Charterer’s Breach of Safe Port Warranty Results in $138m Liability

In the recent decision of the Commercial Court in Gard Marine v China National Chartering (the “OCEAN VICTORY”), the Court ruled that Charterers had breached their safe port warranty by nominating the port of Kashima, Japan. The Vessel, a Capesize bulk carrier, left her berth during adverse weather conditions to seek shelter at sea but ran aground in force 9 winds and subsequently broke apart. Charterers were left with a liability of US$137.6m.

The Facts

The “OCEAN VICTORY” (the “Vessel”) was a Capesize bulk carrier on bareboat charter from Ocean Victory Maritime (“OVM”) to Ocean Line Holdings (“OLH”). OLH time chartered the Vessel to Sinochart who sub-chartered to Daiichi on a time charter trip. All three of the charterparties contained safe port warranties.

In September 2006 Daiichi ordered the Vessel to load a cargo of iron ore at Saldanha Bay, South Africa and discharge at Kashima, Japan. The Vessel arrived at the port of Kashima on 19 October 2006 and commenced the discharge of her cargo. During discharge, the weather deteriorated and the Vessel began to roll and range alongside the berth and she required two tugs to hold her in place. The master decided to leave the port in order to seek shelter at sea but whilst navigating the Kashima Fairway the Vessel was driven aground. The crew were airlifted ashore and the Vessel broke up.

The claimants, who were H&M underwriters of the head-owners and demise charterers (OVM and OLM), argued that Kashima was an unsafe port because there was no system in place to ensure that vessels could safely leave in order to seek ‘refuge at sea’ during bad weather. The charterers (Sinochart and Daiichi) argued that the port was not unsafe because no other vessel had ever previously become trapped (“unable to stay and unable to go”) and the port’s systems did not have to guard against every conceivable hazard but instead merely had to be ‘reasonably safe’. In the alternative, charterers argued that even if the port was unsafe, the casualty was caused by negligence of the master in leaving the port and/or by negligent navigation.

The judge, Mr Justice Teare, found against the charterers and decided that the port of Kashima was prospectively unsafe for the Vessel and caused the loss. Having heard the evidence of three experts on meteorology and waves, the Court held that the simultaneous incidence of long waves and gale force winds (as existed on 24 October 2006), was a real, not fanciful, risk that could not be described as an ‘abnormal occurrence’. In making his judgment, Teare J restated the classic definition of a ‘safe port’ found in The Eastern City[1] and rejected the charterer’ s notion of a ‘reasonably safe port’:

“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.”

The Court found that charterers had ordered the Vessel to discharge her cargo at an unsafe port because there was a risk that the Vessel might have to leave the port on account of bad weather at a time when the sea conditions in the channel were such that more than ordinary seamanship and navigation were required to enable the Vessel to leave the port safely. Moreover there was no system in place at the port to advise vessels when they could safely leave.

Comment

This decision provides a particularly stark reminder of how strictly the English courts will continue to apply safe port warranties. In this case, a rare combination of extreme wind and swell meant that it was unsafe for the Vessel to stay in or to leave the port. The Court stated that the vulnerability of the port to long swells and gale force winds meant that the danger flowed from the characteristics of the port and not conditions that could be described as an ‘abnormal occurrence’. This reasoning can be criticised as the storm was one of the most severe storms to have ever affected the port of Kashima and if extreme weather events are to be deemed ‘characteristics’ of a port merely because they are ‘at least foreseeable’, it is difficult to see how ports located in areas prone to storms and typhoons can ever be considered ‘safe’.

This problem is further evidenced by the fact that neither the Court nor the Claimants were able to identify a system which, had it been in place, would have enabled a master in possession of ordinary skills of seamanship and navigation to avoid the danger of leaving the port at a time when it was unsafe to do so. It was also acknowledged that the new systems since implemented at the port of Kashima would also have failed to prevent the casualty.

Charterers and port authorities will find it odd, and perhaps unacceptable, that English law should consider a port ‘unsafe’ in circumstances where a casualty is caused by a combination of two extreme weather events, especially when that casualty could not have been avoided by improvements in the port’s systems or practices.

However this case is not a departure from the established legal principles on safe port warranties but merely emphasises the tendency of the Court to interpret such warranties strictly, to the benefit of owners and the detriment of charterers.

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[1] [1958] 2 LLR 127
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About the contributor

  • William Pyle Solicitor

    William is a solicitor in our Singapore office. He is a member of the firm's Shipping and International Trade group and advises a range of clients including P&I Clubs, shipowners, charterers, insurers and banks.

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