
47. Fifthly and ultimately, the question of
whether there has been a break in the chain of
causation is fact sensitive, involving as it does a
practical inquiry into the circumstances of the
defendants breach of contract and the claimants
subsequent conduct. As Roskill LJ observed, in
Lambert v Lewis (loc cit), it is always a question of
degree at what point the damage claimed for ceases
to flow naturally and directly from the breach. For
my part, I respectfully agree with the observations
of Evans-Lombe J, in Barings plc v Coopers &
Lybrand [2003] Lloyds Rep IR 566, at para 838,
where he expressed an unwillingness to accept any
all-embracing test for what may constitute the
breaking of the chain of causation:
. . . It seems to me that what will constitute
such conduct is so fact-sensitive to the facts of
any case where the issue arises that it is almost
impossible to generalise. If one must do so, I
would say that it must be some unreasonable
conduct, not necessarily unforeseeable . . . , a
new cause coming in and disturbing the sequence
of events . . . , not necessarily reckless . . . ,
which may result from an accumulation of events
which in sum have the effect of removing the
negligence sued on as a cause . . . , which
accumulation of events may take place over
time . . .
I would add too that while the authorities of
course provide guidance, they are not to be read as
statutes.
Remoteness
48. This topic can be taken very shortly indeed.
First, because as already underlined it is raised by
Geogas only in respect of two discrete areas of
dispute. Secondly, because the orthodox
approach (Hamblen J in Sylvia Shipping Co Ltd v
Progress Bulk Carriers Ltd (The Sylvia) [2010] 2
Lloyds Rep 81; at para 20 et seq) based upon
Hadley v Baxendale (1854) 9 Exch 341 and C
Czarnikow Ltd v Koufos (The Heron II) [1969] 1
AC 350 has been settled for so long. As succinctly
formulated by Lord Reid in The Heron II, at pages
382 and 383, was the loss of a kind which the
defendant at the time of the contract ought to have
realised was not unlikely to result from the
breach meaning a degree of probability con-
siderably less than an even chance but nevertheless
not very unusual and easily foreseeable? Thirdly,
because if and to the extent that, with respect, the
speeches of Lords Hoffmann and Hope in Trans-
field Shipping Inc v Mercator Shipping Inc (The
Achilleas) [2009] 1 AC 61 have added assumption
of responsibility as an additional requirement of
the remoteness rule in some cases (so that a loss
even if not unlikely to result might still be too
remote if the defendant had not assumed responsi-
[2011] Vol 1
[QBD (Comm Ct)
bility for that type of loss), the orthodox approach
continues to apply in the great majority of cases
as Lord Hoffmanns and Lord Hopes observa-
tions themselves make clear: see, The Achilleas, at
paras 9, 11 and 36; see too, the valuable discussion
to be found in Hamblen Js judgment in The Sylvia
(supra), at paras 20 to 51. There are, in my judg-
ment, no exceptional circumstances in the present
case calling for specific consideration of the
assumption of responsibility test. Fourthly,
because, looking ahead, I cannot see that the appli-
cation of Lord Hoffmanns test (whether a party
would reasonably be regarded as having assumed
responsibility for the type of losses in question) to
the issues in dispute here would realistically pro-
duce a different outcome to that flowing from the
application of the orthodox approach. For present
purposes, it is therefore unnecessary to say more as
to the law on remoteness.
Mitigation
49. Mitigation was relevant both to the Geogas
secondary case and to the discrete point as to the
unavailability of the cavern. As it is so well settled
and was not in dispute before me, the law here can
likewise be taken very shortly. A convenient start-
ing point is to be found in the judgment of Sir John
Donaldson MR in Sotiros Shipping Inc v Sameiet
Solholt (The Solholt) [1983] 1 Lloyds Rep 605, at
page 608:
A plaintiff is under no duty to mitigate his
loss, despite the habitual use by the lawyers of
the phrase duty to mitigate. He is completely
free to act as he judges to be in his best interests.
On the other hand, a defendant is not liable for all
loss suffered by the plaintiff in consequence of
his so acting. A defendant is only liable for such
part of the plaintiffs loss as is properly to be
regarded as caused by the defendants breach of
duty. As Viscount Haldane LC put it in British
Westinghouse Electric and Manufacturing Co
Ltd v Underground Electric Railways Co of
London Ltd [1912] AC 673 at p689:
The fundamental basis is thus compensa-
tion for pecuniary loss naturally flowing from
the breach; but this first principle is qualified
by a second, which imposes on a plaintiff the
duty of taking all reasonable steps to mitigate
the loss consequent on the breach, and debars
him from claiming any part of the damage
which is due to his neglect to take such
steps.
...
Whether a loss is avoidable by reasonable
action on the part of the plaintiff is a question of
fact not law. This was decided in Payzu Ltd v
Saunders [1919] 2 KB 581.
[2011] Vol 1 LLOYDS LAW REPORTS
QBD (Comm Ct)] Borealis v Geogas Trading
50. For present purposes, it is only necessary to
add the following. First, the onus of proof on the
issue of mitigation is on the defendant: McGregor
on Damages, 18th Edition, at para 7-019. Secondly,
the conduct of the innocent party should not be
weighed in nice scales at the instance of the party
whose breach of contract has occasioned the diffi-
culty: per Lord Macmillan in Banco de Portugal v
Waterlow & Sons Ltd [1932] AC 452, at page 506.
Immediately thereafter (ibid), Lord Macmillan said
this:
It is often easy after an emergency has passed
to criticise the steps which have been taken to
meet it, but such criticism does not come well
from those who have themselves created the
emergency. The law is satisfied if the party
placed in a difficult situation by reason of the
breach of a duty owed to him has acted reason-
ably in the adoption of remedial measures, and
he will not be held disentitled to recover the cost
of such measures merely because the party in
breach can suggest that other measures less
burdensome to him might have been taken.
Issue (I): the Geogas secondary case
(1) The rival contentions
51. As already introduced, the Geogas secondary
case is that Borealis failed to react appropriately, or
at all, to the pH alarm which sounded at 15.20 on 12
September some two hours after discharge of the
goods had commenced. Borealiss conduct broke
the chain of causation between the admitted Geogas
breach of contract and the loss and damage claimed
by Borealis; alternatively, Borealis had failed to
mitigate its loss. In broad outline and as presented
in his closing submissions, Mr Ashcroft argued that
the operators failure to take prompt action in
response to the pH alarm was unreasonable. The pH
trend should have been monitored; such monitoring
would have revealed a severe and unusual fall. The
reliability of the pH meter should have been con-
firmed, ammonia should have been injected and
laboratory samples obtained; that it was a Friday
night was neither here nor there the plant oper-
ated on a 24/7 basis. On the footing that, contrary to
expectations, the injection of ammonia did not
result in any significant increase in the pH level,
plant management should have been involved.
Once the matter had been properly considered, the
linkage between the contamination and the goods,
now forming part of the feedstock from the cavern,
would have become clear. Urgent steps should then
have been taken to stop using the LPG mix from the
cavern; these should have been accomplished
within 22 hours of the alarm sounding, so by
13.20 on 13 September the contaminated feed-
stock from the cavern should no longer have been
491
[GROSS LJ
used. Accepting that the physical damage sustained
by the plant was substantially suffered in the first 58
hours following discharge, Geogas should not be
liable for more than 22/58ths of that physical dam-
age, or at any rate, Geogass liability for physical
damage should be substantially reduced reflecting
the time by when the feed should have been
changed. Even if that were wrong and by the
conclusion of his submissions Mr Ashcroft realis-
tically accepted that the meat of the Geogas sec-
ondary case lay in reducing or eliminating its
liability for consequential loss had the feedstock
been changed in a timely manner, the titanium tubes
would not have been holed and the very sizeable
claim for lost production in September 2003 would
have been avoided.
52. Ms Buehrlens response for Borealis was
forthright. There had been no unreasonable conduct
on the part of Borealis; even if there had been, it
was not such as to break the chain of causation, nor
had there been a failure to mitigate; in any event,
the Geogas secondary case (if reasoned through)
would not have avoided any loss, physical or con-
sequential. Borealis did not know and had no rea-
son to suspect that the goods had been
contaminated with fluorides. The Geogas focus on
the pH alarm failed to take into account the purpose
of that alarm and Borealiss operational experience.
Having regard to the context, it would not have
been unreasonable for the operators to wait until
Monday 15 September for the next scheduled labo-
ratory samples but of course by then, any con-
cerns as to the pH alarm had been overtaken by
events. There was moreover no or insufficient rea-
son to suppose that, if steps had been taken in
accordance with the Geogas secondary case, plant
management would have concluded that the LPG
feed from the cavern should be stopped. Even if the
ammonia injection though incapable of prevent-
ing damage to the primary heat exchangers did
not mask the damage being done by the HF in the
contaminated feed, the more likely conclusion
would have been that the drop in pH was attributa-
ble to the high level of oxygenates in the goods. In
any event, the timeline contemplated by the Geogas
secondary case was artificial and unrealistic. On the
evidence, it would have required at least 12 hours to
take the relevant furnaces offline so as to change the
feed; as it was known that titanium tubes had perfo-
rated by 20.00 on 13 September the time when
the gas alarm sounded the Geogas secondary
case went nowhere unless all the relevant decisions
and conclusions had been reached by 08.00 on 13
September at the latest. Further, on the undisputed
evidence that the titanium tubes needed to be
replaced if 20 per cent damaged, it could not be said
that physical damage would have been avoided,
even if the contaminated feed had been stopped as
492 LLOYDS LAW REPORTS
GROSS LJ] Borealis v Geogas Trading
contended for by Geogas; there was not and could
not be any assumption that damage was linear. Still
further and as to consequential loss, the reasoning
of the Geogas secondary case did not make good
the case that the September 2003 production would
not have been lost; had Borealis suspected the pres-
ence of an unusual and corrosive acid in the system,
it was unlikely that full production would have
gone ahead, regardless.
(2) The Geogas breach of contract
53. With a view to placing the Borealis reaction
to the Geogas breach of contract in context it is
appropriate first to focus on the breach of contract
itself albeit that the breach has been conceded.
That concession, welcome, forensically wise and
perhaps inevitable though it was, should not be
allowed to deflect attention from the position in
which Borealis found itself by reason of the
breach.
54. The reality is that Geogas supplied goods
which were heavily contaminated with fluorides. In
accordance with the figures contended for by Bore-
alis Geogas advanced no positive case to the
contrary I find that the average level of con-
tamination was 265 to 295 ppm fluoride compounds
(wtt), corresponding to 1,060 to 1,180 ppm of the
actual contaminant, 2M2F.
55. Samples of the contents of the cavern follow-
ing discharge of the goods from the vessel showed
levels of fluoride contamination up to 83 ppm (wtt)
and averaging 55 ppm corresponding to 220 ppm
(wtt) of 2M2F. Prior to discharge of the goods into
the cavern, the contents of the cavern contained
levels of fluorides of 1ppm or less, ie, at most trace
levels.
56. The contract provided, expressly, that Geogas
would supply Borealis with field grade butane.
