Mercuria Energy Trading Pte v. Raphael Cotoner Investments Ltd (The Afra Oak) [2023] EWHC 2978 (Comm)
If the master of the chartered vessel, in breach of charterer’s employment instructions, causes a loss to the charterer, would the owner be entitled to rely on Article IV(2)(a) of the Hague-Visby Rules (error in navigation) as a defence in a claim brought by the charterer for compensation? This was the central issue in The Afra Oak. The facts are relatively straightforward. On 7 February 2019, the charterers instructed the owners “to proceed to Spore EOPL for further orders.” On 9 February, the master, while on passage, took a decision to anchor within Indonesian territorial waters to wait for orders on the basis that it was an easier place to anchor. On 12 February 2019, the Indonesian Navy detained the vessel and arrested the master. It transpired that the vessel was not entitled to anchor under the United Nations Convention on Law of the Sea (UNCLOS) 1982 in Indonesian territorial waters and such anchoring was prohibited by Indonesian law and by doing so the master committed a criminal offence which he was convicted for in October 2019. The charterer demanded damages from the owner by claiming that the vessel was unseaworthy (due to the fact that the master had a disabling lack of knowledge in relation to anchoring in territorial waters) and also the actions of the master amounted to breach of its employment instructions. The arbitration tribunal held against the charterer on the first issue (that the vessel was unseaworthy) but decided in its favour on the second (i.e. the actions of the master amounted to breach of employment instructions given). However, this was not adequate to bring victory to charterer in the present case as the tribunal also held that the owner was entitled in this instance to rely on Article IV(2)(a) of the Hague Rules (there is no difference between Hague and Hague Visby Rules in this respect and the Rules were incorporated in this instance into the charterparty) which provided a defence to the owner. This provision states:
“Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from: (a) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship….”
The charterer appealed to the High Court contending that the tribunal made an error in law in holding that Article IV(2)(a) of the Rules would be applicable in the present case. The charterers case primarily based on the House of Lords decision in The Hill Harmony [2001] 1 AC 638 where the owner was not allowed to rely on the same exception when it opted to follow a route different than the one recommended by the charterer. More precisely, the master declined to take the shorter northern circle route recommended to charterers by a weather routeing service for a trans-Pacific voyage and took the longer more southerly rhumb line route. He did so because on a previous trans-Pacific voyage, the vessel had encountered very bad weather and had suffered damage. The House of Lords were adamant that in such a case the owner could not rely on the “error in navigation” defence as the master had no rational justification for doing what he did.
Sir Nigel Teare was able to distinguish the present case than The Hill Harmony stressing that the master here simply failed to exhibit good navigation and seamanship in failing to take into account of the risk of anchoring in Indonesian territorial waters. Put differently, in this instance what caused the master to fail to comply with the charterer’s order was his failure to exhibit good navigation and seamanship. Conversely, in The Hill Harmony the master’s choice of route was not caused by any error in navigation or seamanship.
Sir Nigel Teare, correctly in author’s view, came to the conclusion that The Hill Harmony was not authority for the proposition that where there has been a failure to follow an employment order the exception in respect of a fault in the navigation of the vessel is unavailable. He stressed that there could be instances like The Hill Harmony where the master not due to any error in navigation and seamanship (but simply due to a commercial choice) takes a decision in breach of the employment instructions. In such cases, the navigational error defence found in Article IV(2)(a) of the Rules would not be open to the owner. However, in a case like the present one the defence might certainly be available, It is worth noting, however, that to be able to rely on the defence it is essential for a shipowner to demonstrate that the master’s actions were in the navigation or management of the vessel and an exercise of (poor) seamanship! Sir Teare’s judgment is a sigh of relief to owners especially when trading to ports where territorial boundaries in surrounding waters can be unclear. In such places, any mistake made by the crew in determining the place of anchorage (or making any other navigational decision) which might cause loss to the charterer might provide a defence to the owner if the Rules are successfully incorporated into the charterparty.
