TT Talk - Legal eagle: what may cause unseaworthiness

An important case, not least because it went to the English Supreme Court, clarifying that acts or defaults in exercising due diligence may give rise to ‘unseaworthiness’ and the consequences of falling on the wrong side of the boundary, including in relation to general average. 

The facts

‘CMA CGM Libra’, on departing from Xiamen in May 2011 for Hong Kong and Europe, sailed out of a buoyed fairway and grounded on an uncharted shoal. In the absence of electronic charts, the ship was dependent on paper charts. A notice to mariners had been issued five months previously by the UK Hydrographic Office, identifying the waters outside the fairway as having been mined during the Korean war and adding that, for this reason, survey information was unreliable and depths could be less than those charted. The ship’s passage plan, prepared by the second officer and approved by the master, failed to take account of this notice.

The ship was refloated by salvors under a Lloyd's Open Form. The ship owner funded the salvage operation and then declared general average (GA) in excess of USD13 million, of which USD9.5 million was paid to the salvors.

The total value for GA adjustment exceeded USD500 million, of which the cargo contribution amounted to USD367 million. Most of the cargo Interests agreed to pay GA (subject in some cases to a small discount). However, around 8% of cargo interests declined to pay, on the basis that the owners had failed to exercise due diligence to make the ship seaworthy and there was therefore actionable fault under the York-Antwerp Rules.  

The ship owner commenced proceedings in the Admiralty Court to recover approximately USD800,000 from the non-paying cargo interests.

The judgments

The Admiralty Court at first instance heard extensive expert and witness evidence. As a matter of fact, the defence that the passage plan was adequate because the notice to mariners was attached to it was disbelieved. If this had been the case, the master would not have left the buoyed channel. The Court found that the navigation of the ship was negligent because the passage plan was defective, and this was causative of the grounding.

The owners then pleaded the negligent navigation defence under Hague-Visby Rules Article IV(2)1. This defence clearly does not apply, under Article III(1)2, if the ship is unseaworthy. The owners attempted to get around this by pleading that the preparation of the plan was part of the navigation of the ship and did not go to seaworthiness. This was defeated mainly by applying the established precedent of McFadden v Blue Star Line (1905), that a prudent owner who had known of the defect in question would not have put the ship to sea without rectifying it. Setting sail with out of date charts was an “attribute” of the ship that could render her unseaworthy. Further support for this position was found in an IMO Resolution3 that characterised a ‘well planned voyage’ as being of essential importance. 

Having decided that the ship was unseaworthy, the burden under Hague Rules moved to the owners to prove that they had exercised due diligence to make it seaworthy. It was not sufficient that the owners had put in place adequate systems. The duty to make the ship seaworthy was non-delegable, and extended to the servants and agents on whom the owners relied for this purpose – in this case to the master and second officer.  

The Court found for the defendant cargo interests, that they were not liable to contribute in GA. 

The decision at first instance was appealed to the Court of Appeal and again to the Supreme Court, being upheld at both levels. It was noted that the lower court judges were all experienced maritime lawyers, who had correctly applied long established legal principles. In particular, the attempt to distinguish acts of the master and crew as ‘carrier’, for which the ship owners were responsible, from their acts as ‘navigator’, for which the ship owners were not responsible. was “misconceived”, “novel” and “unsound”.

Comment

This case is notable as an example of reasoning from a case at the start of the last century being applied to modern conditions. Analytically, it is now clear that Hague-Visby Rules Article III(1) may be triggered by an act or default which is causative of unseaworthiness, as well as by actual unseaworthiness. This widening of the concept of causative unseaworthiness may be controversial, and some commentators have accused the Court of re-drawing rather than clarifying Hague-Visby. In any case, the Court accepted that there may be cases “at the boundaries of unseaworthiness”, but the seriousness of the error in this case put it on the wrong side of these boundaries. There is however likely to be litigation as the boundaries are tested in the future.

On a less analytical level, the judgment highlights the importance of accurate passage planning, particularly in difficult waters, and of not responding too hastily to GA demands. The decision increases the due diligence burden on ship owners, potentially impacting on other issues, such as crew training. It has already had, and will continue to have, considerable impact on marine cargo claims.

ALIZE 1954 v ALLIANZ ELEMENTAR VERSICHERUNGS AG (THE CMA CGM LIBRA)
[2021] UKSC 51

1“Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from: (a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship…”
2“The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to: (a) Make the ship seaworthy…”
3Resolution A.893(21) adopted on 25 November 1999. For general discussion and background, see https://en.wikipedia.org/wiki/Passage_planning 

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    09/02/2022

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Peregrine Storrs-Fox

Risk Management Director

Date18/01/2022