Factual and Procedural Background
On 14 July 2011, during a laden voyage from Argentina to China, the vessel CAPE BONNY, a Suezmax oil tanker built in 2005, suffered a main engine breakdown while attempting to avoid tropical storm MA-ON. Towage assistance was arranged on 18 July 2011 by the tug KOYO MARU. The vessel was denied entry to a Japanese port of refuge and was also not permitted to discharge cargo at the Chinese port of discharge. Consequently, the vessel proceeded to Yosu in South Korea where a ship-to-ship (STS) cargo transfer operation was conducted on 2 and 3 August 2011. Due to the approach of another tropical storm, MUIFA, the vessel was taken out to sea by KOYO MARU on 3 August and returned on 9 August 2011, after which KOYO MARU was released and the vessel berthed for repairs.
General average was declared, and on 28 July 2011 the Defendants provided a guarantee on behalf of the cargo interests to pay any contribution to general average properly due. An average adjustment was prepared on 13 March 2013 assessing the cargo's contribution at approximately US$2.5 million, later amended to about US$2.1 million.
The Defendants denied liability under the guarantee, alleging that the casualty was caused by actionable fault on the part of the Owners, specifically a failure to exercise due diligence to make the vessel seaworthy, and thus no amount was properly due from cargo interests. There were also quantum disputes relating to the engagement of KOYO MARU, the diversion to Korea, and the STS operation, with controversy over the burden of proof regarding the reasonableness of expenditure.
The Owners accepted the vessel was unseaworthy at the voyage's start due to metal particles in the luboil system but argued that the main engine failure was caused by weld slag particles originating from the vessel’s build in 2005, which broke off during the voyage. The Defendants contended the particles originated from spark erosion, chain drive gear damage, or poor cleaning procedures, and that the damage was avoidable by due diligence, pointing to warning signs such as crankweb deflections and Wear Particle Index trends.
The trial lasted eight days, involving multiple fact and expert witnesses, including marine engineers and technical superintendents. Both parties presented conflicting expert opinions on the cause of the engine damage and the exercise of due diligence.
Legal Issues Presented
- Whether the Owners exercised due diligence to make the vessel seaworthy before the commencement of the voyage under the Hague-Visby Rules.
- Whether the main engine breakdown was caused by actionable fault attributable to the Owners, thereby affecting the liability of cargo interests for general average contributions.
- The reasonableness of the general average expenditure incurred, including the engagement of the tug KOYO MARU, the diversion to Korea, and the STS operation.
- The allocation of the burden of proof concerning the reasonableness of the general average expenditure under the York-Antwerp Rules and the Rule Paramount.
Arguments of the Parties
Owners' Arguments
- The main engine failure was caused by weld slag particles originating from the vessel's build, which broke free during the voyage, constituting a latent defect.
- The vessel was seaworthy at the commencement of the voyage as due diligence was exercised, and the breakdown was not due to any negligence.
- The inspection and maintenance procedures, including filter checks and analysis of crankweb deflections, were adequate and complied with applicable standards.
- The engagement of KOYO MARU as the salvage tug was reasonable given the circumstances, and the diversion to Korea and STS operation were necessary and prudent responses to port refusals.
- The general average expenditure was reasonably incurred, and the burden of proving unreasonableness lay with the Defendants.
Defendants' Arguments
- The vessel was unseaworthy at the voyage's start due to abnormal wear of the no.1 main bearing and damaged luboil filters, resulting from failure to exercise due diligence.
- The particles causing the damage originated from spark erosion, chain drive gear failure, or improper cleaning procedures, all avoidable by proper maintenance.
- The crankweb deflection readings in May 2011 indicated abnormal wear that should have prompted further inspection and repair prior to the voyage.
- The Owners failed to carry out proper inspections of the luboil filters, notably by not lifting and examining filter candles as required.
- The decision to hire KOYO MARU, rather than a cheaper alternative tug, was unreasonable, as was the decision to divert to Korea and conduct an STS operation without adequate enquiry or cost consideration.
- The Owners bore the burden of proving that the general average expenditure was reasonable and failed to do so.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Mitsui v Beteiligungsgesellshaft LPG Tankerflotte [2017] UKSC 68 |
Interpretation of Rule F of the York-Antwerp Rules concerning fault in general average |
The court noted the decision but found it did not affect the construction or operation of Rule D in the present case. |
| The Atlantik Confidence [2016] 2 Lloyd's Reports 525 |
Assessment of witness evidence given through interpretation |
The court used this precedent to assess the credibility of witnesses providing evidence via interpreters. |
| The Marion [1984] 2 Lloyd's Reports 1 |
Shipowners' duty to ensure safe and efficient management of vessels |
The court applied this principle to emphasize that the duty cannot be discharged by relying solely on the master or chief engineer. |
| Popi M [1985] 2 Lloyd's Reports 12 |
Prohibition against reasoning by exclusion in causation |
The court rejected reasoning that excluded weld slag as cause and left bearing wear as cause without proper basis. |
Court's Reasoning and Analysis
The court carefully analyzed the factual and expert evidence concerning the cause of the main engine breakdown and the exercise of due diligence by the Owners. It accepted that foreign particles were present in the no.1 main bearing and that some filter candles had damaged mesh prior to the breakdown. The court found, on the balance of probabilities, that abnormal wear was present in the no.1 bearing as indicated by the significant increase in crankweb deflection measurements in May 2011, supported by finite element analysis and MAN operational manuals.
The court rejected the Owners' weld slag theory as improbable and unsupported by metallurgical evidence. It also found that spark erosion and chain coupling bolt failure may have contributed but were not proven causes.
Regarding due diligence, the court concluded that the Owners failed to conduct a proper inspection of the luboil filters in May 2011, as the inspection did not involve lifting and examining the filter candles as required. However, the court found that this failure was not causative since it was uncertain that a proper inspection would have revealed the damage.
More critically, the court found that the failure to investigate the significant increase in crankweb deflections in May 2011 constituted a failure to exercise due diligence. A prudent chief engineer or technical superintendent would have ordered bearing clearance measurements, which would likely have revealed abnormal wear necessitating repair before the voyage. This failure was causative of the breakdown.
The court further analyzed the reasonableness of the general average expenditure. It found the decision to hire KOYO MARU reasonable given the urgency and risks posed by the typhoon, and the estimated arrival times compared to alternatives. The diversion to Korea and STS operation were also reasonable responses to port refusals and receivers' unwillingness to accept delivery at alternative berths. Retaining KOYO MARU after 1 August 2011 was justified by operational necessities including weather conditions and port permissions.
Regarding the burden of proof on reasonableness of expenditure, the court held that under Rule E and the Rule Paramount, the Owners bore the burden of proving that expenditure was reasonable. The court found the expenditure reasonable and properly incurred.
Ultimately, the court concluded that the general average expenditure was caused by actionable fault of the Owners, specifically their failure to exercise due diligence in relation to the crankweb deflection readings, and therefore cargo interests were not liable to contribute to general average.
Holding and Implications
The claim against the Defendants for general average contribution is dismissed.
The court held that the Owners failed to exercise due diligence to make the vessel seaworthy, causing the main engine breakdown and resulting general average expenditure. As a result, the cargo interests guaranteed by the Defendants are not liable to contribute to general average. The court found the general average expenditure reasonable but barred recovery due to actionable fault.
No new precedent was established; the decision applies existing principles concerning due diligence, causation, and burden of proof in general average disputes.