398. Gard Marine & Energy Ltd v China National Chartering Co Ltd & others (the “Ocean Victory”) [2013] EWHC 2199 (Comm) ;[2015] EWCA Civ 16; [2017] UKSC 35

Safe port warranty – port of Kashima affected simultaneously with long waves and a force 9 gale – running aground and breaking up – charterers not in breach of safe port warranty

The Facts

The vessel, a Capesize Bulk Carrier, was ordered on a time charter trip on an amended NYPE form to carry iron ore from Saldahna Bay to Kashima.

The vessel was on demise charter for 10 years which provided that the vessel was to be deployed only between “good and safe ports”. A time charter followed for a minimum of 5 months, maximum 7 months via “safe anchorage(s), safe berth(s), safe port(s) on an amended NYPE form.  Last in the chain was the time charter trip via safe port(s), safe anchorage(s) South Africa, mentioned above.

During the course of discharge at the Raw Materials Quay at Kashima, cargo operations were stopped by heavy rain. The weather reports warned of high seas, heavy rain, gales and storm surge.

At the same time there were “long” waves (waves with long amplitude) moving in from the Pacific causing swell and the danger of collision against the quay. To make allowance for this, additional mooring lines were ordered for the vessel.

Another Capesize Bulk Carrier was berthed at the same quay. The possibility was considered that both vessels might leave their berths to seek shelter in the open sea.

Leaving for the open sea entailed sailing north along 2 intersecting fairways and passing in close proximity to a breakwater. This subjected vessels to the danger of being swept towards the breakwater by the prevailing head wind.

In the rolling and pitching, 2 mooring lines broke. The other mooring lines were chafing on the side of the vessel.  The Master had the lines reset, greased the side of the vessel and ordered 2 tugs to hold the vessel against the berth. Faced with the Scylla of the swell and the Charybdis of negotiating the dangerous passage out to open sea, the Master’s preference was to remain in port.

A misunderstanding then arose between the Port Authorities and the Master. The Port Authorities mistakenly thought that the Master had requested the services of a pilot to navigate the vessel out to sea (pilotage was optional).  When the pilot arrived on board, the Master mistakenly thought that his presence signified an order from the Port Authorities to leave.

The vessel left the berth accompanied by 4 tugs which were released at various stages along the passage of the 2 fairways. The pilot on board disembarked onto the last remaining tug at the southern end of the breakwater.  The Master was now on his own, tasked with sailing his vessel along the length of the 2-mile breakwater out into the open sea.

In negotiating the passage, the vessel lost steerage and went aground against the breakwater. The crew was airlifted to safety.

The Proceedings

The P&I Club of the owners and demise charterers brought an action for damages against the time charterers who joined the hybrid voyage/time charterer, last in line, as a third party.

The main issue in a trial which lasted 17 days was the safety of the port.

Findings

After reviewing all the leading safe port authorities, Teare J concluded that the port was unsafe because it had no early warning system in respect of the onset of long waves. An early warning system was in place to warn vessels to leave for the open sea in the event of a typhoon.

He found that the Master was negligent in the choice of navigational aids deployed in leaving the port (the Master had used a GPS instead of the accepted parallel indexing method). This, however, did not lead to situational unawareness and was not causative of the casualty.

Teare J accepted the evidence of the owners’ navigation expert that ordinary seamanship and navigation could not ensure a safe exit from the port in the prevailing weather conditions.

He found that the coincidence of long waves and a northerly gale, though rare, was not unforeseeable and did not therefore qualify as an abnormal circumstance.

In the appeal which was heard before Longmore, Gloster and Underhill LJJ, the judge’s finding that it was unsafe for the vessel to remain in port was accepted.

In a combined judgment handed down by Longmore LJ, it was found that the judge had incorrectly rejected the meteorological evidence led by the charterers that the storm in question was of unprecedented intensity.

Also the evidence reflected that the combination of long waves making it necessary for the vessel to leave port for the open sea and the presence of a northerly gale which made it unsafe for a Capesize vessel to leave the port, was so unusual as to qualify as an abnormal circumstance saving the port from a finding of unsafety.

The Court of Appeal also decided two side issues, unnecessary in view of the main finding: the effect of having joint insurance on the question of liability inter se, and whether charterers responsible for damage to the vessel itself, were entitled to the benefit of limitation under international convention.

Following the Evia 2 they held that it was nonsensical that the demise charterers should remain liable to the owners for breach of the safe port warranty having been placed under the obligation to insure the vessel for the joint benefit of the owners and the charterers.

The UKSC confirmed the CA on the safe port issue for the reasons given by Longmore LJ.

Longmore LJ had also held, following the CMA Djakarta, that, in any event, charterers who were responsible for damage to the vessel itself were not entitled to the benefits of the 1976 Convention on Limitation of Liability for Maritime Claims. The UKSC agreed.

They split however on the other academic question, whether demise charterers who took out joint insurance with head owners could be liable to head owners for damage caused by time charterers for which demise charterers would, in the ordinary course, be liable to head owners.

Following Longmore LJ, Lords Mance, Toulson and Hodge agreed that it would be nonsensical to hold demise charterers liable in principle to head owners where they had agreed to take out joint insurance. Lords Clarke and Sumption thought otherwise. Their reasoning was based partly on the wording of the Barecon 89 charter itself and the notion that insurance was traditionally considered res inter alios acta in determining the wrongdoer’s liability. They also thought the possibility that the insurance might fail, should play a role in the interpretation of the contract.

Commentary

The test in the Eastern City (A port will not 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…) was formulated on facts where foreseeable weather conditions led to the casualty and a finding that the port in question was unsafe.

The UKSC, following the lead of Lord Roskill in the Evia 2, has effectively adopted reasonable foreseeability (as opposed to foreseeability per se) as the rationale for holding charterers liable for breach of the safe port warranty.

This suggests that those cases which held the charterers liable for hidden temporary dangers involving physical aspects of the port, Houston City, Carnival and even the Mary Lou, were wrongly decided.

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