Ελληνικα
Alize 1954 & CMA CGM SA v. Allianz Elementar Versicherungs AG and 16 ORS
[“THE CMA CGM LIBRA”] [2019] EWHC 481 (Admlty), [2020] EWCA Civ.293
The CMA CGM LIBRA, a large container vessel (hereafter referred to as the “Vessel”) was the subject matter of a dispute which arose as a result of the cargo interests’ refusal to pay their GA contribution to the Owners of the Vessel on the basis that the Vessel was not seaworthy at the time that the grounding occurred.
A. The facts of the case were briefly as follows:
On 17 May 2011, the Vessel, fully laden with containerized cargo with a value of over US$500 million, departed from the loading port of Xiamen in China bound for Hong Kong and Europe.
The passage plan for the voyage from Xiamen to the next port of call, which was Hong Kong, was prepared by the Vessel’s second officer and was contained in two documents: the passage plan document and the Vessel’s working chart. The working chart was followed by the Master when navigating the Vessel out of the port area- it included marked buoys along the fairway but there were no markings regarding any “no go” areas on either side of the fairway. In an attempt to avoid a dangerous shallow area to port, the Master navigated slightly out of the buoyed fairway with the intention to return to it, but in the course of so doing the Vessel grounded at a speed of around 12 knots.
The Vessel was subsequently refloated by a salvage company under the Lloyd’s Open Form (LOF) salvage contract and the Owners of the Vessel (CMA CGM) declared General Average (GA) to recover the majority of the salvors’ remuneration and other pertinent GA expenses from the cargo interests.
The total amount of GA expenditure was in excess of US$13 million, of which US$9.5 million was paid to the salvors for their services under the LOF contract. The majority of the cargo interests (approximately 92%) agreed and paid for their GA contribution (including the salvors’ remuneration under the LOF) but a small percentage (of approximately 8%) refused to do so on the basis of their allegation that the Vessel was not seaworthy at the time of the grounding (by reason of the negligently prepared passage plan which caused the grounding) and as such, the Owners should be liable to pay the full GA claim.
B. The High Court and Court of Appeal Decisions
The dispute reached the High Court of England and Wales and on 8 March 2019 it was decided that the Owners had failed to exercise due diligence before and at the beginning of the voyage, as required by Article III Rule 1 of the Hague/Hague-Visby Rules, to make the Vessel seaworthy in that they failed to prepare an adequate passage plan, thus causing the grounding of the Vessel. Consequently, the cargo interests were not liable to contribute to the GA claim.
The Owners appealed to the Court of Appeal. On 4 March 2020 the Court of Appeal unanimously upheld the decision of the High Court against the Owners.
The conclusions of the High Court (Teare J) which were unanimously affirmed by the Court of Appeal were the following:
1. The passage plan in this case was defective as it made no reference to uncharted shallows/shoals and did not clearly mark “no go” areas, therefore it was not capable of ensuring the safe navigation of the Vessel and/or assisting the Master to make the correct impromptu navigation decisions. Teare J indicated (and the Court of Appeal agreed) that the chart should have at least mentioned the warning as per NM6274/P10 that “depths less than charted exist outside the fairway”. The Master confirmed that if these “no go” areas had been properly marked he would not have attempted to carry out the manoeuvre which led to the grounding.
2. The passage plan did not refer to (and/or take into account) a Preliminary Notice to Mariners (NM6274/P10) which had been issued by the United Kingdom Hydrographic Office some 5 months before the grounding by way of warning to mariners approaching the Xiamen Port in that numerous depths were less than those charted.
3. The Court further stated that the Owners’ duty to exercise due diligence (before and at the beginning of the voyage) to make their Vessel seaworthy is non-delegable. As such, the Master and Second Officer had a duty to exercise due diligence (for and on behalf of the carrier) by using reasonable care and skill to prepare a correct passage plan, which would have avoided the grounding incident. The nature of this non-delegable obligation meant that the Owners could not successfully argue that the preparation of the chart was an error in navigation for which they were not responsible (as opposed to being something relating to the inherent/intrinsic attributes of their vessel for which they would be responsible). Teare J stated the position as follows:
“Whenever an owner/operator puts a vessel to sea, they must remember the duty is on them to ensure they exercise due diligence with regards to the safety of the crew, vessel, cargo and environment. Due to the non-delegable nature of this duty, an owner should also ensure that seaworthiness is at the forefront of the servants’, agents’ and crews’ minds at the commencement of any voyage”.
4. For the reasons stated above, the Owners failed to exercise due diligence at the commencement of the voyage to ensure that their Vessel was seaworthy, by failing to have an updated and/or correct working chart and passage plan in place, thus rendering their Vessel unseaworthy. Even though the Owners of the Vessel had exercised due diligence in having a safe management system (SMS) as required by the ISM Code this proved not to be sufficient.
Teare J in the High Court judgment reached his conclusion in the following words:
“For these reasons the Owners’ claim must fail. The Cargo Interests have established causative unseaworthiness and the Owners have failed to establish the exercise of due diligence to make the vessel seaworthy. That is the consequence of applying to the facts of this case, established propositions of law, namely, the traditional test of seaworthiness, the principle that documentation is an aspect of seaworthiness and the non-delegable nature of the duty to exercise due diligence”.
