Reed Smith Client Alerts

The Supreme Court handed down its decision in The Ocean Victory on 10 May 2017.

Authors: Marcus P. Dodds

Background

1. More than a decade has passed since the now infamous ship allided with the breakwater at Kashima, grounded and then eventually broke in two, having tried to depart the port during severe conditions.

2. The severity of the conditions at Kashima was predominantly due to the coincidence of two phenomena: a long swell and gale-force winds from a direction against which the breakwater offered no protection.

3. Neither of these phenomena was unusual, individually. However, the evidence before the court at first instance pointed to their coincidence being extremely rare.

4. Three issues were put before the Supreme Court.

i. The first issue concerned whether there had been a breach of the safe port undertaking(s). Specifically: (i) was the port safe within the meaning of the warranty; and (ii) did the conditions at the port amount to an abnormal occurrence1?

ii. The second issue concerned whether, if the charterer was in breach of the safe port warranty, the insurer (as assignee of the rights of the demise charterer) was entitled to recover the insured value of the ship from the charterer (who, in turn, would recover from the sub-charterer).

iii. The third issue was whether or not the charterer(s) could limit their liability under the 1976 Convention2.

5. As it happened, the finding on the first issue, that the port was safe, rendered it unnecessary to address the remainder. However, the Supreme Court nevertheless did so, variously citing the importance of the issues.