Charles O'Connor Partner
Supreme Court confirms defective passage plan may render vessel unseaworthy
Alize 1954 and CMA CGM SA v. Allianz Elementar Versicherungs AG & Others (CMA CGM Libra)  UKSC 51
In an important and detailed judgment, the Supreme Court has clarified the scope of a carrier’s obligation to exercise due diligence to provide a seaworthy ship before and at the beginning of the voyage and also given additional guidance on the ‘nautical fault exception’ in the Hague and Hague-Visby Rules. Lord Hamblen, with whom the other Justices agreed, gave the judgment and dismissed the Owners’ appeal.
The background facts
In May 2011, the containership, CMA CGM Libra grounded whilst leaving Xiamen, China, laden with cargo and bound for Hong Kong. Shortly after dropping the pilot, the Master navigated outside the dredged and buoyed fairway and the ship ran aground in water where the Admiralty chart indicated ample depth.
Following the grounding, the Owners declared general average (GA) and sought contributions from cargo interests towards a GA claim of some US$ 13 million. While about 92% of cargo interests contributed in GA, the remaining 8% refused to pay. They alleged that the ship was unseaworthy, that the Owners had not exercised due diligence before and at the beginning of the voyage to make the ship seaworthy, and that the unseaworthiness resulted in the grounding. The cargo interests submitted that this was a breach of the Owners’ obligation under Article III, Rule 1 of the Hague/Hague-Visby Rules to exercise due diligence to make the vessel seaworthy before and at the beginning of the voyage. The Rules were incorporated into the contracts of carriage, and the breach amounted to actionable fault within the meaning of the York-Antwerp Rules, such that no GA was due, so said the cargo interests.
The Admiralty Court decision
The Admiralty Judge, Teare J, held that the navigation of the ship was negligent and that the ship’s passage plan was defective. The working chart in the passage plan did not specifically refer the navigator to the terms of a Notice to Mariners, issued in 2010, which stated that “numerous depths less than the charted exist within and in the approaches to Xiamen”. The navigator was, therefore, not warned of the grave dangers of straying outside the fairway. In 1999, the IMO adopted the Guidelines on Passage Planning, which require berth-to-berth passage planning, including indications on charts of “all areas of danger”. In the Court’s view, a prudent owner would not have allowed the vessel to depart from Xiamen with a passage plan that was defective in the manner identified. The Judge added that if a vessel carried a chart which the officers had failed to update, or a passage plan that was defective because it lacked a required warning of ‘no go’ areas, then those defects were capable of rendering the vessel unseaworthy at the beginning of the voyage.
The Judge dismissed the argument that passage planning was an element of navigation, not of seaworthiness. The Owners’ obligation under Article III, Rule 1 of the Hague Rules was not subject to the ‘nautical fault exception’ in Article IV, Rule 2(a). Therefore, if there was a causative breach of Article III, Rule 1, the fact that a cause of the casualty was also negligent navigation would not protect the carrier from liability. Further, while the duty to make the ship seaworthy was not absolute, the Owners had a non-delegable duty to exercise due diligence and they remained liable for the negligence of any parties who carried out the duty on their behalf – here, the Master and Second Officer – who could have prepared a proper passage plan with reasonable care and skill, but did not do so.
The Admiralty Judge concluded that the defective passage plan was causative of the grounding as, had there been an explicit warning on the chart about the charted depths being unreliable, the Master would not have strayed outside the buoyed fairway. Therefore, the breach caused the loss and there was actionable fault, such that the cargo interests were not liable in GA.
The Court of Appeal decision
The Court of Appeal upheld this decision, rejecting the argument that passage planning was a record of a navigational decision and so could not render a vessel unseaworthy. Rather, the Article III, Rule 1 obligation was an overriding obligation, not subject to the exceptions to liability in Article IV, Rule 2 and acts of negligent navigation before or at the commencement of the voyage could render the vessel unseaworthy. Further, it did not matter whether the defect was a one-off incident or a systemic failing. Both were capable of constituting unseaworthiness. The Court of Appeal also found that there was no difference, for these purposes, between charts that were defective because they had not been updated (which could clearly constitute unseaworthiness) and charts that had not been updated with necessary warnings, as part of passage planning.
