Facts
Supplementing the facts given in the above summary, the owners’ claim amounted to GP£2.491 million and was founded on allegations that the classification society (‘ABS’) had failed in its duties to the owners by not insisting on the installation of a fire detection system in the yacht’s engine room and by improperly approving the fixed fire extinguishing system (the ‘FFES’) that was installed on board, which, in the owners’ submission, was subject to a number of critical defects. These included allegations that ABS had failed to ensure that the engine room could be rendered airtight to ensure the effectiveness of the CO ₂ system and that the automatic closure of the fuel supply to the engines included in the FFES would not shut the engines down quickly enough to enable the CO ₂ injections to be effective. Owners further alleged that the engine push button stop systems accepted by ABS should have been configured to stop the engines when de-activated, rather than when activated.

The Award
The panel accepted that a classification agreement, such as that between the owners and ABS in this case, was a maritime contract which would be governed by the general maritime law as applied in New York, the agreed place of arbitration under the contract. Any fault or neglect would accordingly constitute a maritime tort, and be subject to the same law. The standard of care to be applied to ABS’ technical effort in this case was the same standard generally applicable to naval architects and marine engineers and similar technical experts, namely that of the ordinary and reasonable skill usually exercised by, in this case, classification society surveyors.

But the panel then drew the important distinction that class societies and their surveyors are not chargeable with duties corresponding to those of the owners’ design agents, naval architects and marine engineers, who select and adapt and adjust for all the factors in producing a final design. The class society’s surveyor’s role is narrower. He inspects and observes the design that is presented to him, probably first at the plan approval level and then performs two duties, as stated in the case of Great American Insurance Company v. Bureau Veritas, affirmed by the Court of Appeals for the Second Circuit in 1973. These are, firstly, to survey and classify vessels in accordance with rules and standards promulgated by the society for that purpose and secondly, to use due care in detecting defects in the ships it surveys and notifying them to the owner. The panel held that the class society and its surveyors are not responsible for insisting that all design decisions result in the best choice for this or that purpose. This is true so long as the trade-offs inherent in design do not go so far as to violate existing rules or regulations or result in an unsafe or seriously defective condition. Nor are class societies or their surveyors under any duty to recommend additional optional safety features not required by their rules or the regulatory authorities, in the absence of serious, dangerous defects. In other words, they are not overall safety/seaworthiness guarantors.

The panel concluded that for them to find ABS liable in the instant case in contract or tort, there would have to be direct evidence of an unreasonable failure on its part in line with the standards of skill normally exercised by class society personnel, to have required the correction of a specific defect in the yacht and that such a defect, or a combination of similar such defects, was a substantial factor in causing the fire to run out of control and the yacht to sink. If a class society fails to advise an owner of a condition not readily apparent to such owner, which it perceives or should perceive creates an unsafe condition and should be corrected, with the result that the vessel is damaged or lost, the class society should respond in damages. But there needs to be direct evidence connecting that negligence causally to the loss or damage sustained.

The panel held that the owners failed to establish such a state of affairs in this case. The panel did not know whether, if the fire did start in the engine room, as, on balance it was prepared to find, it would have been extinguished but for one or more of the alleged defects and shortcomings claimed to exist on board the yacht. The panel said that it had "no idea as to what contribution, if any, any of these conditions made to the fact that the fire burned out of control and sank the [yacht]". The panel found that, given the volume of air/CO ₂ used by the engines while running, the failure to stop the engines [by reason of the unexplained malfunction of the stop buttons on the flying bridge and in the wheelhouse] nullified any realistic possibility that the CO ₂ system in the engine room could extinguish the fire, which the panel found, on the evidence, to be in an advanced stage and outside the engine room when the system was activated.

The panel accepted that there may have been some mistakes or misjudgments in the totality of the work done by ABS for the owners, but these had not been shown to cause the loss of the yacbt. As regards the absence of a fire detection system in the engine room, the panel held that, as of 1990, the relevant rules of ABS did not require pleasure boats to have engine room fire alarms. Moreover, the owners had not established that the presence of an alarm in the engine room would have enabled the fire to be extinguished. Thus the absence of a fire alarm had not been proved to be a proximate cause of the loss. The panel concluded "These fibreglass laminates are so extremely flammable, so easily ignited and a fire burning them so very difficult to extinguish that the likelihood of a detection system providing an early enough warning to enable such a fire to be controlled is highly conjectural. These same conditions make successful extinguishment of a fibreglass fire, even if confined to the engine room, by use of a CO ₂ FFES…. similarly conjectural." The panel held that ABS never warranted that the FFES would extinguish any engine room fire.

As for the FFES itself, owners were correct in their assertion [which ABS had contested] that, at the relevant time, there was an ABS requirement that a FFES be installed in the engine room, as was done here. But since there was such a system fitted, the apparent misinterpretation of its own rules by ABS could not engender liability but, of course, its testing and evaluation of the FFES must have been up to standard. The panel did not consider the CO ₂ containment features of the FFES to constitute a defect to which ABS should have objected, particularly since the system presupposed stopped engines and little, if any, forward speed.

Claimants had further criticised ABS for the positioning of the remote-activated fuel turn-off valves in the engine room, claiming that these were placed at a considerable distance from the engines, and the fuel tank side (rather than the engine side) of two large cylindrical filters serving each engine. As a result, , even after the valves were activated, there would have been sufficient fuel left in the lines and filters to keep the engines running sufficiently long to dissipate all of the injected CO2. The tribunal, however, felt that it could not hold ABS liable for the loss without better proof of the defective location of the turn-off valves and without proof that the fire was confined to the engine room at the relevant times.

In denying all of the Claimants’ claims, the tribunal concluded with the following comments:
"Claimant has launched an encyclopaedic attack on ABS’ performance on the [vessel], proceeding with monumental industry and perseverance at every stage, but this massive, extremely thorough effort has strayed from normal workaday realities. Claimant is seeking to transform ABS’s role from classification society to overall safety guarantor when it asks us to hold ABS liable for the consequences of this fire which originated and flourished under circumstances unknown….. ABS was not owner’s supervising engineer or independent marine surveyor and did not become such because Claimant did not engage such an engineer or surveyor. Nor [as the jurisprudence makes clear] is ABS a safety guarantor."