Grand Champion Tankers Ltd v Norpipe A/S (Marion)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE DUNN,LORD JUSTICE PURCHAS,THE MASTER OF THE ROLLS |
| Judgment Date | 20 May 1983 |
| Judgment citation (vLex) | [1983] EWCA Civ J0520-2 |
| Docket Number | 83/0212 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 May 1983 |
[1983] EWCA Civ J0520-2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (ADMIRALTY COURT)
(MR. JUSTICE SHEEN)
Royal Courts of Justice.
The Master of the Rolls
(Sir John Donaldson)
Lord Justice Dunn
and
Lord Justice Purchas
83/0212
1981 Folio 556
MR. GORDON POLLOCK, Q.C., MR. DAVID STEEL, Q.C. and MR. CHARLES McDONALD (instructed by Messrs. Coward Chance) appeared on behalf of the Appellants.
MR. ANTHONY CLARKE, Q.C. and MR. JEREMY RUSSELL (instructed by Messrs. Clyde & Co.) appeared on behalf of the Respondents.
On the 14th March, 1977 the Liberian tanker "Marion" came to anchor off Hartlepool in a position about 2.7 miles east of the Heugh. Four days later "Marion" attempted to weigh anchor. She was unable to do so because, as was subsequently discovered, her anchor had fouled an oil pipeline running from Ekofisk Field through Tees Bay to Teesside. The pipeline was severely damaged by the "Marion's" anchor. The immediate cause of the damage, as found by the judge, was the negligence of the master, Captain Potenza, in navigating the vessel when he came to anchor on the 14th March off uncorrected charts upon which the pipeline was not shown. In the course of the subsequent liability action the owners admitted vicarious liability for that negligence, described by the judge as an "inexcusable lapse from ordinary and proper standards of care in navigation".
The owners sought to limit the amount of their liability under section 503 of the Merchant Shipping Act 1894 as amended by the Merchant Shipping (Liability of Ship Owners and Others) Act 1958 on the ground that the damage to the pipeline was caused without their actual fault or privity. The judge found for the owners in the limitation action. He held that the provision and maintenance of the charts, including their correction, being matters incidental to navigation, fell within the sole responsibility of the master, and found on the evidence that the owners were justified in relying on the master to ensure that the vessel was provided with adequate and up to date charts of the areas to which she traded.
The appellants, mostly oil companies claiming to be entitled to damages by reason of the damage caused to the Tees/Ekofisk pipe by "Marion's" anchor, appeal on the ground that authorities decided over the last 20 years establish that it is not now sufficient for a shipowner to leave to the master, without any supervision, the whole responsibility for the adequacy of a vessel's charts, even though incidental to navigation. The reasons for that are said to be the increased number of casualties in recent years due to inadequate or uncorrected charts, and the amount of damage caused by casualties involving tankers and pipelines. Consequently it is in the interest of safety that owners should lay down and maintain a proper system to ensure the use of up to date charts on board their vessels. The appellants submit that, contrary to his findings, the evidence before the judge showed that the majority of reputable shipowners now have a system for the inspection and checking of charts by shore management and do not leave these matters to the exclusive responsibility of the master.
Certain matters were common ground in this court. It was agreed that where as here the vessel was owned by one limited company and managed by another limited company, the court looks to the managing company when considering whether the owners are guilty of actual fault. (See Lennards Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd. (1915) Appeal Cases 705; and The "Charlotte" (1921) 9 Lloyd's List Reports 347). In this case the vessel formed part of a small fleet owned effectively by the Sugaharas, a Japanese American family. She was built in Japan in 1960 and carried a Japanese crew until 1967. Thereafter she sailed with Italian officers and a Pakistani crew. From 1960 to 1975 she was under demise charter to a Panamanian company Pomona Co. Inc. and thereafter owned by the Liberian company Grand Champion Tankers Ltd. From 1966 to 1970 she was managed and operated by a small company R.J. Chisnelli; from 1970 to October 1974 by Odyssey Inc. based in New York and from October 1974 onwards by Fairfield Maxwell Services Ltd. (F.M.S.L.) based in London. All these companies were associated with the parent company Fairfield Maxwell Ltd. which was effectively owned by the Sugahara family, so that the changes of ownership and management remained within the group. Other vessels managed by F.M.S.L. were the tanker "Euros" and the survey vessel "Aqua Star" which also formed part of the Sugahara fleet.