C. What was the position before The CMA CGM LIBRA?
In order to consider the importance of this Court of Appeal decision (which now forms part of the applicable legal principles of English law) it is important to take a step back and consider the legal (and industry) position prior to 4 March 2020.
Under English common law, Owners have an absolute obligation to provide a seaworthy vessel. The test of seaworthiness has been set out in the case of McFadden v. Blue Star Line [1905] 1 K.B. 697, where it was stated that:
“If the defect existed, the question to be put is, would a prudent owner have required that it should be made good before sending his ship to sea, had he known of it? If he would, the ship was not seaworthy within the meaning of the undertaking”.
In cases where a charterparty and/or the bills of lading incorporate the Hague Rules or the Hague-Visby Rules, then the absolute obligation of seaworthiness is made somewhat more lenient for the Owners in that they have to exercise due diligence to provide a seaworthy ship pursuant to Article III, Rule 1 (a) which reads:
“The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to: (a) Make the ship seaworthy”.
This due diligence obligation is usually satisfied when the owners can show that they took all reasonable steps to detect and rectify a defect prior to the commencement of a voyage. Further, prior to the CMA CBM LIBRA decision, it was common for owners to satisfy due diligence by showing that they abided by the requirements of the International Safety Management (ISM) Code in ensuring that their safety management system (SMS) was sufficiently maintained so that their vessels had all the necessary updated documents in place and were both seaworthy and cargo-worthy.
In terms of the possible defects which could cause unseaworthiness, these mainly concerned technical and/or mechanical issues that were considered to be inherent attributes of a vessel affecting its performance (and which owners could repair prior to or at the commencement of the voyage). Since the passage plan and working chart concerned the navigation and seamanship of the vessel, they were not considered as aspects of seaworthiness prior to the CMA CBM LIBRA decision. Therefore any negligence or lack of expertise in preparing the passage plan or working chart (thereby causing loss or damage) would not go towards proving lack of due diligence in providing a seaworthy vessel – an error in navigation of this type would not render a vessel unseaworthy. In fact, if anything, such negligence was considered to be an accepted peril (hence a valid defence for the shipowners) under the Hague and Hague-Visby Rules: Under Article IV (1) and (2)(a).
D. The key legal and practical implications of The CMA CGM LIBRA
It is clear from the above analysis that this decision has now placed a greater burden on the shipowners and managers/operators of vessels in ensuring that their vessels are seaworthy before and at the beginning of any voyage. This will inevitably change industry practice as further explained below. In particular:
- The “McFadden prudent owner test” mentioned above is to continue to be applied across the board irrespective of whether the defect in question relates to a technical and/or mechanical attribute of a vessel or otherwise. There are therefore no longer any conceptual limits to the types of defects that can constitute unseaworthiness if the McFadden test is satisfied. In particular, these are no longer confined to technical and/or mechanical aspects and ISM requirements. Seaworthiness extends to having the appropriate and necessary navigational documents such as correct/updated charts. As Flaux LJ has stated in the Court of Appeal judgment: “…an uncorrected chart which is not up to date and a passage plan which is defective because it does not contain a warning of “no go” areas are both aspects of the vessel’s documentation which are capable of rendering the vessel unseaworthy”.
- The duty of an owner/carrier to exercise due diligence before and at the commencement of the voyage pursuant to Article III, Rule 1(a) of the Hague/Hague-Visby Rules is non-delegable which in practice means that the owners remain liable and cannot hide behind their crew, officers or the Master in order to avoid liability. In addition, there have to be sufficiently maintained SMS mechanisms within the ship management companies to ensure that the Master and crew are well trained so as to do all that is necessary for the vessel to remain seaworthy at all times.
- Following from (2) above, it is clear that there is no longer any 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 were not responsible). In the words of Flaux LJ in the Court of Appeal judgment, once an owner assumes responsibility for the cargo as carrier “all the acts of the Master and crew in preparing the vessel for the voyage are performed qua carrier, even if they are acts of navigation before and at the commencement of the voyage. The Owners are responsible for all such acts as a consequence of the non-delegable duty under Article III Rule 1”.
- It is now clear that an error in planning a voyage prior to departure is no longer considered to be simply an error of navigation which may be attributed to the negligence of the Master and/or the crew giving the owners a defence under Articles IV (1) and (2)(a) of the Hague/Hague-Visby Rules. This means that keeping updated charts on board now goes to the ship’s seaworthiness and owners should ensure that their charts are kept up to date and that they are corrected when necessary in accordance with relevant notices (such as the “Temporary and Preliminary Notices to Mariners” also knows as NMs).
- Last but not least, this case will have direct implications in establishing the contribution of cargo interests in a General Average claim, in that the latter now have a greater scope of ammunition against the owners in proving that a vessel is unseaworthy (and that the said unseaworthiness caused the incident) hence avoiding their payment contribution to GA.
Should you wish to read the full Court of Appeal judgment you may find it here CMA CGM LIBRA CA Judgment 4 March 2020 (PDF)
Maria Stavropoulou
Solicitor (England & Wales), Greek Lawyer (Athens Bar Association)