Grounded! Lessons in seaworthiness from the UK Court of Appeal

By Chris Sacré and Kendall Messer

The decision of the UK Supreme Court in The CMA CGM Libra [2021] UKSC 51 provides an important reminder of the principles underlying the concept of seaworthiness which are central to a number of aspects of maritime law:

• Marine Insurance – implied warranty of seaworthiness (section 45 of the Marine Insurance Act 1909 (Cth));
• Pleasurecraft Insurance – bespoke seaworthiness exclusions in most Australian market policies;
• General Average – actionable fault defence arising out of unseaworthiness;
• Cargo Claims – a carrier is obliged to exercise due diligence to make a vessel seaworthy (Article III Rule 1(a) of the Amended Hague Visby Rules applicable in Australia); and
• Voyage and Time Charter disputes – Owners express or implied duty to provide a seaworthy ship.

The grounding of the CMA CGM Libra

The CMA CGM Libra grounded in 2011 when transiting outside of a buoyed fairway exiting the port of Xiamen, China, on the way to Hong Kong. The salvage effort cost US$9.5 million, and the owner brought a general average claim of US$13 million against cargo interests.

The dispute

Most of the cargo interests settled and paid the General Average (GA) claim, while approximately US$800,000 worth of cargo interests claimed the vessel was unseaworthy when it sailed. On this basis cargo interests had a complete defence to the GA claim by reason of Owners’ actionable fault (namely a breach of Owners’ obligations to exercise due diligence to provide a seaworthy ship pursuant to Article III Rule 1 of the Hague Rules).

The cargo owners alleged that the vessel was unseaworthy because the relevant navigational chart had not been updated with an annotation that ‘Numerous depths less than the charted exist within, and in the approaches to Xiamen Gang’.

The ship owners argued that the vessel was not unseaworthy and/or due diligence was exercised, and that any negligence in passage planning was a navigational fault of the Master and Crew which was exempted under Article IV rule 2(a) of the Hague Rules.

The decision

The UK Supreme Court agreed with cargo interests, finding that the Master would not have navigated outside of the fairway had the warning been annotated on the chart. The failure to update the chart meant that the vessel’s passage plan was defective.

The UK Supreme Court concluded 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 UK Supreme Court confirmed the applicable legal test of seaworthiness to be:

Save for exceptional cases at the boundaries of seaworthiness, the test was whether a prudent owner would have required the relevant defect to be made good before sending the ship to sea had he known of it.

An Australian perspective

The case of CMA CGM Libra was decided by the United Kingdom Supreme Court and, although not binding in Australia, will be persuasive. This is especially true where the Federal Court of Australia has already considered very similar factual circumstances and reached the same conclusion.

In 1991 the Sanko Harvest^[1] navigated outside the channel entering the Port of Esperance and grounded on the Recherche Archipelago, spilling 700 tonnes of bunker oil and 30,000 tonnes of fertiliser. The crew of the Sanko Harvest had not updated the relevant charts with a warning of uncharted depths outside of the channel.

On ‘the objective question whether the vessel was unseaworthy because it was sailing on uncorrected charts‘ Justice Sheppard concluded, ‘Clearly it was‘. Justice Sheppard said it was the proper practice for an owner to exercise due diligence to supervise the correction of charts on board the vessel.

… it is necessary to emphasise the heinousness of the shocking piece of navigation which led the vessel to the rock upon which it eventually foundered. It is not an exaggeration to say that the master and second officer of the vessel made a conscious decision to make a frontal assault on the Archipelago of the Recherche.

– Justice Sheppard

Thus, it is very likely that an Australian Court would conclude that a defective passage plan renders a vessel unseaworthy just as the English Court did in the CMA CGM Libra.

Key takeaways

• The test for seaworthiness is generally whether a prudent owner would have required the relevant defect to be made good before sending the ship to sea had he known of it.
• Defective passage planning by the master and crew or a failure to update charts is likely to render a vessel unseaworthy (subject to the type of vessel and intended voyage)
• Marine and pleasurecraft Insurers should have this in mind when investigating and considering whether an express or implied seaworthiness warranty or exclusion has been breached.
• Cargo interests should have this in mind when considering breaches of the Hague or Hague Visby Rules.
• Those being asked to contribute in general average should have this in mind when considering whether they can establish an actionable fault on the part of Owners.

For advice on any of these questions, please contact a member of our Transport & Trade team.

[1] Sanko Steamship Co Ltd and another v Sumitomo Australia Ltd (No 2) (1995) 63 FCR 277.