The evidence at trial differed as to whether field
grade meant butane that had come directly from a
field (so that field grade related to the source of
the goods) or that it had the same quality or purity
characteristics as butane sourced from a field (so
that field grade related to the quality of the goods)
ie, a high quality cargo free of contaminants. For
present purposes it matters not which definition of
field grade is adopted. Butane sourced from a
field would not be contaminated with fluorides.
Field grade butane sourced from a refinery
plainly ought not to have been contaminated with
fluorides. In any event, butane sourced from a refin-
ery could only be contaminated with fluorides if the
refinery was using an HF alkylation unit. On the
evidence, of the 31 cargoes of butane sourced by
Borealis from refineries in the period January to
September 2003, only one (the Stanlow cargo)
was sourced from a refinery using an HF alkylation
[2011] Vol 1
[QBD (Comm Ct)
unit. On the evidence of a number of witnesses
called by Borealis (Messrs Andersson, Petersen,
Eerola and Harris) I further find that:
(i) Borealis was not aware that the goods were
contaminated with fluorides;
(ii) Borealis was not aware of the risk that
field grade butane sourced from a refinery
might be heavily contaminated with fluorides;
(iii) contrary to some suggestions from Mr
Lumley, an expert witness called by Geogas (of
whom more presently), Borealis could not rea-
sonably have been expected to be aware of the
risk that field grade butane sourced from a
refinery might be heavily contaminated with
fluorides.
57. Borealis was further unaware that although
the contract had provided for a water content of
nil, the goods had in fact contained some 10 mt of
water at the load port. I find, with regret but no
hesitation, that Mr Gudefin the Geogas trader
whose trade this was and who gave oral evidence at
trial perhaps with others at Geogas, went to
some lengths to conceal this fact from Borealis.
Instead of claiming from Sunoco, the supplier to
Geogas in respect of this water content, Geogas
arranged for the removal of much of the water and
went to the lengths of procuring the issue of new
bills of lading for a reduced cargo quantity. It subse-
quently transpired, to my mind, revealingly, that the
water had a pH of 2 to 2.2 Of this, Borealis was at
all material times unaware but the evidence does
not permit any conclusion as to whether Borealiss
actions would have been different had it known.
58. Borealis was aware of the levels of oxygen-
ates in the goods, a matter of some significance and
considered further below. The vessels tanks con-
tained 225 ppm, 135 ppm, 200 ppm and 130 ppm
respectively. The average oxygenates content of the
goods overall was some 172.5ppm against a con-
tractual specification of nil and Borealiss internal
specification limit of 200 ppm. In the event,
Borealis accepted the goods.
59. Queries as to the goods met with unhelpful
responses from Geogas. So, on 12 September 2003
(the morning of discharge), when Borealis
expressed some concern as to the quality of the
goods, Geogas replied, reassuringly, that the two
previous cargoes on the vessel had been field grade
products. An internal Geogas communication of the
same day remarked: Luckily water was no[t]
reported. Subsequently, on 24 September, after
Geogas had reserved its rights, Mr Gudefin
responded, inter alia, that Geogass suppliers con-
firmed that nothing abnormal that could have con-
taminated the cargo happened during loading
operations. He remained, in my judgment and
despite the answer he gave in cross-examination,
[2011] Vol 1 LLOYDS LAW REPORTS
QBD (Comm Ct)] Borealis v Geogas Trading
most anxious to conceal the fact that there had been
an unusual quantity of water in the cargo when first
loaded.
60. Pulling the threads together, as at 12 Sep-
tember 2003, Borealis was wholly unaware that the
goods with which it had been supplied were con-
taminated with fluorides. Nor was there any reason
why Borealis ought to have been aware that the
goods might have been so contaminated. To my
mind, this is an important factual consideration
when addressing the Geogas secondary case.
(3) The pH alarm
61. Though there was some resistance from Geo-
gas, there was overwhelming evidence that the
essential purpose of the pH alarm was to protect
downstream carbon steel plant and equipment from
corroding weak acids (eg, carbonic acid) naturally
occurring in the product stream. This alarm system
was not designed or intended to deal with an unex-
pected contaminant in the feed such as HF.
62. Mr Harris is a Sales Director of Shaw Energy
& Chemicals Group, a leading engineering and
design contractor and the designer of the plant. Mr
Harris is also the Borealis account manager. Mr
Harris accepted in cross-examination that the pH
alarm would detect the presence of any acid in the
system and that the injection of ammonia the
anticipated response to a fall in pH below desirable
levels would (no doubt depending on quantities,
proportions and the like) neutralise acids generally.
As I understood his evidence, he did not, however,
depart from the following observations in his wit-
ness statement:
The pH control system in process systems
such as that existing at the . . . plant, is designed
to counter organic acids that may form in the
furnace outlet stream during normal operating
conditions . . . The pH control systems are not
designed to counteract hydrofluoric acid as this is
not an acid that one would expect to encounter in
an ethylene plant . . .
63. Mr Hedvall was, in 2003, the Production
Manager of the plant. His evidence was that the pH
alarms were unreliable and, based on the informa-
tion available to Borealis in 2003, there was no
need for immediate action when the pH alarm
sounded. As he put it:
. . . this is a slow system so that there is no
high priority on this alarm. . . . we know from
experience that we can operate this system for a
long period with low pH so there is no need for
immediate response . . .
Mr Hedvall said in a witness statement that
though, ordinarily, manual laboratory samples were
not undertaken over the weekend, where pH
remained low for hours (as here), he would have
493
[GROSS LJ
expected the operator to make a particular request
for an additional manual sample on Sunday 14
September; he surmised that no such request had
been made because it was overtaken by events. The
ammonia injection system had been designed for
weak acids. Having regard to those acids, low pH
was not seen as a problem:
Based on the experience, I mean, we have
operated this plant since 1970 and low pH has
never been a problem until September 2003. So
based on the knowledge we had [in] 2003 I
would say that the operators did not see low pH
as a problem.
64. Mr Andersson was a control room shift
supervisor at Borealis, from 1989 to 2007; he was
not on duty on 12 September when the pH alarm
was triggered (but came on duty subsequently). The
tenor of Mr Anderssons evidence here was clear.
The purposes of the pH alarm was to alert the
operator to the pH being lower (and though he did
not say it, higher) than recommended. However, a
low pH was not harmful for the equipment and so
was not a big deal for Borealis. They had oper-
ated with a low pH for a long time previously; in his
view, there was no need to react promptly to the pH
alarm sounding. In response to the suggestion that a
strong acid had come into the system, he said
this:
In our knowledge there was no strong acid.
We didnt know anything about that. We only
knew . . . that the system is constructed for a
slow build-up of acid in the process. This is a low
capacity ammonia system. It has no big capacity
to take care of anything larger than that.
The pH alarm system was there to control the pH
for the carbon steel system. The pH alarms were
in any event unreliable so there was a general
practice to wait for the regular testing undertaken
by the laboratory on Mondays, Wednesdays and
Fridays.
65. Professor Davies was called by Borealis to
give expert evidence in the discipline of chemical
engineering. He had visited the plant. He pointed
out that a fall in the pH level, even a rapid drop,
while indicating the presence of an acid in the
system would not tell the operator what type of acid
it was. It was his opinion:
. . . that the pH system . . . was designed
and the introduction of ammonia was designed to
neutralise acids that have formed from oxygen-
ates that appear in the feed . . .
Carbonic acid is a weak acid. So we are deal-
ing with a system that has been principally
designed to remove CO2 in the form of its weak
acid in aqueous solution . . .
So we have a system designed to remove weak
acids . . .
494 LLOYDS LAW REPORTS
GROSS LJ] Borealis v Geogas Trading
. . . downstream of the heat exchangers and
before the compressors . . . carbon steel is used
and is attacked by weak acids. The reason why
the ammonia system is there in the first place is
to protect the downstream plant, it is as simple
as that.
. . . the corrosion rate of . . . [these] . . . weak
acids is very low. So there is no real urgency in
adjusting the pH . . .
66. Pulling the threads together, on the
evidence:
(i) The pH alarm was a low priority (a white
not a red) alarm; these alarms had been notori-
ously unreliable.
(ii) The weak acids typically encountered by
the plant and with which the pH alarm and
ammonia system were designed to deal, took a
long time to do damage to the carbon steel so
suggesting that a prompt let alone immediate
response to the pH alarm was not thus
necessary.
(iii) In some 40 years of operating experience,
low pH had not been seen as a problem.
(iv) Low pH indicated the presence of an acid
in the system but not the type of acid; those at the
plant did not contemplate encountering HF and
had no reason to do so.
(v) Laboratory sampling was routinely under-
taken on Mondays, Wednesdays and Fridays but,
ordinarily, not on weekends.
67. Mention has already been made of Mr Lum-
ley, an expert called by Geogas. Significantly, in
cross-examination, he accepted a good deal of this
evidence. As fairly summarised by Ms Buehrlen:
The purpose of the pH system, . . . the fact
that the pH system was itself a low priority
alarm, the fact that it was not designed to deal
with contaminants in the feeds such as fluorides,
. . . the experience of how the plant operates
were all accepted by Mr Lumley as relevant
factors when considering Borealis response to
the pH alarm and drop in pH . . .
68. Mr Lumley did, however, place much empha-
sis on the following provision found in the Borealis
Operations Handbook (the Handbook):
The pH value must be maintained at 5.56.5.
At a higher pH value emulsion problems may
arise in D-1681, and at low PHs corrosive
attacks on the material increase.
In the absence of other written procedures for the
plant this provision was to be followed; it was not
for the operators to go off-piste and ignore the pH
alarm. The plant was to be operated within strict
guidelines; it was dangerous to do otherwise.
69. With respect, I appreciate the force of Mr
Lumleys reasoning on this part of his evidence.
[2011] Vol 1
[QBD (Comm Ct)
But I think it needs to be kept in perspective a
perspective provided by the context already out-
lined. The provision in the Handbook does not, for
instance, say anything as to the necessary speed of
response, should the pH level move outside the
relevant parameters, or as to the prioritisation of the
pH alarm. It is additionally of note that this provi-
sion cautions both against pH levels above and
below the recommended levels; a matter to which I
shall briefly return later.
70. For my part, therefore, I remain very much of
the view that the purpose of the pH alarm and the
operating experience of those at the plant are sig-
nificant and material factors when considering the
Geogas secondary case and its criticisms of
Borealiss conduct.
(4) The sounding of the pH alarm
71. Against the background already outlined, I
come to the sounding of the pH alarm at 15.20 on
the afternoon of 12 September.
72. The pH levels are a good place to start. It will
be recollected that discharge of the goods com-
menced at 13.20 on 12 September. Between 12.00
and 14.00, the pH levels were a little above 6.
However, between 15.00 and 20.00, the pH levels
dropped considerably.
15.00 5.3
16.00 4.2
17.00 3.8
18.00 3.7
19.00 3.6
20.00 3.6
Thereafter, the pH levels remained in the high 3s
until 13.00 on 14 September when they rose to a
little over 4 and rose further to more than 5 at about
01.45 on 15 September.