Over the 34 days that the case lasted the evidence was directed primarily to an examination of the affairs of F.M.S.L. as managers at the relevant time. It was accepted in this court following Tesco Ltd. v. Nattress (1972) Appeal Cases 153 that the natural persons to be treated in law as being the company, when considering actual fault, were those members of the board of directors concerned with the management of the vessel, and not the subordinate managers. On that basis two persons were regarded successively as the alter ego of the company; the two managing directors, from October 1974 to August 1975 Mr. Leland Smith, a U.S. citizen, and thereafter Captain Downard, a British national. The essential question at the trial was whether either or both of those two persons were guilty of actual fault.
In October 1974 Mr. Leland Smith was 68 years old. He had a lifetime of experience in the operation of oil tankers. He had worked for the Standard Oil Co. of California and for Caltex, where he had been Vice President of the tanker fleet. Since 1971 he had been Vice President and Director of Fairfield Maxwell Inc., not directly involved in the management of "Marion", though a friend and colleague of Mr. Reinhard, the chartering manager of Odyssey.
When it was decided to transfer the management of "Marion" from New York to London, Mr. Leland Smith was asked to establish F.M.S.L. with Mr. Lowry as operations manager. Mr. Lowry had formerly been employed by Chianelli and Odyssey, where he was assistant operations manager to Mr. Reinhard. From October 1974 Odyssey retained the chartering responsibility for "Marion", but all other aspects of her management were transferred to F.M.S.L. Mr. Lowry did not possess a master mariner's certificate, although he had served in the U.S. Navy, and in January 1975 Mr. Graham was employed by F.M.S.L. as assistant operations manager. Thereafter Mr. Lowry concentrated on insurance and financial matters, with Mr. Graham in charge of the day to day management of the vessel though reporting to Mr. Lowry and subject to his direction. Mr. Graham was a master mariner, with 12 years' experience with B.P. Tankers Ltd., mostly at sea. The intention was that the U.S. personnel at F.M.S.L. should gradually be replaced by British, with Mr. Graham becoming operations manager and Mr. Lowry returning to the U.S. Mr. Martinengo was an engineer superintendent employed by Odyssey, who continued in this capacity under contract to F.M.S.L. There was no marine superintendent as such, and on his frequent visits to the vessel Mr. Martinengo acted as sole owner's representative, and dealt with deck as well as engineroom matters. He did not at all concern himself with the provision or correction of charts, or with any system on board for recording corrections.
For many years "Marion" had been under charter to Mobil, trading principally between the Mediterranean ports and ports in the North American continent. When visiting U.S. ports she was required by local coast guard regulations to use U.S. charts. In 1975 the Mobil charter ended, and "Marion" traded on the spot market thereafter. As a result of her previous pattern of trading "Marion" had predominantly U.S. charts, and received U.S. notices to mariners. Odyssey left it entirely to the master to requisition for the charts he required for the particular voyage, and to ensure that the charts were kept up to date from the U.S. notices to mariners, and by the purchase of new charts when required. For the greater part of the time since 1967 Captain Potenza was master. Odyssey never questioned any of his requisitions for charts, and faithfully fulfilled Captain Potenza's requirements. Once the management was transferred to F.M.S.L., British Admiralty charts were predominantly used in the place of United States charts, but the system whereby the master was responsible for requisitioning for the charts he required, collating them, and keeping them up to date, continued.
Very soon after Mr. Graham joined F.M.S.L. he communicated with J.D. Potter Ltd., the Admiralty agents for charts. They wrote on the 10th January, 1975 offering certain chart services. These were: (1) The B.N.I.T.A. tracing overlay system which involved the weekly issue of tracings in wallets containing the current British Admiralty notices to mariners. (2) A chart correction list whereby Potters extracted from the Notices to Mariners the information applicable to the vessel's chart index. (3) A new edition service whereby Potters despatched new editions of charts applicable to the vessel's chart index, and (4) A chart outfit overhaul whereby the complete outfit of charts was off-landed and brought to Potter's premises for up-dating. Mr. Graham recommended that all four services be accepted, but Mr. Lowry was content with the existing system, although he agreed to the introduction...
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