Following the grounding of the CMA CGM Libra in 2011, a minority of cargo owners (Cargo Interests) challenged the ship owners’ (Owners) claim for general average contributions, on the basis that the loss was caused by the Owners’ defective passage planning.
The English Supreme Court has now upheld the decisions of the High Court and the Court of Appeal that the defective passage plan made the vessel unseaworthy, and as a consequence of this actionable fault, the Owners could not recover general average contributions from Cargo Interests.
The judgment is likely to act as an important precedent for seaworthiness both under the Hague/Hague-Visby Rules and charterparties. It may also encourage a more rigorous response from cargo interests to claims by ship owners for general average contributions.
In May 2011, whilst leaving Xiamen enroute for Hong Kong, the laden container vessel CMA CGM LIBRA (Vessel) grounded outside of the buoyed fairway.
IMO Guidelines for Voyage Planning required the Vessel to have a passage plan.
The passage plan (as is usual) was prepared by the Master/crew.
The Vessel’s passage plan in relation to departing Xiamen relied on British Admiralty chart 3449 (BA3449). The version of BA3349 onboard the Vessel was the most up to date printed version.
Notices to Mariners (NTM) were published weekly to accompany BA3449. One of the NTM included an express warning that there were depths less than those charted off Xiamen, but within the buoyed fairway the minimum depth was sufficiently deep for the Vessel. This NTM was not referred to in the passage plan.
Under the passage plan, the Vessel was not meant to leave the buoyed fairway. Despite this, while underway the Master decided to leave the fairway and the Vessel ran aground.
The Vessel was refloated by salvors. The Owners sought to recover expenses in general average. Cargo owners’ general average contributions were said to be around US$9m.
A small minority of the cargo owners refused to pay the Owners’ claim for general average contributions. To recover the remaining contribution of c$USD 800,000, the Owners commenced legal proceedings against the respondent Cargo Interests.
The Cargo Interests challenged the claim on the basis that the loss or expenditure was caused by the Owners’ actionable fault, which included a causative breach of the terms of contract of carriage.
The contract of carriage incorporated the Hague/Hague Visby Rules. Under Article III, Rule 1 the carrier has an obligation before and at the beginning of the voyage to exercise due diligence to make the ship seaworthy.
Cargo Interests asserted that the passage plan was defective, causing the loss, and meaning the Owners had breached their seaworthiness obligation.
High Court Decision
The High Court concluded the passage plan was defective because it did not include the NTM which warned of depths less than those charted.
During cross examination, the Master admitted that had he known of the NTM, he would have not left the buoyed fairway.
The Court found:
- the passage plan was defective and causative of the grounding; and
- as a consequence, the Owners failed to exercise the due diligence and reasonable skill and care required of them under Article III, Rule 1 of the Hague/Hague-Visby Rules to make the vessel seaworthy.
Court of Appeal Decision
The Owners appealed the High Court decision. The two questions of law for the Court of Appeal were:
- does a defective passage plan render a vessel unseaworthy under Article III, Rule 1 of the Hague/Hague-Visby Rules?
- does the carriers’ duty to exercise due diligence under Article III, Rule 1 of the Hague/Hague-Visby Rules extend to the actions of the Master/Crew made in their capacity as navigators?
Both grounds of appeal were rejected.
In addition to upholding the High Court’s decision on the first issue, the Court of Appeal found:
- the duty to exercise due diligence to make the Vessel seaworthy prior to the commencement of the voyage, cannot be delegated; and
- a failure by the Master and crew to prepare an adequate passage plan could amount to a breach of the Owners’ duty if the failure arose before the voyage commenced.
Supreme Court Decision
The Owners’ appeal to the Supreme Court was dismissed in a decision delivered on 10 November 2021.
The Supreme Court considered the same two issues of law set out above.
On the first issue, the Court upheld the High Court’s and the Court of Appeal’s reasoning. In doing so, the Court noted that unseaworthiness does not require a defect in the physical seaworthiness of the vessel. Defective documents might also cause unseaworthiness. The use of a passage plan is a crucial component in ensuring the safety and seaworthiness of any vessel. Any vessel with a defective passage safety plan is likely to be one which is unseaworthy.
Further, where this is the case, and there has been a causative breach of the carrier’s obligation to exercise due diligence to make the vessel seaworthy, the navigational fault exception under Article IV, Rule 2 cannot be relied on.
In deciding the second issue, the Court determined that prior to the commencement of the voyage, the vessel is at all times under the carrier’s control. The failure to exercise due diligence and care in the preparation of the vessel for her voyage is a failure of the carrier. The carrier maintains a non-delegable role in exercising due diligence to ensure the vessel is seaworthy. This due diligence requirement is not limited to providing a proper system for the Master to comply with. The carrier will remain responsible for any causative failure to exercise due diligence under Article III, Rule 1.
The Supreme Court judgment provides helpful clarification on a carrier’s / owners’ seaworthiness obligations.
Ship owners may be concerned that it extends the scope of those obligations beyond what is practicable, and exposes them to claims that are traditionally avoided. It certainly underlines the need to ensure that a vessel’s charts are kept updated and that careful passage planning is undertaken.
It is likely to encourage cargo owners and insurers to take a more robust approach to claims for general average contributions.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.