73. Surprisingly, in my view, Borealis did not
call either of the operators who had been on duty
when the pH alarm was triggered (or, for that mat-
ter, the supervisors then on duty). The best explana-
tion was that neither of the operators any longer
worked for Borealis. Even that explanation does not
altogether satisfy concerns in this regard, in partic-
ular as to the reason why no witness statements
were available. Mr Ashcroft criticised Borealis with
regard to the absence of the operators, in my judg-
ment, rightly. He submitted, again rightly, that I
should be cautious as to the explanations from
others as to what was or might have been done or
left undone by the operators; I agree. As canvassed
[2011] Vol 1 LLOYDS LAW REPORTS
QBD (Comm Ct)] Borealis v Geogas Trading
at the trial, it also seems right to me not to speculate
as to what the operators might have said, had they
given evidence. I must proceed on the evidence
available.
74. All this said, the lacuna left by the absence of
the operators and supervisors (or any witness state-
ments from them) is at least in good measure filled
by the extremely helpful Root Cause Failure Anal-
ysis Report, an internal Borealis document, pre-
pared after the incident and in its final form dated
18 December, 2003 (the Report). The frankness
of the Report in criticising various of Borealiss
own procedures is commendable and adds to its
weight such frankness doubtless aiding the man-
ifest objective of the Report, namely, to avoid a
recurrence. Furthermore, the Borealis lead inves-
tigator into the incident and (with a team of others)
responsible for the preparation of the Report, was a
Mr Arvidsson. He did attend to give evidence. As
both his evidence and the Report made clear, in the
course of preparing the Report interviews were con-
ducted, including of the operators. It follows that, in
part, at least, the Report reflects what the operators
were saying at the time.
75. Before turning to the substance of the Report,
I should mention two preliminary matters:
(i) Ms Buehrlen very properly invited me to
read the Report with these observations of Bram-
well B, in Hart v Lancashire and Yorkshire Rail-
way Co (1869) 21 LT 261 in mind:
. . . people do not furnish evidence against
themselves simply by adopting a new plan in
order to prevent the recurrence of an accident.
I think that a proposition to the contrary would
be barbarous.
Although, as Mr Ashcroft submitted, there can
be no rule of law to this effect, I think, with
respect, that these observations of Bramwell B
are germane and helpful in maintaining a sense
of perspective.
(ii) The Report speaks of the Direct Cause of
the damage to the titanium tubes (the contami-
nants in the goods cracking in the cracking fur-
nace allowing the formation of HF and an
aggressive corrosive attack on the tubes) and
various Causal Factors. Two of those Causal
Factors concern pH. However, the methodology
of the Report is such that I do not think the mere
inclusion of pH matters amongst the Causal
Factors assists the argument before me.
76. Coming to the substance of the Report but
confining myself to matters relevant to the Geogas
secondary case, the Executive Summary records
that approximately 1 hour 20 minutes after dis-
charging commenced, the pH of sour water in
D-1681 dropped rapidly from 5.5 to a range of
3.5 to 3.7. The Executive Summary continued:
495
[GROSS LJ
A pH alarm is present with the LLA set at
5.0. No actions were taken. There was no knowl-
edge at production department or among opera-
tors about the potentially damaging effects of
hydrofluoric acid on titanium. The alarm was
later tested and found to be working.
The low pH condition persisted for approx-
imately 59 hours.
The Executive Summary recommended that:
Understanding about the potential corrosive
effects of low pH, and the need to react to low
pH alarm, have to be communicated to all
operators.
77. In the section of the Report entitled Events
and Conditions, the drop in pH from 5.5 to a range
of 3.5 to 3.7 was considered. Laboratory samples
taken before and after the incident indicated that the
pH meter was relatively accurate. While there was
no alarm log for the pH alarm system, this passage
of the Report was able to say the following:
No actions were taken to increase the pH (eg,
increase NH3). Causal Factor 4
u Historically the unit has run without NH3
with a pH of ~ 4 for extended periods without
damage.
u In earlier years, the pH meter was unreli-
able and more emphasis was put on lab sam-
pling of pH.
u Lab samples are not routinely taken dur-
ing the weekend.
u ...
u There has been no experience to show that
low pH is harmful to titanium. Causal Factor
5
As Geogas sought to pray it in aid (discussed
below), I should record the entry for 13.00 on 18
September. A request had been made by the inves-
tigation team and:
pH trend was noted for the first time.
78. Under the heading Observations and Con-
clusions, the Report has this to say:
. . . pH is controlled by manually adjusting
NH3 injection rates to the tower overhead. The
target range for pH is 5.0 and 7.0. Historically
the primary purpose for pH control has been to
reduce corrosion of carbon steel in the tower
overhead, piping and heat exchanger shells.
Under normal operating conditions the primary
corroding species is carbonic acid formed from a
combination of steam condensate and CO2.
Since the bundle metallurgy was changed to
titanium there have been a number of incidents
when NH3 injection has been interrupted and pH
levels have been allowed to fall without neutral-
ization, in at least one case for a period of 23
496 LLOYDS LAW REPORTS
GROSS LJ] Borealis v Geogas Trading
weeks. The resulting overhead pH levels have
typically fallen to around 4.6. It was determined
that the corrosion rate of carbon steel under these
conditions is relatively low and, during routine
inspections, no visual indication of titanium has
been observed as a consequence of intermittent
operation below a pH of 5.0. Nevertheless, long
term exposure of carbon steel to lower levels of
pH has been deemed to be inadvisable. Until this
incident, there have been no pH excursions
below 5.0 during the past two years.
pH is monitored with an online pH meter
located in the sour water distillate drum
(D-1681). When the online pH meter was origi-
nally installed it was relatively unreliable. Labo-
ratory samples are taken three times a week to
verify pH meter readings. Comparison of recent
laboratory measures of pH with the on-line meter
has shown that the meter currently tracks pH
reliably. However, appreciation of this improve-
ment in reliability is not shared by all operators
who are responsible for monitoring pH.
79. Later in the Report, there were these observa-
tions, linking the corrosive attack to the contami-
nated goods:
The drop in pH . . . began approximately 1
hour after . . . [unloading began] . . . of a
shipment of N-butane from the Henning Maersk
into the UC731 storage cavern. The cavern inlet
from the dock is in close proximity to the unit
feed pump suction line. Past experience has
shown that the effects of new feed are typically
observed in the unit in approximately 1 hour
from the time that unloading begins. This obser-
vation is viewed as further confirmation that cor-
rosion of the E-1651 and E-1656 is related to
contaminants in the butane that was shipped on
the Henning Maersk.
80. As already highlighted, two Causal Factors
are here relevant and are related. These were:
4. No action was taken in response to drop-
ping pH.
5. Experience has never indicated that low pH
is potentially damaging to Ti.
The Report noted the online measure of pH had
fallen below the low level alarm of 5.0 and
remained there for over 40 hours. After 30 hours at
a pH of approximately 3.6, the first (gas) leak from
the E-1651 exchangers was detected. The Report
remarked that there was no evidence that any
attention was paid to this parameter (ie, the low
level pH alarm). The Report went on to say:
The investigative team interviewed a number
of operators and other members of the production
staff to gain a better understanding of this over-
sight. Our objective was to determine the extent
to which this could be explained by past operat-
[2011] Vol 1
[QBD (Comm Ct)
ing experience with pH, lack of knowledge and
understanding of the potential damaging effects
of low pH, or simple failure to follow reasonable
standard operating procedures.
The Report indicated that the findings from these
interviews had been set out in the Events and
Conditions section already recorded above.
81. The Reports own conclusions in this regard
were as follows:
. . . operating experience for the past 20
years suggested that pH was a relatively unim-
portant operating parameter. It was certainly true
that essentially no one in the production depart-
ment was aware of the potentially damaging
effects of hydrofluoric and/or hydrochloric acid
on titanium or even for the potential for HC1 in
the primary fractionator tower overhead.
This said, it is apparent that the low pH alarm
was functional, yet no additional samples were
sent to the lab to confirm that the low readings
were real. Also, no adjustments were made to
NH3 injections which may have mitigated the
effects of the HC1.
82. Finally, the Report dealt with Causal Factors
4 and 5 as follows:
Root cause category 2a) Lack of knowledge
and skills
Historical experience and lack of familiarity of
the impact of low pH on the corrosion of tita-
nium, resulted in little or no attention to pH
levels below the alarm level.
83. To my mind, on the evidence before the
court, no action had been taken in respect of the pH
alarm prior to the gas alarm sounding essentially for
the reasons set out in the Report and noted above.
(Understandably, after the gas alarms sounded,
other concerns predominated.) Those reasons
related to the experience of the plant and the pur-
pose of the pH alarm. It is unsurprising that with an
eye to the future whatever the outcome of this
litigation the authors of the Report should rec-
ommend improved understanding of low pH, its
possible consequences and the need to react to the
low pH alarm.
84. For completeness, in the light of the Reports
conclusions, I accept that the low level pH alarm
was in working order on 12 September. In his
witness statement, Mr Andersson described what
happens when the alarm is triggered:
The low level pH alarm sounds when the pH
in the D1681 distillate drum falls below pH5.
When the alarm sounds the alarm indicator light
on the panel above the process computer begins
to flash. The operator acknowledges the alarm by
pressing the flashing light button. Once acknowl-
edged the alarm sound and flashing light will
[2011] Vol 1 LLOYDS LAW REPORTS
QBD (Comm Ct)] Borealis v Geogas Trading
stop. However, the indicator light will stay lit
until the pH returns above 5.
If only to stop the sound and flashing light, the
probabilities are that an operator acknowledged
the alarm by pressing the flashing light button. On
the available evidence, the operator did no more
than that, for the reasons already discussed. Against
this background, I am unable, with respect, to
attach to the 13.00 entry in the Report, under
Events and Conditions, the significance for which
Mr Ashcroft contends. Even assuming that the par-
ticular entry is not simply referring to the work of
the investigators, I do not think that any failure to
note the pH trend advances the argument it is
no more than part of the overall picture already
outlined.
(5) The high point of the Geogas secondary case
85. The high point of the Geogas secondary case
may be seen as the level of similarity in the evi-
dence of Mr Harris, Mr Lumley and Professor
Davies as to the reactions they would have expected
from the Borealis operators and management to the
drop in pH levels on the afternoon of 12 September.
On the basis of this evidence in particular, Geogas
pressed its secondary case; the Borealis reaction to
the drop in pH levels was indefensible; it was
unreasonable; it broke the chain of causation; had
the reaction been as contemplated by these wit-
nesses, physical damage and consequential loss
would have been very substantially reduced.
86. Mr Harris (to whom reference has already
been made) said that the sudden drop in pH levels
was an indication that something was wrong. On
the assumption that there was nothing wrong with
the measuring instrument, in his view, the sudden
drop indicated to the operator that there was a
strong acid in the system. If there was a strong acid
in the system, then that called for an immediate
laboratory analysis on the water in the system.
87. As I understood Mr Lumleys evidence, in its
final form on this part of the case, his views may be
summarised by reference to a passage in one of his
reports. Once the pH alarm had been triggered (at
15.20 on 12 September) the timeline should have
been as follows:
1. The first step should have been to increase
the ammonia flow to the maximum. This would
have been a safe procedure with no negative
consequences.
