By Kevin Duguid
AN INDUSTRIAL cleaning firm has been forced to pay out more than £1.7million after losing a legal battle over a supply ship blaze which killed one of its workers.
Shaun McDonald died on board the 200ft Far Service while she was berthed in Peterhead in July 2002.
The 25-year-old was part of a six-man team cleaning the ship for Peterhead-based Enviroco when fire spread through the engine room.
The cleaning firm was sued by the Aberdeenshire-based ship’s owners, Farstad Supply, for £2.7million in compensation for the engine-room fire, which caused substantial damage to the vessel.
It has now emerged the cleaning firm will have to pay £1.75million.
Farstad successfully sued Enviroco after claiming the cleaning firm’s staff were negligent.
At the time of the blaze the master of the vessel started up the engines to prepare to move to another berth.
However, at the same time an employee of Enviroco inadvertently opened a valve which released oil into the engine room near hot machinery. The oil ignited and caused the fire.
The details of the financial settlement were revealed in a Court of Session judgment, which ruled on a dispute over how much interest Enviroco would have to pay Farstad.
Lord Hodge, who presided over the interest dispute, said the action had been settled out of court on August 22. He added: “The parties entered into a joint minute by which they invited the court to pronounce a decree ordering Enviroco to pay £1,750,000 to Farstad together with interest from 31 December 2002.”
Enviroco had claimed it was exempt from paying compensation because of an agreement between Farstad and Aberdeen Service Company (North Sea) Ltd (Asco) – which had chartered the ship – to waive liability for any damage to the vessel.
As a subsidiary of Asco, a major oil and gas logistics company, Enviroco argued it too was exempt from any liability.
Five judges of the Supreme Court – the UK’s final court of appeal for civil cases – rejected the claim and ruled against the cleaning firm because of an “odd and possibly absurd” situation involving the company’s shares.
In May 2000, Asco assigned the 50% of Enviroco shares it owned to the Bank of Scotland as security for other obligations.
The judges have held that Enviroco was transferred to the bank “absolutely and without any qualification” and was no longer a subsidiary of Asco or held under its protection.
Delivering his judgment, Lord Collins said if the companies had thought about the consequences of the transfer to the bank they may not have been willing to exempt Enviroco’s liability.
Another judge, Lord Clarke, acknowledged that on “any sensible view” Enviroco remained a subsidiary of Asco, but “reluctantly” added that there was “no escape” from the result that the company’s exemption disappeared when the shares were transferred.
A fatal accident inquiry in 2006 revealed that oil which was being removed from the vessel by Mr McDonald and his workmates was accidentally pumped back into the ship and ignited in the hot engine rooms.
After a Health and Safety Executive investigation, the three firms involved admitted breaching safety rules.
Enviroco was fined £100,000, Farstad Shipping £40,000 and Asco was fined £28,000.
In his judgement, which was published yesterday, Lord Hodge agreed that Enviroco would have to pay 8% on the agreed damages of £1,750,000 from December 31 2002 to December 4, 2008, at the rate of 4% a year thereafter.
Farstad Shipping Ltd managing director John Maxwell previously welcomed the Supreme Court judges’ decision.
He said: “They have opened the way for Enviroco to be exposed to liability on this. We don’t see this as any sort of victory. There has been a fatality here.
“I think all parties concerned will be relieved to see an end to the legal matters.”
When the Supreme Court judgement was made an Asco spokesman said: “This was a terrible tragedy.”