Lloyd's Maritime and Commercial Law Quarterly
SAFE PORT UNDERTAKINGS, “ABNORMAL OCCURRENCES” AND INSURANCE CLAUSES IN DEMISE CHARTERS
The Ocean Victory
Gard Marine and Energy Ltd v China National Chartering Co Ltd (The Ocean Victory)
1 raised three important points of shipping law. First, in the context of a safe port undertaking in a charterparty, when is an event that causes damage to the vessel when in the environs of the port to be characterised as an “abnormal occurrence”? Secondly, if an owner of a ship claims damages from the charterer for the loss of the vessel by reason of a breach of the safe port undertaking, can the charterer limit its liability for such damages pursuant to s.185 and Art.2.1 of Sch.7 of the Merchant Shipping Act 1995 (implementing the Convention on Limitation of Liability for Maritime Claims (LLMC) 19762)? Thirdly, if there is a provision in a charterparty for joint insurance of the hull of the vessel by the owner and charterer for their several interests, will that provision preclude the owner (or the hull insurer by right of subrogation) from recovering from the charterer losses that are covered by the hull insurance if the charterer has been in breach of the safe port undertaking in the charter? All these points had never before been considered by the Supreme Court. The court was unanimous in its answer to the first two questions but divided 3:2 on the third.
Ocean Victory, a Capesize bulk carrier, was owned by Ocean Victory Maritime Inc (“the owners”) and demise chartered to an associated company, Ocean Line Holdings Ltd (“OLH”), on a Barecon 89 form of demise charter. OLH time chartered the vessel to China National Chartering Co Ltd (“Sinochart”), who sub-chartered her (for a time charter trip) to Daiichi Chuo Kisen Kaisha (“DCKK”). The demise charter and the two time charters each had clauses by which the charterer undertook to trade the vessel only between good and safe ports, without any other qualification. The Barecon 89 form of demise charter contained a standard form of cl.12, which, in summary, provided that the demise charterers were to keep the vessel insured, at their expense, against marine, war and P&I risks during the charter period, such insurance to protect the interests of the owners, the demise charterers and any mortgagees. The insurance was to be in the joint names of the owner and demise charterer “as their interests may appear”. If the vessel became an actual or constructive total loss for the purposes of the insurance taken out by the demise charterer, then all insurance payments were to be made to the mortgagee, who was to distribute the sum between the mortgagee, owner and demise charterer according to their several interests. The demise
1. [2017] UKSC 35; [2017] 1 Lloyd’s Rep 521; [2017] 1 WLR 1793.
2. See post, fn.12 and text thereto.
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