2. Within 4 hours [so, 19.20], the pH signal
could have been confirmed after drawing a sam-
ple from the plant, checking with pH indicator
paper and confirming with the laboratory. Within
this period as the ammonia had been increased to
the maximum, the pH record should be mon-
497
[GROSS LJ
itored to check the effect of the additional
supply
3. A further allowance of 6 hours [01.20 on 13
September] is made for Borealis to confirm the
source of the acidity. Time is also required for
discussions with the supervisor and management
to obtain approval to change the feed. I regard
this allowance as generous to Borealis, because
. . . the operators, supervisors and management
should quickly have appreciated that the HM
cargo was the cause of the drop in pH.
4. A further 12 hours is required [13.20 on 13
September] to stop LPG and change over to
alternative feed safely.
5. Continue to operate the plant on alternative
feed from 13.20 hours 13th September . . . at
full capacity, not 15th September . . .
Therefore, I estimate, the contaminated feed
through the heat exchangers should have ceased
within 22 hours of the triggering of the pH
alarm.
(Times in italics in square brackets are added.)
It may be noted that in taking 12 hours as the
time to stop the LPG and change to an alternative
feed (step 4), Mr Lumley relied on Mr Hedvalls
evidence to this effect, rather than Mr Anderssons
16 hours.
88. Turning to Professor Davies, he accepted that
he did not know what Borealiss procedures were
and was surprised that (as he put it) he had not got
to the bottom of the reasons why the operators had
not acted in response to the pH alarm. He also said
that one wouldnt be running . . . to the lab every
time it went down below 5. Subject to the caveat,
twice underlined in the course of his cross-exam-
ination, that the scenario was artificial, Pro-
fessor Daviess evidence as to timings and related
matters on the 12 and 13 September was along the
following lines:
(i) Within two hours of the pH alarm being
triggered [so, by 17.20], the operators should
have looked at the pH trend, decided it was real
and added ammonia. Throughout his evidence,
Professor Davies made it clear that additions of
ammonia should be incremental; he disagreed
with Mr Lumleys suggestion of increasing the
ammonia flow to maximum in one fell swoop.
(ii) Within a further four hours [by 21.20], the
operators should have checked with the labo-
ratory that the pH readings were accurate.
(iii) By 21.20, the ammonia flow (on this sce-
nario) would have been increased incrementally
up to the maximum. If there was then no discern-
ible improvement in pH levels the operator
ought to say this is unusual and lets get some
advice.
498 LLOYDS LAW REPORTS
GROSS LJ] Borealis v Geogas Trading
(iv) If the readings were accurate and if there
was by this stage [21.20] no discernible change
in the pH level and if a supervisor had been
consulted, that indicated acid in the system
though Professor Davies was adamantly opposed
to any suggestion that it was strong acid; for that
matter he was of the opinion (a debate which it is
unnecessary to explore) that HF was not a strong
acid. The inquiry then was [now about or post-
21.20]: where did the acid come from? As the
plant used a number of feedstocks, there would
be a question (for a supervisor rather than an
operator) as to whether the acid could be linked
with one of them.
(v) Professor Davies was to some degree
equivocal about making the linkage between the
unusual situation and the feedstock from the cav-
ern. If, however, such linkage had been made, a
deduction that would have been entirely in
keeping was that the low pH level was due to
the contaminated goods, on account of the oxy-
genates in the goods being well . . . above the
normal levels. If so, it was at least implicit in
Professor Daviess evidence that the anxiety
would, for the time being at least, have been
allayed.
(vi) If it was possible to identify which feed-
stock was causing the problem and if oxygenates
in the goods did not furnish the perceived cause,
then it would be reasonable to take urgent action
to stop using that feedstock while investigations
were made. On this footing, he accepted that it
would be more than prudent to take steps
immediately to stop using the LPG mix from the
cavern.
(6) Discussion: Starting point
89. I start with the evidence characterised as the
high point of the Geogas secondary case.
90. With respect, I am not sure that that part of
Mr Harriss evidence relied upon by Geogas took
the matter significantly further. I have no doubt that
Mr Harris was doing his best to assist the court. It
would, moreover, be difficult to quibble with his
view that the sudden drop in pH levels gave an
indication that something was wrong. But I am
unable to accept his further answer that (assuming
there was nothing wrong with the measuring instru-
ment) the sudden drop in pH levels indicated that
there was a strong acid in the system and hence
the need for an immediate laboratory analysis. I
accept in this regard the evidence of Professor
Davies that a drop in pH levels (assuming no instru-
ment fault) indicated acid in the system but not
what type of acid.
91. I turn to Mr Lumley. His evidence came
under severe attack from Borealis. Insofar as that
[2011] Vol 1
[QBD (Comm Ct)
attack included the suggestion that in part he had set
out to mislead the court, I should at once and in
fairness to Mr Lumley make it clear that I reject it.
I do not at all think that Mr Lumley was a dishonest
witness. Nor was his evidence without a number of
points of considerable force (one of which has
already been mentioned). There were, however, a
number of features of his evidence which do
prompt very considerable caution when that evi-
dence comes to be weighed; these features include
the following:
(i) Although he gave his Specialist Field as
Chemical and process plant design and opera-
tion in the manufacture of organic chemicals, he
is in fact a mechanical engineer. He had never
worked in an ethylene cracker or on a project
concerned with an ethylene cracker; he had never
been involved in the design, operation or man-
agement of a cracker; he has never visited the
plant. Mr Ashcroft retorted, fairly, that Professor
Davies had himself never worked in an ethylene
cracker or been involved in the design, operation
or management of a cracker. That is fair as far as
it goes and is indeed a matter I shall take into
account when considering Professor Daviess
evidence. Mr Ashcroft further submitted that
what was required was general knowledge of
proper plant operations and procedures and that
Mr Lumley had a great deal of experience in
relation to plant design and operation. That too is
fair and does serve to weaken the force of the
Borealis criticism going to Mr Lumleys lack of
relevant expertise or experience. Even so, I am
left with something of a question mark as to Mr
Lumleys expertise. An example directly rele-
vant to the Geogas secondary case was Mr
Lumleys suggestion in his timeline evidence (set
out above) that a sample could have been drawn
from the line and checked with litmus paper
before the pH was confirmed by the laboratory.
Without belabouring the point, the operation of
the plant made any such suggestion absurd;
proper procedure required taking a sample with a
specialised pressurised container for testing,
using proper pH metering equipment not
litmus paper.
(ii) This concern as to Mr Lumleys expertise
and a tendency to stray beyond it is magnified
rather than assuaged when regard is had to Mr
Lumleys evidence overall. An example is appar-
ent in the context of the later abandoned Geogas
allegation that, in its re-sale of the goods, Bore-
alis had failed to mitigate its loss. Mr Lumley
purported to express an opinion as to how long it
would have taken to identify the contaminant in
the goods (2M2F), find a suitable buyer and
arrange delivery. Inevitably, in cross-examina-
tion, he accepted that he was not in a position to
[2011] Vol 1 LLOYDS LAW REPORTS
QBD (Comm Ct)] Borealis v Geogas Trading
give expert evidence of this nature. In the same
vein, Mr Lumley in his report strayed into the
debate as to whether butane with a particular
level of contamination could be used for cooking
or heating in India or Africa. Although Mr Lum-
ley sought to justify his evidence in this regard
(as a crossover between the technical and trading
features of the case), in my judgment, comments
of this nature were outside his expertise
indeed plainly so and should never have
featured in his evidence.
(iii) In his reports, Mr Lumley spoke of his
primary case, secondary case and tertiary The recommendations in the Report were undoubt-
case. During the trial, I observed that parties had
cases but experts did not. This language was
unhelpful and troubling, in that the court relies
on expert witnesses being non-partisan. That
said, I am not minded to make too much of this
criticism because the error may well have been
no more than semantic.
(iv) There was, with respect, bizarre confusion
between the body of Mr Lumleys original report
and one of his appendices as to the length of time
to be allowed from the triggering of the alarm for
the LPG feeds to be closed down and the fur-
naces transferred to alternative feeds. While I do
not think that anything more sinister than chaotic
preparation was to blame for this disconnect
(as Ms Buehrlen termed it), it did nothing to
enhance any feeling of confidence in Mr Lum-
leys evidence.
92. Against the background of these criticisms,
Mr Lumleys evidence, had it stood alone, would
have furnished a weak foundation for the Geogas
secondary case. In reality, the force of the Geogas
secondary case lay in the evidence of Professor
Davies, upon which Geogas placed understandable
reliance.
93. Professor Davies was a witness of manifest
independence and, within his discipline (chemical
or process engineering) undoubted expertise. To my
mind, it was his evidence which gave the Geogas
secondary case such credibility as it had.
94. Even, however, in connection with an expert
of the calibre of Professor Davies, it is necessary to
bear in mind the following:
(i) Professor Davies did not have experience as
a plant operator. Although he had visited the
plant, as he himself said, he did not know what
Borealiss procedures were.
(ii) As already underlined, Professor Davies
himself described the time line scenario, as to
which he was cross-examined, as artificial.
(iii) While an expert is there to provide a court
with the benefit of his expertise on part of the
case, it is for the tribunal of fact (a judge in a
499
[GROSS LJ
civil case and a jury in a criminal case) to decide
the case on the whole of the evidence.
Unreasonable?
95. Having regard to the evidence of Professor
Davies, all the more so, when considered in con-
junction with the Report, I am readily satisfied that
the Borealis reaction to the sudden and substantial
drop in pH levels on the afternoon of 12 September
left considerable room for improvement. On any
view, this reaction fell well short of best practice.
edly apposite.
96. But was the Borealis reaction unreasonable?
I confess that I did not find this an easy question to
resolve. But, on balance, on the whole of the
evidence and notwithstanding Mr Ashcrofts advo-
cacy, I do not think it was.
97. In my judgment, it is essential to keep upper-
most in mind my earlier conclusion: namely, that
Borealis did not know and could not reasonably
have been expected to know of the kind of acid
introduced into the system by the Geogas breach of
contract and the nature of the threat it posed. Again,
as already concluded, the pH system was not
designed or intended to deal with acids of such a
nature. It is correct that the sudden and considerable
drop in pH and the triggering of the pH alarm
indicated an acid in the system; but, strikingly, had
it been an acid of the kind typically encountered by
the plant, nothing untoward would have resulted
from the operators waiting until the routine samples
were taken on the Monday (15 September). In the
light of the experience of those at the plant, this
would not have been a problem. That the operators
could have done better, as indeed they did when pH
dropped significantly after discharge of the Stanlow
cargo (a cargo mentioned above), is one thing
and as already underlined amply justifies the con-
clusions in the Report. But, against this back-
ground, to characterise as unreasonable the
operators failure to achieve best practice, seems to
me a step too far. It should also be noted that
operators and supervisors (including Mr Anders-
son) on the shift/s subsequent to that when the pH
levels first fell, reacted in the same manner as those
on the initial shift. It might be said that the focus
must then move (away from the initial operators
and supervisors) to the training given to operators
and others in the production department in the
plant. If so, however, the same conclusion is
reached: until the occurrence of this incident and in
the light of experience hitherto, Borealis had no
reason to anticipate that low pH would or could
have consequences of this nature.