The Court of Appeal then rejected the Owners’ attempt to distinguish between acts of the crew in their capacity as carriers (for which the Owners were responsible) and acts of the crew in their capacity as navigators (for which the Owners were not responsible). Once the Owners had assumed responsibility for the cargo as carriers, all the acts of the Master and crew in preparing the vessel for the voyage were performed qua carrier, even if they were acts of navigation before and at the commencement of the voyage. The Owners were, therefore, responsible for all such acts as a consequence of their non-delegable duty under Article III, Rule 1.
The Supreme Court decision
The Owners sought to argue that the Hague Rules draw a distinction between: (i) the vessel’s fitness for safe navigation on the one hand, which concerns the carrier’s duty to provide a seaworthy ship; and (ii) the navigation and/or management of the vessel by the crew on the other hand, which is subject to the nautical fault exception in Article IV, Rule 2(a) of the Hague Rules (“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”).
The Owners further contended that to render the vessel unseaworthy, a defect must be an attribute of the vessel. They argued that passage planning was navigating, that a navigational decision was not an attribute of the ship, that a passage plan was a set of navigational decisions and that a defective passage plan did not render the underlying chart defective. Therefore, they said, the defective passage plan did not render the vessel unseaworthy and they were not liable because of the nautical fault exception.
The Supreme Court rejected these arguments. It cited existing authority confirming that where there is a causative breach of the Article III, Rule 1 obligation to exercise due diligence to make the vessel seaworthy before and at the beginning of the voyage, the carrier cannot rely on the Article IV, Rule 2 exceptions. The Court reiterated that the Article IV, Rule 2 exceptions apply to the Article III, Rule 2 obligations (“the carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods”), but not to the Article III, Rule 1 obligation to exercise due diligence to make the vessel seaworthy before and at the beginning of the voyage. The Article III, Rule 1 obligation is an overriding obligation, any causative breach of which would render the carrier liable for loss or damage caused.
Consequently, the Supreme Court rejected the Owners’ category-based distinction between seaworthiness and navigation. Instead, it held that seaworthiness and navigation are not mutually exclusive. Negligent navigation may cause unseaworthiness and, if the act of negligent navigation or management occurred before the commencement of the voyage, the carrier would be liable. The Supreme Court, therefore, upheld the temporal distinction emphasised by the Court of Appeal, which stated that: “The fact, however, that the seaworthiness obligation under article III rule 1 only applies before and at the beginning of the voyage necessarily imports temporality. The carrier will be liable for a negligent act of navigation or management which causes the vessel to become unseaworthy before and at the beginning of the voyage, but not so liable if the same act does so after the voyage has commenced.”
The Supreme Court observed that this did not mean that the Article IV, Rule 2 exceptions are inapplicable prior to the voyage; they could be relied on in relation to an alleged breach of Article III, Rule 2 at any time from when the goods come into the care of the carrier, but not in relation to a causative breach of Article III, Rule 1.
The Supreme Court also rejected any alleged distinction between an act of navigation or management which causes unseaworthiness and an act which is itself the unseaworthiness as unprincipled. What matters instead is the fact of unseaworthiness. As to that, the Court rejected too the Owners’ suggested ‘attribute threshold’, whereby it was necessary to identify an attribute of the vessel which threatened the safety of the vessel or her cargo to establish unseaworthiness. Instead, the Court favoured the ‘prudent owner test’ (whether a prudent owner would have required the relevant defect, had he known of it, to be made good before sending his ship to sea) as an appropriate test, though the Court acknowledged that it was not a universal test of unseaworthiness and might not be appropriate in some exceptional circumstances “at the boundaries of seaworthiness”. However, generally, it is a helpful test and adaptable to differing and changing standards.
As to the importance of passage planning, the Supreme Court held that “There can be no doubt that a vessel would be unseaworthy if she began her voyage without a passage plan. The same must be true if she did so with a defective passage plan which endangered the safety of the vessel.”
The Supreme Court held that if a defect was remediable, that might mean that a vessel was not unseaworthy. If, for example, an open “porthole is inaccessible, then it would not reasonably be expected to be closed during the voyage and so the prudent owner would require the defect to be made good before sending the vessel to sea and the vessel would be unseaworthy. If, on the other hand, it is easily accessible then it would reasonably be expected to be closed by the crew as and when the need to do so arose and the vessel would not be unseaworthy.” This line of argument was accepted. However, when applied to the present case, the Supreme Court held that the fact that the defective passage plan could have been remedied did not assist the Owners as the requisite noting and marking up ought to have been done as part of the planning stage and was unlikely to be revisited as part of the execution stage, after the vessel had departed. Teare J’s conclusion that it was inconceivable that a prudent owner would allow the vessel to depart on her voyage with a passage plan which was defective in the manner found was, therefore, approved, as were his other findings on unseaworthiness, which the Supreme Court described as “unassailable”.
