UK & Europe
The Court of Appeal has confirmed that defects in passage planning, as well as charts that have not been fully updated, will render a vessel unseaworthy.
Clyde & Co LLP (Jai Sharma & John Reed) successfully represented those Cargo Interests who declined to pay General Average, on the basis that CMA CGM (Owners) were responsible for the casualty.
Further detail on the facts of the dispute and the first instance judgment can be found here and below.
On 17th May 2011, the large container vessel "CMA CGM LIBRA" departed from Xiamen bound for Hong Kong and Europe. She was laden with 8,950 TEU of containerised cargo with a value in excess of US$500 million. She also had on board almost 8,000 tons of bunkers.
Shortly after dropping off the pilot, the vessel's Master navigated out of the recognised dredged channel marked by lit buoys, resulting in the vessel grounding at a speed of around 12 knots.
The grounding site was within an area identified as a Former Mined Area. Although there was no longer any direct threat to surface craft due to mines, mariners are warned that the former presence of those mines inhibited hydrographic surveying, giving rise to a risk of uncharted shoals.
The vessel was subsequently refloated by professional salvors under a Lloyd's Open Form salvage contract. Following an underwater inspection, little or no damage was found. She proceeded on her voyage to Hong Kong and then Europe.
CMA CGM funded the salvage operation in the first instance and declared General Average to recover the majority of the salvors' remuneration (together with other elements of General Average expenditure said to have been incurred) from Cargo Interests.
The total amount of General Average expenditure was in excess of US$13 million, of which US$9.5 million was paid to the salvors.
Approximately 92% of Cargo Interests agreed to pay either 98.5% or 100% of the General Average claim. The remaining 8% of the Cargo Interests (approximately) represented by Clyde & Co LLP chose not to pay, alleging that there was actionable fault on the part of CMA CGM, which would give them a complete defence to the General Average claim.
CMA CGM refused to accept that they were responsible for the casualty and commenced legal proceedings to recover approximately US$800,000 from the non-paying Cargo Interests.
At first instance, the Court held that the passage plan was inadequate. In addition to a number of errors and inconsistencies that demonstrated a lack of attention to detail, it did not refer to the existence of a crucial Preliminary Notice to Mariners (NM6274/P10). That notice had been issued by the United Kingdom Hydrographic Office approximately 5 months before the grounding, alerting mariners to the presence of numerous depths less than charted in the approaches to Xiamen and confirming that the charted depths within the dredged channel were sufficient for the vessel.
Moreover, contrary to Owners' requirements (and those of the industry) the passage plan did not identify any "no-go areas" on the chart. During his evidence at trial, the vessel's Master confirmed that, had the chart been marked up with the appropriate "no-go areas", he would not have left the channel and attempted to execute the manoeuvre that ultimately led to the stranding of the vessel.
The vessel's passage plans for a number of previous voyages to and from Xiamen also contained similar failings.
The Court further held that the absence of an adequate passage plan was causative of the grounding and that CMA CGM 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, Cargo Interests were not liable to contribute to General Average.
An appeal to the Court of Appeal will only deal with questions of law, it will not deal with factual findings determined at first instance.
CMA CGM did not dispute that the vessel ran aground because of defective passage planning but appealed on the following grounds:
In opposition to the first ground, Cargo Interests submitted that previous case law demonstrated that the preparation of a proper passage plan prior to the commencement of the voyage was not an error in navigation.
Cargo Interests also argued that there are no conceptual limits to the types of defect which can constitute unseaworthiness provided that a prudent owner would require that defect to be rectified before sending his ship to sea, had he known about it (the McFadden test).
In opposition to the second ground, Cargo Interests argued that the law was clear. The duty to exercise due diligence before and at the commencement of the voyage under Article III Rule 1 is non-delegable. If there is a defect that renders a vessel unseaworthy, the owners are vicariously liable for a failure to exercise due diligence on the part of any person or persons to whom they have delegated the task of making the vessel seaworthy.
The Court of Appeal found that the 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 Owners are responsible) and their acts qua navigator (for which the Owners are not responsible) were misconceived.
Accordingly, both grounds of appeal failed and the appeal was dismissed.
The Court of Appeal unanimously upheld the first instance judgment. This is significant because the judgment reinforces the principle that owners must exercise due diligence before and at the commencement of the voyage in all aspects of seaworthiness. The argument that an error in planning the voyage prior to departure should be characterised as an error of navigation rather than unseaworthiness has also been resoundingly rejected.
In practice, this judgment maintains and highlights the need for shipowners 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, particularly when an intended voyage includes navigating in confined and difficult waters.
On this occasion, Owners were very lucky that there was no damage to the environment, little or no damage to the vessel, and no physical damage to cargo. They were also fortunate to recover approximately US$9m from other cargo interests in circumstances where the vessel was found to be causatively unseaworthy.
This decision also reinforces the need for careful consideration to be given by cargo interests to any request for payment of contributions in General Average.
To download a copy of the judgment please click the link below.