Two hazards threatened the Ocean Victory at the same time. Long swell made it dangerous to stay at the berth, while a northerly gale made it dangerous to leave. Whether that combination was a normal characteristic of Kashima determined who bore the loss of the ship.
The Ocean Victory, a bulk carrier, grounded while trying to leave Kashima in Japan on 24 October 2006 and became a total loss. Her owners had let the ship under a demise charter, which put Ocean Line Holdings Ltd in possession of her. Ocean Line in turn let her on time charter to China National Chartering Co Ltd, which sub-chartered her to Daiichi. Each agreement included a promise to nominate a safe port. Gard, a hull insurer acting under assignments, claimed the value of the ship as well as salvage-related expenses, wreck removal costs and loss of hire.
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Teare J held that the casualty was caused by the unsafety of Kashima and awarded those damages. The Court of Appeal allowed the appeal, holding that the conditions were an abnormal occurrence so that there was no breach, and that the demise charter’s insurance provisions in any event prevented recovery of losses covered by the hull insurance.
Safe port and abnormal occurrence
The undertaking is assessed at the time the charterer nominates the port. The question is whether this particular ship can be expected to reach, use and leave the port safely with good navigation and seamanship. The promise allows for an abnormal event. The shipowner and charterer disagreed about what counted as abnormal in a port where either kind of weather could occur.
Lord Clarke, with whom the other members of the Court agreed on this issue, held that “abnormal occurrence” bears its ordinary meaning. It is an event well removed from the normal, out of the ordinary course and unexpected — something the notional charterer would not have in mind. Reasonable foreseeability is not the test. The judge had erred by considering long swell and northerly gales separately, treating each as a characteristic of the port, and concluding that their combination could not be abnormal even if rare. The correct question was unitary: whether the simultaneous occurrence of swell making it dangerous to remain at the berth and gale conditions making the fairway unnavigable was itself an abnormal occurrence or a normal characteristic of Kashima.
On the evidence, including that no vessel had been dangerously trapped in that way in the port’s history and that the storm was exceptional in its rapid development, duration and severity, the concurrent occurrence was rare. The Court of Appeal had been right to hold that it was an abnormal occurrence. The port was not unsafe and the charterers were not in breach.
Joint insurance
The effect of clause 12 of the Barecon 89 form therefore did not arise, but the Court expressed views. Clause 12 required the demise charterers to insure the vessel, at their expense, against marine, war and protection and indemnity risks in the joint names of the owners and charterers. Lords Mance, Toulson and Hodge agreed with the Court of Appeal that this was a comprehensive scheme under which the co-insured parties were not to claim against one another for an insured hull loss. The express safe port warranty added as clause 29 was not intended to create a separate damages claim for that loss or to displace the insurance-funded result. Lords Clarke and Sumption disagreed. They considered that clause 12 contained no clear exclusion of liability for breach of the safe port warranty, particularly as an alternative clause containing an express exclusion of subrogation had been deleted, and that recovery would not have been precluded.
Limitation of liability
The question whether the time charterers could limit liability under the Convention on Limitation of Liability for Maritime Claims 1976, given the force of law by section 185 of and Schedule 7 to the Merchant Shipping Act 1995, likewise did not arise. The Court held, affirming the reasoning in The CMA Djakarta, that article 2(1)(a) does not extend to a claim for loss of or damage to the very ship by reference to whose tonnage the limitation fund would be calculated. The charterers would not have been entitled to limit their liability for the loss of the Ocean Victory.
Verdict: The Supreme Court unanimously dismissed Gard’s appeal. The combination of swell and gale was abnormal, so there was no breach of the safe port undertaking. Had there been a breach, three justices considered that the joint insurance scheme would prevent recovery for the insured hull loss. All five agreed that the charterer could not use the 1976 Convention to limit liability for loss of the ship itself.
