MarIus

4.6.1 Issue 1: Seaworthiness

Owners claimed that the lower courts were mistaken in their findings, maintaining that the defective passage plan did not amount to a breach of the seaworthiness obligation, per article III, r. 1 and that, in any event, the defective passage plan falls within the scope of the nautical fault exemption, per article IV rule 2 (a).^{(4) Ibid, 59} Owners organised their claim as follows: « (i) passage planning is navigating; (ii) a defective passage plan does not in and of itself render a vessel unseaworthy because (a) a navigational decision is not an attribute of the ship an d (b) a passage plan is a set of such navigational decisions and therefore also not an attribute of the ship; (iii) a defective passage plan does not render the underlying chart defective and a passage plan is not part of the “documentary outfit” of the vessel or a navigational tool.»^{(5) Ibid, 58}

In its assessment of the seaworthiness issue, the Court considered the Travaux Préparatoires of the Hague Rules,^{(6) Travaux Préparatoires of the Hague and Hague-Visby Rules} the official record of negotiations prior to the inception of the Hague Rules. Owners emphasized the importance of the navigational fault exemption, referring to the words of Sir Norman Hill, who represented the British shipowners at the Hague Conference. Sir Norman Hill stressed that that article IV “is the shipowners’ clause” whereas article III is “the cargo interests’ clause” and “our big point is the navigation point, and what we have asked is that we should have the words which from time immemorial have certainly appeared in all British bills of lading”^{(7)Libra [2021], 52} The importance of distinguishing between the “shipowners clause” and the “cargo interests clause” was, as held by owners” related to the underlying objective of the Hague Rules to spread risk and allow appropriate allocation of insurance among the different interests of the maritime venture. Specifically, owners held that “the allocation of risk is that the carriers have to insure themselves against the risk of all damage to both their own ship and the property of third parties such as other vessels and the structure of ports, but cargo interests have to insure themselves against the risk of negligent navigation causing damage to their cargo.^{(8)Libra [2021],53}

The Supreme Court rejected the owners’ arguments, affirming that the obligation to make the vessel seaworthy at the beginning of the voyage, per article III r. 1 is an overriding obligation. The court relied on the authority of the Privy Council in Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd^{(9)Maxine Footwear Co Ltd v Canadian Government Merchant Marine Ltd [1959] AC 589}, where Lord Somervell of Harrow firmly held that “Article III rule 1 is an overriding obligation. If it is not fulfilled and the non-fulfillment causes the damage the immunities of article IV cannot be relied on”.^{(10)Libra [2021], 68 referring to Maxine Footwear p. 115} In applying the principles set out in Maxine Footwear, the Supreme Court held that “that where loss or damage is caused by a breach of the carrier’s obligation to exercise due diligence to make the vessel seaworthy under article III rule 1, the article IV rule 2 exceptions cannot be relied upon, including where the excepted matter is the cause of the unseaworthiness”^{(11)Ibid, 70} Effectively, the Supreme Court rejected owners` contention that there is a category based distinction between seaworthiness and navigation of the ship, confirming that negligent navigation can amount to initial unseaworthiness.^{(12) Ibid, 71}

In addressing the insurance risk issue, the Supreme Court simply held that “shipowners and their insurers bear the risk of cargo damage or general average expenses caused by a failure to exercise due diligence to make the vessel seaworthy. That remains the case where the unseaworthiness is caused by negligent management or navigation.”^{(13)Ibid, 82}The Supreme Court did recognize the importance of the navigational fault exemption for owners, but pointed out that in most cases it will be errors in navigations during the voyage that will lead to loss or damage, and in which cases, the error in navigation exemption will apply.^{(14) Ibid, 82}

