Gard Marine & Energy Ltd v China National Chartering Company Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore |
| Judgment Date | 22 January 2015 |
| Neutral Citation | [2015] EWCA Civ 16 |
| Docket Number | Case No: A3/2013/2960 & A3/2013/3011 |
| Court | Court of Appeal (Civil Division) |
[2015] EWCA Civ 16
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HONOURABLE MR JUSTICE TEARE
Royal Courts of Justice
Strand, London, WC2A 2LL
The Right Honourable Lord Justice Longmore The Right Honourable Lady Justice Gloster and The Right Honourable Lord Justice Underhill
Case No: A3/2013/2960 & A3/2013/3011
Mr Dominic Kendrick QC, Mr David GoldstoneQC andMr Gavin Geary (instructed by MFB Solicitors) for the Appellants
Mr Michael Davey QC (instructed by Winter Scott LLP) for the Intermediate Charterers
Mr Jeremy Russell QC, Mr Jeffrey GruderQC andMr James TurnerQC (instructed by Ince & Co LLP) for the Respondents
Hearing dates: 14 th, 15 th, 16 th & 17 th October 2014
This is a judgment of the court handed down by
Introduction
This is the judgment of the court to which all members of the constitution have contributed.
The Ocean Victory ("the vessel" or "Ocean Victory") was a Capesize bulk carrier 1 which went aground at the port of Kashima in Japan on 24th October 2006; she subsequently broke up and became a total loss in December of that year. She was owned by Ocean Victory Maritime Co. ("the owners") who on 8th June 2005 had demise chartered her as a new building to an associated company in the same group, Ocean Line Holdings Ltd ("the demise charterers"). On 2nd August 2006 the demise charterers time-chartered the vessel to China National Chartering Co Ltd (whom we will refer to as "the intermediate charterers" as necessary), who on 13th September 2006 sub-time-chartered the vessel to Daiichi Chou Kisen Kaisha (whom we will refer to as "the charterers") 2. Each charterparty contained an undertaking to trade the vessel between safe ports.
On 12th or 13th September 2006 (depending upon the time zone), the charterers ordered the vessel to Saldanha Bay in South Africa to load a cargo of iron ore for carriage to Kashima in Japan. She arrived at Kashima on 20th October and berthed at the Raw Materials Quay. She began discharging her cargo but that had to stop on 23rd October due to strong winds and heavy rain. Thereafter the situation rapidly deteriorated; there was a considerable swell (as a result of a phenomenon known as long waves) affecting the vessel's berth at the Raw Materials Quay and high winds rising to Force 9 on the Beaufort Scale. In circumstances which we will have to examine, on 24th October the Master decided to leave the berth for open water, but lost control of the vessel while leaving the port and the vessel was driven back onto the breakwater wall, and subsequently became a total loss.
The owners and demise charterers claimed that the port of Kashima was unsafe. The demise charterers had insured the vessel for the respective rights and interests of themselves and the owners pursuant to clause 12 of the demise charter and in due course hull insurers paid $70,000,000 being the agreed value of the vessel. On 15th October 2008 one of the insuring companies, Gard Marine & Energy Limited
("Gard"), took an assignment of both the owners' and the demise charterers' rights in respect of the grounding and the total loss of the vessel.The charterers denied that the port was unsafe saying that the conditions on 24th October 2006 were an abnormal occurrence and that, even if the port was unsafe, the cause of the loss was the Master's navigational decision to leave the port not its unsafety. They said further that clause 12 of the demise charter provided for joint insurance without any right of recovery (by way of subrogation or otherwise) by the owners against the demise charterers, who, being under no liability to the owners, had no liability to pass down the chartering chain to the charterers, not having themselves suffered any loss.
No proceedings were ever brought by the owners, or by Gard, as assignee, against the demise charterers for breach of the safe port warranty in the demise charter, nor was any extension of time granted in respect of such claim.
On 21st April 2010 Gard, as assignee, issued proceedings in the Commercial Court against the intermediate charterers for damages arising out of the loss of the ship. The intermediate charterers in turn brought third-party proceedings against the charterers.
On 30th July 2013, after a lengthy trial, Teare J ("the judge") held 3, 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 the third-party proceedings, that the charterers were liable to the intermediate charterers for breach of the safe port warranty in the sub-charter. He rejected the charterers' argument that the cause of the casualty was not the breach of the safe port warranty, but rather the master's navigational decision to put to sea in extreme conditions. He also rejected the charterers' contention that the demise charterers, were not, even assuming a breach of the safe port warranty, liable to the owners in respect of the loss of the vessel, and that, in the circumstances, the demise charterers had suffered no loss in respect of the loss of the vessel, and accordingly had no claim to pass on to the intermediate charterers, or, in turn, the charterers.
As a result of the judgment, Gard (as assignee) was (subject to any appeal) entitled to damages from the demise charterers (and the demise charterers were entitled to damages from the charterers) agreed in the following amounts:-
i) US$ 88.5 million in respect of the loss of the vessel (which was its agreed market value);
ii) US$ 12 million in respect of the cost of salvage services;
iii) US$ 35 million in respect of the cost of wreck removal; and
iv) US$ 2.68 million in respect of loss of earnings.
Although, formally, the demise charterers' claim was against the intermediate charterers, in circumstances where the ultimate liability (if any) fell on the charterers, the charterers defended the claim and prosecuted the appeal before us.
