Acergy Shipping Ltd v Societe Bretonne De Reparation Navale SAS

Reciprocal contractual indemnities allocating property damage on a knock-for-knock basis are not displaced merely because the damage occurs while works are being performed. An exception for loss or damage to the “Works” must be construed consistently with the underlying allocation of risk and does not extend to all property damaged by an event connected with those works.

“Property on which” a supplier performs work does not ordinarily include the vessel or part of the vessel remaining in situ. Custody and care require more than operational control of a work area or the provision of safety measures. An aggregate contractual liability cap may apply to liquidated damages even where the cap is positioned within an indemnity article.

Acergy contracted with Sobrena for dry-docking and repair works to the Acergy Falcon. A fire occurred during hot work on deck plating above the carousel hold, causing extensive damage to the vessel. The parties disputed responsibility for the fire, but the contractual indemnities made causation and fault immaterial for the preliminary issues.

The court was asked to construe Article 10.3 and related provisions concerning damage to the Works, property in Sobrena’s custody and care, insurance, Acergy’s reciprocal indemnity, and a €30 million aggregate liability cap. It also considered whether liquidated damages for delay fell within that cap.

1. Article 10.3, second sentence. The exception to the knock-for-knock allocation applied only to loss or damage to the contractual “Works”. It did not cover all vessel damage caused by a fire which began in or was connected with the Works. Construing it that broadly would substantially eliminate Article 10.2 and contradict Article 10.4’s exclusion of questions of cause and fault.
2. Article 10.3, third sentence. “Property” in the phrase “property on which Supplier performs work” did not include the vessel or a part of it remaining in situ. The vessel remained under Acergy’s custody and care. Sobrena’s control of the dry dock, worksite safety arrangements, fire watches and particular work area did not transfer custody and care of the vessel or carousel hold to Sobrena.
3. Article 10.3, first sentence. The obligation to take necessary measures to complete the Works, and to bear their cost, did not create an indemnity for all damage to the Works. That construction would be inconsistent with Article 10.2.
4. Insurance. Sobrena was not entitled to the benefit of Acergy’s insurance under the relevant sentence of Article 10.3. The provision operated only where there was a Client under the Main Contract, which was not the situation established.
5. Liability cap. Although the issue did not arise on the conclusions reached, the €30 million cap applied to liquidated damages for delay. It concerned aggregate contractual liability and was not restricted to insured claims.

First-instance decision determining preliminary contractual construction issues in the Commercial Court.