Facts
The defendant was time-charterer of MV "Cita". The owner of the Antigua registered vessel was the M Shipping Company of St. John’s, Antigua & Barbuda; the beneficial owner was the Dutch company D. Early in the morning of 26 March 1997 the "Cita" stranded off the Scilly Isles and sank. The cause of the stranding was that the first officer X, who been keeping watch on his own, had changed the course of the vessel and then fallen asleep at about 0100 hrs. When he woke up, the vessel had already stranded. The vessel was equipped with a functioning watch-alarm, the purpose of which is to ensure that the watch-keeper does not fall asleep. It was general practice on board to switch the watch-alarm off, even before the voyage in question.

The defendant had set up a limitation fund. The plaintiff, as assignee of two cargo interests, established a claim against the fund in the amount of DM1 million and applied for a declaratory court order that the claim was valid. [In the "Cita" case, the plaintiffs sued the time-charterer because the time-charterer was the (contractual) carrier, that is, the party by whom or in whose name the contact of carriage of goods by sea had been concluded with the shipper. As carrier, the time-charterer was liable for the loss of the goods pursuant to s.606* HGB.]

The plaintiff argued that the defendant was liable pursuant to s.559 HGB because the vessel had been unseaworthy. The first officer X was only qualified as a second deck officer. The Antiguan Safe Manning Certificate was not sufficient proof that the vessel was properly manned. Moreover, the behaviour of officer X evidenced that he was unable to manage the vessel properly because he had been keeping watch without the watch-alarm and without a second watch keeper. This constituted an infringement of the Standards of Training, Certification and Watchkeeping Convention ("STCW") 1978 which had also been incorporated into English law. Given that the casualty occurred off the Scilly Isles, English law was the law of the place where the accident took place. The defendant was also liable pursuant to s.606 HGB because the loss had been caused by want of due diligence on the part of the carrier. The true cause of the loss was not an error in navigation, but rather ‘faulty business organization’ because the watch-keeping officer, who had been supervising the loading of the vessel before departure, had not been granted sufficient time to rest.

The defendant maintained that the vessel had been seaworthy and properly manned at the commencement of the voyage. The fact that the watch-alarm had been switched off constituted an error in navigation and thus an exclusion of liability pursuant to s.607.2 HGB. Any alleged infringement of the SCTW 1978 and 1995 was not relevant because these conventions had not been in force for Antigua at the time of the loss. Officer X had been granted sufficient time to rest. Moreover, any behaviour in connection with the watch keeping was the sole responsibility of the master.

The Regional Court (Landgericht) Hamburg held in favour of the plaintiff that the defendant was vicariously liable for the behaviour of its servants pursuant to ss.606 and 607.1* HGB. The exclusion for error in navigation according to s.607.2* HGB did not apply. This was an exception the scope of which had to be construed restrictedly.

The defendant appealed and argued, principally, that the Landgericht had erred in denying an error in navigation.

Judgment
The Oberlandesgericht overruled the decision of the Landgericht and held in favour of the defendant. S.559 HGB did not apply because the vessel had been properly manned and was accordingly not unseaworthy. The defendant had been entitled to accept the Certificate of Competency as sufficient proof of the qualification of officer X. Further, there was nothing in the conduct or behaviour of officer X that would constitute unseaworthiness of the vessel. It could not be assumed that officer X was incompetent simply because a) he may have been too tired when the vessel sailed or b) he had insufficient knowledge of the applicable regulations on watch-keeping. Even if the officer had been tired at the commencement of the voyage, such condition could have been rectified by granting him sufficient time to rest after sailing. Irrespective whether the STCW 1978 and 1995 applied to an Antigua registered vessel, the organization of watch-keeping was in any event the sole responsibility of the master and not that of the first officer. Thus, any ignorance of the latter of the relevant regulations could not lead to an assumption of insufficient manning.

Neither was the defendant liable for lack of organisational measures to ensure a proper watch-keeping. Although the crew did not know about the requirements of two watch-keepers, it could not be assumed that such ignorance was due to any fault in organisation on the part of the defendant. It was true that at the time of the loss the Merchant Shipping (Certification and Watchkeeping) Regulation 1982 - requiring two persons on the bridge - had been in force at the place of the casualty, although not under the law of the vessel’s flag. However, it would be too high a standard of duty to demand from the carrier that he research in advance the legal provisions that might apply to the route taken by the vessel in any particular trade. This would be otherwise only if Notices to Mariners (Merchant Shipping Notices) with the corresponding information had been readily accessible to the carrier at that time.

Finally, the defendants were not liable pursuant to s.606 HGB because the loss had been caused by an error in navigation. That meant that the liability of the defendants was excluded by s.607.2.1 HGB. The conduct of the navigation or management of the vessel included such behaviour that was an omission rather than an action, such as not switching on the watch-alarm or the watch-keeping officer not staying awake. Such behaviour affected the operation of the vessel in the same way as the non-correction of the vessel’s course or the failure to check the compass or radar.

In view of the clear wording of s.607.2.1 HGB, the court found itself prevented from reducing the scope of application of this provision by way of judicial construction, since the legislature had to date, in spite of a) the well-known concerns about this provision and b) the technical developments in shipping, not seen the need for any adjustment.

In view of the general significance of the issues raised, the court has allowed an appeal to the Federal Court of Justice (BGH).

Comment
Although justifiable in view of the wording of s.607.2.1 HGB (which generally corresponds to Art.IV R.2(a) of the Hague Visby Rules), the result of this judgment is unsatisfactory. The OLG itself makes it clear that it finds the current legal situation far from satisfactory, and calls on the legislature to adjust the exclusion of liability to today’s circumstances in shipping. It is questionable whether the case could have been decided in the same way if the loss had occurred after the entry into force of the ISM Code. In view of the clear allocation of responsibilities on all levels of the management and the high standard of information and documentation set by the ISM Code, it would seem problematic to deny a liability of the carrier if certain precautionary organisational measures relating to watch-keeping were not taken. Particularly the fact that master and crew did not have notice of the requirements of the Merchant Shipping (Certification and Watchkeeping) Regulation would suggest a different approach to the question of the carrier’s fault in organising his business and in the management of the vessel. Accordingly, the judgment should not be considered as a confirmation of an extensive and irrevocable concept of exclusion of liability for error in navigation but rather as a warning that this bastion cannot necessarily be relied upon in the future.

S.607 HGB

1. "The carrier shall be vicariously liable for any fault on the part of his servants and the crew.

2. If the loss is due to any conduct in the navigation or management of the ship or to fire, the carrier shall only be liable if there is actual fault or privity on his part. The management of the ship does not include such conduct that is primarily directed towards the care of the cargo."