The Supreme Court further dismissed the suggestion that there is a “attribute” threshold for seaworthiness, citing various authorities that demonstrate that seaworthiness is concerned with not only physical defects in the vessel or her equipment, but also, for example the adequacy of the vessel’s systems such as in relation to engine maintenance,^{(15)Libra [2021], 92 referring to CHS Inc Iberia SL v Far East Marine SA (The Devon) [2012] EWHC 3747 (Comm)} the mental abilities of the crew,^{(16) Ibid, referring to Papera Traders Co Ltd v Hyundai Merchant Marine Co Ltd (The Eurasian Dream) [2002] 1 Lloyd’s Rep 719} the adequacy of piping plans^{(17) Ibid, referring to Owners of Cargo Lately Laden on Board the Makedonia v The Makedonia [1962] P 190 and Robin Hood Flour Mills Ltd v N M Paterson & Sons Ltd (The Farrandoc) [1967] 2 Lloyd’s Rep 276} and the trading history of the vessel.^{(18) Ibid, referring to Ciampa v British India Steam Navigation Co [1915] 2 KB 774} The Supreme Court hence found that “if “attribute” is to have such a wide and extended meaning as to cover all these eventualities, it is unlikely to be of definitional assistance”^{(19)Libra [2021], 92} Accordingly, the Court concluded “that it is either correct or helpful to treat the concept of unseaworthiness as being subject to an attribute threshold” and that it is best treated as an “illustrative rather than a prescriptive requirement”^{(20) Ibid, 96 referring to quote from Carver on Charterparties, 2nd ed (2020), at 3.115}

The applicability of the “prudent owner” test for seaworthiness was upheld by the Supreme Court, whereby it was confirmed that the test endorsed in McFadden v Blue Star Line is an appropriate test for seaworthiness, except for in cases “at the boundaries of seaworthiness”.^{(21)Libra [2021], 101} It was held that for cases at the boundaries of seaworthiness”, it «may be necessary to address a prior question of whether the defect or state of affairs relied upon sufficiently affects the fitness of the vessel to carry the goods safely on the contractual voyage as to engage the doctrine of seaworthiness.”^{(22) Ibid, 101} The Aquarcharm was described as a case “at the boundaries of seaworthiness”. In this case, the vessel was negligently overloaded by the master at the commencement of the voyage, to the point that she was refused entry through the Panama Canal, resulting in part of the cargo having to be transshipped.^{(23)Actis Co Ltd v Sanko Steamship Co Ltd (The Aquacharm) [1982] 1 WLR 119} The Court of Appeal in this case found the vessel to be seaworthy. The Supreme Court in CMA CGM Libra explained that the Aquacharm was “at the boundaries of seaworthiness” because the sole consequence of the negligently overloaded vessel was to cause some delay and expense and no damage to the vessel.^{(24)Libra [2021], 95}CMA CGM Libra, on the other hand, was not at the boundaries of seaworthiness, the Supreme Court explaining that, “given the judge’s findings as to the importance of passage planning to the safe navigation of the vessel there can be no doubt that this was an appropriate case for the judge to apply the prudent owner test of unseaworthiness”.^{(25) Ibid, 128}

The Supreme Court then considered if the defect in question was “remediable”, which may mean that the vessel was not unseaworthy. A defect is remediable if it “would reasonably be expected to be put right before any danger to vessel or cargo arose”.^{(26) Ibid, 103} The Court, however, found that the prudent owner could not reasonably expect the defects in the passage plan to be remedied before its use.^{(27) Ibid, 127} Hence, the defect in question was not remediable, and the Supreme Courts` conclusion remained that the vessel was unseaworthy at the commencement of the voyage, due to the defective passage plan.

Conclusively, the Supreme Court accepted that preparation of a passage plan is a matter of navigation.^{(28) Ibid, 118} However, with reference to Maxine Footwear, the Supreme Court decisively affirmed that navigational fault exemption cannot be relied on in the event of a causative breach of the carrier’s obligation to exercise due diligence. Accordingly, the Supreme Court endorsed the finding of Justine Teare in the Admiralty Court, maintaining that CMA CGM Libra was unseaworthy; “His trenchant conclusion as to what the prudent owner would have done is unassailable, as is his consequent conclusion on unseaworthiness.”^{(29) Ibid, 128}

