The dispute followed the grounding of a tanker the Ocean Victory. The ship was working outside of a safe port requirement in the charterparty agreement. The contract required the purchase of insurance against maritime war and protection and indemnity risks. The grounding occurred during a combination of severe weather events. Each of the two elements was known, but they had not previously occurred together.
Held: The appeal was dismissed. There had been no breach of the safe port undertaking. Had there been a breach of that undertaking Daiichi (the sub-charterers) would not have been entitled to limit its liability through the Convention.
Lords Toulson and Mance, Lord Hodge concurring, upheld the Court of Appeal opinion that the joint insurance would have precluded any claim by owners against the demise charterer, or therefore by the latter down the line. Lord Clarke and Lord Sumption disagreed on this point.
An ‘abnormal occurrence’ has its ordinary meaning. It is not a term of art. On the evidence the combination of conditions were an abnormal occurrence and there was therefore no breach by Daiichi of the safe port undertaking.
A charterer does not assume responsibility for unexpected and abnormal events which occur suddenly and which create conditions of unsafety after he has given the order to proceed to the relevant port. These are the responsibility of the ship’s hull insurers (if owners have insured) or of owners themselves. Moreover the concept of ‘safety’ is necessarily not an absolute one.
‘there is nothing in clause 12 which provides that the demise charterers have no liability for breach of clause 29 and I see no basis for such a necessary implication, essentially for the reasons given by the judge and by Lord Sumption. In particular, it seems to me to be striking that, as the judge observed in para 195, clause 13, which contained an alternative insurance and repairs clause which not only provided that hull insurance would be paid for by the registered owner but also expressly stated that the registered owners and/or insurers would not have any rights of recovery or subrogation against the demise charterers in respect of insured losses, was deleted from the printed form. Thus the demise charterers chose not to be bound by clause 13.’
Had there been a breach of the safe port warranty, Gard claimed to be able to recover the insured value of the vessel from the time charterers as the demise charterer’s assignee on the basis that the demise charterer was liable to the owners for breach of its safe port undertaking, and so entitled to recover the same sum from the time charterer. Lords Toulson, Mance and Hodge concluded that the provisions of clause 12 of the demise charter, which provided for joint insurance and a distribution of insurance proceeds, precluded such a claim. Co-insureds cannot claim against each other in respect of an insured loss. Clause 12 provided a comprehensive scheme for an insurance funded result in the event of loss of the vessel by marine risks. The safe port undertaking did not alter this scheme.
Judges:
Lord Mance, Lord Clarke, Lord Sumption, Lord Hodge, Lord Toulson
Citations:
[2017] UKSC 35, [2018] 1 All ER (Comm) 1, [2017] 1 Lloyd’s Rep 521, 2017 AMC 1336, [2017] 1 CLC 870, [2017] WLR(D) 333, [2017] 1 WLR 1793, [2017] Lloyd’s Rep IR 291, [2018] 1 All ER 832, UKSC 2015/0036, UKSC 2015/0037
Links:
Bailii, Bailii Summary, WLRD, SC Summary Video (37), SC (36), SC Summary (36), SC Summary Video (36), SC (37), SC summary (37
Statutes:
Merchant Shipping Act 1995, Convention on Limitation of Liability for Maritime Claims 1976, Vienna Convention on the Law of Treaties 1969 31 32
Jurisdiction:
England and Wales
Citing:
Cited – Leeds Shipping Co Ltd v Societe Francaise Bunge (The Eastern City) CA 1958
Non-performance, in the context of the clause, would be the refusal or failure of the ship to enter upon the charterparty’s obligations at all or the refusal or failure of the charterers to take any step to fulfil the contract into which they had . .
Cited – Compania Naviera Maropan S/A v Bowater’s Pulp and Paper Mills Limited (The Stork) CA 1954
Where, in breach of charterparty, charterers order a vessel to proceed to an unsafe port, the conduct of the vessel’s master in obeying the order (placed as he well may be, on the horns of a dilemma) will be judged sympathetically, in context and . .
Appeal from – Gard Marine and Energy Ltd v China National Chartering Co Ltd CA 22-Jan-2015
The Ocean Victory went aground in a storm in Kashima port. The court was now asked (i) what, as a matter of law, was the correct test for an abnormal occurrence; (ii) in particular, was the judge correct to hold that the combination of two weather . .
At First Instance – Gard Marine and Energy Ltd v China National Chartering Co Ltd and Others ComC 30-Jul-2013
The vessel ‘Ocean Victory’ grounded in 2006 entering a port in a storm.
Held: In the first action, that the intermediate charterers were liable to the demise charterers for breach of the safe port warranty in the time charter, and likewise, in . .
Cited – Reardon Smith Line Limited v Australian Wheat Board (The Houston City) PC 26-Jan-1956
(Australia) . .
Cited – Kodros Shipping Corporation of Monrovia v Empresa Cubana De Fletes (The Evia (No 2)) HL 1982
Lord Diplock regarded the nature of the contractual promise by the charterer in what he called the safe port clause as having been well settled for a quarter of a century at the very least: ‘It was correctly and concisely stated by Sellers L.J. in . .
