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22 July 2020
Admiralty Court decision
Court of Appeal decision
The Court of Appeal recently endorsed a first-instance Admiralty Court decision that a failure to properly prepare a passage plan or properly mark up navigational charts to reflect navigational dangers may amount to a failure to exercise due diligence to make the vessel seaworthy, leading to an actionable fault defence for cargo interests who had refused to contribute to the general average.(1)
On 17 May 2011 the CMA CGM LIBRA departed Xiamen, China bound for Hong Kong. It was carrying over 8,000 20-foot equivalent units of containerised cargo, valued in excess of $500 million. After dropping off the pilot, the vessel's master navigated out of the recognised channel marked by lit buoys, with the vessel subsequently grounding at a speed of approximately 12 knots.
The grounding site was within an area identified as a former mined area. Mariners are warned by way of notices that the former presence of such mines inhibits hydrographic surveying and increases the risk of uncharted shoals (rather than a risk of mines themselves). The case revolved around one specific notice to mariners, NM 6274(P)/10, which was not included in the passage plan, and the fact that no-go areas were not marked on the chart to reflect the dangers of shallow water to which mariners were alerted by NM 6274(P)/10. The question examined was whether these omissions had caused the grounding and, if so, whether that omission had rendered the vessel unseaworthy.
Approximately 92% of the cargo interests agreed to pay the general average claim. The remaining 8% of the cargo interests chose not to pay, alleging that there was an actionable fault on the part of the CMA CGM LIBRA which gave them a complete defence to the general average claim pursuant to Rule D of the York-Antwerp Rules.
The CMA CGM LIBRA sought to recover approximately $800,000 from the non-paying cargo interests.
At first instance, the Admiralty Court found that:
The two grounds of appeal advanced by the owners for which permission to appeal was granted were that:
In relation to the first ground of appeal, there were several strands to the owners' case. First, they relied on the decision in The Hill Harmony, as they did at first-instance, arguing that passage planning constituted a navigational decision even though it took place before the vessel had left the berth and that the placing of no-go areas on the chart could be similarly characterised.
They also argued that seaworthiness was concerned with attributes or intrinsic qualities of the vessel and its crew and equipment. The owners accepted that these qualities went beyond physical attributes, conceding that they would encompass having a proper system on-board, but argued that the passage plan and marking of the navigational charts were simply the recording of navigational decisions rather than being attributes of the vessel. There was a fundamental distinction, the owners argued, between having everything necessary on board, which was part of the owners' responsibility to make the vessel seaworthy under Article III(1) of the Hague Rules and the actual navigation by the crew (of which the passage plan formed part) where any failure would fall within the exception in Article IV2(a) of the Hague Rules.
In relation to the second ground of appeal, the owners argued that the carrier's obligation to exercise due diligence to make the vessel seaworthy was limited to acts by the master and officers in their capacity "as carriers" and that anything they did in a capacity "as navigators" was "outside the orbit" of the owners' responsibility. The obligation on the owners in the present context was to:
Beyond that, a failure by the master and crew to navigate carefully, which was their responsibility, was outside the owners' responsibility.
The Court of Appeal dismissed the appeal in emphatic terms. It held that the submission that negligent navigation cannot render a vessel unseaworthy, even if it happens before the commencement of a voyage, is wrong as a matter of principle and based on case law. Mr Justice Flaux stated that for concluding that a defect caused by navigational error by the master or crew before or at the commencement of the voyage could not have rendered the vessel unseaworthy. Likewise, the distinction which the owners sought to draw between mechanical acts of the master and crew which might render the vessel unseaworthy and acts of the master and crew which require judgment and seapersonship which would not render the vessel unseaworthy was dismissed as a "misconceived distinction".
The owners' argument that one-off acts of negligence could not render a ship unseaworthy were readily dismissed; the Court of Appeal agreed with the cargo interests that it is well established that both one-off instances of negligence and systematic failings can cause unseaworthiness.
The Court of Appeal concluded that both an out-of-date uncorrected chart and a passage plan and working chart which were defective because they failed to contain the warning in NM 6274(P)/10 were 'attributes' of the vessel and rendered it unseaworthy. Given that conclusion, the court did not need to examine the owners' argument that unseaworthiness required the defect to be an attribute of the vessel, but they were certainly leaning in favour of the arguments presented by the cargo interests.
As noted by the counsel for the cargo interests before the Court of Appeal in relation to the attribute point, the owners relied on The Apostolis ( 2 Lloyds Rep 245), but that case involved a cargo fire caused by sparks from welding being performed on deck and, importantly, the welding was being performed for repairs which were not required to make the ship seaworthy. This must be contrasted with the act of proper passage planning and the marking of charts, both of which were required for the safe navigation of the CMA CGM LIBRA.
The second ground of appeal was dismissed as emphatically as the first. The owners relied on the decision in The Kapitan Sakharov to draw a distinction between acts of the master and crew 'as carrier' (for which the owners are responsible) and their acts 'as navigator' (for which the owners are not responsible). The court pointed out that in The Kapitan Sakharov, it was argued that the shipowner was liable for the negligence of the shippers in stuffing containers (with dangerous cargo which rendered the vessel unseaworthy) where the contract of carriage did not make the owners responsible for that task. That was the context in which it was said that certain acts were 'outside the orbit' of the shipowner.
Thus, the Court of Appeal concluded that The Kapitan Sakharov was "simply not authority" for the proposition that a shipowner is relived of its obligations under Article III(1) of the Hague Rules if the acts of the master and crew are to be categorised as acts of navigation, notwithstanding that those acts are in preparation for the voyage and their negligent performance renders the vessel unseaworthy.
This case, perhaps surprisingly, split opinions when the first-instance judgment was handed down. However, in that judgment, Justice Teare summed up as follows:
The cargo interests have established causative unseaworthiness and the owners have failed to establish the exercise of due diligence to make the vessel seaworthy. That is the consequence of applying to the facts of this case established propositions of law, namely, the traditional test of seaworthiness, the principle that documentation is an aspect of seaworthiness and the non-delegable nature of the duty to exercise due diligence. (Emphasis added)
As it is difficult to disagree with the above statement, it is arguably unsurprising that the Court of Appeal upheld the decision. The case serves as an important reminder to all sectors of the maritime industry of not just the legal principles, but also the practical steps which should be kept in mind.
The case also demonstrates that all available information must be carefully incorporated into passage plans and electronic navigation charts. Although the case can be said to have an unusual set of facts, it highlights the value of conducting internal audits to scrutinise passage plans to ensure that they are thoroughly checked by the master.
In these times of ever-larger ships and more valuable cargo, cargo interests can be reasonably expected to challenge calls for general average contributions in such cases. Typically, the evidence quickly reveals whether arguments of the type seen in CMA CGM LIBRA could be run, but they might not always be clear cut. There was significant debate about causation during the course of the trial and this may the battleground on which future cases are fought.
For further information on this topic please contact Chris Grieveson or Alex Hookway at Wikborg Rein by telephone (+44 20 7367 0300) or email (email@example.com or firstname.lastname@example.org). Alternatively, please contact Ian Teare at Wikborg Rein's Singapore office by telephone (+65 6438 4498) or email (email@example.com). The Wikborg Rein website can be accessed at www.wr.no.
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