Supreme Court Decision on the “CMA CGM LIBRA” – GA Defence - Legal Development 10 November 2021

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.

This decision reinforces the view that in principle there is no conceptual limit on a shipowner’s obligation to exercise due diligence before and at the commencement of the voyage to make the vessel seaworthy.

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.