Cited – The Saga Cob CA 1992
The fact that an event (in this case a guerrilla attack) was theoretically foreseeable did not make it an ‘normal characteristic’ of the port: ‘Be that as it may, there is no evidence whatever that the system introduced after the Omo Wonz had any . .
Cited – Ogden v Graham and Another 27-Nov-1861
The defendants chartered a ship to proceed from England to a safe port in Chilli, with laave to call at Valparaiso. On her arrival at Valparaiso; the charterers’ agent named the port of Carrisal Bajo as the port of discharge, and directed the master . .
Cited – GW Grace and Co Ltd v General Steam Navigation Co Ltd (The Sussex Oak) QBD 1950
The court considered a time charter in the Baltime form. The charterers entered into a voyage sub-charter with the board of trade. Under the voyage charter the ship loaded a cargo of timber for London from Hamburg. On the voyage to and from Hamburg . .
Cited – Transoceanic Petroleum Carriers v Cook Industries Inc (The Mary Lou) QBD 1981
Mustill J considered a charterparty which provided that the vessel was to ‘proceed to one or two safe berths one safe port US Gulf (excluding Brownsville) New Orleans/Ama/Reserve/Myrtle Grove/Destrehan counting as one port . . ‘ He said: ‘The . .
Cited – Kodros Shipping Corporation of Monrovia v Empresa Cubana De Fletes (The Evia (No 2)) CA 1982
. .
Cited – Modern Engineering (Bristol) Ltd v Gilbert Ash (Northern) Ltd HL 1974
The court considered how to construe a clause in a contract which excluded a remedy provided by law. Lord Diplock said: ‘It is, of course, open to parties to a contract . . to exclude by express agreement a remedy for its breach which would . .
Cited – Stag Line v Foscolo, Mango and Company HL 1931
English statutes which give effect to international conventions need to be interpreted with the international origin of the rules well in mind. The Act only applies to contracts of carriage of goods outwards from ports in the United Kingdom, and the . .
Cited – Pearl Carriers Inc v Japan Line Ltd ‘The Chemical Venture’ QBD 1993
. .
Cited – D/S A/S Idaho v Clossus Maritime DA (The Concordia Fjord) QBD 1984
The vessel was chartered for 4 months, with a safe port requirement and a limited area of operation subject to payment of additional insurance premiums. The vessel set off to Beirut, then a safe port. The port lost that designation before the vessel . .
Mentioned – Tyco Fire and Integrated Solutions (UK) Ltd v Rolls-Royce Motor Cars Ltd CA 2-Apr-2008
. .
Overruled by Statute – Bureau Wijsmuller NV v Owners of the Tojo Maru (No 2) HL 1971
Salvors were held not to be entitled to limit in respect of the negligent action of their diver since, by definition, neither the diver nor the damaged vessel were on board the salvor’s tug and, further, the diver was not acting in the management of . .
Cited – Aegean Sea Traders Corp v Repsol Petroleo SA (‘The Aegean Sea’) AdCt 1998
The Aegean Sea was lost at sea causing very extensive damage through the escape of its cargo of crude oil. AST asserted as a preliminary issue, that RP had become liable for that damage. RP’s wholly owned subsidiary ROIL was the charterer, argued . .
Cited – CNA CGM S A v Classica Shipping Company Ltd ComC 27-Mar-2003
. .
Cited – CMA CGM Sa v Classica Shipping Co Ltd ‘The CMA Djakarta’ CA 12-Feb-2004
The charterers were held liable to the shippers for the cost of repairing the vessel when containers containing bleach exploded. The charterers had established a compensation limitation fund in France.
Held: The liability of the charterers was . .
Cited – Sir John Jackson Ltd v Owners of Steamship ‘Blanche’ and Others HL 28-Feb-1908
Charterers by demise are ‘owners’ within the meaning of section 3 of the Merchant Shipping Act 1894, and can, therefore, under that section, claim the benefit of limitation of liability, conferred by sections 503 and 504, in respect of loss or . .
Cited – James Buchanan and Co Ltd v Babco Forwarding and Shipping (UK) Ltd HL 1978
A consignment of whisky was stolen whilst on consignemt from a bonded warehouse under CMR terms for Teheran. In bond, it was worth 7,000 pounds, and on export no excise duty was to be paid. Being stolen in the course of transit, excise duty of . .
Cited – Bradburn v Great Western Rail Co CEC 1874
The plaintiff had received a sum of money from a private insurer to compensate him for lost income as a result of an accident caused by the negligence of the defendant.
Held: He was entitled to full damages as well as the payment from the . .
Cited – Co-Operative Retail Services Limited and others v Taylor Young Partnership and others HL 25-Apr-2002
Whilst a substantial new building was being constructed, it was damaged by fire caused by the negligence of several contractors. The case concerned apportionment of liability.
Held: The appeal failed. The parties could by agreement vary the . .
Cited – The Winkfield 1902
A bailee in possession has a right to recover for loss or damage to his bailor’s goods even though he would have had a good defence to an action by the bailor. . .