The issues arising on the appeal
There were three principal issues arising on the appeal. These were:-
i) whether as a matter of law in the circumstances there had been a breach of the safe port warranty ("the safe port issue");
ii) whether, even on the assumption that there had been a breach of the safe port warranty, the cause of the casualty was not the breach, but rather the Master's navigational decision to put to sea in extreme conditions, rather than to stay at the berth ("the causation issue"); and
iii) whether, on the true construction of the terms of the demise charterparty, the demise charterers, who had insured the vessel at their expense, had any liability to the owners in respect of insured losses, notwithstanding that such losses may have been caused by a breach of the safe port warranty ("the recoverability issue").
The judge gave the charterers permission to appeal the recoverability issue. On 25th February 2014, Aikens LJ on paper gave the charterers permission to appeal the safe port issue and the causation issue. However, he dismissed the charterers' application to appeal against the judge's findings of fact: (a) that it had not been safe for the vessel to remain alongside her berth on 24th October 2006; and (ii) that the master had not been negligent in his navigation of the vessel at 1512 on 24th October 2006. The charterers did not renew their application to appeal in respect of those issues.
Representation on the appeal
Mr Dominic Kendrick QC, Mr David Goldstone QC and Mr Gavin Geary appeared on behalf of the charterers; Mr Jeremy Russell QC, Mr Jeffrey Gruder QC and Mr James Turner QC appeared on behalf of the owners; and Mr Michael Davey appeared on behalf of the intermediate charterers. Although he was instructed to attend the appeal, Mr Davey did not present any separate argument to the court.
The safe port issue
It was common ground between the parties that if the damage sustained by the vessel at Kashima on 24th October 2006 was caused by an "abnormal occurrence" then the charterers would not have been in breach of the safe port warranty. That common ground was based on the classic dictum of Sellers LJ in The Eastern City [1958] 2 Lloyd's Rep. 127 at 131 that:-
"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 seamanship and navigation".
What was in dispute between the parties on the appeal in relation to this issue was:-
i) what, as a matter of law, was the correct test for an abnormal occurrence;
ii) in particular, whether the judge was correct to hold 4 that the combination of two weather conditions on the casualty date (namely the phenomenon of swell from "long waves," which might have forced the vessel to leave the berth, and a very severe northerly gale which meant that the vessel could not safely exit the port) was not to be characterised as an abnormal occurrence, notwithstanding that the coincidence of the two conditions was "rare" 5, because both conditions were physical characteristics or attributes of the port; and
iii) whether, on the facts as found by, or undisputed before, the judge, the weather conditions on the...
To continue reading
Request your trial
-
Herculito Maritime Ltd and Others v Gunvor International BV and Others
...LJ in the Court of Appeal in The Ocean Victory, with whose judgment the majority in the Supreme Court agreed. Longmore LJ said, at [2015] 1 Lloyd's Rep 381 at paragraph 74: ‘Similar problems can also arise, in the absence of joint insurance, if one party to a commercial relationship is req......
-
Gard Marine and Energy Ltd v China National Chartering Company Ltd and another
...[2017] UKSC 35 before Lord Mance Lord Clarke Lord Sumption Lord Hodge Lord Toulson THE SUPREME COURT Easter Term On appeal from: [2015] EWCA Civ 16 Appellant/Respondents ( China National Chartering Co Michael Davey QC (Instructed by Winter Scott LLP) Respondent/Appellant ( Gard Marine & Ene......
-
Bank of New York Mellon (International) Ltd v Cine-UK Ltd
...as well as to negligence (see for example Guard Marine and Energy v China National Chartering Company Limited (The Ocean Victory) [2015] 1 Lloyds Reports 381 at paragraphs 74 to 75). In other words, the legal issue in this case depends upon the proper construction and effect of the tenancy......
-
Elizabeth Ann Frasca-Judd v Galina Golovina
...as well as to negligence (see for example Guard Marine and Energy v China National Chartering Company Limited (The Ocean Victory) [2015] 1 Lloyds Reports 381 at paragraphs 74 to 75). In other words, the legal issue in this case depends upon the proper construction and effect of the tenancy ......
-
'OCEAN VICTORY' Court of Appeal Decision
...Gard Marine & Energy Ltd v China National Chartering Co Ltd (Rev 1) [2015] EWCA Civ 16, the Appellant sub-charterers appealed the 2013 judgment of Teare On or around 12 September 2006, the sub-charterers ordered the vessel, "Ocean Victory", a Cape-size bulk carrier, to discharge a cargo......
-
Relevance Of Insurance Provisions To Cargo Interests' Liability To Contribute In General Average - Herculito Maritime Limited V Gunvor International BV - Paul Toms
...held by reference to the dicta of Lord Roskill in The Evia No. 2 [1983] AC 736 and the analysis of Longmore LJ in The Ocean Victory [2015] 1 Lloyd's Rep 381 (with whose judgment the majority of the Supreme Court agreed) that if there was an agreement by a charterer to pay insurance premium,......
-
Court Of Appeal Confirms Insurer's Right Of Subrogation Depends On Underlying Contract Between The Parties
...actions which had allegedly caused the breach of that obligation. Gard Marine & Energy Ltd v China National Chartering Co Ltd [2015] EWCA Civ 16 Court Of Appeal Confirms Insurer's Right Of Subrogation Depends On Underlying Contract Between The The content of this article is intended to ......
-
'Ocean Victory': Court Of Appeal Reverses First Instance Decision
...Marine & Energy Ltd v China National Chartering Co Ltd (The "Ocean Victory") [2015] EWCA Civ 16. In a previous post, we commented on the High Court's decision in Gard Marine & Energy Ltd v China National Chartering Co Ltd (The "Ocean Victory") [2013] EWHC 2199 (Comm), which dealt wi......