Insights

In brief 

The judgment Gard Marine & Energy Limited (Appellant) v China National Chartering Co Ltd and another (Respondents) [2017] UKSC 35, was handed down on 10 May 2017, in relation to the "Ocean Victory" vessel. 

The bulk carrier "Ocean Victory" had been time chartered by the bareboat charterers, and then sub-time chartered pursuant to charter parties containing a safe port warranty by which the charterers had undertaken to trade the vessel between safe ports. 

The vessel had been chartered to carry a cargo of iron ore from South Africa to Kashima in Japan where she had begun to discharge her cargo but had to stop due to strong winds and heavy rain. There was a considerable swell and gale force winds that affected the vessel's berth. The Master decided to leave the berth for open water, lost control while leaving the port and the vessel was driven back onto the breakwater wall, subsequently becoming a total loss.

An often repeated expression as to what constitutes a "safe port" is that of Sellers, LJ. in Leeds Shipping v Societe Francaise Bunge (the "Eastern City") (1958) 2 Lloyd's Rep 127 where his Lordship said:

"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 …" (emphasis added)

At first instance it had been held that there had been a breach of the safe port warranty. The judge had rejected the "abnormal occurrence" defence and held that the combination of the two weather conditions which had prevailed, namely the phenomenon of swells and long waves and a very severe northerly gale, was not an abnormal occurrence, although the coincidence of the two conditions was rare. 

That decision was overturned on appeal when the Court of Appeal held that the judge had adopted an incorrect approach by considering each of the individual component dangers that gave rise to the events in question, deciding that each could not be said to be rare, and both were attributes or characteristics of the port. He had then compounded that error by concluding that even if the critical combination of those two events was rare, it was nonetheless a characteristic of the port, and therefore not an "abnormal occurrence". 

That decision has been upheld unanimously in the Supreme Court of the United Kingdom and the correctness of the approach taken in the Eastern City, as elaborated in the later case of The Evia (No. 2) [1981] 2 Lloyds Rep 613, has been confirmed. 

There was a second issue in the proceedings, which did not arise if there was no breach of the safe port undertaking, relating to the provisions for insurance in clause 12 of the BARECON 89. By a majority of three to two in the Supreme Court it was held that the BARECON demise charter excluded rights of recourse between owners and demise charterers, in favour of an insurance-funded solution. 

The third issue again only arose in circumstances in which there was a breach of the safe port undertaking. On this issue, like the first issue, there was unanimity, with all judges holding that in such circumstances the charterers would not have been entitled to limit their liability and, in doing so, followed the Court of Appeal's decision in the CMA Djakarta in which David Steele J had upheld the shipowners' argument that the vessel cannot be both the victim and the perpetrator and that the "property" envisaged in the article of the Limitation Convention must be the property of a third party either on board the vessel, for example, the cargo, or external to the vessel. 

This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal or financial advice. Please seek your own legal or financial advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.​

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