Case Comment: Alize 1954 and Anor v Allianz Elementar Versicherungs AG and Ors [2021] UKSC 51

In this post, Eleanor Lane, Nicholas Carroll, and Robyn Connolly of CMS comment on the UK Supreme Court’s decision in Alize 1954 and Anor v Allianz Elementar Versicherungs AG and Ors [2021] UKSC 51, which delivered further guidance on the seaworthiness obligations under the Hague Rules.

On 10 November 2021 the Supreme Court unanimously dismissed the appeal in Alize 1954 and Anor v Allianz Elementar Versicherungs AG and Ors [2021] UKSC 51.

The judgment clarifies the seaworthiness obligations under the Hague Rules, making it clear that uncorrected charts and defective passage plans are each an “attribute of the vessel” which will render a vessel unseaworthy.

This case will be of particular interest to vessel owners and carriers / shippers of cargo.

The factual background

On 18 May 2011 the container vessel CMA CGM LIBRA was leaving the port of Xiamen in China en route to Hong Kong laden with cargo.

A Notice to Mariners on board the vessel indicated that, outwith the fairway, the chart was unreliable but this information was not noted by the crew on the vessel’s chart nor was it included in the passage plan.

The passage plan indicated that the vessel would remain within the buoyed fairway but the master (in a decision which the Admiralty judge found to be negligent) decided otherwise and the vessel ended up grounded on a shoal to the west of the fairway. The grounding resulted in salvage costs of US $9.5 million and the owners made a claim against the cargo owners in general average totalling US $13 million.

A small minority of cargo owners refused to pay on the grounds that a shipowner is not entitled to recover general average where the loss was caused by its own actionable fault – essentially that by having a defective passage plan the owners were in breach of their obligation under Article III Rule 1 of the Hague Rules to exercise due diligence to make the ship seaworthy. The ship’s owners argued that a defective passage plan does not render a vessel unseaworthy and that, under the Hague Rules, shipowners are not liable for negligent navigational decisions. They also argued that they had exercised due diligence to make the vessel seaworthy by employing a competent crew and equipping the vessel with all necessary equipment including up to date charts and Notices to Mariners.

At first instance the Admiralty judge, Teare J held that the vessel was unseaworthy prior to the voyage taking place due to the defective passage plan, saying “It seems to me inconceivable that the prudent owner would allow the vessel to depart from Xiamen with a passage plan which was defective in the manner… found”. The judge concluded that the ship’s owners were responsible for all acts of the crew while passage planning and that the failure of the master and second officer to exercise reasonable skill and care in preparing the passage plan was accordingly the fault of the owners.

The Court of Appeal, three judges with considerable experience in shipping, upheld Teare J’s decision.

Permission to appeal to the Supreme Court was granted on two grounds:

Firstly, that the judge was wrong in holding that the defective passage plan rendered the vessel “unseaworthy” for the purposes of Article III Rule 1 of the Hague Rules.

Secondly, that by equipping the vessel with a competent master and crew and by making available all necessary information to permit safe navigation, the carrier had discharged its duty to exercise due diligence to make the vessel seaworthy.

The judgment comprehensively addresses both of these issues.

Issue 1 – Did the defective passage plan render the vessel unseaworthy for the purposes of Article III Rule 1 of the Hague Rules?

Article III Rule 1 of the Hague Rules places an obligation on a carrier to make the ship seaworthy and to properly man, equip and supply the ship. Article IV contains a number of exceptions which include “any act, neglect or default of the master…” in the navigation of the ship.

The owners argued that the Hague Rules distinguish between the “navigable state” of a vessel and the navigation of that vessel by the master and crew. The defect in the passage plan was (according to the owners) an error of navigation and was therefore not an “attribute of the vessel” which rendered the vessel unseaworthy.

The usual test of seaworthiness is whether a prudent owner would have required a defect (had he known of it) to be made good before letting a ship go to sea. The Supreme Court, finding that theAarticle IV exceptions cannot be relied on where a carrier / owner is in breach of its obligation to use due diligence to render a vessel seaworthy, agreed with Teare J that a prudent owner would not have allowed a vessel to depart with such a defective passage plan. This meant that the vessel was unseaworthy before the voyage ever started and the owners had accordingly failed to exercise due diligence to make the vessel seaworthy.

Issue 2 – Did the failure of the master and second officer to exercise reasonable skill and care when preparing the passage plan constitute want of due diligence on the part of the carrier for the purposes of Article III Rule 2 of the Hague Rules?

Article III Rule 2 provides that, subject to the Article IV exceptions noted above, “the carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried”.

The owners sought to rely on the exception in Article IV Rule 2(a), arguing the acts of the master and second officer which led to the grounding were those of negligent navigation. They stated that the crew had been equipped with everything necessary for safe navigation of the vessel by a competent crew; the defective passage plan was caused by the crew’s failure to annotate the plan and not by the carrier’s lack of due diligence.

The Supreme Court noted that the vessel was at all material times within the owners’ orbit and that, although there are limits to a carrier’s responsibility, a carrier cannot escape its responsibilities simply by delegating them to servants or agents. The failure to exercise diligence was not done by a third party unconnected to the owner / carrier, such as a shipbuilder or a previous handler of cargo, and/or in circumstances which were not reasonably discoverable by the exercise of due diligence.

In this situation, the vessel was at all times under the carrier’s control and the failure to exercise due diligence was a failure of the servants of the carrier. Even though navigation is the responsibility of the master, involving specialist knowledge and judgement of the master and crew, the carrier remains responsible for any lack of diligence in the performance of that task. If the incident had occurred as a result of poor navigation during the voyage, the nautical fault exception could potentially have been relied upon – but where the errors in passage planning occur at the appraisal or planning stage and mean that the vessel is unseaworthy before a voyage ever starts, the carrier will be liable.

Comment

The judgment significantly clarifies the extent of a shipowner’s / carrier’s obligation to render a vessel seaworthy and at what point this will begin to apply – defining the concept of seaworthiness as illustrative rather than prescriptive.

The judgment further confirms that in most cases the “prudent owner” test – being the test of whether a prudent owner would (had he known of it) have required a defect to be made good before putting a vessel to sea – is an appropriate test of seaworthiness.

The obligation to render a vessel seaworthy extends to everything which a prudent owner would require to be in place to ensure safe passage prior to setting sail. Amongst other things, this means that setting sail without a passage plan or with a defective passage plan will render a vessel unseaworthy.

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