MT 'Cape Bonny' Tankschiffahrts GmbH & Co KG v Ping AN Property and Casualty Insurance Company of China Ltd & Anor, Court of Appeal - Commercial Court, December 04, 2017, [2017] EWHC 3036 (Comm)

Issuing Organization:Commercial Court
Actores:MT 'Cape Bonny' Tankschiffahrts GmbH & Co KG v Ping AN Property and Casualty Insurance Company of China Ltd & Anor
Resolution Date:December 04, 2017
 
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Case No: CL-2013-000790

Neutral Citation Number: [2017] EWHC 3036 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Rolls Building, 7 Rolls Buildings

Fetter Lane, London EC4A 1NL

Date: 04/12/2017

Before :

MR. JUSTICE TEARE

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Between :

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Robert Bright QC and Saira Paruk (instructed by Reed Smith LLP) for the Claimant

Christopher Smith QC and Sean Snook (instructed by Rodgers Liu & Assoc. Solicitors (Asia) Pte. Ltd) for the Defendant

Hearing dates: 9, 10, 11, 12, 16, 17, 18 and 19 October 2017

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JudgmentMr. Justice Teare :

Introduction

  1. On 14 July 2011, in the course of a laden voyage from Argentina to China, CAPE BONNY, a Suezmax oil tanker built in 2005, suffered an engine breakdown. The timing of the breakdown was unfortunate; the vessel was seeking to avoid tropical storm or typhoon MA-ON. Towage assistance was required and on 18 July 2011 the vessel was taken in tow by KOYO MARU. The vessel was not permitted to enter a Japanese port of refuge or to discharge her cargo in the Chinese port of discharge. She was therefore taken to Yosu in South Korea where her cargo was transferred into another vessel by an STS operation on 2 and 3 August 2011. Due to the approach of another tropical storm or typhoon, MUIFA, KOYO MARU took the vessel out to sea on 3 August and returned on 9 August 2011. KOYO MARU was then released and the vessel was berthed for repairs.

  2. General average was declared and on 28 July 2011 the Defendants provided a guarantee on behalf of the cargo interests by which they promised to pay any contribution to general average ``which may hereafter be ascertained to be properly due.'' In due course, on 13 March 2013 an average adjustment was prepared which assessed cargo's contribution to general average in the sum of about US$2.5m. The adjustment was later amended assessing cargo's contribution to general average at approximately US$2.1m.

  3. Rule D of the York-Antwerp Rules provides as follows:

    ``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.''

  4. Although the usually calm waters of general average have recently been disturbed by the decision of the Supreme Court in Mitsui v Beteiligungsgesellshaft LPG Tankerflotte [2017] UKSC 68 regarding Rule F of the York-Antwerp Rules there is in the present case no dispute as to the true construction of Rule D and how it operates. Rule D is explained in Scrutton on Charterparties, 23rded. at p.518 and in Lowndes and Rudolf on General Average 14thed. 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.

  5. The Defendants have denied any liability under the guarantee, alleging that the casualty was caused by actionable fault on the part of the Owners of CAPE BONNY, namely, a failure by the Owners to exercise due diligence to make the vessel seaworthy and accordingly no amount was ``properly due'' from cargo interests. In the event that a contribution in general average is properly due there are quantum disputes concerning the engagement of KOYO MARU, the diversion to Korea and the STS operation. In this connection there was controversy as to who bore the burden of proof that expenditure was reasonably incurred, in the light of the Rule Paramount and Rules A and E.

    Outline of the dispute

  6. The Owners accept 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 but not (at the commencement of the voyage) circulating within the luboil itself. The burden therefore lies 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. They say that they can discharge that burden of proof because the main engine failure was caused by sudden and catastrophic damage to the no.1 main bearing caused in turn by the metal particles which had been present in the luboil piping from the date of build (in 2005) -referred to as weld slag - breaking off from that piping during the voyage in a period of bad weather, working their way through the lub oil piping into the bearing assemblies over a period of weeks and then rapidly causing damage to the no.1 main bearing.

