Gard Marine & Energy Ltd v China National Chartering Co Ltd (Rev 1)

A safe port warranty is prospective when the charterer orders the vessel. It does not make the charterer an insurer against an unexpected and abnormal event occurring thereafter. Whether an event is abnormal requires a realistic, evidential assessment of the event as a whole. Mere theoretical foreseeability, or the fact that separate conditions are each features of a port, is insufficient. A rare concurrence of conditions may therefore be abnormal. Where a demise charter requires the charterers to insure the vessel in joint names, the underlying contract may establish an insurance-funded solution, leaving the parties to look to insurers rather than to one another for insured losses.

The vessel Ocean Victory grounded and became a total loss after leaving the Raw Materials Quay at Kashima, Japan, in severe weather. Gard, as assignee of the owners and demise charterers, claimed against the intermediate charterers, who brought third-party proceedings against the charterers.

Teare J held that Kashima was prospectively unsafe, that the loss was caused by breach of the safe port warranty, and that the demise charterers remained liable to the owners despite the insurance arrangements: [2013] EWHC 2199 (Comm). The appeals concerned the safe port issue, causation, and the construction of the demise charter’s insurance provisions.

Disposition. The Court of Appeal unanimously allowed the appeal and set aside the judge’s order.

1. Safe port warranty. The warranty is prospective at the time the order to proceed is given. It requires the port to be safe for the particular vessel to reach, use and leave, but does not make the charterer liable for an unexpected and abnormal event arising later. The approach in The Eastern City and The Evia (No. 2) was applied, with the realistic assessment illustrated by The Saga Cob and The Mary Lou.
2. Abnormal occurrence. The relevant question was unitary. It was whether the critical combination itself was a normal characteristic of Kashima or an abnormal occurrence: long-wave swell making it dangerous to remain at the berth while gale-force northerly winds made the fairway dangerous or impossible for a Capesize vessel. The judge erred by considering the two component dangers separately and treating mere foreseeability as sufficient. The court had to consider the port’s history, frequency and regularity of the combined event, its likelihood, and the exceptional nature of the storm. The combination was rare and unprecedented in the relevant history of the port. It was therefore an abnormal occurrence, and there was no breach of the safe port warranty.
3. Causation. Since there was no breach, the court declined to determine whether the master’s decision to leave broke the chain of causation.
4. Recoverability. Even if there had been a breach, clause 12 of the demise charter required insurance in joint names and was construed as providing an insurance-funded solution for insured marine and war risks. The parties were to look to the insurance proceeds rather than to each other. The demise charterers therefore had no liability to the owners for the insured loss, and no contractual loss claim could pass down the chartering chain.

• Court of Appeal (Civil Division) [2015] EWCA Civ 16: allowed the appeal and set aside the Commercial Court order.
• High Court of Justice, Queen’s Bench Division, Commercial Court [2013] EWHC 2199 (Comm): Teare J held that the port was unsafe, that the safe port warranty had been breached, and that the charterers were liable through the chartering chain.