98. For my part, I conclude that it was not unrea-
sonable of those at the plant not to take the steps on
500 LLOYDS LAW REPORTS
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Friday 12 September or Saturday 13 September,
canvassed in the evidence of Mr Lumley and Pro-
fessor Davies when dealing with timelines. I am
fortified in that conclusion and in preferring the
evidence of those with practical experience of the
plant, by Professor Daviess own concerns under-
lined by his description of the timelines scenario
as artificial. In my judgment, it would not have
been unreasonable to wait for routine sampling on
Monday 15 September, or, given Mr Hedvalls evi-
dence (recounted earlier), at least Sunday 14 Sep-
tember. I take no more time over the difference
between 14 and 15 September, as, in my view, it is
academic; in any event, by 14 September, such
questions as to sampling had been overtaken by
events.
99. This conclusion is sufficient to dispose of the
Geogas secondary case whether advanced in terms
of a break in the chain of causation or as a failure
to mitigate.
100. With specific regard to the question of mit-
igation, the linkage between the knowledge of a
claimant and the reasonableness (or otherwise) of
its conduct is plain. As illustrated by the judgment
of Nolan LJ in Schering (supra), at page 16, the
conclusion that there had in that case been a failure
to mitigate was premised on the plaintiffs:
. . . actual knowledge of the danger to which
the defective heat sealer gave rise.
There was no such knowledge in this case, aris-
ing from the drop in pH on the afternoon of 12
September nor, in fairness to Borealis, ought
there to have been.
If unreasonable, was the chain of causation
broken?
101. In case I am wrong and in any event out of
deference to the arguments advanced, I go on to
consider whether the Borealis reaction to the drop
in pH levels and the triggering of the pH alarm, if
unreasonable, broke the chain of causation. Here,
without hesitation, I conclude it did not.
102. First, I did not understand the Geogas sec-
ondary case to be advanced on the basis that the
Borealis reaction was reckless (as distinct from
unreasonable). For the avoidance of doubt, any
such case would have been hopeless. The absence
of recklessness is itself a significant conclusion,
favourable to Borealis, even if (as discussed above)
it is not by itself sufficient to dispose of the Geogas
secondary case.
103. Secondly, on the facts already found, while
this is not a horns of a dilemma case, as in The
Stork (supra), it is also far removed from the facts
of Lambert v Lewis (supra) where the defect in
the coupling was, so to speak, staring the farmer in
the face and the facts of Schering (supra), where
[2011] Vol 1
[QBD (Comm Ct)
there was actual knowledge of the danger to which
the defective heat sealer gave rise. Nor are the facts
here close to those of The Spontaneity (supra),
where the negligent re-floating was clearly sepa-
rate, both in time and in terms of seamanship, from
the earlier grounding. While Borealis did know of
the rapid and substantial fall in pH, the facts here
are closer to those of County Ltd v Girozentrale
Securities (supra); on 12 September, Borealis was
entitled to start from the premise that it had been
supplied with a high quality cargo free of con-
taminants, whereas the reality, unknown to Bore-
alis, was very different.
104. Thirdly, the answer ultimately lies not
in authority but in a fact-sensitive inquiry.
Approached as a question of fact and degree, I
cannot begin to say that any failure/s on the part of
Borealis, obliterated or destroyed the causative
potency of the anterior Geogas breach of contract.
It seems plain to me that the Geogas breach of
contract remained, at the least, an effective cause of
the Borealis loss and damage, regardless of any
failure/s on the part of Borealis. Though Borealis
knew or ought to have known of the presence of an
acid in the system, it remained in the grip of
an unknown breach giving rise to an unknown
danger.
Would any loss have been avoided?
105. The conclusion that the chain of causation
was not broken is itself sufficient to dispose of the
Geogas secondary case. In any event, however, I
would have been unable to accept the Geogas sec-
ondary case because, reasoned through, I do not
think the steps it advocated would have avoided any
loss, physical or consequential. I proceed by way of
an examination of those steps, as they broadly
appear from the evidence of Mr Lumley and
Professor Davies.
106. I consider, first, the adding of ammonia. I
have no hesitation in preferring the evidence of
Professor Davies to Mr Lumley; there was, simply,
no or no proper basis for immediately increasing
the flow of ammonia to the maximum; any addi-
tions would or would likely have been incremental.
The fact that a pH of more than 7 was a concern
would also have told against an immediate increase
of the flow to the maximum. Thereafter, the point is
to a degree double edged, for both parties. The
more the addition of ammonia increased the pH,
the more likely it would be that to some extent,
the addition of ammonia masked the presence of the
contaminants in the system. The less it did so, while
underlining that the addition of ammonia by itself
would not have achieved significant results, the
more it would have prompted further consideration
of the situation.
[2011] Vol 1 LLOYDS LAW REPORTS
QBD (Comm Ct)] Borealis v Geogas Trading
107. In my judgment, the addition of ammonia
would not have had any significant effect in reduc-
ing the damage suffered especially where the
damage most mattered, in the area of the primary
heat exchangers. Having regard to the evidence of
Dr Brisdon (an expert called by Borealis in the field
of chemistry) and Professor Davies, the relevant
reaction depicting the addition of ammonia to
hydrogen fluoride, producing ammonium fluoride,
is: HF + NH3 = NH4F; however, this reaction
cannot take place at temperatures above 100C as
ammonium fluoride disassociates at such tempera-
tures. Accordingly, no additional amount of ammo-
nia could have protected the primary heat
exchangers (where the temperature of the water
entering the exchangers under pressure is about
105C) from the corrosive effect of the HF. As
Professor Davies put it:
. . . the HF cannot be neutralised at the
entrance to the [primary] exchanger.
It doesnt matter how much ammonia you put
in because it is not going to work if it is
unstable.
If that is the case you must always have the
risk of corrosion at the entrance to the [primary]
exchangers . . . if HF is present.
In passing, it may be thought that this difficulty,
by itself, serves to illustrate the fact that the pH
alarm system was not designed for dealing with the
problems posed by the introduction of an acid such
as HF into the system.
108. If an addition of ammonia had neutralised
HF it would have done so in the area of the secon-
dary exchangers (where the temperature range was
some 58 to 35C), producing some reduction in
damage but also increasing to some extent the
pH and, in so doing, masking the corrosive attack in
the areas of the highest temperatures. That said,
though the matter is to an extent speculative, on all
the evidence, my inclination is that an increase in
ammonia would not have significantly increased
the pH level.
109. Pulling these threads together, while the
addition of ammonia would have been an entirely
understandable step to take in response to a fall in
pH, I conclude that it would not on its own have
averted the physical damage suffered at the plant.
Its contribution to the Geogas secondary case must
be assessed on effectively the converse assumption;
namely, that the addition of ammonia would not
have had a significant effect in raising pH and so
would have prompted further consideration as to
the nature of the problem.
110. I turn next, therefore, to the position reached
when it was ascertained that the pH readings were
accurate and that despite the addition of ammonia
up to the maximum there was no discernible
501
[GROSS LJ
improvement in pH levels. The conclusion would
have been that there was an acid in the system and,
logically, the inquiry would have been as to the
source of the acid. I am not sure that the connection
to the goods (and hence the feedstock to the cavern)
would have been quite so straightforward and quick
as argued by Geogas; nor for that matter do I think
it would have been as complex as suggested by
Borealis, in the light of the observations in the
Report (set out above) as to the typical timescale for
observing the effects of new feed.
111. If, however, a connection had been made
between the low pH readings and the goods, then,
in agreement with Ms Buehrlen, I do think that
considerable time would have been taken thereafter,
while the acidity was attributed to the level of
oxygenates in the goods. It is to be remembered that
the weak acids normally present in the feeds and
which the pH system is designed to detect are a
consequence of the presence of oxygenates in the
feeds. Both Professor Davies and Mr Lumley stated
or agreed in cross-examination that it would have
been reasonable for Borealis to have linked the drop
in pH with the high oxygenates content of the
goods. As already foreshadowed, Professor Davies
would have reached that conclusion himself. In
re-examination Mr Lumley, reminded that the aver-
age oxygenates content of the four tanks of the
vessel was less than the Borealis 200 ppm accep-
tance criterion and that therefore the cargo had
been approved for unloading retreated somewhat
from his answers in cross-examination.
112. A clear perspective is necessary. In my
view, Geogas was right to insist that the average
level of oxygenates in the goods was within the
Borealis acceptance parameters (not more than 200
ppm) otherwise discharge of the goods would
likely not have taken place. That said, Borealis was
right to underline that the oxygenates level was
high in that it was significantly above the norm
of cargoes for feedstock deliveries received by
Borealis at the plant over the period 14 January to
12 September 2003. A study of the cargoes deliv-
ered over that period shows that the goods con-
tained the second highest average level of
oxygenates, exceeded only by the Stanlow cargo
(referred to above). The Stanlow cargo had oxygen-
ates ranging from 200 to 229 ppm; the range for the
goods was 130 to 225 ppm; the average of all
deliveries over this period was 59 ppm (including
the Stanlow cargo and the goods) and 31 ppm for
the remaining 39 deliveries if the Stanlow cargo
and the vessels cargo are excluded. Moreover, as
canvassed earlier, the presence of these oxygenates
in the goods disclosed a breach of contract.
113. I do not overlook Mr Ashcrofts submission,
based on the reaction of witnesses from the plant
(Messrs Hedvall and Andersson) that, as the
502 LLOYDS LAW REPORTS
GROSS LJ] Borealis v Geogas Trading
drop in pH was not explicable by reference to
normal operating conditions, it was unrealistic to
postulate oxygenates as the likely explanation for
the fall in pH. Nor do I overlook the data put
forward by Mr Ashcroft as suggesting that the pH
fall compared to other deliveries could not be
ascribed to oxygenates; in this regard, however, Mr
Ashcroft both accepted that he had not put this data
to Professor Davies and, by way of a qualification,
that the data he relied upon could not be simplist-
ically interpreted. I take all this into account. Hav-
ing done so and stripping the matter of all
hindsight, I am of the view that if the problem had
been escalated up the Borealis hierarchy (as the
Geogas secondary case assumes), so the question of
oxygenates would indeed have loomed large. The
presence of HF would not have occurred to anyone.
They would instead have begun their consideration
by reference to the available analyses. On those
analyses, the presence of oxygenates would have
been conspicuous. Suffice it is to say that some
considerable time would likely have elapsed and, to
my mind, quite properly, while this topic was can-
vassed. No doubt in time, the conclusion would
have been reached that the explanation could not lie
with oxygenates but time is critical for the Geo-
gas secondary case to have any practical impact.
114. It only needs to be kept in mind that for the
feedstock to be changed decisions needed to be
taken that the drop in pH was alarming; that the pH
readings were accurate; that the reason for the drop
in pH, which additions of ammonia had failed to
reverse, was an acid in the system; that the acid was
linked to the goods; that the explanation did not or
could not be assumed to lie in oxygenates. All this
would have involved the matter moving from the
operators to the supervisors, via a special request to
the laboratory and then further up the organisation
chain to plant management. The decision to change
feedstock was not one to be taken lightly.