  7. By contrast the Defendants do not accept that the particles were weld slag. They say that the particles had been generated by spark erosion or by damage to the vessel's chain drive gear or had been permitted to enter the engine by poor procedures when the crew were cleaning the filters. They further say that there was progressive wear to the no.1 main bearing shells caused by damaged luboil filters failing to remove the particles from the lub oil. They say that the damage to the no.1 main bearing was avoidable by due diligence. The crankweb deflections in May 2011 should have alerted the crew and managers to the problem, as should the trend in the Wear Particle Index (``WPI'') in the lub oil analyses. Failing to maintain in good condition the shaft earthing device (which should have prevented spark erosion) and the lub oil filters (which should have removed the particles from the luboil) was also a failure of due diligence as was the failure to use proper procedures when cleaning the lub oil filters.

    The vessel

  8. The vessel is 274.47m. in length, of 81,076 tons gross and has 12 cargo tanks. She was built in 2005 by Hyundai, South Korea and is powered by a MAN B&W 6S70ME-C engine which develops a service rated output of 22,790 BHP at 87.9 rpm. She is classed with the American Bureau of Shipping.

  9. The vessel is owned by a German company and managed by Columbia Shipmanagement (``CSM''), one of the world's largest ship managers. The headquarters of CSM is in Cyprus but it has offices in Hamburg and Singapore. The vessel was managed from the Hamburg office. The Hamburg office had a Safety Management System (``SMS'') which complied with the requirements of the International Management Code for the Safe Operation of Ships and for Pollution Prevention (the ``ISM Code''). The Hamburg office managed a fleet of 83 vessels. The master, officers and crew of CAPE BONNY were Russian and East European.

  10. In view of the nature of the dispute it is necessary to mention certain parts of the main engine. The vessel's main engine has six cylinders numbered 1-6, fore to aft. The crankshaft is driven via the piston, connecting rod and crankpin of each cylinder. The crankpins are the outermost part of the six crankthrows, each formed by a pair of crankwebs. Each section of the crankshaft main journal is enclosed and supported by a bearing of tin/aluminium and is separated from the bearing by a film of luboil. Luboil in the sump tank passes through a filter and a purifier before entering the gap between the crankshaft and the bearing.

  11. The lub oil filters (of which there were two) were designed to remove all particles greater than 40 micron from the oil. The purifiers were designed to remove even smaller particles. The filters consisted of six chambers with 18 cartridges (or candles) and also one paper cartridge for back flushing, a form of cleaning. Back flushing was controlled by a timer. It was set to occur every four hours. In addition, where the differential pressure between the lub oil outlet and the lub oil inlet was too great, indicating clogging of the filter, back flushing was initiated automatically. The engineers on board could manually activate further back flushing.

  12. MAN caution against opening up of the bearings because bearings made of tin/aluminium suffer from minimal wear and because opening up risks the introduction of foreign particles. ``Inspection'' therefore takes place by other methods, one of which is the taking of crankweb deflection measurements and, if required, measurements of the top clearance between the shaft and the bearings. The latter can reveal wear of the bearings.

    Investigations by MAN, the main engine designers

  13. Following the salvage of the vessel (performed on commercial terms by KOYO MARU) and the discharge of her cargo the main engine was repaired in Korea. Representatives of MAN were present from 6 August to 26 September 2011 to assist with the repairs and to investigate the ``root cause'' of the damage to the no.1 main bearing. MAN produced a ``root cause'' report dated 20 October 2011. That report stated that such was the extent of the damage to the main bearing that the damage itself could not reveal the cause. Two main sources were suggested. The first was ``foreign particles in the bearings''. It was said that such particles could not be excluded as the cause and ``may have entered the engine during new building at the shipyard or during incorrect filter cleaning procedure, or as a combination of these sources.'' The second was spark erosion, ``where the electrical potential of the crankshaft discharges through the main or thrust bearings instead of via the earthing device mounted on the propeller/intermediate shaft.'' However, MAN said that ``considering the signs of spark erosion, it may not be a contributing factor.'' MAN added that it may have been possible to detect the ``maturing bearing failure'' during the last deflection measurement in May 2011.

  14. It is clear from MAN's report that the cause of the damage to the no.1 main bearing is not obvious....

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