5.2 Review of the Supreme Court’s Ruling on Due Diligence
The Supreme Court, in addressing the issue of due diligence, relied on the precedent set in Muncaster Castle, affirming that the due diligence obligation under the Hague Rules is non-delegable. Effectively by reason of the second officer and master’s negligence in relation to passage planning, the owner was held to have failed to exercise due diligence to make the vessel seaworthy. The court dismissed the argument that passage planning was outside of the carriers orbit of responsibility, holding that “At all material times the vessel was within the owners’ “orbit”(1)Libra [2021], 137 and that the second officer and master were “implicated by the carriers in the work of keeping or making the vessel seaworthy” in relation to passage planning. As such, the owners “must answer for anything that has been done amiss in the work. »(2) ibid The Supreme Court hence concluded that the carrier's duty to exercise due diligence in ensuring the vessel's seaworthiness extends to all aspects of the work required to achieve seaworthiness, regardless of who performs the task.(3) Ibid, 145 (viii)
5.2.1 Regarding The Muncaster Castle
Reliance was placed on the authority in Muncaster Castle(4) Riverstone Meat Co Pty Ltd v Lancashire Shipping Co Ltd (The Muncaster Castle) [1961] AC 807 when deciding on the issue of due diligence. Therefore, it is of interest to review the circumstances of this case. In Muncaster Castle, cargo was damaged by water entering the hold via the inspection covers on the storm valves. Subsequent inspections revealed that the nuts holding the covers were loose due to the negligence of a reputable firm of ship repairers when inspecting the storm valves under the supervision of a Lloyds surveyor some months prior to the relevant voyage. The House of Lords found the carrier to be liable for the breach of the obligation to exercise due diligence, Viscount Simonds explaining that, “no other solution is possible than to say that the shipowner’s obligation of due diligence demands due diligence in the work of repair by whomsoever it may be done.”(5) Muncaster Castle
The Travaux Prepratoires reveal that The Muncaster Castle decision was subject to much discourse prior to the adoption of the Hague-Visby Rules.(6) Travaux, p. 148 The British delegation suggested a potential amendment to article IV (1) to alter the position at law created by The Muncaster Castle judgement, a suggestion that was well received by many representatives of the various nations.(7) Ibid, p. 148-179 The “anti-Muncaster clause” initiative was, however, eventually abandoned.(8) Solvang (2021) p. 25 Nevertheless, the initiative prompted fruitful discussions regarding the Muncaster Castle judgement. The reflections of Mr. Mr. Podromidés of France are of particular interest:
Mr. Podromidés expressed his support for the Muncaster Castle judgement, holding that the decision of the House of Lords is “completely equitable, completely defensible, completely legal”, further explaining that “In the case of the “Muncaster Castle”, we are in presence of three persons: the shipper, the carrier and the shipyard. It is a question of damage sustained by the goods as a consequence of a defect in the ship which has not been properly repaired. It is not abnormal that the carrier be held liable for that damage. It is quite obvious that the shipyard be held responsible, but what is quite abnormal is that the shipper be the one who is held responsible.”(9) Travaux, p. 176 Mr. Podromidés hence appealed to the equitable logic underlying the Muncaster Castle judgement: The carrier has a contractual relationship with the shipyard and is hence in a better position to recover from the shipyard, than that of the shipper. As further elucidated by Mr. Podromidés, “One could say: but he (the shipper) shall always be entitled to bring an action against the shipyard on the ground of a fault in tort. Maybe, but this is not certain for all countries, and even as far as in a country the action of this said shipper against the shipyard, with which he has no contractual bond, would be considered as admissible, the shipyard would say: if you are entitled to sue me in tort, the basis of my obligation is the building contract”(10) Ibid, p. 176
Based on Mr. Podromidés’ reflections, the Muncaster Castle judgment appears reasonable and just. As held by Lord Radcliffe in The Muncaster Castle, “I should regard it as unsatisfactory, where a cargo owner has found his goods damaged through a defect in the seaworthiness of the vessel that his rights of recovering from the carrier should depend upon particular circumstances in the carrier`s situation and arrangements for which the cargo owner has nothing to do”(11)The Muncaster Castle, at p.82 Accordingly, it appears that the House of Lords were also concerned with the practical realities of the relevant issued in Muncaster Castle, and in particular that it would be inequitable to hold cargo liable when a damage occurs to the ship, caused by the negligence of a third party repair firm.
Accordingly, it appears that the non-delegable nature of the due diligence obligation has its grounds in policy considerations. It is, however, argued that these policy considerations are not relevant in matters of initial unseaworthiness due to errors of navigation. Cargo interests should be well prepared to carry the consequential risk of errors of navigation. After all, the risk allocation system underlying the Hague Rules makes it clear that cargo interests should insure themselves in case of loss caused by negligent navigation. Hence, it might be argued that a more functional approach to the non-delegable nature of the due diligence obligation should be adopted in matters regarding errors due to negligent navigation.
As Solvang (2020) observes in his analysis of the reliance on The Muncaster Castle as a precedent in CMA CGM Libra, “Although the Muncaster Castle contains general statements as to non-delegable duties on the shipowner’s part to exercise diligence to make the ship seaworthy, this does not, in the writer’s view, answer the question at hand. Put differently, there is no basis in the wording of the HVR to say that a shipowner is responsible for servants back in time – or where such line is to be drawn. Hence, that type of arguments (including the English authorities on the point) cannot as a matter of analysis be said to resolve the interrelation and grey zones concerning the master’s potential dual roles in connection with the vessel’s unseaworthiness before departure. Put still differently, no one would doubt that the master is generally speaking a servant of the shipowner; he is a servant also during the voyage, but the question concerns the exception from liability for nautical faults, and that is a question clearly not applicable to the situation being decided in the Muncaster Castle, namely a shipowner’s vicarious liability for the fault of a ship repair worker; a ship repair worker is not capable of committing a nautical fault. The English approach is therefore marked with an idiosyncratic narrow type of construction, not looking at the (clashing) policy considerations in play under the HVR.”(12) Solvang (2020), p. 73
With the above in mind, it could be argued that the principles derived from The Muncaster Castle regarding the non-delegable nature of the due diligence obligation, are not applicable in matters regarding initial unseaworthiness due to negligent navigation. An alternative solution as suggested by owners in CMA CGM Libra might be to delimit the due diligence obligation in matters of navigation to matters within the carrier`s “orbit of responsibility” or under the shipowner’s "direct control," as outlined in the New Zealand Supreme Court case Tasman Pioneer. However, the UK Supreme Court declined to differentiate between nautical matters and non-nautical matters in their interpretation of the due diligence obligation, hence maintaining the all-encompassing applicability of The Muncaster Castle authority and the stringent “non-delegable” nature of the due diligence obligation. As a result, the owners in CMA CGM Libra were deemed to have failed to exercise due diligence to make the vessel seaworthy.