MV "Cita" - Supreme Court

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Cargo interests on board MV "Cita" v. Time-charterers of MV "Cita"
Federal Supreme Court (Bundesgerichtshof – BGH); 26 October 2006 – I ZR 20/04
(see also DMC Case Note DMC/04//10 for the lower instance decision of the Hanseatic Court of Appeal of Hamburg)
Sinking of vessel because watch keeper asleep and watch alarm switched off: exclusion of liability for error in navigation –- s.607.2.1 German Commercial Code (Handelsgesetzbuch - HGB)
The German Federal Supreme Court ("BGH") had to consider a case where a vessel had stranded and sunk because the watch-keeping officer had fallen asleep and the watch alarm had been switched off. Upholding the judgment of the appeal court, the BGH found that the exclusion of liability for error in navigation (s.607.2.1 HGB*) included intentional and negligent behaviour of crew members that later on causes the sinking of the vessel without the sinking itself being controlled by human will. Accordingly, the fact that the watch alarm had been switched off and that the watch-keeping officer had fallen asleep constituted an error in navigation relieving the defendant time-charterer from liability

DMC Category Rating: Confirmed

This case note is contributed by BBL Rechtsanwalte of Hamburg, the international contributor to this website for Germany

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 DM 1 million and applied for a declaratory court order that the claim was valid. [The plaintiff 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 – the plaintiff claimed - 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.607.2.1 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 ("OLG") 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. The Hanseatic Court of Appeal in Hamburg changed the first instance judgement and held in favour of defendant that the exclusion for error in navigation applied. The plaintiff appealed against the OLG judgement to the German Federal Supreme Court (BGH).

The Bundesgerichtshof upheld the OLG judgment in favour of defendant.

It held that M/V "Cita" was not unseaworthy under s.559 HGB due to improper manning. It found that the manning complied with the Safe Manning Certificate. Further, the defendant had been entitled to accept the Certificate of Competency as sufficient proof of the qualification of officer X. Also a possible fatigue of the watch-keeping first officer at the beginning of the voyage could not have caused unseaworthiness of the vessel as such a defect could have been easily rectified by granting him sufficient time to rest after commencement of the voyage. The defendant was allowed to rely on the captain organising the watch-keeping properly.

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.

The BGH further held that the OLG rightfully adjudged that the defendant was not liable under s.606 HGB due to the exclusion of liability for an error in navigation (S.607.2.1 HGB). It held that all measures which could be considered as contributing to the cause of the loss - setting of a new course, not switching on the watch alarm, watch-keeping with only one instead of two persons, and fatigue of the watch-keeper - were measures of navigation and management of the vessel which led to the said exclusion of liability. The BGH also stated that, according to the clear wording of s.607.2.1 HGB, the exclusion of liability for error in navigation and management of the vessel applies not only in case of negligent conduct but also in case of intent.

Finally the BGH held that defendant, as time-charterer, had no obligation to cargo interests to attend to the proper use of the watch alarm. Therefore, an organisational fault of the management of the time-charterer was denied.

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 exclusion of liability for error in navigation seems to be a relic from the age before modern means of communication. It was justified with the argument that the shipowner could not influence the captain and the crew whilst the vessel was on a voyage. Nowadays a ship-owner has the same possibilities of controlling its captain as a haulier its truck driver – although the degree of control that may be appropriate may differ in the two cases.

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.

*HGB  (Handelsgeseztbuch)
S.606 HGB "The carrier shall be bound to exercise due diligence to properly and carefully load, handle, stow, carry, keep, care for and discharge the goods. He shall be liable for any loss of or damage to the goods from the time he has taken over the goods until the time he has delivered the goods, unless the loss or damage is due to circumstances that could not have been avoided by exercising due diligence on the part of the carrier"

S.607 HGB 
"The carrier shall be vicariously liable for any fault on the part of his servants and the crew.
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.

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