In   our   Shipping   and   Transport   Bulletin   of February-­‐March  2014,  we  dealt  with  the  first instance judgment delivered by English courts in relation to the “Ocean Victory”1 case, about the “safe ports” clause.

We are now returning to this case because the aforementioned judgement was reversed by the Court of Appeal that established a principle of fundamental relevance in favour of charterers.

The case

The vessel Ocean Victory, a capsize bulk carrier, was chartered on an amended Barecon 89 form, which provided that the vessel was to be exclusively used between “good and safe ports”.

On 24 October 2006, because of the bad weather conditions, the Ocean Victory was forced to stop the unloading operations and to abandon the port of Kashima, in Japan, to go offshore in order to avoid the impact with the dock. However, in the attempt to leave the port, the Master lost control of the vessel, which got beached and then sank.

The first instance judgment

The insurers, as assignees of the rights both of registered owners and charterers,  brought  a lawsuit against the sub-­‐charterers who failed to fulfil the good and safe  ports  warranty,  provided for by the charter-­‐party.

To uphold their claim, the insurers argued that the port of Kashima was unsafe for a capsize bulk carrier and had no protection system in place.

The sub-­‐charterers replied that the port in question was not unsafe and that the protection systems of a port cannot predict and cope with any kind of danger, being it sufficient for a port to have a suitable protection system.

Moreover, the sub-­‐charterers argued that, even if the port was not safe, this circumstance could not be considered the cause of the accident, which instead had to be found in a navigation error committed by the Master. To support their defence, the sub-­‐charterers finally stressed that, until that moment, the simultaneous occurrence of two events like seaquake and winds force 9 had never happened in the port of Kashima.

In the first instance proceeding the Court rejected the arguments of the sub-­‐charterers and accepted the insurers’ claim, holding as “unsafe” the port of Kashima. Indeed, according to the Court, the seaquake and the storm that had caused the sinking of the vessel were not to be considered an “abnormal event” and the real cause of the accident was the lack of security systems in the port.

The different view expressed by the Court of Appeal

When deciding the dispute in appeal, the Court of Appeal reversed the first instance judgment accepting the arguments proposed by the sub-­‐ charterers.

With regard to the “good and safe port” issue, the court established that the adverse weather conditions of that day at the port of Kashima were an exceptional circumstance and that, therefore, the sub-­‐charterers did not fail to fulfil the safe port warranty.

Hence, in the Court’s opinion, the “safe ports” clause has not an absolute validity and in order to be satisfied, it is sufficient that the port has reasonable security systems to avoid such accidents.

In the case under examination, an exceptional combination of events (seaquake and winds force 9) occurred in the port of Kashima that had never happened before in that port, inasmuch that even the best seamanship could not guarantee the safe exit of the ship from the port.

The Court has set an important principle, stating that, in order to evaluate whether an event is or not an “exceptional condition”, it is necessary to consider if that event has already occurred in the past with a sufficient frequency to be actually considered as a characteristic of the port.

Hence the exceptional nature of the event must be evaluated based on the frequency, the regularity and the relevance of identical events occurred in the past. According to the Court, in the case at issue, the combination of seaquake and winds force 9 could not be considered an ordinary event, or an occasional event, but rather a rare event.

In the same judgment, the Court also intervened on the interpretation of clause 12 of the bareboat charter-­‐party on BARECON 89 form, which provides the charterers’ obligation to take out a marine and war risk insurance for the vessel.

In such respect, the Court stated that, if the parties take out a joint insurance, or if one  of them pays the insurance on behalf of both of them, there is no possibility of subrogation, and the insurers cannot subrogate in the rights of the innocent party against the co-­‐insured party, or against the guilty party who paid the insurance. So the owners, co-­‐insured with the charterers, were denied the right to recover co-­‐insured losses from the charterers.

There could be further developments regarding this case, since the owners may challenge the judgement of the Court of Appeal before the High Court of Justice.