On 14 July 2011, in the course of a laden voyage from Argentina to China, the Cape Bonny, a Suezmax oil tanker built in 2005, suffered an engine breakdown, as she was seeking to avoid typhoon Ma-on. Towage assistance was required and on 18 July 2011 the vessel was taken in tow by the tug, Koyo Maru. General average was declared. As the Cape Bonny was not permitted to enter a Japanese port of refuge or to discharge her cargo in the named Chinese port of discharge, she was taken to Yosu in South Korea where her cargo was transferred by STS to another vessel, whereupon the Cape Bonny could finally berth for repairs.

Rule D of the York-Antwerp Rules provides:

‘Rights to contribution in general average shall not be affected, though the event which gave rise to the sacrifice or expenditure may have been due to the fault of one of the parties to the adventure, but this shall not prejudice any remedies or defences which may be open against or to that party in respect of such fault.’

There was no dispute as to the true construction of Rule D and how it operates. As explained in Scrutton on Charterparties 23rd ed at p 518 and in Lowndes and Rudolf on General Average 14th ed at D.02-03 and D.26, the object of Rule D is to keep all questions of alleged fault out of the adjustment and to preserve unimpaired the legal position at the stage of enforcement. A fault is a legal wrong which is actionable between the parties at the time when the sacrifice or expenditure is made.

The defendant cargo interests denied any liability to contribute in general average, alleging that the casualty was caused by actionable fault on the part of owners of the Cape Bonny, namely a failure by the owners to exercise due diligence to make the vessel seaworthy.

In the event that a contribution in general average was properly due from the cargo interests, there was a further dispute as to quantum. In this connection there was controversy as to who bore the burden of proof that expenditure was reasonably incurred, in light of the Rule Paramount, Rule A and Rule E.

The owners accepted that the vessel was unseaworthy at the commencement of the voyage by reason of the presence of metal particles in the luboil system, lying downstream of the luboil filters. The burden therefore lay upon the owners, pursuant to the Hague-Visby Rules which were incorporated in the contract of carriage, to show that they exercised due diligence to make the vessel seaworthy before the commencement of the voyage.

Held:

Unseaworthiness

The usual test of unseaworthiness is whether a prudent owner would have required that the defect in question should be made good before sending its ship to sea. If it would, then the ship is not seaworthy (see Scrutton on Charterparties 23rd ed para 7-025).

Had the owners known that main bearing no 1 was suffering from an abnormal degree of wear, the court considered that they, acting as prudent owners, would have required that the bearing be repaired. There was also the presence of foreign particles (which it was admitted rendered the vessel unseaworthy) and the presence of damaged luboil filters. It was therefore beyond doubt that the presence of all three rendered the vessel unseaworthy at the commencement of the voyage.

The duty of due diligence imposed by art 3.1 of the Hague-Visby Rules to make the vessel seaworthy is the equivalent of the common law duty of care. The burden of proving due diligence lies on the owners as carrier pursuant to art 4.1 of the Hague-Visby Rules.

Failure to exercise due diligence

After an extensive examination of the available factual evidence, the court found that the cause of the main engine breakdown in July 2011 was that foreign particles which should have been removed from the luboil were not removed and accordingly were able to cause damage to main bearing no 1.

This finding gave rise to two questions on due diligence:

1. did the owners exercise due diligence to ensure that the filters were in seaworthy condition at the commencement of the voyage?

2. did the owners exercise due diligence when considering whether the deflection readings in May 2011 indicated abnormal wear of main bearing no 1?

In relation to an inspection conducted by the crew which failed to reveal a defect, there will be a failure to exercise due diligence if (1) the examination was, in the circumstances, of a character such as a skilled and prudent shipowner should reasonably have made and (2) if so, whether the examination was carried out with reasonable skill, care and competence (see Scrutton on Charterparties 23rd ed, para 14-047).

The filters

After examining the evidence, the court held that a skilled and prudent chief engineer would have ensured that a proper visual check was made of at least a representative sample of the filter candles in May 2011, and the chief engineer on board the vessel at the time of the incident and his second engineer did not carry out such an inspection. The court therefore held that the owners were unable to prove that they exercised due diligence to make the vessel, in particular the filters, seaworthy before the commencement of the voyage in June 2011. 

The next question was whether that breach of duty was causative. It would only be so if the inspection which ought to have been carried out in May 2011 would, on the balance of probabilities, have revealed that some of the filter candles had damaged mesh. The court found that, while it was possible that the inspection would have revealed that, it was not inevitable (for the representative sample of candles chosen for inspection by lifting out and examining in a good light may not have included those which were damaged: the MAN (main engine designers) report was that ‘some’ of the filter candles had damaged mesh). In the circumstances, Teare J was unable to find that on the balance of probabilities the damage would have been detected. It followed that this failure to exercise due diligence was not causative of the engine breakdown.

The crankweb deflections

After considering all the available evidence, the court concluded that a prudent engineer or superintendent would have decided, in the light of the May 2011 deflection readings, that bearing clearance measurements should be taken. The failure to do so was a failure to exercise due diligence to make the vessel seaworthy.

Had the measurements been taken, the best evidence (the MET report) is that they would have revealed an increase in clearance of significantly more than 0.05mm which would have indicated abnormal wear, thus necessitating a repair before the voyage could safely be undertaken. The failure to exercise due diligence was therefore causative of the subsequent engine breakdown.

Conclusion on liability

For the reasons set out above, the court found that the general average expenditure incurred by the owners was due to an actionable fault. The cargo interests were accordingly not liable to make a general average contribution. The claim against the defendants was therefore dismissed.

Quantum

Although unnecessary, given the court’s conclusion on liability, Teare J held, obiter, that the burden of proving that the general average expenditure was reasonably incurred lay upon the owners. That was the effect of Rule E and of the Rule Paramount.

Rule E (‘The onus of proof is upon the party claiming in general average to show that the loss or expense claimed is properly allowable as general average.’) does not expressly deal with the question of reasonableness but states a general rule which must encompass that question.

The Rule Paramount (‘In no case shall there be any allowance for sacrifice or expenditure unless reasonably made or incurred.’) makes clear that the person claiming a contribution in general average must allege and therefore prove that the expenditure or sacrifice was reasonably made.

That said, owners and managers when taking such decisions were also entitled to the benefit of the doubt if the circumstances were such that a prompt decision to obtain (in this case towage) assistance was required. Hindsight should not be taken into account.

In the present case, the circumstances in which the decision was taken to engage the tug Koyo Maru were that the Cape Bonny, a laden tanker, was adrift at sea having suffered a main engine breakdown. Whilst there was no danger of her grounding, she was immobilized at sea at a time when typhoon Ma-on was causing concern. It was therefore essential to have regard to the time at which the available tugs could reach the casualty.

Considering the evidence, Teare J was satisfied that the decision to engage Koyo Maru was reasonable. In the circumstances, he did not consider that it would have been prudent to delay the engagement of assistance by haggling over the price. He also found that it was reasonable to retain Koyo Maru until she was in fact dismissed, and to have discharged the cargo by STS (given how the Cape Bonny was refused entry into a Japanese port of refuge and her original Chinese discharge port)

It followed that the expenditure incurred by the owners was reasonable and that no deduction fell to be made in respect of the contribution in general average payable by the cargo interests.

However, since the expenditure was caused by the fault of the owners, no such contribution was in fact payable.