115. For my part, I regard the notion that within
10 hours (or anything like it) of the pH alarm being
triggered a decision would have been taken to
change the feed as arbitrary and artificial in like
measure. Bearing in mind that the titanium tubes
needed replacing once 20 per cent damaged, it can
readily be seen that the Geogas secondary case
(even if otherwise well-founded) was unlikely to
avoid any or significant physical damage. Moreo-
ver, as perforations were present in the tubes by or
at 20.00 on 13 September hence the sounding of
the gas alarm and as the minimum time for
changing the feedstock was 12 hours, it seems to
me that the Geogas secondary case could not have
avoided physical damage to the plant unless a final
decision to change the feedstock had been taken by
08.00 on 13 September. But that timescale, for
the reasons already given, I regard as unrealistic.
[2011] Vol 1
[QBD (Comm Ct)
Against this background, Mr Ashcroft was, in my
judgment, realistic when he accepted in his closing
oral submissions that:
. . . the meat of this secondary case . . . as
the evidence has turned out, is not so much in
relation to the costs of the physical repairs . . .
116. The real meat of the Geogas secondary
case, Mr Ashcroft went on to contend, related to the
substantial loss of profit claim for September 2003.
I shall deal with that in a moment but I must first
deal with the Borealis case as to E and G units
which sustained (very limited) damage, having
come online at about 03.00 on 15 September. Here,
Mr Ashcroft submitted that if there was force in the
Geogas secondary case other than in his timeline
argument, then such loss as related to these units
would have been avoided; they ought not to have
been exposed to contaminated feed at all. For the
reasons already given, if I am right about Borealiss
conduct not being unreasonable and not breaking
the chain of causation, this submission too must
fail. But in any event, as it seems to me, if the
matter is only to be considered once the gas alarm
had sounded, it is unrealistic to castigate as unrea-
sonable the steps taken by those at the plant after
20.00 on 13 September. No such case was devel-
oped on the evidence and, understandably, at that
time, attention had shifted to other matters.
117. I come finally in this chapter to the submis-
sion that the September 2003 loss of profit claim
should reasonably have been avoided. This argu-
ment was advanced by Mr Ashcroft in these
terms:
. . . there is no reason to conclude that there
were any holes in the heat exchanger tubes any
significant time before the gas alarm was trig-
gered. If the feeds had been changed before there
were holes in the tubes, the probability . . . is
that production would have continued using
perfectly acceptable uncontaminated feeds which
would cause no further damage to the tubes
for the balance of September . . .
...
If they were not leaking . . . there would have
been no reason to stop.
Developing this submission, Mr Ashcroft con-
tended that the entire September 2003 loss of profit
claim could have been avoided if he was right as to
a change of feed within 22 hours of the triggering of
the pH alarm (ie, by 13.20 on 13 September). Even
if I was against him on that but concluded that there
should have been a change of feed by (say) 18.00
on 13 September, then he submitted that the same
conclusion should be reached. It could not be
assumed that the tubes were significantly holed
before 20.00 on 13 September otherwise the gas
[2011] Vol 1 LLOYDS LAW REPORTS
QBD (Comm Ct)] Borealis v Geogas Trading
alarm would have sounded earlier. Once the feed
had been switched, there was, he said, no reason to
suppose that the tubes would have been perforated
at 20.00 on 13 September, or at all.
118. With respect, I am unable to accept this
submission. First, for reasons already fully dis-
cussed, I am not persuaded that there was unreaso-
nableness, still less unreasonableness breaking the
chain of causation, prior to 20.00 on 13 September.
Secondly, I think the case is speculative as to
whether the perforations would have been avoided
if there had been a change of feed close to 20.00 on
13 September. Thirdly and in any event, Ms Buehr-
lens succinct response was as follows:
To suggest that the probable consequence of
discovering that your plant has been subjected to
a strong acid for 22 plus hours and to then con-
tinue at full production ignoring that fact, not
even looking at your equipment to discover the
level of damage . . . we say cannot possibly be
the probable consequence of ceasing to use the
LPG shortly before the perforations occur.
One could imagine the scenario in which
Borealis were to conduct itself like that and what
would be said if two weeks later there was sud-
denly a major incident arising out of the fact that
these pipes have simply been allowed to stay in
situ with nobody doing anything about it.
Suffice to say that I entirely agree; notably, this
case was not explored with the Borealis witnesses
in cross-examination.
119. It follows that I am unable to accept that the
steps proposed in the Geogas secondary case would
have successfully avoided loss, whether physical or
consequential. I accordingly dismiss the Geogas
secondary case. It follows that Borealis is entitled
to recover the September 2003 loss of profit, agreed
at 2,902,237.
Issue (II): remoteness of damage
120. In the event, this is an issue falling within a
narrow compass and which can be taken very
briefly indeed.
121. As ultimately put by Mr Ashcroft in his
written closing submissions, the Geogas case on
remoteness was as follows:
(i) First, it was contended that the September
2004 loss of profit was too remote:
Any loss of profits occurring almost a full
year after the incident and many months after
all repairs had been completed would be too
remote in law to be recoverable. It is not a type
or kind of loss that would follow ordinarily, in
the great multitude of cases. It is not a type or
kind of loss for which G can reasonably be
taken to have assumed responsibility.
503
[GROSS LJ
(ii) Secondly, it was said that losses due to the
non-availability of the cavern were too remote:
Such losses are too remote in law to be
recoverable. No losses were suffered until
2004. It was not within the reasonable con-
templation of G that the cavern was likely (or
not unlikely) to remain unusable into 2004,
nor that any inability to use the cavern would
be likely (or not unlikely) to result in a loss of
profits. It is not suggested that G had any
knowledge of Bs practice of stockpiling
cheap butane in the autumn and winter
months nor of the complicated manner in
which B juggled different feedstocks to maxi-
mise revenue. Further, the losses in fact suf-
fered were due to a particular combination of
the movements in relative market prices of
different feedstocks, customer requirements
relating to the end product and the relative
yields of different feedstocks . . . Such losses
were entirely unpredictable and unquantifi-
able. They are not a type or kind of loss that
would follow ordinarily, in the great multitude
of cases. They are not a type or kind of loss for
which G can reasonably be taken to have
assumed responsibility.
122. By way of explanation as to the September
2004 loss of profits, this head of argument relates to
the reinstalling of heat exchanger units E and G. It
will be recollected that these units were brought
online from 03.00 on 15 September 2003. As a
result of the incident, they were disconnected in
March 2004 for inspection and were reinstalled
put neutrally at a time when other works were
done in September 2004. The argument here is
purely one of remoteness; submissions that this loss
is not recoverable by virtue of the Geogas secon-
dary case have already failed; submissions that this
loss is not recoverable because other works were in
any event undertaken in September 2004 will be
dealt with below. The amount in question is rela-
tively small, some 72,000.
123. As to losses due to the non-availability of
the cavern, these relate to two distinct, if not unre-
lated, heads of claim, amounting in total to
938,000 (agreed as a figure). The first, concerns
the loss of use of the 32,000 mt-odd of butane stock
that was in the cavern. The second, arises out of the
inability to buy and crack butane after the existing
butane stock had been used up, because of dealing
with the heel of the contaminated product. The
focus here is on remoteness only. The Geogas sub-
missions as to a failure by Borealis to mitigate are
dealt with below.
124. With great respect to Mr Ashcroft, these
valiant submissions lacked substance. As to the lost
profits in September 2004, it was perfectly likely,
504 LLOYDS LAW REPORTS
GROSS LJ] Borealis v Geogas Trading
as Ms Buehrlen submitted, that if a contaminant
was introduced into the plant that the equipment
would need to be inspected and that production
would be lost when taking such equipment offline
and bringing it back online. Whichever test of
remoteness of damage is applicable (see above),
Geogas seems to me to be plainly on the wrong side
of the line. Moreover, as a question of remoteness,
it cannot matter whether the E and G heat
exchanger units were reinstalled in March or Sep-
tember 2004.
125. Turning to the losses due to the non-availa-
bility of the cavern, again, with respect, this does
not seem to give rise to a question of remoteness at
all whichever test is applied. The introduction of
goods heavily contaminated with fluorides was
obviously likely to result in contamination of and
damage to the pre-existing contents of the cavern.
Insofar as Mr Ashcroft suggested that this loss
arose from Borealiss inability to buy in replace-
ment butane in September 2003 without loss, it
seems to me that the point becomes no stronger; the
type of loss was plainly likely; there is no require-
ment that liability depends on Geogas foreseeing or
taking responsibility for its precise manifestation.
Equally, in my judgment, the introduction of heav-
ily contaminated goods was likely to result in the
loss of use of the cavern while the contamination
was dealt with. Even assuming in Mr Ashcrofts
favour that, as he put it, the extent of the loss
involved a complex equation, that is neither here
nor there. For completeness, I do not think that, to
which Mr Ashcroft referred, advanced the
argument.
126. No further elaboration is required. The
remoteness defence fails.
Issue (III): mitigation
127. In broad terms, Mr Ashcrofts attractively-
presented argument was that Borealis had unrea-
sonably delayed replenishing the cavern and that
Geogas should not be liable for losses resulting
from such errors or failings on the part of Borealis.
The Geogas case was that the cavern should have
been ready for use by 1 February 2004, or such
intermediate date as the court thought appropriate,
whereas it was in fact only ready on 21 March
2004. The amount in dispute was some 238,000 at
most and less if it should be held that there had
been a failure to mitigate but with reference to a
date later than 1 February 2004.
128. In considering this criticism of Borealis it is
necessary to keep well in mind what Borealis did
do. The contents of the cavern were sold to Statoil
on 5 January 2004. Originally, this disposal was one
of the main planks of the Geogas case that Borealis
had failed to mitigate its loss; but, as foreshadowed,
[2011] Vol 1
[QBD (Comm Ct)
that challenge was later abandoned. The loading of
the cargo pursuant to this contract was not ulti-
mately completed until 21 January 2004. One day
before that, on 20 January 2004, Borealis concluded
a contract for the import of 3,300 mt of butane (+/
5 per cent), at a price of US$327 pmt. This ship-
ment was delivered on 29 January 2004 (3,266 mt
to which 871 mt of propane were added). Under-
standably, Borealis was concerned that the cavern
contents (ie, the heel after the disposal to Statoil) as
diluted by this shipment were safe for cracking;
vessel and cavern samples were accordingly taken
and analysed (externally) by Saybolt. On 10 Feb-
ruary 2004 Borealis decided that at least another
4,000 mt should be imported to further dilute the
contents of the cavern before cracking. Some 14
days followed before, on 24 February 2004, Bore-
alis concluded two contracts. The first, a contract
with BP, at US$315 pmt, produced a delivery on 2
March of 5,018 mt (to which 1,896 mt of propane
were added); vessel and cavern samples were again
analysed. The second, a contract with Shell, at
US$317 pmt, was for delivery of 20,600 mt during
the period 14 to 18 March. On 9 March, satisfied
with tests of the fluoride content, Borealis proposed
to start cracking but with one LPG furnace only; the
use of one furnace was a matter of prudence but
entailed a loss of profit as the best choice would
have been to use two LPG furnaces. Independent
advice at the time remained cautious and con-
cerned. On 12 March Borealis did proceed and
re-started cracking, albeit using one LPG furnace
only. On 20 and 21 March Borealis started using
two furnaces, so bringing this chapter to an end.
