The Supreme Court has upheld the decisions of both the
High Court and the Court of Appeal had confirmed that a defective passage plan
will render a vessel unseaworthy. All nine judges involved in the High Court,
Court of Appeal and the Supreme Court have therefore determined that the claims
for General Average pursued against our clients by the Shipowners of the “CMA
CGM LIBRA” failed.
It also clarifies that a shipowner will be liable for a
causative error of navigation (and thus unable to rely on the error of
navigation or management defence in the Hague and Hague-Visby Rules), provided
the error occurred before or at the commencement of the voyage.
Shipowners informed us that all of the cargo interests
not represented by Clyde & Co settled the claims for General Average at
between 98.5% and 100% of the sums claimed.
Factual background
On 17 May 2011, the 11,356 TEU “CMA CGM LIBRA” sailed
from Xiamen laden with 5,983 containers. Shortly after departure from Xiamen,
on 18 May 2011, the vessel deviated from her intended course, navigating out of
the buoyed fairway and grounded shortly thereafter.
The vessel grounded in a position immediately adjacent to
a shoal with a depth of 1.2 meters, the existence of which had been the subject
of a Notice to Mariners promulgated by the United Kingdom Hydrographic Office
(UKHO) several weeks before the incident.
In addition to the paper chart BA 3449 said to have been
in use on board the vessel at the material time, the vessel was also equipped
with an “unofficial” electronic chart on which the shoal on which the vessel
grounded was not shown.
A further Notice to Mariners (6274(P)/10) had also been
issued by UKHO in December 2010, warning mariners that depths shown on the
chart beyond the confines of the buoyed fairway in the approaches to Xiamen
were unreliable and that the waters were shallower than recorded on the chart.
The paper chart did not indicate the full extent of the
shoal on which the vessel grounded, and it had not been updated with the
warning contained in 6274(P)/10.
The vessel was subsequently refloated by professional
salvors. The Shipowners are said to have incurred expenditure in the sum of
approximately US$13 million and declared General Average to recover around $9m
of this from cargo interests.
Approximately 92% of cargo interests agreed to pay either
98.5% or 100% of their proportion of General Average, resulting in
approximately US$8 million being paid by cargo insurers to the Shipowners
and/or their insurers.
The remaining cargo interests declined and maintained
that they were not liable to pay contributions in General Average on the basis
that (amongst other things) a defective passage plan, rendering the vessel
unseaworthy, caused the grounding, giving rise to a defense to the Shipowners’
claim.
High Court
The Shipowners asserted that the effective cause of the
grounding was the existence of a shoal not shown on either the paper chart BA
3449 or the vessel’s electronic chart and that all charts had been fully
corrected prior to the vessel’s departure from Xiamen. That view was not shared
by the High Court. The Admiralty Judge at first instance held that there was an
error of navigation but that the absence of an adequate passage plan, which is
a requirement under the 1999 IMO Guidelines for Voyage Planning, was causative
of the grounding. It was also held that the Shipowners were in breach of their
obligation to exercise due diligence to make the vessel seaworthy as required
by Article III Rule 1 of the Hague (or Hague-Visby) Rules. Consequently, the
Cargo Interests were not liable to contribute in General Average.
Court of Appeal
Decision
The Shipowners appealed to the Court of Appeal on two
questions of law.
1.
Does a defective passage plan render a ship unseaworthy for the purposes
of Article III Rule 1 of the Hague Rules?
2.
Can the actions of a ship’s master or crew which are carried out in
their capacity as navigators be treated as (attempted) performance by the
shipowner of its duty as carrier to exercise due diligence to make the ship
seaworthy under Article III Rule 1 of the Hague Rules?
The Court of Appeal found that the Admiralty Judge at
first instance correctly applied long established principles of English law to
the facts of this case.
It also held that attempts to draw a distinction between
acts of the master and crew qua carrier
(for which the shipowners are responsible) and their acts qua navigator (for which the shipowners are not
responsible) were misconceived. Any failure by the master and crew in preparing
an adequate passage plan amounted to unseaworthiness provided that the failure
arose before the voyage commenced.