4.6.2 Issue 2: Due diligence

The owners argued that the carrier had exercised sufficient due diligence by equipping the vessel with all that was necessary for her to be safely navigated. The crew`s failure to safely navigate the ship was, as held by owners, outside of the carrier`s orbit of responsibility.^{(30)Libra [2021], 129} Owners urged the court to take a similar approach to that of Cresswell J. in The Eurasian Dream, which would entail that the diligence required by the carrier should in the context of passage planning include “(i) employing competent navigating officers, (ii) ensuring that the navigating officers are properly instructed in respect of passage planning and (iii) auditing at regular intervals their performance to ensure that those instructions are being complied with.”^{(31) Ibid 130 with reference to Papera Traders Co Ltd v Hyundai Merchant Marine Co Ltd (The Eurasian Dream) [2002] 1 Lloyd’s Rep 719 at para 132} Further reference was made to the words of Judge Kirkpatrick in The Oritani, “The theory of the law is that the owners are justified in committing all matters of navigation to skillful and experienced navigating officers”^{(32)Libra [2021], 131 with reference to The Oritani (1929) 40 F 2d 522, 528.} Additionally, it was observed that “It would be invidious for an owner to have to second-guess the navigational decisions made by a master whenever the ship is about to leave port»,^{(33) Ibid, 132} given that “navigational decisions often involve judgments made at the time based on prevailing nautical and environmental local conditions»^{(34) ibid}

The Supreme Court rejected owners’ contention that sufficient due diligence had been exercised by the carrier. Relying on the authority in Muncaster Castle, the Supreme Court affirmed the non-delegable nature of the due diligence obligation, stating that “The carrier is responsible for any failure to exercise due diligence by those to whom he has entrusted the task of making the vessel seaworthy. It is the carrier’s contractual responsibility to ensure that due diligence is exercised in making the vessel seaworthy and he cannot contract out of that responsibility by delegation.”^{(35) Ibid, 134} The Supreme Court did, however, confirm that the due diligence obligation does not apply when the owner has no responsibility for the vessel or the cargo, i.e., when the vessel or cargo is not in the “orbit” of the carrier.^{(36) Ibid, 137 with reference to W Angliss & Co (Australia) Pty Ltd v P&O Steam Navigation Co [1927] 2 KB 456 & Northern Shipping Co v Deutsche Seereederei GmbH (The Kapitan Sakharov) [2000] 2 Lloyd’s Rep 586} In the case at hand, “the vessel was at all times under the carrier’s control and the failure to exercise due diligence was that of the carrier’s servants in the preparation of the vessel for her voyage.”^{(37)Libra [2021], 138} The Court further rejected the owners’ assertions related to the special nature of navigation, holding that the carrier remains responsible for any lack of due diligence in the performance of the task of navigation.

To conclude, the Supreme Court upheld the trial judges` and the Court of Appeals finding on the issue of due diligence, confirming that “The carrier cannot escape from its responsibilities under article III rule 1 of the Hague Rules by delegating them to its servants or agents qua navigators, or qua managers, or qua engineers or qua ship repairers.”^{(38) Ibid, 144} The Supreme Court confirmed that the master and crew had failed to exercise due diligence when producing a passage plan, effectively amounting to a failure by the carrier to exercise due diligence to make the vessel seaworthy.

4.6.3 Supreme Court: Conclusion

The Supreme Court conclusively affirmed that owners had breached their seaworthiness obligation under the Hague Rules, Article III, r. 1(a). As a result, due to the overriding nature of the seaworthiness obligation at the beginning of the voyage, owners could not avail of the error in navigation exemption in Article IV, r. 2(a). To support this conclusion, the Supreme Court highlighted the main legal principles relevant to the case, as outlined in paragraph 145 of the judgment. For the purpose of this thesis, it is of particular interest to note that the Supreme Court confirmed (1) “if the vessel is unseaworthy, it makes no difference whether negligent navigation or management is the cause of the unseaworthiness or is itself the unseaworthiness”^{(39) Ibid [2021], 145 (ii)} (2) the carrier is liable for a failure to exercise due diligence by the master and deck officers of his vessel in the preparation of a passage plan for the vessel’s voyage”^{(40) Ibid (x)} and (3) “Save for exceptional cases at the boundaries of seaworthiness, the well-established prudent owner test, namely whether a prudent owner would have required the relevant defect to be made good before sending the vessel to sea had he known of it, is an appropriate test of seaworthiness, well suited to adapt to differing and changing standards.”^{(41)Libra [2021], 145 (iv)}

Ultimately, the Supreme Court dismissed the owners appeal, upholding the decision of Justice Teare, concluding that, “the judge directed himself properly in law and the findings he made amply support the conclusion he reached that the defective passage plan involved a want of due diligence to make the vessel seaworthy”.^{(42) ibid 146} The owners were hence found to be in breach of the terms of the contract of carriage, by way of a breach of the Hague Rules Article III, r. 1(a), and cargo interests could rightfully deny paying their contribution in GA.