129. To my mind, working through this chronol-
ogy is invaluable. First, even if the notion that
Borealis should have bought in one single cargo
sufficient by itself to dilute the heel appropriately
had practical merit without the benefit of hind-
sight it was in no sense unreasonable not to have
done so. On any view, such a purchasing strategy
would have involved buying in a larger quantity of
butane (whether 20,000 mt plus or about 11,000 mt
of butane, depending on which variant of the Geo-
gas case is under consideration) at a winter seasonal
high a matter evidenced even by the difference
between the January and February purchase prices
of the cargoes bought in. Such a strategy would
have risked increasing the overall loss. Secondly,
Borealis had been seared by the experience of the
contaminated goods. If its subsequent approach dis-
closed caution, that was eminently understandable.
Thirdly, against this background, I can see no
proper ground whether commercial or technical
for criticising the Borealis approach of replen-
ishing the cavern in stages, having samples inde-
pendently analysed as it proceeded. Fourthly, I can
[2011] Vol 1 LLOYDS LAW REPORTS
QBD (Comm Ct)] Borealis v Geogas Trading
see nothing wrong with the timing of the first pur-
chase, that contract having been entered into even
before conclusion of the loading of the Statoil
cargo. It follows that the Geogas submission that
the cavern ought to have been available by 1 Feb-
ruary is, with respect, entirely unrealistic. The mit-
igation argument, if it is to prevail at all, can only
be for a significantly lesser period than that con-
tended for.
130. Pausing there, I am not sure that these
conclusions involve a rejection of Ms Jagos evi-
dence but, for reasons to which I shall come in
a moment, if they do then I am not at all deterred.
The key passage in Ms Jagos evidence seemed to
me to be the following:
. . . during the early part of January, they
should have been looking at availabilities of
butane to blend with what they could be fairly
certain was going to be some heel left there. So
by the time they were getting close to completion
of lifting of the cargo to Statoil, they should have
been close to purchasing a cargo of butane to
blend in with what would have been left in the
cavern . . .
...
. . . they would have to wait until they knew
what the heel was before they could finally make
the purchase, but they could still be determining
what cargoes were available prior to that . . .
With respect, given the timing of the first pur-
chase of butane (the day before completion of the
loading of the Statoil cargo), these observations
hardly advance the Geogas case that Borealis failed
in its duty to mitigate. They would only go some-
where if allied to other criticisms of the Borealis
purchasing strategy which I have already rejected.
131. There are, however, with regret, other reser-
vations I have as to Ms Jagos evidence. Ms Jago
was called by Geogas as an expert in the fields of
LPG trading or broking and as a market analyst. My
first reservation goes to some (in fairness to Ms
Jago, by no means all) of her promotional material
and other material in the case, which materially
misstated her qualifications. So, Ms Jago was in
places described as Dr Jago; but although Ms
Jago had been a doctoral student, she had not sub-
mitted her thesis and was not entitled to the title
Dr. Furthermore, she was also described as Dr
Jago LLB but she did not have the LLB qual-
ification either; she had a postgraduate diploma in
law. Having regard to Mr Ashcrofts submissions, I
am prepared to accept that these errors came about
through lax oversight rather than that she had delib-
erately set out to misrepresent her qualifications. In
the field of expert evidence, however, this remains
a matter of grave concern and Ms Jago must be in
no doubt that there should be no recurrence. Sec-
505
[GROSS LJ
ondly, despite the field in which she was called to
give expert evidence, it transpired that Ms Jago had
never traded LPG or butane. This lack of experi-
ence did not inhibit Ms Jago from expressing her
opinion on a variety of issues which called for such
experience. In the light of these reservations, even
though Ms Jago may well have had some experi-
ence in dealing with heels and blending, I confess
that I would in any event have been unable to place
any serious weight on her evidence, at least unless
it was agreed or uncontradicted. In the event, for the
reasons given earlier, I do not think that Ms Jagos
evidence takes the present issue any further.
132. What remains of the Geogas case really
comes down to two points: (1) a criticism that
Borealis waited until 10 February before taking a
decision to purchase additional cargo; (2) a failure
thereafter to conclude any purchase contracts until
24 February.
133. Pausing here and as foreshadowed, it may
be noted that this claim is necessarily restricted to a
small sum only. The maximum period in issue
would have been some three weeks the 10 to
12-day period between discharging the first incom-
ing cargo and determining to order more, coupled
with the fortnights wait before concluding the sec-
ond purchase contract (followed, it is to be remem-
bered, by prompt delivery). I am, in any event,
inclined to think that those two periods could not
have been added together simplistically. It follows
that on no view could Geogas realistically have
expected the cavern to be ready before 1 March
2004 and any successful claim for mitigation would
have been for some reduced period, between a date
later than 1 March and 21 March.
134. It is next pertinent to inquire as to the
evidential basis for the Geogas case of a failure to
mitigate bearing in mind that, on this issue,
Geogas bears the burden of proof. Nothing in Ms
Jagos evidence assists on these points. So far as
concerns Mr Lumley, he was asked in cross-exam-
ination about Borealis taking until 12 March to
re-start cracking; to this, he answered:
. . . they were slow, they could have been
quicker.
Asked next if he was saying that Borealis had
been unreasonable, he gave this reply:
No, I wouldnt say it was unreasonable.
Plainly, that evidence provides no assistance to
the Geogas case.
135. In fairness to Geogas and Mr Lumley, it
might be said that this area, in part at least, was
outside his field of expertise. But be that as it may,
it follows that the Geogas case is left somewhat
bereft of evidential support.
136. The reality is that the Geogas case depends
on gaps in or inferences to be drawn from the
506 LLOYDS LAW REPORTS
GROSS LJ] Borealis v Geogas Trading
evidence called by Borealis. Mr Eerola was the
senior feedstock trader at Borealis. As to the wait
until 10 February before deciding to purchase addi-
tional cargo, his somewhat speculative answer was
that it was linked to the progress made with the first
incoming shipment. As to the time taken until 24
February to conclude the next purchase contract, he
frankly accepted that he could not remember but
nonetheless maintained that the second cargo was
ordered and received within the three-week period
ordinarily allowed by Borealis for sourcing
feedstock.
137. Somewhat on balance, I am not persuaded
by the Geogas case of a failure to mitigate. I do not
think that the evidence makes good a case that
Borealis acted unreasonably; the facts that there are
do not speak for themselves; the inferences to be
drawn from the gaps in the evidence do not point
sufficiently cogently to unreasonable delay on the
part of Borealis. It would not be right to be unduly
precise in assessing every step taken by Borealis in
dealing with the contaminated cavern and bringing
it back into use. I keep in mind in addition to the
authority cited earlier the trenchant observations
of Lord Loreburn LC in Lodge Holes Colliery Co v
Wednesbury Corporation [1908] AC 323, at
page 325:
Now I think a Court of Justice ought to be
very slow in countenancing any attempt by a
wrong-doer to make captious objections to the
methods by which those whom he has injured
have sought to repair the injury. When a road is
let down or land let down, those entitled to have
it repaired find themselves saddled with a busi-
ness which they did not seek, and for which they
are not to blame. Errors of judgment may be
committed in this as in other affairs of life. It
would be intolerable if persons so situated could
be called to account by the wrong-doer in a
minute scrutiny of the expense, as though they
were his agents, for any mistake or miscalcula-
tion, provided they act honestly and reasonably.
In judging whether they have acted reasonably, I
think a Court should be very indulgent and
always bear in mind who was to blame.
I further keep in mind that Borealis had no
motive for not getting on with restoring the cavern
into service; tellingly, the events in question took
place in 2004; any recovery from Geogas will not
be received until 2010. I think on this issue, Mr
Lumleys opinion captures the essence of the mat-
ter: the Borealis reaction was slow; it could have
been quicker but it was not unreasonable. That is an
end of the Geogas case of a failure on the part of
Borealis to mitigate its losses in connection with the
cavern.
[2011] Vol 1
[QBD (Comm Ct)
Issue (IV): quantum
138. Although the parties undertook a consider-
able amount of work to narrow the disputes as to
quantum, a number of issues remain. These are
addressed here.
(1) Supplier repair costs
139. Borealis claims 1,332,451 in this regard.
140. Mr Ashcroft invited me to deal with this
head of claim on a rough and ready basis and
argued for a 30 per cent deduction or such other
figure as the court thought appropriate. First, Bore-
alis had been over-inclusive in its allocation of
costs to these repairs; there was a lack of underlying
documentation to support this claim. Moreover,
there was reason to be sceptical, having regard to
the very large claim advanced by Borealis for lost
profits in November 2003 and subsequently aban-
doned. Secondly, he relied on Mr Lumleys evi-
dence for the proposition that Borealis had
(unreasonably) failed to negotiate a 5 to 10 per cent
discount.
141. I think that there is much practical good
sense in Mr Ashcrofts call for a rough and ready
approach to be adopted. Whether it entitles Geogas
to anything like the deduction for which he con-
tended, may be another matter.
142. To begin with, I am wholly unable to accept
Mr Lumleys evidence that Borealis had unreason-
ably failed to negotiate a 5 to 10 per cent discount.
Mr Lumley had said that Borealis was not to be
given a blank cheque. It should have nibbled at the
prices quoted by suppliers. From his experience, a
discount of the order of 5 to 10 per cent should have
been negotiated. To my mind, Mr Lumleys evi-
dence simply failed to grapple with the following
considerations:
(i) Borealis was seeking to effect repairs under
pressure of time. The daily cost to Borealis of
having the plant out of action was put at several
hundred thousand euros per day.
(ii) The Borealis predicament was known to
relevant suppliers. Moreover and as Mr Lumley
accepted in cross-examination, he was in no
position to challenge the undisputed evidence of
Mr Hermansson (of Borealis) that at the time of
Borealiss 2003 turnaround similar maintenance
projects were also being carried out by other
industries in the vicinity so that the number of
available contractors was limited.
(iii) In any event, some of the supplies were
called down under a long-term framework agree-
ment which left no room for item-by-item
haggling.
With respect to Mr Lumley, I think his evidence
in this regard was without substance.
[2011] Vol 1 LLOYDS LAW REPORTS
QBD (Comm Ct)] Borealis v Geogas Trading
143. I turn to the question of allocation. In gen-
eral, I accept the accuracy of the Borealis account-
ing system, under which costs were allocated to
particular work orders. To my mind, the detailed
material contained in the Scott Schedule, in its final
form and as attached to the Borealis closing sub-
missions (the Scott Schedule), was of consider-
able assistance in this regard. Accordingly, I can see
no basis for any significant discount. That said, I do
have regard to the abandoned claim for November
2003 profits. I also have in mind that in the course
of her closing submissions, Ms Buehrlen very prop-
erly conceded that she could not support some
55,000 of the claim. In works of this scale and
nature it is very difficult to guard against any inac-
curacies creeping in. I see no unfairness to Borealis
if I make some limited allowance in this regard.
Adopting Mr Ashcrofts rough and ready approach,
I think that an award of 1,250,000 under this head
of claim does justice to both parties.
(2) Personnel costs
144. Borealis claims 135,748 under this head of
claim. It relates essentially to amounts paid to its
own employees and managers in respect of the
inspection of and repairs to the heat exchangers.
