The 'OCEAN VICTORY' – Court Of Appeal Clarifies 'Abnormal Occurrence' In A Safe Port Warranty

Author:Mr Andrew Rourke
Profession:Clyde & Co
 
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The Court of Appeal overturned the first instance decision in the matter of the "OCEAN VICTORY" and found that time charterers had not directed the vessel to an unsafe port. In the process, the Court clarified what constitutes an "abnormal occurrence" in the context of a safe port warranty.

Facts

In October 2006, The "OCEAN VICTORY", a Capesize vessel carrying iron ore, attempted to leave the port of Kashima, Japan, in a gale. Whilst sailing from the port, the vessel ran aground and later broke apart. The vessel was on a ten year bareboat charter from Ocean Victory Maritime Inc. (OVM) to Ocean Line Holdings Ltd (OLH). The charterparty contained a warranty that the vessel would be employed "only between good and safe ports". OLH , in turn, chartered the vessel to China National Chartering Corp. (CNCC), on a time charter, and CNCC then sub-chartered it to Daiichi on a time charter trip. The former charterparty included a warranty in respect of "safe anchorage(s), safe berth(s), safe port(s)" whereas the latter related to "safe port(s), safe anchorage(s)".

First instance

As a result of the casualty, hull underwriters as assignees of the owners under the bareboat charter, brought a claim against the time charterers for over USD 137 million in respect of the total loss of the vessel (USD 88.5 million), loss of earnings (USD 2.68 million), salvage (USD 12 million) and wreck removal costs (USD 35 million). The claimants' case rested on their assertion that Kashima port was unsafe.

The claimants' safe port case was based on the fact that, they argued, the cause of the casualty was a combination of severe northerly gales and a swell caused by long waves both of which were known to be a problem at the port. At first instance, the judge found that the casualty was caused by a characteristic of the port. It could not have been avoided by the exercise of good navigation and seamanship, and did not constitute an "abnormal occurrence". As a result, owners succeeded in their claim and were awarded USD 137.7 million.

Court of Appeal

The matter was, however, appealed to the Court of Appeal in London who handed down their decision on 22 January 2015.

Whilst the court looked at three key issues, the most important was whether, as a matter of law, in the circumstances, there had been a breach of the safe port warranty. Both parties accepted that if the loss of the vessel was caused by an "abnormal occurrence" then the charterers would not be in breach of the...

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