Cited – Dunlop v Lambert HL 16-Jun-1839
A cargo of whisky was lost in carriage by sea between Leith and Newcastle. A second shipment was made and the loss was claimed. The House was asked whether ‘in a question between a carrier and the person to whom the carrier is responsible in the . .
Cited – King v Bristow Helicopters Ltd; Morris v KLM Royal Dutch Airlines HL 28-Feb-2002
Psychiatric Injury under Warsaw Convention
The applicants were passengers who claimed damages for psychiatric injury, after accidents in aircraft.
Held: The Convention created strict liability on air carriers, but explicitly restricted damages to be payable for ‘bodily injury’. That . .
Cited – Co-operative Retail Services Ltd v Taylor Young Partnership, Hoare Lea and Partners (a Firm) and Others CA 4-Jul-2000
A building owner entered into a standard form of building contract for the construction of office premises. Under its terms the contractor was required to take out and maintain a policy in the names of the owner, the contractor and specialist . .
Cited – Alfred Mcalpine Construction Limited v Panatown Limited HL 17-Feb-2000
A main contractor who was building not on his own land, would only be free to claim damages from a sub-contractor for defects in the building where the actual owner of the land would not also have had a remedy. Here, the land owner was able to sue . .
Cited – Parry v Cleaver HL 5-Feb-1969
PI Damages not Reduced for Own Pension
The plaintiff policeman was disabled by the negligence of the defendant and received a disablement pension. Part had been contributed by himself and part by his employer.
Held: The plaintiff’s appeal succeeded. Damages for personal injury were . .
Cited – Fothergill v Monarch Airlines Ltd HL 10-Jul-1980
The plaintiff, on arriving at the airport found that his luggage had been lost. The defendant denied liability saying he had not notified his claim within the requisite period.
Held: Elementary justice requires that the rules by which the . .
Cited – Hopewell Project Management Ltd v Ewbank Preece Ltd 1998
Recorder Jackson QC described as nonsensical if parties who were jointly insured under a contractors’ all risks policy could make claims against one another in respect of damage to the contract works. . .
Cited – Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd and Others; St. Martins Property Corporation Ltd v Sir Robert McAlpine HL 8-Dec-1993
A contractor had done defective work in breach of a building contract with the developer but the loss was suffered by a third party who had by then purchased the development. The developer recovered the loss suffered by the purchaser.
Held: . .
Cited – Mark Rowlands v Berni Inns Ltd CA 1985
The plaintiff owned the freehold and had let the basement to the defendant. The plaintiff insured the building. The defendant covenanted to pay to the plaintiff an insurance rent equal to the proportionate cost of insuring the part of the building . .
Cited – Petrofina (UK) Ltd v Magnaload Ltd 1983
A finding of double insurance requires the same insured to be covered in respect of the same property against the same risks.
Lloyd J held that: ‘a head contractor ought to be able to insure the entire contract works in his own name and the . .
Cited – Darlington Borough Council v Wiltshier Northern Ltd CA 28-Jun-1994
The plaintiff council complained of the work done for it by the defendant builder.
Held: Steyn LJ said: ‘in the case of a building contract, the prima facie rule is cost of cure, i.e., the cost of remedying the defect: East Ham Corporation v. . .
Cited – Tate Gallery (Board of Trustees of) v Duffy Construction Ltd and Another TCC 15-Feb-2007
. .
Cited – Liverpool City Council v Irwin HL 31-Mar-1976
The House found it to be an implied term of a tenancy agreement that the lessor was to be responsible for repairing and lighting the common parts of the building of which the premises formed part. In analysing the different types of contract case in . .
Cited – Herrmann and Another v Withers Llp Admn 30-May-2012
. .
Cited – Glory Wealth Shipping Pte Ltd v Korea Line Corporation ComC 14-Jul-2011
(‘The Wren’) Appeal against arbitrator’s award finding repudiatory breach of charterparty. . .
Cited – Koch Marine Inc v D’Amica Societa Di Navigazione ARL (The Elena d’Amico) QBD 1980
The ship owners wrongfully repudiated a charterparty in March 1973, 14 months after its inception. The charterers did not hire a substitute but claimed damages for the loss of profits they would have made between January and April 1974, during which . .
Cited – Zodiac Maritime Agencies Ltd v Fortescue Metals Group Ltd ComC 28-Apr-2010
The Kildare . .
Cited – Hussey v Eels CA 1990
Profits made on development were not deductible
The purchasers of a property for a price of 53,250 pounds had relied on a negligent misrepresentation that the property had not been the subject of subsidence. In fact it had. The cost of the required works was 17,000 pounds, which they could not . .
Cited – Palatine Graphic Arts Co Ltd v Liverpool City Council CA 1985
The defendant local authority agreed to pay for the plaintiff’s premises in Liverpool at the price which would have been payable if the acquisition had been by way of compulsory purchase. The major part of the price constituted compensation for . .
Lists of cited by and citing cases may be incomplete.
Transport, Contract
Updated: 16 August 2022; Ref: scu.582171