The Ocean Victory case highlights charterers’ ability to limit their liability against owners in respect of the loss of the vessel
The UK Supreme Court has handed down its much anticipated judgment in the matter of the Ocean Victory, a capesize vessel carrying iron ore (Gard Marine and Energy Limited v China National Chartering Company Limited and Daiichi Chuo Kisen Kaisha (2017)).
The Supreme Court dismissed the appeal and unanimously upheld that the UK Court of Appeal was correct in its approach to the assessment of the safety of the port of Kashima in Japan, and its finding that the port was safe. It also upheld by a majority the Court of Appeal’s decision on whether the bareboat charterers had any right to bring a claim.
The case first arose following an incident in October 2006, whereby the Ocean Victory attempted to leave the port in a gale. Whilst sailing from the port, the vessel ran aground and later broke apart. This resulted in a claim against charterers for an alleged breach of the safe port warranty in the charterparties.
“The Court was satisfied that the combination of conditions was an abnormal occurrence and not a characteristic of the port, and so the safe port warranty had not been breached.”
At first instance, the trial judge found that the port was unsafe as neither of the two causes of the incident (long waves and severe northerly gales) was rare, but the Court of Appeal disagreed and found that the port was safe. This was because, although neither the long waves nor the severe northerly gales which caused the incident were uncommon in themselves, the combination of the two was extremely rare.
Breach of warranty?
The parties accepted that the test for breach of the safe port warranty was whether the loss of the vessel was caused by an “abnormal occurrence”. The Supreme Court found that the port was safe, and that the Court of Appeal was correct in finding that it was not the frequency with which long waves and the danger of northerly gales were experienced individually at the port that was important, but the crucial consideration was the history of the coincidence of the two conditions. The Court was satisfied that the combination of conditions was an abnormal occurrence and not a characteristic of the port, and so the safe port warranty had not been breached.
The Supreme Court also upheld (by a majority of 3-2) the Court of Appeal’s decision that, even if the port had been found to be unsafe, the bareboat charterer could not bring a claim against time charterers due to the comprehensive regime in the bareboat charterparty that provided for joint insurance and distribution of the insurance proceeds. [As the owners could bring no claim against the bareboat charterers, the bareboat charterers had no claim to bring against time charterers.]
The final issue which the Supreme Court considered was how limitation under the 1976 Convention on Limitation of Liability for Maritime Claims was intended to work between owners and charterers. The Supreme Court unanimously upheld the approach adopted in the CMA DJAKARTA (2004) and found that voyage charterers would not have been able to limit their liability for the loss of the vessel had the port been unsafe.
Andrew Rourke leads a team of lawyers based in both Shanghai and Guildford on various matters of commercial disputes and international arbitrations, particularly in shipping and trading. He can be contacted at firstname.lastname@example.org or +44 (0) 20 7876 5504.