This claim includes an amount of basic rate time
where wages would have had to be paid to employ-
ees in any event but as they were diverted from
their ordinary duties, additional costs were incurred
by way of payments to sub-contractors who ful-
filled their duties. The claim has been restricted to
the employees basic rate time given the difficulties
of quantifying the increased costs relating to sub-
contractors and given that sub-contractors time
is more costly than the time of the employees in
question. The sum claimed here also includes a
round sum in respect of management time.
145. As appears from the Scott Schedule, Geogas
disputes this amount on the following grounds:
(i) Salaries would have been incurred in any
event.
(ii) There was no proven linkage to the heat
exchanger damage.
(iii) There is no proof of increased sub-con-
tractors costs.
(iv) There is no proof that staff or management
were diverted from revenue-generating
activities.
146. Developing these grounds orally, Mr Ash-
croft emphasised two matters in particular. First, he
submitted that a significant part of the claim was for
unproven sub-contractors costs, dressed up as a
claim for personnel costs. Secondly, he contended
that as the plant was focused on the planned Octo-
ber turnaround, no inference could be drawn that if
management and staff had not had to spend more
507
[GROSS LJ
time dealing with the heat exchanger damage, they
would have been engaged on revenue-earning
activities.
147. It was common ground that the relevant
principles appear from the following passage in
Aerospace Publishing Ltd v Thames Water Utilities
Ltd [2007] Bus LR 726, per Wilson LJ at para
86:
I consider that the authorities establish the
following propositions. (a) The fact and, if so,
the extent of the diversion of staff time have to be
properly established and, if in that regard evi-
dence which it would have been reasonable for
the claimant to adduce is not adduced, he is at
risk of a finding that they have not been estab-
lished. (b) The claimant also has to establish that
the diversion caused significant disruption to its
business. (c) Even though it may well be that
strictly the claim should be cast in terms of a loss
of revenue attributable to the diversion of staff
time, nevertheless in the ordinary case, and
unless the defendant can establish the contrary, it
is reasonable for the court to infer from the dis-
ruption that, had their time not been thus
diverted, staff would have applied to activities
which would, directly or indirectly, have gen-
erated revenue for the claimant in an amount at
least equal to the costs of employing them during
that time.
See too, Al Rawas v Pegasus Energy [2009] 1 All
ER 346, especially at paras 22 and 23; and 4 Eng
Ltd v Harper [2009] Ch 91, especially at para 40.
148. Insofar as Geogas denies this claim in its
entirely, it seems to me that its approach is, with
respect, unrealistic. I am satisfied on the totality of
the evidence helpfully summarised in both the
Borealis opening and closing written submissions
(and which need not be set out here), that there was
significant and major business disruption flowing
from the Geogas breach of contract. Such disrup-
tion inescapably consumed staff and management
time which was thus lost. I think that any Geogas
insistence on further detail risks a disproportionate
approach to proof of damage. As Jack J observed in
Al Rawas v Pegasus Energy Ltd (supra), at para 23,
in this area, the application of common sense
may fill a gap in the evidence. I am also unable to
accept Mr Ashcrofts submission that the inference,
referred to by Wilson LJ under (c) in the passage of
his judgment in Aerospace (supra) cited above, is
negated because of the focus on the turnaround; that
is to take altogether too narrow a view of revenue-
generating activities.
149. However, it is also the case that there is a
good deal of the broad brush in this Borealis claim
as Borealis in effect itself avers. There are diffi-
culties of proof relating to the correlation of the
508 LLOYDS LAW REPORTS
GROSS LJ] Borealis v Geogas Trading
expense on sub-contractors and the additional work
done by staff. There must be recognition of the fact
that wages would have been incurred in any event.
As Borealis itself acknowledges, the figure for
management time is a round figure. Doing the best
I can on the evidence, I am satisfied that Borealis
suffered a loss in this regard of at least 75,000 and
it is that sum I propose to award under this head.
(3) Own equipment used to effect repairs
150. Here, Borealis claims 18,630. The basis of
the claim lies in Borealiss use of its own equip-
ment for 12 hours a day on 14 days to repair the
heat exchangers. Borealis contends that this use
gives rise to a recoverable loss, quantified as the
same amount that an outside contractor would have
charged by way of a daily rate for the equipment in
question.
151. Geogas resists this claim, submitting that
Borealis has not proved that costs were incurred or
loss suffered. In any event and though the
amount of the claim is agreed as a reasonable figure
for the hire of such equipment the claim could
only lie (if at all) for the cost of operating the
equipment not the (notional) hire cost.
152. Both parties relied on the decision in The
West Wales [1932] P 165. That case concerned the
battleship HMS Nelson; she had been damaged in a
collision and was put into a naval drydock for
repairs. In assessing damages, the Registrar allowed
nothing in respect of the use of the dock and cranes,
on the ground that the Admiralty had suffered no
pecuniary expenses or loss. Bateson J remitted the
case to the Registrar for reassessment, holding that
the ship had occupied the dock and used the cranes,
to the exclusion of other vessels and some allow-
ance was therefore to be made to the Admiralty in
respect of these items. Bateson J said this, at
page 168:
The learned registrar has allowed nothing for
either of these items. I think it is clear that some-
thing must be allowed. What the figure may be is
a matter for him to decide, but I do not think it
can be right to say that the Admiralty have suf-
fered no loss by giving up their dry dock and by
using their cranes in doing these repairs. The
Nelson occupied the dock to the exclusion of
other ships, and made use of the cranes and so on
for the purpose of docking and cleaning and
coating the bottom, which would be necessary in
connection with these repairs. Docks and cranes
cannot be used without expense, and there must
be some damage to the Admiralty from these
matters. The learned registrar says that in respect
of these there was not a pecuniary expenditure or
loss and, therefore, these items are not allowable.
I think that is wrong. I think there was pecuniary
[2011] Vol 1
[QBD (Comm Ct)
expenditure and loss. It may not be actual money
paid out to any particular person, but these
expensive appliances cannot be utilised without
some loss.
153. Mr Ashcroft submitted that there was no
evidential basis for a finding here that the use of the
Borealis equipment could not take place without
pecuniary expenditure and loss. I disagree. The
logic of Bateson Js reasoning is, with respect,
inherently attractive, practical and, to my mind,
applicable here at least in the absence of evi-
dence or a compelling inference to the contrary.
The use of the equipment carries a cost. However,
Mr Ashcroft is plainly right in submitting that Bore-
alis cannot recover for the daily rate it would have
paid had it hired the equipment; that is simply not a
loss it suffered. Borealis is accordingly restricted to
the operating cost of the equipment in question; that
cost cannot be equated with the cost of hiring the
equipment it must necessarily be significantly
less. Doing the best I can, I assess the operating cost
of the equipment as 6,000.
(4) Warehousing cost of corroded titanium tubes:
19,066
154. I confess to some regret that the parties did
not find it possible to reach agreement on an item
such as this. I take it summarily. Borealis was
entitled to store these tubes while the litigation was
pending; it is anything but fanciful to suppose that
a point may have been taken by Geogas had Bore-
alis not done so. I think this (external) cost is
allowable. Geogas submitted that a deduction
should be made for the scrap value of the tubes.
There does come a time when common sense must
prevail. I decline to investigate or to require the
parties to investigate the scrap value of these tubes.
I allow the claim in the full amount of 19,066 on
terms that, on payment of this claim, Geogas shall
be at liberty, if it so desires, to take delivery of the
tubes and to dispose of them as it sees fit. In the
order, a fallback provision should be made for
Borealis to dispose of the tubes within a given
period of time, should Geogas choose not to take
delivery of the tubes.
(5) Spare parts: 19,420
155. This is a claim for consumables such as
breathing masks, batteries, gloves, goggles, packing
materials and so on. Geogas resists this claim on the
basis that the cost of these items is not referable to
its breach of contract. I adopt the same approach as
I did in connection with the allocation question
more generally. I think there is sufficient evidence
of a linkage to justify the claim generally but
that some allowance should be made for inevitable
[2011] Vol 1 LLOYDS LAW REPORTS
QBD (Comm Ct)] Borealis v Geogas Trading
errors in allocation. I allow this claim but only in
the amount of 15,000.
(6) Loss of profit September 2004
156. The hard-fought and already much dis-
cussed issue which arises under this heading con-
cerns a relatively small sum of money, 72,202,
agreed as a figure, concerning loss of profit incurred
in September 2004 when reinstalling heat exchang-
ers E and G. As will be recollected, these heat
exchangers were disconnected in March 2004 as a
result of the incident. The issue arises because, over
the same period in September 2004, Borealis
effected repairs to other equipment at the plant.
157. Geogas contends that no loss of profit is
recoverable in respect of this period, as, given the
other works done to the acetylene reactor (uncon-
nected with Geogass breach of contract), there
would have been a similar loss of production
regardless of the reinstallation of the heat exchang-
ers. Borealis contends that, as a matter of law, it is
entitled to the entire period of lost production; that
it did other works is neither here nor there. How-
ever, as a pragmatic matter, it is content to attribute
the lost production over the three-day period in
question equally between the heat exchangers and
the acetylene reactor.
158. In cross-examination, Mr Eerola explained
the position as to the various works as follows:
. . . we had two parallel maintenance works
going on at the site . . . both would have resulted
. . . [in] . . . a production loss alone but since
they were carried out in parallel the production
loss that resulted was clearly less than in the case
they would have been done at a different time
individually.
As it seems to me, on such evidence as there was:
(1) Borealis needed to reinstall the exchangers at
some time and whenever it did so, production
was likely to be lost; (2) the other works undertaken
in September 2004 were conveniently undertaken
then but it was not necessary for Borealis to
509
[GROSS LJ
undertake those other works at that particular
time.
159. These circumstances are such that guidance
may usefully be obtained from a number of Admi-
ralty (and commercial) cases, most simply sum-
marised as follows. Let it be assumed that a ship is
damaged in a collision. She is not immediately
rendered unseaworthy but the repairs need to be
undertaken at some convenient time. At the time
when the collision repairs are undertaken, the
owner takes the opportunity of undertaking other
works, not immediately necessary. As I understand
the authorities, the tortfeasor will be liable for the
entire period of detention and the owner will not be
obliged to give credit for the time required by the
unrelated repairs. The position would be different if
it was necessary to undertake the unrelated repairs
at that time. See the very helpful summary in
McGregor on Damages, 18th Edition, at para
32-037, together with the authorities there cited; see
too, Elpidoforos Shipping Corporation v Furness
Withy (Australia) Pty Ltd (The Oinoussian Friend-
ship) [1987] 1 Lloyds Rep 258, especially at
pages 263 to 265.
160. In my judgment, the key to this issue is that
whenever the heat exchangers were reinstalled
there would, in all probability, be a loss of produc-
tion. On the face of it, therefore, Borealis ought to
be entitled to recover for the loss suffered when the
reinstallation took place. No doubt if it had been
necessary to do other works at the same time, then
Geogas would have had a good answer to any such
claim. But that was not this case; the evidence does
not show that the other works Borealis undertook in
September 2004 had to be done then. On that foot-
ing, Borealis is in principle entitled to recover for
the lost production in September 2004. As, how-
ever, pragmatically (and attractively) Borealis has
indicated that it is content to claim for only half the
time in question, I shall allow the claim to such
extent only, namely in the amount of 36,101.
161. I shall be grateful for the assistance of
counsel in drawing up an appropriate order and as
to all questions of costs.