Accordingly, both grounds of appeal failed, and the
appeal was dismissed. The Shipowners appealed to the Supreme Court on the same
two questions of law.
Supreme Court
The first question: The five Supreme
Court Judges unanimously found that the Admiralty Judge at first instance and
the Court of Appeal Judges (all of whom were experienced maritime lawyers)
directed themselves properly in law, and the findings made support the
conclusion reached that the defective passage plan resulted from the
Shipowners’ failure to exercise due diligence to make the vessel seaworthy.
Given the importance of passage planning for the safety
of navigation, a vessel is likely to be unseaworthy if she begins her voyage
with a defective passage plan.
The fact that the defective passage plan, which by
definition must be prepared before sailing, involved neglect or default on the
part of the master and/or crew (and which was characterized by the Shipowners
to be an error in navigation as per the Article IV Rule 2(a) exception) was no defense
to a claim for loss or damage caused by unseaworthiness.
The second question: The essence of the
Shipowners’ case on this point was that they had provided the vessel (and the
master/crew) with the necessary instructions, charts and nautical publications etc.
to enable an adequate passage plan to be drawn up prior to the commencement of
the voyage, on which basis they had discharged their burden of exercising due
diligence.
The Supreme Court rejected the Shipowners’ case on due
diligence, branding it novel and unsound. A carrier cannot escape its Article
III Rule 1 obligations by delegating them to its servants or agents and the
carrier is responsible for any causative failure by the crew to exercise due
diligence. It makes no difference if those obligations include elements that
involve navigation.
Therefore, both grounds of appeal failed, and the appeal
was dismissed. The claim for General Average contributions from the Cargo
Interests failed entirely.
Impact on the
Industry
The International Group of P&I Clubs expect the
decision to have a wide-ranging impact. As set out in the submissions made by
Shipowners, the decision has “clearly caused a lot of
consternation. It has been relied on with considerable frequency. In March this
year, the Group estimated that the total value of claims concerning passage
planning that had been received by the IG member clubs since the decision of
the Admiralty Court in this case is in excess of $116 million.”
Conclusion
This is a significant decision. It confirms that the well-established
legal principles of due diligence and seaworthiness apply to passage planning
in the same way as they do to any other aspect of seaworthiness.
Further, the argument that an error in planning the
passage prior to the commencement of the voyage should be characterized as an
error of navigation rather than unseaworthiness has also been resoundingly
rejected.
In practice, this judgment also underlines the need to
ensure that charts are kept fully up to date (including the application of
Temporary and Preliminary Notices to Mariners) and that careful accurate
passage planning is carried out before departure.
The judgment further highlights the importance for Cargo
Interests to give careful consideration to any request for payment of
contributions in General Average, as considerable savings can be made.
The
Supreme Court has reiterated that the carrier’s obligation under the Hague
Rules to make the vessel seaworthy is non-delegable, “The carrier cannot
escape from its responsibilities under article III rule 1 of the Hague Rules by
delegating them to its servants or agents qua navigators, or qua managers, or
qua engineers or qua ship repairers.”
However,
the carrier may not be liable for lack of due diligence which occurs before he
has responsibility for the vessel or the cargo. The carrier cannot be held
responsible if the failure to exercise due diligence was, for example that of
the shipbuilder prior to the carrier’s acquisition of the vessel, or of a
shipper prior to the carrier’s acquisition of control over the cargo.
The fact that a defect is remediable may also mean that a vessel is not unseaworthy. This however is likely to depend on whether it would be reasonable to expect that the defect is remedied before any danger to vessel or cargo arose.
The
owners had submitted that the risk of cargo damage or GA expenses arising from
a failure to exercise due diligence to make the vessel seaworthy is borne by
shipowners and their insurers, and a decision that negligent passage planning
may render the vessel unseaworthy will lead to more cargo damage or GA claims
being made against shipowners and their insurers. While this may be the result,
it would still be necessary for claimants to prove in each case that the
defect in the passage plan was sufficiently serious to render the vessel
unseaworthy, and that it was causative of the loss or damage.