The Owners’ alternative case that, as long as the carrier had equipped the vessel properly for safe navigation, the failure by the crew to navigate safely was not a lack of due diligence by the carrier, such that there was no breach of the Article III, Rule 1 obligation, was rejected as “novel and unsound”. The Owners had argued that the crew’s failure was outside the carrier’s “orbit” of responsibility. The Supreme Court confirmed the non-delegable duty of exercising due diligence by reference to The Muncaster Castle  1 Lloyds Rep 57 and stated that: “The obligation on the carrier to exercise due diligence to make the vessel seaworthy requires that due diligence be exercised in the work of making the vessel seaworthy, regardless of who is engaged to carry out that task.” That said, the Court explained the limits to the carrier’s duty to exercise due diligence: the carrier may not be liable for a lack of due diligence before the vessel “comes into his orbit” and similarly before cargo “comes into his orbit”, but “the carrier may nevertheless be liable if the defect or danger would be reasonably discoverable by the exercise of due diligence once the vessel or cargo has come within its control”. In this case, the lack of due diligence occurred when the vessel and cargo were firmly within the Owners’ “orbit” and Teare J was, therefore, right to hold the Owners liable for the failure to exercise due diligence by their crew.
The crucial enquiries in a potential situation of unseaworthiness, therefore, are: (i) when did the error occur?; (ii) did the error render the vessel unseaworthy?; and (iii) if so, were the error and the resultant unseaworthiness causative of the loss? If the error occurred before or at the commencement of the voyage and, applying the prudent owner test, the vessel was unseaworthy, this may result in liability for the carrier, if the unseaworthiness caused the loss.
The Supreme Court decision puts beyond doubt that a vessel with no passage plan or a defective passage plan which endangers the safety of the vessel will be unseaworthy. In casualty cases, we anticipate that cargo interests will demand early disclosure of passage plans. Shipowners should continue to ensure, and record, compliance with proper systems and procedures, including passage planning, before and at the beginning of the voyage, as well as recording compliance with systems and procedures during the voyage. Charts should, of course, be kept fully up to date. It will be interesting to see how electronic charts and automatic updates, including Notices to Mariners, affect the position.
Whilst passage planning is essential, as the Supreme Court observed, “in many cases it will be the failure to properly and carefully navigate the vessel during the voyage that is the cause of the loss rather than any prior defect in passage planning. A different conclusion was reached on the particular facts of the present case because (i) the defect in the passage plan was found to have a decisive influence on the master’s critical decision to leave the fairway and (ii) the danger was one which was not sufficiently visible or otherwise detectable to be avoided by the exercise of due navigational care.” Therefore, the same result will not always follow on different facts and causation will be hard fought in other cases.
A carrier’s Article III, Rule 1 obligations vis-à-vis specific cargo are determined by reference to the contractual voyage (as set out in the contract of carriage, usually the bill of lading), with the obligation to make the vessel seaworthy arising at the commencement of that contractual voyage. Parties should, therefore, check carefully the contractual voyage agreed in the bill of lading. Where, as in the container trade, a ship is calling at multiple ports in rotation and a defect in a passage plan results in a casualty on a particular leg of the rotation, the owners may only be liable in respect of cargo loaded at the port preceding the casualty (i.e. where causative unseaworthiness occurred). In such a case, the issue may be whether the owners are obliged (and whether it is possible) on departure from the first port to have prepared a berth-to-berth passage plan for all intended port calls, or if it is sufficient to have a passage plan only for the first leg of the voyage and appropriate documents and systems in place for the drafting of passage plans for subsequent ports.
The Supreme Court also acknowledged that there would potentially be “exceptional casesat the boundaries of seaworthiness” to which the prudent owner test does not apply because the defect does not impact the vessel’s safety. In those cases, it might be necessary to consider first whether the defect relied on sufficiently affects the vessel’s fitness to carry the goods safely on the contractual voyage such that seaworthiness comes into play. However, the Court did not clarify how to identify these boundaries of unseaworthiness, which prospectively leaves room for future argument and debate.
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