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OCEAN VICTORY: Unitary approach prevails – no breach of safe port warranty

Maritime practitioners have been eagerly awaiting the Supreme Court’s judgment in Gard Marine & Energy v China National Chartering Company Limited (“the Ocean Victory”) [2017] UKSC 35 and today they have it. The basic facts are relatively well-known: the vessel was demise, time, and further sub-time chartered with all charterparties containing a safe port undertaking. The sub-time charterers ordered the vessel to Kashima in Japan, a port whose quay was vulnerable to “long waves” which can require a vessel to leave the port. The route in and out at Kashima is through a narrow channel which can be subject to northerly gales. Coincidentally, the Ocean Victory, seeking to leave the port on 24 October 2006 due to long waves at the quay was subjected when so doing to severely northerly gales in the channel. The vessel grounded and became a total loss. Was there a breach of the safe port undertaking?

The test for a safe port derives from the dictum of Sellers LJ in The Eastern City [1985] 2 Lloyd’s Rep 127, 131 that ‘a port will be safe unless, in the relevant period of time, the particular ship can reach it, use it and return from it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship…’. The date for judging the safety is the date of nomination, i.e. is the port nominated a prospectively safe one in light of its predicted characteristics? As Lord Clarke, giving the leading of the Supreme Court this morning, put it at [28]:

‘In short, I would accept the charterers’ submission that the first question is whether a reasonable shipowner in the position of the particular shipowner trading the ship for his own account and knowing the relevant facts would proceed to the nominated port. If the answer is “yes unless there is an abnormal occurrence”, the port is prospectively safe for the particular ship and the promise is fulfilled. In a case where the vessel suffers loss or damage, a second question arises, namely whether there was damage caused by an abnormal occurrence as defined above.

In The Ocean Victory, the safe port point was in essence whether the coincidence of the long waves and the northerly gale in the channel constituted an abnormal occurrence.

In the High Court, Teare J had found no abnormal occurrence (essentially because both long waves and northerly gales in the channel were, in and of themselves, relatively normal) and that consequently there was a breach of the safe port warranty. The Court of Appeal disagreed, and the Supreme Court has this morning unanimously dismissed the owners’ appeal, upholding the judgment of the Court of Appeal. Lord Clarke noted that Teare J had erred in failing to answer the unitary question as to the effect of the simultaneous coincidence of the long waves and the northerly gales. Agreeing with the Court of Appeal at [41], Lord Clarke found support in his conclusion in the fact that no vessel in the port’s history had been trapped at the quay at the same time as the exit channel was not navigable. This led to the conclusion that the simultaneous coincidence was abnormal. The test is not unforeseeability, but abnormality. The coincidence may have been foreseeable, but that did not make it normal or characteristic.

The decision on the safe port point emphasises the factual nature of a safe port dispute. One is concerned with whether the event causing the damage is abnormal. That requires consideration of the sum of the event, rather than its parts.

Two other issues arose before the Supreme Court concerning (1) the scope and application of the rule that co-insureds cannot claim against each other in respect of an insured loss; and (2) the applicability of the 1976 Convention on Limitation of Liability for Maritime Claims in the circumstances where the ship itself is damaged. In brief, the Court ultimately concluded that had there been a breach of the safe port warranty, Gard (who were assignees of the owners and demise charterers but in their capacity here as assignees of the demise charterers) would not have been able to recover the insured value of the vessel from the time charterers on account of the demise charterparty providing for joint insurance and a distribution of insurance proceeds as between Gard’s insureds (the owners and demise charterers). The demise charterparty thus precluded the owners’ claim against the demise charterers, so the latter had no claim to pass down the line to time charterers. On the limitation point, the Court held, agreeing with the Court of Appeal in The CMA Djakarta [2004] 1 Lloyd’s Rep 460 that the Convention did not apply to loss or damage to the ship itself. 

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